# [1959] Supp. 1 S.C.R. 528

- **Citation:** [1959] Supp. 1 S.C.R. 528
- **Court:** Supreme Court of India
- **Decided:** 1959
- **Case number:** Civil Appeal No. 208of1958
- **Bench:** S. R. Das, N. H. Bhagwati, s. K. DAS, J. L. KAPUR a.nd K. SUBBA RAO
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1959-supp-1-s-c-r-528-1568
- **Pages:** 96

## Headnote

Income-tax-Evasion of taxation-Case referred tq Investigatio11
Commission-Comme11cement of the Constitution-Settlement of case
-·-Constitutional, validity of-Waiver of fundamental right, if permissible-Taxation of Income (Investigation Commission) Act, I947
(.JO of' I947l. s. BA-Constitution of India, Art. I4, Part III.
The two questions for determination in this appeal were, (r)
whether a settlement under s. SA of the Taxation of Income (Investigation Commission) Act, 1947 (30 of 1947) made after the
commencement of the Constitution was constitutionally valid and
(2) whether the waiver of a fundamental right was permissible
under the Constitution. The appellant's case was on July 22,
194S, referred by the Central Government under s. 5(r) of the
Act to the Investigation Commission for investigation and report.
The Commission directed the authorised official under s. 6 of the
Act to examine the appellant's accounts. He submitted his final
report by the end of 1953· The Commission considered the report
heard the assessee and came to the conclusion that Rs. 4,47,915
had escaped assessment. Thereupon the appellant on May 20,
r954, applied to the Commission for a settlement of his case
under s. SA of the Act, agreeing to pay Rs. 3,50,000 by way of "'
tax and penalty at the concessional rate. The Commission reported to the Central Government approving of the settlement,
the Central Government accepted it and it was recorded by the
Commission. The Central Government directed the recovery of
the said amount under s. SA(2) of the Act. The appellant was
permitted to make payments by monthly instalments of Rs. 5,000
and the total amount thus paid up to September S, 1957, aggregated to Rs. I,2S,ooo. In the meantime the Income Tax Officer
issued a certificate and certain properties of the appellant were
attached. Relying on the decisions of this Court in Suraj Mall
Mohta and Co. v. A. V. Visvanatha Sastri, [1955] 1 S.C.R. 448 and
M. Ct. Muthiah v. The Commissioner of Income-tax, Madras, [1955]
2 S.C.R. 1247, the appellant applied to the Commissioner of
Income-tax challenging the validity of the settlement made under
s. SA of the Act on the ground that s. 5(r) of the Act on which
it was founded had been declared void by this Court, and claimed
that his properties might be released from attachment and the
amount paid under the settlement might be refunded to him. On
January 29, 195S, the Commissioner of Income Tax sent a reply
to the appellant maintaining that the settlement was valid and
(1) S.C.R.
SUPREME COURT REPORTS
529
that the appellant was bound thereunder to pay up the arrears
z95a
of instalments and requesting him to continue to pay in future.
Against this decision of the Commissioner of Income Tax the Bashesha, Natlt
appellant came up to the Supreme Court by special leave. It was
v.
contended on behalf of the respondent that the Act laid down The Commissioner
two distinct and separate procedures, one for investigation and of Income-ta,,,
the other for settlement and it was the former alone and not the Delhi & Rajaslhan
latter that was affected by the decisions of this Court and that
& Another
the appellant by voluntarily entering into the settlement had
waived his fundamental right founded on Art. 14 of the Constitution.
Held (Per Curiam), that both the contentions must fail.
It was not correct to say that the Taxation of Income (Investigation Commi&sion) Act, 1947, laid down two different
procedures, one for investigation and assessment under s. 8(2) of
the Act and another for settlement under s. SA of the Act and
assessment in terms of such settlement and that while the decision of this Court in M. Ct. Muthiah v. The Commissioner of Incometax, Madras, declaring s. 5(1) of the Act to be discriminatory and
therefore void, affected only the former procedure and not the
latter. The Act laid down but one procedure and in entertaining
a proposal for settlement as in the investigation itself the Commission exercised the same jurisdict

## Text

_Characters 0–39,918 of 217,648. This is a partial read: ask again with offset=39918 for what follows._

November 19.
528
SUPREME COURT REPORTS [1959] Supp.
BASHESHAR NATH
ti.
THE COMMISSIONER OF INCOME-TAX,
DELHI & RAJ ASTHAN & ANOTHER.
(S. R. DAS, c. J., N. H. BHAGWATI, s. K. DAS,
J. L. KAPUR a.nd K. SUBBA RAO, JJ.)
Income-tax-Evasion of taxation-Case referred tq Investigatio11
Commission-Comme11cement of the Constitution-Settlement of case
-·-Constitutional, validity of-Waiver of fundamental right, if permissible-Taxation of Income (Investigation Commission) Act, I947
(.JO of' I947l. s. BA-Constitution of India, Art. I4, Part III.
The two questions for determination in this appeal were, (r)
whether a settlement under s. SA of the Taxation of Income (Investigation Commission) Act, 1947 (30 of 1947) made after the
commencement of the Constitution was constitutionally valid and
(2) whether the waiver of a fundamental right was permissible
under the Constitution. The appellant's case was on July 22,
194S, referred by the Central Government under s. 5(r) of the
Act to the Investigation Commission for investigation and report.
