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Vallabhdas Manjibhai Dholakia and ors. Vs. Commissioner of Income-tax, Gujarat Iii and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberSpecial Civil Application No. 848 of 1972
Judge
Reported in[1975]98ITR403(Guj)
ActsIncome Tax Act, 1961 - Sections 68, 69, 69A, 69B, 132, 133, 133A, 142, 230A, 285A and 285A(1); Constitution of India - Articles 14 and 19(1)
AppellantVallabhdas Manjibhai Dholakia and ors.
RespondentCommissioner of Income-tax, Gujarat Iii and ors.
Cases ReferredCoimbatore v. K. P. Abdulla and Bros. The
Excerpt:
direct taxation - validity - income tax act, 1961 and articles 14 and 19 (1) (g) of constitution of india - constitutional validity of section 285a challenged on grounds of being violative of articles 14 and 19 (1) (g) - said provision enacted with view of detecting and preventing large-scale evasion of taxes in immovable property - allegedly said provision discriminates building contractors - building contractors not subjected to any hostile unequal treatment - classification of building contractors made on basis of intelligible differentia - such differentia has rational relation to object sought to be achieved by impugned provision - no invasion of fundamental right to carry on trade guaranteed under article 19 (1) (g) - petitioners failed to discharge heavy burden to sustain.....p.d. desai, j.1. the second and third petitioners are firms registered under the indian partnership act, 1922. the first petitioners is a partner in the said two firms. the said firms carry on the business of building contractors and their principle place of business is in wadhwan city, district surendranagar. between december 14, 1964, and july 19, 1969, the second petitioner entered into nine separate contracts for construction of buildings with different co-operative housing societies. likewise, between april 28, 1967, and august 24, 1969, the third petitioner entered into five separate contracts of similar nature with different co-operative housing societies. it appears that the value of those contracts exceeded fifty thousand rupees and the concerned petitioner was, therefore,.....
Judgment:

P.D. Desai, J.

1. The second and third petitioners are firms registered under the Indian Partnership Act, 1922. The first petitioners is a partner in the said two firms. The said firms carry on the business of building contractors and their principle place of business is in Wadhwan City, District Surendranagar. Between December 14, 1964, and July 19, 1969, the second petitioner entered into nine separate contracts for construction of buildings with different co-operative housing societies. Likewise, between April 28, 1967, and August 24, 1969, the third petitioner entered into five separate contracts of similar nature with different co-operative housing societies. It appears that the value of those contracts exceeded fifty thousand rupees and the concerned petitioner was, therefore, required to furnish to the Income-tax Officer having jurisdiction to assess it particulars relating to the contracts within one month of the making of the contracts under section 285A of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). The petitioners, however, failed to furnish the requisite particulars accordingly. In the course of proceedings for assessment to income-tax for the assessment years 1965-66 to 1970-71 (in the case of the second petitioner) and assessment years 1968-69 to 1970-71 (in the case of the third petitioner), particulars relating to these various contracts were disclosed by the respective petitioners and assessment orders were passed in due course by the concerned Income-tax Officer after taking into account the income derived by the second and third petitioner out of the said contracts.

2. On December 28, 1971, the Commissioner of Income-tax, Gujarat-III, the first respondent herein, issued notices under rule 121 of the Income-tax Rules, 1962, calling upon the second and third petitioners to show cause why penalty or fine should not be imposed upon them under section 285A of the Act for failure particulars relating to the above-mentioned contracts to the concerned Income-tax Officer within one month of the making of the contracts. The petitioner showed cause and in due course the first respondent passed orders levying fine in the sums of Rs. 14,660 and Rs. 14,900 respectively on the second and third petitioners for noncompliance with the provisions of section 285A. The petitioners have thereupon filed the present petitioner under article 226 of the Constitution of India challenging the said orders.

3. Though the impugned orders were challenged in the petitioner on several grounds, at the hearing of the petition the petitioners confined their challenge only to the constitutional validity of section 285A and that too on the ground that the said section violated the fundamental rights guaranteed under articles 19(1) (f) and (g) and article 14 of the Constitution of India. The challenge to the legislative competence as well as to the merits of the two orders in question was not pressed before us. As regards the challenge on merits, it was stated that the petitioners would approach the authorities constituted under the Act and seek appropriate relief in the said forum.

