J '( ' v. The Stattof

The Travancot='c Commission had been appointed the last day of to act up to in the first Karkadakom 1125 the Travan (16-8-1950). Neither core Commission nor the Indian Commission to which the Travancore Commission the pending cases before report on transferred as these casrs of the expiry of this period nor was any extension of the term of appoint- ment of the Travancore Commission made up to la~t day of Karkadakom 1126 (16-8-1951) as originally therefore,, contemplated. On the Opium and Revenue Laws of Appli cation) Amendment Act, 1951, being Act XLIV of amending Act XXXIII of 1950 1951, was passed in the place of clause (b) whereby it was provided of section 3 of Act XXXIII of 1950, the following clause shall be substituted and shall be deemed always to have been substituted, viz., "in the disposal of the s:tme powers Commission shall have and exercise investigation 9£ cases in the referred to it under the Taxation on Income (Investi gation Commission) Act, 1947 (XXX of 1947) and shall be entitled term as under sub sectic•n (3) of section 4 of that Act" and it was furher that any decision given by the Chief Revenue provided of Travancore or of Travancore-Cochin Authority shall be deemed a decision of the Income-tax Auth<> (2) of section 8 for the purposes of sub-section of the Travancore Act XIV off 1124. the Central Commission it has and exercise transferred · to for same to act On the 18th October 1951, a notification was Investigation In issued Indian Commission appointing M. V enkitachalam Potty, come-tax Officer on Special Duty, Trivandrum, as an Income-tax 1955 A. Thangal Kunju Musaliar v. M. Venkitachalam Potti orid another BhagwaJi]. 1204 SUPREME COURT REPORTS r t9551 , section 6 of for his information a copy of the Travan authorised official under core Taxation on Income (Investigation Commission) Act, 1124 read with Act XXXIII of 1950. The autho to as respondent rised official, hereinafter - referred l, the 21st November the petitioner on forwarded 1951 that notification the powers of an authorised official investing him with and intimated to be to the years 1942 and conducted will no be confined two years originally covered by Evasion 1943, that it would be neces Cases Nos. l and 2 of 1125 but the petitioner's income the last completed asse» the erstwhile ment year notwithstanding State Commission had not specifically intimated him that for him investigate the period from 1940 to the investigation proposed to cover the full period. they proposed the fact to be income the full proposed the steps The petitioner thereupon ;rhe petitioner, by his registered letter dated the 23rd February 1952 pointed out to respondent 1 the illegality of him to 'which, however, the la_tter replied - by his letter that he proposed dated the 13th March 1952 stati1ig to consider investigation period, last completed assessment year. viz., from 1940 -to the filed on the 6th May 1952 a writ petition the High Court of Travancore Cochin, being 0. P. 41 of 1952 against respondent 1 Investigation Commis as also sion, hereinafter called for a writ of prohibition or any other appropriate writ or direction the respondents from holding any enquiry prohibiting into the cases registered as Evasion Cases Nos. 1 and 2 of 1125 on Investigation Commission of Travancore or from holding any in vestigation 1940 to the last completed assessment year or for any other period. income of the petitioner the Indian Income-tax respondent 2, Income-tax file of Respondent 1 filed was inter alia submitted: a counter-affidavit in which it "that the Commission by to clutch at non-existent trying cordance with the direction of this Hon'ble Court". fully prepared to shape these proceedings is not jurisdiction. They their proceedings in ac 2S.C.R. SUPREME COURT REPORTS 1205 This affidavit was stated answer dents 1 and 2 and respondent 1 stated been fully authorised to do so. to have been filed as the counter-petitioners, viz., respon that he had The writ petition was heard by a Bench of three the High Court consisting of K. T. Koshi Judges of C. J. and P. K. Subramonia Iyer and M. S. Menon, JJ. The learned Judges held that respondent 2 had all thl". powers the Travancore Commission had undi;r the Travancore Act XIV of 1124 and no more and accordingly issued a writ prohibiting respondent l from conducting an investigation into years other that any attempt to than 1942 and 1943 observing legisla enlarge the scope of the enquiry was without tive warrant. 1955 A. Thangol Kunju Musolior v. M. V enkittUholam Potti and another Bhogwati]. in so far as The petitioner appealed the order of the en the High Court was against him permitting the years 1942 and 1943, his appeal being Civil Appeal No. 21 of 1954. Respondents 1 and 2 the High Court in so appealed against the order of far as it prohibited respondent 1 from conducting the years which were not covered by vestigation the Evasion Cases Nos. 1 and 2 of 1125, their appeal being Civil Appeal No. 22 of 1954. Both the said section 5 ( 1) argument had proceeded the Constitution, and (b) the petitioner, asked for leave these appeals came for hearing and final dis the 20th September 1955. After posal before us on time Shri for some to urge Nambiyar, for additional grounds, viz., (a) that section 5 ( 1) of Tra vancore Act XIV of 1124 was ultra vires under arti cles 14 and 19 of infringed article 14 of particular inasmuch as it was not based on any the Constitution rational the word therein could not possibly be deemed "substantial" to be any form of classification. On our giving him the 'learned Attorney-General, appearing in an the background against which Tra affidavit showing vancore Act XIV of 1124 had been passed by was accord Travancore Legislature. An affidavit filed before us by Gauri Shanker, Secretary of respondents 1 and 2 asked for time to put classification whatsoever, 1955 A. Thangal Kunju Musaliar v. M. Venkitachalam Potti and another Bh.agwali]. 1206 SUPREME COURT REPORTS p955i (espondent 2 setting out facts and events as and by· these new contentions of the peti-. way of answer ti oner. that as the writ respondents, to entertain filed by the jurisdiction of the argument was readiness to shape in accordance with the directions of that respondent 2 was not amenable beyond the prayer embodied A preliminary objection to the to entertain High Court pet1t10n may be dealt with first. This objection was not taken in the· they hav counter-affidavit their proceed- ing expressed their the Court. The "learned Advocate-General of Travancore-Cochin the High Court that the Court however, urged before in view was not competent the petition of the respon its jurisdiction and dent 2 functioned outside the State of Travancore respondent 1 was a mere subordinate of Cochin and the competence of the respondent 2, it was in the peti High Court to grant tion. The High Court overruled the objection observ the State ing, that respondent 1 was of Travancore-Cochin, his situated Trivandrum, all his the State and the tion.er had emanated confined act1v1t1es acuv1t1es that the prayer to paralyse the hands of respondent 1 and the mis the location of chief and respondent 1 was clearly· his office within the Court under arti amenable cle 226 of It was further of opinion respondent 1, issued, was the mischief complained about sufficient and therefore it to decide whe ther or not a writ could be issued so far as respondent 2 was concerned. the necessary therefore, writ of prohlbition against respondent 1. the writ against stopping it was unnecessary for communications from within complained about were the opinion in essence, a prayer the State. the petition was, resident within office was that, by his residence and to the jurisdiction of the Constitution. thus prevent It was of the State, issued It, The learned Attorney-General pressed this prelimi nary objection at the outset while arguing Civir Appeal No. 22 of 1954.. He pointed out that respondent 2 had its office in New Delhi and was permanently located' there and the mere fact of its having appointed: res- 1955 A. Tlzangal Ku,Yu Uusaliar v. M. Vtnkitachalam Potti and another Bhagwali]. 2S.C.R. SUPREME COURT REPORTS 1207 jurisdicion to entertain therefore, contended to do directly an<l the investigation pondent 1 to function and carry on within the State of Travancore under its direction did not make it amenable to the jurisdiction of the High the High Court Court. He, petition the writ Jgainst respondent 2. He further contended High Court could not .do indirectly what it could not issue any respondent 1 either even writ of though he had his office at Trivandrum and had a location within permanent High Court inasmuch as he was merely an arm of res pondent 2 and any writ issued against him would have respondent 2 from the indirect effect of prohj_biting exercising the ambit the Travancore Act XIV of 1124 of its powers under read with A.ct XXX of 1950 and Act XLIV of 1951. ·prohibition against functions within jurisdiction of legitimate it was restraining respondent Reliance was placed by him on the decision of this Court in Election Commission, India v. Saka T'enkat.1 Rao(1 ). The had ap to the High Court of Madras under article 226 the Election Commission, a for a writ statutory authority constituted by the Presi<lent having its office permanently located at New Delhi into his alleged disqualification from enquiring the Assembly, and a single Judge of membership of the High Court had issued a writ of prohibition res the Election Commission from doing so. The training Election Commission filed an ;ippeal to this Court arid the jurisdiction of the High the question of agitated Court under article 226 it. this question, Patanjali Sastri C. J., While discussing who delivered the Court, observed as under:- the writ agai.11st judgment of to issue "Rut wide as were the powers limitation was placed upon two-fold In the first place, the power territories out the jurisdiction'', Court cannot jurisdiction. run beyond Secondly, that is to say, relation thus conferred, a their exercise. to exercised "through to which it exercises · the writs issued by the the territories subject to its person or authority (I) [1953] SCR 1!44. 1208 SUPREME COURT REPORTS [1955} 1955 A. Thangal Ku,Yu Musaliar v. M. Venkitachalam Patti and another BhagwaliJ. whom the .writs must implies tion either tories". The and development of writs as a special remedy page 1151:- learned Chief Justice is empowered High Court be "within those that they must be amenable by residence or location within to issue such territories" , which clear to its jurisdic those terri- the power traced the origin issue prerogative in England and observed at thus specifically directed "These writs were the persons or authorities against whom redress was sought and were made returnable in the Court issuing in case of disobedience, were enforceable them and, characteristics by attachment it necessary of the special for its effective these writs should be within the limits of its territorial jurisdiction". use that the persons or authorities for contempt. These the Court was asked form of remedy rendered to issue The mere functioning, of the territorial invest the tribunal or authority permanently located and nurmally carrying on its acti limits was not vities elsewhere, within considered sufficient the High Court with jurisdiction under article 226 nor was the cause of action within territories considered sufficient for location the person or authority was within considered a condition of the High Court being em to issue such writs with the result that the powered its office permanently Election Commission having located at New Delhi was held not amenable to the jurisdiction of the High Court for the issue of a writ under article 226. the purpose. The residence or the territories of the accrual of...,. this Court This decision followed by Income-tax Investigation Commission, etc.