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TEAMCODE: 70
3RD NUJS AIFTP B.P. SARAF NATIONAL TAX MOOT COURT COMPETITION, 2017
versus
TABLE OF CONTENTS
PLEADINGS ............................................................................................................................. 1
INDEX OF AUTHORITIES
Cases
Rajasthan State Road Transport Corpn. v. Bal Mukund Bairwa (2), (2009) 4 SCC 299. ....... 13
Re: Special Courts Bill, AIR 1979 SC 478: (1979) 1 SCC 380 .............................................. 11
S. Kodar v. State of Kerala, AIR 1974 SC 2272...................................................................... 18
Samarendra Nath v. State of West Bengal, AIR 1981 Cal. 58 ................................................ 18
Spences Hotels Pvt. Ltd. v. State of West Bengal, (1991) 2 SCC 154 .................................... 10
State of Andhra Pradesh v. Raja Reddy, AIR 1967 SC 1458 .................................................. 18
State of Gujarat v. Sri Ambica Mills, AIR 1974 SC 1300 ....................................................... 10
State of Haryana v. Jai Singh, (2003) 9 SCC 114 .................................................................... 12
State of Maharashtra v. KK Subramaniam Ramaswamy, AIR 1977 SC 2091. ....................... 16
State of Uttar Pradesh v. Kamla Palace, AIR 2000 SC 617: (2000) 1 SCC 557 ..................... 11
T. K. Thimmappa v. Chairman, Central Board of Directors, AIR 2001 SC 467..................... 11
The State of West Bengal v. Anwar Ali Sarkar, AIR 1952 SC 75. ......................................... 10
Union of India v. Sanyasi Rao, [1996] 219 ITR 330 (SC). ..................................................... 16
Wealth tax Commissioner, Amritsar v. Suresh Seth, AIR 1981 SC 1106. .............................. 17
Welfare Asson. ARP v. Ranjit P. Gohil, (2003) 9 SCC 358 ................................................... 12
Western U.P. Electric Power and Supply Co. Ltd. v. State of Uttar Pradesh, AIR 1970 SC 21
.............................................................................................................................................. 11
Books
Statutes
STATEMENT OF JURISDICTION
THE APPELLANT HAS APPROACHED THE COURT IN PURSUANCE OF AN SPECIAL LEAVE PETITION
FILED UNDER ARTICLE 136 OF THE CONSTITUTION OF INDIA.
QUESTIONS PRESENTED
THE RESPONDENT VERY RESPECTFULLY PUT FORTH TO THE HON’BLE SUPREME COURT, THE
FOLLOWING QUERIES:
STATEMENT OF FACTS
Concerns were raised that some of the existing provisions of the Act, particularly Section
115BBE could possibly be used for converting black money into white by just paying tax @
30%. To plug these loopholes Government proposed to amend the Act.
The Taxation Laws (Second Amendment) Bill, 2016 was introduced in the Parliament which
came into force at once i.e. upon its enactment and assent by the President which was given
on December 16, 2016.
Chapter II of the Amendment Act amended existing provisions of sections 115BBE (hiking
the tax rate from 30 % to 60 %) and also introduced a new penal section 271AAC in the Act.
Chapter III of the Amendment Act – amended the provisions of the Finance Act, 2016 to the
extent of levy of surcharge on income chargeable to tax at the rates mentioned in section
115BBE; and inserted Chapter IXA to the Finance Act, 2016 captioned “Taxation and
Investment Regime for Pradhan Mantri Garib Kalyan Yojana, 2016” (PMGKY) giving one
more one- time opportunity to the black money holders to come out clean.
A writ petition was filed by AIFTP before Ld. Single Bench of the Hon’ble Calcutta High
Court challenging the constitutional validity of the amendment made in section 115BBE
whereby tax rate under the said section was hiked to 60% and a cess @ 25% of tax was
imposed. Further, the new penalty provision u/s 271AAC was also a subject matter of
challenge.
Ld. Single Bench of the Hon’ble Calcutta High Court dismissed the writ petition and held in
favour of constitutionality of Amendment Act, 2016.
