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TMI Blog1970 (2) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out to 3,843.00 (c) Purchase of foundry clinckers of N. Railway. Total purchases (as per sale orders in original filed with the I.T.O.) 1,44,600.00 Estimated sale 1,50,000.00 Net rate of profit estimated at 7% Net profit worked out 10,500.00 Grand Total. 23,968.00 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 per cent. of the income assessed, i.e., Rs. 47,845.00, the Income-tax Officer started pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e correct income) as assessed under section 143 or section 144 or section 147 (reduced by the expenditure incurred bonafide by him for the purpose of making or earning any income included in the total income but which has been disallowed as a deduction), such person shall, unless he proves that the failure to return the correct income did not arise from any fraud or any gross or wilful neglect on his part, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income for the purposes of clause (c) of this sub-section. The grounds disclosed in the petition itself are as follows : " I.That the provisions of the Explanation appended to section 271(1)(c) of the Income-tax Act are null and void as being violative of article 14 of the Constitution of India. II. That the provisions of the Explanation are null and void as they cast the onus or the burden of proving his innocence on the petitioner. III. That the provisions of the Explanation are null and void as they presume an automatic offence without any proof as regards its ingredients. IV. That the Explanation is bad in law as it takes for granted concealment without there being a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing or dis-establishing specific substantive right, but it is a case of raising a presumption only as a rule of evidence. As has been laid down in Izhar Ahmad v. Union of India, in deciding a question as to whether a rule about irrebuttable presumption-in the instant case it is a rule of rebuttable presumption---is a rule of evidence or not, the proper approach to adopt would be to consider whether fact A from the proof of which a presumption is required to be drawn about the existence of fact B, is inherently relevant in the matter of proving fact B and has inherently any probative or persuasive value in that behalf or not. If fact A is inherently relevant in proving the existence of fact B and to any rational mind it would bear a probative or persuasive value in the matter of proving the existence of fact B, then a rule prescribing either a rebuttable presumption or an irrebuttable presumption in that behalf, would be a rule of evidence. On the other hand, if fact A is inherently not relevant in proving the existence of fact B or has no probative value in that behalf and yet a rule is made prescribing for a rebuttable or an irrebuttable presumption in that connection, that rule w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances, that the existence of the position of the return being less than 80% of the total income assessed is not relevant to the concealment of the particulars of his income by the assessee or his furnishing inaccurate particulars of such income. Clause (c) of sub-section (1) of section 271 contemplates a certain amount of penalty for concealment of the particulars of income or furnishing inaccurate particulars by an assessee. If the return of an assessee's income is found not to be correct and is less than 80% of the income at which he is ultimately assessed, the Explanation in such a state of affairs provides for the raising of a presumption against the assessee for his having concealed the particulars of his income or having furnished inaccurate particulars of such income. Obviously, applying the test laid down in Izhar Ahmad Khan's case the Explanation provides nothing more than a rule of evidence relating to the raising of a rebuttable presumption in certain circumstances. It is not a rule which creates or negatives any substantive right. Such a rule is within the competence of the legislature to create. The question, however, is as to whether by the creation of such a rule the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made in that behalf and it must be shown that the impugned statute is based on discrimination and that such discrimination is not referable to any classification which is rational and which has nexus with the object intended to be achieved by the said statute. In Probhudas Morarji Rajkotia v. Union of India, following the observations in Ramchand Jagdish Chand v. Union of India, it was again pointed out that to make out a case of denial of the equal protection of the laws under article 14 of the Constitution; a plea of differential treatment is by itself not sufficient. An applicant pleading that article 14 has been violated must make out that not only he had been treated differently from others, but he has been so treated from persons similarly circumstanced without any reasonable basis, and such differential treatment is unjustifiably made. Section 271(1) consists of three clauses. The first two clauses deal with a case of the failure of the assessee to furnish the return of total income either initially or within the time allowed under the provisions of law referred to therein and also with the failure to comply without reasonable cause with a notice under certain provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed, he will be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof for the purpose of the penalty unless he proves that the failure to return the correct income did not arise from any fraud or wilful neglect on his part. The purpose of the clauses is, to discourage concealing the particulars of one's income or furnishing inaccurate particulars of such income in the course of filing the returns. Such persons are looked upon with disfavour. If the concealment is a large amount or the inaccuracy in the furnishing of the particulars is large, the test of which is that it is less than 80% of the amount for which the assessee has been ultimately assessed, the legislature thinks that there would be a presumption of such concealment, having been made or inaccurate particulars having been supplied arising out of fraud or gross or wilful neglect on the part of the assessee. The purpose of the Explanation, therefore, is to discourage concealment of particulars in the filing of the returns of income and the furnishing of inaccurate particulars in the return and the more serious the concealment of the particulars or the furnishing of inaccur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acture of liquor or any intoxicating drug, or any such materials as are ordinarily used in the tapping of toddy or the manufacture of liquor or any intoxicating drug, for the possession of which he is unable to account satisfactorily ; and (b) that a person accused of any offence under clause (k) of subsection (1) has committed such offence if an offence is proved to have been committed in premises in his immediate possession in respect of any liquor or intoxicating drug, or any still, utensil, implement or apparatus whatsoever for the tapping of toddy or the manufacture of liquor or any intoxicating drug, or any such materials as are ordinarily used in the tapping of toddy or the manufacture of liquor or any intoxicating drug. When the provisions of section 4(2) above-quoted were challenged as being repugnant to article 14 of the Constitution, the learned judges observed that they were unable to see how section 4(2) offended the requirement as to equality before law or the equal protection of laws. The presumptions enacted therein had to be raised against all persons against whom the facts mentioned therein were established. After considering the matter their Lordships arrived a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis adopted by the legislature in classifying one class of public servants who are brought within the mischief of section 4(1) is a perfectly rational basis. It is based on an intelligible differentia and there can be no difficulty in distinguishing the class of persons covered by the impugned section from other classes of persons who are accused of commiting other offences. Legislature presumably realised that experience in courts showed how difficult it is to bring home to the accused persons the charge of bribery ; evidence which is and can be generally adduced in such cases in support of the charge is apt to be treated as tainted, and so it is not very easy to establish the charge of bribery beyond a reasonable doubt. Legislature felt that the evil of corruption amongst public servants posed a serious problem and had to be effectively rooted out in the interest of clean and efficient administration. That is why the legislature decided to enact section 4(1) with a view to require the raising of the statutory presumption as soon as the condition precedent prescribed by it in that behalf is satisfied. The object which the legislature thus wanted to achieve is the eradicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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