I96r v. THE COMMISSIONER OF INCOME-TAX, U. P & Ors.

that the petitioner belonged not to the larger class of debtors of Government but to a special class which had evaded payment of income-tax for which the procedure laid down in s. 8-A(2) was one and the same, and that the classification being reasonable having a just relation to the object of the provision, the recovery procedure cannot be challenged as discriminatory under A rt. 14. SurajMallMohtaand Co. v. A. V. Visvanatha Sastri and Another, [1955] l S.C.R. 448, M. CT. Muthiah & two Others v. The Commissioner of Income-tax, Madras & Another, [r955] 2 S.C.R. 1247 and Basheshar Nath v. The Commissioner of Income tax, Delhi & Rajasthan and Another, [1959] Supp. l S.C.R. 528, distinguished. ORIGINAL JURISDICTION: Writ Petition No. 85 of

#1959. Writ Petition under Art. 32 of the Constitution of India for the enforcement of fundamental rights. A. V. Viswanatha Sastri, R. S. Pathak, S .. N. Andley, Rameshwar Nath and P. L. Vohra, for the petitioner. K. N. Rajagopala Sastri and D. Gupta, for respon dents Nos. I and 2.

1961.' April 14. The Judgment of the Court was delivered by S. K. DAS, J.-One Ranjit Singh is the petitioner s. K. Das ;. before us. The respondents are the Commissioner of Income-tax, Lucknow, the Income-tax Officer, Luck- now, and the Collectors of three districts in U ttar Pradesh, namely, Dehra Dun, Kanpur and Lucknow, being officers under whose orders certain properties of the petitioner and his family have been attached in pursuance of a notice of demand issued under s. 29 of the Indian Income-tax Act, 1922, in circumstances which we shall presently state. The facts are shortly these. In 1948 the Central Government referred a number of cases in which the petitioner was concerned to the Income-tax Investiga tion· Commission set up under the relevant provisions 968 SUPREME COURT REPORTS (1962] '9 6' S. J(. Das ]. Ranjit Singh v. Income-tax, u. P. of the Taxation on Income (Investigation Commission) Act, 1947 (Act XXX of 1947), hereinafter referred to as the Act. On May 30, 1948, the Secretary Commissioner of of the Commission issued a notice to the petitioner to furnish a list of businesses or concerns in which interested and to produce the the petitioner was account books, registers etc. relating thereto. The petitioner complied with the notice. Then, an Autho- rised Official appointed by the Commission commenced an investigation into the cases in February, 1949, and in due course submitted a report to the Commission. The Commission heard the petitioner and on April 16, 1949, submitted a report under s. 8-A(l) of the Act. The findings of the Commission appear from the following extract from their report: "The total tax payable on the undisclosed in come upto March 31, 1947 would accordingly be Rs. 6,61,917 . .... ················· .............................................. . The amount of Rs. 6,61,917 may be recovered from Mr. Ranjit Singh and from the family assets in In view of the the hands of Mr. Ranjit Singh. admission recorded as num her (iii) in para 6 supra, the tax will also be recoverable from the properties acquired between 1939 and 1947 in the names of Mrs. Ranjit Singh and Mr. Ranjit Singh's sons Baljit Singh and Satendrajit Singh. In the circum stances, we recommend that no penalty be levied on the assessee in respect of non-disclosures and false or incorrect statements so far made either to the income-tax authorities or in the course of the present proceedings (including those before the Authorised Official). Mr. Ranjit Singh and Mr. Vaidyanatha Ayyar (representative of Mr. Ranjit Singh) have asked that they be allowed sufficiently long time to pay up the tax. It has been repre sented that out of taxes already assessed by the Income-tax Department about Rs. 3,86,000 is still due and the addition of the amount leviable under this report will bring the assessee's total liability to about 10! lakhs. Mr. Ranjit Singh has asked that he may be permitted to pay up this sum in not I •• I .. • I I I J I ' • • 1 S.C.R. SUPREME COURT REPORTS ' 969 more than five years, in instalments Of not leSS than a lakh of rupees at a time. While we do not wish Ranjit Singh to go into the details of the offer, we recommend this request for time for favourable consideration Commissioner of by Government." r96I v. . lncome-ta>, u. P. Then, on November 7, 1949, the petitioner, his wife and two sons submitted a petition to the Commission s. I<. Das J. in which they accepted the findings of the Commission as correct and offered to pay the tax in instalments in accordance with certain terms of settlement. Some of these terms are: "3. \Ve offer to pay the aforesaid amount of Rs. 6,61,9i7 as per the following instalments: (1) on or before the 31st March, 1951 Rs. 1,00,000. (2) on or before the 31st March, 1952 Rs. 2,31,000. (3) on or before the 30th June, 1952 Rs. 3,30,917 . . 4. We, however, pray that so far as the last instalment is concerned in case we are unable to pay the same by· the date mentioned above and are able to satisfy the Central Board of Revenue that we have failed to raise the money for reasons beyond our control and for no fault of our own, a suitable extension of time may be granted.

