1. This 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. The material facts are as follows:
2. The applicant, who is the assessee in this case, is a firm constituted with effect from the first day of October, 1963, to carry on the business of manufacture of hosiery and sale of cotton yarn at Kanpur. Its first accounting period commenced on the 1st of October, 1961 and ended on the 31st March, 1962. For this period, the applicant returned an Income of Rs. 74,129/- assessable for the assessment year 1962-63. The income was ultimately assessed at Rs. 86,302/-. The Indian Income Tax Act, 1922, hereafter referred to as the old Act, was in force throughout this account period. The applicant was a new assessee and, therefore, Section 18-A (3) of the Old Act was applicable to It. Section 18-A (3) ran as follows:--
'18A (3). Any person who has not hitherto been assessed shall, before the 15th day of March in each financial year, if his total income of the period which would be the previous year for an assessment for the financial year next following is likely to exceed the maximum amount not chargeable to tax in his case by two thousand five hundred rupees, send to the Income-tax Officer an estimate of the tax payable by him on that part of his income to which the provisions of Section 18 do not apply of the said previous year calculated in the manner laid down In Sub-section (1) and shall pay the amount on such of the dates specified in that Sub-section as have not expired, by instalments which may be revised according to the proviso to Sub-section (2).'
Under this section, read with Section 18A (1). there was clearly an obligation on the part of the applicant to submit an estimate of the tax payable by him and pay the amount by equal instalments on the 15th of December, 1961 and on the 15th of March, 1962. The applicant, however, did not either file the estimate nor paythe amount of the advance tax as required by Section 18A (3).
3. On the 1st April, 1962 the Income Tax Act, 1961, hereafter referred to as the new Act, came into force and, by Sub-section (1) of Section 297 thereof, the old Act stood repealed with effect from the said date. As the applicant had not complied with the provisions of Section 18A (3) of the old Act, the Income Tax Officer issued a notice to the applicant on the 18th September, 1964 requiring it to show cause why penalty should not be imposed under Section 273 of the new Act. In reply the applicant stated that the penal provisions of Section 273 of the new Act were not attracted in case of non-compliance with the provisions of Section 18A (3) of the old Act. The Income Tax Officer rejected the contention and imposed a penalty of Rs. 500/-under Section 273(b) of the new Act by his order dated 28th February, 1966.
4. The applicant appealed to the Appellate Assistant Commissioner and contended that Section 273(b) of the new Act, under which penalty had been imposed would be applicable if the applicant had committed the default under Section 212(3) of the new Act (corresponding to Section 18A (3) of the old Act). As, however, the new Act was not in force, on the 15th December, 1961 and the 15th March, 1962, when the defaults in question were committed, the provisions of Section 273(b) could not be pressed into service for imposition of penalty for such defaults. The Appellate Assistant Commissioner overruled the objection. He found that by virtue of the powers conferred on the Central Government by Section 298(1) of the new Act, the Removal of Difficulties Order No. 2 of 1963 had been promulgated which provided that the reference to Sections 212, 215, 216 and 217 in Section 273 of the new Act should be treated as reference to the corresponding provisions of Section 18-A of the old Act in cases where there had been default under Section 18-A of the old Act for the financial year commencing on the 1st day of April, 1961. As, in the instant case, the relevant accounting period fell within the financial year commencing on the 1st day of April, 1961, the Appellate Assistant Commissioner held that the Removal of Difficulties Order was applicable and the default under Section 18-A (3) of the old Act should be regarded as a default under Section 212(3) of the new Act. The Appellate Assistant Commissioner, therefore, sustained the penalty of Rs. 500/- imposed by the Income Tax Officer.
5. At the hearing before us it was contended on behalf of the applicant that, in the first place, Section 298 of the new Act was ultra vires in so far as it authorises the Central Government to 'do anything' in the garb of removal of difficulties. This, it was contended, amounts to excessive delegation of powers, including legislative powers, and it should be struck down on that ground. Secondly, it was argued, assuming that Section 298 was validly enacted, the Central Government went beyond the powers conferred by Section 298 in promulgating the Removal of Difficulties Order No. 2 of 1963 which authorised the I. T. O. to levy penalty under Section 273 of the new Act in respect of default under Section 18-A (3) committed under the old Act. It was contended that the power conferred by the Legislature to the Central Government under Section 298 related only to details regarding the working of taxation laws; such powers were not intended to be exercised for imposition of penalty in respect of a default committed under an Act which had been repealed. It was also contended that the Central Government had no power to give a retrospective effect to the Removal of Difficulties Order from the 1st of April, 1962. Further, it was urged that the order was discriminatory and, therefore, unconstitutional.
