Judgment Case ID: 23

Judgment:
135 of 1950. Application under article 32 of the Constitution for a writ in the nature of a writ of certiorari and prohibition. Dr. Tek Chand (Hardayal Hardy and Jindra Lal	 with him) for the petitioner. M.C. Setalvad	 Attorney. General for India	 (section M. Sikri	 with him) for the respondent. january 12. This is said to be a test case	 for	 on its decision	 we are told	 depend the rights of numerous other persons whose interests are similar to those of the petitioner. There is no serious controversy as to the facts material for the purposes of this application. They are shortly as follows: On May 5	 1948	 the then Rulers of eight Punjab States including. Patiala and Nabha with the concurrence and guarantee of the Government of India entered into a covenant agreeing to unite and integrate their territories in one State with a common executive	 legislature and judiciary by the name of Patiala and East Punjab States Union	 hereinaf ter compendiously referred to as the Pepsu. By article III (6) of the covenant the then Ruler of Patiala became the first President or Raj Pramukh of the Council of Rulers and he is to hold the office during his lifetime. Article VI of the covenant is as follows : "(1) The Ruler of each Covenanting State shall	 as soon as may be practicable	 and in any event not later than the 20th of August	 1948	 make over the administration of his State to the Raj Pramukh	 and thereupon	 (a) all rights	 authority and jurisdiction belonging to the Ruler which appertain	 or are incidental to the Govern ment of the Covenanting State shall vest in 130 the Union and shall thereafter be exercisable only as pro vided by this Covenant or by the Constitution to be framed thereunder; (b) all duties and obligations of the Ruler pertaining or incidental to the Government of the Covenanting State shall devolve on the Union and shall be discharged by it; (c) all the assets and liabilities of the Covenanting State shall be the assets and liabilities of the Union	 and (d) the military forces	 if any	 of the Covenanting State shall become the military forces of the Union. " Article X provides for the formation of a Constituent Assembly to frame a constitution of a unitary type for the Union within the framework of the Covenant and the Constitu tion of India. This Constituent Assembly was also to func tion as the interim Legislalature of the Union until an elected legislature came into being. The proviso to clause (2) of that Article runs as follows : "Provided that until a Constitution framed by the Con stituent Assembly comes into operation after receiving the assent of the Raj Pramukh	 the Raj Pramukh shall have power to make and promulgate Ordinances for the peace and good government of the Union or any part thereof	 and any Ordi nance so made shall	 for the space of not more than six months from its promulgation have the like force of law as an Act passed by the Constituent Assembly;but any such Ordinance may be controlled or superseded by any such Act. " This Union was inaugurated on July 15	 1948	 and the Raj Pramukh thereafter took over the administration of the different Covenanting States. The Administration of Nabha State was taken over by the Raj Pramukh on August 20	 1948. On the same day the Raj Pramukh	 in exercise of the powers vested in him	 promulgated an Ordinance (No. 1 of 2005) called the Patiala and East Punjab States Union (Administra tion) 131 Ordinance	 2005. The following provisions of this Ordi nance are relevant for our purpose: "1. (2) It shall extend to the territories included in the Covenanting States on and from the date on which the administration of any of the said State or States has been or is made over to the Raj Pramukh. * * 3. As soon as the administration of any Covenanting State has been taken over by the Raj Pramukh as aforesaid	 all laws	 Ordinances	 Acts	 Rules	 Regulations	 Notifica tions	 Hidayats and Firrnans i Shahi having force of law in Patiala State on the date of commencement of this Ordinance shall apply mutatis mutandis to the territories of the said State and with effect from that date all laws in force in such covenanting State immediately before that date shall be repealed: Provided that proceedings of any nature whatsoever pending on such date in the Courts or offices of any such Covenanting State shall	 notwithstanding anything contained in this Ordinance or any other Ordinance	 be disposed of in accordance with the laws governing such proceedings in force for the time being m any such Covenanting State. " Section 6 provides for the adaptation of the laws etc. enforced under section 3 and	 amongst other things	 any reference in these laws etc. to the Patiala State and the like was to be construed as a reference to the State of the Union. A notification (No.35 dated 27 5 05/11 9 1948) was issued over the signature of the Revenue Secretary notifying that the Patiala Income tax Act of 2001 and the Rules there under had come into force in the various Covenanting States from August 20	 1948	 thereby repealing the law or laws in force in that behalf in those