The Commission directed the authorised official under s. 6 of the
Act to examine the appellant's accounts. He submitted his final
report by the end of 1953· The Commission considered the report
heard the assessee and came to the conclusion that Rs. 4,47,915
had escaped assessment. Thereupon the appellant on May 20,
r954, applied to the Commission for a settlement of his case
under s. SA of the Act, agreeing to pay Rs. 3,50,000 by way of "'
tax and penalty at the concessional rate. The Commission reported to the Central Government approving of the settlement,
the Central Government accepted it and it was recorded by the
Commission. The Central Government directed the recovery of
the said amount under s. SA(2) of the Act. The appellant was
permitted to make payments by monthly instalments of Rs. 5,000
and the total amount thus paid up to September S, 1957, aggregated to Rs. I,2S,ooo. In the meantime the Income Tax Officer
issued a certificate and certain properties of the appellant were
attached. Relying on the decisions of this Court in Suraj Mall
Mohta and Co. v. A. V. Visvanatha Sastri, [1955] 1 S.C.R. 448 and
M. Ct. Muthiah v. The Commissioner of Income-tax, Madras, [1955]
2 S.C.R. 1247, the appellant applied to the Commissioner of
Income-tax challenging the validity of the settlement made under
s. SA of the Act on the ground that s. 5(r) of the Act on which
it was founded had been declared void by this Court, and claimed
that his properties might be released from attachment and the
amount paid under the settlement might be refunded to him. On
January 29, 195S, the Commissioner of Income Tax sent a reply
to the appellant maintaining that the settlement was valid and
(1) S.C.R.
SUPREME COURT REPORTS
529
that the appellant was bound thereunder to pay up the arrears
z95a
of instalments and requesting him to continue to pay in future.
Against this decision of the Commissioner of Income Tax the Bashesha, Natlt
appellant came up to the Supreme Court by special leave. It was
v.
contended on behalf of the respondent that the Act laid down The Commissioner
two distinct and separate procedures, one for investigation and of Income-ta,,,
the other for settlement and it was the former alone and not the Delhi & Rajaslhan
latter that was affected by the decisions of this Court and that
& Another
the appellant by voluntarily entering into the settlement had
waived his fundamental right founded on Art. 14 of the Constitution.
Held (Per Curiam), that both the contentions must fail.
It was not correct to say that the Taxation of Income (Investigation Commi&sion) Act, 1947, laid down two different
procedures, one for investigation and assessment under s. 8(2) of
the Act and another for settlement under s. SA of the Act and
assessment in terms of such settlement and that while the decision of this Court in M. Ct. Muthiah v. The Commissioner of Incometax, Madras, declaring s. 5(1) of the Act to be discriminatory and
therefore void, affected only the former procedure and not the
latter. The Act laid down but one procedure and in entertaining
a proposal for settlement as in the investigation itself the Commission exercised the same jurisdiction, and powers and followed
the one and the same procedllre as laid down by ss. 5, 6 and 7 of
the Act. Since the settlement in the instant case was no exception to that rule, it was covered by the decision and must be held
to be violative of Art. 14 of the Constitution.
M. Ct. Muthilllt v. The Commissioner of Income-tax, Madras,
[1955] 2 S.C.R. 12'47• applied.
The observations made in the majority judgment of this
Court in Syed Qasim Razvi v. The State of Hyderabad, [1953]
S.C.R. 589, must be kept strictly confined to the special facts of
that case and had no application to the facts of the present case.
Syed Qasim Razvi v. The State of Hyderabad, [1953] S.C.R.
589, held inapplicable.
Per Das, C. J., and Kapur, }.-There could be no waiver of
the fundamental right founded on Art. 14 of the Constitution, and
it was not correct to contend that the appellant had by entering
into the settlement under s. SA of the Act, waived his fundamental right under that Article. Article 14 was founded on a
sound public policy recognised and valued all over the civilised
world, its language was the language of command and it imposed
an obligation on the State of which no person could, by his act or
conduct, relieve it. As it was not strictly necessary for the disposal of this case, the question whether any other fundamental
right could be waived need not be considered in this connection.
Laxamanappa Hanumantappa Jamkhandi v. The Union of
llldia, [1955] 1 S.C.R. 769; Dewan Bahadur Seth Gopal Das Mohta
6'/
530
SUPREME COURT REPORTS· [1959] Supp.
z958
v. The Union of India, [1955] l S.C.R.:773; Baburao Narayanrao
Sanas v. The Union of India, [1954] 26 l.T.R. 725; Subedar v.
Basheshar Nath State, A.LR. 1957 All. 396 and Pakhar Singh v. The State, A.LR.
v.
1958 Punj. 294, distinguished and held inapplicable.
The Commissioner
p
B
.
JJ
.