#5. In respect of the other instalments, we agree that in case 'of default in the payment of any one of them, the whole amount of tax outstanding at the time shall become immediately payable." _, The report of the Commission and the terms suggested by the petitioner for a settlement were accepted by the Central Government and an order was passed under s. 8-A(2) of the Act on November 21, 1949, which stated in its operative part that a demand notice be served immediately by the Income-tax Offi- cer concerned under s. 29 of the Indian Income-tax Act, 1922, on the petitioner in accordance with the terms and conditions of settlement and that all such other proceedings under the Indian Income, tax Act or under any other law as may be necessary be taken with a view to enforce the payment of the demand and terms and conditions of the septlement. I22 ! • " I •• • ' • ' I .• ' • 970 SUPRE1ME. COURT REPORTS . 5 1 R "" r96r Income-tax, u. P. ~- The respondents allege that a demand notice was accordingly issued to the petitioner on December 2, .. 1 '' .Sing' 1949. The petitioner alleges, however, that he receiv Commi~ion" of ed the notice in or about April, 1950, after the Consti • tution of India had come into force. Thereafter, in pursuance of the demand notice certain payments were made by the petitioner. The petitioner was, · I<. Das f. however, unable to make full payment within the stipulated periods mentioned in the demand notice. Tl!e result was that according to the terms of settlement the whole amount outstanding at the time became immediately payable by the petitioner. Then, certain properties of the petitioner and his family were attached by the Collector of the district concern ed in pursuance of the orders received ·from time to time from the Income-tax Officer. On June 8, 1959, the petitioner filed the present writ petition challenging the legality of the demand notice dated December 2, 1949, and the subsequent proceed ings taken in pursuance of that notice. The case of the petitioner is that after the coming into force of the Constitution of India on January 26, 1950, the demand notice could not be given effect to and the proceedings taken in pursuance of that notice are un constitutional inasmuch as they violate his fundamen tal rights guaranteed by the Constitution. In the petition a reference has been made to Articles 14, 31 and 19(l)(g) of the Constitution, but the argument before us has proceeded on the contention urged on behalf of the petitioner that there has been a viola tion of the fundamental right of equal protection of the laws guaranteed to him under Art. 14 of the Con stitution inasmuch as he has been dealt with diffe rently from other debtors who owe money to the State under a contractual liability. The 'substantial prayer of the netitioner is for the issuance of a writ of man damus directing the respondents not to give effect to the notice of demand dated December 2, 1949, nor to take any proceedings for enforcing the terms of settle - ment and for recovery of the sums specified therein. The petition has been contested by the respondents and the principal point taken on their behalf is that _, l S.C.R. SUPREME COURT REPORTS 971 196 the legality of the demand ~otice dated December 2, 194.9, cannot be challenged by the petitioner on the Ranjit Singh strength of the provisions of the Constitution, because the Constitution is prospectiVE( and not retrospective; Commissioner of secondly, it is contended on behalf of the respondents that the subsequent proceedings taken in pursuance of the demand notice aforesaid do not in any way vio- late the right of equal protection of the laws guaran- teed unde/ Art. 14 of the Constitution. Income-tax. u. P. s. re Das f. v. ' the Indian It is convenient at this stage to refer to some of the earlier decisions of this Court on the question of con stitutionality of some of the provisions of the Act. On May 28, 1954, this Court delivered judgment in Suraj Mall Mohta and Go. v. A. V. Visvanatha Sastri and Another (1). It is not necessary to state the facts of that decision. It is enough to say that it was held therein that sub-s. (4) ofs. 5 of the Act was bad, as it offended the provisions of Art. 14 of the Constitution. Sub-section (4) of s. 5 of the Act having been declared void, Parliament passed Income-tax Amendment Act (33 of 1954) amending s. 34 of the Indian Income-tax Act, 192.2. As a result of this amendment, the validity of sub-s. (1) of s. 5 of the Act came in for challenge on the ground that the Income-tax Officer could pick out some