1985 (8) TMI 43 - HC - Income Tax

Court upholds validity of Companies Surtax Act, dismisses writ petitions challenging assessments.

The court dismissed the writ petitions challenging the constitutional validity of section 7 of the Companies (Profits) Surtax Act, 1964, and the ... Provisional Assessment, Surtax Issues:1. Challenge to the constitutional validity of section 7 of the Companies (Profits) Surtax Act, 1964.2. Provisional assessment made by the Income-tax Officer for the assessment years 1979-80 and 1980-81.3. Construction and interpretation of section 7 of the Act.4. Allegation of unguided, uncanalised, uncontrolled, and arbitrary powers conferred by section 7.5. Violation of Article 14 of the Constitution.6. Judicial precedent in Jaipur Udyog Ltd.'s case and its applicability.7. Examination of the validity of the notice issued by the Income-tax Officer for provisional assessment.Analysis:The judgment involves a challenge to the constitutional validity of section 7 of the Companies (Profits) Surtax Act, 1964, and the provisional assessments made by the Income-tax Officer for the assessment years 1979-80 and 1980-81. The petitioner, a foreign company, contested the validity of the notice issued by the Income-tax Officer for the provisional assessment under section 7(2) of the Act. The petitioner argued that the Income-tax Officer was not empowered to adjudicate disputes and was bound to accept all objections without any adjudication. The respondent, the Revenue, opposed these contentions.The court examined the scope and ambit of section 7 of the Act, which empowers the Income-tax Officer to make a provisional assessment in a summary manner on the chargeable profits of a company. The provision allows the Income-tax Officer to consider objections raised by the assessee and make a determination based on those objections. The court emphasized that the power to consider objections comprehends the authority to accept or reject them, and there is no automatic acceptance mandated by the provision. The court distinguished the ruling in Jaipur Udyog Ltd.'s case, stating that its interpretation did not apply to the construction of section 7 of the Act.Regarding the allegation of unguided and arbitrary powers conferred by section 7, the court held that the provision, when read in conjunction with the Schedules, provides sufficient guidelines for provisional assessments. The court rejected the contention that section 7 violated Article 14 of the Constitution, citing previous Supreme Court rulings that supported the constitutionality of similar provisions. The court found no merit in the petitioner's challenge to section 7 of the Act based on arbitrary powers or constitutional violations.In conclusion, the court dismissed the writ petitions challenging the constitutional validity of section 7 and the provisional assessments made by the Income-tax Officer. The court held that the provisional assessments were in conformity with the Act, and there was no justification to interfere with them. The court directed the parties to bear their own costs, and the rule issued in the cases was discharged.