('). case, the assessees who were within and whose original assessments were made ipcome-tax authorities of petitions writs under article 226 tion Commission in Saka Venkata Rao's case was in K. S. Rashid & Son v. The In that the State of U.P. by the that State · had filed writ the issue of Investiga investigating the Punjab High Court for located in Delhi and the Income-tax (1) [1954] SCR 738 .. 1955 A. Thangal KUJ!iu Musaliar v. M. V1nkitae/ullam Potti artd a11otlwi BhagwatiJ. 2 S.C.R. SUPREME COURT REPORTS 120') jurisdiction respondents having belonged their cases under section 5 of the Taxation on Income (Investigation Commission) Act, 1947. The Punjab the objection urged on High Court had sustained bi; half of the effect that the State of U.P. their assessees by the Income-tax Com to be made assessment was missioner of the mere fact that that State and location of . the Investigation Commission was in Delhi the Punjab High would not confer Court to issue writs under article 226 and had dis the petitions. This Court, on appeal, disting missed in Parlakimidi's case which was uished the decision by the respondents before it to be relied sought it had been and followed law as enunciated supra, Venkata Rao's case the Punjab High Court had jurisdiction and held to issue a writ under article 226 the Investigation Commission which was in spite of located the State of U.P. and their original assessments were made by the income-tax authorities of that State. fact that the assessees were within the position in Delhi Saka learned Attorney-General, The principle of these decisions would, it was urged respon the High Court of Travancore-Cochin dent 2 and would have no jurisdiction the writ peti tion against it. to entertain eliminate the affidavit had submitted their proceedings to shape the directions of It was, however, urged on behalf of the petitioner that, filed by the respondents, both they were fully the respondents in accordance prepared it was sub the Court. This, jurisdic mitted, was a voluntary submission investing the High Court with tion of against jurisdiction respondent 2. We need not, however, express any in fact opinion on issued by respondent 2 nor the petitioner against that was any appeal filed by part of this point because no writ was the decision of the High Court. the High Court against appropriate writ the High Court is whether a writ could The real question, however, issue against respondent 1 who is, it was submitted, a mere arm of respondent 2 and a writ against whom. 1955 .. A. Thanxal Kunju Mu.salitJT v. M. Vtnkitacludam Potti anJ anothtr -Bhagwa#J. 1210 SUPREME COURT REPORTS (1955] to a writ would be equivalent Court against respondent 2 which tion. to do. issued by it had no the High jurisdic (called it appears direction of the Commission the "authorised to the Commission that behalf subject the Commission from the Commission, with the persons. The authorised ta interrogate any person or An authorised official derives his appointment from the O>rnmission under section 6 of the Travancore Act XIV of 1124. Section 6(4) of the Act provides in the course of any investigatior> conducted that if he necessary to examine any accounts or tlocuments to obtain any state the Commission may authorise ment from any person rank of an any income-tax authority not below official") income-tax officer to such directions as may be to time and the issued by authorised official shall examine the accounts or docu the state the personi and obtain interrogate ments, official (5), subject to invested, under section 6, sub-section powers . as the Commission under sub-sections (1), (2) to require the Commission and (3) which empower any person or banking or other company to prepare and furnish written statements of accounts and affairs giving or in the opinion directly be useful or relevant referred to it; to administer' oaths and exercise all powers of a ·Civil Court under the Code of Civil Procedure for the purpose of taking evidence on oath, enforcing attend- · aJlce of witnesses and of persons whose cases are the production of docu being investigated, compelling ments and issuing commissions the examination to impound and retain in its custody of witnesses and for such period as thinks fit any documents pro duced before it. The is, under section 6, sub-section (10), to have full and free access to all documents, books and other papers which in his opinion are relevant in any case or the Act and if specially authorised in this cases under to any buildings and places behalf by the Commission that such books, where he may have reason to believe information on such points or matters as the Commission may directly authorised official to the proceedings to any case 1955 A, T hangal K 1111ju Musaliar v. M. Tienkilachalam Potti and another -· Bhagwali ]. 2S.C.R. SUPREME COURT REPORTS 1211 documents or papers may be found and also power to place documents or papers and therefrom or if he considers session of or seize such Under section 6, cial is deemed ing of section 16 of 1074). to have identification marks on such books, to make extracts or copies to take pos books, documents or papers. the authorised offi to be a public servant wihin the mean the Travancore Penal Code · (I of sub-section ( 11), it necessary important It is clear from the conduct of the above provisions that the autho has considerable powers conferred upon rised official the investigation and even though he could be called a mere arm of the Commis the Commission, he or an authorised agent of to discharge and functions is not the Commission or a con merely a mouth-piece of the directions of transmitting duit-pipe the orders or is no doubt under the general the Commission. He the Commission but he control and supervision of functions assigned to him on performs in the exercise of his discretion. his own therefore, he does anything in the discharge of his If, functions is not autho fundamental rights rised by law or is violative of the of the petitioner, he would be amenable to the tktion of the High Court under article 226. as authorised official which the various initiative and that he is acting under Even though this is the prima facie position, the activities and not same. This contention the matter of it was the directions of the Commission as its authorised agent and as such no writ can issue against him, because the principal who the agent would be directs liable is unsound. the commis There can be no agency sion of a wrong. The wrong doer would certainly be responsible liable between for his wrongful action. The relevant for the principal and agent would only be the principal also is purpose the wrong perpetrated by his vicariously agent. On 22-85 S. C. India/59 to be dealt . with as the party directly the analogy of criminal of determining whether relationship liability, liable 1955 A. Thangal KU1jju Musa liar •• M. V tnkitachalam Petti and anotktr Bhagwati]. 1212 SUPREME COURT REPORTS [1955] to say protect tortfeasor tort under liability on its territories is guilty of fould certainly not to protect and safeguard the wrongful act done by him and certainly not be heard the offence under offender could that he the behest or direc was comm1ttmg tions of his principal. On the analogy of a civil wrong, himself the ground of having committed against the directions of his principal. The agent could in no event exculpate himself from lity for if he is to the jurisdiction of the High Court thus amenable issue an appropriate the fligh Court could certainly writ against him under article 226. The jurisdiction under article 226 is exercised by the High Court rights of citizens and wherever the High Court finds that any person within iloing an act is not authorised by' law or is violative of the fundamental jurisdiction :rnd the only conditions of its redress his grievances and exercise of that jurisdiction are those laid down in passage judgment cited above. The argument that by issuing a writ against the agent under those circumstances the High Court would be putting him in a position whereby he the directions of his would be compelled to disobey principal is also of no avail for the simple an agent to obey all lawful directions of his the High Court principal anc? not directions which in law. The agent from obeying the un could certainly be prohibited lawful directions of his principal and even principal cannot be reached by reason of his being the arm of the law could cer outside the territories, is guilty of having com tainly reach mitted the wrong and the High Court could certainly issue a writ against him under aricle 226. the citizen, to vindicate his to be unlawful or not justified from Patanjali Sastri, C. J.'s rights of in order exercises rights the agent who reason contended It was further writ agaimt would be indirectly prohibiting conducting even though it could not directly prohibit that by issuing such a the authorised official the High Court the Commission from territories the Com- investigation within 1955 A. Thangal Kunju Musaliar v. M. Venkitachalam Potti and another BhagwaJi]. .2 S.C.R. SUPREME COURT REPORTS 1213 through the territories the Commission If the Commission was doing its auth~ in law, it would to urge that issue a writ of prohibition its agent, the authorised official, who had his territories location within prohibited territories. that his agent in a manner which was not warranted by is expected the Investi it and not its agent in the wrong by directing him to act mission from doing so. something within rised official which was not justified not lie in the mouth of the High Court. could not against residence or permanent because merely The principal could, should be allowed territories law. It law or had no this Court has declared the law that once gation Commission would comply with contrary it would perpetrating a wrong within be indirectly to the law so declared. in no event urge for him wihin justification function to three recent in this connection Our attention was drawn by the learned Attorney General decisions of the High Courts of Allahaba<l, Nagpur and Pepsu which, according to him, supported his contention, viz., Azmat Ullah v. Custodian, Evacuee Prope;-t)'. U.P., Lttcknow (1), Burlianpur National Textile Worker.c Union, Burhanpur v. Labour Appellate Tribunal of India at Bomba.v and others (2) and f oginder Singh Waryam Singh v. Director, Rural Rehabilitation, Pepm, Patia/a and others ('1). These decisions, however, are the order clearly not in point territories and passed by the High Court accordingly wihin superior concerne<l had merged territories authority which was and was, High Court. territories could be of inferior authority within the the petitioner concerned and could give no avail to the superior authority him no relief for the order of remain outstanding and outside operative against him. As, therefore, no writ could jurisdiction of situation, a writ against the order of located outside for, the authority within the jurisdiction of therefore, beyond the territories would in each of them, that outside authority and as (2) ,\.l.R. 19551\'a~. 1-18. issued against (I) A.I.R. 1955 All 435. In (3) A.LR. 1955 Pt•psu !JI. 1955 .d. Thangol Kunju Mwaliar v. M. Venkitachalam Potli anJ another Bhagwati ]. 