Ranjit Singh v. The Commissioner Of Income-Tax, U. P. And Others

I96r April r4. 966 SUPREME COURT REPORTS [1962] RANJIT SINGH THE COMMISSIONER OF INCOME-TAX, U. P. AND OTHERS. (S. K. DAS, J. L. KAPUR, M. HIDAYATULLAH, J. C. SHAH and T. L. VENKATARAMA AIYAR, JJ.) Income Tax-Evasion of Taxation-Case referred lo Investiga-tion Commission-Settlement of Case-Notice of demand-Com-mencement of Constitution-Reco11ery of tax thereafter-Legality-Taxation on Income (Investigation Commission.) Act, 1947 (30 of 1947), ss. 8, 8-A-Constitution of lndia, Art. r4. In 1948 the Central Government referred a number of cases in which the petitioner was concerned, to the Income-tax Inves-tigation Commission set up under the relevant provisions of the Taxation on Income (Investigation Commission) Act, 1947· After the Commissi~n had submitted the report under s. 8-A(l} of the Act, in which the total tax payable on the undisclosed income upto March 31, 1947, was estimated, the petitioner applied for a settlement of his case by offering to pay the amount of tax in instalments and by agreeing to pay the whole amount imme-diately in case of default in payment of any of the instalments in time. The Central Government accepted the terms suggested by the petitioner and passed an order on November 21, 1949, under s. 8-A(2) ·of the Act directing the service of a demand notice on the petitioner and recovery of the tax in accordance with the terms and conditions of the settlement. On December 2, 1949, a notice of demand was issued to the petitioner who, in pursuance thereof, made certain payments. But as the petition-er was unable to make full payment within the stipulated periods, the whole amount outstanding became immediately payable and certain properties belonging to him and his family were attached by the Collector of the district concerned for the recovery of the amount. On June 8, 1959, the petitioner filed a writ petition under Art. 32 of the Constitution of India chal-lenging the legality of the demand notice dated December 2, 1949, and the subsequent proceedings taken in pursuance of that notice on the ground that after the coming into force of the Constitution of India on January 26, r950, they were viola-tive of the fundamental right of equal protection of the laws guaranteed under Art. 14, inasmuch as what he had agreed to pay the Government as a result of the settlement was really a debt and be had been dealt with differently from other debtors who.owed money to the State under a contractnal liability. Held, (r) that the proceedings against the petitioner cul-minating in the service of the notice of demand against him were all completed before the coming into force of th~ Constitu-tion and the petitioner cannot challenge those proceedrngs under 1 S.C.R. SUPREME COURT REPORTS Art. r4 of the Constitution, because it is well settled that the Constitution is prospective and not retrospective; (2) that the true scope and effect of sub-s. (2) of s. 8-A is to enforce the terms of any settlement arrived at in pursuance of sub-s. (r), which was really income-tax which had escaped assessment; Ranjit Singh v. Commissioner of Income·tax, U. P. (3) that the petitioner belonged not to the larger class of debtors of Government but to a special class which had evaded payment of income-tax for which the procedure laid down in s. 8-A(2) was one and the same, and that the classification being reasonable having a just relation to the object of the provision, the recovery procedure cannot be challenged as discriminatory under A rt. 14. SurajMallMohtaand Co. v. A. V. Visvanatha Sastri and Another, [1955] l S.C.R. 448, M. CT. Muthiah & two Others v. The Commissioner of Income-tax, Madras & Another, [r955] 2 S.C.R. 1247 and Basheshar Nath v. The Commissioner of Income-tax, Delhi & Rajasthan and Another, [1959] Supp. l S.C.R. 528, distinguished. ORIGINAL JURISDICTION: 1959. Writ Petition No. 85 of Writ Petition under Art. 32 of the Constitution of India for the enforcement of fundamental rights. A. V. Viswanatha Sastri, R. S. Pathak, S .. N. Andley, Rameshwar Nath and P. L. Vohra, for the petitioner. K. N. Rajagopala Sastri and D. Gupta, for respon- dents Nos. I and 2. 1961.' April 14. The Judgment of the Court was delivered by S. K. DAS, J.