# PANNALAL BINJRAJ v. UNION OF INDIA

- **Citation:** [1957] 1 S.C.R. 233
- **Court:** Supreme Court of India
- **Decided:** 1957
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/pannalal-binjraj-v-union-of-india-1338
- **Pages:** 41

## Headnote

S.C.R.
SUPREME COURT REPORTS
233
PANNALAL BINJRAJ
v.
UNION OF INDIA.
(BHAGWATI,
JAGANNADHADAS,
VENKATARAMA
AYYAR, B. P. SINHA and S. K. DAs JJ.)
Income-tax-Transfer of cases-Discretion vested in the Commissioner or the Board, if discriminatory and violative of
fundamental rights-Omnibus wholesale order of transfer, if constitutionally valid-Indian Income-tax Act (XI of 1922), as amended by
Amending Act XXVI of 1956, JS. 5(7 A), 64(1), (2)-Constitution of
India Arts. 14, 19(J)(g).
These petitions on behalf of the assessees raised the common
question as to the
constitutionality
of s.
5(7-A) of ·the
Indian
Income-tax Act, which was
raised but not decided by this Court
in Bidi Supply Co.
v. The Union of India, (1956) S. C. R. 267.
Reliance
was
placed
on the
obsenrations
of Bose, J., in
his
minority judgment in that case and it was contended that the
section read with the explanation, subsequently added to it as a
result of that decision, conferred arbitrary and uncontrolled powers
cf transfer on
the
Income-tax
Commissioner
and
the Central
Board of Revenue, was discriminatory and violative of the provisions of Art. 14 and imposed an unreasonable
restriction on
the
right to carry on trade or business in contravention of Art. 19(1 )(g)
of
the
Constitution.
It
was
further
contended
that
the
omnibus wholesale orders of transfer made without any reference
to any particular case or without any limitation as
to time were
inconvenient and discriminatory and ran counter to the majority
judgment in that case. The contention of the Central Board of
Revenue, supported by affidavits filed on its
behalf, was that the
section was intended to
minimise
administrative
inconvenience.
there was no
discrimination
aftc-.r
transfer
because
the
same
relevant provisions of the Act as applied to others similarly situated, were applied after the transfer and any resulting inconvenience to the asscsscc was sought to be minimised
by transferring
his case either to the nearest area or, where that was not feasible,
by examining his accounts or evidence, if required by him, at a
place suited to his convenience
and that the wholesale omnibus
orders of transfer were covered by the explanation :
Held, that s. 5(7A) of the Indian
Income-tax Act was
a
measure of administrative convenience,
was con~titutionally valid
2nd did not infringe any of the fundamental rights conferred by
Arts. 14 and (19)(g) of the Constitution and the orders of transfer
in question were saved by the explanation to
that section
and
wen: constitutionally valid.
D1e1mher, 21.
1956
P•M-1.J Binjraj
v.
Ullio11 If India
234
SUPREME COURT REPORTS
[1957]
The right conferred on the assessec by s. 64( I) and ~2) of the
Act was hot an absolute right and must be subject to the- primaryobjcct
of the Act itself, namely, the assessment and collection
of
incomc~tax, and
\Vhc:rc
the .exigencies
of
tax
colli:ction
so
required, the Co111missioncr of lncomc~tax or the Central
Board,
o{ Revenue had the power under s. 5(7A) of the A<:t
t.<> transfer
his case to some other officer outside
the area where he resided or
carried on business and
any difference
in his
pos1t1on
created
thereby as compared to that of others similarly situa<ed would be
no more than a minor deviation from the
general
standard
and
would not amount to a denial of equ•lity before the law.
This discretionary
power vested in the
Authecitics by the
section to override_ the statutory right of the assascc must be.
distinguished from
the
discretion
that
has
to be exercised
in
respect of a fundamental
right guaranteed
by
the Constitution
and the two tests to judge whether it
was
discriminatory would
be, ( 1 ) whether it admitted of the possibility of any real and
substantial
discrimination and
(2) whether it impinged on a
fundamental
right
guaranteed
by
the
Constitution,
and,
IO
judged, the discretion vested in the Authorities by s. 5(7 A) of
the Act was not at all discriminatory nor did the
section impose
any unreasonable restriction
on the
fundamenta

## Text

_Characters 0–39,924 of 91,741. This is a partial read: ask again with offset=39924 for what follows._

S.C.R.
SUPREME COURT REPORTS
233
PANNALAL BINJRAJ
v.
UNION OF INDIA.
(BHAGWATI,
JAGANNADHADAS,
VENKATARAMA
AYYAR, B. P. SINHA and S. K. DAs JJ.)
Income-tax-Transfer of cases-Discretion vested in the Commissioner or the Board, if discriminatory and violative of
fundamental rights-Omnibus wholesale order of transfer, if constitutionally valid-Indian Income-tax Act (XI of 1922), as amended by
Amending Act XXVI of 1956, JS. 5(7 A), 64(1), (2)-Constitution of
India Arts. 14, 19(J)(g).
These petitions on behalf of the assessees raised the common
question as to the
constitutionality
of s.
5(7-A) of ·the
Indian
Income-tax Act, which was
raised but not decided by this Court
in Bidi Supply Co.
v. The Union of India, (1956) S. C. R. 267.
