Ranjit Singh V. The Commissioner of
Income-Tax, U. P. & Ors  INSC 157 (14 April 1961)
AIYYAR, T.L. VENKATARAMA KAPUR, J.L.
CITATION: 1962 AIR 92 1962 SCR (1) 966
Income Tax Evasion of Taxation-Case referred
to Investigation Commission-Settlement of Case-Notice of demand--Commencement
of Constitution-Recovery of tax thereafter-Legality-Taxation on Income
(Investigation Commission) Act,1947 (30 of 1947), ss. 8,8-A--Constitution of India,
In 1948 the Central Government referred a
number of cases in which the petitioner was concerned, to the Income-tax Investigation
Commission set up under the relevant provisions of the Taxation on Income
(Investigation Commission) Act, 1947.
After the Commission had submitted the report
under s. 8A(1) of the Act, in which the total tax payable on the undisclosed
income upto March 31, 1947, was estimated, the petitioner applied for a
settlement of his case by offering to pay the amount of tax in installments and
by agreeing to pay the whole amount immediately in case of default in payment
of any of the installments in time. The Central Government accepted the terms
suggested by the petitioner and passed an order on November, 21, 1949, under s.
8-A(2) of the Act directing the service of a demand notice on the petitioner
and recovery of the tax in accordance with the terms and conditions of the
settlement. On December 2, 1949, a notice of demand was issued to the
petitioner who, in pursuance thereof, made certain payments. But as the
petitioner was unable to make full payment within the stipulated periods, the
whole amount outstanding became immediately payable and certain properties
belonging to him and his family were attached by the Collector of the district
Concerned for the recovery of the amount. On June 8, 1959, the petitioner filed
a writ petition tinder Art. 32 of the Constitution of India challenging the
legality of the demand notice dated December 2, 1049, and the subsequent proceedings
taken in pursuance of that notice on the ground that after the coming into
force of the Constitution of India on January 26, 1950, they were violative of
the fundamental right of equal protection of the laws guaranteed under Art. 14,
inasmuch as what he had agreed to pay the Government as a result of the
settlement was really a debt, and he had been dealt with differently from other
debtors who owed money to the State under a contractual liability.
Held, (1) that the proceedings against the
petitioner culminating in the service of the notice of demand against him were
all completed before the coming into force of the Constitution and the
petitioner cannot challenge those proceedings under 967 Art. 14 of the
Constitution, because it is well settled that the Constitution is prospective
and not retrospective;
(2) that the true scope and effect of sub-s.
(2) of s. 8-A is to enforce the terms of any settlement arrived at in pursuance
of sub-s. (1), which was really income-tax which had escaped assessment;
(3) that the petitioner belonged not to the
larger class of debtors of Government but to a special class which had evaded
payment of income-tax for which the procedure laid down in s. 8-A(2) was one
and the same, and that the classification being reasonable having a just
relation to the object of the provision, the recovery procedure cannot be
challenged as discriminatory under Art. 14.
Suraj Mail Mohta and Co. v. A. V. Visvanatha
Sastri and Another,  1 S.C.R.448, M. CT. Muthiah & two Others v. The
Commissioner of Income-tax, Madras & Another,  2 S.C.R. 1247 and
Basheshar Nath v. The Commissioner of Income-tax, Delhi & Rajasthan and
Another,  Supp. 1 S.C.R. 528, distinguished.
ORIGINAL JURISDICTION: Writ Petition No. 85
Writ Petition under Art. 32 of the
Constitution of India for the enforcement of fundamental rights.
A. V. Viswanatha Sastri, R. S. Pathak, S. N.
Andley, Rameshwar Nath and P. L. Vohra, for the petitioner.
K. N. Rajagopala Sastri and D. Gupta, for
respondents Nos. 1 and 2.
1961. April 14. The Judgment of the Court was
delivered by S. K. DAS,J.-One Ranjit Singh is the petitioner before us.
The respondents are the Commissioner of
Income-tax, Lucknow, the Income-tax Officer, Lucknow, and the Collectors of
three districts in Uttar Pradesh, namely, Dehra Dun, kanpur and Lucknow, being
officers under whose orders certain properties of the petitioner and his family
have been attached in pursuance of a notice of demand issued under s.
