Dwarka Prasad, J. - (1.) THE petitioner, the Mewur Textile Mills Ltd., Bhilwara (hereinafter referred to as "the company "), is a public limited company incorporated under the Companies Act, having its registered office at Bhilwara in Rajasthan. In respect of the assessment year 1966-67, the company filed a return of its income on June 30, 1966. THE company was required under Section 140A(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), to make payment of such amount of tax as was payable on the basis of the aforesaid return, after taking into account the amount of tax already paid by way of advance tax, within a period of 30 days of the furnishing of the return. But the company deposited the amount of tax due to be paid on the basis of self-assessment under Section 140A(1) only on October 17, 1966, and such payment was thus delayed by 78 days. . Later on, on May 24, 1968, the company filed a revised return of its income, according to which the tax liability of the company was increased by a sum of Rs. 19,476, but the company also failed to make payment of the amount of enhanced tax liability within a period of 30 days from the date of filing of the return. As a matter of fact, the said amount of Rs. 19,476 was not paid by the company towards its tax liability until a provisional assessment was made by the ITO under Section 141 of the Act on January 29, 1969.
(2.) AFTER a notice was issued to the company under Section 140A(3) of the Act, calling upon it to show cause why penalty should not be imposed on it for non-compliance with the provisions of Section 140A(1), the ITO proceeded to impose a penalty of Rs. 5,000 upon the company for not depositing the amount of tax payable by it on self-assessment. The AAC, on appeal, upheld the imposition of penalty, but reduced the amount thereof from Rs. 5,000 to Rs. 4,000. On further appeal to the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (hereinafter called "the Tribunal"), the company advanced a plea that when the revised return was filed, the company was under the control of the State Government and was managed by an administrator appointed by the State Government and as such the non-payment of the amount of tax, payable under Section 140A(1) on self-assessment was not on account of any contumacious conduct or dishonest intention on the part of the company. It was stated on behalf of the company that an IAS Officer was appointed as an administrator of the company by the State Government of Rajasthan and if he did not make payment of the amount of tax in accordance with the provisions of Section 140A(1), the company should not be made liable to pay a penalty in respect thereof. The Tribunal rejected this contention. Another ground advanced before the Tribunal on behalf of the company was that the provisions of Section 140A(1) of the Act were ultra vires the provisions of Article 19(1)(f) of the Constitution of India and were not saved by article 19(5) thereof. A decision of the Madras High Court in Soli Maricar v. ITO [1973] 90 ITR 116 was relied upon in support of the aforesaid contention. The Tribunal, by its order dated March 31, 1973, did not accept this contention as well and held that as there was no decision of the Rajasthan High Court or of the Supreme Court till then on the question of the alleged invalidity of the provisions of Section 140A(1), the judgment of the Madras High Court was not binding upon the Tribunal and it was bound to give effect to the provisions contained in Section 140A. The company filed an application before the Tribunal under Section 256(1) of the Act requesting the Tribunal to make a reference to the High Court in respect of the questions of law arising out of its order dated March 31, 1973, but the Tribunal refused to make a reference to the High Court by its order dated September 19, 1973. In this writ petition, two grounds were urged by the learned counsel for the petitioner company, which were the same as were submitted on its behalf before the Tribunal. In the first place, it was urged that the provisions of Section 140A(3) of the Act were ultra vires as they were violative of the provisions of Article 19(1)(f) of the Constitution of India and were not saved by Article 19(5) thereof. The decision of the Madras High Court in Sali Maricay's case [1973] 90 ITR 116 was relied upon by the learned counsel for the petitioner company in support of his aforesaid contention. The second contention advanced before me was that the Tribunal erred in upholding the imposition of penalty upon the company under Section 140A(3) of the Act, without even considering the case set up by the company for non-payment of the amount of tax on self-assessment within the time limited under Section 140A(1) of the Act. Although the provisions of Article 19(i)(f) of the Constitution of India relating to right to property have been deleted with effect from June 20, 1979, by the Constitution (Forty-fourth Amendment) Act, 1978, yet the subsequent deletion of the right to property from the array of fundamental rights would not deprive the petitioner company of such rights as were available to it prior to the coming into force of the 44th Amendment Act. As this writ petition was filed in the year 1974, and at that time the provisions of Article 19(1)(f) were available to the petitioner company, I shall proceed to consider the question of validity of the provisions of Section 140A(3) of the Act. Section 140A was inserted in the I.T. Act, 1961, by the Finance Act of 1964, and the provisions thereof, as they existed at the relevant date, when the company was alleged to have incurred the liability for imposition of penalty under Section 140A(3), ran as under : "140A. Self-assessment.--(1) Where a return has been furnished under Section 139 and the tax payable on the basis of that return as reduced by any tax already paid under any provision of this Act exceeds five hundred rupees, the assessee shall pay the tax so payable within thirty days of furnishing the return. (2) After a provisional assessment under Section 141 or a regular assessment under Section 143 or Section 144 has been made, any amount paid under Sub-section (1) shall be deemed to have been paid towards the provisional assessment or regular assessment, as the case may be. (3) If any assessee fails to pay the tax or any part thereof in accordance with the provisions of Sub-section (1), he shall, unless provisional assessment under Section 141 or a regular assessment under Section 143 or Section 144 has been made before the expiry of thirty days referred to in that sub-section, be liable, by way of penalty, to pay such amount as the Income-tax Officer may direct, so however, that the amount of penalty does not exceed 50 per cent, of the amount of such tax or part, as the case may be : Provided that before levying any such penalty, the assessee shall be given a reasonable opportunity of being heard. "