Reliance
was
placed
on the
obsenrations
of Bose, J., in
his
minority judgment in that case and it was contended that the
section read with the explanation, subsequently added to it as a
result of that decision, conferred arbitrary and uncontrolled powers
cf transfer on
the
Income-tax
Commissioner
and
the Central
Board of Revenue, was discriminatory and violative of the provisions of Art. 14 and imposed an unreasonable
restriction on
the
right to carry on trade or business in contravention of Art. 19(1 )(g)
of
the
Constitution.
It
was
further
contended
that
the
omnibus wholesale orders of transfer made without any reference
to any particular case or without any limitation as
to time were
inconvenient and discriminatory and ran counter to the majority
judgment in that case. The contention of the Central Board of
Revenue, supported by affidavits filed on its
behalf, was that the
section was intended to
minimise
administrative
inconvenience.
there was no
discrimination
aftc-.r
transfer
because
the
same
relevant provisions of the Act as applied to others similarly situated, were applied after the transfer and any resulting inconvenience to the asscsscc was sought to be minimised
by transferring
his case either to the nearest area or, where that was not feasible,
by examining his accounts or evidence, if required by him, at a
place suited to his convenience
and that the wholesale omnibus
orders of transfer were covered by the explanation :
Held, that s. 5(7A) of the Indian
Income-tax Act was
a
measure of administrative convenience,
was con~titutionally valid
2nd did not infringe any of the fundamental rights conferred by
Arts. 14 and (19)(g) of the Constitution and the orders of transfer
in question were saved by the explanation to
that section
and
wen: constitutionally valid.
D1e1mher, 21.
1956
P•M-1.J Binjraj
v.
Ullio11 If India
234
SUPREME COURT REPORTS
[1957]
The right conferred on the assessec by s. 64( I) and ~2) of the
Act was hot an absolute right and must be subject to the- primaryobjcct
of the Act itself, namely, the assessment and collection
of
incomc~tax, and
\Vhc:rc
the .exigencies
of
tax
colli:ction
so
required, the Co111missioncr of lncomc~tax or the Central
Board,
o{ Revenue had the power under s. 5(7A) of the A<:t
t.<> transfer
his case to some other officer outside
the area where he resided or
carried on business and
any difference
in his
pos1t1on
created
thereby as compared to that of others similarly situa<ed would be
no more than a minor deviation from the
general
standard
and
would not amount to a denial of equ•lity before the law.
This discretionary
power vested in the
Authecitics by the
section to override_ the statutory right of the assascc must be.
distinguished from
the
discretion
that
has
to be exercised
in
respect of a fundamental
right guaranteed
by
the Constitution
and the two tests to judge whether it
was
discriminatory would
be, ( 1 ) whether it admitted of the possibility of any real and
substantial
discrimination and
(2) whether it impinged on a
fundamental
right
guaranteed
by
the
Constitution,
and,
IO
judged, the discretion vested in the Authorities by s. 5(7 A) of
the Act was not at all discriminatory nor did the
section impose
any unreasonable restriction
on the
fundamental
right
to carry
on trade or business.
Bidi Supply Co. v. The Union of India, (1956) S.C.R. 267;
M. K. Gopa/an v. The State of Madhya Pradesh,
(1955) I S.C.R.
168; The State of West Bengal v. Anwar Ali Sarlr.u, (1952) S.C.R.
284 ; Daya/das Kushiram v. Commission" of lnc.,,,,e-tu, ( Centrlll)~
l.L.R. 1940 Born. 650; Dayaldas Kushiram
v.
Commission" of
Income-tax, Central, (1943)
11 I.T.R. 67; and Wallace Brothers 6'
Co., /Jd.
v.
Commissioner
of Income-tax,
Bombay,
Sinll
&
Baluchistan, A.l.R. 1945 F.C. 9, discussed.
The explanation added to the section by the Amending
Act
XXVI of 1956, was
intended to
expand the connotation
of the
term 'case'
used
in
the
section
and
included both
pending
proceedings as also other proceedings under the Act which
might
be commenced in respect of any year after the
date
of
transfer
and as such the orders in question
were not unconstitutional
or
void.
The Income-Tax
Authorities,
however,
must be held bouad
by the statements made in their affidavits and where an
asscncc
could make out a prima facie case of a maid fide or discriminatory
exercise of the discretion vested in them, the Court will scrutinise
the circumstances in
the light of thoS. statements and where
necessary quash an abuse of the power under Arts. 226 and 32 of
the Constitution.
Raton/a/ Gupta v. The District M•gistrate of Ganiam, 1.L.lt.
1951
Cuttack
441
and Brundaban Chandr• Dhir Narenlir• Y.
S.C.IL
SUPREME COURT REPORTS
235
The State ·of Oriua (Revenue Department), I.L.R.
1952
Cuttack
529, ·referred to.
The :Income-tax
Authorities should follow the rules of natural
·justice and, where feasible, give notice of the intended transfer to
the assessee concerned in order that he may represent his view of
the matter and record the
reasons of the
transfer, however,
briefly, •to enable the Court to judge whether such transfer was
ma/a fide or discriminatory, if and when challenged.
ORIGINAL
JuRISDICTION : Petitions
Nos. 97, 97 A,
44, 86 to 88,
111, 112, 85, 158, 211 to 251 and 225 to
229 of 1956.
Under Article 32 of the Constitution of India for
:the enforcement of Fundamental Rights.
N. C. Chatterji, A. K. Sen, B. P. Maheshwari and
Tarachand Bnjmohan Lal, for the petitioners in Petitions Nos. 97 and 97 A of 1956.
