9911796707
TMI Blog1956 (12) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... dent of the same place and erstwhile karta of the Hindu undivided family, which carried on business in the name and style of Messrs. Pannalal Binjraj, petitioner No. 2. Before 28th September, 1954, they were being assessed by the Income-tax Officer, Special Circle, Patna. On 28th September, 1954, the Central Board of Revenue made an order transferring their cases to the Income-tax Officer, Central Circle XI, Calcutta. On 22nd January, 1955, the Central Board of Revenue transferred the cases of petitioner No. 2 to the Income-tax Officer, Central Circle VI, Delhi, and on 12th July, 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 section 5(7A) of the Act was ultra vires the Constitution and all the proceedings whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name and style of Messrs. Bhagwan Das Sud & Sons and the cases of both these petitioners were transferred to the Income-tax Officer, Special Circle, Ambala, as above, by the said respective orders. Petitions Nos. 86 of 1956, 87 of 1956, 88 of 1956, 111 of 1956, 112 of 1956, and 158 of 1956 : These petitions may be compendiously described as the Amritsar group. The petitioner in Petition No. 86 of 1956 is Sardar Gurdial Singh, son of S. Narain Singh. The petitioner in Petition No. 87 of 1956 is Dr. Sarmukh Singh, son of S. Narain Singh. The petitioner in Petition No. 112 of 1956 is S. Ram Singh, son of S. Narain Singh. These three are brothers and the petitioner in Petition No. 88 of 1956 is the father, S. Narain Singh, son of S. Basdev Singh. The father and the three sons were the directors in the Hindustan Embroidery Mills (Private) Ltd., petitioner No. 1 in Petition No. 11, of 1956, which is located at Chheharta near Amritsar. All these petitioners were, prior to the orders of transfer made by the Commissioner of Income-tax under section 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, fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income-tax Officer, Central Circle, Calcutta, and a couple of months thereafter, they were again transferred to the Income-tax Officer, Central Circle IV, Calcutta. On 8th June, 1946, there was a further transfer assigning the cases to the Income-tax Officer, Central Circle I, Calcutta, and on 27th July, 1946, orders were passed by the Commissioner of Income-tax, Central, Calcutta, under section 5(7A) 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 unconstitutionality of section 5(7A) of the Act. It may be noted, however, that these orders were all prior to the Constitution and having been made on 27th July, 1946, as aforesaid were followed up by completed assessment proceedings in respect of the said respective years and also certificate proceedings under section 46(2) of the Act. There were further orders dated 15th December, 1947, and sometime in September, 1948, transferring t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 21st December, 1953, and the other made sometime in May, 1955, under section 5(7A) of the Act and the proceedings continued and instituted by the respective officers thereunder as unconstitutional and void on the ground that section 5(7A) was ultra 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 vires character of section 5(7A) 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. (7A) 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 mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was inserted simultaneously with section 5(7A) and would not have the effect of depriving the assessee of the valuable right conferred upon him under section 64(1) and (2) unless and until section 5(7A) was intra vires but section 5(7A) as stated above being discriminatory in its nature is ultra vires the Constitution and cannot save section 64(5) which is merely consequential. The discrimination involved in section 5(7A) is substantial in character and therefore infringes the fundamental right enshrined in article 14 of the Constitution. It also infringes article 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. State of Madhya Pradesh. The very same question as regards the unconstitutionality of section 5(7A) of the Act had come up for decision before this Court in Bidi Supply Co. v. Union of India and Others. The case of the assessee there had been transferred by the Central Board of Revenue under section 5(7A) of the Act 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 ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... freight and hotel expenses. Therefore the reality of the discrimination cannot be 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 arise. 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 section 5(7A) of the Act was thus left open and the decision turned merely on the construction of the impugned order. Learned counsel for the petitioners, however, lays particular stress on the observations of Bose, J., in the minority judgment which he delivered in that case whereby he held that sections 5(7A) and 64(5)(b) of the Act were themselves ultra vires article 14 of the Constitution and not merely the order of the Central Board of Revenue. The learned Judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-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 State in these petitions : " 4. I say that the provisions of section 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 provision 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 to transfer the case from one Income-tax Officer to another either because of the request of the assessee or for dealing with cases involving special features such as cases of assessees involving wide-spread activities and large 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 section 5(7A) are thus administrative in character,............ ; (ii) that the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im, the Income-tax Officer complies with the request 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 standard 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 Fazl Ali, J., in State of West Bengal v. Anwar Ali Sarkar, which was referred to by Bose, J., in his minority judgment in Bidi Supply Co. v. The Union of India, at page 281 : " It was suggested that the reply to this query is that the Act itself being general a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 section 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 section 64(1) and (2) of the Act and that right continues to be enjoyed by all the assessees except the assessee whose case is transferred under section 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 section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the particular assessee. In the later case of Dayaldas Kushiram v. Commissioner of Income-tax, (Central), Beaumont, C.J., expressed himself as follows : " The Income-tax Act does not determine the place of assessment. What it does is to determine the officer who is to have power to assess and in some cases it does so by reference to locality but I apprehend that an appeal would be not against an order of the Commissioner as to the place of assessment, but against the order of assessment of the Income-tax Officer, " thus stating in effect that this section does not give a right to the assessee to have his assessment at a particular place but determines the Income-tax Officer who is to have power to assess him. This aspect was further emphasized by the Federal Court in Wallace Brothers & Co. Ltd. v. Commissioner of Income-tax, Bombay, Sind & Baluchistan, where Spens, C.J., observed : " Clause (3) of section 64 provides that any question as to the place of assessment shall be determined by the Commissioner or by the Central Board of Revenue. The third proviso to the clause enacts that if the place of assessment is called in question by the assessee, the Income-tax Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reside or carry on business. There is thus no differential treatment and no scope for the argument that the particular assessee is discriminated against with reference to others similarly situated. It was observed by this Court in M. K. Gopalan v. State of Madhya Pradesh : " In support of the objection raised under article 14 of the Constitution, reliance is placed on the decision of this Court in Anwar Ali Sarkar's case. That decision, however, applies only to a case where on the allotment of an individual case to a special Court authorised to conduct the trial by a procedure substantially different from the normal procedure, discrimination arises as between persons who have committed similar offences, by one or more out of them being subjected to a procedure, which is materially different from the normal procedure and prejudicing them thereby. In the present case, the Special Magistrate under section 14 of the Criminal Procedure Code has to try the case entirely under the normal procedure, and no discrimination of the kind contemplated by the decision in Anwar Ali Sarkar's case, and the other cases following it, arises here. A law vesting discretion in an authority under such c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this action or non-action may proceed from enmity or prejudice, from partisan zeal or animosity, from favouritism and other improper influences and motives easy of concealment and difficult to be detected and exposed, it becomes unnecessary to suggest or comment upon the injustice capable of being wrought under cover of such a power, for that becomes apparent to every one who gives to the subject a moment's consideration. " In other words, "it is not a question of an unconstitutional administration of a statute otherwise valid on its face but here the unconstitutionality is writ large on the face of the statute itself " : (per Das, J., as he then was, in The State of West Bengal v. Anwar Ali Sarkar, at p. 346). It has to be remembered that the purpose of the Act is to levy income-tax, assess and collect the same. The preamble of the Act does not say so in terms it being an Act to consolidate and amend the law relating to income-tax and super tax but that is the purpose of the Act as disclosed in the preamble of the first Indian Income-tax Act of 1886 (Act II of 1886). It follows, therefore, that all the provisions contained in the Act have been designed with the object of achie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, the appropriate authority has to determine what are the proper cases in which such power should be exercised having regard to the object of the Act and the ends to be achieved. The cases of the assessees which come for assessment before the Income-tax authorities are of various types and no one case is similar to another. There are complications introduced by the very nature of the business which is carried on by the assessees and there may be, in particular cases, such widespread activities and large ramifications or inter-related transactions as might require for the convenient and efficient assessment of income-tax the transfer of such cases from one Income-tax Officer to another. In such cases the Commissioner of Income-tax or the Central Board of Revenue, as the case may be, has to exercise its discretion with due regard to