H.R. Khanna, J.
(1) In this petition under Articles 226 and 227 of the Constitution of India filed by registered firm Messrs Jain Brothers and its four partners against Union of India respondent No. 1, Central Board of Direct Taxes respondent No. 2, Shri B. L. Dhawan Income-tax Officer respondent No. 3 and Shri T. P. Jhunjhunwala, Appellate Assistant Commissioner respondent No. 4, the petitioners have, inter alia, challenged the virus of clause (g) of sub-section (2) of section 297 and sub-section (2) of section 271 of the Income-Tax Act, 1961 (43 of 1961), (hereinafter referred to as the Act of 1961).
(2) Petitioner No. 1 is a firm carrying on business in Delhi and has been registered under section 26A of the Indian IncomeTax Act, 1922 (11 of 1922), (hereinafter referred to as the Act of 1922). For the assessment year 1960-61 (account year ending October 31, 1959) a notice dated May 14, 1960 under sub-section (2) of section 22 of Act of 1922 was served by the Income-Tax Officer on May 26, 1960 calling upon petitioner No. 1 to submit a return of income to be filed within 35 days of the service of the notice. The return was thus due by June 30, 1960. The petitioner did nto file the return within the time allowed in the notice. Notice under sub-section (4) of section 22 of Act of 1922 was there
(4) The petitioner has been registered by respondent No. 3 and a return has been filed on his behalf. Notice was also ordered to be issued to the Attorney General of India. No one has, however, appeared on behalf of the Union of India or the Attorney General.
(5) The main contentions, which have been raised on behalf of the petitioners, are :
(1)As the petitioners submitted their return on November 18, 1961 before the coming into force on April I, 1962 of Act of 1961, penalty could be imposed upon the petitioners only under the provisions of section 28 of Act of 1922 and nto under section 271 of Act of 1961. The assessment having been completed under the Act of 1922, the proceedings for imposition of penalty could also be under that Act and nto under the Act of 1961. The provisions of clause (g) of sub-section (2) of section 297 of Act of 1961, upon which the revenue relied in order to invoke the provisions of Act of 1961, are vocative of Article 14 of the Constitution.
(2)The provisions of sub-section (2) of section 271 of Act of 1922 too are vocative of Article 14 of the Constitution inasmuch as a discrimination is made against registered firms in the matter of calculation of penalty.
(3)Assuming that clause (g) of sub-section (2) of section 297 and sub-section (2) of section 271 of Act of 1961 are infra vires, the Income-Tax Authorities cannto apply Section 271 of Act of 1961 for the imposition of penalty as those provisions do nto cover a case like the present
(6) So far as the assessment order made on November 23, 1964 is concerned, the learned counsel for the petitioners has stated that though the petitioners are content with that orders, they want to challenge the validity of the aforesaid order also in order to seek redress against the order imposing penalty. In respect of the last contention about the validity of the assessment order dated November 23, 1964, we have formed the view, after hearing the learned counsel for the parties, that the petitioners should nto be allowed to agitate the same in these proceedings. The present writ petition was filed on August 26, 1967, more than 2' years after the making of the said order, and there is no cogent Explanationn for the inordinate delay. We are also nto impressed by the argument that the order imposing penalty confers a right on the petitioners to challenge the assessment order dated November 23, 1964 even though initially they were nto aggrieved against that order. The order imposing penalty undoubtedly arises out of the assessment proceedings culminating in the order dated November 23, 1964. We, however, fail to understand as to how the petitioners can be said to get a fresh cause of action to assail that assessment order because of the imposition of penalty on them. In view of the inordinate delay we have come to the conclusion that in exercise of our discretion we should nto allow the petitioners to assail the assessment order dated November 23, 1964 in this writ petition.