1 1
t
er hagwab and Subba Rao,
.-There could be no waiver
D ~h· J;,'°;'~- at~ not only of the fundamental right enshrined in Art. 14 but i'lso
' ~ A ;i"' an of any other fundamental right guaranteed by Part III ofthe
"
0
"
Constitution. The Constitution made no distinction between
fundamental rights enacted for the benefit of the individual and
those enacted in the public interest or on grounds of the public
policy. There could, therefore, be no justification ,for importing
American notions or authority of decided cases to whittle down
the transcendental character of those rights, conceived in public
interest and subject only to such limitations as the Constitution
had itself thought fit to impose.
Article 13(2) was in terms a constitutional mandate to the
State in respect of all the fundamental rights enacted in Part III
of the Constitution and no citizen could by waiver of any one of
them relieve the State of the solemn obligation that lay on it.
The view expressed by Mahajan, C. J., in Behram
Khurshed
Pesikaka v. The State of Bombay, [1955] l S.C.R. 613, correctly
laid down the law on the point. Since the arguments in the
instant case had covered the entire field of fundamental rights,
there was no reason why the answer should be confined to Art. 14
alone.
Behram Khurshed Pesikaka v. The State of Bombay, [1955] l
S.C.R. 613; State of Travancore-Cochin v. The Bombay Co., Ltd.,
[1954] S.C.R. n12 and The State of Bombay v. R. M. D. Chamarbaugwala, [1957] S.C.R. 874, referred to.
.
Per S. K. Das, J.-It seems clear that Art. 13 itself recognises the distinction between absence of legislative power
which will make the law made by an incompetent legislature
wholly void, and exercise of legislative power in contravention of
a restriction or check on such power, which will make the law
void to the extent of the inconsistency or contravention; therefore the mere use of the word " void " in Art. 13 does not necessarily militate against the application of the doctrine of waiver
in respect of the provisions contained in Part III of the Constitution.
Behram Khurshed Pesikaka v. The State of Bombay, [1955] l
S.C.R. 613, considered.
Bhikaji Narain Dhakras v. The State of Madhya Pradesh,
[1955] 2 S.C.R. 589; M. Ct. Muthiah v. The Commissioner of
Income-tax, Madras, [1955] 2 S.C.R. 1247 and The State >f Bombay
v. R.M.D. Chamarbaugwala, [1957] S.C.R. 874, referred to.
There was nothing in the two preambles to the Indian and
the American Constitutions that could make the doctrine of waiver
applicable to the one and not to the other ; since the doctrine
(I) S.C.R. SUPREME COURT REPORTS
531
applied to the constitutional rights under the American Constituz958
tion, there is no reason why it should not apply to the fundamental rights under the Indian Constitution.
Basheshar Nath
Case-law considered.
v.
.
.
The Commissioner
But 1t must be made clear that there 1s no absolute rule, or
1 1
one formulated in the abstract, as to the applicability of that D ~,.. ;c~m~-ta~
doctrine to fundamental rights and such applicability must dee ~ A
~~ast a"
pend on (I) the nature of fundamental right to which it is sought
no er
to be applied and (2) the foundation on the basis of which the plea
is raised. The true test must be whether the fundamental right
is one primarily meant for the benefit of individuals or for the
benefit of the general public.
Where, ~herefore, the Constitution vested the right in the
individual, primarily intending to benefit him and such right did
not impinge on the rights of others, there could be a waiver of
such right provided it was not forbidden by law or did not contravene public policy or public morals.
As in the instant case the respondents who had raised the
plea, had failed to prove the necessary facts on which it could be
sustained, the plea of waiver must fail.
Per Subba Rao, ].-Apart from the question as to whether
there could be a waiver in respect of a fundamental right, s. 5(1)
of the Taxation of Income (Investigation Commission) Act, r947,
having been declared void by this Court in M. Ct. Muthiah v. The
Commissio11a of focome-tax, Madras, as being violative of the
fundamental right founded on Art. I4 of the Constitution and
such decision being binding on all courts in India, the Commissioner of Income-tax had no jurisdiction to continue the proceedings against the appellant under that Act and the appellant could
not by a waiver of his right confer jurisdiction on him.
No distinction could be made under Art. r3(1) of the Constitution between the constitutional incompetency of a legislature
and constitutional limitation placed on its power of legislation,
for a statute declared void on either ground would continue to be
so, so long as the inconsistency continued. As the inconsistency
of s. 5(1) of the Act with Art. 14 continued, it must continue to
be void.
Keshav111; Madhava Mc11on v. The State of Bombay, [1951]
S.C.R. 228; Bchram Khurshed Pcsikaka v. Stlltc of Bombay, [1955]
1 S.C.R. 613 and Bhikaji Narai11 Dhakras v. Stllte of Madhya
Pradesh, [1955] 2 S.C.R. 589, referred to.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No.
208of1958.
Appeal by special leave from the order dated
January 29, 1958, of the Commissioner of Income-tax,
Delhi & Rajasthan at New Delhi, under s. 8A(2) of the
Basheshar Nath
532
SUPREME COURT REPORTS [1959] Supp.
Taxation on Income (Investigation Commission) Act,
1947.
v.
Harnam Singh and Sadhu Singh for the appellant.
The Commissioner
·
K
of Income-tax,
M. G. Seta.lv.ad, Attorney-Gener<!f. for India, G.
.