29 of the Indian Income-tax Act, 1922, in
circumstances which we shall presently state.
The facts are shortly these. In 1948 the
Central Government referred a number of cases in which the petitioner was
concerned to the Income-tax Investigation Commission set up under the relevant
provisions 968 of the Taxation on Income (Investigation Commission) Act, 1947
(Act XXX of 1947), hereinafter referred to as the Act.
On May 30, 1948, the Secretary of the
Commission issued a notice to the petitioner to furnish a list of businesses or
concerns in which the petitioner was interested and to produce the account
books, registers etc. relating thereto.
The petitioner complied with the notice.
Then, an Authorised Official appointed by the Commission commenced an
investigation into the cases in February, 1949, and in due course submitted a
report to the Commission. The Commission heard the petitioner and on April 16,
1949, submitted a report under s. 8-A(1) of the Act. The findings of the
Commission appear from the following extract from their report:
"The total tax payable on the
undisclosed income upto March 31, 1947 would accordingly be Rs. 6,61,917.
The amount of Rs.6,61,917 may be recovered
from Mr. Ranjit Singh and from the family assets in the hands of Mr. Ranjit
Singh. In view of the admission recorded as number (iii) in para 6 supra, the
tax will also be recoverable from the properties acquired between 1939 and 1947
in the names of Mrs. Ranjit Singh and Mr. Ranjit Singh's sons Baljit Singh and
Satendrajit Singh. In the circumstances, we recommend that no penalty be levied
on the assessee in respect of nondisclosures and false or incorrect statements
so far made either to the income-tax authorities or in the course of the
present proceedings (including those before the Authorised Official). Mr.
Ranjit Singh and Mr. Vaidyanatha Ayyar (representative of Mr. Ranjit Singh)
have asked that they be allowed sufficiently long time to pay up the tax. It
has been represented that out of taxes already assessed by the Income-tax
Department about Rs. 3,86,000 is still due and the addition of the amount
leviable under this report will bring the assessee's total liability to about
10 1/2 lakhs.
Mr. Ranjit Singh has asked that he may be
permitted to pay up this sum in not 969 more than five years, in installments
of not less than a lakh of rupees at a time. While we do not wish to go into
the details of the offer, we recommend this request for time for favourable
consideration by Government." Then, on November 7, 1949, the petitioner,
his wife and two sons submitted a petition to the Commission in which they
accepted the findings of the Commission as correct and offered to pay the tax
in installments in accordance with certain terms of settlement. Some of these
"3. We offer to pay the aforesaid amount
of Rs. 6,61,917 as per the following installments:
(1) on or before the 31st March, 1951 Rs. 1,00,000.
(2) on or before the 31st March, 1952 Rs. 2,31,000.
(3) on or before the 30th June, 1952 Rs. 3,30,917.
4. We, however, pray that so far as the last installment
is concerned in case we are unable to pay the same by the date mentioned above
and are able to satisfy the Central Board of Revenue that we have failed to
raise the money for reasons beyond our control and for no fault of our own, a
suitable extension of time may be granted.
5. In respect of the other installments, we
agree that in case of default in the payment of any one of them, the whole
amount of tax outstanding at the time shall become immediately payable."
The report of the Commission and the terms suggested by the petitioner for a
settlement were accepted by the Central Government and an order was passed
under s. 8-A(2) of the Act on November 21, 1949, which stated in its operative
part that a demand notice be served immediately by the Income-tax Officer
concerned under s. 29 of the Indian Income-tax Act, 1922, on the petitioner in
accordance with the terms and conditions of settlement and that all such other
proceedings under the Indian Income-tax Act or under any other law as may be
necessary be taken with a view to enforce the payment of the demand and terms
and conditions of the settlement.
122 970 The respondents allege that a demand
notice was accordingly issued to the petitioner on December 2, 1949. The
petitioner alleges, however, that he received the notice in or about April,
1950, after the Constitution of India had come into force. Thereafter, in
pursuance of the demand notice certain payments were made by the petitioner.
The petitioner was, however, unable to make full payment within the stipulated
periods mentioned in the demand notice. The result was that according to the
terms of settlement the whole amount outstanding at the time became immediately
payable by the petitioner. Then, certain properties of the petitioner and his
family were attached by the Collector of the district concerned in pursuance of
the orders received from time to time from the Income-tax Officer.