4. In order to appreciate the points raised for our determination, it would be necessary to make reference to the relevant statutory provisions Section 285A reads as under :

'285A. Information by contractors in certain cases. - (1) Where any person (hereinafter referred to as 'the contractor') enters into a contract for the construction of a building for, or the supply of goods or service in connection therewith to, any other person, the value of which exceeds fifty thousand rupees, he shall, within one month of the making of the contract, furnish to the Income-tax Officer having jurisdiction to assess the contractor such particulars relating to the contract and in such form as may be prescribed.

(2) Without prejudice to the provisions of any other law for the time being in force, where any contractor contravenes the provisions of such section (1), the Commissioner may impose upon him such fine not exceeding fifty rupees as he thinks fit for every day during which the contravention continues, so, however, that the amount of fine so imposed shall not, in the aggregate, exceed twenty-five per cent. of the value of the contract.

(3) The Commissioner shall, on making an order under this section imposing a fine, forthwith send a copy of the same to the Income-tax Officer.'

5. Rules 120 and 121, which are the material rules, read as under :

'120. Form for furnishing particulars by contractor. - The particulars required to be furnished under sub-section (1) of section 285A by a contractor shall be in Form No. 52.

121. Procedure for imposition of fine. - No order imposing a fine under sub-section (2) of section 285A shall be made unless the contractor has been given a reasonable opportunity of being heard.'

6. Form No. 52 requires the contractor to furnish the following main particulars : (1) full name and address of the person with whom the contract for the construction of a building or for the supply of goods and service in connection with the construction of a building is made, (ii) date of the contract, (iii) total value of the contract, (iv) place where the contract is to be executed, (v) date by which the contract has to be performed, (vi) location of the place where the building is to be constructed, the number of storey to be constructed and the number of rooms in each storey and plinth area of the proposed building, and (vii) brief description of the goods or service to be supplied under the contract and the value thereof.

7. On a combined reading of these provisions it would appear that under section 285A an obligation is case on the contractor, who enters into a contract, for the construction of a building or for the supply of goods or services in connection therewith, the value of which exceeds fifty thousand rupees, to furnish to the Income-tax Officer having jurisdiction to assessee such contractor, within one month of the making of the contract, particulars such as the name and address of the other party to the contract, the date and value of the contract, location as well as description of the proposed building, the date by which the contract is to be performed and so on and so forth. It would further appear that the failure to furnish requisite particulars within the time and in the manner prescribed has been made a continuing offence and power to impose on the defaulting contractor fine not exceeding fifty rupees for every day during which the contravention continues and not exceeding in the aggregate twenty-five per cent. of the value of the contract has been conferred on the Commissioner of Income-tax. The section does not prescribed the minimum fine to be imposed. It, however, prescribes the maximum limit of the fine in two respect; it provides, in the first place, that fine per each day of the breach shall not exceed fifty rupees and, secondly, that the total amount of fine imposed for the continuing breach shall not exceed twenty-five per cent. of the value of the contract. Furthermore, no order imposing a fine can be made unless the contractor has been given a reasonable opportunity of being heard. This is in substance the enactment, the constitutionality of which is under challenge before us.

8. We shall take up for consideration first the challenge based on article 19(1) (f) and (g). The argument on behalf of the petitioner was that the impugned provisions contravened their fundamental right to acquire, hold and dispose of property as well as to carry on their trade or business of building contractors and that the restrictions opposed thereby were neither reasonable not in the interest of public. Several points were raised in the petitioner to substantiate this challenge. However, at the hearing of the petition, only a few grounds were pressed in support of the challenge. It was urged that :

(i) the material particulars relating to the contract which a contractor is required to furnish to the Income-tax Officer are 'property' within the meaning of article 19(1)(f) and that a statutory provision which requires a contractor to furnish such particulars to a taxing authority under the threat of penalty would be per se violative of the fundamental right to hold property;

