The only other question, namely whether a v. Bhanji Munji

Shree Meenakshi Mills Ltd. v. Sri A. V. Vi.sva natlw Sastri and Another. " \ - - 788 SUPREME COURT REPORTS [1955] was alleged, formed a distinct class, can be dealt with under Indian amended s. 34 and under the procedure provided those who Income-tax Act. Both categories of persons, namely, calne \Vithin the scope of s. 5(1) as well as those who came within the ambit of s. 34, now form one class. Held, that after the coming into force of the Indian Incomc- tax (Amendment) Act, 1954 (XXXIII of 1954) which operates on the same field as s. 5(1) of Act XXX of 1947 the provisions of s. 5(1) of Taxation on Income (Investigation Com1nission) Act, 1947 (XXX of 1947), assuming they were based on a rational classifica tion, have becorne void and unenforceable as being discrimina tory in character. Article I 4 of the Constitution not only guarantees protection as regards substantive laws but procedural laws as well. When an Act is valid in its entirety before the date of the Constitution the part of the proceedings regulated by the special procedure and taken during the pre-Constitution period cannot be questioned however discriminatory it may have been but the dis crin1inatory procedure after the coining into force of the Constitu tion cannot be continued. Suraj Mal Mohta v. Sri A. V. Visvanatha Sastri (A.LR. 1954 S.C. 545), Keshava Madhava Menon v. The State of Bombay ([1951] S.C.R. 228), Lachmandas Kewalram Ahuja and Another v. The State of Bombay· ([1952] S.C.R. 710), Syed Qasin Razvi v. State of Hyderabad ([1953] S.C.R. 589) and Habeeb Mohammad v. State of Hyderabad ([1953] S.C.R. 661) referred to. ORIGINAL 333 of 1954. JuRISDICTION : Petitions Nos. 330 Under article 132 of the Constitution of India for the enforcement of Fundamental Rights. P. R. Das (B. Sen, Balaprasad Singh and Ganpat Rai, with him) for the petitioner. M. C. Setalvad, Attorney-General for India, and C. K. Daphtary, Solicitor-General for India (G. N. Joshi, Porus A. Mehta and P. G. Gokhale, with them) for the respondents.

1954. October 21. The Judgment of the Court was delivered by MEHR CHAND MAHAJAN C.J.-Writ Petitions Nos. by different 330 to 333 of 1954, though presented persons, identical questions for consideration and decision and can be conveniently disposed of by one judgment. • - - 1954 Shree Meenakshi Mills Laid. v. Sri A. V. Visva natha Sastri and Another. Mahajan C. ]. S.C.R. SUPREME COURT REPORTS 789 In April, 1947, Taxation on Income (Investigation Commission) Act, 1947 (Act XXX of 1947), was passed by the Central Legislature. By section 3 of the Act the Central Government was empowered to constitute an Investigation Commission for investigating Income-tax taxation on income with particular matters relating law was reference to the qµestion whether the existing thereof. Section adequate for preventing the evasion 5(1) of the Act further empowered the Q~ntral Govern ment to make a reference by the 30th June, 1948, to the report of any cases Commission for investigation wherein it had prima facie reason for believing that a person had, to a substantial extent, evaded payment of taxation on ilKome.

The date for making the reference was subsequently extended to 1st of September, 1948. By an Amendment Act passed in 1948 it was provided that the life of the Commission, in the first instance, would be up to the 31st of March, 1950, but that it could be further extended to 31 of March, 1951. By subs1~quent legislations the life of the Commission has been extended to December, 1955. It constitutes a departure law of procedure and m certain The procedure prescribed by the Act for making the investigation under its provisions is of a summary and drastic nature. from the important ordinary is detrimental to the persons subjected to it aspects and as such is discriminatorv. The substantial differ the normal procedure of the Income-tax Act ences 111 the procedure for catching escaped mcome and in prescribed by Act X~X of 1947. were fully discussed by this Court in Suraj Mal Mohta v. Sri A. V. Visva natha Sastri (1) and require no further discussion here.

