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PETITIONER:

A. THANGAL KUNJU MUSALIAR

Vs.

RESPONDENT:

M. VENKITACHALAM POTTI AND ANOTHER(with connected appeal)

DATE OF JUDGMENT:

20/12/1955

BENCH:

BHAGWATI, NATWARLAL H.

BENCH:

BHAGWATI, NATWARLAL H.

DAS, SUDHI RANJAN

BOSE, VIVIAN

JAGANNADHADAS, B.

SINHA, BHUVNESHWAR P.

CITATION:

1956 AIR 246 1955 SCR (2)1196

ACT:

Constitution of India-Article 14-Travancore Taxation on

Income (Investigation Commission) Act, 1124(Act XIV of

1124), s. 5(1)-Whether ultra vires the Constitution-Read

along with s. 47(1) of Travancore Income-Tax Act, 1121 (Act

XXIII of 1121)High Court-Jurisdiction-Article 226 of the

Constitution-Writ Petition against authorise Official-

Appointed under s. 6 of the Travancore Act (XIV of 1124)-

Investigation Commission-Whether competent under the

provisions of the Travancore Act XIV of 1124 to investigate

cases not referred to it by Government.

HEADNOTE:

The petitioners native of Quilon within the Travancore State

-had been assessed to income-tax for the years 1942 and

1943, the final orders in his assessment having been passed

by the Chief Revenue authority of Travancore in December

1946 and November 1946 respectively. Travancore Taxation on

Income (Investigation Commission) Act, 1124 (Act XIV of

1124) modelled on the Indian Act XXX of 1947 was passed by

the Travancore Legislature, to provide for an investigation

into matters relating to taxation on income. In July 1949 ,

the United State of Travancore and Cochin was brought into

existence as a result of integration between the two States.

All existing laws of Travancore were to continue in force by

virtue of Ordinance I of 1124 which was later enacted as Act

VI of 1125. In November 1949 the Government of the 'United

State of Travancore-

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Cochin issued orders under s. 5(1) of the Travancore Act XIV

of 1 124 referring the cases of the petitioner for the years

1942 and 1943 (called Evasion Cases Nos. 1 & 2 of 1125) for

investigation by the Travancore Income-Tax Investigation

Commission. Before the Commission could make its report the

Constitution of India came into force and the United State

of Travancore-Cochin became a part of India (Part B State)

and the Travancore Act XIV of 1124 was continued in force

until altered, amended or repealed by a competent authority.

In April 1950 Parliament passed Act XXXIII of 1950 whereby

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Taxation on Income (Investigation Commission) Act, (Act XXX

of 1947) was extended to Travancore-Cochin and the law of

Travancore corresponding to Act XXX of 1947 was to continue

in force with certain modifications. In October 1951, a

notification issued by the Indian Investigation Commission

appointed Respondent No. 1 as an authorised official under

s. 6 of Travancore Act XIV of 1124 read with Act XXXIII of

1950. Respondent No. I sent a copy of that notification to

the petitioner on 21st November, 1951 for his information

and further intimated to him that the investigation proposed

to be conducted will not be confined to the years 1942 and

1943 but that it would be necessary for him to investigate

the petitioner's income for the period from 1940 to the last

completed assessment year.

The petitioner filed a writ petition in the Travancore High

Court against Respondent No. I and Respondent No. 2 (Indian

Income-Tax Investigation Commission) for a writ of

prohibition or any other writ prohibiting the Respondents

from holding an enquiry into the cases registered as Evasion

Cases Nos. 1 & 2 of 1126 or from holding an investigation

into the income of the petitioner from the year 1940 to the

last completed assessment year. The Travancore High Court

held that the Respondent No. 2 had all the powers that the

Travancore Commission had under Travancore Act XIV of 1124

and no more and granted the writ prohibiting respondents

from conducting an enquiry into years other than 1942 and

1943. Both the parties appealed to the Supreme Court

against the order of the High Court. A preliminary

objection to the jurisdiction of the High Court to entertain

the writ petition was repeated in the Supreme Court by the

Attorney-General.

Held, that the High Court bad jurisdiction under Art. 226 of

the Constitution to issue a writ against Respondent No. 1

because under the provisions of s. 6 of the Travancore Act

XIV of 1124 the authorised official (Respondent No. 1) had

considerable powers conferred upon him in the conduct of the

investigation, and if he did anything as authorised official

which was not authorised by law or was violative of the

fundamental rights of the petitioner as in the present case

be would be amenable to the jurisdiction of the High Court

under Art. 226 of the Constitution.

Held, further that under the provisions of the Travancore

Act XIV of 1124 the Commission had no authority 'to

investigate any case suo motu. It could only investigate

cases referred to it by

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Government. All that was done in the present case was that

by two separate orders made under s. 5(1) of the Act the

Government referred two cases of the petitioner for the two

years 1942 and 1943 to the Commission. There was no other

order under s. 5(1) at any time before 16th February 1950

and none could be made under that sub-section after that

date. Therefore neither Respondent No. 2 nor Respondent No.

1 who had been appointed as authorised Official by

Respondent No. 2 had jurisdiction to cover any period beyond

the two specific years 1942 and 1943 and the notice dated

21st November 1951 issued by Respondent No. 1 to investigate

the petitioner's income for the period from 1940 to the last

completed assessment year was clearly illegal and without

jurisdiction.

Held, also that s. 5(1) of the Travancore Act XIV of 1124

which is to be read in juxta-position with s. 47 of the

Travancore Inc6me-Tax Act, 1121 (XXIII of 1121) is not

discriminatory and violative of the fundamental right

guaranteed under Art. 14 of the Constitution.

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Section 47(1) of the Travancore Act XXIII of 1121 was

directed only against those persons concerning whom definite

information came into the possession of the, Income-tax

Officer and in consequence of which the Income-tax Officer

discovered that the income of those persons had escaped or

been under-assessed or assessed at too low a rate or had

been the subject of excessive relief. The class of persons

envisaged by s. 47(1) was a definite class about which there

was definite information leading to discovery within 8 years

or 4 years as the case may be of definite item or items of

income which had escaped assessment. The action to be taken

under Travancore Act XXIII of 1121 was not confined to

escapement from assessment of income made during the war

period (September 1939 to 1946). Action could be taken in

respect of income which escaped assessment even before the

war and also more than 8 years after the end of the war.

On the other hand under s. 5(1) of the Travancore Act XIV of

1124 the class of persons sought to be reached comprised

only these persons about whom there was no definite

information and no discovery of any definite item or items

of income which escaped taxation but about whom the

Government had only prima facie reason to believe that they

had evaded payment of tax to a substantial amount. Further,

action under s. 5(1) read with s. 8(2) of the Travancore Act

XIV of 1124 was definitely limited to the evasion of payment

of taxation on income made during the war period and

therefore s. 5(1) of the Travancore Act XIV of 1124 was not

discriminatory in comparison with s. 47(1) of the Travancore

Act XXIII of 1121.

Election Commission, India v. Saka Venkata Rao ([1953]

S.C.R. 1144), K. S. Rashid & Son v. The Income-tax

Investigation Commission, etc. ([1954] S.C.R. 738), Azmat

Ullah v. Custodian, Evacuee Property, U.P., Lucknow (A.I.R.

1955 All, 435), Burhanpur

1199

National Textile Workers Union, Burhanpur v. Labour

Appellate Tribunal of India at Bombay and others (A.I.R.

1955 Rag. 148), Joginder Singh Waryam Singh v. Director,

Rural Rehabilitation, Pepsu, Patiala and others (A.I.R. 1955

Pepsu 91), Chiranjit Lal Chowdhuri v. The Union of India

([1950] S.C.R. 869), Budhan Chowdhury and others v. The

State of Bihar ([1955] 1 S.C.R. 1045), Suraj Mall Mohta &

Co. v. A. V. Visvanatha Sastri and another ([1955] 1 S.C.R.

448), Shree Meenakshi Mills Ltd. v. Sri A. V. Visvanatha

Sastri and Another ([1955] 1 S.C.R. 787), Aswini Kumar

Ghose's case ([1953] S.C.R. 1), Subodh Gopal Bose's case

([1954] S.C.R. 587, 628), Kathi Baning Bawat v. The State of

Saurashtra ([1952] S.C.R. 435), Palser v. Grinling ([1948]

A.C. 291) and Kedar Nath Bajoria v. The State of West

Bengal ([1954] S.C.R. 30), referred to.

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 21 and 22

of 1954.

Appeals under Article 133(1) (c) of the Constitution of

India from the judgment and order dated the 18th September

1953 of the Travancore-Cochin High Court at Ernakulam in O.

P. No. 41 of 1952.

M.K. Nambiar, (N. Palpu, Sri Narain Andley and Rajinder

Narain) for the appellant in C. A. No. 21 of 1954 and

respondent in C. A. No. 22 of 1954.

M.C. Setalvad, Attorney-General of India (G. N. Joshi), R.

Ganapathy Iyer, Porus A. Mehta and R. H. Dhebar), for the

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respondents in C. A. No. 21 of 1954 and appellants in C. A.

No. 22 of 1954.

1955. December 20. The Judgment of the Court was delivered

by

BHAGWATI J.-These two appeals with certificates under

article 133 of the Constitution are directed against a

judgment of the High Court of TravancoreCochin in a writ

petition filed by one A. Thangal Kunju Musaliar, hereinafter

called the petitioner.

The petitioner is a native of Quilon within the Travancore

State which was originally under the sovereignty of the

Maharaja of Travancore. He is the Managing Director of

Messrs A. Thangal Kunju. Musaliar & Sons Ltd., Quilon, and

bad been assessed to income-tax for the years 1942 and 1943

and the final orders in his assessment for the said years

were

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passed by the Chief Revenue Authority of Travancore on the

6th December 1946 and 30th November 1946 respectively.

On the 7th March 1949, the Travancore Legislature passed Act

XIV of 1124 (M.E.) modelled on our Act XXX of 1947, styled

the Travancore Taxation on Income (Investigation Commission)

Act, 1124, to provide for an investigation into matters

relating to taxation on income. Section 1(3) of the Act

provided that it was to come into force on such date as the

Travancore Government may by notification in the Government

Gazette appoint. 'Under section 3, a Commission to be

called the Income-tax Investigation Commission was to be

constituted inter alia to investigate in accordance with the

provisions of the Act cases referred to it under section 5

and report thereon to the Government. The Commission was to

be appointed to act in the first instance up to the last day

of Karkadakom 1125 (16-8-1950) but the Government was

empowered to extend its appointment to any period up to the

last day of Karkadakom 1126 (16-8-1951). Section 5(1)

enacted that the Government might, at any time before the

last day of Makaram 1125 (15-2-1950) refer to the Commission

for investigation and report any case or points in a case in

which the Government had prima facie reasons for belief that

a person had to a substantial extent evaded payment of tax

on income together with such material as might be available

in support of such belief. Section 6 prescribed the powers

of the Commission and inter alia provided for the

appointment by the Commission of an authorised official to

examine accounts or documents, interrogate persons or obtain

statements from persons.