6. The challenge to the vires of Section 298 of the new Act must fail in view of the decision of the Supreme Court in the case of Kalawati Devi Harlalka v. Commissioner of Income Tax, West Bengal : 66ITR680(SC) , in which it was held that the section had been validly enacted. It is true that the point now raised by the applicant in the present case, namely, excessive delegation of powers, was not considered by the Supreme Court in that case, but it is not open to this Court to disregard the decision of the Supreme Court on that ground. Under Article 141 of the Constitution, the law declared by the Supreme Court is binding on all courts within the territory of India and we are bound to proceed on the basis that Section 298 of the new Act is valid.
7. The next point for consideration is whether, in promulgating the Removal of Difficulties Order, No. 2 of 1963, the Central Government exceeded the powers conferred by Section 298. Sub-section (1) of Section 298 of the new Act which is material for our purpose, runs as follows:
'298. Power to remove difficulties.--(1). If any difficulty arises in giving effect to the provisions of this Act the Central Government may, by general or special order, do anything not inconsistent with such provisions which appears to it to be necessary or expedient for the purpose of removing the difficulty.'
In pursuance of the powers conferred by the above Sub-section the Central Government issued the following Order by notification on the 11th June, 1963:--
'In exercise of the powers conferred by Section 298 of the Income-tax Act, 1961 (XLIII of 1961), the Central Government hereby makes the following order, namely:--
1. Short title and commencement--(1) This Order may be called the Income-tax (Removal of Difficulties) Order No. 2 of 1963.
(2) It shall be deemed to have come into force on the 1st day of April, 1962.
2. Applicability of Section 273 of Act XLIII of 1961 in certain cases. Where in respect of the financial year commencing on the 1st day of April, 1961, an assessee has furnished an estimate of the tax payable by him under Sub-section (2) or Sub-section (3) of Section 18-A of the Indian Income-tax Act, 1922 (XI of 1922) (hereinafter referred to as the repealed Act), which he knew or had reason to believe to be untrue, or where he has without reasonable cause failed to furnish an estimate of the tax payable by him under Sub-section (3) of Section 18-A of the repealed Act in respect of the said financial year, the provisions of Section 273 of the income-tax Act, 1961 (XLIII of 1961), shall apply as if the references in that Section to the provisions of Section 212, Chapter XVII-C, Section 215, Section 210 and Section 217 were, so far as may be, references to the corresponding provisions of Section 18-A of the repealed Act.'
8. From the terms of Section 298 of the new Act quoted above, it would appear that the Central Government has been authorised by the Legislature to make a general or special order for the purpose stated therein provided the following two conditions are satisfied, namely:--
(i) that there is a difficulty in giving effect to the provisions of the new Act, and
(ii) that such order is not inconsistent with such provisions.
As regards the first pre-condition, there is no doubt that the Central Government was faced with obvious difficulty. As we have already noticed, the applicant was liable under the old Act to furnish an estimate of the advance tax payable by him and to pay the same in equal instalments on the 15th December, 1961 and on the 15th March, 1962, when the old Act was in force. There is no dispute that the applicant did not comply with these requirements. The applicant was, therefore, liable to penalty under Section 18-A (9) read with Section 28 (1) of the old Act. The old Act, however, was repealed on 1-4-1962 by virtue of the provisions of Section 297(1) read with Section 1(3) of the new Act. By reason of the repeal the applicant could not be proceeded against under the provisions of the old Act in respect of the default committed by it and it is not possible to take penal action against the applicant under Section 18-A (9). The applicant's liability to penalty, however, was not extinguished. Section 6 of the General Clauses Act (Act No. X of 1897) provides as follows:--
'6. Where this Act, or any Central Act or Regulation made after the commencement of this Act repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not-
(a) ..........; or
(b) ........; or
(c) affect any right, privilege, or obligation or liability acquired, accrued or incurred under any enactment so repealed; or
(d) ............; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid;
and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forefeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.'
9. In the case of : 66ITR680(SC) (supra) the facts were that the Commissioner of Income-tax West Bengal issued a notice under Section 33-B of the old Act on the 24th January, 1963 after its repeal. The question to be decided was whether the Commissioner had jurisdiction to issue the notice under Section 23-B of the old Act in view of Section 297(2) of the new Act read with paragraph 4 of the Income Tax (Removal of Difficulties) Order, 1962. The matter was heard by Banerji J., sitting singly, in writ jurisdiction. He held that a proceeding under Section 33-B of the old Act was, in reality a proceeding in assessment and, therefore, the notice was saved by reason of the provisions of Section 297(2)(a) of the new Act. On behalf of the Revenue, Section 6 of the General Clauses Act 1897, appears to have been also pressed into service to validate the impugned notice. The learned Judge observed that as the Commissioner could take action under Section 33-B of the old Act, even after its repeal, in view of the saving provisions of Section 297(2)(a) of the new Act, it was not necessary to determine whether Section 6 of the General Clauses Act also saved the power of the Commissioner under Section 33-B of the old Act, but he remarked as follows:--
'If it had been necessary to do so, I would have no hesitation in holding that such power would be saved under Section 6, Clauses (c) and (e) of the General Clauses Act, there being no intention to the contrary in the repealing Act of 1961.'