_N.
C.
Chatterji and V. S. Sawhney, for
the
'Petitioners in Petitions Nos. 44, 86 to 88, 111 and 112
of 1956.
N. C. Chatterji and D. N. Mukherji, for the
petitioners in Petition No. 85 of 1956.
Purshottam Tirukumdas and C. P. Lal, for the
petitioners in Petitions Nos. 211 to 215 of 1956.
S. C. Isaacs and K. R. Chaudhury, for the petitioners in Petitions Nos. 225 to 229 of 1956.
Bhagirath Das and M. L. Kapur, for the petitioner in Petition No. 158 of 1956.
C. K. Dapht11ry, Solicitor-General of India, G. N.
Joshi, Porus A. Mehta and
R. H. Dhebar. for the
respondents (Union of India, the Central Board of
Revenue
and
various
Income-tax
Officers in all
petitions.)
B. Sen and P. K. Chose, for the State of West
Bengal (Respondents Nos. 2 and 3 in Petitions Nos.
211 to 215 of 1956).
1956.
Dec~mbcr 21. The Judgment of the Court was
delivered by
BHAGWATI J.-These petitions under Art. 32 of the
Constitution raise a common question of law whether
s. 5(7A) of the Indian Income-tax Act, hereinafter
1956
Pannalal Bi'!frlfi
v.
Union of India
1956
Panrralal Bin.fraj
v.
Union of /,,,,tiia
Bhagwati J.
236
SUPREME COURT REPORTS
[19571
called the Act, is ultra vires the
Constitution as
infringing the fundamental rights enshrined in Art. 14
and Art. 19 (1) (g).
The facts which led to the filirig of the petitions may
be shortly stated.
Petitions Nos. 97 &97-A of 1956:
The petitioners are M/ s. Pannalal Binjraj,
Oil~ill
owners, merchants and commission agents, carrymg
on business at Sahibganj in the district of Santhal
Parganas, having their branch at 94, Lower Chitpur
Road, Calcutta, petitioner No. 1, and R. B. Jamuna
Das Chowdhury, resident of the same place and erstwhile karta of the Hindu undivided family, which
carried on business in the name and style of M/s.
Pannalal Binjraj, petitioner No. 2. Before September
28, 1954, they were being assessed by the Income-tax
Officer, Special Circle, Patna. On September 28, 1954,
the Central Board of Revenue made an order transferring their cases to the Income-tax Officer, Central
Circle XI, Calcutta. On January 22, 1955, the Centril
Board of Revenue transferred
the
cases of petitioner
No. 2 to the Income-tax Officer, Central Circle VI,
Delhi, and on July 12,
1955, it similarly transferred
the cases of petitioner No. 1 to the same officer. After
the dates of such transfer to the Income-tax Officer,
Central Circle VI, Delhi, the said officer instituted
several proceedings against them· and the petitioners
challenged in these petitions the validity of the said
orders of transfer and all the subsequent proceedings
including the assessment orders as well as the order
levying penalty for
non-payment of the income-tax
which had been already assessed prior thereto, on the
ground that s. 5 (7 A) of the Act was ultra vires the
Constitution and all the proceedings which were entertained
against
the petitioners
by
the
Income-tax
Officer, Central Circle XI, Calcutta, and by the Incometax
Officer, Central Circle VI, Delhi, were without
j uris<liction and void.
Petitions Nos. 44 and 85 of 1956 :
The petitioner in Petition No. 44/56 is Shri A. L Sud,
the sole proprietor of M/s. Amritlal Sud (Construction),
who originally belonged to Hoshiarpur district in the
S.C.R.
SUPREME COURT REPORTS
237
State of Punjab but has since 1948 been residing and
carrying on business in Calcutta. Prior to June 29,
1955, he had
been
assessed
to
income-tax
by
the
Income-tax Officer, Special Survey Circle VII, Calcutta.
On June 29, 1955, the
Central
Board
of
Revenue
transferred his case to the Income-tax Officer, Special
Circle, Ambala, and the said officer continued the pn>·
cec:dings in the
transferred case
and also
instituted
further proceedings against the petitioner and assessed
him under s. 23( 4) of the Act for the assessment years
1946-47 and 1947-48. Demands were made upon the
petitioner for payment of the: amount of income-tax
thus assessed whereupon he filed this petition impeaching the validity of the order of the Central Board of
Revenue dated
June: 29, 1955, and the proceedings
entertained by the Income-tax Officer, Special Circle:,
Ambala, on the ground that s. 5 (7A) of the Act was
ultra vires the Constitutipn.
Petition No. 85/56 was filed by M/s. Bhagwan Das
Sud & Sons, Merchants, Hoshiarpur, carrying on business in rosin and turpentine there. Before October 20,
1953; they
were being
assessed by the
Income-tax
Officer, Hoshiarpur, but on that date their case was
transferred under s. 5(7A) of the Act by the Commissioner of
Income-tax to the
Income-tax
Officer,
Special Circle, Ambala. The said officer continued the
said case and reopened the assessment for the years
1944-45 to 1950-51 and complc:tc:d the assessment for
the assessment
years
1947-48,
1950-51
and
1951-52.
These:
petitioners also thereupon filed
the:
petition
challenging validity
of the:
order
of
transfer
made
by
the Commissioner of Income-tax on October 20,
1953, and the proceedings entertained by the Incometax Officer, Special Circle, Ambala, thereafter, on the
same ground of the ultra vires character of s. 5(7A) of
the Act.