On the 1st July; 1949, the Travancore State and the Cochin

State integrated with each other and there was brought into

existence the United State of Travancore and Cochin. By

virtue of Ordinance I of 1124 promulgated on the same day,

called the United State of Travancore and Cochin Administra-

tion and Application of Laws Ordinance, 1124 (Ordinance I

was enacted later as Act VT of 1125),

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all existing laws of Travancore were to continue in force

till altered, amended or repealed by competent authority.

The existing law of Travancore was defined to mean any law

in force in the State of Travancore immediately prior to the

1st July 1949.

On the 26th July 1949, a notification was published in the

Travancore-Cochin Government Gazette whereby, in exercise of

the powers conferred by section 1(3) of the Travancore

Taxation oN Income Investigation Commission) Act XIV of 1124

as continued in force By the United State of Travancore and

Cochin Administration & Application of Laws (Ordinance, 1124

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(I of 1124), the Government appointed the 7th Karkadakom

1124 (22-7-1949) to be the date on which the said Act was To

have come into force.

On the 26th November 1949 the Government of the United

State of Travancore and Cochin issued orders under section

5(1) of the Travancore Act XIV of 1124 referring the cases

of the petitioner for the years 1942 and 1943 for

investigation by the Travancore Income-tax Investigation

Commission. These orders had specific reference to the

years 1942 and 1943 and the investigation to be made by the

Commission was with reference to the alleged evasion of tax

by the petitioner for those respective years. The cases

were registered as Evasion Cases I and 2 of 1125.

On the 10th December 1949 the petitioner received from the

Secretary of the Commission a notice in regard to the said

cases. The relevant portion of the said notice stated:

"Whereas the Income-tax Investigation Commission having

been informed that a substantial portion of your income for

1942 and 1943 has escaped assessment, has ordered

investigation into the matter, you are hereby required to

produce the following on or before 21-12-1949 before the

Commission.

1. The account books (day books and ledgers) for the years

1942 and 1943.

2. .... ..... .......

3. ..... ..... .......

4. ..... ...... .......

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5. ..... ...... .....

6. .... ..... .....

Pursuant to this notice the petitioner produced the

relevant books and the Commission duly completed its

investigation under the terms of the Travancore Act XIV of

1124.

Before the Commission could, however, make its report, the

Constitution of India came into force on the 26th January

1950 and the United State of Travancore and Cochin became a

part of the territory of India,, forming, a Part 'B' State.

Under article 372(1) of the Constitution, the Travancore

Taxation on Income (Investigation Commission) Act, 1124

(Travancore Act XIV of 1124) was continued in force "until

altered, amended or replaced by a competent authority"

An Indian States Finance Enquiry Committee had been

appointed in 1948-49 and it had made its recommendations

regarding the agreements to be entered into between the

President of the Union and the Rajpramukhs in regard to

financial arrangements. In accordance with the

recommendations of the Committee, an agreement was entered

into on the 25th February 1950 between the President of the

Union and the Rajpramukh of Travancore-Cochin in regard to

these matters and on the 31st March 1950 the Finance Act,

1950 (Act XXV of 1950) came into force and the Indian

Income-tax Act, 1922 (XI of 1922) was extended to

Travancore-Cochin.

On the 18th April 1950, the Opium and Revenue Laws

(Extension of Application) Act, 1950, being Act XXXIII of

1950, was passed by Parliament extending to Travancore-

Cochin the Taxation on Income (Investigation commission)

Act, 1947 (XXX of 1947) and section 3 of that Act provided

that the law of Travancore corresponding to the Taxation on

Income (Investigation Commission) Act, 1947 (XXX of 1947)

shall continue to remain in force with the following

modifications, viz.,

(a) that all cases referred to or pending before the

State Commission (by whatever name called) in respect of

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matters relating to taxation on income

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other than agricultural income shall stand transferred to

the Central Commission for disposal; and

(b) that the State law shall, so far as may be, apply

to determine the procedure that may be followed and powers

that may be exercised by the Central Commission in the

disposal of cases transferred under clause (a).

The Travancore Commission bad been appointed in the first

instance to act up to the last -day of Karkadakom 1125

116-8-1950). Neither the Travancore Commission nor the

Indian Commission to which the pending cases before the

Travancore Commission were transferred as aforesaid made any

report on these cases of the petitioner before the expiry of

this period nor was any extension of the term of appointment

of the Travancore Commission made up to the last day of

Karkadakom 11 26 (16-8-1951) as originally contemplated. On

the 25th August 1951, therefore, the Opium and Revenue Laws

(Extension of Application) Amendment Act, 1951, being Act

XLIV of 1951, was passed amending Act XXXIII of 1950 whereby

it was provided that in the place of clause (b) of section 3

of Act XXXIII of 1960, the following clause shall be

substituted and shall be deemed always to have been

substituted, viz., "in the disposal of cases transferred to

the Central Commission, the Commission shall have and

exercise the same powers as it has and exercises in the

investigation of cases referred to it under the Taxation on

Income (Investigation Commission) Act, 1947 (XXX of 1947)

and shall be entitled to act for same term as under sub-

section (3) of section 4 of that Act" and it was further

provided that any decision given by the Chief Revenue

Authority of Travancore or of Travancore-Cochin shall be

deemed a decision of the Income-tax Authority for the

purposes of sub-section (2) of section 8 of the Travancore

Act XIV of 1124.

On the 18th October 1951, a notification was issued by

the Indian Income-tax Investigation Commission appointing M.

Venkitachalam Potty, Income-tax Officer on Special Duty,

Trivandrum, as an

152

1204

authorised official under section 6 of the Travancore

Taxation on Income (Investigation Commission) Act, 1124 read

with Act XXXIII of 1950. The authorised official,

hereinafter referred to as respondent 1, forwarded to the

petitioner on the 21st November 1951 for his information a

copy of that notification, investing him with the powers of

an authorised official and intimated that the investigation

proposed to be conducted will not be confined to the years

1942 and 1943, the two years originally covered by Evasion

Cases Nos. 1 and 2 of 1125 but that it would be necessary

for him to investigate the petitioner's income for the

period from 1940 to the last completed assessment year

notwithstanding the fact that the erstwhile State Commission

had not specifically intimated to him that they proposed to

cover the full period.

The petitioner, by his registered letter dated the 23rd

February 1952 pointed out to respondent 1 the illegality of

the steps proposed to be taken by him to which, however, the

latter replied by his letter dated the 13th March 1952

stating that he proposed to consider income for the full

investigation period, viz., from 1940 to the last completed

assessment year.

The petitioner thereupon filed on the 6th May 1952 a writ

petition in the High Court of Travancore-Cochin, being 0. P.

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41 of 1952 against respondent 1 as also the Indian Income-

tax Investigation Commission, hereinafter called respondent

2, for a writ of prohibition or any other appropriate writ

or direction prohibiting the respondents from holding any

enquiry into the cases registered as Evasion Cases Nos. I

and 2 of 1125 on the file of Income-tax Investigation

Commission of Travancore or from holding any investigation

into the income of the petitioner from 1940 to the last

completed assessment year or for any other period.

Respondent 1 filed a counter-affidavit in which it was

inter alia submitted:

"that the Commission by these proceedings is not trying

to clutch at non-existent jurisdiction. They are fully

prepared to shape their proceedings in accordance with the

directions of this Hon'ble Court".

1205

This affidavit was stated to have been filed as the

answer of both the counter-petitioners, viz., respondents I

and 2 and respondent I stated that he had been fully

authorised to do so.

The writ petition was heard by a Bench of three Judges of

the High Court consisting of K. T. Koshi, C. J. and P. K.

Subramonia Iyer and M. S. Menon, JJ. The learned Judges held

that respondent 2 bad all the powers that the Travancore

Commission had under the Travancore Act XIV of 1124 and no

-mote and accordingly issued a writ prohibiting respondent I

from conducting an investigation into years other than 1942

and 1943 observing that any attempt to enlarge the scope of

the enquiry was without legislative warrant.

The petitioner appealed in so far as the order of the High

Court was against him permitting the enquiry for the years

1942 and 1943, his appeal being Civil Appeal No. 21 of 1954.

Respondents I and 2 appealed against the order of the High

Court in so far as it prohibited respondent 1 from

conducting investigation for the years which were not

covered by the Evasion Cases Nos. I and 2 of 1125, their

appeal being Civil Appeal No. 22 of 1954.

Both these appeals came for hearing and final disposal

before us on the 20th September 1955. After the arguments

had proceeded for some time Shri Nambiyar, for the

petitioner, asked for leave to urge additional grounds,

viz., (a) that section 5(1) of Travancore Act XIV of 1124

was ultra vires under articles 14 and 19, of the

Constitution, and (b) that in particular,the said section

5(1) infringed article 14 of the Constitution inasmuch as it

was not based on any rational classification whatsoever, and

the word "substantial" therein could not possibly be deemed

to be any form of classification. On, our giving him such

leave the learned Attorney-General, appearing for

respondents I and 2 asked for time to put in an affidavit

showing the background against which Travaneore Act XIV of

1124 bad been passed by the, Travancore Legislature. An

affidavit was accordingly filed before us by Gauri Shanker,

Secretary of

1206

respondent 2 setting out facts and events as and by way of

answer to these new contentions of the petitioner.

A preliminary objection to the jurisdiction of the High

Court to entertain the writ petition may be dealt with

first. This objection was not taken in the counter-

affidavit filed by the respondents, they having expressed

their readiness to shape their proceeding,s in accordance

with the directions of the Court. The learned Advocate-

General of Travancore-Cochin, however, urged before the High

Court that the Court was not competent to entertain the

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petition in view of the fact that respondent 2 was not

amenable to i s jurisdiction and the argument was that as

respondent 2 functioned outside the State of Travancore-

Cochin and respondent I was a mere subordinate of respondent

2 it was beyond the competence of the High Court to grant

the prayer embodied in the petition. The High Court

overruled the objection observing that respondent I was

resident within the State of Travancore- Cochin, his office

was situated at Trivandrum, all his communications to the

petitioner had emanated from within the State and the

activities complained about were activities confined to the

State. It was of the opinion that the prayer in the

petition was, in essence, a prayer to paralyse the hands of

respondent I and thus prevent the mischief and that, by his

residence and the location of his office within the State,

respondent 1 was clearly amenable to the jurisdiction of the

Court under article 226 of the Constitution. It was further

of opinion that the writ against respondent 1, if issued,

was sufficient for stopping the mischief complained about

and therefore it was unnecessary for it to decide whether or

not a writ could be issued so far as respondent 2 was

concerned. It, therefore, issued the necessary writ of

prohibition against respondent 1.

The learned Attorney-General pressed this preliminary

objection at the outset while arguing Civil Appeal No. 22 of

1954. He pointed out that respondent 2 had its office in

New Delhi and was permanently located there and the mere

fact of its having appointed res-

1207

pondent 1 to function and carry on the investigation within

the State. of Travancore under its direction did not make it

amenable to the jurisdiction of the High' Court. He,

therefore, contended that the High Court had no jurisdiction

to entertain the writ petition against respondent 2. He

further contended that the High Court could not do

indirectly what it was not able to do directly and that it

could not issue any writ of prohibition against respondent 1

either even though he had his office at Trivandrum and had a

permanent location within the jurisdiction of the High Court

inasmuch as he was merely an arm of respondent 2 and any

writ issued against him would have the indirect effect of

prohibiting respondent 2 from exercising its legitimate

functions within the ambit of its powers under the

Travancore Act XIV of 11 24 read with Act XXX of 1950 and

Act XLIV of 1951.