Aggrieved with decision of the Ld. Single Bench, AIFTP filed an appeal before the Division
Bench of the Hon’ble Calcutta High Court which was heard and order was passed in favour
of the petitioners therein.
The appeal against the decision of the Division Bench of the Hon’ble Calcutta High Court
has now been filed before the Hon’ble Supreme Court by the Union of India, which stands
admitted.
SUMMARY OF PLEADINGS
It is respectfully submitted before this Hon’ble Court that, in the instant matter, there is
no reasonable classification made with regard to the class of people brought under the
purview of the amended Section 115BBE of the Income Tax Act, 1961 amended by the
Taxation Laws (Second Amendment) Act, 2016. It includes honest tax payers who may
have unaccounted money but not necessarily black money. Further, Article 14 of the
Constitution in its ambit and sweep involves two facets, viz. it permits reasonable
classification which is found on intelligible differentia and has a rational relation to the
objects sought to be achieved. It does not allow any kind of arbitrariness and ensures
fairness and equality of treatment.
It is a humble submission of the Respondent that the Parliament did not had authority to
make section 115BBE and 271AAC to apply retrospectively. Retrospective application
of amended sections is unconstitutional and further, violates Article 20(1) of the
Constitution of India. Hence, the legislature is not competent to enforce the amended
sections retrospectively.
It is the humble submission of the Respondent that the nature of taxation must be
determined through an evaluation of rate of tax and reasonableness of the provision. It
is submitted that taxation imposed under section 115BBE is confiscatory in nature and
violates Article 19(1)(g). Further, making the amendment permanent is unreasonable in
light of the statement of object and reason of the enactment.
PLEADINGS
1. It is respectfully submitted before this Hon’ble Court that, in the instant matter, there is
no reasonable classification made with regard to the class of people brought under the
purview of the amended Section 115BBE of the Income Tax Act, 1961 amended by the
Taxation Laws (Second Amendment) Act, 2016. It includes honest tax payers who may
have unaccounted money but not necessarily black money. Further, Article 14 of the
Constitution in its ambit and sweep involves two facets, viz. it permits reasonable
classification which is found on intelligible differentia and has a rational relation to the
objects sought to be achieved. It does not allow any kind of arbitrariness and ensures
fairness and equality of treatment.
i. Intelligible Differentia
2. It is submitted that no reasonable classification has been made with regard to the class
of people brought under the purview of the amended Section 115BBE1 of the Income
Tax Act, 1961 and includes honest tax payers who may have unaccounted money but
not necessarily black money.
3. Article 14 of the Constitution forbids discrimination.2 However, it does not forbid
creation of class on well-founded principles which implies the two-fold requirements,
i.e., that it must be on an intelligible differentia and second, that, it must have a
reasonable nexus to the object sough to be achieved by the law. 3 Further, such
classification cannot be arbitrary but has to be rational. 4
1
Amended by The Taxation Laws (Second Amendment) Act, 2016
2
K. Thimmappa v. Chairman, Central Board of Directors, AIR 2001 SC 467: (2001) 2 SCC 259.
3
Laxmi Khandsari v. State of Uttar Pradesh, AIR 1981 SC 873.
4
Food Corporation of India v. Kamdhenu Cattle Feed Industries, AIR 1993 SC 1601.
4. While interpreting article 14, Justice S.K. Das, of the Supreme Court has held in The
State of West Bengal v. Anwar Ali Sarkar5 that,
“In order to pass the test, two conditions must be fulfilled, namely,
that the classification must be founded on an intelligible differentia
which distinguishes those that are grouped together from others and
that that differentia must have a rational relation to the object sought
to be achieved by the Act.”
5. It is submitted that the amendment was made to classify ‘Black Money Holders’ as one
class and to achieve the purpose of curing the problem of tax evasion. However,
Section 115BBE only specifies the rate of tax and does not mention to whom such tax
will be levied. Therefore, the classification here is not on the basis of intelligible
differentia. Hence, it violates Article 14 of the Constitution.