Delhi & Rajasthan Daphtary, Solicitor-General of India, B. Sen and R.H.
& Another
Dhebar for the respondents.
A. G. Mitra and B. P. Maheshwari, for the interveners.
1958. November 19.
The Judgment of Das, C.J.,
and Kapur, J., was delivered by Das, 0. J. Bhagwati,
S. K. Das and Subba Rao, JJ., delivered separate judgments.
Das c. J.
DAS, C. J.-This appeal by special ]eave filed by
one Shri Besheshar Nath hereinafter referred to as
" the assessee " calls in question the validity of a
settlement made under s. SA of the Taxation on Income
(Investigation Commission) Act, 1947 (30 of 1947),
hereinafter referred to as " the Investigation Act ".
This Act, which came into force on May 1, 1947, by a
notification issued by the Central Government under
s. (1) (3) thereof, has had a short 1,rnt chequered career,
as will appear from the facts hereinafter stated.
In order to appreciate the several questions canvassed before us it is necessary to refer to the provisions
of the impugned Act. Section 3 authorised the Central
Government to constitute an Income Tax Investigation Commission (hereinafter called the Commission)
and imposed on it the following duties :-
"(a) to investigate and report to the Central
Government on all matters relating to taxation on
income, with particular reference to the extent to
which the existing law relating to, and procedure for,
the assessment and collection of such taxation is adequate to prevent the evasion thereof;
(b) to investigate in accordance with the provisions of this Act any case or points in a case referred
to it under section 5 and make a report thereon (including such interim reports as the Commission may
think fit) to the Central Government in respect of all
or any of the assessments made in relation to the case
(1) S.C.R.
SUPREME COURT REPORTS
533
before the date of its report or interim report, as the
z95B
case may be."
Basheshar Nath
We may skip overs. 4 which dealt with the composiv.
tion of the Commission. Section 5, which is of import- The Commissioner
ance was as follows:-
of. Income.-tax,
Delhi & Ra;asthan
"5. (1) The Central Government may"at any time
6- Another
before the 30th day of June, 1948, refer to the Commission for investigation and report any case or points in
Das C.J.
a case in which the Central Government has prima
facie reasons for believing that a person has to a substantial extent evaded payment of taxation on income,
together with such material as may be available in
support of such belief, and may at any time before the
30th day of June, 1948, apply to the Commission for
the withdrawal of any case. or points in a case thus
referred, and if the Commission approves of the withdrawal, no further proceedings shall thereafter be
taken by or before the Commission in respect of the
case or points so withdrawn.
(2) The Commission may, after examining the
material submitted by the Central Government with
reference to any case or points in a case and making
such investigation as it considers necessary, report to
the Central Government that in its opinion further
investigation is not likely to reveal any substantial
evasion of taxation on income and on such report
being ma.de the investigation shall be deemed to be
closed.
(3) No reference made by the Central Government
under sub-section (1), at any time before the 30th day
of June, 1948, shall be called in question, nor shall the
sufficiency of the material on which such a reference
has been ma.de be investigated in any manner hy a.riy
Court.
(4) If in the course of investigation into any case
or points in a case referred to it under sub-section (1),
the Commission has reason to believe-
(a.) that some person other than the person whose
case is being investigated has evaded payment of
taxation on income, or
(b) that some points other than those referred to
534
SUPREME COURT REPORTS [1959) Supp.
z95B
it by the Central Government in respect of any case
also require investigation,
Basheshar Nalh
v.
it may make a report to the Central Government
The Commissioner stating its reasons for such belief and, on receipt of
0!. Incom'.·tax. such report, the Central Government shall, notwithDelh~ ~::,i:;•h•• st~nding anything cont~in.ed in s~b-sec~ion. (1), forthwith refer to the Comm1ss10n for mvcst1gat10n the case
Das c .J.
of such other person or such additional points as may
be indicated in that report."
The date " 30th day of June, 1948 " appearing in
sub-ss. (1) and (3) was, by Act 49 of 1948, substituted
by the words " 1st day of September, 1948 ". Section 6
set out the various powers conferred on the Commission and s. 7 prescribed the procedure of the Commission. It is not rtece~sary to set out the various
powers and the details of the procedure in extenso and
it will suffice to say that they have been considered by
this Court and pronounced to be much more drastic
and harsh than the powers to be exercised and the
procedure to be followed by the income tax authorities
acting under the provisions of the Indian Income Tax
Act, 1922. The relevant portions of s. 8 ran as
follows:-
" 8.
( l) Save as otherwise provided in this Act,
the materials brought on record shall be considered by
all the three members of the Commission sitting
together and the report of the Commission shall be in
accordance with the opinion of the majority.
(2) After considering the report, the Central
Government shall by order in writing direct that such
proceedings as it thinks fit under the Indian Income
Tax Act, 1922, the Excess Profits Tax Act, 1940, or
any other law, shall be taken against the person to
whose case the report relates in respect of the income
of any period commencing after the 31st day of
December, 1938; and, upon such a direction being
given, such proceedings may be taken and completed
under the appropriate law notwithstanding the restrictions contained in section 34 of the Indian Income
Tax Act, 1922, or section 15 of the Excess Profits Tax
Act, 1940, or any other law and notwithstanding any
lapse of time or any decision to a different effect given
(1) S.C.R. SUPREME COURT REPORTS
535
in the case by any Income tax authority or Income
Tax Appellate Tribunal.
