Basheshar Nath v. The Commissioner Of Income-Tax, Delhi & Rajasthan & Another

November 19. 528 SUPREME COURT REPORTS [1959] Supp. BASHESHAR NATH THE COMMISSIONER OF INCOME-TAX, DELHI & RAJ ASTHAN & ANOTHER. (S. R. DAS, c. J., N. H. BHAGWATI, s. K. DAS, J. L. KAPUR a.nd K. SUBBA RAO, JJ.) Income-tax-Evasion of taxation-Case referred tq Investigatio11 Commission-Comme11cement of the Constitution-Settlement of case -·-Constitutional, validity of-Waiver of fundamental right, if permis-sible-Taxation of Income (Investigation Commission) Act, I947 (.JO of' I947l. s. BA-Constitution of India, Art. I4, Part III. The two questions for determination in this appeal were, (r) whether a settlement under s. SA of the Taxation of Income (In-vestigation Commission) Act, 1947 (30 of 1947) made after the commencement of the Constitution was constitutionally valid and (2) whether the waiver of a fundamental right was permissible under the Constitution. The appellant's case was on July 22, 194S, referred by the Central Government under s. 5(r) of the Act to the Investigation Commission for investigation and report. The Commission directed the authorised official under s. 6 of the Act to examine the appellant's accounts. He submitted his final report by the end of 1953· The Commission considered the report heard the assessee and came to the conclusion that Rs. 4,47,915 had escaped assessment. Thereupon the appellant on May 20, r954, applied to the Commission for a settlement of his case under s. SA of the Act, agreeing to pay Rs. 3,50,000 by way of "' tax and penalty at the concessional rate. The Commission re-ported to the Central Government approving of the settlement, the Central Government accepted it and it was recorded by the Commission. The Central Government directed the recovery of the said amount under s. SA(2) of the Act. The appellant was permitted to make payments by monthly instalments of Rs. 5,000 and the total amount thus paid up to September S, 1957, aggre-gated to Rs. I,2S,ooo. In the meantime the Income Tax Officer issued a certificate and certain properties of the appellant were attached. Relying on the decisions of this Court in Suraj Mall Mohta and Co. v. A. V. Visvanatha Sastri, [1955] 1 S.C.R. 448 and M. Ct. Muthiah v. The Commissioner of Income-tax, Madras, [1955] 2 S.C.R. 1247, the appellant applied to the Commissioner of Income-tax challenging the validity of the settlement made under s. SA of the Act on the ground that s. 5(r) of the Act on which it was founded had been declared void by this Court, and claimed that his properties might be released from attachment and the amount paid under the settlement might be refunded to him. On January 29, 195S, the Commissioner of Income Tax sent a reply to the appellant maintaining that the settlement was valid and z95a v. that the appellant was bound thereunder to pay up the arrears z95a of instalments and requesting him to continue to pay in future. Against this decision of the Commissioner of Income Tax the Bashesha, Natlt appellant came up to the Supreme Court by special leave. It was v. contended on behalf of the respondent that the Act laid down The Commissioner two distinct and separate procedures, one for investigation and of Income-ta,,, the other for settlement and it was the former alone and not the Delhi & Rajaslhan latter that was affected by the decisions of this Court and that & Another the appellant by voluntarily entering into the settlement had waived his fundamental right founded on Art. 14 of the Constitu-tion. Held (Per Curiam), that both the contentions must fail. 1958 529 Section: CONCLUSION It was not correct to say that the Taxation of Income (In-vestigation Commi&sion) Act, 1947, laid down two different procedures, one for investigation and assessment under s. 8(2) of the Act and another for settlement under s. SA of the Act and assessment in terms of such settlement and that while the deci-sion of this Court in M. Ct. Muthiah v. The Commissioner of Income-tax, Madras, declaring s. 5(1) of the Act to be discriminatory and therefore void, affected only the former procedure and not the latter. The Act laid down but one procedure and in entertaining a proposal for settlement as in the investigation itself the Com-mission exercised the same jurisdiction, and powers and followed the one and the same procedllre as laid down by ss. 5, 6 and 7 of the Act. Since the settlement in the instant case was no excep-tion to that rule, it was covered by the decision and must be held to be violative of Art. 14 of the Constitution. M. Ct. Muthilllt v. The Commissioner of Income-tax, Madras, [1955] 2 S.C.R. 12'47• applied. The observations made in the majority judgment of this Court in Syed Qasim Razvi v. The State of Hyderabad, [1953] S.C.R. 589, must be kept strictly confined to the special facts of that case and had no application to the facts of the present case. Syed Qasim Razvi v. The State of Hyderabad, [1953] S.C.R. 589, held inapplicable. Per Das, C. J., and Kapur, }.