1214 SUPREME COURT REPORTS (1955] the authority within to dismiss respondent 1 was actually claiming territories against orders in view of the orders of the superior authority, would, the High Court concerned had, have been infructuous, of ·necessity, the petition .. Such, however, the present petition before was not the position the High Court of Travancore-Cochine. There was here no question of merger of any judicial order of the judicial order of respondent 2. respondent 1 into In this case exercise powers conferred upon him by certain tions of the Travancore Act XIV of 1124 which to law or discrimina was S]Jbmitted, were contrary tory and consequently ultra vires the Constitution. respon .the agent of The fact that respondent 1 was dent 2, which being beyond its jurisdiction could not i;!e reached by the High Court, could not make his the less objectionable or discriminatory and acts any if his action ultra vires. the provisions of law under was contrary which he was claiming to act became, after the com mencement of the Constitution, void under article 13(1) as being repugnant the doer the High Court, the High Court had jurisdiction under article thereby 226 petitioner's prevent rights. The preliminary objection urged fundamental jurisdic tion of the High Court, therefore, fails. the learneq Attorney-General against illegal act was within the reach of It is sufficient to law or if to issue a writ against respondent 1 and to article 14 and infringement say that further respondent 2 was entitled The next question canvassed in Civil Appeal No. 22 of 1954 was the alleged evasion of tax by the peti investigate the years 1942 and 1943 but also tioner not only for the last completed as from 1940 the other years sessment year. The decision of this question turns on a construction of the terms of . the references made by the Government of the United State of Travancore and Cochin under section 5(1) of the Travancore Act the 17th November 1949 XIV of 1124. A report dated in regard to had been made by the Board of Revenue years 1119 and 1120 (M.E.) and two orders were passed income-tax assessment of the petitioner for 1955 A. Thangal KWfiu Musqliar v. M. Venkilachalam Potti and. another Bhagwati]. 2S.C.R. SUPREME COURT REPORTS 1215 reference to taxation on they considered the petitioner had that report. The first of the second related to the taxation on his the Government stated for believing that on the 26th November 1949 by the Government on these orders the strength of related the petitioner's income for 1119 income the year ending for 1120. The return of income for the subject-matter of the 31st December 1942 was first order and after setting out the materials in they had prima f acie reasons the petitioner had to tax on his a substantial extent evaded payment of this was a income for 1119 and fit case Investigation the Income-tax Commission under section 5(1) of the Act. The second order' referred to the petitioner's return of income for the 31st December 1943 and after the year ending the materials, wound up similarily by stat setting out the Government had prim a f acie reasons for ing that to a substantial ex believing tent evaded payment of tax on his income for 1120 and they considered for ref Investigation Commission erence under section 5(1) of the Act. A cursory perusal of the Travancore Act XIV of 1124 will show th<it the Commission had n~ authority any case suo motu. It could only investigate investigate cases the Government. referred Thus under section 5(1), Government might refer to investigation it for and report any case or points in the Government had prim a f acie rea a case in which sons for believing to a substantial that a person had payment of taxation on income. Such extent evaded reference, however, could be made at any time before the 16th February 1950 but not later. Again, under if in the course of sub-section ( 4) of the same section, investigation in a case erred · to it under sub-section (1) the Commission had reason to believe that some other person had evaded payment of taxation on income or some other points required investigation, it might make a report to forthwith Government and the case of refer to such nther person or such additional points as might the Government would into any case or points the Commission for this was a fit case investigation Income-tax to it by 1955 A. Thangal Kunju. Musaliar v. M. Vmkitachalam P1tti and onolhtr Bhagwati]. 1216 SUPREME COURT REPORTS (1955J the Commission and that report. All that was done in the be indicated in present case was .two separate orders made that by under section 5 (I) of the Act the Government referred two cases of two vears 1942 the petitioner and 194.3 they were "tegistered as Evasion Cases Nos. 1 and 2 of 1125. There was no other order under section 5 ( 1) at any time before 16th February 1950 and none could be made under It was not suggested that sub-section after that date. that there was any report by the Commission or any reference of any case or additional points in a case under section 5 ( 4). therefore, contended for jurisdic the petitioner to enquire in any • year to the years 1942 and 1943 . The prior or subsequent learned Attorney-General, on the other Jland, con tended the Government could, under section 5 ( 1) of the Act, only refer the case of was reasonably suspected to have evaded therefore, the whole case of years referred subject-matter cif entrusted to the Commission. the tax and, investigation which had been the petitioner for all the Act was the Commission had no into any alleged evasion to in section 8(2) of the petitioner who - It was, to accept We are• unable that a "case" referred in a case. There is nothing the Government might have reason this contention. Under section 5 ( 1) the Government could refer any case or points that sub-sec thereunder tion which requi.res must cover ,;he entire p~rio<l mentioned in section 8(2). Indeed, to believe that an assessee evaded the tax only in, say, two years the Government and not in others and in such a case could only refer for investigation of evasion during those cn:uld not any case to which they had no rea for other years as such a situati:m' the sonable belief. Therefore, reference must be the particular yeats· in limited taken place. difference whether one calls the matter It makes no referred a "case" or "points It follows, in a case". therefore, to ascertain whether, in a given case the entire period or only a shorter period, one has only to look at the order the evasion was believed two years only but the reference covers in order the case to have that, 1955 A. Thangal Kunju Musaliar . :v. M. Venkitachalarn Potti and another Bhagwati]. 2 S.C.R. SUPREME COURT REPORTS 1217 clearly income taxation Income-tax for believing referred back reference the 26th November 1949 the two orders. they considered the two orders of reference. The operative parts of in the of reference dated present case clearly record the fact that the Govern ment had prima facie that the reasons to a substantial extent evaded pay petitioner had income for 1119 and 1120 ment of taxation on his that "this was a fit (M.E.) and · Investigation Commission under section 5(1) of Act XIV of 1124". reference was described as What was a fit case the evasion ·1bis" which Gt payment on specific years therefore, It is, respondent 1 official by res who was to cover any period be pondent 2 had jurisdiction specific years yond those 1942 and 1943 and notice which was by respondent 1 on the 21st issued therefore, not warranted by law. November 1951 was, no warrant or authority whatever Respondent 1 had the opinion notice and we are of for issuing the said the conclusion to respondent 1 was illegal, wi~hout jurisdiction and unsupported clearly The writ of prohibition issued against res- pondent 1 was, order and Civil Appeal No. 22 of 1954 must stand dismissed with costs. As regards Civil Appeal No. 21 of 1954, that neither re~pondent 2 nor appointed an authorised tioner contended that authority the alleged evasion of years 1942 and 1943 also. Shri Nambiyar urged the peti respondent 2 J1ad no power or that : (1) The Travancore Act XIV of 1124 was not a the integration and was not an force by Ordinance I of in regard tax by the petitioner for the High Court was it came to conduct an law in force "existing law" continued 1124; the action of investigation therefore, law. (2) The notification dated to bring from the 22nd July 1949 was the 26th July 1949 the Travancore Act XIV which purported of 1124 into force effective and invalid; (3) Even if the Travancore Act XIV of 1124 was 1955 •• A. Thangal KPju Musaliar M. Venkitachalam Potti and another BhagwatiJ. 1218 SUPREME COURT REPORTS [1955] it could not in force, ment orders conduded by rity, Travancore; apply to or override the assess the Chief Revenue Autho agreement in accordance with (4) The Rajpramukh's read with article 245 of the Constitution precluded any investi the Travancore Act gation except XIV of 1124 and Act XXXIII of 1950 amended by that it Act XLIV of 1951 was invalid in accordance authorised investigation otherwise than with the Travancore Law; (5) Assuming 'all against the petitioner, section 5(1) of Act XIV of 1124 was and void as being Constitution. the foregoing points were held the Travancore in any event unconstitutional inconsistent with article 14 of the extent It was, however, under section 1 (3) Re. (J) : The Travancore Act XIV of 1124 was the 7th the Travancore Legislature on passed by March 1949. come into force on such date as the Travancore Gov ernment might by notification the Government Gazette appoint. No such notification was issued by the 1st July 1949 the Travancore Government up when the Travancore State and the Cochin State the United State of Travancore tegrated Cochin. On the United State of the 1st July 1949, Travancore and Cochin promulgated -Ordinance I of thereby all existing laws of Travancore were 1124 continued repealed to mean any law in Travancore" was immediately prior to the ht July 1949. the 26th July 1949 that a notification was issued under section 1(3) the United State of Travancore and Cochin bring ing Act XIV of 1124 into force retrospectively from 22nd July, 1949. till altered, amended or the "existing competent authority and the State of Travancore It was only on therein defined in force The contention put forward on behalf of the peti that as· no notification under section 1 (3) issued up to the 1st July that Act had not been brought into force and therefore, was nor that date and, law" which alone was given conti- tioner was of Act XIV of 1124 had been 1949, was not then an "existing in force on 1955 A. Thangal Kwfiu Musalw v. M. V enkita&halam Potti and anothef BhagwatiJ. 2 S.C.R. SUPREME COURT REPORTS 1219 issued the circumstances I of 1124 but had nuity by Ordinance I of 1124 which was promulgated on that very day. The contention further was the Act was not continued by therefore, lapsed and, Ordinance the 26th July the subsequent notification 1949 was wholly reference of the Com mission appointment of respondent 1 as the authorised official issued by him were unauthorised and and the notices wholly devoid of any authority of law. The question is whether Act XIV of 1124 or for our consideration any part of it was, on the 1st July 1949, an existing \aw. the cases of investigation under section 5(1), ineffective and consequently the petitioner law, as it receives the royal assent The general rule of English to the date of the commencement of a statute, since 1797, has been that when no other date is fixed by it for its the date it is in force into operation coming (33 Geo. 3, c. 13). The same rule has been adopted in section 5 of our General Clauses Act, 1897. We have not been referred to any Travancore Law which provides otherwise. If, therefore, that State, the same principle prevailed ·in Travancore Act XIV of 1124 would have come into the 7th March 1949 when it was passed by force on the Travancore Legislature. What prevented result? The answer obviously points to section 1( 3) which authorises to bring the Act the Government into force on a later date by issuing a .notification. How could section 1(3) operate to postpone ·the com itself was mencement of the Act unless in force? One must, that section 1(3) came the Act was passed, for otherwise it could not postpone. the coming the same argu into operation of ment in another W;\y, if the entire . Act including sec the date of its tion 1(3) was not passing, how could issue any notifi that very section? There must be some cation under the Act into law authorising force. Where it were in section 1 (3) ? In answer, Shri Nambiyar referred therefore, concede immediately in operation at the Government the Government to bring law to be found unless the Act. To put into operation that section is that 1955 A. Thangal Kunju Musaliar v. M. V 1nkitachalam Polti and onothe r Bhagwali]. 