Sub-section ( 4) of section 5 of the Act provided that the Central Government could refer to the Commission than those whose cases had been cases of persons other 1st of September, 1948, under referred to it by the Commission investigation, section 5(1) if, after made a report to that effect. Thus, two categories cases under Act XXX of 1947 could be referred to the the Central Government, investigation Commission by , [1955] I S.C.R. 448. 1 ~54 Shret Mteiiakhsi Mills Ltd. v. Sri A. V. Visva· nat!llJ Sastri and Another. Mahqjan C. J. 790 SUPREME COURT REPORTS [1955] namely, those falling under section 5(1) and those falling under section 5 ( 4) of the Act. the cases of It is alleged the Central Government on In accordance with the provisions of section 5 (I) of the Act the 31st of December, J947, referred to the Investigation Commis the four petitioners for investigation s10n and report. by each of these petitioners that no action was taken by the Commission on these references during the original period of its life or even during the extended perioo provided by the Amend If a report had been submitted m ment Act of 1948. these cases during the original period of the life of that now anse would not Commission, the problems have arisen, because the Act being a pre-Constitution Act was good law before the Constitution and acts done · thereunder before the commencement of the Constitu tion could not be impugned on the basis of the provi s10ns of Part III of the Constitution which came into January, 1950.

Those provisions had force on the 26th no retrospective operation validity of this law or the completed proceedings taken thereunder. Be that as it may, it appears that nothing happened in these cases till January, 1952, when it 1s summoned the allc;15ed an official of the Commission petitioners place in February, 1952, and since then the petitioners have from time to time been called upon to produce a account, but the number of statements and books investigation has not proceeded beyond the preliminary admittedly not stages and the Commission itself has commenced any proceedings in these cases, though a period of nearly that subsequent references were made, with the result events have intervened and, in our opinion, have made these references to the Commission abortive. for a preliminary discussion which seven years has could not affect elapsed smce As already stated, the Constitution of India came into force on the 26th January, 1950, and the pre Constitution laws had then to stand the test for their validity on the provisions of Part III of the Constitu tion.

Article 14 of this Part guarantees to all persons the right of equality before the law and equal protection of the laws within the territory of India. This article not • - 1954 Shree Meenakshi Mills Ltd. v. Sri A. V. Visva natha Sastri and Another. Mahajan C. J. S.C.R. SUPREME COURT REPORTS 791 article cases should be Qnly guarantees equal protection as regards substantive laws but procedural laws also come within its ambit. The implication of the that all litigants to avail themselves of similarly situated are entitled the same procedural rights £o: relief: a?-d. fo: defence with like protection and without discnmmanon. The procedural provisions of Act XXX of 1947 had there fore to stand the challenge of article 14 and could only be upheld provided they withstoood tl1at challenge. The ·question was canvassed in this Court in April, 1954, in Suraj Mal Mohta v. Sri A. V. Visvanatha Sastri (supra).

What happened in that case was that the Investigation case of another 'Commission, while dealing with the assessee referred to it under section 5 ( 1) of the Act, reported to the Central Government that Suraj Mal Mohta and other members of the family had evaded referred to it income-tax and their (4) of section 5. under the provisions of sub-section accordingly made with the result The reference was that Suraj Mal Mohta applied to this Court under article 32 for an appropriate writ restraining the Com mission from taking any action against him under It was there con provisions of Act XXX of tended that the provisions of sections 5(1), 5(4), 6, 7 :and 8 of the Act had become void after the coming into ·character, and that these contravened the guarantee of article 14 of the Constitution. This Court granted an appropriate upheld this contention ·writ It there expressed to Suraj Mal Mohta. sub-section ( 4) of section 5, on its plain ·Qpinion that reading, was not limited to cases of persons who, to a taxation but evaded substantial extent, had ·dealt with all those persons whose cases fell within the :ambit of section 34 of the Indian Income-tax Act, and that being so, there was no justification for discriminat ing them in matters of procedure from those dealt with 11mder the Indian Income-tax Act, and thus sub-section ( 4) of section 5 was hit by article 14 of the Constitution :and was void and unenforceable. The result of this 1decision was that the Commission was restrained .dealing with Mohta's case. The provisions of section 5(1) the Constitution, being discriminatory provisions

1947. - 1 954 Skrte Meenakshi Mills Ltd. v. Sri A. V. Visva natha Sastri and Another. Mahajan C. J. 792 SUPREME COURT REPORTS [1955) in that case expressing of the Act W!'re also attacked as con travening article 14 of the Constitution, but the Court any opnuon about their refrained constitutionality that question had no relevancy then. The consequence of that decision was that a certain provision of Act XXX of 1947 was declared void and unenforceable to the extent of its repugnancy to the provisions of Part III of the Constitution under article 13(1) Its validity however during the pre-constitution period was beyond q>1estion. thereof. reason What this Court said in its judgment in Suraj Mal Mohta v. Sri A. V. Visvanatha Sastri (supra) has perhaps resulted m the filing of these petitions which were presented to this Court on the 16th of July, 1954, after the decision in that case had been pronounced.