10. When the case, eventually went up in appeal to the Supreme Court, and it has been reported in 1967-66 ITR 680: (AIR 1968 SC 162), Sikri J., quoted the above remarks of Banerji J, but he held that Section 6 of the General Clauses Act had no application to the case inasmuch as a contrary intention appeared from the language and content of Section 297(2) which provided for all matters relating to assessments including revisions under Section 33B. The case before us, however, stands on a different footing. Levy of advance tax under Section 18-A of the old Act is not a matter relating to assessment of income-tax. Assessment proceedings commence after the previous year has closed and the assessment year has started. In the case of advance tax, however, the procedure for its levy commences during the previous year itself. It is not possible, therefore to hold that proceedings for levy of penalty for nonpayment of advance tax are included in the proceedings for assessment of income-tax. Consequently, none of the Sub-clauses (a) to (m) in Section 297 (2) apply to save the liability to penalty for nonpayment of advance tax already incurred under the old Act. It cannot also be assumed that the Legislature intended that the liability to pay penalty for failure to furnish returns or to pay advance tax incurred under the old Act should terminate with the repeal thereof. Such an assumption would be irrational. There is, therefore, no difficulty in holding that the power to levy penalty under Section 18-A of the old Act is saved by Section 6, Clauses (c) and (e) of the General Clauses Act quoted above, there being no intention to the contrary in the repealing Act.
11. The position, therefore, is that though the liability survived, there was no specific provision in the new Act to give effect to such liability. In view of this patent difficulty the Central Government promulgated the Income-tax (Removal of Difficulties) Order No. 2, 1963, which provides inter alia that the default contemplated in Section 18-A (3) of the old Act shall be regarded as a default under Section 212(3) for the purpose of imposition of penalty under Section 273 of the new Act.
12. The first condition precedent, namely, the existence of a difficulty in giving effect to the provisions of the new Act, is clearly satisfied. The second condition as noted above, is that the Central Government may not do anything inconsistent with the provisions of the new Act. Mr. Sharma, appearing for the assessee, submitted that this provision is not satisfied in the present case. His contention is that imposition of penalty in the present case by resort to the provisions of the Order would result in an infringement of Section 273 of the new Act, which requires the satisfaction of the I. T. O. 'in the course of any proceedings in connection with the regular assessment.' He contended that as there has been no regular assessment under the new Act, Section 273 was not attracted. The contention is, however, misconceived inasmuch as the regular assessment for the relevant assessment year 1962-63 was clearly made under the new Act. We are not satisfied that the provisions of the Order are inconsistent with the provisions of the new Act which also impose penalty for failure to pay advance tax in the same way as the old Act did.
13. We are unable to hold, therefore, that the Central Government exceeded its powers in promulgating the Income-Tax (Removal of Difficulties) Order No. 2, 1963.
14. There is also nothing in the content of the terms of the Order to suggest that it is discriminatory in nature. It applies equally to all assessees who were liable to pay advance tax and furnish estimates under the old Act for the financial year 1961-62, but defaulted in doing so. The Income Tax Officer has no discretion in the matter. He has to Impose, penalty on all such defaulters and the Order gives him no scope for meting out differential treatment to them. If some assessees had escaped penal proceedings before the promulgation of the Order on 11-6-1963, that does not mean that the Order itself makes a discrimination between assessees In the same category. This contention must also fail
15. The last contention is that the Central Government was not competent to give retrospective effect to the Order in exercise of its delegated powers. It would be noticed that the Order was promulgated on 11-6-1963, but it was given effect from the 1st of April, 1962. In the case of this assessee notice under Section 274 was issued on 18-9-1964, after the promulgation of the Order and penalty was imposed even thereafter on 28-2-1966. Hence, the fact that the Order has been given retrospective effect, does not operate to the prejudice of the assesses and it would be merely academic to enter Into a discussion of the applicant's contention in point.
16. The petition in writ must, therefore, be dismissed with costs without prejudice to the contentions of the applicantnot bearing on the validity of Section 298of the new Act and of the Order. Theapplicant would be at liberty to agitatesuch other contentions before the IncomeTax Appellate Tribunal, if it is so advised.