out of the class of substantial tax evaders and refer their cases under sub-s. (1) of s. 5 while dealing with other such persons under amended s. 34 of the Indian Income In Shree Meenakshi Mills Ltd., Madurai v. tax Act. A. V. Visvanatha Sastri and Another('), sub-s. (1) of s. 5 of the Act was held to be bad on that ground. It should be noted that in none of the petitions disposed of by that judgment had any assessment been made under the Act and this Court only, prohibited further proceedings before the Commission under the Act. Finally, on December 20, 1955, came the decision of this Court in M. OT. 211uthiah & two Others v. The Commissioner of Income-tax, Madras & Another('). In that case, on a reference under s. 5(1) of the Act, the Commission submitted its report to Government under (r) [r955] r S.C.R. 448. (2) [1955] r S.C.R. 787. (3) [r955] 2 S.C.R. 1247. - 972 SUPREME COURT REPORTS [1962] Ranjit Singh v. s. 8(1) of the Act on August 26, 1952-that is, after the coming into force of the Constitution, and the Central Government made its order under s. 8(2) of Commissioner of the Act on Septembe~ 16, 1952. stances it was held: In these circum Income-tax, u. P. S. J(. Das ]. ' "The result, therefore, is that barring the cases of persons which were already concluded by reports made by the Commission and the directions given by the Central Government under section 8(2) of the Act XXX of 1947 culminating in the assessment or re-assessment of the escaped income, those cases which were pending on the 26th January 1950 for investigation before the Commission as also the assessment or re-assessment proceedings which were pending on the 26th January 1950 before Income-tax Officers concerned in pursuance of the directions given by the Central Government under section 8(2) of the Act would be hit by Article 14 of the Constitution and would be invalidated." Lastly, came the decision in Basheshar Nath v. The Commissioner of Income-tax, Delhi & Rajasthan and ). That was a case of a settlement under Another (1 s. 8-A of the Act as in the present case, but the fact which distinguishes that case from the present is that the settlement there was made after the commence ment of the Constitution. It was held therein that the settlement was the result of a procedure which became discriminatory. after the commencement of the Constitution and was therefore bad, and as the discriminatory process of investigation continued even after the commencement of the Constitution, the principle laid down in Syed Qasim-Razvi v. The State of Hyderabad and Others(') did not apply. The point which-requires emphasis with regard to these earlier decisions is this: they all dealt with the operation of a discriminatory procedure under the different provisions of the Act after the commencement of the Constitution. The position in the case under our present consideration is that the settlement, the order under s. 8-A(2) of the Act, and even the notice of demand in pursuance of that order-all these took (1) [1959) Supp. ' S.C R. 528. (2) [1953) S.C.R. 589. I S.C.R. SUPREME COURT REPORTS 973 place before the coming into force of the Constitution, and this vital distinction must be borne in mind in considering the contentions urged by learned Counsel for the petitioner. The main contention is that the proceedings taken against the petitioner in pursuance of the order under s. 8-A(2) are violative of the guarantee of equal protcc- tion of the laws under Art. 14 o t e onstitut10n. There are, however, two subsidiary contentions which do not directly raise any question of the violation of a fundamental right, and these may be disposed of before we deal with the main contention. f h C . . Ranjit Singh v. Cominissioner of Income-tax, u. P. S. J{. Das ]. \ , In his petition the petitioner has stated t.hat ho ·. ="received the demand notice dated December 2, 1949 in or a.bout April, 1950, In the counter-affidavit of the respondents it has been stated that the assessee was informed of the demand early in December, 1949. A copy of the order of the Central Government under s. 8-A(2) of the Act dated November 21, 1949, was sent to the pei; itioner; there is an endorsement in the office copy of the demand notice dated December 2, 1949, that it was sent by registered post, acknowledg ment due. Thereafter, the petitioner paid part of the tax on different dates without raising any objec tion that he had not received the demand notice before April, 1950. It was for the first time in April, 1959, some ten years after, that the petitioner asked for a copy of the order under s. 8-A(2) and informa tion as to the date when he had received the regis tered notice of demad. He also asked for an inspec tion of the file. This was, however, refused. Then, the petitioner made the statement that he had receiv ed the demand notice in or about April, 1950. He said that the statement was based on his knowledge; he did not disclose the source of his knowledge nor did he say how he remembered ten years after, with out reference to any documents, that he had received the demand notice in or about April, 1950. 