TaxTMI 
TaxTMI 
1954 (10) TMI 5
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....1948, to the Commission for investigation and report of any cases wherein it had prima facie reason for believing that a person had, to a substantial extent, evaded payment of taxation on income. The date for making the reference was subsequently extended to 1st of September, 1948. By an Amendment Act passed in 1948 it was provided that the life of the Commission, in the first instance, would be up to the 31st of March, 1950, but that it could be further extended to 31st of March, 1951. By subsequent legislations the life of the Commission has been extended to December, 1955. The procedure prescribed by the Act for making the investigation under its provisions is of a summary and drastic nature. It constitutes a departure from the ordinary law of procedure and in certain important aspects is detrimental to the persons subjected to it and as such is discriminatory. The substantial differences in the normal procedure of the Income-tax Act for catching escaped income and in the procedure prescribed by Act XXX of 1947, were fully discussed by this Court in Suraj Mall Mohta v. Sri A. V. Visvanatha Sastri and require no further discussion here. Sub-section (4) of Section 5 of the Act....
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....sions of Part III of the Constitution. Article 14 of this Part guarantees to all persons the right of equality before the law and equal protection of the laws within the territory of India. This article not only guarantees equal protection as regards substantive laws but procedural laws also come within its ambit. The implication of the article is that all litigants similarly situated are entitled to avail themselves of the same procedural rights for relief, and for defence with like protection and without discrimination. The procedural provisions of Act XXX of 1947 had therefore to stand the challenge of Article 14 and could only be upheld provided they withstood that challenge. The question was canvassed in this Court in April 1954 in Suraj Mal Mohta's case. What happened in that case was that the Investigation Commission while dealing with the case of another assessee referred to it under Section 5(1) of the Act, reported to the Central Government that Suraj Mal Mohta and other members of the family had evaded income-tax and their cases should be referred to it under the provisions of sub-section (4) of Section 5. The reference was accordingly made with the result that Suraj Mal....
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....tioners belonged to the same class of persons as were dealt with under the ordinary law enacted in Section 34 of the Indian Income-tax Act. Before these petitions could come to a hearing and a day after they were presented to this Court, the Indian Income-tax (Amendment) Ordinance VIII of 1954 was promulgated by the President and this was subsequently made into an Act on the 25th of September, 1954. The Indian Income-tax (Amendment) Act, XXXIII of 1954, though assented to by the President on the 25th of September, 1954, came into force with effect from the 17th of July, 1954. The provisions of this Act furnished an additional ground of attack to the petitioners on the continuance of proceedings by the Commission in these cases under the provisions of Act XXX of 1947. An application was therefore made seeking permission to urge additional grounds. This was not opposed by the learned Attorney-General and was allowed. In the additional grounds it was urged that the relevant sections of Act XXX of 1947, which affected the petitioners, had been impliedly repealed by the amended Act of 1954 and ceased to have any legal force and that the Commission could no longer proceed under those pro....
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....with under the amended Section 34 and under the procedure provided in the Income-tax Act. Both categories of persons, namely, those who came within the scope of Section 5(1) as well as those who came within the ambit of Section 34, now form one class. In other words, substantial tax-dodgers or war profiteers who were alleged to have formed a definite class according to the contention of the learned Attorney-General under Section 5(1), and whose cases needed special treatment at the hands of the Investigation Commission, now clearly fall within the ambit of the amended Section 34 of the Indian Income-tax Act. That being so, the only basis for giving them differential treatment, namely, that they formed a distinct class by themselves, has completely disappeared, with the result that continuance of discriminatory treatment to them comes within the mischief of Article 14 of the Constitution and has thus to be relieved against. All these persons can now well ask the question, why are we now being dealt with by the discriminatory and drastic procedure of Act XXX of 1947 when those similarly situated as ourselves can be dealt with by the Income-tax Officer under the amended provisions of ....
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....before 1st September, 1948. Assuming that evasion of tax to a substantial amount could form a basis of classification at all for imposing a drastic procedure on that class, the inclusion of only such of them whose cases had been referred before 1st September, 1948, into a class for being dealt with by the drastic procedure, leaving other tax evaders to be dealt with under the ordinary law, will be a clear discrimination for the reference of the case within a particular time has no special or rational nexus with the necessity for drastic procedure. Further it seems that this very class of persons is now included within the ambit of the amended Section 34 of Act XXXIII of 1954. The draftsman of this section has apparently attempted to remedy whatever defects in the classification made under Section 5(1) of Act XXX of 1947 had been pointed out during the discussion in Suraj Mal Mohta's case in this Court. The preamble of the Act states that the Act is intended to provide for assessment or re-assessment of persons who to a substantial extent had evaded payment of tax during a certain period and for matters connected therewith. The language employed here bears close likeness to that emp....
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....so. The amended section clearly states that the amended section will operate on income made between the 1st September, 1939, and the 31st March, 1946, and on which tax has been evaded. It is thus clear that the new sub-section inserted in Section 34 by the provisions of Act XXXIII of 1954 is intended to deal with the class of persons who were said to have been classified for special treatment by Section 5(1) of Act XXX of 1947. The learned Attorney-General frankly conceded that to a certain extent the two sections overlapped, but he urged that the overlapping was not complete and that those remained still outside it whose cases had already been referred to the Investigation Commission. We are unable to uphold this contention in view of the clear language employed in the amended Act and this contention is therefore negatived. The second contention raised by the learned Attorney-General is, in our opinion, concluded by a number of earlier decisions of this court wherein it has been held that when an Act is valid in its entirety before the date of the Constitution, the part of the proceedings regulated by the special procedure and taken during pre-constitution period cannot be quest....