Citation: 1959 Supp (1) SCR 528: AIR 1959 SC 149 : 35 ITR 190
Case Type: Civil Appeal
Case No: 208 of 1958
Decided On: 19 th November 1958
Appellant: Basheshar Nath
Respondent: Commissioner of Income Tax Delhi & Rajasthan and Ors
Intervener: Model Knitting Industries Ltd.
Bench: Sudhi Ranjan, C.J, N.H. Bhagwati, , S.K. Das, J, L. Kapur and K. Subba Rao, JJ.
Statutes Referred: Constitution of India, Taxation on Income(Investigation Commission) Act, 1947; Income Tax Act . 1922
Case Referred:
- M.CT. Muthiah v. CIT,
2. Behram Khurshed Pesikaka v. State of Bombay
3. Suraj Mall Mohta and Co. V. A.V. Visvanatha Sastri
Facts:
1. Ministry of finance(Revenue Division) referred the case of the appellant-assessee to the commission U/S 5(1) of the Taxation on Income(Investigation Commission) Act, 1947 on the ground that the Central Government had prima facie reasons to believe that the assessee had evaded payment of taxation on income to a substantial extent.
2. The commission announced on May 19th ,1954 that the profit, gains, income of the assessee had escaped from the assessment for the year beginning 1 st April,1939 to 31st March,1947 of a sum of 4,47,915.
3. The commission suggested that the assesse can go for settlement U/S 8-A for 75% payment of income escaped along with the penalty of 14,064. And the assesse had no other alternative but to accept it.
4. The entire sum of 3,50,000 was allowed to be paid in instalment at ₹5,000 p/m. The assesse paid its installment upto the total of 1,28,000, following which he made an application to the Income Tax Commissioner on 27th December,1957 stating that the
Section 5(1) of the Investigation Act was held unconstitutional and hence settlement U/S 8-A could not be enforced and was void. And that the attached property be released and the amount be refunded.
5. On January 29th 1950, the commissioner stated that the settlement is valid and binding upon the assesse. Aggrieved by this decision the assesse moved to the Supreme Court.
Issues Involved:
1. Whether settlement U/S 8-A of the Taxation on Income (Investigation Commission) Act, 1947 is valid.
2. Whether by entering into settlement the assesse waived off its fundamental right under Article 14 of the Constitution of India.
Observation/Obiter Dicta:
1. Hon’ble Supreme Court observed by reference to the Suraj Mall Mohta and Co. case and M.CT. Muthiah case that Section 5(1) of the Investigation Act was discriminatory in nature and offended the provision of Article 14 of the Constitution and was therefore void and unenforceable.
2. Section 8-A clearly mentions that the assesse can during the investigation before the Income Tax Commission, can apply for settlement and therefore the provision is an integral part of the investigation procedure. It was not a separate or independent procedure.
3. Hon’ble Court observed that U/S 8-A different assesse belonging to the same class of evaders could be dealt under different procedure. One could be dealt with harsh and drastic procedure while other with normal procedure giving rise to discriminatory approach. Hence it was declared void.
4. Respondent Attorney-General argued that the appellant-assessee by entering into settlement, voluntarily waived of its fundamental right. To which the Hon’ble Court observed that the rights enumerated in the Constitution of India are necessary
consequence of the preamble of the constitution. These fundamental rights have been included for the benefit of the society as a whole based upon public policy and not for any individual benefit. Hence the doctrine of waiver has no application.
5. “Articles 15(1), 20, 21 makes the proposition quite plain. A citizen cannot get discrimination by telling the State “You can discriminate”, or get convicted by waiving the protection given under Articles 20 and 21.”
Rationale:
1. Section 5(1) of the Taxation on Income (Investigation Commission) Act, 1947 provides that if the Central Government has prima facie reasons to believe that an assesse has tried to conceal its income to give effect to evasion of income tax, then it can refer the matter to the Commission authorized in this regard U/S 3 of the Act.
2. Article 14 of the Constitution provides that “The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.” This Article is an admonition to States that it cannot under any circumstances
discriminate among the citizen of India.
3. Article 20 of the Constitution of India provides safeguards to persons accused of crimes. That no person shall be convicted for any offences except for violation of law in force at the time of the commission of the act charged. It also safeguards the person against double jeopardy.
Judgement:
Sudhi Ranjan, C.J:
1. “On a consideration of the nature of the fundamental right flowing from Article 14, we have no doubt in our mind that it is not for a citizen or any other person who benefits by reason of its provisions to waive any breach of the obligation on the part
of the State.
2. We are, therefore, of the opinion that this appeal should be accepted, the order of the Income Tax Commissioner Delhi dated January 29, 1958 should be set aside and all proceedings now pending for implementation of the order of the Union Government dated July 5, 1954 should be quashed and that the assessee-appellant should get the costs of this appeal.”
Conclusion:
1. The Supreme Court of India has always held noble views when it comes to protection of rights of the citizen.
2. Specially in a country like India which has suffered due to wide discrimination on the grounds of caste, creed, religion, color etc it is the inevitable for the Supreme Court to protect and safeguard the rights of the citizen as guaranteed by the Constitution.
3. Similarly here in this case the Supreme Court evenly performed its noble duty by rejecting the waiver of fundamental rights in question. Allowing waiving of such rights would indecisive the core objectives upon which the Constitution of India stands.
Prepared by Kaushal Aggarwal