Reliance was placed by him on the decision of this Court in

Election Commission, India v. Saka Venkata Rao(1). The

respondent in that case bad applied to the High Court of

Madras under article 226 for a writ restraining the Election

Commission, a statutory authority constituted by the

President and having its office permanently located at New

Delhi, from enquiring into his alleged disqualification for

membership of the Assembly, and a single Judge of the High

Court had issued a writ of prohibition restraining the

Election Commission from doing so. The Election Commission

filed an appeal to this Court and agitated the question of

the jurisdiction of the High Court under article 226 to

issue the writ against it. While discussing this question,

Patanjali Sastri, C.J., who delivered the judgment of the

Court, observed as under:-

"But wide as were the powers thus conferred, a two-fold

limitation was placed upon their exercise. In the first

place, the power is to be exercised "throughout the,

territories in relation to which it exercises jurisdiction",

that is to say, the writs issued by the Court cannot run

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beyond the territories subject to its jurisdiction.

Secondly, the person or authority to

(1) [1953] S.C.R. 1144.

1208

whom the High Court is empowered to issue such writs must be

"within those territories", Which clearly implies that they

must be am-enable to its jurisdiction either by residence or

location within those territories".

The learned Chief Justice then traced the origin and

development. of the power to issue prerogative writs as a

special remedy in England and observed at page 1151:-

"These writs were thus specifically directed to the

persons or authorities against whom redress was sought and

were made returnable in the Court issuing them and, in case

of disobedience, were enforceable by attachment for

contempt. These characteristics of the special form of

remedy rendered it necessary for its effective use that the

persons or authorities to whom the Court was asked to issue

these writs should be within the limits of its territorial

jurisdiction".

The mere functioning, of the tribunal or authority

permanently located and normally carrying on its activities

elsewhere, within the territorial limits was not considered

sufficient to invest the High Court with jurisdiction under

article 226 nor was the accrual of the cause of action

within the territories considered sufficient for the

purpose. The residence or location within the territories

of the person or authority was considered a condition of the

High Court being empowered to issue such writs with the

result that the Election Commission having its office

permanently located at New Delhi was held not amenable to

the jurisdiction of the High Court for the issue of a writ

under article 226.

This decision in Saka Venkata Rao's case was followed by

this Court in K. S. Rashid & Son v. The Income-tax

Investigation Commission, etc.(1). In that case, the

assesses who were within the state of U.P. and whose

original assessments were made by the income-tax authorities

of that State had filed writ petitions in the Punjab High

Court for the issue of writs tinder article 226 to the

Income-tax Investigation-Commission located in Delhi and

investigating

(1) [1954] S.C.R. 738.

1209

their cases under -section 5 of the Taxation on Income

(Investigation Commission) Act, 1947. The Punjab High Court

had sustained the objection urged on behalf of the

respondents to the effect that the assesses having belonged

to the State of U.P. their assessment was to be made by the

Income-tax Commissioner of that State and the mere fact that

the location of the Investigation Commission was in Delhi

would not confer jurisdiction on the Punjab High Court to

issue writs under article 226 and had dismissed the

petitions. This Court, on appeal, distinguished the

decision in Parlakimidi's case which was sought to be relied

upon by the respondents before it and followed the position

in law as it bad been enunciated in Saka Venkata Rao's case,

supra, and held that the Punjab High Court had jurisdiction

to issue a writ under article 226 to the Investigation

Commission which was located in Delhi in spite of the fact

that the assesses were within the State of U.P. and their

original assessments were made by the income-tax authorities

of that State.

The principle of these decisions would, it was urged by

the learned Attorney-General, eliminate respondent 2 and the

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High Court of Travancore-Cochin would have no jurisdiction

to entertain the writ petition against it.

It was, however, urged on behalf of the petitioner that,

in the affidavit filed by the respondents, both the

respondents had submitted that they were fully prepared to

shape their proceedings in accordance with the directions of

the Court. This, it was submitted, was a voluntary

submission to the jurisdiction of the High Court investing

the High Court with jurisdiction to issue the appropriate,

writ against respondent 2. We need not, however, express any

opinion on this point because no writ was in fact issued by

the High Court against respondent 2 nor was any appeal filed

by the petitioner against that part of the decision of the

High Court.

The real question, however, is whether a writ could issue

against respondent 1 who is, it was submitted, a mere arm of

respondent 2 and a writ against whom

1210

would be equivalent to a writ issued by the High Court

against respondent 2 which it had no jurisdiction to do.

An authorised official derives his appointment from the

Commission under section 6 of the Travancore Act XIV of

1124. Section 6(4) of the Act provides that if in the

course of any investigation conducted by the Commission it

appears to the Commission to be necessary to examine any

accounts or documents or to interrogate any person or to

obtain any statement from any person the Commission may

authorise any income-tax authority not below the rank-of an

income-tax officer (called the "authorised official") in

that behalf subject to such directions as may be issued by

the Commission from time to time and the authorised official

shall examine the accounts or documents, interrogate the

persons and obtain the statements from the persons. The

authorised official is invested, under section 6, sub-

section (5), subject to the direction of the Commission,

with the same powers as the Commission under sub-sections

(1), (2) and (3) which empower the Commission to require any

person or banking or other company to prepare and furnish

written statements of accounts and affairs giving

information on such points or matters as in the opinion of

the Commission may directly or indirectly be useful or

relevant to any case referred to it; to administer oaths and

exercise all powers of a Civil Court under the Code of Civil

Procedure for the purpose of taking evidence on oath,

enforcing attendance of witnesses and of persons whose cases

are being investigated, compelling the production of docu-

ments and issuing commissions for the examination of

witnesses and to impound and retain in its custody for such

period as it thinks fit any documents produced before it.

The authorised official is, under section 6, sub-section

(10), to have full and free access to all documents, books

and other papers which in his opinion are relevant to the

proceedings in any case or cases under the Act and if

specially authorised in this behalf by the Commission to any

buildings and places where he may have reason to believe

that such books,

1211

documents or papers may be found and also to have power to

place identification marks on such books, documents or

papers and to make extracts or copies therefrom or if he

considers it necessary to take possession of or seize -such

books, documents or papers. Under section 6, sub-section

(11), the authorised official is deemed to be a public

servant within the meaning of section 16 of the Travancore

Penal Code (I of 1074).

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It is clear from the above provisions that the authorised

official has considerable powers conferred upon him in the

conduct of the investigation and even though he could be

called a mere arm of the Commission or an authorised agent

of the Commission, he has important functions to discharge

and is not merely a mouth-piece of the Commission or a con-

duit-pipe transmitting the orders or the directions of the

Commission. He is no doubt under the general control and

supervision of the Commission but he performs the various

functions assigned to him on his own initiative and in the

exercise of his discretion. If, therefore, he does anything

in the discharge of his functions as authorised official

which is not authorised by law or is violative of the

fundamental rights of the petitioner, he would be amenable

to the jurisdiction of the High Court under article 226.

Even though this is the prima facie position, it was urged

that he is acting under the directions of the Commission as

its authorised agent and as such no writ can issue against

him, because the principal who directs the activities and

not the agent would be liable for the same. This contention

is unsound. There can be no agency in the matter of the

commission of a wrong. The wrong doer would certainly be

liable to be dealt with as the party directly responsible

for his wrongful action. The relationship between principal

and agent would only be relevant for the purpose of

determining whether the principal also is vicariously liable

for the wrong perpetrated by his agent. On the analogy of

criminal liability, the

153

1212

offender could certainly not be heard to say that he was

committing the offence under the behest or directions of his

principal. On the analogy of a civil wrong, the tortfeasor

could certainly not protect himself against liability on the

ground of having committed the tort under the directions of

his principal. The

agent could in no event exculpate himself from liability for

the wrongful act done by him and if he is thus amenable to

the jurisdiction of the High Court the High Court could

certainly issue an appropriate writ against him under

article 226. The jurisdiction under article 226 is

exercised by the High Court in order to protect and

safeguard the rights of the citizens and wherever the High

Court finds that any person within its territories is guilty

of doing an act which is not authorised by law or is

violative of the fundamental rights of the citizen, it

exercises that jurisdiction in order to vindicate his rights

and redress his grievances and the only conditions of its

exercise of that jurisdiction are those laid down in the

passage from Patanjali Sastri, C.J.'s judgment cited above.

The argument that by issuing a writ against the agent under

those circumstances the High Court would be putting him in a

position whereby he would be compelled to disobey the

directions of his principal is also of no avail for the

simple reason that an agent is bound to obey all lawful

directions of his principal and not directions which the

High Court holds to be unlawful or not justified in law.

The agent could certainly be prohibited from obeying the un-

lawful directions of his principal and even if the principal

cannot be reached by reason of his being outside the

territories, the arm of the law could certainly reach the

agent who is guilty of having committed the wrong and the

High Court could certainly issue a writ against him under

article 226.

It was further contended that by issuing such a writ

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against the authorised official the High Court would be

indirectly prohibiting the Commission from conducting the

investigation within the territories even though it could

not directly prohibit the Com-

1213

mission from doing so. If the Commission was doing

something within the territories through its authorised

official which was not justified in law, it would not lie in

the mouth of the Commission to urge that the High Court

could not issue a writ of prohibition against its agent, the

authorised official, who had his residence or permanent

location within the territories merely because it would be

indirectly prohibited from perpetrating a wrong within the

territories. The principal could, in no event, urge that

his agent should be allowed to function for him within the

territories in a manner which was not warranted by law or

had no justification in law. It is expected that once this

Court has declared the law the Investigation Commission

would comply with it and not place its agent in the wrong by

directing him to act contrary to the law so declared.

Our attention was drawn by the learned Attorney-General

in this connection to three recent decisions of the High

Courts of Allahabad, Nagpur and Pepsu which, according to

him, supported his contention, viz., Azmat Ullah v.

Custodian, Evacuee Property, U.P., Lucknow(1), Burhanpur

National Textile Workers Union, Burhanpur v. Labour

Appellate Tribunal of India at Bombay and others(2) and

Joginder Singh Waryam Singh v. Director, Rural

Rehabilitation, Pepsu, Patiala and others(2). These

decisions, however, are clearly not in point for, in each of

them, the order passed by the authority within the

territories and accordingly within the jurisdiction of the

High Court concerned had merged in the order of the superior

authority which was located outside the territories and was,

therefore, beyond the jurisdiction of that High Court. In

that situation, a writ against the inferior authority within

the territories could be of no avail to the petitioner

concerned and could give him no relief for the order of the

superior authority outside the territories would remain

outstanding and operative against him. As, therefore, no

writ could be issued against that outside authority and as

the

(1) A.I.R. 1955 All. 435. (2) A.I.R. 1955 Nag. 148.

(3) A.I.R. 1955 Pepsu 91.