States before that date	 except as to pending proceedings. It may be mentioned here that prior to that date there was no law in the Nabha State imposing income tax on the subjects of that State. On November 14	 1948	 the Commissioner of Income tax issued a Notification (No. 4	 dated 132 29 7 2005) intimating that persons belonging to the Cove nanting States of Nabha and Nalagarh would be assessed to income tax under the Patiala Income Tax Act	 2001. It was mentioned that persons of those States whose income reached the taxable limit ' 'should henceforward keep regular and proper accounts for purposes of audit by the Income Tax Department" on February 2	 1949	 Ordinance 1 of 2005 was repealed and replaced by Ordinance No. XVI of 2005 promul gated by the Raj Pramukh and called the Patiala and East Punjab States Union General Provisions (Administration) Ordinance	 2006. Section 3 (1) runs as follows: "3. (1) As from the appointed day	 all laws and rules	 regulations	 bye laws and notifications made thereunder	 and all other provisions having the force of law	 in Patiala State on the said day shall apply mutatis mutandis to the territories of the Union and all laws in force in the other Covenanting States immediately before that day shall cease to have effect; Provided that all suits	 appeals	 revisions applica tions	 reviews	 executions and other proceedings	 or any of them	 whether Civil or Criminal or Revenue	 pending in the Courts and before authorities of any Covenanting States shall	 notwithstanding anything contained in this Ordinance	 be disposed of in accordance with the laws governing such proceedings in force in any such Covenanting State immedi ately before the appointed day. " By section 2 (a) the "appointed day" was defined as meaning the 5th day of Bhadon	 2005	 corresponding to August 20	 1948. There was a section providing for adaptation similar to section 6 of the Ordinance 1 of 2005. There was another Ordinance to which reference has to be made	 namely	 Ordinance No. 1 of 2006 called the Finance Ordinance promul gated on April 13	 1949	 which came into force on that very date. Section 5 of that Ordinance introduced several amend ments to the Patiala Income Tax Act	 2001. It recast 133 sections 3 and 34 of that Act and introduced a new section as section 23B. Section 6 of that Ordinance runs thus: "6. For the assessment year beginning on the 1st day of Baisakh	 2006	 that is to say	 in respect of the accounting the income	 profits and gains of the previous year ending on the last day of Chet	 2005	 (a) income tax shall be charged at the rates specified in Part I of the Second Schedule to this Ordinance	 and (b) rates of super tax shall	 for the purposes of sec tion 55 of the Patiala Income Tax Act	 2001	 be specified in Part II of the Second Schedule to this Ordinance. " It is in this setting that the facts leading to the present petition have to be considered. The petitioner is a resident of Ateli in the district of Mohindargarh now in Pepsu but which formerly formed part of the Nabha State. The petitioner has been carrying on his business at Ateli for a number of years under the ' name and style of Raghunath Rai Ram Parshad. He never paid any income tax as no such tax was imposed by any law in the Nabha State. On October '20	 1949	 the petitioner was served with a notice under sections 22(2) and 88 of the Patiala Income Tax Act	 2001	 requiring him to submit a return for the Income Tax year 2006 (13 4 1949 to 12 4 1950) disclosing his income during the previous year (13 4 1948 to 12 4 1949). The petitioner	 on December 4	 1949	 filed his return for the year 2006 and on February 14	 1950	 he was assessed to income tax. On May 23	 1950	 the petitioner received a notice under section 34 calling upon him to file his return for the year ending the last day of Chet 2005	 i.e.	 for the year 13 4 1948 to 12 4 1949. In this return he had to specify his income of the previous year	 namely	 2004 (i.e.	 13 4 1947 to 12 4 1948). It ap pears that the petitioner along with other assessees of Ateli and Kanina submitted a petition before the Income Tax Officer on July 9	 1950	 asking him not to 134 proceed with the assessment for the year 2005 but on July 13	 1950	 the Income Tax Officer assessed him to the best of his judgment under section 34(4) read with section 22(4) of the Income Tax Act. The petitioner along with other asses sees similarly situated moved the Income Tax Commissioner and the Central Board of Revenue	 New Delhi	 but without any success. No formal appeal under the Patiala Income Tax Act appears to have been filed by the petitioner against assess ments for either of the two years 2005 and 2006. On August 10	 1950	 the petitioner filed his present petition before this Court under article 32 of the Constitution praying that a writ in the nature of a writ of certiorari be issued for quashing the assessments of the petitioner 's income accrued in the years 2004 and 2005 and other ancillary reliefs. During the pendency of this petition the income tax authori ties have issued a notice under section 46 intimating that penalty will be