-There could be no waiver of the fundamental right founded on Art. 14 of the Constitution, and it was not correct to contend that the appellant had by entering into the settlement under s. SA of the Act, waived his funda-mental right under that Article. Article 14 was founded on a sound public policy recognised and valued all over the civilised world, its language was the language of command and it imposed an obligation on the State of which no person could, by his act or conduct, relieve it. As it was not strictly necessary for the dis-posal of this case, the question whether any other fundamental right could be waived need not be considered in this connection. Laxamanappa Hanumantappa Jamkhandi v. The Union of llldia, [1955] 1 S.C.R. 769; Dewan Bahadur Seth Gopal Das Mohta 6'/ z958 v. The Union of India, [1955] l S.C.R.:773; Baburao Narayanrao Sanas v. The Union of India, [1954] 26 l.T.R. 725; Subedar v. Basheshar Nath State, A.LR. 1957 All. 396 and Pakhar Singh v. The State, A.LR. v. 1958 Punj. 294, distinguished and held inapplicable. The Commissioner t p er hagwab and Subba Rao, B . JJ .-There could be no waiver . 1 [1 ]D ~h· J;,'°;'~- at~ not only of the fundamental right enshrined in Art. 14 but i'lso ' ~ A "0 ;i"' " an Constitution. The Constitution made no distinction between of any other fundamental right guaranteed by Part III ofthe fundamental rights enacted for the benefit of the individual and those enacted in the public interest or on grounds of the public policy. There could, therefore, be no justification ,for importing American notions or authority of decided cases to whittle down the transcendental character of those rights, conceived in public interest and subject only to such limitations as the Constitution had itself thought fit to impose. Article 13(2) was in terms a constitutional mandate to the State in respect of all the fundamental rights enacted in Part III of the Constitution and no citizen could by waiver of any one of them relieve the State of the solemn obligation that lay on it. The view expressed by Mahajan, C. J., in Behram Khurshed Pesikaka v. The State of Bombay, [1955] l S.C.R. 613, correctly laid down the law on the point. Since the arguments in the instant case had covered the entire field of fundamental rights, there was no reason why the answer should be confined to Art. 14 alone. Behram Khurshed Pesikaka v. The State of Bombay, [1955] l S.C.R. 613; State of Travancore-Cochin v. The Bombay Co., Ltd., [1954] S.C.R. n12 and The State of Bombay v. R. M. D. Chamar-baugwala, [1957] S.C.R. 874, referred to. . 531 1958 Per S. K. Das, J.-It seems clear that Art. 13 itself re-cognises the distinction between absence of legislative power which will make the law made by an incompetent legislature wholly void, and exercise of legislative power in contravention of a restriction or check on such power, which will make the law void to the extent of the inconsistency or contravention; there-fore the mere use of the word " void " in Art. 13 does not neces-sarily militate against the application of the doctrine of waiver in respect of the provisions contained in Part III of the Constitu-tion. Behram Khurshed Pesikaka v. The State of Bombay, [1955] l S.C.R. 613, considered. Bhikaji Narain Dhakras v. The State of Madhya Pradesh, [1955] 2 S.C.R. 589; M. Ct. Muthiah v. The Commissioner of Income-tax, Madras, [1955] 2 S.C.R. 1247 and The State >f Bombay v. R.M.D. Chamarbaugwala, [1957] S.C.R. 874, referred to. There was nothing in the two preambles to the Indian and the American Constitutions that could make the doctrine of waiver applicable to the one and not to the other ; since the doctrine (I) S.C.R. SUPREME COURT REPORTS 531 applied to the constitutional rights under the American Constitu-tion, there is no reason why it should not apply to the funda-mental rights under the Indian Constitution. z958 Basheshar Nath v. The Commissioner ~,.. 1 [[1 ]];c~m~-ta~ e ~ A ~~ast a" no er Case-law considered. But 1t . must be made clear that there 1s . no absolute rule, or 1 [[1 ]]one formulated in the abstract, as to the applicability of that D ~,.. ;c~m~-ta~ doctrine to fundamental rights and such applicability must de-e ~ A ~~ast pend on (I) the nature of fundamental right to which it is sought no er to be applied and (2) the foundation on the basis of which the plea is raised. The true test must be whether the fundamental right is one primarily meant for the benefit of individuals or for the benefit of the general public. Where, ~herefore, the Constitution vested the right in the individual, primarily intending to benefit him and such right did not impinge on the rights of others, there could be a waiver of such right provided it was not forbidden by law or did not con-travene public policy or public morals. As in the instant case the respondents who had raised the plea, had failed to prove the necessary facts on which it could be sustained, the plea of waiver must fail. Per Subba Rao, ].