1214

orders against the authority within the territories would,

in view of the orders of the superior authority, have been

infructuous, the High Court concerned had, of necessity, to

dismiss the petition. Such, however, was not the position

in the present petition before the High Court of Travancore-

Cochin. There was here no question of merger of any

judicial order of respondent I into the judicial order of

respondent 2. In this case respondent 1 was actually

claiming to exercise powers conferred upon him by certain

sections of the Travancore Act XIV of 1124 which, it was

submitted, were contrary to law or discriminatory and

consequently ultra vires the Constitution. The fact that

respondent 1 was the agent of respondent 2, which being

beyond its jurisdiction could not be reached by the High

Court, could not make his acts any the less objectionable or

discriminatory and ultra vires. It is sufficient to say

that if his action was contrary to law-or if the provisions

of law under which he was claiming to act became, after the

commencement of the Constitution, void under article 13(1)

as being repugnant to article 14 and the doer of the illegal

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act was within the reach of the High Court, the High Court

had jurisdiction under article 226 to issue a writ against

respondent I and thereby prevent further infringement of the

petitioner's fundamental rights. The preliminary objection

urged by the learned Attorney-General against the jurisdic-

tion of the High Court, therefore, fails.

The next question canvassed in Civil Appeal No. 22 of

1954 was that respondent 2 was entitled to investigate the

alleged evasion of tax by the petitioner not only for the

years 1942 and 1943 but also the other years from 1940 to

the last completed assessment year. The decision of this

question turns on a construction of the terms, of the

references made by the Government of the United State of

Travancore and Cochin under section 5(1) of the Travancore

Act XIV of 1124. A report dated the 17th November 1949 had

been made by the Board of Revenue in regard to the income-

tax assessment of the petitioner for the years 11 19 and

1120(M.E.) and two orders were passed

1215

on the 26th November 1949 by the Government on -the strength

of that report. The first of these orders related to

taxation on the petitioner's income for 1119 and the second

related to the taxation on his income for 1120. The return

of income for the year ending the 31st December 1942 was the

subject-matter of the first order and after setting out the

materials in the order the Government stated that they had

prima facie reasons for believing that the petitioner had to

a substantial extent evaded payment of tax on his income for

1119 and they considered that this was a fit case for

reference to the Income-tax Investigation 'Commission under

section 5(1) of the Act. The second order referred to the

petitioner's return of income for the year ending the 31st

December 1943 and after ,setting out the materials, wound up

similarly by stating that the Government had Prima facie

reasons for believing that the petitioner bad to a

substantial extent evaded payment of tax on his income for

1120 and they considered that this was a fit case for ref-

erence to the Income-tax Investigation Commission under

section 5(1) of the Act.

A cursory perusal of the Travancore Act XIV of 1124 will

show that the Commission had no authority to investigate any

case suo motu. It could only investigate cases referred to

it by the Government. Thus under section 5(1), Government

might refer to it for investigation and report any case or

points in a case in which the Government had prima facie

reasons for believing that a person had to a substantial

extent evaded payment of taxation on income. Such

reference, however, could be made at anytime before the 16th

February 1950 but not later. Again, under sub-section (4)

of the same section, if in the course of investigation into

any case or points in a case referred to it under sub-

section (1) the Commission bad reason to believe that some

other person had evaded payment of taxation on income or

some other points required investigation, it might make a

report to the Government and the Government would forthwith

refer to the Commission for investigation the case of such

other person or such additional points as might

1216

be indicated in that report. All that was done in the

present case was that by two separate orders made under

section 5(1) of the Act the Government referred two cases of

the petitioner for the two years 1942 and 1943 to the

Commission and they were registered as Evasion Cases Nos. 1

and 2 of 1125. There was no other order under section 5(1)

at any time before the 16th February 1950 and none could be

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made under that sub-section after that date. It was not

suggested that there was any report by the Commission or any

reference of any case or additional points in a case under

section 5(4). It was, therefore, contended for the

petitioner that the Commission had no jurisdiction to

enquire into any alleged evasion in any year prior or

subsequent to the years 1942 and 1943. The learned

Attorney-General, on the other hand, contended that the

Government could, under section 5(1) of the Act, only refer

the case of the petitioner who was reasonably suspected to

have evaded the tax and, therefore, the whole case of the

petitioner for all the years referred to in section 8(2) of

the Act was the subject-matter of the investigation which

bad been entrusted to the Commission.

We are unable to accept this contention. Under section

5(1) the Government could refer any case or points in a

case. There is nothing in that sub-section which requires

that a "case" referred thereunder must cover the entire

period mentioned in section 8(2). Indeed, the Government

might have reason to believe that an assessee evaded the tax

only in, say, two years and not in others and in such a case

the Government could only refer the case for investigation

of evasion during those two years only but could not refer

any case for other years as to which they had no reasonable

belief Therefore, in such a situation the reference must be

limited to the particular years in which the evasion was

believed to have taken place. It makes no difference

whether one calls the matter referred a "case" or "points in

a case". It follows, therefore, that, in order to ascertain

whether, in a given case, the reference covers the entire

period or only a shorter period, one has only to look at the

order

1217

of reference. The operative parts of the two orders of

reference dated the 26th November 1949 in the present case

clearly record the fact that the Government had prima facie

reasons for believing that the petitioner had to a

substantial extent evaded payment of taxation on his income

for 1119 and 1120 (M.E.) and that they considered that "this

was a fit case for reference to the Income-tax Investigation

Commission under section 5(1) of Act XIV of 1124". What was

a fit case for reference was described as "this" which

clearly referred back to the evasion of payment on taxation

on income for the two specific years in the two orders. It

is, therefore, clear that neither respondent 2 nor

respondent I who was appointed an authorised official by

respondent 2 had jurisdiction to cover any period beyond

those specific years 1942 and 1943 and the notice which was

issued by respondent I on the 21st November 1951 was,

therefore, not warranted by law. Respondent I had no

warrant or authority whatever for issuing the said notice

and we are of the opinion that the High Court was right in

the conclusion to which it -came that the action of

respondent 1 was clearly illegal, without jurisdiction and

unsupported by law. The writ of prohibition issued against

respondent I was, therefore, in order and Civil Appeal No.

22 of 1954 must stand dismissed with costs.

As regards Civil Appeal No. 21 of 1954, the petitioner

contended that respondent 2 had no power or authority to

conduct an investigation in regard to the alleged evasion of

tax by the petitioner for the years 1942 and 1943 also.

Shri Nambiyar urged that:

(1)The Travancore Act XIV of 1124 was not a law in force

prior to the integration and was not an "existing law"

continued in force by Ordinance I of 1124;

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(2)The notification dated the 26th July 1949 which

purported to bring the Travancore Act XIV of 1124 into force

as from the 22nd July 1949 was in effective and invalid;

(3) Even if the Travancore Act XIV of 11 24 was

1218

in force, it could not apply to or override the assessment

orders concluded by the Chief Revenue Authority, Travancore;

(4) The Rajpramukh's agreement read with article 245

of the Constitution precluded any investigation except in

accordance with the Travancore Act XIV of 1124 and Act

XXXIII of 1950 amended by Act XLIV of 1951 was invalid to

the extent that it authorised investigation otherwise than

in accordance with the Travancore Law;

(5) Assuming all the foregoing points were held

against the petitioner, section 5(1) of the Travancore Act

XIV of 1124 was in any event unconstitutional and void as

being inconsistent with article 14 of the Constitution.

Re. (1): The Travancore Act XIV of 1124 was passed by the

Travancore Legislature on the 7th March 1949. It was,

however, under section 1(3) to come into force on such date

as the Travancore Government might by notification in the

Government Gazette appoint. No such notification was issued

by the Travancore Government UP to the 1st July 1949 when

the Travancore State and the Cochin State integrated into

the United State of Travancore and Cochin. On the 1st July

1949, the United State of Travancore and Cochin promulgated

Ordinance I of 1124 whereby all existing laws of Travancore

were continued in force till altered, amended or repealed

by-competent authority and the "existing law of Travancore"

was therein defined to mean any law in force in the State of

Travancore immediately prior to the 1st July 1949. It was

only on the 26th July 1949 that a notification was issued

under section 1(3) by the United State of Travancore and

Cochin bringing Act XIV of 1124 into force retrospectively

from 22nd July, 1949.

The contention put forward on behalf of the petitioner was

that as no notification under section 1(3) of Act XIV of

1124 had been issued up to the 1st July 1949, that Act had

not been brought into force and was not in force on that

date and, therefore, was not then an "existing law" which

alone was given conti-

1219

nuity by Ordinance I of 1124 which was promulgated on that

very day. The contention further was that, in the

circumstances the Act was not continued by Ordinance I of

1124 but had lapsed and, therefore, the subsequent

notification issued on the 26th July 1949 was wholly

ineffective and consequently the reference of the cases of

the petitioner to the Commission for investigation under

section 5(1), the appointment of respondent I as the

authorised official and the notices issued by him were

unauthorised and wholly devoid of any authority of law. The

question for our consideration is whether Act XIV of 1124 or

any part of it was, on the 1st July 1949, an existing law.

The general rule of English law, as to the date of the

commencement of a statute, since 1797, has been and is that

when no other date is fixed by it for its coming into

operation it is in force from the date when it receives the

royal assent (33 Geo. 3. c. 13). The same rule has been

adopted in section 5 of our General Clauses Act, 1897. We

have not been referred to any Travancore Law which provides

otherwise. If, therefore, the same principle prevailed in

that State, Travancore Act XIV of 1124 would have come into

force on the 7th March 1949 when it was passed by the

Travancore Legislature. What prevented that result? The

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answer obviously points to section 1(3) which authorises the

Government to bring the Act into force on a later date by

issuing a notificated. How could section 1(3) operate to

postpone the commencement of the Act unless that section

itself was in force? One must, therefore, concede that

section 1(3) came into operation immediately the Act was

passed, for otherwise it could not postpone the coming into

operation of the Act. To put the same argument in another

way, if the entire Act including section 1(3) was not in

operation at the date of its passing, how could the

Government issue any notification under that very section?

There must be some law authorising the Government to bring

the Act into force. Where is that law to be found unless it

were in section 1(3)? In answer, Shri Nambiyar referred

154

1220

is to the principle embodied in section 37 of the English

Interpretation Act which corresponds to section 22 of our

General Clauses Act. That section does not help the

petitioner at all. All that it does is to authorise the

making of rules or bye-laws and the issuing of orders

between the passing and the commencement of the enactment

but the last sentence of the section clearly says that

"rules, bye-laws or orders so made or issued shall not take

effect till the commencement of the Act or Regulation".

Suppose Shri Nambiyar is right in saying that the Government

could issue a notification under section 1(3) by virtue of

the principle embodied in section 22 of the General Clauses

Act, it will not take his argument an inch forward, for that

notification, by reason of the last sentence of section 22

quoted above, will not take effect till the commencement of

the Act. It will bring about a stalemate. It is,

therefore, clear that a notification bringing an Act into

force is not contemplated by section 22 of the General

Clauses Act. Seeing, therefore, that it is section 1 (3)

which operates to prevent the commencement of the Act until

a notification is issued thereunder by the Government and

that it is section 1(3) which operates to authorise the

Government to issue a notification thereunder, it must be

conceded that section 1(3) came into force immediately on

the passing of the Act. There is, therefore, no getting

away from the fact that the Act was an "existing law" from

the date of its passing right up to the 1st July 1949 and

was, consequently, continued by Ordinance I of 1124. This

being the position, the validity of the notification issued

on the 26th July 1949 under section 1(3), the reference of

the case of the petitioner, the appointment of respondent 1

as the authorised official and all proceedings under the

Travancore Act XIV of 1124 cannot be questioned on the

ground that the Act lapsed and was not continued by

Ordinance I of 1124.