-One Ranjit Singh is the petitioner s. K. Das ;. before us. The respondents are the Commissioner of Income-tax, Lucknow, the Income-tax Officer, Luck-now, and the Collectors of three districts in U ttar Pradesh, namely, Dehra Dun, Kanpur and Lucknow, being officers under whose orders certain properties of the petitioner and his family have been attached in pursuance of a notice of demand issued under s. 29 of the Indian Income-tax Act, 1922, in circumstances which we shall presently state. The facts are shortly these. In 1948 the Central Government referred a number of cases in which the petitioner was concerned to the Income-tax Investiga-tion· Commission set up under the relevant provisions 968 SUPREME COURT REPORTS (1962] '9[6]' of the Taxation on Income (Investigation Commission) Act, 1947 (Act XXX of 1947), hereinafter referred Ranjit Singh v. to as the Act. On May 30, 1948, the Secretary Commissioner of of the Commission issued a notice to the petitioner Income-tax, to furnish a list of businesses or concerns in which u. P. the petitioner was interested and to produce the S. J(. Das ]. account books, registers etc. relating thereto. The petitioner complied with the notice. Then, an Autho-rised Official appointed by the Commission commenced an investigation into the cases in February, 1949, and in due course submitted a report to the Commission. The Commission heard the petitioner and on April 16, 1949, submitted a report under s. 8-A(l) of the Act. The findings of the Commission appear from the following extract from their report: "The total tax payable on the undisclosed in-come upto March 31, 1947 would accordingly be Rs. 6,61,917 . .............................................. . . The amount of Rs. 6,61,917 may be recovered from Mr. Ranjit Singh and from the family assets in the hands of Mr. Ranjit Singh. In view of the admission recorded as num her (iii) in para 6 supra, the tax will also be recoverable from the properties acquired between 1939 and 1947 in the names of Mrs. Ranjit Singh and Mr. Ranjit Singh's sons Baljit Singh and Satendrajit Singh. In the circum-stances, we recommend that no penalty be levied on the assessee in respect of non-disclosures and false or incorrect statements so far made either to the income-tax authorities or in the course of the present proceedings (including those before the Authorised Official). Mr. Ranjit Singh and Mr. Vaidyanatha Ayyar (representative of Mr. Ranjit Singh) have asked that they be allowed sufficiently long time to pay up the tax. It has been repre-sented that out of taxes already assessed by the Income-tax Department about Rs. 3,86,000 is still due and the addition of the amount leviable under this report will bring the assessee's total liability to about 10! lakhs. Mr. Ranjit Singh has asked that he may be permitted to pay up this sum in not 969 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . more than five years, in instalments Of not leSS than r96I a lakh of rupees at a time. While we do not wish Ranjit Singh to go into the details of the offer, we recommend v. this request for time for favourable consideration Commissioner of by Government." . lncome-ta>, Then, on November 7, 1949, the petitioner, his wife u. P. and two sons submitted a petition to the Commission s. I<. Das J. in which they accepted the findings of the Commission as correct and offered to pay the tax in instalments in accordance with certain terms of settlement. Some of these terms are: "3. \Ve offer to pay the aforesaid amount of Rs. 6,61,9i7 as per the following instalments: (1) on or before the 31st March, 1951 Rs. 1,00,000. (2) on or before the 31st March, 1952 Rs. 2,31,000. (3) on or before the 30th June, 1952 Rs. 3,30,917 . . 4. We, however, pray that so far as the last instalment is concerned in case we are unable to pay the same by· the date mentioned above and are able to satisfy the Central Board of Revenue that we have failed to raise the money for reasons beyond our control and for no fault of our own, a suitable extension of time may be granted. 5. In respect of the other instalments, we agree that in case 'of default in the payment of any one of them, the whole amount of tax outstanding at the time shall become immediately payable." The report of the Commission and the terms suggested by the petitioner for a settlement were accepted by the Central Government and an order was passed under s. 8-A(2) of the Act on November 21, 1949, which stated in its operative part that a demand notice be served immediately by the Income-tax Offi-cer concerned under s. 29 of the Indian Income-tax Act, 1922, on the petitioner in accordance with the terms and conditions of settlement and that all such other proceedings under the Indian Income, tax Act or under any other law as may be necessary be taken with a view to enforce the payment of the demand and terms and conditions of the septlement. I22 970 SUPRE1ME. COURT REPORTS r96r The respondents allege that a demand notice was R .. . 