1968 (10) TMI 10 - HC - Income Tax

Writ petition raises the question of vires of section 298 of the Income-tax Act 1961 and the Removal of Difficulties Order No. 2 of 1963 issued by the Central Government thereunder by notification dated the 11th June 1963

Issues Involved:
1. Vires of Section 298 of the Income-tax Act, 1961.
2. Validity of the Removal of Difficulties Order No. 2 of 1963.
3. Excessive delegation of powers.
4. Retrospective effect of the Removal of Difficulties Order.
5. Discrimination and constitutionality of the Order.

Detailed Analysis:

1. Vires of Section 298 of the Income-tax Act, 1961:
The applicant challenged the vires of Section 298, arguing it amounted to excessive delegation of powers to the Central Government. However, this challenge was dismissed based on the Supreme Court's decision in Kalawati Devi Harlalka v. Commissioner of Income-tax, which upheld the validity of Section 298. The court emphasized that under Article 141 of the Constitution, the law declared by the Supreme Court is binding on all courts within India, and thus, it must proceed on the basis that Section 298 is valid.

2. Validity of the Removal of Difficulties Order No. 2 of 1963:
The applicant argued that the Central Government exceeded its powers under Section 298 when issuing the Removal of Difficulties Order No. 2 of 1963. The court examined Section 298(1), which allows the Central Government to issue orders to remove difficulties in giving effect to the provisions of the new Act, provided the order is not inconsistent with the Act. The court found that the Central Government faced an obvious difficulty as the old Act was repealed, but the applicant's liability for default under Section 18A(3) of the old Act persisted. The Order was thus necessary to address this difficulty, and it was not inconsistent with the new Act.

3. Excessive Delegation of Powers:
The applicant contended that Section 298 authorized the Central Government to "do anything" under the guise of removing difficulties, amounting to excessive delegation of legislative powers. The court dismissed this contention, reiterating the Supreme Court's validation of Section 298 and emphasizing that it is bound by this precedent.

4. Retrospective Effect of the Removal of Difficulties Order:
The applicant argued that the Central Government lacked the competence to give retrospective effect to the Order. The court noted that the Order was promulgated on June 11, 1963, but was given effect from April 1, 1962. Since the notice under Section 274 and the penalty imposition occurred after the promulgation of the Order, the retrospective effect did not prejudice the applicant. Therefore, this contention was deemed academic and dismissed.

5. Discrimination and Constitutionality of the Order:
The applicant claimed that the Order was discriminatory and unconstitutional. The court found no evidence of discrimination, stating that the Order applied equally to all assessees liable under the old Act for the financial year 1961-62. The Income-tax Officer was mandated to impose penalties on all defaulters uniformly, with no scope for differential treatment. Thus, the contention of discrimination was also dismissed.

Conclusion:
The writ petition was dismissed with costs. The court upheld the validity of Section 298 of the new Act and the Removal of Difficulties Order No. 2 of 1963, finding no excessive delegation of powers, no inconsistency with the new Act, and no discrimination. The applicant was allowed to agitate other contentions before the Income-tax Appellate Tribunal.

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