Re. (2): It is urged that the notification issued on the

26th July 1949 was bad in that it purported to bring the Act

into operation as from the 22nd July 1949. The reason

relied upon is that the Govern-

1221

meat could not, in the absence of express provision,

authorising it in that behalf, fix the commencement of the

Act retrospectively. The reason for which the Court

disfavours retroactive operation of laws is that it may

prejudicially affect vested rights. No such, reason is

involved in this case. Section 1(3) authorises the

Government to bring the Act into force on such date as it

may, by notification, appoint. In exercise of the power

conferred by this section the Government surely had the

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power to issue the notification bringing the Act into force

on any date subsequent to the passing of the Act. There

can, therefore, be no objection to the notification fixing

the commencement of the Act on the 22nd July 1949 which was

a date subsequent to the passing of the Act. So the Act has

not been given retrospective operation, that is to say, it

has not been made to commence from a date prior to the date

of its passing. It is true that the date of commencement as

fixed by the notification is anterior to the date of the

notification but that circumstance does not attract the

principle disfavouring the retroactive operation of a

statute. Here there is no question of affecting vested

rights. The operation of the notification itself is not

retrospective. It only brings the Act into operation on and

from an earlier date. In any case it was in terms

authorised to issue the notification bringing the Act into

force on any date subsequent to the passing of the Act and

that is all that the Government did. In this view of the

matter, the further argument advanced by the learned

Attorney-General and which found favour with the Court

below, namely, that the notification was at any rate good to

bring the Act into operation as on and from the date of its

issue need not be considered. There is no substance in this

contention also.

Re. (3): It was urged that, even if the Travancore Act XIV

of 1124 was in force on the 1st July 1949 and was validly

brought into operation from the 22nd July 1949, the terms of

section 8(2) of the Act could not apply to or override the

assessment orders of the petitioner for the years 1942 and

1943 which

1222

were concluded by the Chief Revenue Authority of Travancore.

Section 8(2) of the Act provided that, after considering the

report of the Commission, the Government shall, by an order

in writing, direct that such proceedings as they think fit

under the various Income-tax Acts of Travancore therein

mentioned or any other law shall be taken against the person

to whose case the report relates in respect of the income of

any period commencing after the last day of Karkadakom 1115

(16-8-1939) and upon such a direction being given such

proceedings may be taken and completed under the appropriate

law notwithstanding any decision to a different effect given

in the case by any income-tax authority or Income-tax

Appellate Tribunal. It was contended that the Chief Revenue

Authority was not included in the description of "any

income-tax authority" and, therefore, even if the report of

respondent 2 was adverse to the petitioner the assessment

orders which were concluded by the Chief Revenue Authority

could not be affected by the provisions of section 8(2) and

could not be reopened.

This argument is based on a misconception of the true

position of the Chief Revenue Authority. The Chief Revenue

Authority was an income-tax authority mentioned in the

hierarchy under the Travancore Act VIII of 1096. When the

Travancore Act XXIII of 1121 came to be passed, the income-

tax authorities enumerated therein included the Board of

Revenue at the apex., substituting the Board of Revenue for

the Chief Revenue Authority which occupied a similar

position in the old Act. By section 10 of the Travancore

Act XIV of 1124, the Travancore Act VIII of 1096 was deemed

to be in force for the purpose of the Act and to the extent

necessary, with the result that in construing the provisions

of section 8(2) of the Act, the words "any income-tax auth-

ority" would include the Chief Revenue Authority which was

an income-tax authority under the Travancore Act VIII of

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1096. It may also be noted that section 4 of the Travancore

Act XVII of 1122 continued all proceedings and petitions

pending before the

1223

Chief Revenue Authority and provided that the same may be

disposed of by the said authority or by such authority as

may be appointed by the Government for the purpose as if the

'Said Travancore Act VIII of 1096 bad not been repealed.

It, therefore, follows that the Chief Revenue Authority was

included within the expression "any income-tax authority" in

section 8(2) of the Act and the assessment orders of the

petitioner for the years 1942 and 1943 which were concluded

by the Chief Revenue Authority could be affected or

overridden by any order which might be passed by the

Government under section 8(2) of the Act. This contention

of the petitioner also, there-fore, does not avail him.

Re. (4): The Indian States Finance Enquiry Committee 1948-

49 made two interim reports. It recommended in the first

interim report that subject to certain limitations indicated

therein which were designed to secure -legal "continuity" of

pending proceedings and "finality and validity" of completed

proceedings under the pre-existing State legislation, the

whole body of State legislation relating to "federal"

subjects should be repealed and the corresponding body of

Central legislation extended proprio vigore to the States

with effect from the prescribed date or as and when the

administration of particular "federal" subjects was assumed

by the Centre. All matters and proceedings pending under or

arising out of preexisting States Acts should be disposed of

under those Acts by, so far as may be, the "corresponding

authorities" under the corresponding Indian Acts. The

income, profits and gains accruing and arising in States of

all periods which were 'previous years' of the States

assessment years 1949-50 or earlier should be assessed

wholly and in accordance with the States' laws and at the

States' rates respectively, appropriate to the assessment

years concerned. Except in Travancore, there was no Income-

tax Investigation Commission in any State. Should the

Travancore Commission still be functioning at the time of

the federal financial integration, all cases pending before

it should be taken over by

1224

the Indian Commission. The disposal of those cases should,

however, (as in the case of pending assessments) be in

accordance with the pre-existing Travancore Law. It

recommended in the Second Interim Report that the Travancore

Commission should be wound up and the cases referred to it

should be transferred to the corresponding Commission in

India.

These recommendations of the Committee in so far as they

applied to Travancore-Cochin were accepted by and

incorporated into the agreement entered into between the

President of India and the Rajpramukh of Travancore-Cochin

on the 25th February 1950 subject to certain modifications

which are not relevant for the purpose of the present

enquiry. The result of the agreement was the enactment of

Act XXXIII of 1950 which extended to Travancore-Cochin the

Act XXX of 1947 and section 3 of that Act provided that the

law of Travancore corresponding to Act XXX of 1947 shall

continue to remain in force with the modification that all

cases referred to or pending before the Travancore

Commission shall stand transferred to the Central Commission

for disposal and that the State law shall determine the

procedure to be followed and the powers to be exercised by

the Central Commission in the disposal of those cases.

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Evasion Cases Nos. 1 and 2 of 1125 which were pending before

the Travancore Commission thus became transferred to res-

pondent 2 and were to be disposed of in accordance with the

procedure laid down and the powers conferred on the

Travancore Commission by the Travancore Act XIV of 1124.

Two questions, however, arose in the matter of this

investigation by respondent 2, viz., (1) whether the life of

the Travancore Commission, not having been extended beyond

16-8-1950, respondent 2 had the power and authority to

continue the investigation of the cases of the petitioner

after 16-8-1950, and, (2) whether any orders passed by the

Government on the report made by respondent 2 would have the

effect of overriding the assessment orders concluded by the

Chief Revenue Authority, Travancore, in cases of the

petitioner for the years 1942 and 1943.

1225

In regard to the first question, it was urged by Shri

Nambiyar that the life of the Travancore Commission having

come to an end on the 16th August 1950, respondent 2 also,

which was its successor and to which the pending cases of

the petitioner were transferred, could not function beyond

16-8-1950. Parliament, however, passed, on the 26th August

1951, Act XLIV of 1951 amending Act XXXIII of 1950 whereby

it provided with retrospective effect that, in the disposal

of cases transferred to respondent 2, it shall have and

exercise the same powers as it has and exercises in the

investigation of cases transferred to it under Act XXX of

1947 and shall be entitled to act for the same term as under

sub-section (3) of section 4 of that Act thus extending the

life of respondent 2 beyond 16-8-1950. This) it was

submitted, Parliament was not competent to do by reason of

the terms of the agreement dated the 25th February, 1950,

the effect of the enactment of Act XLIV of 1951 being to

amend the law of the Travancore State which was to govern

the investigation of pending cases by respondent 2. The

agreement was one which was contemplated under article 295

of the Constitution and, being provided by the Constitution

itself, was a bar to the legislative competence of the

Central Legislature under article 245. The Central

Legislature, it was submitted, was, therefore, not competent

to pass Act XLIV of 1951 extending the life of respondent 2

beyond 16-8-1950 and respondent 2 was, therefore, not

entitled to carry on any further investigation in the

Evasion Cases Nos. 1 and 2 of 1125.

Considerable argument was addressed to us on the effect of

the agreement on the legislative competence of the Central

Legislature under article 245. We do not, however, consider

it necessary to decide this question as, in our opinion, the

life of respondent 2 was not a part of the law of Travancore

State which was to govern the procedure followed or the

powers exercised by it in the investigation of the cases of

the petitioner. Respondent 2 to which the pending cases of

the petitioner were transferred, was a body -with a longer

lease of life and the fact that the Travancore

1226

Commission had a shorter lease could not have the effect of

curtailing the life of respondent 2. The life of respondent

2 depended upon the law which established it and it was

extended from time to time by subsequent legislation up to

December, 1955, and that accident which gave to respondent 2

a longer lease of life did not contravene any provision of

the Travancore law which determined the procedure to be

followed and the powers to be exercised by the Travancore

Commission. The transfer to respondent 2 of the cases

pending before the Travancore Commission, of necessity

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involved that those cases would be dealt with by respondent

2 which had a longer lease of life and respondent 2 could

conduct the investigation of these cases and complete the

same within the span of life which had been allotted to it

by the relevant provisions of the Indian Law, the only

limitations imposed upon the conduct of such investigation

being that the procedure to be followed as also the powers

to be exercised by it would be those obtaining in the

Travancore Law. Act XLIV of 1951 merely accepted this

position and there was nothing in that Act which ran counter

to the agreement.

As regards the second question also, the Chief Revenue

Authority, as observed before, was an income-tax authority

within the meaning of the term as used in section 8(2) of

the Travancore Act XIV of 1124 read with section 10 of that

Act which continued in force the provisions of the

Travancore Act VIII of 1096 so far as it was necessary for

the purpose of the Act. There also Act XLIV of 1951 did not

make any changes in the existing Travancore Law which was to

govern the investigation of the pending cases by respondent

2. This contention of the petitioner, therefore, is equally

untenable.

Re. (5): This contention urged by Shri Nambiyar questions

the vires of section 5(1) of the Travancore Act XIV of 1124.

This section provides:

"Section5(1):Our Government may at any time before the

last day of Makaram 1125 refer to the Commission for

investigation and report any case or

1227

points in a case in which our Government have prima facie

reasons for believing that a person has to a substantial

extent evaded payment of taxation on income, together with

such material as may be available in support of such belief,

and may at any time before the last day of Meenam 1125 apply

to the Commission for the withdrawal of any case or points

in a case thus referred, and if the Commission approves of

the withdrawal, no further proceedings shall thereafter be

taken by or before the Commission in respect of the case or

points so withdrawn".