On June 8, 1959, the petitioner filed the
present writ petition challenging the legality of the demand notice dated
December 2, 1949, and the subsequent proceedings taken in pursuance of that
notice. The case of the petitioner is that after the coming into force of the
Constitution of India on January 26, 1950, the demand notice could not be given
effect to and the proceedings taken in pursuance of that notice are
unconstitutional inasmuch as they violate his fundamental rights guaranteed by
the Constitution. In the petition a reference has been made to Articles 14,31 and
19(1)(g) of the Constitution, but the argument before us has proceeded on the
contention urged on behalf of the petitioner that there has been a violation of
the fundamental right of equal protection of the laws guaranteed to him under
Art. 14 of the Constitution inasmuch as he has been dealt with differently from
other debtors who owe money to the State under a contractual liability. The
substantial prayer of the petitioner is for the issuance of a writ of mandamus
directing the respondents not to give effect to the notice of demand dated
December 2, 1949, nor to take any proceedings for enforcing the terms of
settlement and for recovery of the sums specified therein.
The petition has been contested by the
respondents and the principal point taken on their behalf is that 971 the
legality of the demand notice dated December 2, 1949, cannot be challenged by
the petitioner on the strength of the provisions of the Constitution, because
the Constitution is prospective and not retrospective; secondly, it is contended
on behalf of the respondents that the subsequent proceedings taken in pursuance
of the demand notice aforesaid do not in any way violate the right of equal
protection of the laws guaranteed under Art. 14 of the Constitution.
It is convenient at this stage to refer to
some of the earlier decisions of this Court on the question of con.
stitutionality of some of the provisions of
the Act. On May 28, 1954, this Court delivered judgment in Suraj Mall Mohta and
Co. v. A. V. Visvanatha Sastri and Another (1). It is not necessary to state
the facts of that decision. It is enough to say that it was held therein that
sub-s. (4) of s.
5 of the Act war, bad, as it offended the
provisions of Art.
14 of the Constitution. Sub-section (4) of s.
5 of the Act having been declared void, Parliament passed the Indian Income-tax
Amendment Act (33 of 1954) amending s. 34 of the Indian Income-tax Act, 1922.
As a result of this amendment, the validity of sub-s. (1) of s. 5 of the Act
came in for challenge on the ground that the Income-tax Officer could pick out
some out of the class of substantial tax evaders and refer their cases under
sub-s. (1) of s. 5 while dealing with other such persons under amended s. 34 of
the Indian Income-tax Act. In Shree Meenakshi Mills Ltd., Madurai V.
A. V. Viswanatha Sastri and Another(2),
sub-s. (1)' of s. 5 of the Act was held to be bad on that ground. It should be
noted that in none of the petitions disposed of by that judgment had any
assessment been made under the Act and this Court only prohibited further
proceedings before the Commission under the Act, Finally, on December 20, 1955,
came the decision of this Court in M. CT. Muthiah & two Others v. The
Commissioner of Income-tax, Madras & Another (3). In that case, on a reference
under B. 5(1) of the Act, the Commission submitted its report to Government
under (1)  1 S.C.R. 448. (2)  1 S.C.R. 787.
(3)  2 S.C.R. 1247.
972 s.8(1) of the Act on August 26, 1952-that
is, after the coming into force of the Constitution, and the Central Government
made its order under s. 8(2) of the Act on September 16, 1952. In these
circumstances it was held:
"The result, therefore, is that barring
the cases of persons which were already concluded by reports made by the
Commission and the directions given by the Central Government under section
8(2) of the Act XXX of 1947 culminating in the assessment or reassessment of
the escaped income, those cases which were pending on the 26th January 1950 for
investigation before the Commission as also the assessment or reassessment
proceedings which were pending on the 26th January 1950 before the Income-tax
Officers concerned in pursuance of the directions given by the Central
Government under section 8(2) of the Act would be hit by Article 14 of the
Constitution and would be invalidated." Lastly, came the decision in
Basheshar Nath v. The Commissioner of Income-tax, Delhi & Rajasthan and
Another (1). That was a case of a settlement under s. 8-A of the Act as in the
present case, but the fact which distinguishes that case from the present is
that the settlement there was made after the commencement of the Constitution.
