Law:

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section 10 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 - Imposition of penalty - For failure to make compulsory deposits within time - Whether the penalty imposed under section 10 due to the failure to make compulsory deposit could be said to be arbitrary, unconstitutional - Held, no Facts The validity of section 10 in writ was challenged by the certain employees of the BHEL on the ground that it is arbitrary, unjust and unconstitutional. Held Section 10 is a machinery section. It imposes certain penalties on the assessee for their failure to make compulsory deposit within time, without reasonable cause. A section like 10 which has been enacted for the enforcement of tax provision, can only be said to be arbitrary on the ground of procedural defects or the imposition of excessive punishment but it cannot be faulted j for those grounds because it imposes no absolute penalty. Reasonable cause for failure to make compulsory deposit in full or in time is acceptable under section 10. Further, it also provides for notice and hearing before imposition of penalty. Therefore, it does not appear to be excessive. So long as the imposition of compulsory deposit is valid, it cannot be held that the machinery provided under section 10 is unconstitutional. Cases referred to Ved Vyas Chawla v. ITO [1965] 57 ITR 749 (All.) and Visalakshi v. ITO [1968] 67 ITR 150 (Mys.). I. Venkata Narayana for the Petitioner. M. Suryanarayana Murthy for the Respondent. JUDGMENT Choudary, J. - This writ petition is filed by 27 employees of the Bharat Heavy Electricals Ltd., Hyderabad. They challenged in this writ petition the validity of section 10 of the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 ('the Act'), on the ground that it is arbitrary, unjust and unconstitutional. By Act 38 of 1974, the Parliament has enacted the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974. This Act, which has replaced the Scheme of Compulsory Deposit earlier prevailing, directs the persons specified in section 3(2) of the Act to make compulsory deposits for the assessment year commencing on 1-4-1975 and every subsequent assessment year. The petitioners fall under that…

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