It corresponds to section 5(1) of the Taxation on Income

(Investigation Commission) Act, 1947 (XXX of 1947) which

reads as under:

"Section 5 (1): The Central Government may at any time

before the last day of September 1948 refer to the

Commission for investigation and report any case or points

in a case in which the Central Government has prima facie

reasons for believing that a person has to a substantial

extent evaded payment of taxation on income, together with

such material as may be available in support of such belief,

and may at any time before the first day of September 1948

apply to the Commission for the withdrawal of any case or

points in a case thus referred, and if the Commission

approves of the withdrawal, no further proceedings shall

thereafter be taken by or before the Commission in respect

of the case or points so withdrawn".

We may also at this stage refer to the provisions of

section 47 of the Travancore Act XXIII of 1121 which relates

to income escaping assessment:

"Section 47(1): If in consequence of definite information

which has come into his possession the Income-tax Officer

discovers that income, profits or gains chargeable to

income-tax have escaped assessment in any year, or have been

under-assessed, or have been assessed at too low a rate, or

have been the subject of excessive relief under this Act the

Income tax Officer may, in any case in which he has reason

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to believe that the assessed has concealed the particulars

of his income or deliberately furnished inaccu-

155

1228

rate particulars thereof, at any time within eight years,

and in any other case at any time within four years of the

end of that year, serve on the person liable to pay tax on

such income, profits or gains, or, in the case of a company,

on the principal officer thereof, a notice containing all or

any of the requirements which may be included in a notice

under subsection (2) of section 29, and may proceed to

assess or re-assess such income, profits or gains and the

provisions of this Act shall, so far as may be, apply

accordingly as if the notice were a notice issued under

that sub-section: ...................."

The corresponding provision of the Indian Income tax Act

was contained in section 34 which provided:

"Section 34(1): If in consequence of definite information

which has come into his possession the Income-tax Officer

discovers that income, profits or gains chargeable to

income-tax have escaped assessment in any year, or have been

under-assessed, or have been assesses at too low a rate, or

have been the subject of excessive relief under this Act the

Income-tax Officer may, in any case in which be has reason

to believe that the assessed has concealed the particulars

of his income or deliberately furnished inaccurate

particulars thereof, at any time within eight years, and in

any other case at any time within four years of the end of

that year, serve on the person liable to pay tax on such

income, profits or gains, or, in the case of a company, on

the principal officer thereof, a notice containing all or

any of the requirements which may be included in a notice

under subsection (2) of section 22, and may proceed to

assess or re-assess such income, profits or gains, and the

provisions of this Act shall, so far as may be, apply

accordingly as if the notice were a notice issued under that

sub-section: ................."

Section 34 of the Indian Income-tax Act was amended by Act

XLVIII of 1948 which received the assent of the Governor-

General on the 8th September 1948. It was further amended

by the Indian Income-tax Act, 1954 (XXXIII of 1954) which

was assented to by the President on the 25th September

1229

1954 and introduced sub-sections (1-A) to (1-D) therein.

It may, however, be noted that no amendment was made in

section 47 of the Travancore Act XXIII of 1121 at any

subsequent period and the question as to whether the

provisions of section 5(1) of the Travancore Act XIV of 1124

became discriminatory and violative of the fundamental right

guaranteed under article 14 of the Constitution will have to

be determined with reference to the provisions of that sec-

tion set out above.

The true nature, scope and effect of article 14 of the

Constitution have been explained by this Court in a series

of cases beginning with Chiranjit Lal Chowdhuri v. The Union

of India(1) and ending with Budhan Chowdhury and others v.

The State of Bihar(2). It is, therefore, not necessary to

refer to the earlier cases and it will suffice to quote the

principle as summarised in the decision of the Full Court in

the last mentioned case at page 1049 in the following terms:

"It is now well-established that while article 14 forbids

class legislation, it does not forbid reasonable

classification for the purposes of legislation. In order,

however, to pass the test of permissible classification two

conditions must be fulfilled, namely, (i) that the

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classification must be founded on an intelligible

differentia which distinguishes persons or things that are

grouped together from others left out of the group, and (ii)

that differentia must have a rational relation to the object

sought to be achieved by the statute in question. The

classification may be founded on different bases, namely,

geographical, or according to objects or occupations or the

like. What is necessary is that there must be a nexus bet-

ween the basis of classification and the object of the Act

under consideration. It is also well-establisbed by the

decisions of this Court that article 14 condemns

discrimination not only by a substantive law but also by a

law of procedure".

The principles underlying article 14 of the Constitution

are well-settled. The only difficulty which

(1) [1950] S.C.R. 869. (2) [1955] 1 S.C.R. 1045.

1230

arises is in regard to the application of those principles

to the facts of a particular case and the Court has to

consider the terms of the impugned legislation having regard

to the background and the surrounding circumstances so far

as it may be necessary to do so in order to arrive at a

conclusion whether it infringes the fundamental right in

question.

Section 5(1) of Act XXX of 1947 (which is in pari materia

with section 5(1) of the Travancore Act XIV of 1124) was

impugned in the case of Suraj Mall Mohta & Co. v. A. V.

Visvanatha Sastri and another(1). The references for

investigation in that case had been made in pursuance of a

report made by the Commission to the Central Government

under the provisions of section 5(4) of the Act requesting

that the 'Case of the petitioner along with other cases may

be referred to the Commission for investigation. The

contention urged on behalf of the petitioner was that the

provisions of sections 5(1), 5(4), 6, 7 and 8 of Act XXX of

1947 had become void being discriminatory in character after

the coming into force of the Constitution. The attack made

against the provisions of section 5(1) of the Act was two-

fold: "(1) That the section was not based on any valid

classification; the word "substantial" being vague and

uncertain and having no fixed meaning, could furnish no

basis for any classification at all; (2) That the Central

Government was entitled by the provisions of the section to

discriminate between one person and another in the same

class and it was authorised to pick and choose the cases of

persons who fell within the group of those who bad

substantially evaded taxation. It could, if it chose, send

the case of one person to the Commission and show

favouritism to another person by not sending his case to the

Commission though both of these persons be within the group

of those who had evaded the payment of tax to a substantial

extent".

As regards section 5(4), it was urged that it bad no

independent existence and was bound to fall with section

5(1) if his contention regarding its invalidity

(1) [1955] 1 S.C.R. 448.

1231

prevailed. In the alternative, it was urged that assuming

that section 5(1) was valid, even then section 5(4) had to

be declared void because it gave arbitrary power to the

Commission to pick and choose and secondly because the

clause was highly discriminatory in character inasmuch as an

evasion, whether substantial or insubstantial, came within

its ambit as well as within the ambit of section 34(1) of

the Indian Income-tax Act.

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This Court considered it sufficient for the decision of

that case to examine the contentions urged against the

validity of section 5(4) of the Act because the case of the

petitioner was referred to the Commission under those

provisions of the Act and not under section 5(1) and decided

that case on the assumption that section 5(1) of the Act was

based on a valid classification and dealt with a group of

persons who came within the class of war-profiteers which

required special treatment, that the classification was

rational and that reasonable grounds existed for making a

distinction between those who fell within that class and

others who did not come within it, but without in any way

deciding or even expressing any opinion on that question.

This Court compared the provisions of section 5(4) of the

Act with those of section 34(1) of the Indian Income-tax Act

and came to the conclusion that section 5(4) dealt with the

same class of persons who fell within the ambit of section

34(1) of the Indian Income-tax Act and were dealt with in

sub-section (1) of that section and whose income could be

caught by a proceeding under that section. It held that

there was nothing uncommon either in properties or in

characteristics between persons who had been discovered as

evaders of income-tax during an investigation conducted

under section 5(1) of the Act and those who had been

discovered by the Income-tax Officer to have evaded payment

of income tax. Both those kinds of persons had common

properties and had common characteristics and therefore

required equal treatment. The Court thus held that both

section 34(1) of the Indian Income-tax Act and sub-sec-

1232

tion (4) of section 5 of the impugned Act dealt with persons

who had similar characteristics and similar properties, the

common characteristics being that they were persons who had

not truly disclosed their income and had evaded payment of

taxation on income.

The court then considered whether the procedure

prescribed by Act XXX of 1947 for discovering the concealed

profits of those who bad evaded payment of taxation on their

income was substantially different and prejudicial to the

assesses than the procedure prescribed in the Indian Income-

tax Act. After comparing the provisions of section 8 of Act

XXX of 1947 and those of sections 31, 32 and 33 of the

Indian Income-tax Act, this court came to the conclusion

that there was material and substantial difference between

the two procedures and there was no doubt that the procedure

prescribed by the impugned Act deprived a person who was

dealt with under that Act of those rights of appeal, second

appeal and revision to challenge questions of fact decided

by the judge of first instance. The procedure prescribed by

the impugned Act in sections 6 and 7 was also compared with

the procedure prescribed in sections 37 and 38 in the Indian

Income-tax Act and this Court held that the procedure

prescribed by the impugned Act was substantially more

prejudicial to the assessee than the procedure prescribed

under the Indian Income-tax Act. It was thus clear that

persons dealt with under Act XXX of 1947 were submitted to a

procedure which was more drastic and prejudicial than the

procedure which was available to those who were dealt with

under section 34 of the Indian Income-tax Act.

This Court, therefore, was of the opinion that section

5(4) and the procedure prescribed by the impugned Act in so

far as it affected the persons proceeded against thereunder

being a piece of discriminatory legislation offended against

the provisions of article 14 of the Constitution and were

thus void and unenforceable.

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It was after this decision of this Court in Suraj

1233

Mall Mohta's case supra that Parliament enacted the Indian

Income-tax Amendment Act, 1954 (XXXIII of 1954) introducing

sub-sections (1-A) to (1-D) in section 34 of the Indian

Income-tax Act. Though Act XXXIII of 1954 received the

assent of the President on the 5th September 1954 it was to

come into effect from the 17th July 1954.

Section 34(1-A) purported to meet two criticisms which had

been, in the main, offered against the constitutionality of

section 5(1) of the Act in Suraj Mall Mohtas case. One

criticism was that the classification made in section 5(1)

of the Act was bad because the word 'substantial' used

therein was a word which had no fixed meaning and was an

unsatisfactory medium for carrying the idea of some

ascertainable proportion of the whole, and thus the

classification being vague and uncertain, did not save the

enactment from the mischief of article 14 of the Constitu-

tion. That alleged defect was cured in section 34 (1-A)

inasmuch as the Legislature clearly indicated there what it

meant when it said that the said object of Act XXX of 1947

was to catch persons who, to a substantial extent, had

evaded payment of tax, in other words, what was seemingly

indefinite within the meaning of the word 'substantial' bad

been made definite and clear by enacting that no evasion

below a sum of one lakh was within the meaning of that

expression. The other criticism was that section 5(1) did

not necessarily deal with the persons, who, during the war,

had made huge profits and evaded payment of tax on them.

Section 34(1-A) remedied this defect also. It clearly

stated that it would operate on income made between the 1st

September 1939 and 31st March 1946 tax on which had been

evaded.

Section 5(1) was again attacked in the case of Shree

Meenakshi Mills Ltd. v. Sri A. V. Visvanatha Sastri and

Another(1). This was a petition under article 32 of the

Constitution filed on the 16th July 1954 after the decision

in Suraj Mall Mohta's case, supra, had been pronounced.

Section 5(1) of the Act-was attacked on the very same

grounds which were mentioned in

(1) [1955] 1 S.C.R. 787.