1220 SUPREME COURT REPORTS [1955} It is, in saying a stalemate. above, will not therefore, clear by section 22 of the enactment but the commencement of the Act. the principle embodied in section .37 it will not take his argument an that notification by reason of the petitioner at all. All that it does the making of rules or bye-laws and to sec ~nglish Interpretation Act which corresponds t10n 22 of our General Clauses Act. That section does is to not help authorise issuing of orders between the passing and the com mencement of the last sentence of that "rules, bye-laws or orders the section clearly says so made or issued shall not take effect till the com the Act or Regulation". Suppose Shri mencement of Nambiyar the Government could issue a notification under section 1 (3) by virtue in section 22 of the General of the principle embodied Clauses Act, forward, for sentence of section 22 quoted It will bring effect till a is not contem notification bringing an Act into force plated the General Clauses Act. Seeing, ·therefore, that it is section 1(3) which operates the Act until a to prevent notification the Government and that it is section 1 (3) which operates to authorise the Government must be conceded the Act. There is, the fact that the Act was law" from right up. to. the 1st July 1949 and was, consequently, continued by Ordinance I of 1124. This being position, the validity of the notification issued on 26th July 1949 under section 1(3), the reference of the case of the petitioner, the appointment of respon dent 1 as the authorised official and all proceedings the Travancore Act XIV of 1124 cannot be questioned. ~n the ground that lapsed and was not continued by Ordinance I of 1124. is urged the passing o{ therefore, no getting away from issued it purported on the 26th July 1949 was bad to bring the 22nd July 1949. The reason relied upon is that the Govern- the commencement of the notification the Act into operation as that section 1(3) came to issue a notification immediately on thereunder by a11 "existing Re. (2) : It thereunder, the Act issued the date of its passing · 1955 A. Thangal Kunju Afusaliar y. M~ Venkitachalam Potti and another }Jhagwati J. 2S.C.R. SUPREME COURT REPORTS 1221 is· from , a.-date .. prior._ to ,. .the . date of ment:'could not,•;,in .the] absence: of ·express. provision, authorising it: in · that behalf, · fix · the commencement the.• Act·· retrospectively. :-,.The: reason for which the Court:c· disfavours . retroactive , operation : of laws. is . that it: 'may ·:prejudicially. affect vested:. rights .. No. such reason. is• involvetl ·in this case,• Section;-.1(3) - autho: the · Government · to . bring the .. Act :1 into force on such.< date as it may, . by: ,notification,''. appoint .... In exercise oL. the : power conferred by ·this section the Government surely had the power to issue ·the' ,notifi~ cation :bringing the. Act· into force on any. date sub sequent· 'to the passing of the _Act .. ·There can· there~ fore, · be . no , objection . to the notification fixing . the commencement of.: the Act- •. on . .o the 22nd - July_.1949 the. passing of the which was: a date subsequent , ·to Act.; So.the .Act; has; not· been· given.: retrospective operation, . that to· say, · it has, not . been inade,, to - commence passing. · , It is true,; that the· date ; of commencement as fixed. by the notification ··is , anterior, to .: the date , of the notification :.:but i,-that· 1circumstance does,. not attract operation the principle of,a statute,,., Here,,thers is no question. of affecting vested. rights.:, The ciper~tion. , of , the notification it- , _self. is. not..retrospective, .. It' :only brings the Act _into operation , on and. friiin an earlier ·. oate. In' any case it' was . 'in terms ' autho~ised ' to issue : the - notification bringing the - Act irito , fo~ce on . any date. subseq,;ent the passing . of the ,Act ', and.; th:it . is all . that the .to Go,;ernmcnt did. . Ill ' this view. of . ' the ' matter, the further 1argument advanced:_by .. the l~ned 'Attorney~ General,. an,d; whicl( fou~d . fav~ur with : the:, ,Cburi below, , namely( that the not1ficat1on was at ·any. rate good to bring the, Act· into operation :is· on and from the date of. its' issue 'need not be'corisidered. There is no substance ;in this contention. also. . Re. (J) ;:J~ 1was, urged that, ~ven if die ,Tr~v;n~o~e Act . XIV of 1124 ,was, in: force -on the 1st , July·· 1949 into. operation . from ; the and was ·validly brought the . Act 22nd July 1949, the·• assessment , orders could not , apply: · to.· or override the · years 1942 · and .1943 which of the petitioner, . for . . .disfavou~ing the retroactive the terms of section 8(2) of '. : .. · · . . 1955 A. Thangal Kurrju Musaliar v. M. Venkitachalam Potti and another · Bhagwati J. 1222 SUPREME COURT REPORTS [1955] the Act ,provided the person law shall be taken against think fit under Section 8(2) of period commencing after the report relates in respect of the were concluded by the Chief Revenue Authority of that, Travancore. after considering the Commission, the report of Government shall, by an order in writing direct such proceedings as they the various Income-tax Acts of Travancore therein mentioned or any other whose case income of any last day of (16-8-1939) and upon such a direc Karkadakom 1115 tion being given such proceedings may be taken and completed under law notwithstanding to a different effect given in the case by any decision Income-tax Appellate the Chief Revenue Tribunal. included in Authority was not "any income-tax authority" and, the peti the report of respondent 2 was adverse the assessment orders which were concluded tioner. the Chief Revenue Authority could not be affected by the provisions of section 8(2) and could not be re opened. the description therefore, e.ven authority or It was contended the appropriate income-tax therein in the hierarchy the apex, substituting 'Vhen to be passed, included This argument is based on a misconception of the Chief Revenue Authority. The true position of income-tax auth Chief Revenue Authority was an under the Travancore ority mentioned the Travancore Act XXIII Act VIII of 1096. of 1121 came the income-tax authorities the Board of Revenue enumerated the Board of Revenue for the Chief Revenue Authority which occupied a simi lar position Travancore Act XIV of 1124, the Travancore Act the pur VIII of 1096 was deemed pose of the Act and to the extent necessary, with the provisions of section result 8(2) of income-tax auth the Chief Revenue Authority ority" would which was an income-tax the Tra authority under vancore Act V!II of 1096. It may also be noted that section 4 of the Travancore Act XVII of 1122 conti nued all proceedings and petitions pending before the the old Act. By section 10 of to be in force for the words "any in construing the Act, include 2S.C.R. SUPREME COURT REPORTS 1223 Chief Revenue Authority and provided that the same may be disposed of by the said authority or by such authority as may be appointed by the Government if the said Travancore Act VIII for the purpose · as It, therefore, follows of 1096 had not been repealed. that the Chief Revenue Authority was included with in the expression "any income-tax authority" in tion 8(2) of the Act and the assessment orders of the the years 1942 and 1943 which were petitioner for concluded by the Chief Revenue Authority could be affected or overridden by any order which might be passed by the Government under section 8(2) of the Act. This contention of fore, does not avail him. the petitioner also, 195!> A. Thangal Kunju Musaliar . v. M. Vmkita&halam foUi (Z1ld another Bhagwati]. Re. indicated ( 4) : The Indian States Finance Enquiry Committee 1948-49 made two interim reports. It re commended in the first interim report that subject to therein which were de certain limitations secure legal "continuity" of pending pro signed "finality and validity" of completed ceedings proceedings under the pre-existing State legislation, the whole body of State legislation relating to "fede ral" subjects should be repealed and the correspond ing body of Central legislation extended proprio vigore the States with effect from the prescribed date or "fede as and when the administration of particular ral" subjects was assumed by the Centre. All matters and proceedings pending under or arising out of pre existing States Acts disposed of under should be those Acts by, so far as may be, the "corresponding authorites" Indian Acts. The income, profits and gains accruing and arising in 'previous years' of States of all periods which were earlier the States' should be assessed wholly and · in accordance with the States' years con~ pectively, In cerned. in any State. come-tax Should the Travancore Commission still be function integration; the federal financial ing at all cases pending before it should be taken over by Except in Travancore, Investigation Commission the States' the assessment appropriate there was no corresponding assessment time of '1949-50 1224 SUPREME COURT REPORTS [1955] 1955 .A. Thangal K~nJu Musaliar v. M. VtnAitochalam .Potti and anothn BhagwatiJ. (as in the Indian Commission. The disposal of those cases should, however, the case of pending assess ments) be in accordance with the pre-existing Travan in the Second Interim core Law .. It should be Report that the Travancore Commission wound up and the. cases referred to it should be trans ferred to the corresponding Commission in India. recommended transferred These recommendations of the Committee in so far accepted they applied to Travancore-Cochin were by and incorporated into the agreement entered between the President of India and the Rajpramukh of Travancore-Cochin on the 25th February 1950 sub ject to certain modifications which are not relevant for the purpose of the present enquiry. The result of the agreement was the enactment of Act XXXIII of 1950 which extended to Travancore-Cochin the Act XXX of 1947 and section 3 of that Act provided that the law of Travancore corresponding to Act XXX of 1947 shall continue to remain in force with the modifica tion that all cases referred to or pending before Travancore Commission shall stand and . that the State Central Commission for disposal law shall determine the procedure to. be followed and the powers to be exercised by the Central Commission in the disposal of those cases. Evasion Cases Nos. 1 and 2 of 1125 which were pending before the Tra vancore Commission to res thus became pondent 2 and were to be disposed of in accordance the powers con with the procedure the Travancore Commission by the Travan ferred on core Act XIV of 1124. Two questions, however, arose investigation by respondent 2, in the matter of this life of ·the Travancore Commis viz., (1) whether extended beyond 16-8-1950, sion, not having been respondent 2 had the power and authority to continue cases of the petitioner after the investigation of the 16'8~1950, and (2) whether any orders passed by respondent 2 the report made Government on would have the . effect of overriding assessment the Chief Revenue Authotity, orders concluded by Travancore, in cases of for the years 1942 and 1943. laid down and the petitioner transferred 1955 A. Thangal Kunju Mwaliar Yo M. V enkitathalam Potti and anothn Bhagwali]. 