Basheshar Nath
(3)
• • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
v.
The Commission1;
( 4} I;~ . ~ii. ~~~~~·~~~~t· ~; •
;~·-·~~~~~~~~~t
0
P~~~~~di~g~ v:~i 1;'o;;.;::e~an
taken in pursuance of a direction under sub-section
& Another
(2), the findings recorded by the Commission on the
case or on the points referred to it shall, subject to the
provisions of sub-sections (5) and (6), be final; but no
proceedings taken in pursuance of such direction shall
be a bar to the initiation of proceedings under section
34 of the Indian Income Tax Act, 1922.
( 5)
..•.••••..••.•.•••.••.••....•...•..••.••••••.•••••.•••••.•••.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .
(6) .............................................................
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .................. .
(7) Notwithstanding anything to the contrary
contained in this Act or in any other law, for the time
being in force, any evidence in the case admitted
before the Commission or an authorised official shall
be admissible in evidence in any proceedings directed
to be taken under sub-section (2).
(8) .............................................................
. . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . ....... . . . . . . . . . . . . . . .
Section 9 barred the jurisdiction of Courts to call in
question any a.ct or proceeding of the Commission or
any authorised official appointed under s. 6. Section 10
gave power to the Central Government to make ·rules
by notification in the official gazette.
On July 22, 1948, the case of the assessee was referred to the Commission in the following terms :-
" Ministry of Finance (Revenue Division}
New Delhi, the 22nd July, 1948.
Under section 5 (1) of the Taxation on Income
(Investigation Commission} Act, 1947, the cases of the
following persons are hereby referred to the Investigation Commission for investigation and report, as the
Central Government has prima facie reasons for
believing that each such person has either alone or in
combination with the other persons mentioned below,
evaded payment of taxation on income to a. substan~ial
Das C.].
Basheshar Nath
536
SUPREME COURT REPORTS [1959] Supp.
extent. The material available in support of such
belief accompanies.
Na.me
The Commissione' -------·------
v.
No.
of Income-tax,
EP. 829/1
Beshasha.r Na.th and Co.
Delhi & Rajasthan
829/2
Lala. Besha.sha.r Na.th.
& Another
S
Das C.J.
The Secretary, Income-tax,
Investigation Commission,
New Delhi."
d./-Pya.re La.I,
Deputy Secretary,
Ministry of Finance
(Revenue Division).
It is not necessary to set out the a.nnexures that
accompanied this order. It appears that the total
wealth statement of the a.ssessee was filed on N ovember 10, 1948, and was forwarded to the authorised
official. It also appears that from January 8, 1949, to
October 14, 1949, the authorised official was engaged in
the collection of assessment records of the assessee
from the territorial income tax offices and of materials
from the Civil Supplies Directorate regarding the
assessee. In the meantime by s. 33 of Act 67 of 1949
the following section was inserted in the Act as
s. SA:-
.
"SA. Settlenient i;f cases under investigation:-
(1) Where any person concerned in any case
referred to or pending before the Commission for
investigation applies to the Commission 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 iii. the application may be
approved, refer the matter to the Central Government,
and if the Central Government accepts the terms of
such settlement, the Commission shall have the terms
thereof recorded and thereupon the investigation, in so
far as it relates to n:iatters covered by such settlement,
shall be deemed to be closed.
(2) For the purpose of enforcing the terms of any
settlement li'orrived at in pursuance of sub-section (1),
(1) S.C.R. SUPREME COURT REPORTS
537
the Central Government may direct that such pro-
:c95B
ceedings as may be appropriate under the Indian Bash•;har Nath
Income-tax Act, 1922 (XI of 1922), the Excess Profits
v.
Tax Act, 1940 (XV of 1940), or any other law may be The Commis;ioner
taken against the person to whom the settlement_ of lllcome-ta:r,
relates, and in particular the provisions of the second Delhi & Rajastlum
proviso to clause (a) of sub-section (5) of section 23,
&- Another
section 24B, the proviso to sub-section 2 of section
c 1
Das ..
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 the recovery of any sum specified in such settlement by the Income 'fax 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.
(3) Subject to the provisions of sub-section (6) of
section 8, any settlement arrived at under this section
shall be conclusive as to the matters stated therein,
and no person whose case has been so settled be entitled
to re-open in any proceeding for the recovery of any
sum under this section or in any subsequent assessment or reassessment proceeding relating to taxation
on income or in any other proceeding before any Court
or other authority any matter which forms part of
such settlement.
(4) Where a settlement has been accepted by
Government under sub-section (1), no proceedings
under section 34 of the Indian Income Tax Act, 1922
{XI of 1922), or under section 15 of the Excess Profits
Tax Act, 1940 (XV of 1940), shall be initiated in respect of the items of income covered by the settlement,
unless the initiation of such proceedings is expressly
allowed by the terms of the settlement."
