Case: Ranjit Singh Vs. The Commissioner Of Income-Tax, U. P. And Others

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 (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 theirtotal tax payable on the undisclosed income up to 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 Singhs sons Baljit Singh and Satendrajit Singh. In the circumstances, we recommend that no penalty be levied on the assessee in respect of non-disclosures 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 assessees 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 more than five years, in instalments 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 byon 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 instalments in accordance with certain terms of settlement. Some of these terms areoffer to pay the aforesaid amount of Rs. 6,61,917/- as per the following instalments :(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 instalment 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 instalments, 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 immediatelyreport 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.3. 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.4. 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.

Reasoning: 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. 8A(2) of the Act, and even the notice of demand in pursuance of that order-all these took 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 thethe 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 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 notscheme of S. 8-A is different from that of S. 8. The latter section contemplates an assessment or re-assessment in accordance with the direction of the Central Government; see sub-sec. (4) of S. 8. That is not the position under S. 8-A, sub-sec. (2) whereof provides for the enforcement of the norms of any settlement arrived at in pursuance of sub-sec. (1). There is no 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-section (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 arrear of income-tax within the meaning of these provisions."This clearly shows that the true scope and effect of the sub-section is to enforce the terms of any settlement arrived at in pursuance of sub-sec. (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 theof 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 set element 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 provision. 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 can 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-taxthe 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, 1930? We are unable to answer this question in favour of the petitioner for the reasons which we have already stated.12. Learned counsel for the petitioner relied on the decision in M. L. M. Muthiah Chettiar v. Commr., of Income-tax Madras, 1959-35 ITR 339: (AIR 1959 Mad 158  ). 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.