(7) We may also at this stage dispose of a preliminary objection raised by Mr. Kirpal on behalf of the Income-Tax authorities that the remedy of the petitioners, in case they are aggrieved with the order imposing penalty, is to seek redress through the hierarchy of Tribunals created by the Income-Tax Act. In this connection we find that the petitioners, while assailing the order dated November 19, 1966 imposing penalty, has challenged the virus of clause (g) of sub-section (2) of section 297 and sub-section (2) of section 271 of Act of 1961. The three authorities under the Income-Tax Act-the Income-Tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal-are creatures of the Act and have to function there under. The question of the virus of any provision of law, under which they have to function, is outside the scope of their jurisdiction. As no question of virus of the provisions of the Act can arise out of the Tribunals' order, the High Court cannto go into such a question on a reference made by the Tribunal. A writ petition under Article 226 of the Constitution can, thereforee, be considered to be a proper remedy for a petitioner who seeks to challenge an order by questioning the virus of the provisions under which the order is made. We may in this context refer to the observations of their lordships of the Supreme Court in the case of K. S. Venkataraman and Co. (P) Ltd. v. State of Madras wherein it was held by the majority that an authority created by a statute cannto question the virus of that statute or any of the provisions thereof whereunder it functions. It must act under the Act and nto outside it. Again in the case of Car! Still G.m.b. H and another v. The State of Behar and others, it was held :
'THAT where proceedings are taken before a tribunal under a provision of law, which is ultra vires, it is open to a party aggrieved thereby to move the court under Article 226 for issuing appropriate writs for quashing them on the ground that they are incompetent, without his being obliged to wait until those proceedings run their full course.'
(8) The preliminary objection raised by Mr. Kirpal must, thereforee be repelled. Of course so far as the quantum of penalty and the question whether there was sufficient cause for the petitioners justifying the delay in the filing of the return, are matters which cannto be gone into these proceedings but would have to be agitated in the appeal which has been filed by the petitioners before the Appellate Assistant Commissioner. This position has nto been disputed by Mr. Karkhanis on behalf of the petitioners.
(9) Before dealing with the contentions advanced on behalf of the petitioners, it would be appropriate to reproduce the relevant provisions of law. Section 22 of Act of 1922 dealt with the return of income. Sub-section (2) of that section, with which we are concerned, read as under :-
'(2)In the case of any person whose total income is, in the Income-tax Officer's opinion of such an amount as to render such person liable to income-tax, the Income-tax Officer may serve a notice upon him requiring him to furnish, within such period, nto being less than thirty days, as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice) his total income and total world income during the previous year: Provided that the Income-Tax Officer may 'in his discretion extend the date for the delivery of the return.'
(10) Section 23 of the Act made provision for assessment. Section 28 made provision for penalty, infer aha, for failure to furnish the return within the time allowed. The operative part of subsection (1) of that section reads as under :-
'(1)If the Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, in the course of any proceedings under this Act, is satisfied that any person- (a) has without reasonable cause failed to furnish the return of his total income which he was required to furnish by notice given under sub-section (1) or sub-section (2) of section 22 or section 34 or has without reasonable cause failed to furnish it within the time allowed and in the manner required by such notice, or (b) has without reasonable cause failed to comply with a notice under sub-section (4) of section 22 or sub-section (2) of section 23, or (c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income,, he or it may direct that such person shall pay by way of penalty, in the case referred to in clause (a), in addition to the amount of the income-tax and super-tax, if any, payable by him, a sum nto exceeding one and a half times that amount, and in the cases referred to in clauses (b) and (c), in addition to any tax payable by him, a sum nto exceeding one and a half times the amount of the income-tax and super-tax, if any, which would have been avoided if the income as returned by such person had been accepted as the correct income :'
(11) There follows as proviso, clause (d) of which reads as under :
'(D)when the person liable to penalty is a registered firm or an unregistered firm which has been assessed under clause (b), of sub-section (5) of section 23, then, notwithstanding anything contained in the other provisions of this Act, the amount of incometax and super-tax payable by the firm itself shall be taken to be an amount equal to the tax which would have been payable by an unregistered firm on an income equal to the firm's total income, and, in the cases referred to in clauses (b) and (c),. the amount of the income-tax and super-tax which would have been avoided if the income as returned had been accepted as the correct income, shall be taken to be the difference between the amount of the tax which would have been payable by an unregistered firm on an income equal to the firm's total income and the amount of the tax payable by an unregistered firm on an income equal to the income of the firm as actually returned by the firm.'