2S.C.R. SUPREME COURT REPORTS 1225 that, in transferred its successor and that Act thus extending the 16-8-1950. This, In regard to the first question, it was urged by Shri Nambiyar the Travancore Commis life of sion having come to an end on the 16th August 1950, respondent 2 also, which was which the pending cases of the petitioner were trans ferred, &ould not function beyond 16-8-1950. Parlia ment, however, passed, on the 26th August 1951, Act XLIV of 1951 amending Act XXXIII of 1950 where by it provided with retrospective effect disposal of cases transferred to respondent 2, it shall have and exercise the same powers as it has and exer cises in the investigation of cases under Act XXX of 1947 and shall be entitled to act for the same term as under sub-section (3) of section 4 respondent 2 beyond submitted, Parlia ment was not competent to do by reason of the terms the 25th February, 1950, the of the agreement dated effect of the enactment of Act XLIV of J951 being to respon govern dent 2. The agreement was one whlch was contem plated under article the 'Constitution and, being provided by itself, was a bar to the the Central Legis lature under article 245. The Central Legislature, it was submitted, was, therefore, not competent to pa5s Act XLIV of 1951 extending the life of respondent 2 beyond 16-8-1950 and respondent 2 was, therefore, not investigation in the any further entitled to carry on Evasion Cases Nos. 1 and 2 of 1125. the law of the Travancore State ,which was the investigation of pending ca~t·s by 295 of the Constitution competence of legislative it was life of it necessary in our opinion, Considerable argument was addressed to us on the effect of the agreement on the legislative competence of the Central Legislature under article 245. We do not, however, consider question as, the life of respondent 2 was not a part of the law of Travancore State which was to govern the procedure followed or the powers exercised by it in the investigation of the cases of the petitioner. Respondent 2 to which the pending cases of the petitioner were transferred, was a body with a the Travancorc the fact longer lease of life and to decide 1955 A. Tluzngal KUf!iu Musaliat y, M. V enkffaeh4lam Potti and anothn' Bhagwali]. 1726 SUPREME COURT REPORTS (19551 the powers lease could 110t have law which determined legislation up to December, 1955, and the procedure to be exercised by Commission had a shorter effect of curtailing the life of respondent 2. The life of respondent 2 depended upon the law which estab lished it and it was extended from time to time by subsequent accident which gave to respondent 2 a longer •lease .of life did not contravene any provision of the Travan to be followed and Travancore Commission. The transfer to respondent 2 of the cases pending before the T ravancore Com mission, of necessity involved that those cases would be dealt with by respondent 2 which had a longer lease of respondent 2 ·could conduct the same investigation of within the span of life which had been allotted to by the relevant provisions of conduct of such only limitations imposed upon the investigation being that the procedure to be followed as also to be exercisec! by it would be those obtaining in the Travancore Law. Act XLIV of 1951 merely accepted this position and there was nothing in that Act which ran counter to the agree ment. cases and complete the Indian Law, the powers As regards second question also, the Chief Revenue Authority, as observed before, was an the meaning of come-tax authority within in section 8(2) of as used the Travancore Act XIV of 1124 read with section 10 of that Act which continued in force the provisions of the Travancore Act VIII of 1096 so far as it was necessary for the purpose of the Act. There also Act XLIV of 1951 did not make any the existing Travoncore Law which was changes to govern the investigation of the pending cases . by respondent. the petitioner, therefore; is equally untenable. contention

#2. This Re. (5) : This contention urged by Shri Nambiyar questions the t1ires of section 5(1) of the Travancore Act XIV of 1124. This section provides: "Section 5(1): Our Gov.ernment may at any time 1125 refer to the report any case or day of Makaram investigation and before Commission for 1955 A. Thangal Kunju Musaliar ,. M. V enkita&/zlllam Patti and another BhagwaJi]. 2S.C.R. SUPREME COURT REPORTS 1227 points in a case in which our Government have 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 support of such belief, and may at any time before the last day of Meenam 1125 apply to the Commission for the withdrawal of any case or points in a case thus referred, and if the Commission approves of withdrawal, no thereafter further proceedings be taken by or before the Commission in respect of the case or points so withdrawn". It corresponds to section 5(1) of the Taxation on In come (Investigation Commission) Act, 1947 (XXX of 194_7) which reads as under : together with investigation and "Section 5 (J) : The Central Government may at any time before the last day of September 1948 refer report any to the Commission for case or points in a case in which the Central Govern ment has pfima .facie reasons for believing that a per son has to a substantial extent evaded payment of taxation on income, such material as may be available in support of such belief, and may at any time before the first day of September 1948 to the Commi.;sion for the withdrawal of any case or points in a case thus referred, and if the Com the withdrawal, no further pro mission approves of ceedings shall thereafter be taken by or before Commission in respect of the case or points so with drawn." We may also at this stage refer to the provisions of section 47 of the Travancore Act XXIII of 1121 which relates to income escaping assessment: income-tax have "Section 47 (1) : If in consequence of definite formation which has come into his possession the In income, profits or come-tax Otficer discovers gains chargeable escaped assess ment in any year, or have been under-assessed, or have been assessed at too low a rate, or have been the subject of excessive relief under this Act the Income tax Officer may, in any case in which he has reason to believe that concealed the particu inaccu- lars of his 23-'-85 S. C. India/59 income or deliberately furnished assessee has 1955 .. A. Thangal Irlllfiu Mrualiar M. V mkilaehalam Patti and another Bhagwati]. 1228 SUPREME COURT REPORTS [1955] prov1S1on thereof, at any time within eight rate particulars years, and in any other case at any time within four years of the end of that year, serve on the person liable to pay tax on such income, profits or gains, or, the principal officer in the case of a company, on thereof, a notice containing all or any of the require ments which may be included in a notice under sub section (2) of section 29, and may proceed to asse•s or re-assess such income, profits or gains, and provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section: ................ " · The corresponding tax Act was contained of the Indian Income in section 34 which provided "Section 34(1): If in consequence of definite ·in formation which has come Income-tax Officer discovers income, profits or gains chargeable to income-tax have escaped assess ment in any year, or have been under-assessed, or have been assessed too low a rate, or have been the subject of- excessive relief under this Act the In in any case in which· he has come-tax Officer may, reason that the assessee has concealed particulars of his income or deliberately furnished accurate particulars thereof, at any time within eight in any other case at any time within four years, and years of the end of that year, serve on the person to p:ty tax on such income, profits or gains, or, liable in the case of a company, on the principal officer thereof, a notice containing all or any of the require ments which may be included in a notice under sub section (2) of section 22, and may proceed to assess or re-assess such income, profits or gains, and provisions of this Act shall, so far as may be, apply accordiiigly as if the notice were a notice issued under that sub-section: ............ " into his possession to believe the Indian Section 34 of · Income-tax Act was amended by Act XL VIII of 1948 which received the assent of the Governor-General on the 8th September 1948. Indian In come-tax Act, 1954 (XXXIII of 1954) which was the President on the 25th September assented to by further amended by the It was 2 S.C.R SUPREME COURT REPORTS 1229 1954 and therein. introduced sub-sections (1-A) (1-D) It may, however be noted that no amendment was made in section 47 of the Travancore Act XXIII of 1121 at any subsequent period and the question as whether the provisions of section 5(1) of the Travan core Act XIV of 1124 became discriminatory and violative . of right guaranteed under to be deter article 14 of the provisions of that sec mined with tion set out above. the fundamental the Constitution will have reference 1955 A. T hangal K rufiu Musalilll' v. M. Vmkitaehalam Polli and 4lllJlhlr BhagwatiJ. to refer explained by therefore, not necessary "It is now well-established that while article The true nature, scope and effect of article 14 of this Court the Constitution have been in a series of cases beginning with Chiranjit Lal Chowdhuri v· The Union of Indian (1) and ending with Budhan Chowdhury and others v. The State of Bihar e). It is, to the earlier cases and it will suffice to quote the principle as sum the last marised in the decision of the Full Court in following terms: mentioned case at page 1049 in the 14 reasonable legislation, it does not forbid forbids class classification for the purposes of legislation. In order, to pass the test of permissible classification however, two conditions must be fulfilled, namely, (i) that classification must be intelligible diff erentia which distinguishes persons or arc grouped a group, and (ii) rational relation to be achi~ved the statute in question. The classification may founded on different bases, namely, geographical, or according to objects of occupations or is that there must be a nexus bet What is necessary ween the basis of cla&sification and the object of the It is also well-established Act under article 14 con denms discrimination not only by a substantive but also by a law of procedure." that that differentia · must have things left out of together from others the object sought the decl'sions of this Court that consideration. founded on an The principles underlying article 14 of the Consti- The only difficulty which tution are well-settled. (I) [1955] S. C. R. 869. (2) [1965] I S. C.R. 104-:i. 1230 SUPREME COURT REPORTS [1955} 1955 A. Thangal Kunju Musaliar v. M. Venkitachalam Potti and anothtr Bhagwati]. in regard to the application of those princi arises 1s the facts of a particular case and the Court has to consider the terms of the impugned legislation tO' the background and the surrounding having regard it may be necessary to do so circumstances so far as in order to arrive at a conclusion whether it infringes the fundamental right in question. coming into force of the petitioner was that Section 5(1) of Act XXX of 1947 (which 1s m pari materia with section 5(1) of the Travancore Act XIV the case of Sura; Mall of 1124) was impugned in Motha & Co. v. A. V. Visvanatha Sastri and another('). The references for investigation in that case had been made in pursuance of a report made by the Commission to the Central Government under the provisions of section 5( 4) of the Act requesting that the case of the petitioner along with other cases may be referred the Commission investigation. The contention the provi urged on behalf of sions of sections 5 (1), 5(4), 6, 7 and 8 of Act XXX of 1947 had become void being discriminatory in charac ter after the the Constitution. against the provisions of section The attack made 5(1) of the Act was two-fold: "(l) That the section not based on any valid classification; the word and having "substantial" being vague and uncertain no fixed meaning, could furnish no basis classification at all; (2) That the Central Government to dis was entitled by the provisions of another m criminate between one person and to pick and choose same class and it was authorised the cases of persons who fell within the group of It those who had could, if it chose, send the case of . one person to the another person Commission and show favouritism to by not sending his case to the Commission though the group of those these persons be within both of who had evaded the payment of tax to a substantial extent". substantially the section taxation. evaded As regards section 5(4), it was urged that it had no fall with regarding its invalidity independent section 5 ( l) if his contention existence and was bound (I) [1955] S, C. R. 448. 2S.C.R. SUPREME COUI,!.t REPORTS. 