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1959 (7) TMI 55 - ASSAM HIGH COURT

1959 (7) TMI 55 - ASSAM HIGH COURT - [1961] 41 ITR 80 - Civil Rule No. 29 of 1959 - Dated:- 18-7-1959 - C. P. Sinh (CJ) And G. Mehrotra, JJ. For the Petitioner : Dr. D. Pal, H. Goswami and S. R. Khound For the Respondents : S. M. Lahiri, Advocate-General and B. N. Choudhuri JUDGMENT G. Mehrotra, J. This is an application under article 226 of the Constitution of India praying for-(a) a writ of mandamus calling upon the respondents to withdraw, cancel or forbear from giving effect to the notices i .....

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ncome-tax Act, hereinafter called the Act. Under section 5(4) of this Taxation on Income (Investigation Commission) Act, 1947, the case of the petitioner was referred to the Income-tax Investigation Commission. An application was then made under section 8A of the said Income-tax Investigation Commission Act, and the case of the petitioner was settled. The total quantum of income-tax alleged to have escaped assessment was estimated by the Commission at ₹ 19,81,302 and the amount which was f .....

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referred to the Income-tax Investigation Commission under section 5(1) of the Taxation on Income (Investigation Commission) Act, 1947, which was also settled under section 8A and a sum of ₹ 6,46,777 was determined under the said settlement by the said Hindu undivided family. Out of this demand of ₹ 6,46,777 a sum of ₹ 2,89,777 was paid till the 31st January, 1956. By a decision of the Supreme Court sub-section (4) of section 5 of the Taxation on Income (Investigation Commissio .....

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By section 2 of the Income-tax (Amendment) Act, 1954, these two sub-sections were reproduced and two other subsections numbered as (1C) and (1D) were added with effect from 17th July, 1954. These provisions will be referred to later. The Income-tax Officer, Dibrugarh, issued three notices under section 34(1A) of the Income-tax Act for the assessment years 1944-45, 1945-46 and 1946-47 against the applicant and proceeded to assess income, profits or gains of the petitioner for each of the aforesa .....

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ction 34(1A) of the Income- tax Act was ₹ 9,50,376 and the petitioner had to pay ₹ 8,99,206, out of which a sum of ₹ 1,67,000 which had already been paid by the 31st January, 1956, under the settlement arrived at under section 8A of the Taxation on Income (Investigation Commission) Act, 1947, was deducted and the net balance which the petitioner had to pay was a sum of ₹ 7,32,206. The petitioner paid another sum of ₹ 5,78,438 between 22nd March, 1956, and 14th March .....

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0th September, 1957, the fourth instalment had to be paid on or before 31st December, 1957, and the fifth instalment had to be paid on or before 25th March, 1958. One of the clauses of the terms of settlement is that in default of payment of any of the instalments on the due date as specified in column 4 of the settlement, the entire sum then remaining due was to become payable forthwith with interest thereon at the rate of 6 per cent. from the date of default till realisation. By a notice dated .....

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a request was made that these cheques should be presented after a fortnight to enable the petitioner to arrange for the money as at that time bank strike was going on. These two cheques were presented to the Reserve Bank of India on the 30th October, 1957, and the amount was realised. The amount of the next instalment which fell due on the 31st December, 1957, could not be paid in time. On the 16th December, 1957, the petitioner wrote a letter to the Directors of Inspection (Special Investigati .....

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gree to an over-all revision of the instalment plan prayed for, but for the instalment of ₹ 1,66,000 which fell due on the 31st December, 1957, the Department extended the period up to 28th February, 1958. Thereafter the Income-tax Officer, Dibrugarh, asked the petitioner to pay up the instalments of ₹ 1,66,000 due on the 31st December, 1957, by 28th February, 1958, and the amount of the last instalment was to be paid on the due date, that is, 25th March, 1958. On 10th February, 1958 .....