Shri A. L. Sud, the petitioner in Petition No. 44/56
is a member of the Hindu undivided family carrying
on business in the name and stylt ·of M/s. Bhagwan
Das Sud & Sons and the cases oi both these petitioners
were
transferred to the
Income-tax
Offier, Special
195b
PannalaJ Binjra
v.
Union of lntia
Bhagwali].
1956
P•nt1alal Binjraj
v.
UflliOJI of l'Niia
238
SUPREME COURT REPORTS
[1957]
Circle, Ambala,
as
above
by
the
said
respective
orders.
Petitions Nos. 86, 87, 88, 111, 112, and 158 of 1956:
These
petitions may be compendiously described as
the Amritsar group. The petitioner in Petition No.
86/56 is Sardar Gurdial Singh, son of S. Narain Singh,
The petitioner in Petition No. 87 /56 is Dr. Sairmukh
Singh,
son of S. Narain Singh. The
petitioner in
Petition No. 112/56 is S. Ram Singh, son of S. Narain
Singh. These three arc brothers and the petitioner in
Petition No. 88/56 is the father, S. Narain Singh, son
of S. Basdcv Singh. The father and the three sons
were the directors in the Hindustan Embroidery Mills
(Private) Ltd., petitioner No. l in Petition No. 111/56,
which is
located at
Chheharta near
Amritsar. All
these petitioners were, prior to the or<lers of transfer
made by the Commissioner of Income-tax under s. 5(7A)
of the Act, being assessed by the Income-tax Officer,
'A' Ward, Amritsar, but their cases were transferred
on or about
June 29,
1953, from
the
Incodle-tax
Officer, 'A' Ward, Amritsar, to the Income-tax Officer
Special Circle, Amritsar. These cases were continueJ
by the latter officer and notices under s. 34 of the Act
w~c also issued by him against them for the assessment years
1947-48 to
1951-52. Each
one of them
filed a separate petition challenging the said orders of
transfer by the Commissioner of Income-tax and the
proceedings
entert:llned
by the
Income-tax
Officer,
Special Circle, Amritsar, against them on the score of
the unconstitutionality of s. 5(7A) of the Act.
The petitioner in Petition No. 158/56 is one Shri
Ram Saran Das Kapur, the head and l(arta of. the
Hindu undivided family carrying on business outside
Ghee Mandi
Gate, Amritsar. His
case also
which,
prior to the order
complained
against,
was
being
~tertained
by
the
Income-tax
Officer, 'F'
Ward,
Amritsar, was traruferred on SOIXlC date in 1954 by a.,
order of
the
Commissioner
of
Income-tax
under
s. 5(7 A) of the Act to the Income-tax Officer, Special
Circle, Amritsar. No
objection was
talcen
9y
the
•
S.C.R.
SUPREME COURT REPORTS
239
petitioner to this order of transfer until after the assessment order - was
passed
against him but he
a1so
challenged the validity of the said order of transfer
and the proceedings entertained by
the Income-tax
Officer,
Special
Circle, Amritsar,
thereafter, on the
same grounds as the other petitioners.
Petitions Nos. 211 to 215 of 1956:
These petitions may be described as the Sriram
Jhabarmull group. Though separately filed, the petitioner in
each
of them
is
the same
individual,
Nandram Agarwalla, who is
the
sole proprietor of
a business which he carries on
under the name
and style
of 'Sriram Jhabarmull'.
It is
a business,
inter
rdia,
of
import
and
export
of
piece-goods,
as commission agents, and dealers in raw wool and
other materials. The principal place of business is
at
Kalimpong, in the district of Darjeeling, though
there is also a branch at Calcutta. These petitions
concern the assessment of the petitioner to income-tax
for
the
respective
years
1944-45,
1945-46,
1946-47,
1947-48
and
1948-49.
Prior to
the orders
of
the
Commissioner of Income-tax under s. 5(7A) of the Act
complained
against,
the
petitioner was being assessed
by the Income-tax Officer, Jalpaiguri, Darjeeling. On
March 5,
1946, the cases of the petitioner were transferred from the Income-tax Officer, Jalpaiguri, Darjeeling, to the Income-tax Officer, Central Circle I,
Calcutta, and a couple of months thereafter they were
again transferred to the Income-tax Officer, Central
Circle IV, Calcutta. On June 8,
1946, there was a
further transfer assigning the cases to the Income-tax
Officer, Central Circle
I, Calcutta, and on July 27,
1946, orders were passed by the Commissioner ol
Income-tax Central, Calcutta, under s. 5 (7 A) transferring the
cases of the petitioner to the Income-tax
Officer, Central Circle IV, Calcutta. These are
the
orders
which are complained
against as unconstitutional and void invalidating the proceedings ~which
were
continued
and subsequently
instituted
by
the
Income-tax Officer, Central Circle IV, Calcutta, against
the petitioner on the score
of the "Mnconstitutionality
of s. 5(7 A) of the Act. It may be noted, however,
that these orders were all prior to the Constitution and
1956
Pannolal Binjraj
v.
Union of India
8"agwati j.
1956
Pannalal BinJroj
v.
Union of India
Bha.!{Wati ].