6. The courts have held that where there is no nexus between a classification and the
object of the Act, then there is no intelligible differentia, and such classification will be
wholly arbitrary and be liable to be struck down.6 The law laid down by the landmark
case of Bachan Singh v. State of Punjab and Ors.7, provides that it will be arbitrary if
the State makes discriminatory classification, which is not founded on intelligible
differentia, having rational relation to the object sought to be achieved by the law or
they arbitrarily select persons or things for discriminatory treatment.
7. While it cannot be denied that the evasion of tax deprives the nation of its critical
resources, which can enable the Government to undertake programs for the growth and
development of the country, as rightly put forth in the ‘Statement of Object and
Reasons’ of the 2016 Amendment. It is humbly submitted on behalf of the Respondent
that the constitutionality of the newly legislated section is required to be addressed.
Where, in one respect, this amendment seeks to bring under it purview tax evaders,
5
AIR 1952 SC 75.
6
Kerala Hotel and Restaurant Association v. State of Kerala, AIR 1990 SC 913: (1990) 2 SCC 502, Khadi &
Village Soap Industries Association v. State of Haryana, AIR 1994 SC 2479: 1994 Supp (3) SCC 218;
Spences Hotels Pvt. Ltd. v. State of West Bengal, (1991) 2 SCC 154; Gannon Dunkerley & Co. v. State of
Rajasthan, (1993) 1 SCC 364 (397); I.T.O. v. N. Takim Roy Rymbai, AIR 1976 SC 670; G.K. Krishna v.
State of Tamil Nadu, AIR 1975 SC 583; State of Gujarat v. Sri Ambica Mills, AIR 1974 SC 1300; Hiralal v.
State of Uttar Pradesh, AIR 1973 SC 1034; Jaipur Hosiery Mills v. State of Rajasthan, AIR 1971 SC 1330:
(1970) 2 SCC 26.
7
AIR 1982 SC 1325.
what it also seeks to do is treat unequal equally which leads to a highly discriminatory
practice. 8
8. The Supreme Court in the case of M.G. Badappanavar v. State of Karnataka9 had
observed:
“It is a well settled law that equals must be treated equally and
unequal treatment to equals would be violative of Article 14 of the
Constitution. But, it is equally well established that unequals cannot
be treated equally. Equal treatment to unequals would also be
violative of ‘equal protection clause’ enshrined in Article 14 of the
Constitution”.
9. In the instant case, it is sincerely put forth on behalf of the respondents that there is no
intelligible differentia, the class which is being formed consist of honest tax payers and
black money holders which is not a reasonable classification as the amendment was
made only to cover black money holders. As the earlier provision provided for
imposition of tax to bring to light the unaccounted money of the people. It was read
with Section 68, 69, 69A, 69B, 69C and 69D of the Act, which included all the people,
even the ones whose transactions may be valid, and through a bank but with a suspicion
of its source. The amended provision as it stands today is directed towards curbing
black money and punishing the evaders of the tax and cannot be applied to those who
haven’t evaded their tax paying responsibility.
10. The respondents, thus, submit that it is highly arbitrary to read the amended provision
with Section 68, 69, 69A, 69B, 69C and 69D of the Act as those provisions also include
honest taxpayers. Drawing from the maxim that “everyone is innocent until proven
guilty”, in tax jurisprudence, it is necessary to assume that all cash is white unless
proved to be black. The question of determining the tax payable should remain a civil
dispute and decided in a civilized way without recourse to penalties and prosecutions.
Article 14 means ‘equals should be treated alike’; it does not mean that ‘unequal ought
to be treated equally.’10 The people who are forming a class in the given scenario are
8
Ashutosh Gupta v. State of Rajasthan, (2002) 4 SCC 34.
9
AIR 2001 SC 260.