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petitioner wrote another letter on the 3rd March, 1958, to the Under Secretary, Central Board of Revenue, but in reply it was stated that the Board was not prepared to reconsider its decision. Thereafter the Income-tax Officer, Dibrugarh, sent a letter to the petitioner on 12th March, 1958, stating that in view of the Board's decision refusing to alter the instalments, the petitioner was asked to inform the Department if the amount of ₹ 1,66,000 due on 28th February, 1958, had since b .....

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mount. On the 17th May, 1958, the Income-tax Officer, Dibrugarh, passed an order to the effect that under the terms of the settlement ₹ 5,32,000 became payable, forthwith with interest thereon at the rate of 6 per cent. from the date of default, that is, 30th September, 1957, and that a sum of ₹ 2,660 was claimed as interest on the amount at 6 per cent. for one month for the entire amount of ₹ 5,32,000. Thereafter the petitioner by his letter dated 27th June, 1958, wrote to the .....

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8377; 1,00,000 towards his outstanding liability. The cheque was cashed by the Income-tax Officer. On the 24th December, 1958, the petitioner wrote a letter to the Income-tax Commissioner, Assam, praying for instalments of ₹ 5,000 per month to clear up the demand. In the alternative he prayed that the sum of ₹ 3,32,000 still due from the petitioner in respect of the settlement arrived at under section 34(1B) be adjusted from the deposit of ₹ 6,46,777 paid towards the settlement .....

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oner that his prayer for the adjustment of the balance against the sum of ₹ 6,46,777 has been rejected and unless the petitioner paid within one week the amount due, the Income-tax Officer will be obliged to take action for the collection of the outstanding demand and issue certificates to the Collector under section 46(2) of the Act and the shares lodged by the petitioner as security would be put to sale. By the letter of 10th March, 1959, the petitioner wrote to the Commissioner of Incom .....

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ersons specified in paragraph 35 of the petition. The petitioner then wrote a letter to the Income-tax Officer pointing out that this proceeding was illegal and asked him to withdraw the notices issued under section 46(5A) which was refused by the Commissioner of Income-tax. Thereupon the present petition was filed in this court on the 2nd April, 1959, with the prayers which I have already set out. To this petition the Income-tax Officer, Dibrugarh, the Commissioner of Income-tax, Assam, Tripura .....

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is that the proceedings under Chapter VI started under section 46(5A) are illegal inasmuch as there was no proper notice of demand under section 29 of the Income-tax Act which was a condition precedent for the initiation of the proceedings under section 46. In this connection it was urged that the liability in respect of the amount of settlement under section 34(1B) is not a tax liability and thus no notice of demand could be issued under section 29 and further that the notice purporting to be .....

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is violative of articles 14 and 19 of the Constitution. In this connection it was urged that the language of section 46(5A) when contrasted with the language of section 46(2) shows that sub- section (5A) of section 46 does not apply to a liability other than tax liability. Lastly, it was contended that the proceedings could not be initiated under Chapter VI as the recovery of the said sum has become time barred on the 16th of March, 1959, when the said notices under section 46(5A) are said to h .....

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scribed form specifying the sum so payable. The portion of section 34(1A) which is relevant for this case is as follows: "34. (1A) If, in the case of any assessee, the Income-tax Officer has reason to believe- (i) that income, profits or gains chargeable to income-tax have escaped assessment for any year in respect of which the relevant previous year falls wholly or partly within the period beginning on the 1st day of September, 1939, and ending on the 31st day of March, 1946; and (ii) that .....

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2) of section 22, and may proceed to assess or reassess the income, profits or gains of the assessee for all or any of the years referred to in clause (i), and thereupon the provisions of this Act (excepting those contained in clauses (i) and (iii) of the proviso to sub-section (1) and in sub-sections (2) and (3) of this section) shall, so far as may be, apply accordingly: Provided that the Income-tax Officer shall not issue a notice under this sub-section unless he has recorded his reasons for .....

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from the receipt of such notice or before the assessment or reassessment is made, whichever is earlier, to have the matters relating to his assessment settled, the Central Board of Revenue may, after considering the terms of settlement proposed and subject to the previous approval of the Central Government, accept the terms of such settlement, and, if it does so, shall make an order in accordance with the terms of such settlement specifying among other things the sum of money payable by the asse .....