On July 5, 1949, the total wealth statement was
received back from the authorised official. Our Constitution ca.me into force on January 26, 1950. The
order-sheet shows that the authorised official on May
26, 1950, issued a notice to the assessee fixing the
hearing for June 10, 1950, which indicates that the
authorised official was proceeding with the investigation set in motion by the reference of the assessee's
68
538
SUPREME COURT H,EPORTS (1959] Supp.
1958
case to the Commission. The assessee a·ppears to
have attended on June 6, 1950, with an application
Bashesha1' Nath
v.
for extension oftimc which apparently was given. On
ne commission" September 30, 1950, the assesseo Hupplicd certain state-
•/ Income-tax, ments of his firm. Tho entry in the order-sheet
Ddhi & Rajasthan again8t the date October 31, 1950, shows that the
"-' AMther
assessee asked for further extension of time.
There
appears to be a hiatus of about 3 years and evident!.}
Dase.].
I J
nothing was done unti
une 9, 1953, when the authorised official fixed the hearing of the case on June 15,
1953. The authorised official ·submitted his interim
report to the Commission on June 9, 1953. The
assessee was examined on October 9, 10 and 13, 1953,
and the authorised official submitted his final report
on October 19, 1953. On January 30, l954, notice
was issued to the assessee to appear before the Commission on February 15, 1954: Presumably to get
ready for the hearing the assessee, on February 5,
1954, asked for inspection of certain assessment orders
concerning his case, for the return of his lease deed
filed by him and a copy of the statement of one
L. Kalidas and for production of certain documents
before the Commission. The hearing, which had been
fixed for February 15, 1954, was adjourned till March4,
1954. Witness Kalidas was examined on March 4,
1954. On March 29, 1954, the assessee asked for a
copy of the deposition given by the witness Durgadas
before the Commission. After the evidence was closed
notice was issued to the assessee on May l, 1954,
asking him to appear before the Commission on May 19,
1954. On that date the assessee attended, argu.
ments were heard and orders were reserved. Learned
counsel for the assessee states that at the close of the
arguments on May 19, 1954, the Commission announced its view that the income; profits and gains that had
escaped assessment in the hands of the assessee for
the period beginning with April I, 1939, a~d ending
March 31, 1947, were .the sum of Rs. 4,47,915, that the
Commission also threw a hint that should the assessee
accept the said finding he would be granted the bene.
fit of a settlement on the lower concessional basis of
pa.yrncnt of 75% and a small penalty of Rs. 14,064
/
(1) S.C.R. SUPREME COURT REPORTS
-539
and that in the ciroumstances the assessee had no
I95B
other alternative than to make the best of the bad 3'ob
Basheshar Nath
by proposing a settlement under s. SA offering to pay
v.
Rs. 3,50,000 by way of ta! and penalty. This sequ- ne Commi;sionc1·
ence of events is amply borne out by paragraphs 3
of Income-lax,
and 4 of the settlement application filed by the asses'>ce Delhi & Rafastli'"'
on May 20, 1954, a copy of which has been produced
"" Another
before us by the ref!pondents .. The Commission on
-
Ir
Das C. ].
Jhay 24, 1954, made a report under s. SA (1) to the
Central Government that it was of opinion that the
terms of settlement contained in the application might
be approved. The Central Government having accepted the proposed settlement, the Commission ha.d the
terms thereof recorded. The Central Government by
its Order C No. 74 (9-IT) 54 made on ,July 5, 1954,
under s. SA (2) of the Investigation Act directed that
demand notice in accordance with the said terms k
served immediately by the Income Tax Officer and
that all s11ch other proceedings under the Indian
Income Tax Act or other law aa may be necessary be
taken with a view to enforce the payment of the
demand and that the entire sum of Rs. 3,50,000 be
demanded in one sum. It appears, however, that the
assessee was allowed to make payments by instalments of Rs. 5,000, per month.
In the meantime on May 28, 1954, this Court delivered judgment in Suraj Mall Mohta and Co. v.
A. V. Visvanatha Sastri (1). In that case in the course
of investigation of the case of Messrs. Jute·11,nd Gunny
Brokers Ltd. which had been referred to the Commission under s. 5 (1) of the Investigation Act, it was
alleged to have been discovered by the Commission
that Suraj Mall Mohta and Co. had made large profits
which .they had not disclosed and had thus evaded
taxation. A report to that effect having been made
on August 2S, 1953, by the Commission to the Central
Government under s. 5 (4) of the Investigation Act
the Central Government on September 9, ~953, referred the case against Suraj Mall Mohta and Co. to the
Commission under the provisions of s. 5 (4).
On September 15, 19"53, the Commission notified Suraj Mall
(1) [1955] I S.C.R. 448.
540
SUPREME COURT REPORTS [1959] Supp.