In the petitions, as originally drafted, the provisions of section. 5 ( 1) of Act XXX of 1947 were impugned on the ground that they contravened the guarantee of equal protec tion of the laws enacted in article 14 of the Constitu tion and the Commission had no jurisdiction to deal with the cases of the petitioners by applying the discriminatory and drastic procedure of the impugned Act. It was alleged that the petitioners belonged to the same class, of persons as were dealt with under the ordinary law enacted in section 34 of the· Indian Income-tax Act. Before these petitions could come to a hearing and a day after they were presented to this Court, the Income-tax (Amendment) Ordinance VIII of the· President and this was subsequently made into an Act on the 25th of September, 1954. The Indian Income-. though 1954, assented the President on the 25th of September,. 1954, came into force with effect from the 17th of July, 1954.

The provisions of this Act furnished an addi tional ground of attack the petitioners on the· continuance of proceedings by the Commission in these· cases under the prov1s10ns of Act XXX of 1947. An application was therefore made seeking permission to. urge additional grounds. This was not opposed by the learned Attorney-General In the that the relevant: additional grounds Indian 1954 was promulgated by (Amendment) Act, XXXIII and was allowed. it was urged to by - • .... 1954 Skree Memakshi Mills Ltd. v. Sri A. V. Visv,,.. natha Sastri and Another. Mahqjan C. J. S.C.R. SUPREME COURT REPORTS 793 of the against petitioners. sections of Act XXX of 1947, which affected the peti tioners, had been impliedly repealed by the amended Act of 1954 and ceased to have any legal force and that the Commission could no longer proceed under those It was further prov1S1ons contended that the amended section 34 of the Indian Income-tax Act was comprehensive in its scope, and all persons that were dealt with under section 5 ( 1) of Act XXX of 1947 had been brought within its ambit, and that being so, there was no basis for giving them discriminatory or special treatment different from those similarly situated, and who were to be dealt with under section 34 Income-tax Act as amended. that assuming but without admitting that section 5(1) of Act XXX of 1947 was based on a rational classification and was not hit by article 14 of the Constitution because of that circum stance, it had now, because of the amendment in section 34 of the Income-tax Act, become void, as the classifi cation which saved it from the mischief of article 14 if charac at all, had become teristics having disappeared, and that the persons falling within the class defined in section 5 (1) now belong to the same class as is dealt with by section 34 as amended.

Two questions were thus canvassed before us : (1) Whether section 5(1) of Act XXX of 1947 infringes article 14 of the Constitution inasmuch as is not based on a rational classification ? its distinctive It was said ineffective, Indian (2) Whether, after Income-tax the coming into force of the (Amendment) Act, 1954, which Indian operates on the same field as section 5(1) of Act XXX of 1947, the provisions of section 5(1) of Act XXX of 1947, assuming they were based on a rational classifi cation, have not become void and unenforceable, as being discriminatory in character ? In our opinion, for the purpose of deciding these petitions, it is not necessary to express any opm10n on the first question because we think the second conten tion is well founded and is sufficient to determine the case in favour of the petitioners. The provisions of section 5 ( 1) of Act XXX of 1947 be supported, if at all for a differential could only - 1954 Sbree Meenakshi Mills Ltd. v.

Sri .A. V. Visoa natha Sastri and Anotha'. Mahajan C. J. 794 SUPREME COURT REPORTS [19551 alleged the contention of and whose the hands of the clearly section 34 of the in that section in treatment of persons dealt with matters of procedure, on the ground that these persons constituted a separate class, and the classification was Parliament has, however, by amending sec rational. tion 34 of the Indian Income-tax Act, now provided that cases of those very persons who originally fell within the ambit of section 5(1) of Act XXX of 1947, formed a distinct class, can be and who it was alleged dealt with under the amended section 34 and under the procedure p~ovided in the Income-tax Act. Both categories of persons, namely, those who came within the scope of section 5 ( 1) as well as those who came within the ambit of section 34, now form one class. In tax-dodgers or war profiteers other words, substantial to have formed a definite class who were learned Attorney according to General under section 5(1), cases needed Investigation special treatment at Commi; sion. now ambit of amended Income-tax Act.