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assessment or reassessment proceeding relating to any tax chargeable under this Act or in any other proceeding whatsoever before any court or other authority any matter which forms part of such settlement." Section 45 of the Act is as follows: "Any amount specified as payable in a notice of demand under sub-section (3) of section 23A or under section 29 or an order under section 31 or section 33 shall be paid within the time, at the place and to the person mentioned in the notice or or .....

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making a payment of income-tax, the Income-tax Officer may in his discretion direct that in addition to the amount of the arrears, a sum not exceeding that amount shall be recovered from the assessee by way of penalty. Section 46(5A) is as follows: "The Income-tax Officer may, at any time or from time to time, by notice in writing (a copy of which shall be forwarded to the assessee at his last address known to the Income-tax Officer), require any person from whom money is due or may become .....

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e Income-tax Officer may at any time or from time to time amend or revoke any such notice or extend the time for making any payment in pursuance of the notice. Any person making any payment in compliance with a notice under this sub-section shall be deemed to have made the payment under the authority of the assessee and the receipt of the Income-tax Officer shall constitute a good and sufficient discharge of the liability of such person to the assessee to the extent of the amount referred to in .....

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ector on the footing that the Income-tax Officer's notice has the same effect as an attachment by the Collector in exercise of his powers under the proviso to sub-section (2) of section 46. Where a person to whom a notice under this sub-section is sent objects to it on the ground that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then, nothing contained in this section shall be deemed to require such pers .....

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nt is not a tax liability, the provisions of section 29 will not be attracted and no notice of demand could be issued under section 29. The question, therefore, of attacking the validity of the notice on the ground that it does not conform to the form prescribed under the rules would not arise. The only question in that event to be considered will be what is the effect of failure to issue a notice of demand in these circumstances on the proceedings under Chapter VI for the recovery of the amount .....

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rded as a defaulter and no question of recovery under section 46 will arise. But in case the liability under the order of settlement is not a tax liability, section 29 of the Act will not be attracted and no notice of demand could be issued under that section. The result will be that an assessee who is liable to pay the amount under settlement could never be a defaulter and no action could ever be taken against him under Chapter VI. This will be nullifying the very purpose of section 34(1C) of t .....

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f settlement by virtue of section 34(1C) and not on its own terms. Therefore, it cannot be said that the provisions of section 46(5A) cannot be given effect to unless the assessee is declared a defaulter by his failure to pay up the amount mentioned in the demand notice issued under section 29 of the Act. If the assessee has been given a notice of demand, though not strictly in the form prescribed for notices under section 29, by which he can know the amount of his liability and the period durin .....

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is that if the tax payable by an assessee on his income has escaped assessment for a particular period, notice could be given containing all the particulars under section 22, sub-section (2), even though the period has expired and thereupon the Income-tax Officer can proceed to assess or reassess the income, profits or gains of the assessee. The assessee to whom notice has been given under section 34(1A) can apply under section 34(1B) to the Central Board of Revenue to have the matters relating .....

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fixed on the basis of any income computed in accordance with the provisions of the Act. Strictly speaking the amount could not be tax, but the liability is none the less in respect of the tax which is due from the assessee for the period during which his income escaped assessment. This provision for settlement of the income-tax liability was introduced in the Income- tax Act for the first time by the Ordinance followed by the amending Act. It is to my mind for the benefit of the assessee. Instea .....

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It was contended by the counsel for the petitioner that the notice under section 29 is to be in a prescribed form. Rule 20 of the Rules framed under the Act provides that a notice of demand under section 29 shall be in the form given below, and is to be accompanied by the assessment form appended hereto; provided that the said assessment form need not accompany the notice in case where a penalty has been levied subsequent to the assessment order and it is not practicable to include the amount o .....

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sum of money specified in the order under sub-section (1B) of section 34 is to be in the form appended to the said rule. The present notice is in accordance with the form appended to rule 49. Two submissions have been made on behalf of the petitioner in reply to the contention by the Advocate-General. It is firstly urged by the counsel for the petitioner that rules 20 and 20A in terms refer to section 29 of the Act. Rule 20A lays down that notwithstanding anything contained in rule 20, a partic .....