10
Western U.P. Electric Power and Supply Co. Ltd. v. State of Uttar Pradesh, AIR 1970 SC 21: (1969) 1 SCC
817; R.K. Garg v. Union of India, AIR 1981 SC 2138: (1981) 4 SCC 676; Re: Special Courts Bill, AIR 1979
SC 478: (1979) 1 SCC 380; State of Uttar Pradesh v. Kamla Palace, AIR 2000 SC 617: (2000) 1 SCC 557.
unequal and hence, such a treatment of putting a tax rate of more 80 percent is
unwarranted in their case.
11. It is submitted that the Hon’ble Supreme Court has observed in T K. Thimmappa v.
Chairman, Central Board of Directors,11 that
12. It is humbly submitted that when an amendment is introduced, there must be a nexus
with what the provision provides for and the object and purpose for which the
amendment was legislated.12 In the instant matter, the end result of taxation by the way
of the amended Section 115BBE is contrary to the reason for which the amendment
was undertaken which was curbing of black money. The nexus theory is the basis to
decide whether the classification is reasonable or not by establishing a connection
between the classification made and the object sought to be achieved by the legislation.
13. It is submitted that the differentia adopted as the basis of classification must have a
rational or reasonable nexus with the object sought to be achieved by the statute in
question.13 In the present case, the object of the amendment introduced by the
legislation was to coax the assessees to avail the ‘Pradham Mantri Garib Kalyan
Yojana, 2016’ (“PMGKY”) by making cost of non-compliance exorbitant. Contrary to
the intention of the legislature, this amendment does not seem to restrict its application
11
T. K. Thimmappa v. Chairman, Central Board of Directors, AIR 2001 SC 467: (2001) 2 SCC 259.
12
Jaila Singh v. State of Rajasthan, AIR 1975 SC 1436: (1976) 1 SCC 682. Dilip Kumar Garg v. State of Uttar
Pradesh, (2009) 4 SCC 753: (2009) 3 JT 202.
13 Laxmi Khandsari v. State of Uttar Pradesh, AIR 1981 SC 873, 891: (1981) 2 SCC 600. State of Haryana v.
Jai Singh, (2003) 9 SCC 114: AIR 2003 SC 1696; Welfare Asson. ARP v. Ranjit P. Gohil, (2003) 9 SCC 358;
Javed v. State of Haryana, (2003) 8 SCC 369: AIR 2003 SC 3057.
iii. Unreasonableness
15. It is submitted that Article 14 strikes at arbitrary state action including those taken in a
legislative capacity. There has been a significant shift towards equating arbitrary or
unreasonableness as the yardstick by which legislative actions are to be judged. A basic
and obvious test to be applied in cases where legislative action is attacked as arbitrary is
to see whether there is any discernible principle emerging from the impugned action
and if so, does it really satisfy the test of reasonableness.15
16. It is humbly submitted to the Hon’ble Court that by virtue of Sub-Section (2) of Section
271AAC, levy of penalty in cases of addition under Sections 68, 69, 69A, 69B, 69C
and 69D are taken out of the purview of the newly introduced penal provisions in
section 270A vide the Finance Act and dealt with exclusively by this proposed section
271AAC. As per Section 273B of the Income Tax Act, 1961, if the assessee shows
reasonable cause for failures referred to in the sections mentioned in Section 273B, no
penalty can be levied. However, no leeway has been made in the said Section 273B for
penalty leviable under section 271AAC. This means the moment the Assessing Officer
makes an addition under section 68 of the Act, levy of penalty under Section 271AAC
would be automatic. Hence, the Respondent asserts that the provision is unwarrantedly
harsh, unfair and unreasonable.
14
Annexure ‘A’, Fact Sheet.
15
Rajasthan State Road Transport Corpn. v. Bal Mukund Bairwa (2), (2009) 4 SCC 299.
17. It is submitted that a law cannot be declared ultra vires on the ground of hardship,
however it can be declared on the ground of total unreasonableness applying the
Wednesbury standard of “unreasonableness”.16 In the present case, the tax which is
levied by Section 115BBE is 60%, along with it a cess of 25% (25% of 60%) is added.
Also, a penalty of 10% (10% of 60%) maybe added. This total calculates to 81%, which
will leave the assessee with hardly any income. Hence, this tax is harsh and
unreasonable.