(ii) such material particulars are also in the nature of a trade secret and a statutory provisions which compels a contractor on the pain of penalty to divulge such vital information pertaining to his trade or business to a third party (including a taxing authority) must necessarily have the effect of impinging upon the fundamental right to carry on trade or business;

(iii) the legislature, while enacting the impugned provision, proceeding on an unwarranted assumption that every contract for the construction of a building or for the supply of goods and services in connection of tax and on that unjustified premise it has enacted of the fundamental rights guaranteed under articles 19(1) (f), (g);

(iv) even if the above-mentioned assumption made by the legislature is correct and justified, the provisions of the impugned enactment impose on the class of building contractors restrictions of an arbitrary or excessive nature in the exercise of the fundamental rights guaranteed by article 19(1) (f) and (g) and such restrictions are beyond what can be justified as in the interest of public; and

(v) the impugned enactment is likely to affect even innocent persons and is not necessarily confined in its operations to detection of tax-dodgers created by its and heavy penalty is attracted even in cases where the failure to furnish particulars might be purely unintentional or accidental.

9. We shall examine the challenge to the impugned provision in the light of theses submissions.

10. The first question which must be examined is whether the impugned provision directly and as an inevitable consequence affects the fundamental rights guaranteed to the petitioners under article 19(1) (f) and (g). So far as article 19(1)(f) is concerned, the submission on behalf of the petitioners was that a contract is property within the meaning of article 19(1)(f) and that since the particulars which a contractor is required to furnish under the impugned provision form an integral and inseparable part of the contract, such particulars are also property in the context of article 19(1)(f). The property in the shape of such particulars belongs exclusively to the parties to the contract and a statutory provision which compels a party to the contract to part with or share such property with others operates of its own force to prevent the parties from exercising the right to hold such property and the fundamental right guaranteed under article 19(1)(f) is in that manner violated. Now, it may be conceded that the word 'property' as used in article 19(1)(f) should be given a liberal and wide connotation and so interpreted it should be extended to all well recognised types of interest which have insignia or characteristic of proprietary rights. Article 19(1)(f), therefore, would apply equally to concrete as well as abstract rights of property. Even if this wide meaning of the word 'property' is borne in mind, it is difficult to comprehend how the particulars which a contractor is required to furnish under the impugned provision would fall within the connotation of the said expression. A contractor could not possibly have any proprietary right or interest in those particulars. However, even proceeding on the assumption that a contract is property and that all the material particulars relating to a contract are also property, it is still difficult to appreciate how any complaint could be legitimately made by a contractor against the impugned provision, for the said provision does not directly and as an inevitable consequence deprive the contractor of this right to hold such property. By requiring a contractor to disclose the relevant particulars to the Income-tax Officer, the impugned provision does not acquire or take possession of the contract or of its essential ingredients or contents. The contractor, even after furnishing the particulars, still retains possession therefore and can make such use of them as he likes. Even by parting with the so-called property in the shape of such particulars, the contractor does not lose it altogether. Furthermore, the income-tax department does not become a party to the contract not can it claim any interest in the contact nor any benefit thereunder. The contractor still remains interest in the contract as well as in the material particulars which form an inseparable part of the contract and even though he furnishes those particulars to the department, he still remains entitled to perform to dispose it of in the sense that, if permissible, he might assign the rights and liabilities acquired under the contract. It appears to us, therefore, that the impugned provision of its own force could not possibly be said to be in any manner infringing upon the fundamental right guaranteed to the petitioner under article 19(1)(f). It is true that the failure to furnish particulars entails penalty or fine and, in such a case, the defaulting contractor may have to part with property in the shape of money. It cannot be overlooked, however, that the penalty is incurred only on failure to comply with the impugned provisions and that the state does not make the imposition of penalty obligatory and that it leaves it to the discretion of a high officer of the status of the Commissioner of Income-tax to decide, after giving a reasonable opportunity to the defaulting contractor, whether or not penalty should be imposed in the facts and circumstances of the case. In these circumstances, it cannot be said that the impugned provision of its own force has the effect of depriving the contractor of his factors, the challenge to the impugned provision based on article 19(1)(f) must fail on the short ground that it does not, as a proximate and direct result of its operation, invade the fundamental right guaranteed thereunder.

