Commissioner of Income Tax vs Shah Electrical Corporation

G.T. Nanavati, J.—The question referred to this court u/s 256(1) of the Income Tax Act, 1961, by the Income Tax Appellate Tribunal, Ahmedabad, is as under :

"Whether, on the facts and in the circumstances of the case, the Appellate Tribunal has been right in law in holding that the penalty imposed by the Income Tax Officer u/s 140A(3) of the Income Tax Act, 1961, for non-payment of self-assessment tax cannot be sustained ?"

The assessee filed return of its income on June 20, 1974, declaring the total income of Rs. 1,41,000. The tax payable u/s 140A(3) was Rs. 20,028. This self-assessment tax was not paid till October 23, 1976. The Income Tax Officer, therefore, imposed a penalty of Rs. 5,500 u/s 140A(3) of the Act. On appeal, the Appellate Assistant Commissioner upheld the view of the Income Tax Officer that penalty was payable, but reduced the amount of penalty to Rs. 4,500. The assessee then preferred an appeal to the Tribunal. Following the decision of the Bombay High Court in Commissioner of Income Tax Vidarbha Vs. Godavaridevi Saraf, the Tribunal held that the penalty was not sustainable as section 140A(3) was non-existent, it having been declared as ultra vires by the Madras High Court in the case of A.M. Sali Maricar and Another Vs. Income Tax Officer and Another, . The order imposing penalty was, therefore, quashed. The Department then moved the Tribunal for referring the abovestated question to this court.

What is contended by the learned advocate for the Revenue is that the Tribunal decided the appeal on October 26, 1976. By that time, the Andhra Pradesh High Court had upheld the validity of section 140A(3). He drew our attention to the judgment of the Andhra Pradesh High Court in Kashiram Vs. Income Tax Officer, E-Ward, . From the report, it appears that the said judgment was delivered on December 10, 1975. Therefore, the Tribunal was not right in proceeding on the basis that only the Madras High Court judgment was in the field and, therefore, it was open to it to proceed on the basis that section 140A(3) was non-existent. He also submitted that, for that reason, the Tribunal was not right in following the judgment of the Bombay High Court in Commissioner of Income Tax Vidarbha Vs. Godavaridevi Saraf, .

In our opinion, the legal position is correctly stated by the Punjab and Haryana High Court in Commissioner of Income Tax Vs. Ved Parkash, when it observed that "unless and until the Supreme Court or the High Court of the State in question, under article 226 of the Constitution, declares a provision of the Act to be ultra vires, it must be taken to be constitutionally valid and treated as such."

In our opinion, the Tribunal of another State would be justified in proceeding on the basis that the provision has ceased to exist because it has been declared as ultra vires by the High Court only when there is some material to show that the said decision has been accepted by the Department. Again, as rightly pointed out by the Bombay High Court in a subsequent decision in Commissioner of Wealth-tax Vs. Devidayal Stainless Steel India P. Ltd., that, while deciding a reference, the High Court has to consider the legal position obtaining on the date on which it was deciding the reference and not the legal position which existed when the Tribunal decided the appeal.

We are, therefore, of the opinion that the Tribunal was not right in holding that the penalty imposed by the Income Tax Officer u/s 140A(3) of the Act for non-payment of self-assessment tax was not sustainable. The question is, therefore, answered in the negative, that is, in favour of the Revenue and against the assessee. Reference is disposed of accordingly. No order as to costs.