18. It is submitted that in the instant matter, the Assessing Officer under Section 271AAC
brought forth by the recent Amendment has been given the power of directly penalizing
a person if he unable to disclose the source of his income. The differentiation whether
the money was black or white is not made which might lead to an innocent person
being charged. This fallacy leads to rendering of the provision as highly discriminatory
and arbitrary.
19. The Hon’ble Supreme Court in the case of KP Varghese v. The Income Tax Officer and
Anr. 17 observed that:
20. It is thereby submitted on behalf of the respondents that such an unwarranted power of
the Assessing Officer to levy such high penalty on mere suspicion of the source of
income is unfair and arbitrary and a proper procedure needs to be undertaken to be sure
that the findings of the Assessing officer are true without any doubt.
21. It is submitted that to determine discrimination, the impact and effect of the law must
be evaluated and not the phraseology alone. A law ex facie non-discriminatory may in
16
Grand Kakatiya Sheraton Hotel and Towers Employees & Workers Union v. Srinivasa Resorts Ltd., (2009) 5
SCC 342: AIR 2009 SC 2337.
17
AIR 1981 SC 1922.
effect operate unevenly on persons not similarly situated and thus offend equality
clause.18 In the present case, according to the language of the impugned Amendment it
only apply tax on black money holders however the impact of the law is also on the
honest tax payers and therefore this amendment is discriminatory and hence, violative
of Article 14 of the Constitution.
22. It is a humble submission of the Respondent that the Parliament did not had authority to
make Section 115BBE and 271AAC effective retrospectively. Retrospective
application of amended sections is unconstitutional and further, violates Article 20(1)
of the Constitution of India. Hence, the legislature is not competent to enforce the
amended sections retrospectively.
23. It is a cardinal principal of tax law that the Income Tax Act, 1961 as it stands amended
on the first day of April of any financial year must apply to the assessments of that
year. Any amendments in the Act which come into force after the first day of April of a
Financial year, would not apply to the assessment for that year, even if the assessment
is actually made after the amendments come into force.19 In the present case, the
parliament has applied amended Section 115BBE and 271AAC from 1st April 2017 i.e.
Assessment Year 2017-18, thus, giving it a retrospective effect from Financial Year
2016-17.20
24. It is humbly submitted before the Hon’ble Supreme Court that the Amendment Act
came in force on 16th December 2016 and section 115BBE is applicable from
assessment year 2017-18. In accordance with the principle as laid down in case of
Karimtharuvi Tea Estate Ltd.,21 Section 115BBE of the Amendment that taxes income
from previous financial year, starting from 1 April 2016, cannot be made retrospective
18
Khandige Sham Bhat v. Agricultural, I.T.O., AIR 1963 SC 591: (1963) 3 SCR 809.
19
Karimtharuvi Tea Estate Ltd. v. State of Kerala, AIR 1966 SC 1385.
20
Amended by Taxation Laws (Second Amendment) Act, 2016.
21
Karimtharuvi Tea Estate Ltd. v. State of Kerala, AIR 1966 SC 1385.
as it came after 1st April 2016, and any such law which came into effect after 1st April
2016 cannot be enforced for that financial year even if such amendment came into force
before assessment of income from such financial year.
25. The amendment in Section 115BBE by Taxation Laws (Second Amendment) Act, 2016
has made the assessee liable to pay tax of 60% and an additional cess of 25% on such
tax, taking the total to 75% of tax on any income under Section 68, 69, 69A, 69B, 69C
or 69D, as compared to previous rate of 30% which was provided in the unamended
section. The relevant section has been amended to include an additional tax of 45%.
Relevant Section 115BBE applies on income or investment or expenditure under
Section 68 to 69D where source of such income cannot be shown.
26. In case of Commissioner of Income tax v. Vatika Township Pvt. Ltd.,22 the
Constitutional Bench of Hon’ble Supreme Court laid down the principle of
interpretation of taxing statue, while being applied retrospectively, that:
“Our belief in the nature of the law is founded on the bed rock that
every human being is entitled to arrange his affairs by relying on the
existing law and should not find that his plans have been
retrospectively upset.”