1231 that section 5(1) was valid, even In the alternative, it was urged as. then section it gave arbitrary to the Commission to pick and choose and the clause was highly discriminatory character · inasmuch as an evasion, whether sub its ambit as the ambit of section 34( 1) of the Indian prevailed. suming 5 ( 4) had to be declared void becaust; secondly because stantial well as within Income-tax Act. or insubstantial, came within !955 A. Thangal Kunju Musalia; VI M. V mkitachalam Potti and another and decided This Court considered it sufficient for the decision the contentions urged against of that case to examine the validity of section 5 ( 4) of the Act because case of the petitioner was referred the Commission under those provisions of the Act and not under sec tion 5(1) that case on the assumption that section 5(1) of the Act was based on a valid classi fication and dealt with a group of persons . who came required the class of war-profiteers which within special treatment, rational reasonable grounds existed for making a that class distinction between and others who did not come within it, but without in any way deciding or even expressing any opinfon on that question. those who fell within the classification was to the conclusion This Court compared of the in sub-section the provisions of section 5(4) oE the Act with "those of section 34(1) of the Indian Income-tax Act and came that sec the same class of persons who tion 5 ( 4) dealt with Indian fell within the ambit of section 34(1) Income-tax Act arid were dealt with (1) .of that section and whose income could be caught by ,there a procee<ling under that section. was nothing uncommon either persons who had been • dis characteristics investiga covered as evaders of the Act and the Income-tax those who had Officer income-tax. Both those . kinds of persons had common properties and had common required treatment. The Court thus held that both sec Indian Income-tax Act and sub-sec- tion 34(1) of conducted under section 5 (1) of It held in properties or to have evaded payment of income-tax during an been discovered by characteristics and therefore between i I\ 1232 SUPREME COURT REPORTS [1955J 1955 A. Thangal Ku•ju Musali1J1 v. M. V1nlcitachalam Potli and another .Bluiewati ]. tion ( 4) of section 5 of the impugned Act dealt with persons who had similar characteristics and similar properties, they were persons who had not truly disclosed income and had evaded payment of taxation on in- come .. the common characteristics The court for discovering this court came Indian Income-tax Act, the assessees Indian there was material and two procedures and then considered whether the procedure prescribed by Act XXX of 1947 concealed profits of those who had evaded payment taxation on income was substantially diff the pro erent and prejudicial cedure prescribed Income-tax Act. the provisions o£ section 8 of Act After comparing XXX of 1947 and those df sections 31, 32 and 33 of conclusion substantial there was difference between the that the procedure prescribed by no doubt pugned Act deprived a person who was dealt with rights · of appeal, second appeal and instance. The procedure decided by the judge of first prescribed by the impugned Act in sections 6 and 7 the procedure prescribed in was also compared with the Indian Income-tax Act and sections 37 and 38 the procedure prescribed this Court the impugned Act was substantially more prejudicial the procedure prescribed under persons dealt with under Act XXX of 1947 were sub mitted prejudicial the Indian Income-tax Act. to a procedure which was more drastic ~nd the procedure which was available those who were dealt with under section . 34 of to challenge questions Indian Income-tax Act. It was that Act of revision the assessee thus clear This Court, therefore, was of the opinion that sec the procedure prescribed by the persons proceeded thereunder being a piece of discriminatory article thus vOid and un tion 5( 4) pugned Act in so far as it affected against legislation offended against 14 of the Constitution and were enforceable. the provisions of It was after this decision of this Court in S11rai \ 2S.C.R. SUPREME COURT REPORTS 1233 that Parliament enacted introducing sub-sections (1-A) Mall Mohta's case, supra, (XXXIII Indian Income-tax Amendment Act, 1954 of 1954) (1-D) Income-tax Act. Though section 34 of Act XXXIII of 1954 received the Presi dent on the 5th September 1954 it was to come into effect from the 17th July 1954. the assent of Indian 1955 A. Thangal Kunju Musaliar v. M. Venkitaehalam Patti and another Bhagwati J to meet the whole, and Section 34(1-A) purported in the main, offered against extent, had evaded payment of two criticisms the con which had been, in Suraj Mall stitutionality of section 5(1) of the Act Mohta's case. One criticism was the classifica tion made in section 5(1) of the Act was bad because therein was a word which the word 'substantial' used unsatisfactory and was an had no fixed meaning idea of some ascertainable medium for carrying the the classification proportion of the enact being vague and uncertain, did not save the Constitu the mischief of article 14 of ment from in section 34 ti, on. That aHeged defect was cured indicated ( 1-A) inasmuch as the said object there . what it meant when to a of Act XXX of 1947 was substantial other words, what was seemingly indefinite within the meaning of the word 'substantial' had been made definite and clear by enacting that no evasion below the meaning of that a sum of one expression. The other criticism was that section 5(1) did not necessarily deal with the persons, who, during the war, had made huge profits and evaded payment of tax on remedied . this defect also. come made between the 1st September 1939 and 31st March 1946 the Legislature clearly it said that to catch persons who, tax, tax on which had been evaded. Section 5(1) was again attacked in the case of Shree Meenakshi Mills Ltd .• v. Sri A. V. Visvanatha Sastri and Another(1). This was a petition under article 32 of the Constitution decision in Suraj Mall Mohta's case, supra, had been the Act was attacked pronounced. the very same grounds which were mentioned in filed on the 16th July 1954 after them. Section 34(1-A) it would operate on lakh was within It clearly stated Section 5(1) of (I) [19j5] IS.CR. 787. 1955 .d. Thangal Kunju Musoliar v. M. Venkitachalam Patti and atWthtr B/zagwati J. 1234 SUPREME COURT REPORTS [ 1955] above, introduced section 34(1-A) to be heard by this Court, the new sub-section in section 34 by Act XXXIII of 1954 was the judgment in Sura; Mall M ohta' s case, supra, had not been dealt with by this Court it being con down section 5( 4) of the sidered sufficient to strike the vires of Act without expressing any opinion on this case, section 5(1) was not section 5(1). Even struck down as void on a comparison of its provi those of section 34( 1) of the Indian Income . sions with tax Act as was done the case of section 5( 4) Sura;. Mall Mohta's case, supra. By the petition came the Parlia ment had enacted Act XXXIII of 1954 which, in section stated this Court came 34 of the Indian Income-tax Act and to the conclusion on a comparison the provisions of section 5(1) of the Act with section 34(1-A) of the , Indian Income-tax Act . serted tended to deal with the class of persons who were said to have been classified for special treatment by sec tion 5(1) of Act XXX of 1947. This Court reiterated the conclusions in Surai Mall that the procedure prescrib~d by Mohta's case, supra, the Act for making the investigation under its sions was of a summary and drastic nature and constituted a departure from law of pre> important aspects was detri cedure mental to it and as such was discriminatory. It did not again express an opinion the validity of section 5 ( 1) as being based on a valid classification and being mischief of article 14 of the Constitution, but on a comparison of Act with the Indian In the 17th come tax Act which came into effect from July 1954, came that this defence of the provisions of section 5(1) being saved from the mischid of article 14 of the Constitution on the of a valid classification was no longer available in support of it after the introduction of the new sub. section in Income-tax Act which sub.section dealt. with the saine class of per impugned sons dealt with by section 5(1) of the to the persons subjected the provisions of section 5 ( 1) of those of section 34( 1-A) of section 34 of the Indian it had come the conclusion the ordinary thus saved in certain to which 1955 A. Thangal Kunju Musaliar v M. V mkilachalam Pol Ii and another Bhazwat; J. 2 S.C.R. SUPREME COURT REPORTS 1235 ' that proceedings could no Act. The result was longer be continued under the procedure prescribed by the impugned Act and section 5(1) was thus struck down as unconstitutional and void after the coming the Indian In -into operation of section 34(1-A) of come-tax Act. case, these cases, under article the vires were is discriminatory however, helpful this Court was of and thus violative of the is, the question These two cases, viz., Suraj Mall Mohta's case supra, and Shri Beenakshi Mills' supra, did not directly pronounce upon the vires of section 5(1) of the Act fo comparison with section 34(1) of the Indian Income-true Act the subject though matter of a direct challenge therein. The ratio of these decisions the determination that arises directly before us, viz., whether section 5(1) of the Act its character fundamental right guaranteed 14 of the Constitution. In both the opinion the procedure for investigation prescribed by · Act XXX of 1947 the Travancore (corresponding with Act XIV of 1124) was of a ·summary and drastic nature law of and constituted a departure from procedure and persons subjected the proce dure prescribed by the Indian Travancore Act XXIII of 1121) and was as such dis criminatory. The provisions of sections 5(4) and 5(1) of the Act were compared respectively with the provi sions of section 34(1) and section 34(1-A) of the Indian Income-tax Act and, on a comparison of these provi ~ons, this Court came dasses of persons who were said to have been classified those respective sections of for special the Act were intended to be and could be dealt with under section 34(1) and section 34(1-A) of the Indian therefore, be no Income-tax Act treatment under the provisions of Act XXX of 1947 (correspond ing with the Travancore Act XIV of 1124). it as compared with the corresponding provisions of a valid classification for special in certain aspects was detrimental Income-tax Act the conclusion (corresponding treatment by the ordinary there could, The procedure prescribed by the Travancore Act XIV of 1124 being thus discriminatory as compared 1955 A. Thangal Kunju Musaliar v. M. Venkilaehalam Potti and another B/ragwati J. 1236 SUPREME COURT REPORTS [1955} the procedure prescribed XXIII of 1121, sideration are, classification 5(1) of persons were under the provisions Act XXIII of 1121. to be found the questions ( 1) whether the Travancore Act that arise for our con there is a rational basis of in the enactment of section the same class of intended to be and could be dealt with the Travancore of section 47 of the Act, and (2) whether In evasion to which the exterit to prevent is and has been order to ascertain thus: "Whereas it It is hereby enacted as follows". the Travancore Act XIV of 1124, 'the purpose of ascertaining whether the scope and purpose of the impugned section reference must first be made Act . itself. The preamble of a statute has been said to be a good means of finding out its meaning and as it were a key to the understanding of it. The preamble that of Act is expedient XXX of 1947, runs the actual on income incidence of taxation recent years in accordance with the ·provisions of law the existing law and pro cedure for the assessment and recovery of such . taxa tion is adequate thereof, to be made into m<ike provision for an investigation such matters. It does not unfortunately give any assistance the solution the problem before us. Section 5(1) itself, however, gives some indication the real object of it. The condition on which the action of the Government must have made