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tlement is a tax liability, what section 29 requires is that a notice of demand is to be issued in the prescribed form. The word "prescribed" has been defined under the Act to mean prescribed by the rules. Section 59 of the Act gives power to the Central Board of Revenue to make rules for carrying out the purposes of the Act and for the ascertainment and determination of any class of income. Clause (2)(e) of section 59 gives power to the Central Board of Revenue to frame rules, providi .....

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59. It is, therefore, not necessary to refer to section 29 in rule 49 itself. The fact that in rules 20 and 20A there is a reference to section 29 is not of much consequence. An argument was addressed in this connection to the effect that the power given to frame rules under section 59(2)(e) is confined to matters which are to be prescribed by this Act. Section 34(1B) does not prescribe for any notice. Any notice, therefore, of demand in respect of a sum due under the order passed under section .....

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d. In that view of the matter, substantially the contents of the notices dated 10th February conform to the requirements of rules 20 and 20A. In my opinion, therefore, if the liability under the settlement is not a tax liability, section 29 would not be attracted and no notice could be given under section 29. The question, therefore, of the assessee being a defaulter would not arise and it cannot be said that section 46 cannot be applied to the recovery of the aforesaid amount as no notice under .....

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hedule which provides for taxes on income other than agricultural income. It need not be emphasized that the List enumerates broad categories and the entries in the List are to be given large and liberal interpretation. The items in the Lists are not to be interpreted in a narrow and pedantic sense. They are to given the meaning of the widest amplitude; every general word should be held to extend to all ancillary and subsidiary matters which fairly and reasonably can be said to be comprehended i .....

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h on the ground that it violates the provisions of articles 19(1)(f) and 14 of the Constitution. It was contended that the power given to the Income-tax Officer to issue notices to the debtors of the assessee directing them not to pay the amount of debt to the assessee, but to pay the same towards the liquidation of the amount of settlement, affects the right of the assessee to hold and dispose of the property. The debt due to the assessee is a property and any power given to regulate the holdin .....

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ply to the contention of the petitioner that the impugned law has been enacted by the Parliament in the exercise of its taxing power under article 265 of the Constitution read with article 245 and the legislative List. As such, its validity cannot be tested with reference to the requirements of article 19 of the Constitution. The contention is that articles 19, 21, 31(1) deal with what is known as the police power of the State in America. Article 31(2) deals with the power of eminent domain. The .....

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w is enacted providing for levy or collection of tax, such a law itself will be subject to the fundamental rights enshrined in Chapter III of the Constitution and the validity of such a law can be tested with reference to article 19. There is nothing in article 19 or article 265 to make such a law immune from attack on the ground of violation of the fundamental rights guaranteed under article 19. It was in the alternative contended that so far as the law provides for imposition and assessment of .....

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xation is the legal capacity of sovereignty or one of its governmental agents to exact or impose a charge upon persons or their property, for the support of Government and for the payment for any other public purposes, which it may constitutionally carry out (Willis' Constitutional Law, page 716). In the case of Providence Bank v. Billings [1860] 7 Law Ed. 939, the Supreme Court of America referring to the taxing power observed: "This vital power may be abused, but the Constitution of t .....

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for the maintenance and conduct of the State. By extending special protection to certain rights of the citizen enumerated under article 19, it cannot be said to be the intention of the constitution-makers to affect the fundamental obligation of the citizen to provide for the maintenance and conduct of the State. Imposition of tax to some extent puts a restraint on the rights of a citizen; but the purposes of enacting a taxing legislation cannot be said to be a regulatory one. The primary object .....

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on of due process clause. The matter came up for deci-w sion before the Madras High Court in the case of Ananthakrishnan v. State of Madras A.I.R. 1952 Mad. 395. The validity of the Madras Stamp Act of 1922 by which a fee of ₹ 625 was prescribed for enrolment as an advocate was challenged and it was contended that the petitioner as a citizen of India was entitled to carry on any profession. The imposition of the enrolment fee was a restriction placed on his right to carry on business and u .....