240
SUPREME COURT REPORTS
(1957]
having been made on July 27, 1946, as aforesaid were
followed up by completed · assessment proceedings iru
respect of the. said respective years and also certificate
proceedings under · s. 46(2) of the Act. There were
further orders dated December 15, 1947, and sometime
in . September,
1948,
transferring the
cases
of
the
petitioner from the Income-tax Officer, Central Circle
IV, Calcutta, to the Income-tax Officer," Central Circle
I, Calcutta, and back from him · to the Income-tax.
Officer,
Central Circle IV, Calcutta. These, however,:
are . not material for our purposes, the only order
challenged being the order of the Commissioner of
Income-tax
Central, Calcutta, dated
July
27,
1946,
which was passed under s. 5(7A) of the Act.
Petitions Nos. 225 to 229 of 1956:
These petitions may be classed as the Raichur group:
They concern the assessment for the
respective assessment
years
1950-51,
1951-52,
1952-53,
1953-54 and
1954-55. The petitioner in each of them is the same individual, one Kalloor Siddanna, who resides and carries
on business in Raichur ·in the State of Hyderabad as
commission agent and distributor of agricultural pre>-
ducts. Income-tax was first imposed in the Hyderabad
State in 1946 by a special Act of the Legislature and
the·
petitioner was
assessed
under the
Hyderabad
Income-tax Act by the Additional Income-tax Officer,
Raichur,
for
the
assessment
years
1948-49 and
1949-50. As from April l, 1950, the Indian Incometax Act was applied to Hyderabad but the Additional
Income-tax Officer, Raichur, continued to assess the
pet1t1oner.
The cases
in · respect of the assessment
years
1950-51,
1951-52
and
1952-53
were
pending
before that officer and proceedings were tal<en
in
connection with the assessment for those years. On
December 21,
1953, however, the Commissioner of
Income-tax
Hyderabad,
issued a notification under
s. 5{7 A)
ordering that the case of the petitioner should
be transferred from the Additional
Income-tax Officer,
Raichur,
to
the
Income-tax Officer,
Special
Circle,
Hyderabad. The latter officer continued the assessment
proceedings and issued notices under s. 22 ( 4) of the Act
on July 1,
1954, November 2, 1954, November 30, 1954,
S.C.R.
SUPREME COURT REPORTS
241
December 19, 1954, and Mar.ch 11, 1955, in respect
of the said years of assessment. Assessments for the
said years were made on March 21, 1955, and on
April 24,
1955, the petitioner made an application
under s. 27 of the Act to reopen the assessment for the
year 1950-51 as on default under s. 23 ( 4) of the Act.
It appears, however, that shortly before May 19, 1955,
the Commissioner of
Income-tax, Hyderabad, made
another order under s. 5 (7 A) and s. 64 (5) (b) of the
Act transferring all the cases of the petitioner to the
main Income-tax Officer, Raichur. Curiously enough
the petitioner challenged both the orders one dated
December 21, 1953, and the other made sometime in
May, 1955, under s. 5 {7A) of the Act and the proceedings
continued and
instituted
by
the respective
officers thereunder as unconstitutional and void on the
ground that s. 5 (7A) was ttltra vires the Constitution
even though ultimately he was being assessed by the
main Income-tax Officer,
Raichur, under the latter
order.
This is the common question in regard to the ultra
vzres character of s. 5 (7 A) of the Act which is raised ·
in all these petitions, though in regard to each group
there are several questions of fact involving the consideration of the discriminatory character of the specific
orders passed therein which we shall deal with hereafter in their appropriate places.
Section 5 (7A) of the Act runs as under:
"5 (7 A) : The Commissioner of
Income-tax
may
transfer any case from one Income-tax Officer subordinate to him to another, and the Central Board of
Revenue may transfer any case from any one Income-·
tax Officer to another. Such transfer may be made at
any stage of the proceedings, and shall not render
necessary the reissue of any notice already issued by
the Income-tax Officer from whom the case is trans-·
£erred.;'
This sub-section was inserted by s. 3 of the Indian
Income-tax Amendment Act, .1940 (XL of 1940) which
w~s passed as a restdt of the decision of the Bombay
High Court in Dayaldas Kushiram v. Commissioner of
Income-tax, (Central) ( 1 ) •
(1) I.L.R. 1940 Bom. 650.
1956
Pannalal Binjraj
v.
Union of India
Bhagwati J.
1956
.Pannalal Bi,,jraj
v.
•llnion ()f India
.Rhagwo.li ].
242
SUPREME COURT REPORTS
[1957]
By the Indian Income-tax Amendment Act, 1956
(XXVI of 1956) an explanation was added to s. 5(7A)
in the terms following as a result of the decision of
this Court in Bidi Supply Co.
v. Tht: Union of
India(•.) :
"Explanation :-in
this
sub-section,
case
in
relation to any person whose name is specified in the
order of transfer means all proceedings under this Act
in respect of any year whicli may be pending on the
date of the transfer, and includes all proceedings under
this Act which may be commenced after the date of the
transfer in respect of any year."
Section 5 (7 A) together with the explanation thus
falls to be considered by us in these petitions.
The argument on behalf of the petitioners is that
s. 64, sub-ss. (1) and (2) of the Act confer upon the
assessee a valuable right and he is entitled to tell the
taxing authorities that he shall not
be called upon to
attend at different places and thus upset his business.
