N. VINODKUMAT & CO. VS UNION OF INDIA, 2000 PTD-KARNATAKA-HIGH-COURT-INDIA 3347 (1998)

Income-tax---

----Company---Return--Compulsory audit of accounts---Different dates fixed for companies for obtaining audit report or for submitting return vis-a-vis non-companies---Constitutional validity of provisions---Companies constitute a different class---Provisions not discriminatory and violative of Art. 14-- Provisions valid---Indian Income Tax Act, 1961, Ss. 44-AB, `139(1) & 271-B---Constitution of India, Art. 14.

On the question whether prescribing different dates for obtaining the audit report under section 44AB of the Income Tax Act, 1961, or prescribing different dates for filing the return under section 139(1), for companies vis-a- vis non-companies is discriminatory and violative of Article 14 of the Constitution of India.

Held, that in the case of companies even the time-limit- for filing return, where provisions of section 44AB are not applicable, is December 31, which has now been changed to November 30. A company even after the audit has to get the accounts approved and, therefore, the general date for filing return is at a later date. Therefore, in the case of a company it has been considered by Parliament to fix a date subsequent to that which is available to the other assessee. Persons other than the companies are not required to follow the procedure prescribed under the Companies Act, 1956, where some delay may take place. Companies constitute a separate class by themselves and, therefore, if Parliament has prescribed different dates for obtaining report or filing return, it cannot be said that the other assessees are of the same group as a company is. Classification of a company and other assessee is a reasonable classification as companies constitute a, different class. There are other provisions under the Act, where different treatment is being given to companies. Since companies themselves constitute a different class, prescribing different dates for obtaining audit report under section 44AB or prescribing different dates for filing return under section 139(1) cannot be considered to be violative of Article 14 of the Constitution of India.

Abhay Kumar & Co. v. Union of India (1987) 164 ITR 148 (Raj.); Mohan Trading Co. v. Union of India (1985) 156 ITR 134 (MP); Nataraj (T:S.) v. Union of India (1985) 155 ITR 81 (Kar.); Rajkot Engineering Association v. Union of India (1986) 162 ITR 28 (Guj.); Sarma (A.S.) -v. Union of India (1992) 175 ITR 254 (AP); Sathya Moorthy. (R.) v Union of India (1991) 189 ITR 491 (Mad.); State of Gujarat v. Shri Ambica Mills Ltd. (1974) 45 ITR 381, and AIR 1974 SC 1300 fol.

R. Rama Murthy for Petitioners.

K.H. Kalmath for Vasan Associates and Seshachala for respondents.

JUDGMENT

The validity of the provisions of sections 271-B, 44-AB and 139(1) of the Income Tax Act, 1961, have been assailed in these petitions. The petitioners are aggrieved by fixing different dates in obtaining the audit report for the companies vis-a-vis non-companies. It is submitted that the persons whose accounts are to be audited constitute one group and liability under section 44-AB have been cast where sales, turnover or bills, receipts exceeds rupees 40 lakhs in the previous year. It is submitted that all the assessees which fall in that category constitute one category and there cannot be a further discrimination regarding different dates in furnishing the return.

The Explanation to section 44AB defines the specific dates in relation to the accounts of the previous year or years relating to the assessment year means the date of expiry of foul months from the end of the previous year or, where there is more than one previous year, from the end of the previous year which expired last before the commencement of the assessment year, or June 30 of the assessment year, whichever is later. This definition was amended by the Finance Act of 1988 and now a "specified date" in relation to the accounts of the previous year for companies has been mentioned as December 31., and in other cases October 31 of the assessment year. This date of December 31, was further changed to November 30, by the Finance Act of 1994. Section -139(1) prescribes the time limit for filing return which is to be filed on the due date. Explanation 1 has defined "due date" in the case of a company as December 31, of the assessment year which has now been changed to November 30. In the case of assessee other than a company where the accounts are required to be audited the return is to be filed by October 31. Where the assessee is carrying on business or profession the return has to be filed by August 30, and in other cases, the last date for furnishing return is June 30.