11. The challenged based on article 19(1)(g) stands on a still weaker footing. We are unable to see how the requirement of furnishing the requisite particulars amount to an impediment in the way of carrying on of the business or trade of building contracts. It is difficult to conceive of this particulars requirement of the statute as in any manner restricting the right of such a contractor to carry on his business. The statute does not required that before entering into the contract he should furnish the requisite informations, and that unless such particulars are furnished it also does not prescribed that failure to furnish the requisite particulars would entail forfeiture of the right to carry on the business of building contractors not does it put any other impediment in the way of the carrying on of such business. Even assuming without accepting that the information of the nature which a contractor is required to furnish under the impugned provision constitute a trade secret, it is difficult to appreciate how by requiring a contractor to disclose is in any manner impended or restricted. The information is not required to be communicated to a rival businessmen nor to the State or any of its organs in its capacity as a competition in that particular breach of trade or business. The information is required to be conveyed to a taxing authority, the end in view being to plug evasion of tax. In these circumstances, in our opinion, there is no room for contending that as a proximate effect of operation of the impugned provision there is any invasion of the fundamental right to carry on trade or business guaranteed by articles 19(1)(g).

12. The petitioner must really fail in view of the foregoing conclusions. We do not, however, propose to rest our decision only on the grounds afore-mentioned. We will also examine the challenge on the assumption that the impugned provisions in some manner restricts the exercise of the right to hold property and the right to carry on business and thereby infringes upon the fundamental rights guaranteed under articles 19(1) (f) and (g). The question which must then necessarily arise for consideration is whether the impugned provision is still immune to challenge on the ground that it imposes a reasonable restriction on the exercise of those fundamental rights in the interest of general public. Now, it is well settled that the test of reasonableness has to be applied to each individual statute impugned and that there is no abstract standard or general pattern of reasonableness. In judging whether a particulars statutory provision which makes an inroad into a fundamental right is reasonable, regard must be had to the nature of the right alleged to have been infringed, the underlying purpose of the restriction imposed, the extent and urgency of the evil sought to be reminded thereby, the disproportion of the imposition, the prevailing condition at the time and such or similar factors. In the light of these considerations, the court must examine the question whether the limitation imposed on a person in the exercise of the fundamental right is reasonable and justified. Bearing in mind these well-settled principles, we must proceed to examine whether the restrictions, if any, imposed by the impugned provision are reasonable or not.

13. Now, the principal question is : what is the underlying purpose of the restriction imposed and the extent and urgency of the evil sought to be remedied thereby The answer is to be found in the affidavit-in-reply to the petitioner filed by the first respondent. In paragraphs 13 and 14 of the said affidavit, reference is made to the object behind the enactment of the impugned provision and the mischief which it was intended to remedy. The first respondent has stated that evasion of taxes has reach alarming proportions in recent years, that the tax-evaded money is ordinarily invested in house property and that attempt is made by such tax-dodgers to explain away the investments made by them in immovable property by fabricating evidence and setting up plausible stories. Such an attempt on the part of the tax-dodgers could be checked if information in relation to the building contracts comes into the possession of the tax authorities within a short time. The impugned provision has been, therefore, enacted with a view to combating tax evasion with speed and in good time and ensuring that building contractors do not omit to furnish information of furnish incorrect or belated information with regard to the contracts undertaken by them. The first respondent has further stated that the time-limit of one month for disclosure of the particulars is prescribed so that the tax authorities might get timely information regarding investment of black money in immovable properties by the affluent sections of the community and effective steps could be taken by them to detect or plug the tax evasion. Apart from what has been stated in the affidavit of the first respondent, judicial notice can be taken of the well-known fact that in our country there is considerable evasion of taxes in the higher income level group and that huge sums of unaccounted money find a safe outlet in the purchase or construction of immovable properties. The tax-evaded monies which are thus brought into circulation generate inflation and eat into the vitals of the economic life of the community. It is, therefore, in the interest of the community at large that such unaccounted monies should be unearthed and tax-evasion checked in good time. The impugned provision is evidently intended to achieve that purpose and to remedy that evil. The information which might come into the possession of the Income-tax Officer in consequence of the impugned provision would put him on guard and furnish him with some basic data or material enabling him to cause and inquiry to be made in good time with a view to finding out whether a particulars building which is intended to be put up is to be constructed with moneys the source of which is detectable. It is thus manifest that the impugned provision is enacted for tracking down persons who are believed to have evaded the payment of tax on their income. Drastic measures would be necessary to meet difficult and emergent situations and against the background of the legislature object and prevailing conditions, the impugned provisions would stand justified in itself.