Section 5(7A) invests the Commissioner of Income-tax
and the Central Board of Revenue with naked and
arbitrary power to transfer any case from any one
Income-tax Officer to another without any limitation
in point of time, a power which is unguided and uncontrolled and is discriminatory in its nature and it is
open
to
the
Commissioner of
Income-tax
or
the
Central Board of Revenue to pick out the case of one
assessee from those of others in a like situation and
transfer the same from one State to another or from
one end of India to the other without specifying any
object and without giving any reason, thus subjecting
the
particular
assessee
to discriminatory
treatment
whereas the other assessees similarly situated with him
would continue to be assessed at the places where they
reside or carry on business under s. 64 ( l) and (2) of
the Act. Section 64(5) which provides with retrospective effect that the provisions of s. 64 ( l) and ( 2) sha U
not apply, inter alia, where an order has been made
under s. 5(7A) was inserted simultaneously with s.
5 (7 A)
and would not have the effect of depriving the
<•l [1956] s.c.R. 267.
S.C.R.
SUPREME COURT REPORTS
243
assessee of the valuable right conferred upon him
under s. 64 (1) and (2) unless and until s. 5(7A) was
intra vires but s. 5(7A), as stated above, being discriminatory in its nature is ultra vires the Constitution
and cannot save s. 64(5) which is merely consequential.
The discrimination involved in s. 5(7A) is substantial
in character and, therefore, infringes the fundamental
right enshrined in Art. 14 of the Constitution. It also
infringes Art. 19 (1) (g) in so far as it imposes an unreasonable
restriction on
the fundamental
right to
carry on trade or business (Vide Himmatlal Harilal
Mehta v. The State of Madhya Pradesh(1 ) ).
The
very
same
question
as
regards
the unconstitutionality of s. 5(7A) of the Act had come up
for decision before this Court in Bidi Supply Co. v. The
U111011 of India (supra). The case of the assessee there
had been transferred by the Central Board of Revenue
under s. 5(7A) of the Ad from the Income-tax Officer,
District
III,
Calcutta,
to the Income-tax
Officer,
Special Circle, Ranchi. The order was an omnibus
wholesale order of transfer expressed in general terms
without any reference to any particular case and without any limitation as to time and was challenged as
void on the ground that s. 5 (7 A) under which it had
been passed was unconstitutional. This Court, by a
majority judgment, after discussing the general principles underlying Art. 14, did not adjudicate upon that
question, observing at p. 276 :
"We do not consider it necessary, for the purpose
of this case, to pause to consider whether the constitu- ·
tionality of sub-section (7A) of section 5 can be supported on the principle of any reasonable classification
laid down by this Court or whether the Act lays down
any principle for guiding or regulating the exercise of
discretion by the Commissioner or Board of Revenue
or whether the sub-section confers an unguided and
arbitrary power
on
those
authorities to pick and
choose individual assessee and place that assessee at a.
disadvantage in comparison with other assessees. It
is enough for the purpose of this case to say that the
omnibus order made in this case is not contemplated
(1j [195f] S.C R. 1122.
1956
POflllolol BinpO:i
v.
Unio11 of Illlli"'
Blr•gr.oai J.
1956
~fannalal Di11.fraj
v.
Union tJj India
Bhagwali J.
244
SUPREME COURT REPORTS
[1957]
or sanctioned by sub-section (7 A) and that, therefore,
the petitioner is still entitled to the benefit of the
provisions of sub-sections (1) and (2) of section 64.
All assessees are entitled to the benefit of those provisions except . where a particular case or cases of a
particular assessee for a particular year or years is or
are transferred under sub-section (7 A) of section 5,
assuming that section to he valid and if a particular
case or cases is or are transferred his right under
section 64 still remains as regards his other case or cases."
.
The majority judgment then proceeded to consider
the effect of such an omnibus order unlimited in point
of time on the rights of the assessee and further
observed in that context at p. 277 :
"This order is calculated to inflict considerable
inconvenience and harassment on the petitioner. Its
books of account will have to he produced before the
Income-tax
Officer, Special Circle,
Ranchi-a place
hundreds of miles from Calcutta, which is its place of
business. Its partners or principal officers will have
to be
away from the head office for a considerable
period neglecting the main business of the firm. There
may be no suitable place where they can put up during
that period. There will certainly he extra expenditure to he incurred by it by way of railway fare,
freight and hotel expenses. Therefore the reality of
the
discrimination
cannot
he
gainsaid.
In
the
circumstances this substantial discrimination has been
inflicted on the petitioner by an executive fiat which
is
not founded on any law and no question of
reasonable
classification
for
purposes of legislation
can
anse.
Here "the State"
which
includes
its
Income-tax department has by an illegal order denied
to the petitioner, as compared with other Bidi merchants who. are similarly situate, equality before the
law or the equal protection of the laws and the
petitioner can
legitimately complain of an infraction
of his fundamental right under Article 14 of the
Constitution."
The question as to the constitutionality of s. 5 (7 A)
of the Act was thus left open and the decision turned
merely on the construction of the impugned order.
S.C.R.