1 accordingly issued to the petitioner on December 2, ""[1]'' .Sing' 1949. The petitioner alleges, however, that he receiv-Commi~ion" of ed the notice in or about April, 1950, after the Consti-Income-tax, • tution of India had come into force. Thereafter, in u. P. pursuance of the demand notice certain payments ~-were made by the petitioner. The petitioner was, 5 · I<. Das f. however, unable to make full payment within the stipulated periods mentioned in the demand notice. Tl!e result was that according to the terms of settlement the whole amount outstanding at the time became immediately payable by the petitioner. Then, certain properties of the petitioner and his family were attached by the Collector of the district concern-ed in pursuance of the orders received ·from time to time from the Income-tax Officer. On June 8, 1959, the petitioner filed the present writ petition challenging the legality of the demand notice dated December 2, 1949, and the subsequent proceed-ings taken in pursuance of that notice. The case of the petitioner is that after the coming into force of the Constitution of India on January 26, 1950, the demand notice could not be given effect to and the proceedings taken in pursuance of that notice are un-constitutional inasmuch as they violate his fundamen-tal rights guaranteed by the Constitution. In the petition a reference has been made to Articles 14, 31 and 19(l)(g) of the Constitution, but the argument before us has proceeded on the contention urged on behalf of the petitioner that there has been a viola-tion of the fundamental right of equal protection of the laws guaranteed to him under Art. 14 of the Con-stitution inasmuch as he has been dealt with diffe-rently from other debtors who owe money to the State under a contractual liability. The 'substantial prayer of the netitioner is for the issuance of a writ of man-damus directing the respondents not to give effect to the notice of demand dated December 2, 1949, nor to take any proceedings for enforcing the terms of settle -ment and for recovery of the sums specified therein. The petition has been contested by the respondents and the principal point taken on their behalf is that the legality of the demand ~otice dated December 2, 196' 194.9, cannot be challenged by the petitioner on the Ranjit Singh strength of the provisions of the Constitution, because v. the Constitution is prospectiVE( and not retrospective; Commissioner of secondly, it is contended on behalf of the respondents Income-tax. that the subsequent proceedings taken in pursuance of u. P. the demand notice aforesaid do not in any way vio-late the right of equal protection of the laws guaran-s. re Das f. teed unde/ Art. 14 of the Constitution. It is convenient at this stage to refer to some of the earlier decisions of this Court on the question of con-stitutionality of some of the provisions of the Act. On May 28, 1954, this Court delivered judgment in Suraj Mall Mohta and Go. v. A. V. Visvanatha Sastri and Another (1). It is not necessary to state the facts of that decision. It is enough to say that it was held therein that sub-s. (4) ofs. 5 of the Act was bad, as it offended the provisions of Art. 14 of the Constitution. Sub-section (4) of s. 5 of the Act having been declared void, Parliament passed the Indian Income-tax Amendment Act (33 of 1954) amending s. 34 of the Indian Income-tax Act, 192.2. As a result of this amendment, the validity of sub-s. (1) of s. 5 of the Act came in for challenge on the ground that the Income-tax Officer could pick out some out of the class of substantial tax evaders and refer their cases under sub-s. (1) of s. 5 while dealing with other such persons under amended s. 34 of the Indian Income-tax Act. In Shree Meenakshi Mills Ltd., Madurai v. A. V. Visvanatha Sastri and Another('), sub-s. (1) of s. 5 of the Act was held to be bad on that ground. It should be noted that in none of the petitions disposed of by that judgment had any assessment been made under the Act and this Court only, prohibited further proceedings before the Commission under the Act. Finally, on December 20, 1955, came the decision of this Court in M. OT. 211uthiah & two Others v. The Commissioner of Income-tax, Madras & Another('). In that case, on a reference under s. 5(1) of the Act, the Commission submitted its report to Government under (r) [r955] r S.C.R. 448. (2) [1955] r S.C.R. 787. (3) [r955] 2 S.C.R. 1247. - 972 SUPREME COURT REPORTS [1962] s. 8(1) of the Act on August 26, 1952-that is, after the coming into force of the Constitution, and the Ranjit Singh v. Central Government made its order under s. 8(2) of Commissioner of the Act on Septembe~ 16, 1952. In these circum-Income-tax, stances it was held: Ranjit Singh v. Commissioner Income-tax, u. P.