14. The argument that the impugned provision is grossly disproportionate or arbitrary and is in excess of the requirement, that is, beyond what may be justified on the grounds of the interest of the general public, is difficult to appreciate. It must be brine in mind that under the impugned provision every contractor who undertake the work of constructing a building is not required to furnish the necessary particulars. The particulars are to be furnished only when the value of the contract exceeds fifty thousand rupees. This limit is high enough and exempts case of genuine small investors and also of petty contractors. Such contractors do not come within the ambit of section 285A and would not be required to furnish the particulars. It would thus appears that the legislature has with deliberate care chosen a particulars class of contractors, namely, those the value of whose contracts exceed fifty thousand rupees, since it is in the execution of those contracts that the possibility of tax-evaded monies finding an outlet is the highest. Furthermore, the legislature has also provided the time limit of one month with which such information is to be furnished by the concerned contractor. Looking to the nature of particulars which the contractors is required to furnish in the prescribed form, such time limit appears to be quite reasonable. Such information would be ordinarily handy and can be easily furnished by the contractor and as and when it is furnished, it would enable the Income-tax Officer to make proper inquiries in relation to the source of money with the aid of which the proposed construction is intended to be put up. The information so supplied would also enable of the business carried on by the contractor himself and thus help to pug evasion of tax even at his end. It is true that the failure to furnish the particulars prescribed by the substantive part of the impugned provision is made a continuing offence and the defaulting contractor is made liable to suffer penalty. However, it cannot be overlooked that such offence is punishable only with fine and that the imposition of fine is not obligatory in each and every case of default. Furthermore, there is no minimum fine prescribed and there is a two-fold restriction on the maximum fine that could be levied, first, fine not exceeding rupees fifty only could be levied for every day during which the contravention contains and, secondly, the amount of total fine imposed cannot in any event in the aggregate twenty-five per cent. of the value of the contract. The power to impose fine if given to the highest officer of the department, namely, the Commissioner of Income-tax which term includes also the Additional Commissioner of Income-tax. The Commissioner cannot impose the fine without affording to the offending contractor a reasonable opportunity of being heard and when such opportunity is afforded to him, the concerned contractor can bearing to the notice of the Commissioner the circumstances under which the default occurred. Assuming without deciding that means it is not an essential ingredient of the offence created by the impugned provision, the fact that the omission to furnish particulars was unintentional or accidental or for reason beyond the control of the contractor is a relevant matter which must enter into account in the imposition of penalty. The power to impose fine being a quasi-judicial power, it must be presumed that it would be exercised reasonably and bona fide and not arbitrarily and capriciously. The order imposing penalty is appealable to the Income-tax Appellate Tribunal under the provisions of the Act. Having regard to the foregoing discussion, it would appear that the impugned provision in its entirety meets the test of reasonableness. It is a provision enacted with the end in view of detecting large-scale evasion of taxes which is a widespread phenomenon of our economic life and the restriction, if any, which it imposes on the exercise of fundamental rights and the sanction behind it cannot be said to be of an arbitrary or excessive nature and it is justified having regard to the extent and urgency of the evil intended to be remedied thereby.

