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TMI Blog1954 (10) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... e continued under the procedure prescribed by the impugned Act. We therefore direct that an appropriate writ be issued against the Commission prohibiting it from proceeding further with the cases of these petitioners under the provisions of Act XXX of 1947 - W.P.(C) 330 OF 1954 - - - Dated:- 21-10-1954 - Judge(s) : GHULAM HASAN., MEHR CHAND MAHAJAN., N. H. BHAGWATI., S. R. DAS., T. L. VENKATARAMA AYYAR JUDGMENT The Judgment of the Court was delivered by MEHR CHAND MAHAJAN, C. J.--Writ Petitions Nos. 330 to 333 of 1954, though presented by different persons, raise identical questions for consideration and decision and can be conveniently disposed of by one judgment. In April, 1947, the Taxation on Income (Investigation Commission) Act, 1947, Act XXX of 1947, was passed by the Central Legislature. By Section 3 of the Act the Central Government was empowered to constitute an Income-tax Investigation Commission for investigating matters relating to taxation on income with particular reference to the question whether the existing law was adequate for preventing the evasion thereof. Section 5(1) of the Act further empowered the Central Government to make a referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er before the commencement of the Constitution could not be impugned on the basis of the provisions of Part III of the Constitution which came into force on the 26th January, 1950. Those provisions had no retrospective operation and could not affect the validity of this law or the completed proceedings taken thereunder. Be that as it may, it appears that nothing happened in these cases till January, 1952, when it is alleged an official of the Commission summoned the petitioners for a preliminary discussion which took place in February, 1952, and since then the petitioners have from time to time been called upon to produce a number of statements and books of account, but the investigation has not proceeded beyond the preliminary stages and the Commission itself has admittedly not commenced any proceedings in these cases, though a period of nearly seven years has elapsed since the references were made, with the result that subsequent events have intervened and, in our opinion, have made these references to the Commission abortive. As already stated, the Constitution of India came into force on the 26th January, 1950, and the pre-Constitution laws had then to stand the test for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ohta's case. The provisions of Section 5(1) of the Act were also attacked in that case as contravening Article 14 of the Constitution, but the Court refrained from expressing any opinion about their constitutionality as that question had no relevancy then. The consequence of that decision was that a certain provision of Act XXX of 1947 was declared void and unenforceable to the extent of its repugnancy to the provisions of Part III of the Constitution under Article 13(1) thereof. Its validity however during the pre-Constitution period was beyond question. What this Court said in its judgment in Suraj Mal Mohta's case has perhaps resulted in the filing of these petitions which were presented to this Court on the 16th of July, 1954, after the decision in that case had been pronounced. In the petitions, as originally drafted, the provisions of Section 5(1) of Act XXX of 1947 were impugned on the ground that they contravened the guarantee of equal protection of the laws enacted in Article 14 of the Constitution and for that reason the Commission had no jurisdiction to deal with the cases of the petitioners by applying the discriminatory and drastic procedure of the impugned Act. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Article 14 of the Constitution inasmuch as it is not based on a rational classification ? (2) Whether, after the coming into force of the Indian Income-tax (Amendment) Act, 1954, which operates on the same field as Section 5(1) of Act XXX of 1947, the provisions of Section 5(1) of Act XXX of 1947, assuming they were based on a rational classification, have not become void and unenforceable, as being discriminatory in character ? In our opinion, for the purpose of deciding these petitions, it is not necessary to express any opinion on the first question because we think the second contention is well founded and is sufficient to determine the case in favour of the petitioners. The provisions of Section 5 (1) of Act XXX of 1947 could only be supported, if at all, for a differential treatment of persons dealt with in that section in matters of procedure, on the ground that these persons constituted a separate class, and the classification was rational. Parliament has, however, by amending Section 34 of the Indian Income-tax Act, now provided that cases of those very persons who originally fell within the ambit of Section 5(1) of Act XXX of 1947 and who it was alleged formed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government, by 1st of September, 1948, had referred to the Commission and that class had thus become determined finally on that date, and that that class of persons could be dealt with by the Investigation Commission under the drastic procedure of Act XXX of 1947, while Section 34 of the Indian Income-tax Act as amended empowered the Income-tax Officer to deal with cases other than those whose cases had been referred under Section 5(1) to the Investigation Commission ; (2) that in any case the proceedings having started before the Commission in pursuance of the reference under Section 5(1) of Act XXX of 1947 those proceedings cannot be affected by the amendment, it having no retrospective operation. Both these contentions, in our opinion, are not well founded. As regards the first contention canvassed by the learned Attorney-General it seems to us that it cannot stand scrutiny. The class of persons alleged to have been dealt with by Section 5(1) of the impugned Act was comprised of those unsocial elements in society who during recent years prior to the passing of the Act had made substantial profits and had evaded payment of tax on those profits and whose cases were referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o far as may be, apply accordingly............ " It was argued in Mohta's case as well as in these petitions that the classification made in Section 5(1) of the impugned 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 Constitution. This alleged defect stands cured in the amended Section 34 inasmuch as the legislature has clearly indicated in the statute what it means when it says that the object of the Act is 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" has been made definite and clear by enacting that no evasion below a sum of one lakh is within the meaning of that expression. Again, the classification of Section 5(1) was criticized on the ground that it did not necessarily deal with persons who during the period of war had made huge profits and evaded payment of tax on them. The amendment made in S ..... X X X X Extracts X X X X X X X X Extracts X X X X
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