Law:

Section:

Section 3 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 - Constitutional validity of - Whether the Act suffers from legislative incompetence and is violative of article 14 of the Constitution - Held, no Facts The assessee, an individual was, on completion of assessment, issued a notice of demand under section 14(1) of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (the CDS Act) for compulsory deposit of a certain sum. The assessee represented that he was not so liable. The ITO rejected the assessee's contention and issued a notice under section 10 of the CDS Act for levy of penalty for failure to pay the compulsory deposit. The assessee, on writ, challenged the CDS Act as unconstitutional, and offending article 14 of the Constitution and prayed for quashing the notices issued to him and other reliefs. Held The CDS Act is intended to provide for compulsory deposit by certain classes of income-tax payers and is enacted in the interest of national economic development. It requires a specified class of income-tax payers in a comparatively higher income group to make compulsory deposit at a specified rate within a specified time, failing which the person so liable would be exposing himself to penalty. The amount deposited would be returned after a specified time. In Harikrishna Bhargav v. Union of India [1966] 58 ITR 243 the Supreme Court assuming that Chapter XXII-A of the Income-tax Act, 1961 was for borrowing money by the Central Government from taxpayers in the higher income groups at specified rates, repayable in instalments, held (i) that the power to legislate in this behalf is still within the competence of the Parliament by virtue of entry 97 in List I of the Seventh Schedule to the Constitution, (ii) that the doctrine of colourable legislation can have no application when the Parliament is invested with the authority to legislate in respect of annuity deposits, and a taxing statute is not open to challenge merely on the ground that the tax is harsh or excessive, and (iii) that the provisions of section 280X(1) of the 1961 Act do not offend the right guaranteed under article 14. Assuming that the CDS Act was enacted for…

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