1We are unable to accop~ the statement as correct. On the materials in the record it is clear that the proceedings against the petitioner culminating in the service of the notice of demand against him were all completed 974 SUPREME COURT REPORTS [1962] r96r before the coming into force of the Constitution and the petitioner cannot challenge those proceedings under Art. 14 of the Constitution; for it is well settled Commissioner of that the Constitution is prospective and not retros Ranjit Singh v. Income-tax, u. P. pective. On the construction of s. 8-A of the Act it has been argued that after the order made by the Central S. K. Das]. G overnment under sub-s. ( 2) thereof, a fresh assess- ment was necessary and as no such assessment was made, all subsequent proceedings for recovery of the tax are illegal. This is a point which has not been specifically taken in the petition. That apart, we do not think that there is any substance in this conten- tion. We may here read s. 8-A, so far as it is rele- vant: J , "S. 8-A. (1) Where any person concerned in any case referred to or pending before the Commission for investigation applies to the CommiRsion at any time during such investigation to have the case or any part thereof settled in so far as it relates to him, the Commission shall, if it is of opinion- that the terms of the settlement contained in the appli cation may be approved, refer the matter to the Central Government, and if the Central Government accepts the terms of such settlement, the Commis sion shall have the terms thereof recorded and thereupon the investigation, in so far as it relates to matters covered by Sl.lch settlement, shall be deemed to be closed. (2) For the purpose of enforcing the terms of any settlement arrived at in pursuance of sub-section (1), the Central Government may direct that such pro ceedings as may be appropriate under the Indian Income-tax Act, 1922 (XI of 1922), the Excess Profits Tax Act, 1940 (XV of 1940) or any other law may be taken against the person to whom the settlement relates, and, in particular, the provisions of the. second proviso to clause (a) of sub-section (5) of section 23, section 24B, the proviso to sub-sec tion (2) of section 25A, the proviso to sub-section (2) of section 26 and sections 44 and 46 of the Indian Income-tax Act, 1922 shall be applicable to • -\ I I I ~ _, Ranjit Singh v. Com~issioner of Income~la:>r, U. P. S. I{. Das ]. I 1 S.C.R. SDPR:ElME COURT R:ElPORTS 975 the recovery of any sum specified in such settle ment by the Income-tax Officer having jurisdiction to assess the person by whom such sum is payable as if it were income-tax or an arrear of income-tax within the meaning of those provisions." The scheme of s. 8-A is different from that of s. 8. The latter section contemplates an assessment or re- ' assessment 'in accordance with the direction of the Central Go~ernment; see sub-s. (4) ofs. 8. That is not the position under s. 8-A, sub-s. (2) whereof provides for the enforcement of the terms of any settlement arrived at in pursuance of sub-s. (1). There is no doubt a reference to certain special provisions of the Indian Income-tax Act, 1922, regarding assessment of partners in a registered firm, tax payable by the representative of a deceased person etc.; but reference to those provisions does not necessarily mean that a fresh assessment must be made. They merely show that these special provisions will be applicable in appropriate cases. Sub-s. (2) ends by saying that "ss. 44 and 46 of the Indian Income-tax Act, 1922, shall be applicable to the recovery of any sum speci fied in such settlement by th<! Income-tax Officer having jurisdiction to assess the person by whom such sum is payable as if it were income-tax or an arrear of income-tax within the meaning of these provisions." This clearly shows that the true scope and effect of the sub-section is to enforce the terms of any settle ment ~rrived at in pursuance of sub-s. (1) and to recover any sum specified in such settlement as if it were