27. It is humbly submitted that amended section 115BBE has included an additional tax of
45%, thus levying a tax of 75%. Such high rate of tax is bound to upset the plans of
assessees who relied on the law as it stood on 1st April 2016.
28. It is most humbly submitted that such amendment cannot be applied retrospectively.
Alternatively it can be ‘read down’23. In order to make the provision workable, the
Hon’ble Court may make changes to this provision as it deems fit.
29. Section 271AAC was inserted in the Income Tax Act, 1961 by Taxation Laws (Second
Amendment) Act, 2016, section 271AAC says that the Assessing Officer may direct
that:
“in a case where the income determined includes any income referred
to in section 68, section 69, section 69A, section 69B, section 69C or
22
[2014] 367 ITR 466 (SC).
23
Union of India v. Sanyasi Rao, [1996] 219 ITR 330 (SC).
section 69D for any previous year, a sum computed at the rate of ten
per cent of the tax payable under clause (i) of sub-section (1) of
section 115BBE. Provided that no penalty shall be levied on such
income to the extent that such income has been included by the
assessee in the return of income furnished under section 139 and the
tax in accordance with the provisions of clause (i) of sub-section (1)
of section 115BBE has been paid on or before the end of the relevant
previous year.”
30. It is submitted before the Hon’ble Court that Parliament has committed an error by
making application of section 271AAC retrospective, because the said section is penal
in nature. Section 271AAC was inserted with an aim of curbing of black money, it
proposed penal sanction on a person who is suspected to have black money. Hoarding
black money is considered to be an offence and it cannot be presumed that section
271AAC does not have quasi-criminal nature. The section is penal in the sense that its
consequences are intended to be an effective deterrent which will put a stop to practices
which the legislature considers to be against the public interest, and proceeding under
such section is quasi criminal in nature.24
31. It is reverentially submitted that any section having penal sanction cannot be applied
retrospectively, as it would violate Article 20(1) of the Constitution of India. Article
20(1) lays down that if a law enacted later, making an act done earlier (not being an
offence when done) as an offence, will not make the person liable for being convicted
under it.25 It, thus, provide immunity to a person from being tried for an act, under a
law enacted subsequently, which makes the act unlawful.26
32. It is put forth before the Hon’ble Supreme Court that in the case of Wealth tax
Commissioner, Amritsar v. Suresh Seth,27 it was held that:
24
Hindustan Steel Ltd. v. State of Orissa, AIR 1970 SC 253.
25
Kanalyalal v. Indumati, AIR 1958 SC 444.
26
State of Maharashtra v. KK Subramaniam Ramaswamy, AIR 1977 SC 2091.
27
AIR 1981 SC 1106.
33. Applying the principle laid down in case of Surest Seth28 it is submitted that before the
insertion of section 271AAC in Income Tax Act, 1961, there existed no penalty per se
for making a default as now provided under Section 115BBE. The assessee could not
have been aware of such a penalty while committing alleged default as such penal
provision was not in existence during such act. Thus, section 271AAC cannot be
applied retrospectively, as doing so would be in clear violation of Article 20(1) of the
Constitution of India.
34. Hon’ble Supreme Court in its Nine-Judge Bench judgment of Naresh Sridhar Mirajkar
and Ors. v. State of Maharashtra and Anr.29 further emphasised on nature of Article
20(1) as being absolute in case of quasi-criminal proceedings, Hon’ble Court stated
that:
35. It is further submitted that even if arguendo it is considered that said Section 271AAC
is not of criminal or quasi-criminal nature and does not violate Article 20(1) of the
Constitution of India, even then it cannot be made retrospectively applicable. Section
115BBE, which is the charging provision by means of which a penalty is levied under
section 271AAC, cannot be made retrospective and if income under section 68 to 69D
cannot be taxed retrospectively, then by plain logic, assessee cannot be made to pay
penalty for default for such income retrospectively which cannot be taxed
retrospectively.30
28
Ibid.