(12) SUB-SECTION (6) of the section provides :
'(6)The Income-tax Officer shall nto impose any penalty under this section without the previous approval of the Inspecting Assistant Commissioner.'
(13) It may be stated that sections 22,23 and 28 in the Act of 1922 are all contained in one Chapter which comprises sections 18 to 39, and is entitled 'Deductions and Assessment.'
(14) In the Act of 1961 Chapter 14 provides for procedure for assessment. Section 139, which is contained in that Chapter, deals with the return of income. Sub-section (2) of that section provides :
'(2)In the case of any person who, in the Income-tax Officer's opinion, is assessable under or on the total income of any other person during the previous year, the Income-tax Oicer may, before the end of the relevant assessment year, serve a notice upon him requiring him to furnish, within thirty days from the date of service of the notice, a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed: Provided that on an application made in the prescribed manner the Income-tax Officer may, in his discretion, extend the date for the furnishing of the return, and when the date for furnishing the return, whether fixed originally or on extension, falls beyond the 30th day of September or, as the case may be, the 31st day of December of the assessment year, the provisions of sub-clause (iii) of the provision to sub-section (1) shall apply.'
(15) Section 141 of the Act deals with provisional assessment, section 143 with regular assessment and section 144 with best judgment assessment. Chapter 21 of Act of 1961 deals with penalties imposable under the Act and comprises sections 270 to 275 Sub-section (1) and (2) of section 271 of the Act provide (After reading sub-section (1) and (2) of Section 271, His Lordship proceeded:
(16) According to section 275 no order can be passed after the expiration of two years from the date of the completion of the proceedings in the course of which the proceedings for imposition of penalty have been commenced. Section 297 of Act of 1961 has a material bearing. Sub-section (1) as well as clauses (a) to (g) of sub-section (2) of section 297, with which we are concerned, reads as under :-
[AFTER reading sub-section I and relevant clauses of sub-section (2), His Lordship farther proceeded as under :]
(17) Plain persual of the provisions of clauses (f) and (g) of sub-section (2) of section 297 shows that where an assessment has been completed before the 1st day of April, 1962, any proceeding for the imposition of penalty may be initiated and the penalty imposed under the Act of 1922. Where, however, an assessment is completed on or after the 1st day of April, 1962, even though it relates to the year ending on the 31st day of March, 1962, or any earlier year, the proceedings for imposition of penalty would have to be initiated and the penalty imposed under the provisions of Act of 1961.
(18) Mr. Karkhanis on behalf of the petitioners has urged that as the return of income was filed by the petitioners before the commencement of Act of 1961, proceedings for imposition of penalty can only be taken under the Act of 1922 in accordance with clause (a) of sub-section (2) of section 297. The proceedings about the imposition of penalty, it is submitted, are a continuation of proceedings of original assessment order. Reference in this connection is made to the observations in the case of Commissioner of Income-Tax, Madras v. S. Sivaramakrishna lyer to the effect that penalty proceedings are merely a continuation of the original assessment orders. Reference has further been made to the case of C. A. Abraham v. Income tax Officer, Kottayam, and another wherein it was held by their Lordships of the Supreme Court that penalty under section 28 of Act of 1922 is the liability to pay additional tax in view of the dishonest contumacious conduct of the assessed. Although there can be no dispute so far as the proposition is concerned that penalty is the liability to pay additional tax for dishonest contumacious conduct of the assessed, we are unable to accept the contention advanced on behalf of the petitioners that as the petitioners had filed their return before the coming into force of the Act of 1961 the proceedings for imposition of penalty can only be under the Act of 1922. Clause (a) of sub-section (2) of section 297, on which reliance has been placed on behalf of the petitioners, deals with proceedings for assessment of a person, while clauses (f) and (g) specifically deal with proceedings for imposition of penalty. Clause (g) make it clear that if the assessment is completed on or after the 1st day of April, 1962, the proceedings would have to be initiated and the penalty imposed under the Act of 1951 even though the penalty relates to an assessment for a year preceding the 1st day of April, 1962. It is a well established rule of the interpretation of statutes that a general provision must yield to a special provision providing for particular cases. As clause (g) makes a specific provision for proceedings for imposition of penalty in respect of assessments completed on or after the 1st day of April, 1962 no resort, in our opinion, can be made to the provisions of clause (a). For the same reason the provisions of clause (c), to which also reference has been made on behalf of the petitioners, would nto be applicable.
