G.D. Sehgal, J. - (1.) THE petitioner is a railway contractor and carries on business under the name and style of M/s. Saeed Ahmad and Sons. He filed an income-tax return for the assessment year 1964-65 before the Income-tax Officer B-Ward, Circle II, Lucknow, opposite party No. 2, indicating an income of Rs. 23,968.00. THE amount of income in the return filed was arrived at as follows: JUDGEMENT_28_ITR79_1971Html1.htm
(2.) IT would thus appear that no actual accounts of income and expenditure were filed, but the income was assessed at certain rates of estimated profits. The return was not accepted by the Income-tax Officer concerned and the returned income enhanced to Rs. 52,017.00, the Income-tax Officer applying the following rates : (a) Engineering contract rate of profit applied 15% (b) Coal handling contract rate of profit applied 12'5% (c) Foundry clinckers rate of profit applied 14% The petitioner made an appeal to the Appellate Assistant Commissioner of Income-tax with the result that his total income was reduced by a sum of Rs. 4,172.00. A second appeal has been filed before the Income-tax Appellate Tribunal which is pending decision. As the total income disclosed by the petitioner in the return, i.e., Rs. 23,968.00 was less than 80 percent. of the income assessed, i.e., Rs. 47,845.00, the Income-tax Officer started penalty proceedings under Section 271(1)(c) Explanation to that section of the Income-tax Act, 1961 (hereinafter to be referred to as the Act). As the minimum penalty leviable in the petitioner's case exceeded one thousand rupees, the Income-tax Officer, opposite party No. 2, referred the case to the Inspecting Assistant Commissioner, opposite Party No. 1, under Section 274(2)of the Act. A show cause notice (annexure "C") was thereafter issued by the opposite party No. 1 to the petitioner under Section 274(2) read with Section 271 of the Act charging the petitioner with concealment of the particulars of his income. The notice was contested, but ultimately opposite party No. 1 held that the provisions of Section 271(1)(c) read with the Explanation to that section were applicable to the petitioner's case and thus a penalty of Rs. 2,100 was imposed on the petitioner on account of the alleged concealment of income based on the difference between the income returned by the petitioner and the income assessed by the Income-tax Officer and the amount was directed to be recovered by the opposite party No. 2 from the petitioner. A copy of this order is contained in annexure " E " to the petition. It is against this order that this writ petition has been filed, and the relief claimed is that a writ of certiorari be issued for the quashing of the order of assessment, the notice for the imposing of the penalty and the order of the imposition of penalty (annexures "B", "C" and "E"). A writ of mandamus also is prayed for directing opposite party No. 2, Income-tax Officer, not to recover from the petitioner the illegal penalty imposed on him. Besides these two reliefs, there are two other usual reliefs for awarding costs to the petitioner and for granting any other appropriate relief in the circumstances of the case. We have the prayer also for the waiving of 14 days' notice to the standing counsel on account of the urgency of the case, but as in this case the standing counsel could not represent the Government, it being the Union Government, the prayer appears to be misconceived. The order imposing penalty passed by opposite party No. 1 is an appealable order and normally, therefore, if an alternative remedy to the petitioner was available, the writ would not have been entertained. The writ, however, challenges the vires of the provisions of the Explanation to Clause (c) of Sub-section (1) of Section 271 of the Act and as such it was allowed to be entertained, the contention being that the vires of the Act could not be challenged in appeal which is a proceeding arising out of the provisions of the Act itself and the authority hearing the appeal was bound to give effect to the provisions of the Act. We have, therefore, to see as to how far the provisions of the Explanation to Clause (c) of Sub-section (1) of Section 271 can be said to be ultra vires the legislature.
(3.) THE imposing of penalty has been challenged on some other grounds also, namely, of the show cause notice being not a proper notice, being vague and uncertain and its failing to disclose the alleged concealing of income and also on the ground, which ground though not specifically taken in the petition, has been tried to be urged before us that the Explanation could not control the provisions of the substantive enactment. The petitioner's counsel, however, was not allowed to urge grounds other than those relating to the vires of the provisions of the Explanation, for in case the provisions were held to be intra vires, there was no reason why he should not have sought his remedy against the penalty by way of appeal as provided under the Act itself and the other points could in that case be raised before the appellate authority. The only point, therefore, that we have to determine in the case is as to whether the provisions which have been challenged as being ultra vires the legislature are actually so.;