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1955 (12) TMI 1 - SC - Income TaxWhether there is a rational basis of classification to be found in the enactment of section 5(1) of the Act? Whether the same class of persons were intended to be and could be dealt with under the provisions of section 47 of the Travancore Act XXIII of 1121? Held that - The fixation of the date for references for investigation by the Government to the Commission, viz., the 16th February, 1950, was not an attribute of the class of substantial evaders of income-tax which were intended to be specifically treated under the drastic procedure prescribed in the Travancore Act XIV of 1124 but was a mere accident and a measure of administrative convenience. The date of such references could, without touching the nature and purpose of the classification, be extended by the Travancore Legislature by a necessary amendment of the Travancore Act XIV of 1124, and if such an amendment had been grafted on the Act as originally passed, no one belonging to the particular class or category of substantial evaders of income-tax could have complained against the same. Section 5(1) of the Travancore Act XIV of 1124 which has to be read for this purpose in juxtaposition with section 47 of the Travancore Act XXIII of 1121 cannot be held to be discriminatory and violative of the fundamental right guaranteed under article 14 of the Constitution. The proceedings which took place in the course of investigation by the Commission up to the 26th January, 1950, were valid and so also were the proceedings during the course of investigation which took place after the inauguration of the Constitution on the 26th January, 1950, under which the petitioner, as a citizen of our Sovereign Democratic Republic acquired inter alia guarantee of the fundamental right under article 14 of the Constitution. Appeal dismissed.
Issues Involved:
1. Jurisdiction of the High Court to entertain the writ petition. 2. Scope of investigation by the Income-tax Investigation Commission. 3. Validity of the Travancore Act XIV of 1124. 4. Application of the Travancore Act XIV of 1124 to concluded assessment orders. 5. Validity of the Rajpramukh's agreement and its implications. 6. Constitutionality of section 5(1) of the Travancore Act XIV of 1124 under articles 14 and 19 of the Constitution. Issue-wise Detailed Analysis: 1. Jurisdiction of the High Court to entertain the writ petition: The High Court of Travancore-Cochin had jurisdiction to entertain the writ petition against respondent 1, who was resident within the State, had his office at Trivandrum, and whose activities were confined to the State. The High Court issued a writ of prohibition against respondent 1, which was sufficient to stop the mischief complained about. The Supreme Court upheld this decision, stating that the authorised official had considerable powers and functions and was not merely a conduit-pipe transmitting the orders of the Commission. Therefore, he was amenable to the jurisdiction of the High Court under article 226. 2. Scope of investigation by the Income-tax Investigation Commission: The references made by the Government of the United State of Travancore and Cochin under section 5(1) of the Travancore Act XIV of 1124 were limited to the years 1942 and 1943. The Commission had no jurisdiction to investigate any alleged evasion in any year prior or subsequent to these years. The Supreme Court held that the High Court was right in concluding that the action of respondent 1 was illegal and without jurisdiction when he attempted to investigate beyond the specified years. 3. Validity of the Travancore Act XIV of 1124: The Travancore Act XIV of 1124 was an "existing law" continued in force by Ordinance I of 1124. Section 1(3) of the Act, which authorised the Government to bring the Act into force, came into operation immediately upon the passing of the Act. The notification issued on the 26th July, 1949, bringing the Act into force retrospectively from 22nd July, 1949, was valid. The Supreme Court rejected the contention that the Act had lapsed and was not continued by Ordinance I of 1124. 4. Application of the Travancore Act XIV of 1124 to concluded assessment orders: Section 8(2) of the Travancore Act XIV of 1124 allowed the Government to direct proceedings against a person in respect of the income of any period commencing after 16th August, 1939, notwithstanding any decision by any income-tax authority. The Chief Revenue Authority was included within the expression "any income-tax authority," and the assessment orders for the years 1942 and 1943 could be affected or overridden by any order passed by the Government under section 8(2). 5. Validity of the Rajpramukh's agreement and its implications: The agreement between the President of India and the Rajpramukh of Travancore-Cochin was incorporated into Act XXXIII of 1950, which extended the Taxation on Income (Investigation Commission) Act, 1947, to Travancore-Cochin. The cases pending before the Travancore Commission were transferred to the Central Commission for disposal. The Supreme Court held that the life of respondent 2 was not a part of the Travancore law and could be extended by subsequent legislation. Act XLIV of 1951, which extended the life of respondent 2, was valid and did not contravene the agreement. 6. Constitutionality of section 5(1) of the Travancore Act XIV of 1124 under articles 14 and 19 of the Constitution: The Supreme Court held that section 5(1) of the Travancore Act XIV of 1124 was not discriminatory and did not violate article 14 of the Constitution. The classification of substantial evaders of income-tax who required special treatment was rational and had a reasonable nexus with the object sought to be achieved by the Act. The selection of cases for investigation by the Government was guided by the objective set out in section 5(1) and was not left to unguided discretion. The Supreme Court dismissed the contention that the limitation of the period for references (16th February, 1950) was discriminatory. Conclusion: Civil Appeals Nos. 21 and 22 of 1954 were dismissed with costs, with a set-off for costs. The Supreme Court upheld the jurisdiction of the High Court to issue a writ against respondent 1, limited the scope of the investigation to the years 1942 and 1943, validated the Travancore Act XIV of 1124, and confirmed the constitutionality of section 5(1) of the Act.
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