(19) We may at this stage refer to the difference in the provisions of the Act of 1922 and those of Act of 1961 in respect of non furnishing or late furnishing of the return. According to section 28 of Act of 1922 penalty could be imposed by Income-tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal. In the case of Income-tax Officer, it was provided that he could impose penalty only with the previous approval of the Inspecting Assistant Commissioner. In the Act of 1961 the only two authorities, which can take action for imposition of penalty, are the income-tax Officer and the Appellate Assistant Commissioner. The power, which was vested in the Appellate Tribunal, has been taken away. The requirement of previous approval of the Inspecting Assistant commissioner in the case of orders made by Income-Tax Officer has been dispensed with. Although the Act of 1922 did nto provide any limitation for an order imposing penalty, the Act of 1961 prescribed a period of two years from the date of completion of proceedings for the purpose. So far as the quantum of penalty is concerned, the Act of 1922 prescribed that it should nto exceed one and a half times the amount of income-tax and super-tax. The Act of 1961 fixes it 'at a sum equal to two per cent. of the tax for every month during which the default continued, but nto exceeding in the aggregate fifty per cent. of the tax.'
(20) Coming to the main contention advanced on behalf of the petitioners that clause (g) of sub-section (2) of section 297 of Act of 1961 is vocative of Article 14 of the Constitution, we may observe that the following principles are now well-established :
(1) Article 14 forbids class legislation but does nto forbid classification. Permissible classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group, and the differentia must have a rational relation to the object sought to be achieved by the statute in question.
(2)In permissible classification mathematical nicety and perfect equality are nto required. Similarity, nto identity of treatment, is enough.
(3)There is always a presumption in favor of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles.
(SEER am Krishna Dalmia v. Shri Justice S.R. Tendolkar and others')
(4)If there is equality and uniformity within each group, the law will nto be condemned as discriminative, though due to some fortuitous circumstances arising out of a peculiar situation some included in a class get an advantage over others, so long as they are nto singled out for special treatment. Taxation law is nto an exception to this doctrine. But in the application f the principles, the Courts in view of the inherent complexity of fiscal adjustment of diverse elements, permit a larger discretion to the Legislature in the matter of classification, so long it adheres to the fundamental principles underlying the said doctrine. The power of the Legislature to classify is of wide range and flexibility so that it can adjust its system of taxation in all proper and reasonable ways.
(SEEK hading Sham Bhat v. Agricultural Income-tax Officer, Kassaragod and another.
(21) Keeping the above principles in view, we find no violation of Article 14 by enactment of the provisions of clause (g) of subsection (2) of section 297 of Act of 1961. As stated above, penalty has to be calculated and imposed according to the tax assessed and its quantum is linked with the amount of tax. The imposition of penalty, in the circumstances, must necessarily follow the assessment. The question of imposition of penalty would thus arise only after the assessment has been completed. The legislature in clause (f) and (g) has put, for the purpose of imposition of penalty, cases in which the assessment had been completed before the coming into force of Act of 1961 under one classification. So far as the former cases are concerned, it is provided that they would be governed by Act of 1922, while the latter cases would be governed by Act 1961. The above classification is founded on an intelligible differentia and has a rational relation to the object sought to be achieved by the statute in question, and in our opinion it satisfies the conditions of permissible classification. It cannto be disputed that so far as the cases are concerned in which assessment was made after the coming into force of Act of 1961 they have been all treated alike.