29
AIR 1967 SC 1.
30
Goodyear India Ltd. v. State of Haryana & Anr., AIR 1990 SC 781.
36. It is the humble submission of the Respondent that the nature of taxation must be
determined through an evaluation of rate of tax and reasonableness of the provision. It
is submitted that taxation imposed under Section 115BBE is confiscatory in nature and
violates Article 19(1)(g). Further, making the amendment permanent is unreasonable in
light of the statement of object and reason of the enactment.
31
KT Moopil Nair v. State of Kerala, AIR 1961 SC 552.
32
State of Andhra Pradesh v. Raja Reddy, AIR 1967 SC 1458; Samarendra Nath v. State of West Bengal, AIR
1981 Cal. 58.
33
Commissioner of Income tax and Ors. v. Sati Oil Udyog Ltd. and Ors., AIR 2015 SC 3244.
34
AIR 1974 SC 2272.
40. It is most humbly submitted that the character of section 115BBE is confiscation of
property in the garb of tax and not tax itself. The pervious unamended section 115BBE
taxed assessee at rate of 30%, and the amended section taxes at the rate of 75%. The
hike in tax rate clearly shoes that the previous section was used for the purpose of
taxation while, as shown in the Statement of Object, amended section is punitive and in
the cloak of tax is confiscating the property of all the assessees under the presumption
that such income under section 68 to 69D forms part of black money and not
unaccounted income. Thus, such nature of confiscatory taxation is unreasonable and
should be struck down.
41. Further, Section 115BBE has been made a permanent fixture by Taxation Laws
(Second Amendment) Act, 2016. It is recognized that section 115BBE was amended in
wake of demonetisation for the purpose that black money holders do not take advantage
of such loophole of Income Tax Act, 1961 and convert their black money by paying a
tax of 30% under the previous section. Such amended section should have been made
temporary to last only for period till the old legal tenders were being converted by the
Government and after that should have been amended back to the previous section, yet,
the amended section has been made permanent, and hence, it is unreasonable in its
application.
42. It is humbly submitted before The Hon’ble Court that amended section, if allowed to be
made permanent, might promote dishonesty amongst taxpayers, due to high rate of tax,
enticing them to not disclose their income for taxation. Permanent fixture might also be
misutilized by the assessing officer to harass honest taxpayers by rejecting their source
of income and placing it under section 68 to 69D. These practices might make the
purpose of amended section, i.e. curbing of black money, completely futile.
43. The Hon’ble Supreme Court in S. Kodar v. State of Kerala35 explained that unless
confiscatory, does not impose an unreasonable restriction on the right of a person to
carry on trade, irrespective of whether or not law permits or prohibits the dealer from
passing on tax to the purchasers. Court explained that if tax is confiscatory then it
would be violative of Article 19(1)(g) of the Constitution of India. Hence, Section
115BBE, being confiscatory, violates Article 19(1)(g) of the Constitution and thus
should be struck down for being unconstitutional.
35
Ibid.
WHEREFORE, IN THE LIGHT OF THE ISSUES RAISED, ARGUMENTS ADVANCED, REASONS GIVEN
I. HOLD THAT THE TAXATION LAWS (SECOND AMENDMENT) ACT, 2016 VIOLATES
II. HOLD THAT PARLIAMENT IS INCOMPETENT TO ENACT IMPUGNED SECTIONS 115BBE AND
271AAC, RETROSPECTIVELY.
IV. HOLD THAT THE JUDGMENT OF DIVISION BENCH OF CALCUTTA HIGH COURT IS GOOD IN
LAW.
AND ANY OTHER RELIEF THAT THIS HON’BLE COURT MAY BE PLEASED TO GRANT IN THE
INTERESTS OF JUSTICE, EQUITY AND GOOD CONSCIENCE, ALL OF WHICH IS RESPECTFULLY
SUBMITTED.
Sd /-
COUNSELS FOR THE RESPONDENT