the exigencies of tax collection. Even though there may be a common attribute between the assessee whose case is thus transferred and the assessees who continue to be assessed by the Income-tax Officer of the area within which they reside or carry on business, the other attributes would not be common. One assessee may have such widespread activities and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration of a particular law would be done 'not with an evil eye and unequal hand' and the selection made by the Government of the cases of persons to be referred for investigation by the Commission would not be discriminatory. " This presumption, however, cannot be stretched too far and cannot be carried to the extent of always holding that there must be some undisclosed and unknown reason for subjecting certain individuals or corporations to hostile and discriminatory treatment (vide Gulf, Colorado, etc. v. W. H. Ellis). There may be cases where improper execution of power will result in injustice to the parties. As has been observed, however, the possibility of such discriminatory treatment cannot necessarily invalidate the legislation and where there is an abuse of such power, the parties aggrieved are not without ample remedies under the law : (vide Dinabandu Sahu v. Jadumoni Mangaraj & Others). What will be struck down in such cases will not be the provision which invests the authorities with such power but the abuse of the power itself. It is pointed that it will be next to impossible for the assessee to challenge a particular order made by the Commissioner of Income-tax o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of each case and the court will arrive at the conclusion one way or the other having regard to all the circumstances of the case disclosed in the record. The court will certainly not be powerless to strike down the abuse of power in appropriate cases and the assessee will not be without redress. The observations of Fazl Ali, J., in State of West Bengal v. Anwar Ali Sarkar, at pp. 309-310 that the authority will say " I am not to blame as I am acting under the Act " will not necessarily save the order from being challenged because even though the authority purported to act under the Act its action will be subject to scrutiny in the manner indicated above and will be liable to be set aside if it was found to be mala fide or discriminatory qua the assessee. Particular stress is laid on behalf of the petitioners on the observations at page 724 of the majority judgment in Bidi Supply Co. v. Union of India and Others, which in the context of the omnibus wholesale order in question emphasized the substantial discrimination to which the assessee there had been subjected as compared with other bidi merchants who were similarly situated. The inconvenience and harassment to which the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one assessee out of those similarly circumstanced thus subjecting him to discriminatory treatment as compared with others who fall within the same category. The power is guided and controlled by the purpose which is to be achieved by the Act itself, viz., the charge of income-tax, the assessment and collection thereof, and is to be exercised for the more convenient and efficient collection of the tax. A wide discretion is given to the authorities concerned, for the achievement of that purpose, in the matter of the transfer of the cases of the assessees from one Income-tax Officer to another and it cannot be urged that such power which is vested in the authorities is discriminatory in its nature. 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 issuing licences for carrying on trade, profession or business or where restrictions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or by the Central Board of Revenue, as the case may be, the assessee is given an opportunity under section 64(3) of representing his views before any such question is determined. If an opportunity is given to the assessee in such case, it is all the more surprising to find that, when an order of transfer under section 5(7A) is made transferring the case of the assessee from one Income-tax Officer to another irrespective of the area or locality where he resides or carries on business, he should not be given such an opportunity. There is no presumption against the bona fides or the honesty of an assessee and normally the Income-tax authorities would not be justified in refusing to an assessee a reasonable opportunity of representing his views when any order to the prejudice of the normal procedure laid down in section 64(1) and (2) of the Act is sought to be made against him, be it a transfer from one Income-tax Officer to another within the State or from an Income-tax Officer within the State to an Income-tax Officer without it, except of course where the very object of the transfer would be frustrated if notice was given to the party affected. If the reasons for making the order a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich it was done. Reading section 5(7A) and the explanation thereto, it is clear that when any case of a particular assessee which is pending before an Income-tax Officer is transferred from that officer to another Income-tax Officer whether within the State or without it, all proceedings which are pending against him under the Act in respect of the same year as also previous years are meant to be transferred simultaneously and all proceedings under the Act which may be commenced after the date of such transfer in respect of any year whatever are also included therein so that the Income-tax Officer