I958
Mohta and Co. that their cases had been referred for
Basheshar Nath investigation and called upon them to furnish certain
. v.
materials, details of which were set out in annexure to
The Commissioner the petition. Ou April 12, 1954, Suraj Mall Mohta
of Income-tax, and Co. filed a petition under Art. 32 of the ConstituD,Jhi &- Rajasthan ti on asking for an appropriate writ restraining the
,o;. Anoth"
C
· •
f
k"
•
h
d
omm1ss10n rom ta mg any action on t e groun
D
J
that the provisions of the Investigation Act had
as C •
•
become void being discriminatory in character. By
that judgment this Court held that both s. 34 of the
Indian Income Tax Act, 1922, as it then stood, and
sub-s. (4) of s. 5 of the Investigation Act dealt with
persons who had similar. characteristics of being persons who had not truly disclosed their income and had
evaded payment of tax on their income but that as
the procedure prescribed by the Investigation Act was
substantially more prejudicial than the procedure
under the Indian Income Tax Act, 1922, sub-s. (4) of
s. 5 and the procedure prescribed by the Investigation
Act., in so far as it alfec.ted persons proceeded age.inst
undt'r that sub-section was a piece of discriminatory
legislation which offended the provisions of Art. 14 of
the Constitnt.ion and was, therefore, void and unenforceable.
Sub-section (4) of s. 5 of the Investigation Act having been declared void, Parliament passed the Indian
Income Tax Amendment Act (33 of 1954) amending
s. 34 of the Indian Income Tax Act, 1922. Paradoidcal
as it may seem, the result of this amendment was that
persons who originally fell only within the ambit of
s. 5 (1) of the Investigation Act and formed a distinct
class of substantial tax evaders also came within the
amended s. 34 of the Indian Income Tax Act, 1922. The
position after the amendment, therefore, was that the
Income Tax Officers could pick out some of these persons and refer their cases under s. 5 (1) of the Investigation Act and thereby subject them to the drastic and
harsh procedure of that Act, w bile they could deal
with other persons similarly situate under s. 34 as
amended and apply to t.hem the comparatively more
beneficial procedure laid down in the Indian Income
Tax Act, 1922. Promptly several applications were
(1) S.C.R. SUPREME COURT REPORTS
541
made under Art. 32 of the Constitution complaining
r958
that after the amendment of s. 34 of the Indian Income Bashesha. Nath
Tax Act, s. 5 (1) of the Investigation Act became disv.
criminatory in that the persons falling within it could The comtnissioner
be dealt with under the drastic, prejudicial and harsh of Income-tax,
procedure pt·escribed by the Investigation Act, while Delhi & Rajasthan
other persons similarly situate and belonging to the
& Another
same category cou]d at the whim or pleasure of the
-
Income Tax authorities be proceeded against under
the more beneficial procedure prescribed under the
Indian Income Tax Act. All tftose applications were
disposed of by a common judgment reported as Shree
Meenakshi Milla Ltd,. v. Sri A. V. Visvanatha Saatri (1)
This Court held that s. 34 of the Income Tax Act, as
amended by the Indian Income Tax Amendment Act,
1954 (33 of 1954), operated on the same field ass. 5 (1)
of the Investigation Act, and, therefore, s. 5 (1) had
become void and unenforceable as the pr-0cedure
applied to persons dealt with thereunder became discriminatory in character. It should be noted that in
none of those petitions disposed of by that judgment
had any assessment been made under the Investigation Act and this Court only prohibited further proceedings before the Commission under the Investigation Act. The assessee appellant now before us who
had entered into a settlement under s. 8 of the Investigation Act and had been assessed in accordance with
the terms of the settlement continued to pay the tax
by monthly instalments of Rs. 5,000 as before.
Finally on December 20, 1955, came the decision
of this
Court in M. OT. Muthiah v.
The
Commissioner of Income Tax, Madras (2). In that case
the Central Government had under s. 5 (1) of the
Investigation Act referred the case to the Commission.
The Commission after holding an enquiry recorded its
findings
and
held that an aggregate sum of
Rs. 10,07,322-4-3 represented the undisclosed income
during the period under investigation. The Commission having submitted its report to the Central Government, the latter acting under s. 8 (2) of the Investigation Act directed that appropriate action under the
(I) [1955] I 5, C. R. 787.
(2) [1955] 2 S. C. R. 1247.
Das C. ].
542
SUPREME COURT REPORTS [1959] Supp.
Indian Income Tax Act, 1922, be taken against that
assessee with a view to assess or re-assess the income
Bas/..,ha• Nath which had escaped assessment for the period 1940-41
Th' Cm:,;,ission" to 1948-49. The Income. Tax Officer accordingly
of 1""me-tax. issued notices and made the re-assessment for the
Delhi & Ilajaslhan years 1940-41, 1941-42 and 1943-44 to 1948-49 based
& Anoth"
upon the finding of the Commission, which was treated
Das c. ].
as final and conclusive. These assessment orders wore
served on that assessee.
There was, however, no reassessment order for the year 1942-43. In regard to
the assessment orde&> which had been served the
assesseo concerned applied to the Commissioner of
Income Tax under s. 8 (5) of the Investigation Act for
·reference to the High .Court on questions of law arising
out of those re-assessment orders. During the pendency· of those proceedings the assessee, in that case on
December 6, 1954, filed a petition contending that the
provisions of the Investigation Act were illegal, ultra
vires and unconstitutional. The majority of this Court
held that different persons, though falling under the
same class or category of substantial evaders of incometax, were being subjected to different procedures, oue
a summary and drastic procedure and the other the
normal procedure which gave to the assessees various
rights which were denied to those who were specially
treated under the procedure prescribed by the Investigation Act and, therefore, the assessments made under
s. 8 (2) were void and unenforceable. That was a case
of assessment under s. 8 (2) in invitum after an
investigation under the Investigation Act.