1234

the judgment in Suraj Mall Mohta's case, supra, but had not

been dealt with by this Court it being considered sufficient

to strike down section 5(4) of the Act without expressing

any opinion on the vires of section 5(1). Even in this

case, section 5(1) was not struck down as void on a

comparison of its provisions with those of section 34(1) of

the Indian Incometax Act as was done in the case of section

5(4) in Suraj Mall Mohta's case, supra. By the time this

petition came to be heard by this Court, the Parliament had

enacted Act XXXIII of 1954 which, as stated above,

introduced section 34(1-A) in section 34 of the Indian

Income-tax Act and this Court came to the conclusion on a

comparison of the provisions of section 5(1) of the Act with

section 34(1-A) of the Indian Income-tax Act that the new

sub-section inserted in section 34 by Act XXXIII of 1954 was

intended to deal with the class of persons who were said to

have been classified for special treatment by section 5(1)

of Act XXX of 1947. This Court reiterated the conclusions

to which- it had come in Suraj Mall Mohta's case, supra,

that the procedure prescribed by the Act for making the

investigation under its provisions was of a summary and

drastic nature and it constituted a departure from the

ordinary law of procedure and in certain important aspects

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was detrimental to the persons subjected to it and as such

was discriminatory. It did not again express an opinion on

the validity of section 5(1) as being based on a valid

classification and being thus saved from the mischief of

article 14 of the Constitution, but, on a comparison of the

provisions of section 5(1) of the Act with those of section

34(1-A) of the Indian Income tax Act which came into effect

from the 17th July 1954, came to the conclusion that this

defence of the provisions of section 5(1) being saved from

the mischief of article 14 of the Constitution on the basis

of a valid classification was no longer available in support

of it after the introduction of the new subsection in

section 34 of the Indian Income-tax Act which sub-section

dealt with the same class of persons dealt with by section

5(1) of the impugned

1235

Act. The result was that proceedings could no longer be

continued under the procedure prescribed by the impugned

Act and section 5 (1) was thus struck down as

unconstitutional and void after the coming into operation of

section 34(1-A) of the Indian Income-tax Act.

These two cases, viz., Suraj Mall Mohta's case supra and

Shree Meenakshi Mills' case, supra, did not directly

pronounce upon the vires of section 5(1) of the Act in

comparison with section 34(1) of the Indian Income-tax Act

though the vires were the subject matter of a direct

challenge therein. The ratio of these decisions is,

however, helpful in the determination of the question that

arises directly before us, viz., whether section 5(1) of the

Act is discriminatory in its character and thus violative of

the fundamental right guaranteed under article 14 of the

Constitution. In both these cases, this Court was of the

opinion that the procedure for investigation prescribed by

Act XXX of 1947 (corresponding with the Travancore Act XIV

of 1124) was of a summary and drastic nature and constituted

a departure from the ordinary law of procedure and in

certain aspects was detrimental to persons subjected to it

as compared with the procedure prescribed by the

corresponding provisions of the Indian Income-tax Act

(corresponding to the Travancore Act XXIII of 1121) and -was

as such discriminatory. The provisions of sections 5 (4)

and 5 (1) of the Act were compared respectively with the

provisions of section 34(1) and section 34(1-A) of the

Indian Income-tax Act and, on a comparison of these provi-

sions, this Court came to the conclusion that the classes of

persons who were said to have been classified for special

treatment by those respective sections of the Act were

intended to be and could be dealt with under section 34(1)

and section 34(1-A) of the Indian Income-tax Act and there

could, therefore, be no basis of a valid classification for

special treatment under the provisions of Act XXX of 1947

(corresponding with the Travancore Act XIV of 1124).

The procedure prescribed by the Travancore Act XIV of 1124

being thus discriminatory as compared

156

1236

with the procedure prescribed in the Travancore Act XXIII of

1121, the questions that arise for our consideration are,

(1) whether there is a rational basis of classification to

be found in the enactment of section 5(1) of the Act, and

(2) whether the same class of persons were intended to be

and could be dealt with under the provisions of section 47

of the Travancore Act XXIII of 1121.

In order to ascertain the scope and purpose of the

impugned section reference must first be made to the Act

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itself. The preamble of a statute has been said to be a

good means of finding out its meaning and as it were a key

to the understanding of it. The preamble to the Travancore

Act XIV of 1124, like that of Act XXX of 1947, runs thus:

"Whereas it is expedient for the purpose of ascertaining

whether the actual incidence of taxation on income is and

has been in recent years in accordance with the provisions

of law and the extent to which the existing law and pro-

cedure for the assessment and recovery of such taxation is

adequate to prevent the evasion thereof, to make provision

for an investigation to be made into such matters. It is

hereby enacted as follows". It does not unfortunately give

any assistance in the solution of the problem before us.

Section 5(1) itself, however, gives some indication as to

the real object of it. The condition on which the action of

the Government under that section is made dependent is that

the Government must have prima facie reasons for believing

that a person has to a substantial extent evaded payment of

taxation on his income. The powers conferred on the Commis-

sion by section 6 and the procedure prescribed for the

Commission by section 7 are clearly very drastic and harsh.

This unmistakably shows that the legislative authority took

the view that these stringent measures were necessary for

unearthing the tax evasions which had gone unnoticed before

when the usual procedure under the Income-tax law was

applied. Then comes section 8(2) which authorises the

Government after perusal of the report of the Commission to

direct proceedings to, be taken against the person to whose

1237

case the report relates in respect of the income of any

period commencing after the 16th August 1939. This

provision clearly evinces that the intention of the

legislative authority is to catch the income evaded from

after the 16th August 1939. Section 5(1) also provides that

the reference thereunder of a case must be made at any time

before the 16th February 1950. From these sections it will

appear that the object of this law was to uncover the

evasion of tax on income made after the 16th August 1939 and

before the 16th February 1950 about the existence of which

evasion the Government had prima facie reason to believe.

The question at once arises as to why it was that the

legislative authority took the view that there were possible

cases of tax evasion. It has been said that although the

statement of 'the objects and reasons appended to a bill is

not admissible as an aid to the construction of the Act as

passed (see Aswini Kumar Ghose case(1)), yet it may be

referred to only for the limited purpose of ascertaining the

conditions prevailing at the time which necessitated the

making of the law (see Subodh Gopal Bose's case(2)).

Similar observations were made by Fazl Ali, J. with ref-

erence to legislative proceedings being relevant for the

proper understanding of the circumstances under which an Act

was passed and the reasons which necessitated it in

Chiranjit Lal Chowdhuri v. The Union of India(3). Indeed,

in the case of Kathi Raning Rawat v. The State of

Saurashtra(4), this Court permitted the State to file an

affidavit stating in detail the circumstances which

prevailed at the time when the law there under consideration

bad been passed and which necessitated the passing of that

law. In the present case also, an affidavit has been filed

by Gauri Shanker, Secretary of respondent 2, stating the

reasons why it was thought necessary to enact the impugned

Act including section 5(1). This affidavit clearly brings

out the serious problem that faced the revenue authorities.

A war of unprecedented magnitude had raged from September

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1939 to 1946. The

(1) [1953] S.C.R. 1. (2) [1954] S.C.R. 587, 628.

(3) [1950] S.C.R. 869, 879. (4) [1952] S.C R. 435.

1238

war conditions brought in their train a sudden rise in the

demand of all kinds of goods, both consumer and industrial,

which, naturally pushed up the prices to abnormal heights

affording a great opportunity to the producers,

manufacturers and merchants to reap huge profits. There was

good reason to believe that these abnormal profits were not

being brought into regular accounts but-were being

concealed. Faced with this situation, means bad to be

devised to enquire into the tax evasions and to realise the

legitimate dues of the State. If regard be had to this

background it is obvious that section 5(1) had reference to

a class of substantial evaders of income-tax who required to

be specially treated under the drastic procedure provided by

Act XXX of 1947.

It was, however, urged that the words "substantial

extent" were of such vague import that they did not afford

any reasonable-basis of classification. Reference was made

to Stroud's Judicial Dictionary, 3rd ed., Vol. 4, page 2901,

where the word "substantial" has been described to be:

"A word of no fixed meaning, it is an unsatisfactory

medium for carrying the idea of some ascertainable

proportion of the whole (Terry's Motors, Ltd. v.Binder,

[1948] S.A.S.R. 167)".

The word "substantial" has been used in various

legislative enactments and even though it is said to be a

word of no fixed meaning, Viscount Simon in Palser v.

Grinling(1) observed:

"One of the primary meanings of the word is equivalent

to considerable, solid, or big. It is in this sense that we

speak of a substantial fortune, a substantial meal., a

substantial man, a substantial argument or ground of

defence. Applying the word in this sense, it must be left

to the discretion of the judge of fact to decide as best he

can according to the circumstances in each case......."

and it has been described at page 2902 of Stroud's Judicial

Dictionary to be "equivalent to considerable,solid or big".

Even though the word "substantial" by itself might

(1) [1948] A.C. 291, 817.

1239

not afford a definite measure or yard-stick for including

particular individuals within the classification, the

background and the circumstances mentioned in the aforesaid

affidavit of Gauri Shanker indicate with reasonable

certainty the class of persons who are intended to be

subjected to this drastic procedure. It does not require

much effort to pick out persons who would fall within this

group or category of substantial evaders of income-tax and

even though a definite amount be not specified in section

5(1) of the Act as constituting a substantial evasion of

income-tax the Government, to whom the process of selection

for the purposes of reference of the cases for investigation

to the Commission is entrusted, would not have any

difficulty in finding out the persons coming within this

group or category. To use the language of Viscount Simon,

the income-tax which has been evaded would have to be

considerable, solid or big, and once that conclusion was

reached by the Government, the cases of such persons would

indeed be referred by them for investigation by the

Commission under section 5(1) of the Act.

It was, however, urged that it would be open to the

Government within the terms of section 5(1) of the Act

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itself to discriminate between persons and persons who fell

within the very group or category; the Government might

refer the case of A to the Commission leaving the case of B

to be dealt with by the ordinary procedure laid down in the

Travancore Act XXIII of 1121. The possibility of such

discriminatory treatment of persons falling within the same

group or category, however, cannot necessarily invalidate

this piece of legislation. It is to be presumed, unless the

contrary were shown, that the administration of a particular

law would be done "not with an evil eye and unequal band"

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 question was considered by this Court in two cases,

viz. , Kathi Raning Rawat v. The State of Sau-

1240

rashtra(1) and Kedar Nath Bajoria v. The State of West

Bengal(2). Mr. Justice Mukherjea, as he then was, dealt

with the argument in Kathi Raning Rawat v. The State of

Saurashtra(1) as under:-

"It is a doctrine of the American courts which seems to

be well-founded on principle that the equal protection

clause can be invoked not merely where discrimination

appears on the express terms of the statute itself, but also

when it is the result of improper or prejudiced execution of

the law. (Vide Weaver on Constitutional Law, p. 404). But a

statute will not necessarily be condemned as discriminatory,

because it does not make the classification itself but, as

an effective way of carrying out its policy, vests the

authority to do it in certain officers or administrative

bodies.................... In my opinion, if the legislative

policy is clear and definite and as an effective method of

carrying out that policy a discretion is vested by the

statute upon a body of administrators or officers to make

selective application of the law to certain classes or

groups of persons, the statute itself cannot be condemned as

a piece of discriminatory legislation. After all "the law

does all that is needed when it does all that it can,

indicates a policy .... and seeks to bring within the lines

all similarly situated so far as its means allow" (Vide Buck

v. Bell, 274 U.S. 200,-208). In such cases, the power given

to the executive body would import a duty on it to classify

the subject-matter of legislation in accordance with the

objective indicated in the statute. The discretion that is

conferred on official agencies in such circumstances is not

an unguided discretion; it has to be exercised in conformity

with the policy to effectuate which the direction is given

and it is in relation to that objective that the propriety

of the classification would have to be tested. If the ad-

ministrative body proceeds to classify persons or things on

a basis which has no rational relation to the objective of

the legislature, its action can certainly be annulled as

offending against the equal protection clause. On the other

hand, if the statute

(1) [1952] S.C.R. 435, 459.