15. It was contended on behalf of the petitioner that the taxing authorities have enough powers under the Act to detect evasion of tax and that the impugned provision which adds one more weapon to their armoury is really unnecessary and unreasonable in the sense that it is in excess what is required to be enacted to meet the exigencies of the situation. In this connection, our attention was invited, inter alia, to sections 68, 69, 69A, 69B, 132, 133, 133A, 142 and 230A of the Act. The argument was that the above-mentioned provisions are potent and sufficient for the detection of evasion of tax, that some of them have been enacted specifically with a view to unearthing investment of unaccounted money in immovable property and for bringing the tax-dodger to book and that it was really not necessary to confer on the taxing authorities any additional powers, the exercise of which would inevitably result in curtailing a citizen's right to carry on his trade or business or to hold and dispose of property. We must confess that we have been unable to appreciate this argument and particularly the premises on which it is founded. It is true that the Act contains provisions which are intended to pug or detect evasion of tax and that some of the provisions referred to earlier can be invoked for detection of unaccounted money invested in immovable property. It is obvious, however, that the legislature found that those provisions in their practical working were not adequate or sufficient to meet the evil of tax evasion and it, therefore, introduced by amendment the impugned provision as ancillary to and in aid of the existing provisions. The impugned provisions operates at a different point of time and in a different situation and making investment of tax-evaded monies in real property. The legislature must be presumed to know best where the evil is at its worst and how to curb it must effectively. Merely because there are some other provisions in the Act enacted with the end in view of detection of evasion of tax, it cannot be said that the impugned provision which is enacted to meet a specific situation more effectively is either unnecessary or unreasonable. In testing whether a particulars provisions is reasonable or not what is required to be considered is whether the restriction which it imposes is arbitrary or excessive or beyond what is required in the interest of public. That test in its application to the impugned provisions is more that satisfied.

16. It was next urged that the impugned provisions was unreasonable inasmuch as it was founded on an unwarranted assumption that building contracts exceeding a particulars value provide a safe outlet for unaccounted money with the active connivance of a building contractor and that on particulars, no matter whether he is assessable to income-tax or not. Now, so far as the first prong of this argument is concerned, we have already adverted to the fact that there are good grounds to believe that substantial amount of tax-evaded money is sunk into immovable property. It is apparent that unless the contractor connives and co-operates, it would not be possible for the tax-dodger to resort to such subterfuge. It would not be correct to say, therefore, that the presumption on which the impugned provisions is founded is unwarranted. If the legislature wants to put a stop to a mode of investment of tax-evaded monies which it considers on good grounds as being widely prevalent and which is against the public interest, it cannot be legitimately said that a statute enacted by it with that end in view is founded on any unwarranted presumption against any citizen or class of citizens. As regards the second aspect of the argument it is true that the requisite information is to be furnished by a building contractor rupees irrespective of whether he is assessable to income-tax or not. Having regard to the object behind the enactment of the impugned provision, however, it is immaterial whether the contractor upon whom the duty is cast under the impugned provisions to give information is an assessee or not. It is through his medium that the legislature intends to detect the real tax-dodger and, therefore, such an obligation is cast on him. Such or similar provisions are found elsewhere in the Act and are not uncommon in a taxing statute. Furthermore, it would not be unreasonable to assume that a person who undertaken a building contract of such value would ordinarily be assessable to income-tax. Such a person could be compelled even otherwise to disclose this information in the course of his own assessment proceedings. In our opinion, therefore, the argument is devoid or merit.

17. There were the only grounds urged in support of the challenge based on articles 19(1) (f) and (g) and since, in our opinion, there is no merit in any of them, the challenge to the constitutionality of the impugned provisions based on the provisions of the said sub-articles must fail. We might clarify that though the second and third petitioners are partnership firms, we have still examined the challenge to the impugned provisions founded on article 19(1) (f) and (g) since the first petitioner, who is a partner in the said firms, has also jointed as a party petitioner.