dependent prima facie for believing that a person has to taxation on a subs.tantial extent evaded payment of the Commis his income. The powers conferred on sion by section 6 and the procedure prescribed for the Commission by section 7 are dearly very drastic and harsh. This unmistakably shows legislative that these stringent measures authority tax evasions which were necessary for unearthing had gone unnoticed before when the usual procedure law was applied. Then comes under the Income-tax the Government after section 8(2) which authorises the report of perusal of to direct to be taken against the person to whose proceedings the Government under the Commission reasons that section the view 2S.C.R. SUPREME COURT REPORTS 1237 intention of in respect of the income of any the 16th August 1939. This income evaded Section 5(1) also thereunder of a case must the 16th February 1950. the object of law was to uncover the evasion of tax on income the 16th of which evasion the report relates period commencing after provision_ clearly evinces legislative authority is to catch from after the 16th August 1939. the reference provides be made at any time before From these sections made after the 16th August 1939 and before February the Government had prim a f acie reason to believe. it will appear the existence 1950 about 1955 A. Thangal Irun ,., Musaliar v. M. V enkitacha/arr, Potti and another Bhagwati J. although legislative authority The question at once arises as to why it was that were possible cases of tax evasion. It has been said statement of . the the objects to a bill is not admissible as an aid reasons appended the Act as passed (see Aswini to the construction of Kumar Ghose's case (1), yet it may be referred to only the conditions for the limited purpose of ascertaining prevailing at the making the time which necessitated ) ). - Similar of the law (see Subodh Gopal Bose's case( 2 observations were made by Fazal Ali, J. with ref erence relevant for to legislative proceedings being the circumstances under the proper understanding of reasons which which an Act was passed and· the necessitated in Chiranjit Lal Chowdhuri v. The Union of India(-). Indeed, in the case of Kathi R{lning Rawat v. The State of Saurashtra( 4 this Court State permitted detail the time there under consideration had been passed and which necessitated the passing of that law. the present case also, an affidavit has been In filed' respondent 2, stating by Gauri Shanker, Secretary of to enact the the reasons why it was This affidavit impugned Act including section 5(1). clearly brings out the serious problem A war of unprecedented magni revenue authorities. to 1946. The tude had raged from September 1939 (2) (1954] S. C.R. 587, ~8. (4' (1952) S.C.R. 435. the circumstances which prevailed at (I) [1953] S.C.R. I. (3) [1950] S.C.R. 869, 879. to file an affidavit stating thought necessary that faced ), 1955 A. ThMgal K .,Yu Musaliar "· M. V 1nki1athalom Polti and anotht:r Bkagwati J. 1238 SUPREME COURT REPORTS [1955] war conditions brought in their train a sudden rise the demand of all kinds of goods, both consumer and the prices to _industrial, which, naturally pushed up abnormal heights affording a great opportunity to the to reap huge producers, manufactures and merchants profits. There was good reason that these abnormal profits were not being brought into regplar accounts but were being concealed. Faced with this situation, means had to be devised to enquire into the legitimate dues of the tax evasions and State. to a class of obvious substantial .. evaders of income-tax who required to be treated under the drastic procedure provid specially ed by Act XXX of 1947. to realise If regard be had that section 5(1) had reference this background to believe It was, however, urged that reasonable basis of extent" were of such vague afford erence was made ed., Vol. 4, page 2901, where has been described to be: the words "substa!!tial import that they did not classification, Ref to Stroud's Judicial Dictionary, 3rd the word "substantial" "A word of no fixed meaning, it is an unsatisfac tory medium for carrying the idea of some ascertain (Terry's Motors, Ltd. v. able proportion of the whole Rinder, [1948] S.A.S.R. 167)". The word "sub~tantial" has been used legislative and even though be a word of no fixed meaning, Viscount Palser v. Grinling(' ) observed: . m vanous it is said to Simon m enactments . "One of the word It is in the primar)l meanings of to considerable, solid, or big. equivalent sense that we speak of a substantial fortune; a tantial meal, a substantial man, a substantial argu ment or ground of defence. Applying this sense, the discretion of the judge -of fact to decide as best he can according to the cir cumstances in each case . ... ,, Judicial Dictionary -~olid or big". it has been described at page 2902 of Stroud's to ~onsiderable, to be "equivalent it must be left the word Even though the word "substantial" by itself might (l) [1948) A.C. 291,317. 1935 A. Thangal Kunju· Miualillr v. M. Venkitachalan: Potti and anot/rn Bkagwati ]. 2 S.C.ll. SUPREME COURT REPORTS 1239 certainty individuals within the class of persons who the circumstances mentioned includ not afford a de~nite measure or yard-stick for classification, ing particular the background and the aforesaid affidavit of Gauri Shanker indicate with reasonable intended to be subjected to this drastic procedure. It does not require much effort to pick out persons who would fall within this group or category of substan tial evaders of income-tax and even though a definite amount be not specified in section 5(1) of the Act as constituting a substantial evasion of Government, to whom the process of selection for the purposes of reference of the cases the Commission is entrusted, would not have any the persons coming within difficulty in finding out the language of Vis this group or category. To use count Simon, income-tax which has been evaded would have to be considerable, solid or big, and once that conclusion was reached by the Government, the cases of such persons would referred by them for investigation by the Commission under sec tion 5(1) of the Act. for investigation income-tax indeed be itself It was, however, urged the very group or category; that it would be open to the Government within the terms of section 5(1) of the to discriminate·. between persons and per Act sons who fell within Government might the case of A to the Com mission leaving the case of B to be dealt with by the laid down in the Travancore Act ordinary procedure XXIII of 1121. The possibility of such discrimina the same group or category, however, cannot necessarily to be presumed, validate the contrary were shown, that the administra unless law would be done "not with an tion of a particular evil eye and unequal hand" and the selection made to be the Commission would ref erred for not be discriminatory. this piece of legislation. It is the cases of persons treatment of persons the Government of investigation by falling within This question was considered by this Court in tw<> cases, viz., Kathi Raning Rawat v. The State of Sau- 1955 .4. Thattgal Ku,Yu Musaliar v. .M. V enkilachalam Potti and another Bhagwati ]. • 1240 SUPREME COURT REPORTS [1955] rashtra(i) and Kedar Nath Bajoria v. The State of West Bengal(•). Mr. Justice Mukherjea, as he then was, .dealt with the argument in Kathi Raning Rawat v. The State of Sauras~tra( 1 ) as under:- if the terms of also when the classification "It is a doctrine of the statute upon to make selective application of the the American courts which the equal seems to be well-founded on principle protection clause can be invoked not merely where the express discrimination appears on itself, but statute the result of im it is law. (Vide proper or prejudiced execution of Weaver on Constitutional law, p. 404). But a statute will not necessarily be condemned as discriminatory, itself but, it does not make because as an effective way of carrying out its policy, vests to do it in certain officers or adminis- the authority trative bodies ......... .In my opinion, legis- is clear and definite and as an effective lative policy method of carrying out policy a discretion a body of administrators vested by law to or officers certain classes or groups of persons, the statute itself cannot be condemned as a piece of discriminatory legislation. After all "the law does all that is needed when it does all indicates a policy .... and the lines all similarly situated to bring within (Vide Buck v. Bell, 274 so far as its means allow" U.S. 200, 208). In such cases, the power given to the executive body would import a duty on. it to clas·sify legislation in accordance with the subject-matter the statute. The discre the objective in such circumstances exercised effectuate which is given and it is in the propriety relation that objective If classification would have the ad m1rustrative persons things on a basis which has no rational relation the objective of its action can cer legislature, tainly be annulled as offending against the other hand if the statute protection clause. On (2) [1954] S.C.R. 30, 41. (1) [1952] S.C.R. 435, 459. is not an unguided discretion, it has the policy the direction to be is conferred on official agencies indicated conformity with body proceeds tested. classify that it can, 2S.C.R. SUPREME COURT REPORTS 1241 the statute would be held on itself does not disdose a definite policy or objective to make selection and it confers authority on another at i~s pleasure, the fa~e of it to be discriminatory irrespective of the way m which it is applied ........ " The same line of demarcation was also emphasized by Patanjali Sastri , C. J., delivering in Kedar Nath ·Bajoria v. The State of West Court Bengal(1). It, Government .cases of persons of substantial evaders of the Commission would not render section criminatory and void. that the mere fact the power to select the group or category 5(1) dis is entrusted with falling within income-tax for reference the judgment of therefore, follows 1955 A. T haagal K"'fiu MU1alial' v. M. Ven/ritadullam Potti and atUJtlitr Bha&wati J. legislation is within the Act and is quite definite and such drastic procedure the object sought The object sought to be achieved by the impugned piece of is to catch substantial evaders of income-tax out of who have made huge profits during the war period. They form a class by themselves and have to be laid down in the specially treated under die procedure the procedure themselves, Act. Being a class by they are subjected during the course of investi gation of their cases by the Commission is not at all because -discriminatory nexus with reasonable therefore such a classifica achieved by limitations. The the cases of persons falling within selection of the Government cannot be challenged as category by it is not discriminatory the uncontrolled discretion of left to the· Government. The selection is guided by the very set out in the terms of section 5 objective which the attainment of that object controls (1) itself in the Government and the discretion which the Government in making the necessary selec guides tion of cases of persons to be referred for . investiga the Commission. tion by therefore, be It cannot, is a valid basis of classification disputed .to be found in section 5 ( 1) of the Act. the unguided or the simple reason constitutional is vested (I) (1954J S.C.R. 30, 41. A. Tltangal Kunja M111alw v. M. V ln/;ilaehalam Potli and (JJll)l/ier BhagwaJi J. 1242 SUPREME COURT REPORTS [1955J referred laid down in so far as fell within not be subjected the cases of that date would be treated investigation by fhe Government therein are either referred The validity of the classification was further attack the period limitation of ed on the ground that the substantial evaders of within which falling within this group or category may income-tax the Commission, viz., 16th February 1950 imports a discrimination those persons whose cases are referred before the procedure in the Travancore Act XIV those whose cases have not been of 1124 whereas to the referred by that date would though treatment even same category. This would bring about a discrimi the same class of persons some of nation between whom would be subjected treatment to that special and others who would escape the same. Section 5(4) of the Act also would not cure this defect because the the cases which cases contemplated have been already Commission -under section 5(1) of the Act or cases of other persoris about whose· alleged evasion of information the Commission has gathered come-tax during the course of these other persons be thus subjected the special procedure prescribed in the Act there would remain, jurisdiction of the Commission; numbers outside of persons. whose cases are not covered by sections 5(1) or 5f4) but who nonetheless are comprised withe income-tax. the class of substantial evaders of They would have the ordinary to be dealt with under the Travan law and presumably under section 47 of if they could be core Act XXIII of 1121 If they could not be so dealt with, thereunder. they would escape the the only result would be the escape and_ surveillance ment of their cases would be without it was urged, was discriminatory .and was enough section 5 ( l) of the Act. investigations. Even the Government to strike down remedy. This, income-tax in investigation It would be impossible in the normal course to reach all substantial evaders of income-tax. Those persons in. respect of whom the falling within that category 1955 .4. Thangtll Ku,P ,,. Mwaliar M. V illditaclialflfll PotJi and anot!r" 2S.C.R. SUPREME COURT llEPORTS