It was held therein that the settlement was the result of a procedure which
became discriminatory after the commencement of the Constitution and was
therefore bad, and as the discriminatory process of investigation continued
even after the commencement of the Constitution, the principle laid down in
Syed Qasim Razvi v. The State of Hyderabad and Others (2 ) did not apply.
The point which requires emphasis with regard
to these earlier decisions is this: they all dealt with the operation of a
discriminatory procedure under the different provisions of the Act after the
commencement of the Constitution. The position in the case under our present
consideration is that the settlement, the order under s. 8-A(2) of the Act, and
even the notice of damaged in pursuance of that order-all these took (1) 
Supp. 1 S.C. R. 528.
(2)  S.C.R. 589.
973 place before the coming into force of the
Constitution, and this' vital distinction must be borne in mind in considering
the contentions urged by learned Counsel for the petitioner.
The main contention is that the proceedings
taken against the petitioner in pursuance of the order under s. 8-A(2) are
violative of the guarantee of equal protection of the laws under Art. 14 of the
Constitution. There are, however, two subsidiary contentions which do not
directly raise any question of the violation of a fundamental right, and these
may be disposed of before we deal with the main contention.
In his petition the petitioner has stated
that he received the demand notice dated December 2, 1949 in or about April,
1950. In the counter-affidavit of the respondents it has been stated that the
assessee was informed of the demand early in December, 1949. A copy of the
order of the Central Government under s. 8-A(2) of the Act dated November 21,
1949, was sent to the petitioner; there is an endorsement in the office copy of
the demand notice dated December 2, 1949, that it was sent by registered post,
Thereafter, the petitioner paid part of the
tax on different dates without raising any objection that he had not received
the demand notice before April, 1950. It was for the first time in April, 1959,
some ten years after, that the petitioner asked for a copy of the order under
s. 8-A(2) and information as to the date when he had received the registered
notice of demanad. He also asked for an inspection of the file. This was,
however, refused. Then, the petitioner made the statement that he had received
the demand notice in or about April, 1950. He said that the statement was based
on his knowledge; he did not disclose the source of his knowledge nor did he
say how he remembered ten years after, without reference to any documents, that
he had received the demand notice in or about April, 1950. We are unable to
accept the statement as correct. On the materials in the record it is clear
that the proceedings against the petitioner culminating in the service of the
notice of demand against him were all completed 974 before the coming into
force of the Constitution and the petitioner cannot challenge those proceedings
under Art. 14 of the Constitution; for it is well settled that the Constitution
is prospective and not retrospective.
On the construction of s. 8-A of the Act it
has been argued that after the order made by the Central Government under
sub-s. (2) thereof, a fresh assessment was necessary and as no such assessment
was made, all subsequent proceedings for recovery of the tax are illegal. This
is a point which has not been specifically taken in the petition. That apart,
we do not think that there is any substance in this contention.
We may here read s. 8-A, so far as it is
"S. 8-A. (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 in 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 matters covered by such settlement, shall be deemed to be
(2) For the purpose of enforcing the terms of
any settlement arrived at in pursuance of sub,section (1), the Central
Government may direct that such proceedings as may be appropriate under the
Indian Income-tax Act, 1922 (XI of 1922), the Excess Profits Tax Act, 1940 (XV
of 1940) or any other law may be taken against the person to whom the
settlement relates, and, in particular, the provisions of the second proviso to
clause (a) of sub-section (5) of section 23, section 24B, the proviso to
sub-section (2) of section 25A, the proviso to sub-section (2) of section 2 6
and sections 44 and 46 of the Indian Income tax Act, 1922 shall be applicable
to 975 the recovery of any sum specified in such settlement by the Income-tax
Officer having jurisdiction to assess the person by whom such sum is payable as
if it were income-tax or an arrears of income-tax within the meaning of those
provisions." The scheme of s. 8-A is different from that of s. 8. The
latter section contemplates an assessment or reassessment in accordance with
the direction of the Central Government; see sub-s. (4) of s, 8. That is not
the position under s. 8-A, sub-s. (2) whereof provides for the enforcement of
the terms of any settlement arrived at in pursuance, of sub-s. (1).