18. That takes us to the challenge to the impugned provisions founded on articles 14. The arguments urged on behalf of the petitioner in support of this challenge was that the impugned provisions makes an unjust discrimination between persons constituting the single class of evaders of tax as well as of converse of evasion of tax. It was submitted that unaccounted money found a safe resting place not only in immovable property but also in various other types of investments such as jewellery, luxury articles, havala entries, etc., and that all person who connived at and actively assisted or indulged in such practices were liable to be meted out an equal treatment. The impugned provision, however, discriminates such persons by distinguishing building contractors from the rest and subjecting them to a special procedure and rigorous penalty in case of default. According to the petitioner, to single out building contractors and to impose upon them the obligation to furnish requisite information to the Income-tax Officer on pain of penalty amounts to meting out to them a discriminatory treatment which was not justifiable on any rational basis.

19. Now, it is well settled that article 14 forbids class legislation but not reasonable classification in making laws. The test of permissible classification under an Act lies in two cumulative conditions : (i) classification under the Act must be founded on an intelligible differential distinguishing persons, transactions or things grouped together from others left out of the group, and (ii) the differentia must have a rational relation to the object sought to be achieved by the Act. There must be a nexus between the basis of classification and the object of the Act. The legislature need not extend the regulation of a law to all cases it may possibly reach and may make a classification founded on practical grounds of convenience or experience. The court in examining the validity of a statute challenged as infringing the equality clause should make an assumption that there is a reasonable classification and that the classification has a rational relation to the object sought to be achieved by the status. Moreover, the impugned provisions finds place in a taxing statute and it has been enacted in exercise of the legislature power conferred under a taxing entry. Though the impugned provision does not by itself impose any tax, it is enacted to cover a matter incidental or ancillary to the imposition to tax, namely, to detect and prevent evasion of tax. It is, therefore, an integral part of a taxing statute and a necessary corollary to the provisions relating to the levy and collection of tax. It is as much a part of the overall schemed of taxation as the charging section or the sections which deal with computation of tax or exemptions. The constitutional validity of such a provision in the context of article 14 must, therefore, be tested on the same anvil on which the validity of the provisions dealing with the levy, computation of collection of tax might be tested. Now, while considering whether a taxing law is discriminatory or not, two things have to be borne in mind. In the first place, the courts recognise in the legislature considerable degree of elasticity in the choice of the object of taxation, manner of taxation and determination of tastes of tax. The power to select the object of taxation or the mode of taxation or the rate of tax is ordinarily very wide and it is only when within the range of its selection the law operates unequally that it would be struck down as offending the guarantee of the equality clause. In the next place, the burden to establish discrimination in the case of a taxing statute is all the more heavier and the person alleging discrimination must negative every conceivable basis on which such a statute might be supported. He must conclusively establish not merely the possibility of inequality but hostile unequal treatment. (See East Indian Tobacco Co. v. State of Andhra Pradesh, Twyford Tea Co. v. State of Kerala and V. J. Ferreira v. Municipal Corporation of Greater Bombay).

20. Now, against the background of the aforesaid principles, the question which arises for consideration is whether the challenge based on article 14 is well-founded. We have, while dealing with the challenge under article 19(1) (f) and (g), adverted to the object behind the enactment of the impugned provisions and pointed out that it is with a view to combating tax evasion with speed and in good time and tracking down investment of unaccounted monies in immovable properties that this section has been enacted. If the legislative object behind the enactment of the impugned section is borne in mind, it would apparent that building contractors would naturally be the best medium through whom the evasion practiced in that manner can be detected. There is, therefore, an intelligible differentia on the basis of which the classification of building contractors is made. Furthermore, such differentia has rational relation to the object sought to be achieved by the impugned provision. That apart, there is really no basis for holding that building contractors have been subjected to any hostile unequal treatment. If the legislature can validly pick and choose one or more classes of commodities or person for taxation or apply different rates of taxation to different classes of commodities and persons and if such exercise of power by the legislature would not be open to attack under article 14, the same result must follow when having learned by experience that huge sums of tax-evaded monies find a safe outlet in the construction of immovable properties, it picks out a class of persons and through its medium aims at detecting such evasion of tax by timely action. The legislature has an affirmative responsibility and it is its duty to adopt measures to strike at the evil of tax evasion and it must have freedom to choose the class of persons through whom such evasion can be effectively combated and subject such class to special procedure or treatment. Such legislation cannot be struck down on the ground that it metes out hostile unequal treatment. In our opinion, the petitioners have failed to discharge the heavy burden which law upon them to sustain the challenge to the impugned provisions based on article 14 and the contention urged in that behalf must be rejected.