SUPREME. COURT REPORTS
245
Learned counsel for the petitioners, however, lavs
particular stress on the observations of Bose, J., in the
minority judgment which he delivered in that case
whereby he held that ss. 5 (7A) and 64 (5) (b) of the Act
were themselves ultra vires Art. 14 of the Constitution
and not merely the order of the Central Board of
Revenue. The learned Judge referred to a passage
from the judgment of Fazl Ali, J., in The State of West
Bengal v. Anwar Ali Sarkar(1) and also p~inted out
th~
decision of this Court in M/s. Dwarka Prasad Laxmt
Narain v. The State of Uttar Pradesh and Two Others(')
and observed :
. "What is the position here ? There is no hearing.
no reasons are recorded : just peremptory orders tramferring the case from one place to another without any
warning ; and the power given by the A.ct is to tramfer from one end of India to the other ; nor is that
power unused. We have before us in this Court a case
pending in which a transfer has been ordered from
Calcutta in West Bengal to Ambala in the Punjab."
(p. 283)
''If the Legislature itself had done here what the
Central Board of Revenue has done and had passed
a11 Act in the bald terms of the order made here transferring the case of this petitioner, picked out from
othen in a like situation, from one State to another, or
from one end of India to the other, without specifying
any object and without giving any reason, it would, in
my judgment, have been bad. I am unable . to see
how the position is bettered because the Central Board
of
Revenue
has
done this and
not Parliament." .
(p. 284-5)
"In my opinion, the power of transfer can only
be conferred if it is hedged round with reasonable restrictions, the absence or existence of which can in the
last instance be determined bv the courts ; and the
exercise of the power must. be in conformity with the
rules. of natural justice, that is to say , the parties
affected must be heard when that is reasonably possible.
and the reasons for the order must be reduced, however briefly, to writing so that men may know thar
(1) [19511] s,c.~. 284, 3og·310.
·
(2) [1954) s.c.R. 8o3.
1956
Pannalal Binjraj
v.
Union of India
Bhatwati ].
1956
Pannalal Binjraj
v.
Utcio11 of India
B/iagw•tiJ.
246
SUPREME COURT REPORTS
(1957]
the powers conferred on these quasi-judicial bodies arcbeing justly and properly exercised." (p. 287)
The answer furnished on behalf of the State to this
argument is fourfold :
( i) that the provision contained in s. 5 (7 A) of th<"
Act is a measure of administrative convenience enacted
with a view to more conveniently and effectively deal
with the cases of the assessees where the Commissioner
of Income-tax , considers it necessary or desirable ro
transfer any case from one Income-tax Officer subordinate to him to another or the Central Board of Revenue
similarly considers it necessary or desirable to transfer
any case from any one Income-tax Officer to anothrr.
The real o~ject with which s. 5(7A) was inserted by
the Indian Income-tax Amendment Act, 1940 (XL of
1940), has been thus set out in the affidavit of Shri
V. Gouri Shankar, Under Secretary, Central Board of
Revenue, dated November
19,
1956, which is
the
pattern of all the affidavits filed on behalf of the Stare
in these petitions :
"4 ..... .I say that the provisions of s. 5 (7A) were
inserted by the Income-tax Amendment Act. XL of
1940, with the object of minimising certain procedural
difficulties. Before this amendment was passed there
was no specific provisions in the Act for transferring
a case from one Income-tax Officer to another except
by a long and circuitous course even at the request of
the
assessees.
In
order
therefore to be able ro
transfer the case from one l.T.0. to another either
because of the request of the assessee or for dealing
with cases involving special features such as cases
of
assessees
involving widespread
activities and
laqre
ramifications
or
inter-related
transactions, power
to
transfer cases was conferred upon the Central Board
of Revenue and the Commissioner of Income-tax as
the case may be. I say that the provisions of s. 5 (7 A)
are thus administrative in character ...... "
(ii) that the assessee whose case is thus transferred
is not subjected to any discriminatory procedure in the
matter of his assessment.
The Income-tax Officer t0o
whom his case is transferred deals with it under the
same procedure which is laid down in the relevant
S.C.R.
SUPREME COURT REPORTS
247
provisions of the Act. The decision of the Income-tax
Officer is subject to appeal before the Appellate Assistant Commissioner and the assessee has the further
right to appeal to the Income-tax Appellate Tribunal
and to approach the High Court and ultimately the
Supreme Court, as provided in the Act. All assessees,
whether they are assessed by the Income-tax Officer of
the area where they reside or carry on business or
their cases are transferred from one Income-tax Officer
to another, are subject to the same procedure and are
entitled to the same rights and privileges in the matter
of redress of their grievances, if any, and there is no discrimination whatever between assessees and assessees ;
(iii) that the right, if any, conferred upon the assessee under s. 64 (1) and (2) of the Act is not an absolute
right but is circumscribed by the exigencies of tax
collection and can be negatived as it has been in cases
where the Commissioner of Income-tax or the Central
Board of Revenue, as the case may be, think it necessary or desirable to transfer his case from one Incometax Officer to another under s. 5 (7 A) of the Act having
regard to all the circumstances of the case. The argument of inconvenience is thus sought to be met in the
same affidavit :
"S. I further say
that as a result of any transfer
that may be made under the provisions
of s. 5 (7A)
there is no discriminatory treatment with regard to the
procedure and that no privileges and rights which are
given to the assessees by the Income-tax Act am taken
away, nor is the assessee exposed to any increased
prejudice, punitary consequences or differential treatment. I say that in cases where transfers under this
section are made otherwise than on request from
assessees, the convenience of the assessees is taken into
consideration by placing the case in the hands of an
Income-tax Officer who is nearest to the area where it
will be convenient for the assessee to (lttend. If on
account of administrative exigencies this is not possible
and the assessee requests that the examination of
accounts or evidence to be taken should be in a place
convenient to him, the I.T.O. complies with the request
2-JOO s.c. ludia/59
1956
Panna/al Binjraj
v.