to whom such case is transferred would be in a position to continue the pending proceedings and also institute further proceedings against the assessee in respect of any year. The proceedings pending at the date of transfer can be thus continued but in the case of such proceedings the provision in regard to the issue of notices contained in the main body of section 5(7A) would apply and it would not be necessary to re-issue any notice already issued by the Income-tax Officer from whom the case is transferred. This provision applies to pending proceedings which have been transferred leavi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 1956, i.e., the Sriram Jhabarmull group may be dealt with in the first instance as they have a peculiar characteristic of their own. The orders complained against in these petitions were all made by the Commissioner of Income-tax, Central, Calcutta, on July 27, 1946, and further proceedings were entertained against the petitioners by the Income-tax Officer, Central Circle IV, Calcutta, immediately thereafter. All these proceedings culminated in assessment orders and certificate proceedings under section 46(2) of the Act were also taken by the authorities against the petitioners for recovery of the tax so assessed before the advent of the Constitution. The question, therefore, arises whether these orders of transfer can be challenged by the petitioners as unconstitutional and void. It is settled that article 13 of the Constitution has no retrospective effect and if, therefore, any action was taken before the commencement of the Constitution in pursuance of the provisions of any law which was a valid law at the time when such action was taken, such action cannot be challenged and the law under which such action was taken cannot be questioned as unconstitutional and void on the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dvantage of a mere technicality. In the second group, there were orders passed by the Commissioner of Income-tax, transferring the cases of the petitioners from the Income-tax Officer, 'A' Ward, Amritsar, or the Income-tax Officer, 'F' Ward, Amritsar, to the Income-tax Officer, Special Circle, Amritsar. Both these offices were situated in the same building and under the same roof. The argument of inconvenience and harassment can, under these circumstances, be hardly advanced by them. There is moreover another feature which is common to both these groups and it is that none of the petitioners raised any objection to their cases being transferred in the manner stated above and in fact submitted to the jurisdiction of the Income-tax Officers to whom their cases had been transferred. It was only after our decision in Bidi Supply Co. v. Union of India & Others was pronounced on March 20, 1956, that these petitioners woke up and asserted their alleged rights, the Amritsar group on April 20, 1956, and the Raichur group on November 5, 1956. If they acquiesced in the jurisdiction of the Income-tax Officers to whom their cases were transferred, they were certainly not entitled to invoke th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he provisions of that Act. These cases numbering about 470 had to be reopened under section 34(1A) of the Income-tax Act. The Government thought that as in the earlier lot of cases, it would help speedier disposal of the cases, if they were allotted to Income-tax Officers appointed without reference to area to deal with the same. In addition to the circles already created in Bombay and Calcutta, five more circles at Calcutta and four more circles at Bombay and nine more circles at important centres such as Kanpur, Ahmedabad, Madras and Delhi were set up to deal with all these cases. As a result of the influx of these cases, it was found that the 9 circles at Calcutta had about 280 cases of assessees belonging to Calcutta itself to dispose of and therefore cases not belonging to that area had to be taken out and assigned to one of the newly created circles, where the work load was low. It was found then that Central Circle VI had a lower work load compared to other circles and therefore the cases of the petitioners were transferred to the Income-tax Officer, Central Circle VI, Delhi. Having regard to these circumstances which are disclosed in the affidavits of Shri V. Gouri Shanka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve a proper assessment of the petitioner's income that his case also should be dealt with by the Income-tax Officer assessing the joint family and the petitioner was informed that, in the matter of hearing, he would be put to least inconvenience. These were the circumstances under which his case was transferred from the Income-tax Officer, Survey Circle, Calcutta, to the Income-tax Officer, Special Circle, Ambala, by an order of the Central Board of Revenue dated June 29, 1955. The case of Messrs. Bhagwan Das Sud & Sons, petitioners in Petition No. 85 of 1956 had already been transferred by the Commissioner of Income-tax from the Income-tax Officer, Hoshiarpur, to the Income-tax Officer, Special Circle, Ambala, by an order under section 5(7A) of the Act dated October 20, 1953. The petitioners had their office at Hoshiarpur in Punjab but their activities were scattered in various parts of India some of them being in Assam, Bombay, Bareilly, Calcutta and Kanpur in respect of the contracts they undertook with the Government and other parties. They were alleged to have concealed income assessable to income-tax exceeding Rs. 30 lakhs and it was thought necessary to make proper investi ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