imposed if the tax was not paid up. The contention of the petitioner in the first place is that he has been denied the fundamental right of equality before the law and the equal protection of the laws guaran teed to him by article 14 of the Constitution. His griev ances are formulated in paragraphs 10 and 11 of his peti tion. It is said that while the people of Kapurthala which is included in Pepsu have been asked to pay income tax for the period prior to August 20	 1948	 at the old rate fixed by the Kapurthala Income Tax Act which was lower than the rate fixed by the Patiala Income Tax Act	 2001	 the people of Nabha who had not to pay any income tax prior to August 20	 1948	 at all have been made liable to pay at the higher Patiala rate and that such discrimination offends against the provisions of article 14. This charge is refuted by paragraph 10 of the affidavit of Sardar Gurbax Singh	 the Additional Director of Inspection (income Tax)	 New Delhi	 who was formerly the Commissioner of Income Tax	 Punjab and Pepsu	 which has been filed in opposition to the present petition. It is there stated that for the assessment year 2005	 in Kapurthala the assessees whose cases were pending on 135 August 20	 1948	 were assessed under the Kapurthala Income Tax Act at rates fixed thereunder but that for the assess ment year 2006 the provisions of the Patiala Income Tax Act and the rates prescribed thereunder were uniformly applied in all areas of the Pepsu	 including Kapurthala This alle gation which is not denied in the affidavit filed by the petitioner in reply must be taken as correct. The assess ment of Kapurthala assessees for the year 2005 at the old Kapurthala rate was obviously made under the proviso to section 3 of Ordinance No. 1 of 2005	 which was reproduced in the proviso to section 3(1)of the Ordinance No. XVI of 2006 and both of which required all pending proceedings to be completed according to the law applicable to those pro ceedings when they were initiated. No case of assessment was pending as against any Nabha assessee on August 20	 1948	 for there was no Income Tax Act in Nabha prior to that date and	 therefore	 there could be no occasion for completing any pending proceedings against any of such assessees. In the premises	 there can be no grievance by them on the score of discrimination. The discrimination	 if any	 was not brought about by the two Ordinances	 but by the circumstance that there was no Income Tax Act in Nabha and consequently there was no case of assessment pending against any Nabha assessees. In any case the provision that pending proceed ings should be concluded according to the law applicable at the time when the rights or liabilities accrued and the proceedings commenced is a reasonable law rounded upon a reasonable classification of the assessees which is permis sible under the equal protection clause and to which no exception can be taken. In our opinion the grievance of the alleged infringement of fundamental right under Article 14 is not well founded at all. Dr. Tek Chand appearing in support of the petition next contends that the administration of Nabha State having been taken over by the Raj Pramukh only on August 20	 1948	 and the Patiala law including the Patiala Income Tax Act	 2001	 having been brought 136 into operation on and from August 20	 1948	 the assessment of the tax on the petitioner 's income which accrued prior to August 20	 1948	 was wholly illegal and not authorised by the said Ordinances and the State by insisting on collecting the tax so illegally assessed was threatening to invade the petitioner 's fundamental right to property guaranteed by article 31(1) of the Constitution. Article 31(1) runs as follows: "(1) No person shall be deprived of his property save by authority of law. " It will be noticed that clause (1) reproduces subsection (1) of section 299 of the Government of India Act	 1935	 without the words "in British India. " Reference has 'next to be made to article 265 which is in Part XII	 Chapter I	 dealing with "Finance." That article provides that no tax shall be levied or collected except by authority of law. There 'was no similar provision in the corresponding chapter of the Government of India Act	 1935. If collection of taxes amounts to deprivation of property within the meaning of article 31(1)	 then there was no point in making a sepa rate provision again as has been made in article 265. It	 therefore	 follows that clause (1) of article 31 must be 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 eminent domain. Our Constitution evidently has also treated taxation as distinct from compulsory acquisition of property and has made inde pendent provision giving protection against taxation save by authority of law. When Dr. Tek Chand was asked if that was not the correct position	 he did 	not advance any cogent or convincing answer to refute the conclusion put to him. In our opinion	 the protection against imposition and collec tion of taxes save by authority of law directly comes from article 265	 and is not secured by clause (1) of article 31. Article 265	 137 not being in