Union of India
Bhagwali J.
1956
Pannalal Bi,Yraj
v.
Union of India
Bhagwati J.
248
SUPREME COURT REPORTS
[19571
of the assessee
and holds
the
hearing at the place
requested."
Even if there be a difference between assessees who
reside or carry on business in a particular area by
reason of such transfers the difference is not material.
It is only a minor deviation from a general standord
and .does not amount to a denial of equal rights ;
(iv) that the power which is thus vested is a
discretionary power and is not necessarily discriminatory in its nature and that abuse of power is not to be
easily assumed where discretion is vested in such high
officials
of the
State.
Even if
abuse of power
may
sometimes occur, the validity of the provision cannot
be contested because of
such
apprehension. What
may be struck down in such cases is not the provision
itself but the discriminatory application thereof.
The petitioners rejoin by relying upon the following
passage from the judgment of Faz! Ali, J. in Tlze
State of West Bengal v. Anwar Ali Sarkar, (supra), which
was referred to by Bose, J.,
in his minority
judgment
in Bidi Supply Co. v. The Union of India, (supra), at
page 281: · .
"It was suggested that the reply to this query is
that the Act itself being general and applicable to all
persons
and
to
all
offences,
cannot
be
said
to
discriminate in favour of or against any particular
case or classes of persons or cases, and if any charge
of discrimination can be levelled ·at all, it can be levelled
only against the act of the executive authority if the
Act is misused. This · kind of argument however does
not appear to me to solve the difficulty, The result of
accepting it would be that even where discrimination
is quite evident one cannot challenge the Act simply
lx:cause it is couched in general terms ; and one cannot
also challenge the act of the executive authority · whose
duty it is to administer the Act, because that authority
will s.ay :-I am not to blame as I am acting under the
Act. It is "clear that if the argument were to be
accepted, · article 14 could be easily defeated. I think
the fallacy <>f the argument lies in overlooking the fact
that the
'insidious discrimination complained of is
incorporated in the Act itself', it being so drafted
S.C.R.
SUPREME COURT REPORTS
249
that
whenever
any
discrimination
is
made
such
discrimination would be ultimately traceable to it."
The pivot of the whole argument of the petitioners
is the provisions contained in s. 64(1) and (2) of the
Act which prescribe the place of assessment.
They
are:-
"64. (1)
Where an assessee carries on a business,
profession or vocation at any place, he shall be assessed
by
the ' Income-tax Officer of the area in which that
place is situate or, where the business, profession or
vocation is carried on in more places than one, by the
Income-tax Officer of the area in which the principal
place of . his business, profession or vocation is situate.
(2) In all other cases, an assessee shall be assessed
by the Income-tax Officer of the area in which he
resides."
. These provisions were construed by the Bombay High
Court in Dayaldas Kushiram v. Commissioner lncometa:t, (Central), (supra), and Beaumont, C.J., observed at
p. 657:
"In my opinion section 64 was intended to ensure
that
as
far
as
practicable
an
assessee
should
be
assessed locally, and the area to which an Income-tax
Officer is appointed must, so far as the exigencies of
tax collection allow, bear some reasonable relation to
the place
where the assessee
carries on business or
resides."
Kania, J., as he then was, went a step further and
stated at p. 660 :
"A plain reading of the section shows that the
same is imperative in terms. · It also gives to the
assessee a valuable right. He is . entitled to tell the
taxing authorities that he shall not . be called upon to
attend. at · different places and thus upset his business."
The learned Judges there appear to have treated the
provisions ·of s. 64(1) and (2) more as a question of
right than as
a matter of convenience only. If there
were thus a .right conferred upon the assessee by the
provisions of s. 64(1) and (2) of the Act and that right
continues to be enjoyed by all the assessees except the .
1956
Pannalal Bi,Yraj .
v.
Union of lntfia
Bhagwati].
1956
Pannalal Bi,Yraj
v.
Union of India
BhagwatiJ.
250
SUPREME COURT REPORTS
[1957]
assessee whose case is transferred under s. 5(7A) of the
Act to another Income-tax Officer outside the area
where he resides or carries on business the assessee
can urge that,- as compared with those other assessees,
he is discriminated against and is subjected to inconvenience and harassment. It is, therefore, necessary
to consider whether any such right is conferred upon
the assessee by s. 64(1) and (2) of the Act.
Prima facie it would appear that an assessee is
entitled under those provisions to be assessed by the
Income-tax Officer of the particular area where he
resides or carries on business. Even where a question
arises as to the place of assessment such question is
under s. 64(3) to be determined by the Commissioner
or the Commissioners concerned if the question is between places in more States than one or by the Central
Board of Revenue if the latter are not in agreement
and the assessee is given an opportunity of representing
his views
before any such
question is
determined.
This provision also goes to show that the convenience
of the assessee is the main consideration in determining
the place of assessment. .Even so the exigencies of tax
collection have got to be considered and the primary
object of the Act, tJiz., the assessment of income-tax,
has got to be achieved. The hierarchy of income-tax
authorities which is set up under Chapter II of the
Act has been so set up with a view to assess the proper
income-tax payable by the assessee and whether the
one or
the other of the authorities will proceed to
assess
a particular assessee has got to be determined
not only having regard to the convenience of the
assessee but also the exigencies of tax collection.