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by the Constitution and nowhere in the Constitution do we find any prohibition against taxation of fundamental rights. Part III does not contain any such inhibition." Dealing with the argument that the fundamental rights are, under the Constitution, in a paramount position and the Legislatures of the country have no power to abrogate or abridge them, that the power to tax is the power to destroy and that, therefore, Part XII is inoperative in respect of the rights conferred under Part III, .....

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d." It was further observed in this case that the power to tax is an attribute of sovereignty; it carries with it the power to determine when and how the tax shall be levied and it is no objection to its validity that it is levied before the commencement of the trade and not after. The theory of previous restraint has no application to the laws of taxation. In the case of Guruviah Naidu and Bros. v. State of Madras A.I.R. 1958 Mad. 158 the provision of the rules framed under the Madras Gene .....

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his problem which we consider worth pursuing.....The Constitution vests the Union and the States with a power of taxation, which, subject to a few exceptions........is plenary in its nature. The imposition of a tax on a trade or on the profits of a trade is undoubtedly a burden and unless the tax was validly imposed, it would be an illegal and undue interference with the freedom of trade guaranteed by article 19(1)(g) and so invalid. If a tax were a restriction which could be legally imposed on .....

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e of the State.......The restraints imposed by taxation are wholly beyond the scope of article 19(6) and, therefore, not subject to the tests of a valid legislation under that provision. The saving in article 31, sub-clause (5)(b)(i), placing out of the purview of the main article the deprivation of property which taxes entail and which was put in only by way of abundant caution, is a pointer establishing the plenitude of the taxation power." Cooley in his Constitutional Limitations dealing .....

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on of tax may affect the fundamental right guaranteed to a citizen under the Constitution and he may be entitled to come to this court for the enforcement of his fundamental right, but it cannot be said that the validity of a law providing for the levy and collection of tax, having the effect of restraining the activities of a citizen protected under article 19, has to be tested with reference to article 19. In the case of Ramjilal v. Income-tax Officer, Mohindargarh [1951] 19 I.T.R. 174, an app .....

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ts of that State. The petitioner who was a resident of Ateli formerly forming part of the Nabha State, received a notice under sections 22(2) and 38 of the Patiala Income-tax Act, and it was the validity of this notice which was challenged by the petitioner under article 32 of the Constitution. It was contended by the counsel for the petitioner that the Patiala Income-tax Act did not apply to the petitioner and assessment of tax on the petitioner's income was illegal. The State by insisting .....

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regarded as concerned with deprivation of property otherwise than by the imposition or collection of tax, for otherwise article 265 becomes wholly redundant. In the United States of America the power of taxation is regarded as distinct from the exercise of police power or of eminent domain. Our Constitution evidently has also treated taxation as distinct from compulsory acquisition of property and has made independent provision giving protection against taxation save by authority of law. In my o .....

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by authority of law, is not a fundamental right and the guarantee afforded under article 31(1) not to deprive a citizen of his property, without the authority of law, does not apply to a taxing statute. It is true that the case was not one where the validity of a taxing law was challenged on the ground of violation of article 19. But their Lordships of the Supreme Court referred to the law in the United States of America that the power of taxation is regarded as distinct from the exercise of pol .....

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activities and any restraint placed on those activities in the exercise of its police power have to be tested with reference to the provisions of article 19(2). But if the State has acted in the exercise of its taxing power, the limitations imposed on the exercise of police powers under article 19 cannot be placed on the exercise of the taxing power of the State. In my opinion, therefore, the validity of the law which provides for a levy or collection of a tax cannot be tested with reference to .....

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t in infringement of the right guaranteed under article 19(1)(f), the law laying down such a procedure will be void under article 13 of the Constitution. This argument overlooks the distinction between the case where the law itself has the effect of infringing the fundamental right guaranteed under article 19 and the case where any action taken under a valid law results in the infringement of article 19 of the Constitution. If the law providing itself for the imposition of tax and for recovery o .....