Chapter IIi of the Constitution	 its protection is not a fundamental right which can be enforced by an application to this court under article 32. It is not our purpose to say that the right secured by article 265 may not be enforced. It may certainly be enforced by adopting proper proceedings. All that we wish to state is that this application in so far as it purports to be rounded on arti cle 32 read with article 31(1) to this Court is misconceived and must fail. The whole of Dr. Tek Chand 's argument was rounded on the basis that protection against imposition and collection of taxes save by authority of law was guaranteed by article 31(1) and his endeavour was to establish that the Pepsu Ordinances could not	 in law	 and did not	 on a correct interpretation of them	 impose any income tax retrospective ly; that the Income Tax Officer on an erroneous view of the law had wrongly assessed the tax on income accrued prior to August 20	 1948	 and that consequently the petitioner was being threatened with deprivation of property otherwise than by authority of law. In the view we have taken	 namely	 that the protection against imposition or collection of taxes save by authority of law is secured by article 265 and not by article 31(1)	 the questions urged by Dr. Tek Chand do not really arise and it is not necessary to express any opinion on them on this application. Those questions can only arise in appropriate proceedings and not on an applica tion under article 32. In our judgment this application fails on the simple ground that no fundamental right of the petitioner has been infringed either under article 14 or under article 31(1) and we accordingly dismiss the petition with costs. Petition dismissed.

Summary:
Section 3 (1) of the Patiala and East Punjab States Union General Provisions (Administration) Ordinance (No. XVI of 2005) which came into force on February 2	 1949	 and re enacted section 3 of an earlier Ordinance which was in force from August 20	 1948	 provided that as from the appointed day (i.e.	 August 20	 1948) all laws in force in the Patiala State shall apply muutatis mutandis to 17 128 the territories of the said Union	 provided that all pro ceedings pending before courts and other authorities of any of the Covenanting States shall be disposed of in accordance with the laws governing such proeeedings in force in such Covenanting State immediately before August 20	 1948. In one of the Covenanting States	 viz.	 Kapurthala	 there was a law of income tax in force on the said date	 the rate of tax payable under which was lower than that payable under the Patiala Income tax Act	 and in another Covenanting State	 Nabha	 there was no law of income tax at all. For the ac counting year ending April 12	 1948	 assessees of Kapurthala State were assessed at the lower rates fixed by the Kapur thala Income tax Act	 in accordance with the proviso in section 3 of the Ordinance relating to pending proceedings	 and the assessees of Nabha were assessed at the higher rates fixed by the Patiala Act as there was no income tax law in Nabha on August 20	 1948	 and no income tax proceedings were therefore pending in Nabha. The petitioner who was an asses see residing in Nabha and who was assessed under the Patiala Act applied under article 32 of the Constitution for a writ in the nature of a writ of certiorari quashing the assessment on the ground (i) that he had been denied the fundamental right of equality before the law and equal protection of the laws guaranteed by article 14 of the Constitution inasmuch as he was assessed at a higher rate than that at which asses sees of Kapurthala were assessed	 (ii) that	 as the Ordi nance bringing the Patiala Income tax Act into force in Nabha was enacted only on August 20	 1948	 it cannot operate retrospectively and authorise the levy of tax on income which had accrued in the year ending April 12	 1948	 and therefore he was threatened with infringement of the funda mental right guaranteed by article 31 (1) of the Constitution that no one shall be deprived of his property save under authority of law: Held	 (i) that the discrimination	 if any	 between the assessees of Kapurthala and Nabha was not brought about by the Ordinance but by the circumstance that there was no income tax law in Nabha and consequently there was no case of assessment pending against any Nabha assessees; and in any case the provision that pending proceedings should be concluded according to the applicable at the time when the right is or liabilities accrued and the proceedings com menced	 was a reasonable law rounded upon reasonable classi fication of the assessees which is permissible under the equal protection clause; (ii) that	 as there is a special provision in article 965 of the Constitution that no tax shall be levied or collected except by authority of law	 cl. (1) of article 31 must be regarded as concerned with deprivation of property otherwise than by the imposition or collection of tax	 and inasmuch as the right conferred by article 265 not a right conferred by Part III of the Constitution	 it could not be enforced under article 129