(22) In the case of Rao Shiv Bahadur Singh v. State of Vindhya Pradesh it was observed-
'..........BUTthere is no reason why pending proceedings cannto be treated by the legislature as a class by themselves having regard to the exigencies of the situation which such pendency itself calls for. There can arise no question as to such a saving provision infringing Article 14 so long as no scope is left for any further discrimination inter se as between persons affected by such pending matters.'
(23) If pending cases can be treated as a class by themselves, we fail to understand as to how cases, in which the assessment is completed after the coming into force of Act of 1961, cannto be treated as a class different from those in which assessment is completed before the coming into force of that Act. A case more in point is M/s. Hathishing . v. Union of India and another wherein the constitutional validity of section 25 Fff of Industrial Disputes Act, 1947, was assailed. According to that section a distinction was made between employers, who closed their undertakings on or before November 27 (28), 1956, and those, who close their undertakings after that date. ft was urged that the above provision was vocative of Article 14 of the Constitution. Repelling this contention. Shah, J., who spoke for the Court, observed-
'ARTICLE 14 of the Constitution is nto violated by making by law a distinction between employers who closed their undertakings on or before November 27, (28) 1956, and those who close their undertakings after that date. The State is undoubtedly prohibited from denying to any person equality before the law or the equal protection of the laws, but by enacting a law which applies generally to all persons who come within its ambit as from the date on which it becomes operative, no discrimination is practiced. When Parliament enacts a law imposing a liability as flowing from certain transactions prospectively, it evidently makes a distinction between those transactions which are covered by 'Act and those which are nto covered by the Act, because they were completed before the date on which the Act was enacted. This differentiation, however, does nto amount to discrimination, which is liable to be struck down under Article 14. The power of the legislature to impose civil liability in respect of transactions completed even before the date on which the Act is enacted does nto appear to be restricted. If, as is conceded-and in our judgment rightly-by a statute imposing civil liability in respect of post enactment transactions, no discrimination is practiced, by a statute which imposes liability in respect of transaction which have taken place after a date fixed by the statute, but before its enactment, it cannto be said that discrimination is practiced. Article 14 strikes at discrimination in the application of the laws between persons similarly circumstanced; it does nto strike at a differentiation which may result by the enactment of a law between transactions governed thereby and those which are nto governed thereby.'
(24) It is, however, contended on behalf of the petitioners that the above classification would depend upon the sweet-will of the Income-tax Officer because an Income-tax Officer may complete assessment in some cases before April 1, 1962 and in other cases after that date. This argument, in our opinion, would nto detract from the validity of the above classification. The Income- tax officers are expected to dispose of cases with expedition and promptness. If on the facts of a case it is proved that an Income-tax Officer has deliberately delayed the completion of assessment proceedings in order to bring the case within the ambit of clause (g), the assessment itself would be struck down as mala fide. The bare possibility of some Income-tax Officer deliberately delaying the disposal of a case would nto induce us to hold clause (g) as vocative of Article 14 of the Constitution. We, thereforee, reject the contention that clause (g) of sub-section (2) of section 297 contravenes Article 14 of the Constitution.
(25) The next contention of the petitioners relates to the virus of sub-section (2) of section 271 of Act of 1961. It is urged that in the case of assesseds other than registered firms the maximum penalty cannto exceed in the aggregate fifty percent. of the tax of the assessed, while in the case of registered firms the maximum penalty is nto linked with the tax assessed on the registered firms. On the contrary, it is provided, the penalty imposable for registered firm shall be the same as would be imposable on that firm if that firm were an unregistered firm. The registered firms are thus stated to have been discriminated against, and it is urged that this is vocative of Article 14 of the Constitution. There is no force in the above contention. It is well established that a firm is a compendious name of the partners constituting it. For the purpose of Income-tax Act, a registered firm has however, been treated as an entity liable to tax. Although the legislature has provided a special reduced rate of tax for the registered firms , the matter of penalty the legislature has directed that the penalty imposable on a registered firm shall be the same amount as would be imposable on that firm if it were an unregistered firm. We are unable to subscribe to the view that the above provision contravenes Article 14 of the Constitution. There can be nothing to prevent the legislature from giving the benefit of a reduced rate to a registered firm for the purpose of tax but nto in the matter of penalty.