(2) [1954] S.C.R. 30, 41,

1241

itself does not disclose a definite policy or objective and

it confers authority on another to make selection at its

pleasure, the statute would be held on the face of it to be

discriminatory irrespective of the way in which it is

applied.................."

The same line of demarcation was also emphasized by

Patanjali Sastri, C. J., delivering the judgment of the

Court in Kedar Nath Bajoria v. The State of West Bengal(2).

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It, therefore., follows that the mere fact that the

Government is entrusted with the power to select cases of

persons falling within the group or category of substantial

evaders of income-tax for reference to the Commission would

not render section 5(1) discriminatory and void.

The object sought to be achieved by the impugned piece of

legislation is quite definite and that is to catch

substantial evaders of income-tax out of those who have made

huge profits during the war period. They form a class by

themselves and have to be specially treated under the

procedure laid down in the Act. Being a class by

themselves, the procedure to which they are subjected during

the course of investigation of their cases by the Commission

is not at all discriminatory because such drastic procedure

has reasonable nexus with the object sought to be achieved

by the Act and therefore such a classification is within the

constitutional limitations. The selection of the cases of

persons falling within that category by the Government

cannot be challenged as discriminatory for the simple reason

that it is not left to the-unguided or the uncontrolled

discretion of the Government. The selection is guided by

the very objective which is set out in the terms of section

5 (1) itself and the attainment of that object controls the

discretion which is vested in the Government and guides the

Government in making the necessary selection of cases of

persons to be referred for investigation by the Commission.

It cannot, therefore, be disputed that there is a valid

basis of classification to be found in section 5(1) of the

Act.

(1) [1954] S.C.R. 30, 41.

1242

The validity of the classification was further attacked

on the ground that the limitation of the period within which

the cases of the substantial evaders of income-tax falling

within this group or category may be referred for

investigation by the Government to the Commission, viz.,

16th February 1950 imports a discrimination in so far as

those persons whose cases are referred before that date

would be treated under the procedure laid down in the

Travancore Act XIV of 1124 whereas those whose cases have

not been referred by that date would not be subjected to the

same treatment even though they fell within the same

category. This would bring about a discrimination between

the same class of persons some of whom would be subjected to

that special treatment and others who would escape the same.

Section 5(4) of the Act also would not cure this defect

because the cases contemplated therein are either the cases

which have been already referred for investigation to the

Commission under section 5(1) of the Act or cases of other

persons about whose alleged 'evasion of income-tax the

Commission has gathered information during the course of

their investigations. Even if these other persons be thus

subjected to the special procedure prescribed in the Act

there would remain, outside the jurisdiction of the

Commission, numbers .of persons whose cases are not covered

by sections 5(1) or 5(4) but who nonetheless are comprised

within the class of substantial evaders of income-tax. They

would have to be dealt with under the ordinary law and

presumably under section 47 of the Travancore Act XXIII of

1121 if they could be dealt with thereunder. If they could

not be so dealt with, the only result would be that they

would escape the surveillance of the Government and the

escapement of income-tax in their cases would be without any

remedy. This, it was urged, was discriminatory and was

enough to strike down section 5(1) of the Act.

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It would be impossible in the normal course to reach all

substantial evaders of income-tax. Those persons falling

within that category in respect of whom the

1243

Government had received the requisite information and in

whose cases the Government had prima facie reasons for

believing that they had to a substantial extent evaded

payment of taxation on income would have their cases

referred by the Government for investigation by the

Commission. Those persons in respect of whom no such

information was available to the Government would certainly

escape detection but that is the position with regard to

each and every law which may be passed in order to detect

evasion of payment of income-tax. Even under the provisions

of section 47 of the Travancore Act XXIII of 1121

(corresponding to section 34 of the Indian Income-tax Act as

it stood before the amendment in 1948), those persons in

respect of whom the Incometax Officer had gathered definite

information and consequently discovered that income, profits

or gains chargeable to income-tax had escaped assessment in

any year could be dealt with under the relevant provisions

of that Act. Those persons in respect of whom no such

information had been received by the Income-tax Officer

could not be reached at all. The fact that some persons

falling within a particular category may escape detection

altogether is not necessarily destructive of the efficacy of

the particular legislation. The only thing required is

that, as between persons who fall within the same category

and who can be dealt with under the same procedure, there

should be no discrimination, some being treated in one way

and others being treated in another.

It was also urged that discrimination was inherent in the

terms of section 5(1) itself by reason of its operation

being limited only to those persons whose cases were

referred to the Commission on or before the 16th February

1950. It thus arbitrarily left out persons who evaded

payment of taxation on income made during the war period but

whose cases were not discovered or referred to the

Commission on or before that date although they were

otherwise similarly situated. Reliance was placed in support

of this position on the following passage from the judgment

of Mahajan, C. J. in Shree Meenakshi Mills' case,

157

1244

supra, at pages 795-796:

"Assuming that evasion of tax to a substantial amount

could form a basis of classification at all for imposing a

drastic procedure on that class, the inclusion of only such

of them whose cases had been referred before 1st September,

1948, into a class for being dealt with by the drastic

procedure, leaving other tax evaders to be dealt with under

the ordinary law will be a clear discrimination for the

reference of the case within a particular time has no

special or rational nexus with the necessity for drastic

procedure............"

These observations were made to repel the first argument

of the learned Attorney-General that the class of

substantial evaders who fall within section 5(1) were only

those whose cases had been referred within the date fixed.

It was pointed out that if the class was so circumscribed

then that by itself would make the classification

discriminatory by leaving out those substantial evaders

whose cases had not been referred by that date. By that

passage, however, this Court did not hold that in fact

section 5(1) was confined to such a limited class. We are

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of the opinion that the fixation of the date for references

for investigation by the Government to the Commission, viz.,

the 16th February 1950 was not an attribute of the class of

substantial evaders of income-tax which were intended to be

specifically treated under the drastic procedure prescribed

in the Travancore Act XIV of 1124 but was a mere accident

and a measure of administrative convenience. The date of

such references could, without touching the nature and

purpose of the classification, be extended by the Travancore

Legislature by a necessary amendment of the Travancore Act,

XIV of 1124, and if such an amendment had been grafted on

the Act as originally passed, no one belonging to the

particular class or category of substantial evaders of

income tax could have complained against the same.

The next question to consider is whether the same class

of persons dealt with under section 5(1) of the Travancore

Act XIV of 1124 were intended to and

1245

could be dealt with under the provisions of section 47 of

the Travancore Act XXIII of 1121. Because, if that was the

position at any particular period of time, section 5(1) of

the Travancore Act XIV of 1124 would certainly be

discriminatory in so far as there will be two distinct

provisions simultaneously existing in the statute book, one

of which could be applied to some persons within the same

class or category and the other could be applied to others

also falling within the same class or category, thus

discriminating between the two groups.

Section 47 of the Travancore Act XXIII of 1121, as

already observed, was in the same terms as section 34(1) of

the Indian Income-tax Act as it stood before its amendment

in 1948. Each of the following conditions had to be

fulfilled before the Income-tax Officer could take action

under this section, viz.:

(i)that definite information bad come into the possession

of the Income-tax Officer that income, etc. had escaped;

(ii)that inconsequence of such definite information the

Income-tax Officer discovered that income, etc.

(a) had escaped assessment, or

(b) had been under-assessed, or

(c) had been assessed at too low a rate, or

(d) had been the subject of excessive relief;

(iii) that the Income-tax Officer had reason to belive

that

(a) the assessee had concealed the particulars of his

income, or

(b) deliberately furnished inaccurate particulars thereof

It is, therefore, abundantly clear that section 47(1) of

the Travancore Act XXIII of 1121 was directed only against

those persons concerning whom definite information came into

the possession of the Incometax Officer and in consequence

of which the Incometax Officer discovered that the income of

those persons bad escaped or been under-assessed or assessed

at too low a rate or had been the subject of excessive

relief. The class of persons envisaged by

1246

section 47(1) was a definite class about which there was

definite information leading to discovery within 8 years or

4 years as the case may be of definite item or items of

income which had escaped assessment. The Travancore Act

XIII of 11 21 was passed on the 9th July 1946. The action

to be taken under it was not confined to escapement from

assessment of income made during the war period (September

1939 to 1946). Action could be taken in respect of income

which escaped assessment even before the war and also more

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than 8 years after the end of the war. Turning now to

section 5(1) it will be noticed that the class of persons

sought to be reached comprises only persons about whom there

was no definite information and no discovery of any definite

item or items of income which escaped taxation but about

whom the Government had only prima facie reason to believe

that they evaded payment of tax to a substantial amount.

The class of persons who might fall within section 5(1) of

the Travancore Act XIV of 1124 was, therefore, not the same

class of persons who may come under section 47(1) of the

Travancore Act XXIII of 1121. Further, action under section

5(1) read with section 8(2) of the 'Travancore Act XIV of

1124 is definitely limited to the evasion of payment of

taxation on income made during the war period. It cannot,

therefore, be urged that section 5(1) of the Travancore

Act XIV of 1124 was discriminatory in comparison with

section 47(1) of the Travancore Act-XXIII of 1121, for the

persons who came under section 5(1) were not similarly

situated as persons who came under section 47(1), Section

5(1) of Act XXX of 1947 was struck down in Shree Meenakshi

Mills' case, supra, as it comprised the same class of

persons who were brought in the amended section 34(1-A) of

the Indian Income-tax Act, 1922 but the same cannot be said

about section 5(1) as compared to section 47(1). These two

sections do not overlap and do not cover the same class of

persons.

The result, therefore, is that section 5(1) of the

Travancore Act XIV of 1124 which has to be read for

1247

this purpose in juxtaposition with section 47 of the

Travancore Act XXIII of 1121 cannot be held to be

discriminatory and violative of the fundamental right

guaranteed under article 14 of the Constitution. The

proceedings which took place in the course of investigation

by the Commission up to the 26th January 1950 were valid and

so also were the proceedings during the course of

investigation which took place after the inauguration of the

Constitution on the 26th January 1950 under which the

petitioner, as a citizen of our Sovereign Democratic

Republic acquired inter alia guarantee of the fundamental

right under article 14 of the Constitution.

The result, therefore, is that all the contentions urged

on behalf of the petitioner fail and Civil Appeal No. 21 of

1954 must be dismissed with costs.

Civil Appeals Nos. 21 and 22 of 1954 will accordingly be

dismissed with costs. There will be a set off for costs.