12..143 in order the· requisite for believing Those persons (corresponding it stood before the Government to section 34 of income-tax. Even under referred by the Commission; received information Government had the Government had prima f acie -and in whose cases reasons they had to ·a substantial extent evaded payment of taxation on income would their cases investigation by information was available respect of whom no such the Government would certainly escape detection that is the position with regard to each and every to detect evasion law which may be passed of payment· of the provi sions of section 47 of the Travancore Act XX:Ill of the Indian In 1121 come-tax Act as in respect of whom the Income 1948), those persons definite tax Officer had gathered information and income, profits or gains consequently discovered chargeable the relevant pro any year could be dealt with under visions of that Act. Those persons in respect. of whom In no such come-tax Officer could not be reached at all. The fact that some persons failing within a particular category necessarily may escape detection altogether destructive of legisla tion. The is that, as between thing required persons who fall. within ·the same category and who can be dealt with treated in should , be no dis, crimination, one way and others being treated in another. to income-tax had escaped assessment information had been received by the is not the particular the same procedure, the amendment the efficacy of ·some being limited of section 5(1) 16th February 1950. It was also urged the terms that discrimination was inherent itself by reason of its only to those persons whbse operation being the Com~sion on or before cases were referred It thus arbitrarily left out income persons who evaded payment of taxation on made during the war period but whose cases were not discovered or referred to the Commission on or before similarly situated. Reliance was placed position from the judgment of Mahajan, C. J. in Shree · Meenakshi Milli case, 24--'85 S.C. Ibdia/59 they were· otherwise the following passage in support of date although 1244 SUPREME COURT REPORTS [1955] 1955 supra, at pages 795-796: A. Thangal Kunju Musaliar ... M. ·venkitaeWam r olti and anolhn r B1iagwa1; J. to a fixed. the date tax evaders "Assuming the necessity proc~dure on that evasion of tax It was pointed out the drastic procedure to repel learned Attorney-General substantial could form a basis of classification at all for that class, the inclu them whose cases had been into a class for leaving to be dealt with under the ordinary the reference of time has no special or for drastic proce- amount imposing a drastic sion of only such of re£erred before 1st September, 1948, being dealt with by law will be a clear discrimination the case within a particular rational nexus with dure ........ " the first argu These observations were made the class ment ·of evaders who fall within section 5(1) of substantial those whose cases had been referred with were only if the itself would that by class was so circumscribed make the classification discriminatory by leaving out had not been those substantial evaders whose cases referred · by that passage, however .• in fact section 5 ( 1) was this Court did not hold to such a limited class. We are of the opi confined for references for the date nion that investigation by to the Commission, viz., the 16th February 1950 was not an attribute of income-tax which the class of substantial evaders of under the the Travan~ore Act dractic procedure prescribed XIV of 1124 but was a mere accident and a measure of administrative the nature and references could, without be extended by purpose by a necessary amendment Travancore Legislature if such an amendment had been grafted on the Act as origi to the particular class or category income tax could have complained against belonging of substantial evaders of the same. convenience. The date of touching be specifically treated the Travancore Act, XIV of 1124, and the Government of the classification, date. By the fixation inten.ded passed, The next question to consider is whether the same class of persons dealt with under section 5(1) of the intended to and 'l'ravancore A~t XIV of 1124 were 1955 A. Thmigal K!Jtifu Musaliar v• M. Tr mkita&halam Potii and aMihn B/llJgwatiJ.

28.C.R. SUPREME COURT REPORTS 1245 could be dealt with under the provisions of section the Travancore Act XXIII of 1121. Because, 47 of if that was the position at any particular period of time, section 5(1) of the Travancore Act XIV of 1124 would certainly be discriminatory so far as there will be simultaneously exist two distinct provisions ing in the statute book, one of which could be applied to some persons within the same class or category and the other could be applied to others also falling within the same class or category, thus discriminating between the two groups. Section 47 of the Travancore Act XXIII of 1121, as already observed, was in -the same terms as section 34(1) of the Indian Income-tax Act as it stood before its amendment in 1948. Each of the following condi..; tions had to be fulfilled before the Income-tax Officer could take action under this section, viz.: (i) that definite information had come Income-tax Officer into the that income, etc. possession of had escaped; (ii) tion the etc. that in consequence of such definite informa Income-tax Officer discovered income, (a) had escaped assessment, or (b) had been under-assessed, or ( c) had been assessed at too low a rate, or (d) had been the subject of excessive relief; (iii) that the Income-tax Officer had reason believe that- ( a) the assessee had concealed the particulars of his income, or (b) deliberately furnished inaccurate particu- lars thereof. It is, therefore, abundantly dear that section 47(1) of the Travancore Act XXIII of 1121 was directed only · against those persons con~erning whom definite. information came into the posse8$ion of the Income. tax Officer the Income and in consequence of which tax Officer discovered persons assessed at too 10-w a rate or had been the subject of excessive relief. The class of persons envisaged by e~capcd or been under-assessed income of !955 A. Thongal Kunju MUJQ!iar V• M. V mkitacha/a,,. Potti and anothlr 1:246 SUPREME COURT REPOR~ [t955J the end of than 8 years after information leading to escapement from assessment to section 5(1) it will be noticed section 47(1) was a definite class about which there was definite to discovery within the case may be of definite item 8 years or 4 years as or items of income which had assessment. escaped The Travancore Act XXIII of 1121 was passed on the 9th July 1946. The action to be ta.ken under it was not confined come made during the war period (September 1939 to Action could be taken in respect of income 1946). the war and which escaped assessment even before the war. also more Turning now the . class of persons sought to· be reached comprises there was no definite only persons about whom information and no discovery of any definite item or items of income which escaped taxation but about whom the Government had only prima facie reason that they evaded payment of tax to a sub to believe stantial amount. The · class of persons who might fall within section 5(1) of the Travancore Act XIV of 1124 was, therefore, not the same class of persons who may come under section 47(1) of the. Travancore Act XXIII of section 5(1) read with section 8(2) of the Travancore Act XIV of ll24 is definitely limited to the evasion of payment of taxation on intome made during the war period. section 5(1) of the Travancore Act XIV of ll24 was discri minatory in comparison with section 47(1) of' the Tra vancore Act XXIII of ll21, for the persons who came under section 5(1) were not similarly situated as per sons who came under section 47(1). Section 5(1) of Act XXX of 1947 was struck down in Shru Meenak shi Mills' case, supra, as it comprised the same class of person& who were brought in in the amended sec tion, 34(1-A) of Income-tax Act, 1922 Indian but the same caruwt be said about section 5(1) as compared to section do section 47(1).. These two not ovcdap: and: do not coYCr the sairu: class of per sons. It cannot, therefore, be urged Further, action under ll21. 'fhe· result, therefore, is that section 5(1) of the 'Jltavamiore Act XIV of 1124 which. has to: be read for 2·s.c.R. SUPREME COURT REPORTS ·1247 article 14 of took place the Commission up to valid and so also were the the course of investigation which juxta-position with section 47 of. the this purpose in Travancore Act XXIII of 1121 cannot be held to be discriminatory and violative of the fondamental right guaranteed the Constitution. The proceedings which the course of investi gation by the 26th January 1950 were proceedings during. took place the Constitutiol). on the 26th January 1950 under which the petitioner, as a citizen of our Sovereign Democratic Republic acquired inter alia .guarantee of the fundamental right under article 14 of the Constitution. the inauguration of 1955 A. Thangal Kunju Musaliar V• M. Vmliit°'halam Polti and anothlr Bhagwati]. that .all therefore, the petitioner The result, urged on behalf of peal No. 21 of 1954 must be ·dismissed with costs. Civil ·Appeals Nos. 21 and 22 of 1954 wil~ accord ingly be diSlllissed with costs. There wm be a set off the contentions fail and Civil Ap for costs. M. CT. MUTHIAH & 2 OTHERS ti •. 1955 D1umbu 20. THE COMMISSIONER OF INCOME-TAX, MADRAS &, ANOTHER; [S. R. DAs~ ACTING C.J, V1vr:rn BosE, BHAcrWAn, J AGANNADHADAS and B. f. SINHA JI.) Constitution of India, Art. ]'/--Taxation on Income (Investiga (Act XXX of 1947), s. 5(1)-'Whetil~ tion Commisiion) Act, 1947 'lhe· Constitution in vie1v of s. 34 of Indian lncome-Ta1r .ultra vires Act, 1922 (Act XI of 1922) as amended by the 'Income-Tax and Bu1i ness Profits .Tax (Amendment) Act, 1948 (Act XLVlll tif 1948) and the Indian· Income-Tax (Amendment) Act, 1954 (Act X!XXW uf 1954). H~ld (Per S .. R. DAs, .A,cTING C.J., V1v1AN iBoSE, .BHAcwATI and B. P. SINHA, JJ . .}AGANNAoHADAS J., dissenting) that s. 5.(1) of the T<1xation on .. Income (Investigation Commission) Ac~,· .1947 (Act XXX of 1947) iis ultra vires the Constitution as it ii discriminawry .right guaranteed by . Art. l4 of and violative of the fundamental the Constitution by reason of two amenc; lments which were made in ,s. 34 of thf: Indian In~omc-Tax Act, 1922 (Act XI afl922) one ia .1948 by the .c:nac[ment of the Income-T.u: and Busine$& Profit$ Ta