That being so, the only basis for giving them differen they formed a distinct tial treatment, namely, class by themselves, has completely disappeared, with the result that continuance of discriminatory treatment to them comes within the mischief of article 14 of the to be relieved against. All Constitution and has thus these persons can now well ask the question, why are we now being dealt with by the discriminatory and drastic procedure of Act XXX of 1947 when those similarly situated as ourselves can be dealt with by the Income-tax Officer under the amended provisions of section 34 of the Act. Even if we once bore a distinc subsists and the tive label that distinction no longer label now borne by us is is borre by persons who can be dealt with under section 34 of the Act as amended ; in other words, there is nothing un common either characteristics between us and those evaders of income-tax who Income-tax Officer under the to be discovered by the provisions of amended section 34. judgment, In our no satisfactory answer can be returned this query because the field on which amended section 34 op~rates fall within Indian the same as in properties - • - ., # - 1954 Shru Meenaksht Mills Ltd. v.

Sri A. V. Visva-. natha Sastri and Another. Mahqjan C. J. S.C.R. SUPREME COURT REPORTS 795 now includes the strip of territory which previously was occupied by section 5(1) of Act XXX of 1947 and two substantially different laws of procedure, one being more prejudicial to the assessee than the other, cannot be allowed to operate on the same field in view of the guarantee of article 14 of the Constitution. of persons could be dealt with by The learned Attorney-General attempted to combat contention on a two-fold ground : (I) That the class of persons dealt with under section 5(1) of Act XXX of 1947 was not only the class of substantial tax a class of persons whose cases dodgers but it was the Central Government, by 1st of September, 1948, had referred to the Commission that class had thus become determined finally on that date, and that that class the drastic procedure Investigation Commission under the Indian of Act XXX of 1947, while section 34 of Income-tax Act as amended empowered the Income tax Officer to deal with cases other than those whose cases had been Investigation Commission : (2) That in any case started before the Commission in proceedings having section 5 ( 1) of Act pursuance of the reference under XXX of 1947 those proceedings cannot be affected the amendment, it having no retrospective operation. referred under section 5 ( 1) Both these contentions, in our opinion, are not well founded.

As regards the those unsocial elements first contention canvassed by the learned Attorney-General it seems to us that it cannot stand scrutiny. The class of persons allege.cl to have been dealt with by section 5(1) of the impugned Act was comprised of in society who during recent years prior to the passing of the Act substantial profits and had evaded payment had made cases were referred of tax on those profits and whose to the Investigation Commission before 1st September, substantial 1948. Assuming that evasion of tax amount could form a basis of classification at all for imposing a drastic procedure on that class, the inclusion of only such of them whose cases had been referred before 1st September, 1948, into a class for being dealt with by the drastic procedure, leaving other tax evaders to a 1 954 Sfirtt Munakshi Mills Ltd. v. )' ·j A. V. Visvaa natka Sastri md Another. ~ll W.jan C. ]. 7% SUPREME COURT REPORTS [1955] to be dealt with under the ordinary law will be a clear discrimination reference of the case within a particular time has no special or rational nexus with Further it seems the necessity for drastic procedure. that this very class of persons included within is now the ambit of the amended section 34 of Act XXXIII section has apparently of 1954.

The draftsman of the classifi attempted to remedy whatever defects in cation made under section 5(1) of Act XXX of 1947 had been pointed out during the discussion in Suraj Mal M ohta' s case in this Court. The preamble of the Act states that the Act is to provide for assessment or re-assessment of persons who to a substantial extent had evaded payment of tax during a therewith. certain period and for matters connected likeness to The language employed here bears close section 5(1) of the impugned Act. that employed in The Act has inserted the section 34 of the Indian Income-tax Act : "(1-A) If, in the case of any assessee, the Income sub-section following intended tax Officer has reason to believe- (i) that income, profits or gains chargeable to income-tax have escaped any year m respect of which the relevant previous year falls wholly the period beginning on the 1st day or partly within of September, 1939; and ending on the 31st day of March, 1946 ; and assessment (ii) that the income, profits or gain which have so ·escaped assessment for any such year or years amount or are likely to amount to one lakh of rupees or more ; he may, notwithstanding that the period of eight years or, as the case may be, four years specified in sub section ( 1) has expired in respect thereof, serve on assessee ........ a notice containing all or any of requirements which may be included in a notice under sub-section (2) of section 22, and may proceed to assess <>r reassess the income, profits or gains of the assessee for all or any of the years referred to in clause ( 1) and thereupon the provisions of this Act ...... shall, so far as may be, apply accordingly ...... " It was argued in M ohta' s case as well as in these petitions that the classification made in section 5 ( 1) of .. • • 1954 Shree Meenakshi Mills Ltd. v.