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of property and will thus be outside the scope of article 19. In the case of Collector of Malabar v. Erimmal Ebrahim Hajee [1957] 32 I.T.R. 124 the question which arose for consideration was whether the provisions of section 46(2) of the Income-tax Act and section 48 of the Madras Revenue Recovery Act were ultra vires. The respondent in that case was arrested in pursuance of a warrant issued by the Collector of Malabar under section 48 of the Madras Revenue Recovery Act. A certificate had been i .....

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d 22 of the Constitution. Dealing with the question of the infringement of article 19 of the Constitution, it was observed as follows: "It was held by the majority of the learned judges in A.K. Gopalan v. State of Madras [1950] S.C.R. 88 that the right 'to move freely throughout the territory of India' referred to in article 19(1)(d) of the Constitution was but one of the many attributes included in the concept of the right to 'personal liberty', and when a person is lawfull .....

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settled once for all that the personal rights guaranteed by sub-clauses (a) to (e) and (g) of article 19(1) are in a way dependent on the provisions of article 21 just as the right guaranteed by sub-clause (f) of article 19(1) is subject to article 31. If the property itself is taken lawfully under article 31, the right to hold or dispose of it perishes with it and article 19(1)(f) cannot be invoked. Likewise, if life or personal liberty is taken away lawfully under article 21, no question of t .....

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the deprivation of property. It was further contended that this case is only an authority for the proposition that article 19 is subject to article 31 of the Constitution. But it is not an authority for the proposition that article 19 is subject to article 265 of the Constitution. What this case, to my mind, lays down is that once a person's personal liberty has been affected or that he has been deprived of his property, under a valid law, the question of infringement of the guarantee under .....

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possess property is unreasonable. The argument, therefore, that section 46(5A) gives an unfettered discretion to the Income-tax Officer and is, therefore, violative of article 19 being an unreasonable restriction on the right of the petitioner to hold and possess property cannot be accepted. The next ground on which the validity of section 46(5A) is challenged is that it violates the guarantee of equal protection of laws under article 14 of the Constitution. It was urged that the Income-tax Off .....

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s in itself the germ of discrimination and is hit by article 14 of the Constitution. It was contended by the Advocate-General in reply that the law applies equally to all the assessees. It makes no discrimination between assessees. If in applying the aforesaid law any individual Income-tax Officer acts in a discriminatory manner his act may be challenged as being mala fide, but the law itself cannot be said to contain any germ of discrimination. It was further contended that section 46(2) has be .....

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ct, cannot be disputed. That special and speedier method of recovery of the tax liability is justified having regard to the nature of the liability and the necessity of realising the tax dues speedily to maintain the Government can also not be denied. In America the necessity of summary modes of collection has been justified. In Willoughby's Constitution of the United States, second edition, at page 1883, it is observed as follows: "For the collection of taxes, as well as for the apprai .....

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l be devised for the collection of a tax, the legislature must determine, subject only to such rules, limitations, and restraints as the Constitution of the State may have imposed." It cannot, therefore, be said that Chapter VI of the Act laying down summary method of realisation of the tax dues, is hit by article 14 of the Constitution. The question in the present case is if there are several modes of recovery provided under the Act, one procedure being more stringent than the other and if .....

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ticle does not therefore absolutely prevent the State from discriminating. The State has the power of what is known as "classification" on the basis of a rational distinction relevant to the particular subject dealt with. In the case of the State of West Bengal v. Anwar Ali Sarkar [1952] S.C.R. 284, 330, Mukherjee, J., observed that: "It appears to be an accepted doctrine of American courts that the purpose of the equal protection clause is to secure every person within the States .....

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d prove bona fides. But when the statute itself makes a discrimination without any proper or reasonable basis, the statute would be invalidated for being in conflict with the equal protection clause, and the question as to how it is actually worked out may not necessarily be a material fact for consideration." In this case the Act was struck down as being violative of article 14 of the Constitution. In the later case of Kathi Raning Rawat v. State of Saurashtra [1952] S.C.R. 435 the Act was .....

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s of legislation. To put it simply, all that is required in class or special legislation is that the legislative classification must not be arbitrary but should be based on an intelligible principle having a reasonable relation to the object which the legislature seeks to attain........................ It has been further contended that even assuming that the scheduled offences and the persons charged with the commission thereof could properly form a class in respect of which legislation could b .....

