Law:

Section:

Section 44AC, read with section 206C, of the Income-tax Act, 1961 - Special alcoholic liquor/timber trade - Provisions for computing profits and gains from - Whether sections 44AC and 206C lacked legislative competence - Held, no - Whether section 44AC is violative of article 14 of the Constitution - Held, no - Whether, however, denial of relief under sections 28 to 43C to trades specified in section 44AC, available to other assessees, has no nexus to object sought to be achieved by Legislature and to this extent non obstante clause in section 44AC denying such reliefs has no basis and so unfair and arbitrary and equality of treatment is denied to such persons, necessitating grant of appropriate relief - Held, yes - Whether section 44AC is an adjunct to and explanatory to section 206C and it does not dispense with regular assessment as provided in accordance with sections 28 to 43C - Held, yes FACTS The Government wanted to get over the problems in assessing income and recovering tax in the case of persons dealing in country liquor, timber, forest produce, etc. Experience revealed that a large number of persons dealing in the said commodities did not maintain any books of account or the books of account maintained by such persons were incomplete. The business of the above mentioned persons existed only for a short period and after that it was impossible to trace them in many cases. Many of them were found to be dealing in benami names. There was evasion on a large scale. The Government found it difficult to collect the tax from such persons. In order to get over that problem, the Legislature enacted section 44AC and section 206C, which enabled the revenue to estimate the profit on a 'presumptive basis'. Various assessees challenged the aforesaid provisions as ultra vires and beyond legislative competence and also violation of articles 14 and 19(1)(g) in a few high courts. The legislative competence of Parliament to enact sections 44AC and 206C was upheld by all the High Courts. In A. Sanyasi Rao v. Government of Andhra Pradesh [1989] 178 ITR 31 (AP), the High Court, upholding the validity of the Act, read down section 44AC and held that the said provision is…

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