Sri A. V. Visva· natha Sastri and Anolhn'. Mahajan C. ]. S.C.R. SUPREME -COURT REPORTS 797 proportion of therein was a word which the impugned Act was bad because the word "substan tial" used had no fixed meaning and was an unsatisfactory medium for carry ing the idea of some ascertainable the classification being vague and whole, and thus uncertain, did not save the enactment from the mischief of article 14 of the Constitution. This alleged defect stands cured in the amended section 34 inasmuch as the Legislature has clearly indi9ted in the statute what ~t means when it says that the object of the Act is catch persons who to a substantial extent had evaded payment of tax, in other words, what was seemingly indefinite within the meaning of the word "substantial" has been made definite and clear by enacting that no evasion below a sum of one lakh is within the meaning of that expression. Again, the classification of section 5(1) was criticized on the ground that it did not neces sarily deal with persons who during the period of war had made huge profits and evaded payment of tax on them.

The amendment made clearly remedied this defect also. The amended section states that the amended section will operate on income made between the 1st September, 1939, and the 31st March, 1946, It is thus clear that the new sub-section inserted in section 34 by the provisions of Act XXXIII of 1954 is intended to deal with the class of persons who were said to have been classified for sp~cial treatment by section 5(1) of learned Attorney-General Act XXX of frankly conceded sections overlapped, but he urged that the overlapping was not complete and that these remained still outside it whose to uphold Investigation Commission. We are unable this contention in view of the clear language employed in the amended Act and this contention is therefore negatived. and tax on which has been evaded.

1947. The to a certain extent already been cases had referred section 34 The second contention raised by learned Attorney-General is, in our opinion, concluded by a number of earlier decisions of this Court wherein it has an Act is valid in its entirety been held that when before the date of the Constitution, the part of the special procedure and proceedings regulated by - • 1954 Shree Munakshi Mills Ltd. v. Sri ..4.. V. Virva~ natha Saslri and Another. MahqjanC.J. 798 SUPREME COURT REPORTS [1955] ,reriod treated from others similarly cannot be ques taken during pre-Constitution tioned however discriminatory It may have been, but that if the discriminatory procedure is continued after the date of the Constitution, then a person prejudicially affected by it can legitimately ask why he is now being differently situate-vide Kesava Madhava Menon v. The State of Bombay('), and Lachmandas Kewalram Ahuja and Another v.

The State of Bombay(2). The same propositions were re-stated by this Court in Syed Quasim Razvi v. State of Hyderabad( 8 ), and in Habeeb Mohammad v. State of Hyderabad(•). In the cases of these petitioners, as already pointed out, Investigation Commis the proceedings sion against them under the discriminatory procedure of the impugned Act against them have not been com pleted and are pending and that being so, no justifica these proceedings against tion remains for continuing them under the procedure of the impugned Act when other persons the same common characteristics can be dealt with by Income-tax Officer under the provisions of the amended Act and the procedure of the ordinary law of the land. taken by the and having of th.eir Income-tax Act, which sub-section For the reasons given above we are of the opinion that assuming the provisions of section 5(1) of Act XXX of 1947 could be saved from the mischief of article 14 of the Constitution on the basis of a valid classification, that defence is no longer available in support of it after the introduction of the new sub-section in section 34 is intended of the to deal with the same class of persons dealt with by section 5 ( 1) of the impugned Act.

The result is that proceedings before the no longer be continued under the procedure prescribed therefore direct that an by the impugned Act. We appropriate writ be the Commission prohibiting it from proceeding further with the cases of these petitioners under the provisions of Act XXX of this case we 1947. make no order as to costs in these petitions. In the peculiar circumstances of ·Investigation Commission against issued (1) [1951l S.C.R. 228. (2) [1952 s.c.R. 710. (3) [1953] S.C.R. 589 (4) [1953].R. 661. Writ issued. • •