TMI Blog1970 (2) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... ments received 1,37,475.34 (fully backed by the certificate of payments from the disbursing department filed with the I.T.O.) Net flat rate of profit estimated= 7% profit worked out to 9,625.00 (b) Engineering contract at Lucknow. Total payments received (as per certificate of payment from the disbursing officer filed with the I. T. 0. 54,895.00 Net rate of profit estimated=7% profit worked 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 App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable by him, a sum which shall not be less than twenty per cent. but which shall not exceed one and a half times the amount of the tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income. Explanation.-Where the total income returned by any person is less than eighty per cent. of the total income (hereinafter in this Explanation referred to as the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose of making or earning any income included in the total income but which has been disallowed as a deduction. We fail to see how the raising of such a presumption, if the conditions mentioned therein are satisfied, can be said to be ultra vires under any provision of law. The Explanation only lays down a rule of evidence and there is no bar to the legislature prescribing for a rule of evidence. It is not a case of establishing 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 va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rise. Thus if an assessee makes a return and that return is disbelieved and he is assessed to a higher amount than he purports to show in the return and the total income that he has shown in his return is less than 80% of the income for which he is assessed, then the law thinks, as provided by this Explanation, that he has concealed the particulars of his income or, furnished inaccurate particulars. Can it be said, in the circumstances, 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 particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object sought to be attained, and the classification cannot be made arbitrarily and without any substantial basis. " In V. S. Rice Oil Mills v. State of Andhra Pradesh it has been laid down, reiterating the position which has been repeatedly pointed out by the Supreme Court, that when a citizen wants to challenge the validity of any statute on the ground that it contravenes article 14, specific, clear and unambiguous allegations must 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 simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty. The legislature views with disfavour the three types of assessees and considers the case of those covered by clause (c) to be more serious. Under the Explanation what is contemplated by the legislature is that if an assessment has been made in the case of a person who has concealed the particulars of his income or has furnished inaccurate particulars and the return that he has shown is less than 80% of the total income to which he is 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... done under, and in accordance with, the provisions of this Act or the terms of any rule, notification, order, licence or permit issued thereunder. (2) It shall be presumed until the contrary is shown- (a) that a person accused of any offence under clauses (a) to (j) of sub-section (1) has committed such offence 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, 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. W ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s unconstitutional and ultra vires and it violates the fundamental rights granted by article 14 of the Constitution. What seems to have been urged before the Supreme Court was that this legislation was not based on reasonable classification founded on intelligible differentia and that the said differentia had no rational relation to the object sought to be achieved by it. As to it, their Lordships observed : " In the present case there can be no doubt that 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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