TaxTMI 
TaxTMI 
1980 (7) TMI 81
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.... Manilal & Co., filed its return of income for the assessment year 1965-66 on 28th June, 1965. The assessee should have paid a sum of Rs. 17,837 as tax in accordance with the return on or before 27th July, 1965, under s. 140A(1) of the Act. The assessee, however, paid Rs. 9,456 on 9th August, 1967, and Rs. 2,000 on 11th March, 1970, leaving a balance of Rs. 6,381 still payable under s. 140A(1) of the Act. The ITO, by order dated 23rd March, 1972, levied a penalty of Rs. 2,000 under s. 140A(3) for the assessee's failure to pay the amount of Rs. 17,837 as required by s. 140A(1). The order imposing penalty was upheld in appeal by the AAC. The assessee preferred a further appeal to the Appellate Tribunal. The Tribunal allowed the appeal and can....
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.... heard. The learned standing counsel for the department argued that the Tribunal had no jurisdiction to go into the constitutional validity of s. 140A(3) and that it ought to have acted on the assumption that the said provision is valid. It is, no doubt, true that the Tribunal and other authorities under the I.T. Act which are creatures of the Act have no jurisdiction to enquire into the validity of any provision of the Act. Indeed, it has been held that even the High Court and the Supreme Court are not competent to go into the constitutional validity of any provision of the Act in a reference proceeding-see K. S. Venkataraman and Co. (P.) Ltd. v. State of Madras [1966] 60 ITR 112 (SC) and CIT v. Straw Products Ltd. [1966] 60 ITR 156 (SC).....
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.... on the Tribunal but that decision is not binding on us. The question referred to us is whether the Tribunal was " right in law " in cancelling the penalty. The relevant law which the Tribunal ought to have applied has remained unchanged, for the rulings of the different High Courts dealing with the validity and effectiveness of s. 140A(3) are merely expositions of that law. As we are required to decide whether, in law, the Tribunal was right in deciding as it did, we have necessarily to examine whether the ruling of the Madras High Court, which was followed by the Tribunal, correctly laid down the law. The learned counsel for the assessee submitted that as the Madras ruling was the only ruling available at the time when the Tribunal decide....
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....at every citizen has a fundamental right to retain his income after payment of taxes and that levy of penalty under s. 140A(3) is confiscatory of property for non-payment of tax in time and is an unreasonable restriction on the fundamental right to hold property guaranteed under art. 19(1)(f). With great respect, we are unable to agree with this reasoning. Section 140A(1) requires the assessee to pay the tax on the basis of the return within thirty days of its furnishing. To make the evasion of this provision unprofitable, s. 140A(3) authorises the ITO to impose penalty not exceeding 50% of the amount of tax. It will be seen that the ITO has a discretion which he has to exercise judicially after notice to the assessee. The amount of penalty....