21. Before we part with the matter, we must take action on one more argument which was pressed into service of the petitioners in support of the challenge under article 14 as well as under article 19. The argument was that the impugned provisions cannot be treated as incidental or ancillary to the main provisions and that, therefore, it could not be said to have any rational nexus with the main provisions of the statuer. In support of this argument, reliance was placed on the decision of the Supreme Court in Check Post Officer, Coimbatore v. K. P. Abdulla and Bros. The question which arose for consideration before the Supreme Court in that case was whether section 42(3) of the Madras General Sales Tax Act, 1969, which empowered the Check Post Officer to confiscate goods or levy penalty in lieu of confiscation when in respect of goods found in a vehicle the driver of the vehicle was not carrying with him the documents specified in the said section, was within the legislature competence of the State legislature. The Supreme Court made reference to entry 54 of List II of the Seventh Schedule to the Constitution which authorises the State legislature to legislate in respect of taxes on the sale or purchase of goods and observed that the power to confiscate goods in the circumstance sanctioned in the impugned section was not comprehended within the particulars legislative entry even if the widest import and signification was given to the same and even if it was assumed that it conferred upon the legislature the power to legislate for matters ancillary or incidental including provisions for preventing evasion of tax. The Supreme Court pointed out that by sub-section (3) of section 42 the officer-in-charge of the check post or barrier had power to seize and confiscate any goods which were carried in any vehicle provided they were not covered by the document specified in the there sub-clauses of the said sub-section. In enacting this provision, the legislature assumed that all goods carried in a vehicle near a check post were goods which were sold within the State of Madras and in respect of which liability to pay sales-tax had arisen and the provisions enacted on such an assumption was unwarranted. The Supreme Court then observed :

'In any event the power conferred by sub-section (3) to seize and confiscate and to levy penalty in respect of all goods which are carried in a vehicle whether they are sold or not is not incidental or ancillary to the power to levy sales-tax. A person carrying his own goods even as personal luggage from one State to another or for consumption, because he is unable to produce the documents specified in clauses (i), (ii) and (iii) of sub-section (3) of section 42, stands in danger of having his goods forfeited. Power under sub-section (3) of section 42 cannot be said to be ancillary or incidental to the power to legislature for levy of sales-tax.'

22. We are unable to see how this decision can help the petitioners in the present case. In the first place, the question before the Supreme Court was with regard to the legislature competence to enact a provisions which resulted in seizure and confiscation of goods merely on the assumption that those goods were transported after sold within the State. It is in this context that the Supreme Court observed that such a power could not be said to be incidental or ancillary to the power to levy sales-tax. In the present case, we are concerned with a wholly different question, namely, whether the impugned provision violates article 19 or article 14 of the Constitution. The decision cannot, therefore, have any direct bearing on the question which falls for our consideration and the argument founded thereon is somewhat misconceived. In the next place, the provision with which we are concerned does not deal with or confer powers of the nature which were conferred by section 42(3) of the Madras Act. This is not the case where on the basis of any presumption made by the legislature a penalty such as seizure or confiscation or penalty in lieu of confiscation is sought to be levied. The impugned provisions is made on the basis of a well-known fact which is a matter of common knowledge and common report and all that it requires a building contractor to do is to furnish prescribed particulars within the stipulated time limit on the pain of penalty with a view to detecting evasion to tax. Such a provisions is clearly incidental or ancillary to the power to levy tax because the power to enact a provisions for preventing evasion of tax is always an incidental power. In fact, the challenge leveled to the impugned provisions on the ground of legislature incompetence has not even been pressed in the present case. In these circumstances, in our opinion, it could hardly be contended that the impugned provisions being not incidental or ancillary to the main power to tax income which is conferred by the Act, it is no nexus with the statute in question.

23. These were the only argument which were urged before us at the hearing of the petition and since there is no merit in any of them, the petition fails and is dismissed. Rule discharged with costs.

24. Petition dismissed.


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