The
assessee appellant before us, who had at the end of
the investigation entered into a settlement and been
assessed in accordance with the terms of such settlement, however, went on making payments in discharge
of the balance due under the terms of settlement right
up to September 8, 1957, when he made the last payment of Rs. 8,000 bringing the aggregate payment up
to Rs. 1,28,000.
In the meantime the Income Tax Officer had sent a
certificate requesting the Collector of Delhi for the
recovery of the balance due by the assessee under the
settlement. In execution of that certificate some of
tl) S.C.R. SUPREME COURT REPORTS
543
the properties belonging to the assessee situate in
i958
Dharamsalla and Hissar were attached. On DecemBasheshar N alh
ber 27, 1957, the assessee made an application to the
v.
Income Tax Commissioner.
After pointing out that The Commissioner
between July 5, 1954, and December 27, 1957, the of Inconie-ta:e,
petitioner had paid in all Rs. 1,28,000 towards the Delhi &- Rajasthan
discharge of his liability under the settlement and
&- Another
referring to the decisions of this Court in Suraj Mall
-
Mohta's case (1) and Muthiah's case (2)the assessee submitted that the settlement under s. 8A of the Investigation Act had no force and did not bind the petitioner and that the settlement had been made under the
pressure of the situation and in view of the coercive
machinery of the Investigation Act and that from
either point of view the settlement was not binding.
His contention was that when s. 5(1) of the Investigation Act had been held unconstitutional the settlement
under s. 8A could not be enforced, for the foundation
of the proceedings under s. 8A was the reference under
s. 5(1) and the foundation having crumbled down the
superstructure must fall with it. Under the circumstances the assessee submitted that the attached properties be released aud the amount already recovered
under the settlement be refunded. On January 29,
1958, the Income Tax Commissioner sent the following
communication to the assessee :-
No. L-228(1)/54-55/17590
Office of the Commissioner of Income Tax,
Delhi and Hajasthan, New Delhi.
Dated, New Delhi the 29th January, 1958.
Shri Besheshar Nath,
9, Barakhamba Road,
New Delhi.
Dear Sir,
Sub :-Taxation on Income (Investigation Commission) Act, 1947-0rder u/s 8A(2)-Your petition
dated 27th December, 1957.
With reference to your petition dated 27th
December, 1957, regarding the settlement arrived at
(1) (1955).1 S.C.R. 418.
(2) (1955) 2 S.C.R. 12.17.
Das C. ].
544
SUPREME COURT REPORTS [1959] Supp.
'958
under section 8A(2) of the Ta.xa.tion on Income (InvesB•sh"""' Nath tiga.tion Commission) Act, 1947, I a.m to inform you
v.
that the settlement is vs.lid a.nd binding on you.
Tho Commissioner
2. You a.re, therefore, requested to ma.ke good
01. 1..,,._., • ., a.rrea.rs of insta.lments which you have not pa.id re.
Delho 6- Ra1asthan cently by 5th Februa.ry, 1958, a.nd a.lso to continue
6- Another
k"
h
·
d
· h h ·
l
ma. mg t e pa.yments m a.ccor a.nee wit
t e msta. ·
Dos c. J.
ments scheme a.greed to, fa.iling which the recovery
proceedings will be vigorously pursued through the
usual recovery cha.nnels.
Your's fa.ithfully,
Sd./· S. K. Gupta.,
Commissioner of Income-tax,
Delhi & Ra.jasthan, New Delhi.
Being aggrieved by the above decision the a.ssessee
thereupon moved this Court and obtained specie.I
leave to appeal against tha.t order. The appeal ha.s
now come up for final disposal before us.
It may be mentioned here that as the respqndents
are anxious to have the matters of controversy raised
in this appea.l decided and set at rest by a decision of
this Court, the respondents, for the purposes of this
a.ppeal, have not insisted on their objection that an
appea.l does not lie under Art. 136 of the Constitution
against an order of the Commissioner of Income Ta.x.
Learned counsel for the a.ssessee a.Iso has not -pressed
his claim for refund of the a.mounts already paid a.nd
has pressed the appeal regarding the balance that
remains to be pa.id under the settlement which is characterised as invalid. Model Knitting Industries Ltd.
which has a case pending in the High Court of Ca.lout.
ta where the same questions a.a a.re in issue in the
appeal before us, a.re also in issue has been permitted
to intervene· and we have heard counsel a.ppea.ring for
tha.t intervener.
In view of the three decisions referred to a.hove
learned Attorney General does not seriously contend
that the powers conferred on the Commission by s. 6
and the procedure la.id down by s. 7 of the Investiga.
tion Act are not discriminatory, but wha.t he urges is
that none of the said decisions has held that s. 5(1) ill
..
(I) S.C.R.
SUPREME COURT REPORTS
545
wholly void and inoperative. He says that s. 5(1) only
1958
authorises the Centre.I Government to refer certain 8
,
•
N
•
h , C
.