There is Do doubt a reference to certain
special provisions of the Indian Income-tax Act, 1922, regarding assessment of
partners in a registered firm, tax payable by the representative of a deceased
person etc.; but the reference to those provisions does not necessarily mean
that a fresh assessment must be made. They merely show that these special
provisions will be applicable in appropriate cases.
Sub-s. (2) ends by saying that "ss. 44
and 46 of the Indian Income-tax Act, 1922, shall be applicable to the recovery
of any sum specified in such settlement by the Income-tax Officer having
jurisdiction to assess the person by whom such sum is payable as if it were
income-tax or an arrears of income-tax within the meaning of these
provisions." This clearly shows that the true scope and effect of the subsection
is to enforce the terms of any settlement arrived at in pursuance of sub-s. (1)
and to recover any sum specified in such settlement as if it were income-tax or
arrear of income-tax in accordance with the provisions of ss. 44 and 46 of the
Indian Income-tax Act, 1922. We are unable, therefore, to accept the
construction which learned Counsel for the petitioner seeks to put on the
This brings us to the main contention that
the petitioner has been subjected to a discriminatory procedure after the
coming into force of the Constitution by reason of s. 8-A(2) of the Act. Learned
Counsel for the petitioner has put his argument in the following way. He has
submitted that what the petitioner agreed to pay to Government was really a 976
debt arising out of a contract viz., the settlement between him and Government
and the petitioner is one amongst the larger class of persons who are debtors
against all other debtors Government have the
ordinary remedy by way of suit but against the petitioner a special remedy is
provided which is more drastic and envisages the imposition of a penalty under
s. 46 of the Indian Income-tax Act, 1922, if the petitioner is in default in
making a payment of the amount due. This, it is argued, is a discriminatory
procedure which has been continued even after the coming into force of the
Constitution. We are unable to accept this argument as correct. First of all,
the petitioner does not really belong to the larger class of persons whom
learned Counsel has characterised as debtors of Government. The petitioner
belongs to a special class who had evaded payment of Income-tax and had entered
into a settlement to pay the amount due as income-tax or arrear of income-tax.
For this class of persons the procedure laid down in s. 8-A(2) is one and the
same, and no discrimination is made in favour of or against any member of the
same class. The classification is a, reasonable classification having a just
relation to the object of the pro-vision. For the recovery of the amount due as
income-tax or arrear of income-tax all these persons are treated on the same,
footing. Neither is there any discrimination between them and other persons
similarly placed in the matter of recovery of income-tax. or arrears of
income-tax. Secondly, it is open to the legislature to make a law as to how
particular Government dues should be realised and if the law applies equally to
all persons similarly situated, no objection call be taken to such law on the
ground of discrimination. The truth of the matter is that what the petitioner
agreed to pay to Government is really income-tax which should have been paid in
regard to the relevant assessment years but which had escaped assessment and
therefore the recovery is to be made according to income-tax law. That is all
that s. 8-A(2) says. In the decisions of this Court to which we bad earlier
adverted, what was held to be bad was 977 the application of a discriminatory
procedure after the coming into force of the Constitution;. even in Basheshar
Nath's case (1) the Commission applied the discriminatory procedure after the
coming into force of the Constitution and then submitted its report on May 24,
1954, and the Central Government accepted the settlement on July 5, 1954.
It was held that the settlement itself was
vitiated by the discriminatory procedure adopted by the Commission. That is not
the position here. In this case everything was concluded before January 26,
1950, when the Constitution came into force, including the issuance of a notice
All that remained to be done was the recovery
of the amount according to the notice of demand. Therefore, the crucial
question is-is the recovery procedure discriminatory in any way, having regard
to the undoubted validity of the proceedings which had been taken against the
petitioner before ,January 26, 1950? We are unable to answer this question in
favour of the petitioner for the reasons which we have already stated.
Learned Counsel for the petitioner relied on
the decision in M. L. M. Muthiah Chettiar and Others v. Commissioner of
Income-tax, Madras (2). The facts of that case were entirely different and no
question arose there of considering the provisions of s. 8-A (2) of the Act.
For these reasons we hold that there is no
merit in the petition which is, accordingly, dismissed with costs.
(1)  SUPP. 1 S.C.R. 528.
(2)  35 I.T.R. 339.