-Apart from the question as to whether there could be a waiver in respect of a fundamental right, s. 5(1) of the Taxation of Income (Investigation Commission) Act, r947, having been declared void by this Court in M. Ct. Muthiah v. The Commissio11a of focome-tax, Madras, as being violative of the fundamental right founded on Art. I4 of the Constitution and such decision being binding on all courts in India, the Commis-sioner of Income-tax had no jurisdiction to continue the proceed-ings against the appellant under that Act and the appellant could not by a waiver of his right confer jurisdiction on him. No distinction could be made under Art. r3(1) of the Con-stitution between the constitutional incompetency of a legislature and constitutional limitation placed on its power of legislation, for a statute declared void on either ground would continue to be so, so long as the inconsistency continued. As the inconsistency of s. 5(1) of the Act with Art. 14 continued, it must continue to be void. Keshav111; Madhava Mc11on v. The State of Bombay, [1951] S.C.R. 228; Bchram Khurshed Pcsikaka v. Stlltc of Bombay, [1955] 1 S.C.R. 613 and Bhikaji Narai11 Dhakras v. Stllte of Madhya Pradesh, [1955] 2 S.C.R. 589, referred to. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 208of1958. Appeal by special leave from the order dated 1958 1947 . 533 1958 January 29, 1958, of the Commissioner of Income-tax, Delhi & Rajasthan at New Delhi, under s. 8A(2) of the 532 Taxation on Income (Investigation Commission) Act, 1947. Harnam Singh and Sadhu Singh for the appellant. The Commissioner · K of Income-tax, M. G. Seta.lv.ad, Attorney-Gener<!f. for India, G. . Delhi & Rajasthan Daphtary, Solicitor-General of India, B. Sen and R.H. & Another Dhebar for the respondents. A. G. Mitra and B. P. Maheshwari, for the inter- veners. 1958. November 19. 19. 1958. November 19. 19. The Judgment of Das, C.J., and Kapur, J., was delivered by Das, 0. J. Bhagwati, S. K. Das and Subba Rao, JJ., delivered separate judg- ments. DAS, C. J.-This appeal by special ]eave filed by one Shri Besheshar Nath hereinafter referred to as " the assessee " calls in question the validity of a settlement made under s. SA of the Taxation on Income (Investigation Commission) Act, 1947 (30 of 1947), hereinafter referred to as " the Investigation Act ". This Act, which came into force on May 1, 1947, by a notification issued by the Central Government under s. (1) (3) thereof, has had a short 1,rnt chequered career, as will appear from the facts hereinafter stated. Das c. J. In order to appreciate the several questions canvass- ed before us it is necessary to refer to the provisions of the impugned Act. Section 3 authorised the Central Government to constitute an Income Tax Investiga-tion Commission (hereinafter called the Commission) and imposed on it the following duties :- "(a) to investigate and report to the Central Government on all matters relating to taxation on income, with particular reference to the extent to which the existing law relating to, and procedure for, the assessment and collection of such taxation is ade-quate to prevent the evasion thereof; (b) to investigate in accordance with the provi- sions of this Act any case or points in a case referred to it under section 5 and make a report thereon (in-cluding such interim reports as the Commission may think fit) to the Central Government in respect of all or any of the assessments made in relation to the case (1) S.C.R. SUPREME COURT REPORTS 533 before the date of its report or interim report, as the case may be." z95B Basheshar Nath v. The Commissioner of. Income.-tax, Delhi & Ra;asthan 6- Another Das C.J. We may skip overs. 4 which dealt with the composi-v. tion of the Commission. Section 5, which is of import- The Commissioner ance was as follows:- "5. (1) The Central Government may"at any time before the 30th day of June, 1948, refer to the Commis-sion for investigation and report any case or points in a case in which the Central Government has prima facie reasons for believing that a person has to a sub-stantial extent evaded payment of taxation on income, together with such material as may be available in support of such belief, and may at any time before the 30th day of June, 1948, apply to the Commission for the withdrawal of any case. or points in a case thus referred, and if the Commission approves of the with-drawal, no further proceedings shall thereafter be taken by or before the Commission in respect of the case or points so withdrawn. (2) The Commission may, after examining the material submitted by the Central Government with reference to any case or points in a case and making such investigation as it considers necessary, report to the Central Government that in its opinion further investigation is not likely to reveal any substantial evasion of taxation on income and on such report being ma.de the investigation shall be deemed to be closed. (3) No reference made by the Central Government 533 1958 535 1958