income-tax or arrear of income-tax in accordance ;with the provisions of ss. 44 and 46 of the Indian Income-tax Act, 1922. ·We are unable, therefore, to accept the construction which learned Counsel for the petitioner seeks to put on the sub-section. This brings us to the main contention that the petitioner has been. subjected to a discriminatory procedure after the coming into force of the Constitu tion by reason of s. 8-A(2) of the Act. Learned Counsel for the petitioner has put his argument in the following way. He has submitted that what the petitioner 'agreed to pay to Government was really a 976 SUPREME COURT REPORTS [1962) R '9 6' .. an; it 1ng 5 v. debt arising out of a contract viz., the settlement . h between him and Government and the petitioner is I one amongst the larger c· ass of persons who are commissioiit• of debtors of Government; against all other debtors Income-tax, Government have the ordinary remedy by way of . · u. P. s. 1 " Das f. suit but against the petitioner a special remedy is pro vided which is more drastic and envisages the imposi- tion of a penalty under s. 46 of the Indian Income-tax Act, 1922, if the petitioner is in default in making a payment of the amount due. This, it is argued, is a discriminatory iprocedure which has been continued even after the coming into force of the Constitution. We arc unable to accept this argument as correct. First of all, the petitioner does not really belong to the larger class of persons whom learned Counsel has characterised as debtors of Government. The peti tioner belongs to a special class who had evaded pay ment of Income-tax and had entered into a settlement to pay the amount due as income-tax or arrear of income-tax. For this class of persons the procedure laid down in s. 8-A(2) is one and the same, and no discrimination is made in favour of or against any member of the same class. The classification is a reasonable classification having a just relation to the object of the provision. For the recovery of the amount due as income-tax or arrear of income-tax all these persons are treated on the same footing. Neither is there any discrimination between them and other persons similarly placed in the matter of recovery of income-tax or arrears of income-tax. Secondly, it is open to the legislature to make a law as to how parti cular. Government dues should be realised and if the law applies equally to all persons similarly situated, no objection can be taken to such law on the ground of discrimination. The truth of the matter is that what the petitioner agreed to pay to Government is really income-tax which should have been paid in regard to the relevant assessment years but which had escaped assessment and therefore the recovery is to be made according to income-tax law. That is all that s. 8-A(2) says. In the decisions of this Court to which we had earlier adverted, what was held to be bad was ~ ' I ' I I I l l • i • ' I I ~ Ranjit Singh v Commissioner of Income-tax, u. I'. S. K. Das]. 1 S.C.R. SUPREME COURT REPOR'rS 977 the application of a discriminatory procedure after the coming into force of the Constitution; even in Basheshar Nath' s case (1 ) the Commission· a pp lied th\l discriminatory procedure after the coming into force of the Constitution and then submitted its report on May 24, 1954, and the Cm_:itral Government accepted the settlement on July 5, 1954. It was held tha.t the settlement itself was vitiated by the discriminatory procedure adopted by the Commission. That is not the position here. In this case everything was con cluded before January 26, 1950, when the Constitu tion came into force, including the issuance of a notice of demand. All that remained to be done was the recovery of the amount according to the notice of demand. Therefore, the crucial question is-is the recovery procedure discriminatory in any way, having regard to the undoubted validity of the proceedings which had been taken against the petitioner before January 26, 1950? We are unable to answer this question in favour of the petitioner for the reasons which we have already stated. Learned Counsel for the petitioner relied on the decision in M. L. M. Muthiah Ohettiar and Others v. Commissioner of Income-tax, Madras('). The facts of that case were entirely different and no question arose there of considering the provisions of s. 8-A (2) of the Act. For these reasons we hold that there is no merit in the petition which is, accordingly, dismissed with costs. • Petition dismissed. ' (1) (1959] Supp. l S.C.R. 528, (2) [1959] 35 I. T.R. 339. 1'3