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a discriminatory choice among persons charged with the same offence or offences for trial by a special court and such absolute and unguided power of selection, though it has to be exercised within the class or classes of offences mentioned in the schedule, is no less discriminatory than the wider power of selection from the whole range of criminal law conferred on the State Government by the legislation impugned in State of West Bengal v. Anwar Ali Sarkar [1952] S.C.R. 284. The vice of discrimin .....

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nswering to a given description or exhibiting certain common characteristics, but being unable to make a precise and complete classification, leaves it to an administrative authority to make a selective application of the law to persons or things within the defined group, while laying down the standards or at least indicating in clear terms the underlying policy and purpose, in accordance with, and in fulfilment of, which the administrative authority is expected to select the persons or things t .....

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the Government for offences by public servants in relation to their official acts, the policy of the law being that public officials should not be unduly harassed by private prosecution unless, in the opinion of the Government, there were reasonable grounds for prosecuting the public servant which accordingly should condition the grant of sanction." That there should be a special and summary procedure for the recovery of the tax dues cannot be doubted. Having regard to the object of the In .....

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successfully, other instrumentalities and often mode of procedure are necessary, than those which belong to courts of justice." Chapter VI which, therefore, provides for special procedure cannot be struck down being in violation of article 14. The contention, as I have already referred to, was that the germ of discrimination is to be found in section 46(5A) which gives unregulated power to the Income-tax Officer to apply the procedure provided under the aforesaid sub-section against some a .....

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under the Public Demands Recovery Act, and thereafter for the Collector to proceed under the provisions of the Revenue Acts providing for the recovery of the arrears of revenue or as a civil court. The section giving unregulated discretion was violative of article 14 of the Constitution. After considering the cases referred to above, it was held that: "If the law is the same for all, the provision of alternative procedure making it possible for the relevant authority to apply one procedure .....

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to the Collector to issue a warrant of arrest. I shall deal with those cases of the Supreme Court later but the observations quoted above are apposite to the facts of the present case. In the case of Collector of Malabar v. Erimmal Ebrahim Hajee [1957] 32 I.T.R. 124 to which I have already referred, it was held that section 48 of the Madras Revenue Recovery Act and section 46(2) of the Income-tax Act were not violative of article 14. In this case so far as the question of violation of article 1 .....

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ative modes of recovery and the authority had power to apply either of the two methods. This contention was repelled on the ground that the proviso does not indicate a different and alternative mode of recovery of the certified amount of tax, but only confers additional powers on the Collector for the better and more effective application of the only mode of recovery authorised by sub-section (2) of section 46. The second ground on which the protection under article 14 was invoked was based on a .....

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, any uncontrolled discretion given to the executive authority to select either of the two procedures cannot be violative of article 14 of the Constitution. Reliance was placed on the case of Dwarka Prasad Laxmi Narain v. State of U.P. [1954] S.C.R. 803 wherein the provisions of the U.P. Coal Control Order were declared ultra vires. Under the Coal Control Order, no person was entitled to sell or store for sale or otherwise dispose of coal except under a licence. Clause 4(3) of the Coal Control O .....

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excessively invades the right, cannot be said to contain the quality of reasonableness, and unless it strikes a proper balance between the freedom guaranteed under article 19(1)(g) and the social control permitted by clause (6) of article 19, it must held to be wanting in reasonableness. This case dealt with the question of the ambit and scope of article 19(1)(g) and clause (6) and the question of article 14 was not examined in this case. Next, reliance was placed on the case of Saghir Ahmed v. .....

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ernment exclusively or by the State Government in conjunction with railway or partly by the State Government and partly by others in accordance with the provisions of the Act. The whole question is how is the last part of the section to be implemented and carried out? If the State can choose any and every person it likes for the purposes of being associated with the transport service and there are no rules to guide its discretion, plainly the provision would offend against article 14 of the Cons .....