(3.) IT may be pointed out that the provisions of Section 140A were amended by the Taxation Laws (Amendment) Act, 1970, with effect from April 1, 1971, and the aforesaid section was again amended and substituted by the Amending Act No. 141 of 1975, with effect from April 1, 1976. The provisions of Section 140 A, as they existed at the relevant time, were applicable only to those cases in which the tax payable under Section 140A(1), as reduced by any amount of tax already paid, exceeded Rs. 500. In such cases, the assessee was required to make payment of the amount of tax payable on self-assessment within 30 days of the furnishing of the return. If the amount of tax was not paid within the period of 30 days, Sub-section (3) authorised the ITO to impose a penalty upon the assessee, which could not exceed 50% of the amount of tax. In Soli Maricar's case [1973] 90 ITR 116, relied upon by the learned counsel for the company, a Bench, of the Madras High Court took the view that Parliament has provided for imposition of penalty on the amount of tax which remained unpaid, from the day the tax was due and payable, but penalty could not be imposed in the case of self-assessment, as it was confiscatory in nature and, further, that there was no relation to the duration of delay or the wilful or other nature of the violation or the inability to pay tax. The learned judges of the Madras High Court observed as under (p. 134): " To sum up : Tax due and payable under Section 140A(1) of the Act is a civil debt. Any provision in the Act for enforcing payment of that debt would be valid. This provision for enforcing payment and recovery of the tax payable may include or impose anything compensatory for delayed payment or retention of the tax. IT is not the nomenclature, which the legislature has used in the provision, that decides the issue as to whether the provision is compensatory or penal, but the substance of the provision. A power to levy penalty which is not compensatory is neither incidental nor ancillary to the power of recovery, and it is not inherent in the power to recover the tax payable. The levy of penalty could be sustained only in cases of concealment or evasion of taxes. Penalty for concealment or evasion is a punishment and intended as a deterrent against repetition of the same which is criminal or quasi-criminal in nature. Concealment of income or evasion of tax and non-payment of a tax ascertained or determined and payable are different in nature and character. Failure to pay tax due and payable, attracts only a civil liability. Every citizen has a fundamental right to retain his income after payment of taxes. Any provision in the Act which authorises the taking away of this retained income would be confiscatory unless it is saved under Article 19(5). The penalty levied under Section 140A(3) of the Act is not compensatory for delayed payment or retention of tax. In the guise of a deterrent provision for enforcing payment of tax due and payable, Section 140A(3) authorises confiscation of property. Confiscation of property for non-payment in time of a tax ascertained and payable is an unreasonable restriction on the fundamental right to property of an assessee. Section 140A(3) of the Act authorising the levy of penalty for failure to pay within 30 days of the tax payable under Section 140A(1) is confiscatory and is not saved under Article 19(5) of the Constitution. " The view taken by the Madras High Court in Sail Maricar's case [1973] 90 ITR 116 has been dissented from by the Andhra Pradesh, Calcutta, Madhya Pradesh and Jammu and Kashmir High Courts. In Kashiram v. 1TO [1977] 107 ITR 825, a Bench of the Andhra Pradesh High Court, while disagreeing with the view taken by the Madras High Court in Sali Maricar's case [1973] 90 ITR 116 (Mad), observed as under (p. 831) : " In our opinion, the provision made in Sub-section (3) is only a measure enacted for ensuring compliance with Sub-section (1) of Section 140A. It is not true that the said Sub-section does not provide for or take into account the various circumstances of the nature pointed out at page 126 of the said report. The said Sub-section merely makes the assessee liable for a penalty which may go up to 50% of the tax payable under Sub-section (1). A discretion is conferred upon the Income-tax Officer in the matter of levying the penalty. In a proper case, he may decline to levy any penalty. We do not read the said provision as compelling the Income-tax Officer to levy such a penalty in each and every case and/or up to the maximum limit. An appeal and a second appeal are provided against his orders and a further reference to the High Court. Further, we cannot assume the case of an assessee, 'who is not able to pay his taxes'. Every person earning taxable income has to provide for payment of taxes. However, certain situations may arise where the assessee may not be able to pay the taxes within 30 days as required by Section 140A. But in such cases, if he properly explains the circumstances to the satisfaction of the Income-tax Officer, he would not levy the penalty. We further find ourselves unable to agree with the statement of the learned judges that 'the levy of penalty could be sustained only in cases of concealment or evasion of taxes'. With respect, we see no warrant for such a statement. As pointed out by us above, Chapter 22 provides for criminal prosecutions in case of several matters and not only for concealment and evasion of taxes. Penalties are also provided by Chapter 21 in the case of failure to furnish information regarding securities, etc., failure to furnish returns or to comply with notices, failure to give notice of discontinuance as required by Section 176(3), for filing a false estimate or failure to pay advance tax, etc. We equally fail to understand as to how the said provision could be held to be confiscatory. What is due towards tax cannot be said to be the 'property' of the assessee, since it is a debt due to the State towards tax, even as per his own return. The mere fact that it is not quantified by the department on that date would not make it any the less the tax due under Section 140A(1). It is not necessary that every provision conceived in the interest of the revenue, i.e., made to ensure proper payment of taxes should be compensatory only and that no penalties can be provided therefor. In our opinion, therefore, Sub-section (3) of Section 140A does not in any manner infringe Article 19(1)(f) of the Constitution of India and that it is not an unreasonable restriction upon the said right. " ;