Reliance is placed on the judgment given by the apex Court in the case of State of Gujarat v. Shri Ambica Mills Ltd. (1974) 45 FJR 381; AIR 1974 SC 1300, wherein the following observations are made (page 1313 of AIR 1974 SC and page 400 of 45 FJR):

"53. A reasonable classification is one which includes all who are similarly situated and none who are not. The question then is: what does the phrase 'similarly situated' mean? The answer to the question is that we must look beyond the classification to the purpose of the law. A reasonable classification is one which includes all persons who are similarly situated with respect to the purpose of the law. The purpose of a law may be either the elimination of a public mischief or the achievement of some positive public good.

54. A classification is under-inclusive when all who are included in the class are tainted with the mischief but there are others also tainted whom the classification does not include. In other words, a classification is bad as under-inclusive when a State benefits or burdens persons in a manner that furthers a legitimate purpose but does not confer the same benefit or place the same burden on others who are similarly situated. A classification is over inclusive when it includes not only those who are similarly situated with respect to the purpose but others who are not so situated as well. In other words, this type of classification imposes a burden upon a wider range of individuals than are included in the class of those attended with mischief at which the law aims. Herod ordering the death of all male children born on a particular day because one of them would some day bring about his downfall employed such a classification."

Section 271-B provides that if any person fails to get his accounts audited in respect of any previous year or years relating to an assessment year or obtain a report of such audit as required under section 44-AB etc., a penalty equal to one-half per cent of the total sales, turnover or gross receipts or one hundred thousand rupees whichever is less is prescribed.

The entire argument of learned counsel for the petitioner is on the basis that when the company and other assessees constitute one class, providing different dates for obtaining report or submitting the return is discriminatory and violative of Article 14 of the Constitution.

Arguments of both learned counsel have been heard. In the case of companies even the time limit for filing return, where the provisions of section 44AB are not applicable, is December 31, which has now been changed to November 30. A company even after the audit had to get the accounts approved and, therefore, the general date for filing return is at a later date. Therefore, in the case of a company it has been considered by Parliament to fix a date subsequent to that which is available to the other assessee. Persons other than companies are required to follow the procedure prescribed under the Companies Act where some delay may take place. Companies constitute a separate class by themselves and, therefore, if Parliament has prescribed different dates for obtaining report or filing return, it cannot be said that the other assessees are of the same group as a company is. Classification of a company and other assessees is a reasonable classification as the company constitutes a different class. There are other provisions under the Act where different treatment is being given to companies. Since a company itself constitutes a different class, prescribing different dates for obtaining report under section 44AB or prescribing different dates for filing return cannot be considered to be violative of Article 14 of the Constitution of India.

The provisions of section 44AB were held not violative of Articles 14 and 19 of the Constitution by this Court in the case of T.S. Nataraj v. Union of India (1985) 155 ITR 81. The Gujarat High Court in Rajkot Engineering Association v. Union of India (1986) 162 ITR 28, the Andhra Pradesh High Court in A.S. Sarma v. Union of India (1989) 175 ITR 254, the Madhya-Preadesh High Court in Mohan Trading Co. v. Union of India (1985) 156 ITR 134, the Rajasthan High Court in Abdhay Kumar & Co. v. Union of India (1987) 164 ITR 148 and R. Sathya Moorthy v. Union of India::- (1991) 1989 ITR 491 (Mad.), have also taken the same view.

The writ petitions are, therefore, dismissed.

The petitioners have filed appeals before the Commissioner of Income-tax (Appeals) which were dismissed on June 4, 1992. The petitioners have a remedy to challenge that order by filing second appeals before the Income-tax Appellate Tribunal. The petitioners may file such appeals within four weeks from today and if the appeals are filed within the aforesaid period no objection regarding limitation would be raised.

M.B.A./36/FCPetitioner dismissed.