(26) Coming to the last contention advanced on behalf of the petitioner that Section 271 of Act of 1961 cannto apply to a case like the present, we may observe that if the section had stood by itself it could have been argued that the provisions of this section are nto strictly applicable to a case like the present because the section talks of non-compliance with a notice under subsection (2) of section 139 of Act of 1961 and nto of notice under sub-section (2) of section 22 of 1922. The fact, however, remains that the two provisions are pri materia. Clause (g) of subsection (2) of section 297 appears to have been enacted with a view to overcome the above difficulty. To accede to the submission made on behalf of the petitioners would have the effect of rendering the provisions of clause (g) of sub-section (2) of section 297 of Act of 1961 otiose and nugatory. The contention advanced on behalf of the petitioners is similar to that advanced in the case of Income-Tax Officer, A-Ward, Agra, and others v. Firm Madan Mohan Damma Mal and another. The contention was repelled by Bishambhar Dayal J. in following words:-
'IN this connection another contention of the learned counsel may be considered. The contention is that on the words of section 271, failure to file 'a return must be under section 139 of the new Act. Butin the case of a return for previous years before the 1st day of April, 1962, S. 139 was nto applicable. This argument does nto appeal to me because section 297(2)(g) expressly provides that procedure under the new Act will be applicable. Section 271 of the Act, thereforee, although does nto apply by its own force but is made applicable by virtue of section 297(2)(g) and that being so, section 271 must be taken to be applicable in spite of its specific language being inapplicable. If the provisions of section 271 had been applicable by their own force, section 297(2)(g) would have been unnecessary. The very purpose of inserting that provision is to make section 271 applicable when by its own language it does nto apply. I, thereforee, see no force in this argument either.'
(27) We are in respectful agreement with the above observations.
(28) We are also fortified in the view we have taken in the matter by the decision of Madhya Pradesh High Court in the case Kishanlal v. Commissioner of Income-Tax, M.P. The head note of that case, which is based upon the body of the judgment, reads as under :-
'AN assessed is liable to penalty under section 271(1) of the Act of 1961 for defaults referred to in section 28 (1) of the Act of 1922 in respect of any assessment, for the year ending on March 31, 1961, or any earlier year, which is completed on or after April 1, 1962. Since section 271(1) of the Act of 1961 applies to defaults of an assessed committed before April 1, 1962, the period during which the default continued in clause (i) of section 271(1) would include a period prior to April 1, 1962.'
(29) Reliance on behalf of the petitioners has been placed upon two cases Shakti Offset Works v. Inspecting Assistant Commissioner of Income-Tax, Nagpur, and another decided by Nagpur Bench of Bombay High Court, and S. C. Magavi, Haven v. Commissioner of Income-Tax decided by Mysore High Court, in which a contrary view was taken. For the reasons stated above, we are unable to agree with the view expressed by the learned Judges in these two cases.
(30) Reference has also been made on behalf of the petitioners to a case Sheth Gunvantalal Mangoldas and others v Commissioner of Income-fax, Gujarat decided by Gujarat High Court. The facts of that case are clearly distinguishable and the petitioners, in our view, cannto derive any assistance from the above authority. The said case related to a demand for advance payment under section 18A of Act of 1922 and an order or provisional assessment under section 23B of that Act. It was held in that case that the demand of advance payment of tax under section 18A and the passing of an order of provisional assessment under section 23B are different stages in the comprehensive procedure for imposing the tax liability upon the assessed. Where a notice of demand of advance tax was issued prior to the 1st day of April. 1962, penalty for non-payment of Installment can be imposed only under Act of 1922.
(31) As a result of the above, the petition fails and is dismissed, but, in the circumstances of the case, we leave the parties to bear their own costs.