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issioner of Income-tax to transfer any case from one Income-tax Officer subordinate to him to another, and the Central Board of Revenue has been given power to transfer any case from one Income-tax Officer to another. Such a transfer can be made at any stage of the proceeding and shall not render necessary the reissuing of a notice already issued by the Income-tax Officer from whom the case is transferred. The validity was attacked on the ground that section 5(7A) invests the Commissioner and th .....

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eason thus subjecting the particular assessee to discriminatory treatment whereas the other assesses similarly situated with him would continue to be assessed at the place where they reside or carry on business under section 64(1) and (2) of the Act. The discrimination involved in section 5(7A) is substantial in character and, therefore, infringes the fundamental right enshrined in article 14, and it also infringes article 19(1)(g) in so far as it imposes an unreasonable restriction on the funda .....

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aw has been laid down at page 588 of the report as follows [1957] 31 I.T.R. 565, 588: "There is a broad distinction between discretion which has to be exercised with regard to a fundamental right guaranteed by the Constitution and some other right which is given by the statute. If the statute deals with a right which is not fundamental in character the statute can take it away but a fundamental right the statute cannot take away. Where, for example, a discretion is given in the matter of is .....

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ew, viz.,(1) does it admit of the possibility of any real and substantial discrimination, and (2) does it impinge on a fundamental right guaranteed by the Constitution? Article 14 can be invoked only when both these conditions are satisfied." Applying the two tests laid down in the above case, the counsel for the petitioner contends that there is a possibility of a real and substantial discrimination in the present case inasmuch as the procedure provided under section 46(5A) is much more st .....

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is to be followed, opportunity is given to the assessee to file objections and the order passed by the Collector may be appealable to the proper authority. But section 46(5A) gives power to the Income-tax Officer not only to require a person from whom money is due, but from whom money may become due, to the assessee to pay up the amount to the Department. Such a power will affect the trade and business of the assessee and is also not examinable by any superior authority. There is, therefore, po .....

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t of debt due from them, does not, to my mind, amount to any substantial discrimination. That in some cases it may result in hardship to the assessee, is no ground for holding the law as substantially discriminatory. Ordinarily, the tax liability should not be recovered by coercive processes. The coercive processes should be resorted to when all other means have been exhausted. But it cannot be said that the law on that account results in substantial discrimination. The provisions of section 46( .....

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dealt with the question as to how far section 46(5A) can be said to be violative of article 19 and in the view which I have taken on that question, it cannot be said that the discretion given under section 46(5A) impinges upon the fundamental right guaranteed by the Constitution. Where a discretion is given in the matter of granting or refusing a licence such a discretion affects the fundamental right, but where a discretion has been given in the matter of applying one or the other method of rec .....

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s passed on the 16th March, 1959. This order was thus clearly beyond one year of the last day of the financial year in which the notice of demand was given. The contention raised by the petitioner is that the proceedings for recovery of the amount could not have been initiated beyond one year from the last day of the financial year in which the notice of demand was given, or at any rate within one year of the 30th September, 1957, inasmuch as the instalment due on that date was not paid in time .....

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unt. Section 46(7) reads as follows: "Save in accordance with the provisions of sub-section (1) of section 42, or of the proviso to section 45, no proceedings for the recovery of any sum payable under this Act shall be commenced after the expiration of one year from the last day of the financial year in which any demand is made under this Act: Provided that the period of one year herein referred to shall- (i) where an assessee has been treated as not being in default under section 45 as lon .....

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st of such instalments was due." It is very difficult to accept the argument of the petitioner's counsel in this behalf. The opening clause of sub-section (7) only lays down that the proceedings cannot be commenced after the expiration of one year from the last day of the financial year in which any demand is made. If the argument raised in connection with the notice of demand by the petitioner is accepted that no demand notice under section 29 could be issued in regard to the liability .....

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in instalments the period of one year is to be counted from the date when the last instalment was due. It is contended by the Advocate-General that the last instalment was due in this case on the 25th March, 1958, and if that is the starting point of limitation the present order was well within time. The contention of the counsel for the petitioner is that the proviso is attracted only where there is no default clause, and, secondly, it is urged that the entire amount became due by virtue of the .....

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