R. Jayasimha Babu, J.:— The petitioner has challenged the constitutional validity of section 158BB(1)(c) of the Income-Tax Act, 1961. That provision occurs in Chapter XIV-B which lays down a special procedure for assessment of search cases under section 158BB. Section 158B(a) defines a block period with reference to the previous years relevant to ten assessment years preceding the previous year in which the search was conducted under section 132 of the Act or any requisition was made under section 132A of the Act and includes in the previous year in which such search was conducted or requisition made the period up to the date of the commencement of such search or, as the case may be, the date of such requisition. Undisclosed income is defined in section 158B(b), inter alia, to be the income which has not been or would not have been disclosed for the purposes of the Act.
2. Section 158BA provides that the special procedure set out in Chapter XIV-B shall be adopted in search cases covered by the provision “notwithstanding anything contained in any other provisions of this Act.” The Explanation to that provision states that the assessment made under this Chapter will be in addition to the regular assessment in respect of each previous year included in the block period: that the total income undisclosed relating to the block period shall not include the income assessed in any regular assessment as the income of such block period: and that the income assessed under that Chapter shall not be included in the regular assessment of any previous year included in the block period. Sub-section (3) of section 158BA requires the Assessing Officer not to include such part of the income which relates to the assessment year for which the previous year is not ended or the date of the filing of the return of income under section 139(1) has not expired, provided such income or the transactions are recorded on or before the date of search or requisition in the books of account or other documents maintained in the normal course of business relating to such previous year.
3. Section 158BB deals with computation of undisclosed income. It provides that the undisclosed income of the block period would be aggregated to the total income of the previous years within the block period computed in accordance with Chapter IV of the Act on the basis of the evidence found as a result of search or requisition of books of account or documents and such other materials or information as are available with the Assessing Officer, as reduced by the aggregate of the total income, or, as the case may be, as increased by the aggregate of the losses of such previous years determined, inter alia, where the due date for filing a return of income has expired but no return of income has been filed as nil, as provided in clause (c) of sub-section (1) of section 158BB.
4. Learned counsel for the petitioner contended that this provision is unconstitutional as it has the effect of depriving an honest assessee the several deductions allowable under other provisions of the Act even in cases where an assessee has, by relying on section 139(4), filed a return of income after the due date specified in section 139(1), but before the expiry of the period specified in section 139(4). Section 139(4) enables a person who has not filed a return within the time allowed under section 139(1) or under a notice issued under section 142(1) to furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier.
5. The petitioner in this case had not filed his return for the assessment year 1994–95 as also for the assessment year 1995–96 on or before August 31, 1994, and August 31, 1995, respectively. The search was conducted in his premises on January 18,. 1996. Thereafter the assessment was made for the block period by taking into account the amount ascertained as having been not disclosed at the time of search and adding thereto, the income shown in the return filed by the assessee on March 29, 1996, after search. According to the assessee, the inclusion of the income shown in the returns filed within the extended date provided under section 139(4) has the effect of depriving the petitioner of the valuable right conferred on him by section 139(4) and, therefore, section 158BB(1)(c) is arbitrary, ultra vires the Act and unconstitutional.
6. The provision with which we are concerned is a provision in a taxing statute. It is open to Parliament to classify the taxpayers on any rational basis; also treat the different classes of taxpayers differently. It is also permissible for Parliament to classify in a rational and non-arbitrary manner, the assessees further in relation to their conduct. Parliament can legislate with respect to the assessees who comply with the requirements of law and extend such concessions as it deems fit to such assessees, which concessions it may choose to deny to those who have violated the law and such violations have been established by reason of the action taken by the authorities. It is in that background and with the object of laying down a special procedure for the assessment of the assessees who fail to comply with the law by not disclosing in full their taxable income and by not paying the taxes properly due from them that Chapter XIV-B consisting of sections 158B to 158BH was inserted in the Income-Tax Act by the Finance Act, 1995, with effect from July 1, 1995.
7. The assumption made in the scheme of the Act that a person who comes forward with the return or with further information after a search, does so only on account of the detection already effected under the search and the likelihood of further exposure is a reasonable assumption and it can in no way be regarded as arbitrary. The special procedure provided in Chapter XIV-B is meant to apply to all such cases notwithstanding anything contained in any other provisions of the Act, as provided in section 158BA(1), and the other provisions of the Act, therefore cannot control the contents of this Chapter except to the extent provided for in Chapter XIV-B.
8. There is no fundamental right in an assessee to commit breaches of the law. The right that can be asserted by one who has chosen to violate the law is the right to be treated in a manner similar to that in which other similar offenders are treated. Chapter XIV-B accords similar treatment to all persons belonging to the class for whom that Chapter is to apply. There is no discrimination therein among those who suffer such searches.
9. Learned counsel for the petitioner emphasised the words used in the definition of “undisclosed income” which refer to income which has not been or would not have been disclosed. Counsel submitted that in cases (sic) whereas in the case of the present petitioner, the assessee had paid advance tax, such payment would clearly indicate his intention to disclose his income and it could not be said that such person would not have disclosed his income.
10. The payment of advance tax by itself does not establish an intent to disclose the income. The disclosure is to be made by filing the return. Even in search cases where the time for filing the return under section 139(1) has not expired, income disclosed in the books of account is not treated as undisclosed income. All that is denied to the assessee in search cases is the opportunity to file a return after the period specified in section 139(1) and to claim that the income that he would have disclosed in a belated return is not to be regarded as undisclosed income. The reason for denying such opportunity in search cases is obvious. After having suffered a search, the assessee is not to be enabled to escape the consequences of his failure to disclose all his income by filing a return after the search and after the expiry of the time prescribed under section 139(1) and by disclosing therein income which had remained undisclosed upto the date of the search. Section 158BB(1)(c) is not in any way unconstitutional.
11. The writ petition is dismissed. Consequently, W.M Ps. Nos. 4539 and 4540 of 1997 are dismissed.
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