PANNALAL BINJRAJ v. UNION OF INDIA.
Citation: [1957] 1 S.C.R. 233; 1956 INSC 81
Court: Supreme Court of India
Bench: T.L. VENKATARAMA AIYYAR , BHUVNESHWAR PRASAD SINHA, S.K. DAS
Judgment date:
Case summary
1956 INSC 81. Supreme Court of India judgment dated 1956-12-21. PANNALAL BINJRAJ v. UNION OF INDIA. Read the judgment and case details on LawSphereX.
Judgment text
S. C. R. SUPREME COURT REPORTS 233 PANNALAL BINJRAJ v. UNION OF INDIA. (BHAGWATI, JAGANNADHADAS, VENKATARAMA AYYAR, B. P. SINHA and S. K. DAs JJ. ) Income-tax-Transfer of cases-Discretion vested in the Com- missioner or the Board, if discriminatory and violative of funda- mental rights-Omnibus wholesale order of transfer, if constitution- ally valid-Indian Income-tax Act (XI of 1922), as amended by Amending Act XXVI of 1956, JS. 5(7 A), 64(1), (2)-Constitution of India Arts. 14, 19(J)(g). These petitions on behalf of the assessees raised the common question as to the constitutionality of s. 5(7-A) of ·the Indian Income-tax Act, which was raised but not decided by this Court in Bidi Supply Co. v. The Union of India, (1956) S. C. R. 267. Reliance was placed on the obsenrations of Bose, J.
, in his minority judgment in that case and it was contended that the section read with the explanation, subsequently added to it as a result of that decision, conferred arbitrary and uncontrolled powers cf transfer on the Income-tax Commissioner and the Central Board of Revenue, was discriminatory and violative of the provi- sions of Art. 14 and imposed an unreasonable restriction on the right to carry on trade or business in contravention of Art. 19(1 )(g) of the Constitution. It was further contended that the omnibus wholesale orders of transfer made without any reference to any particular case or without any limitation as to time were inconvenient and discriminatory and ran counter to the majority judgment in that case. The contention of the Central Board of Revenue, supported by affidavits filed on its behalf, was that the section was intended to minimise administrative inconvenience. there was no discrimination aftc-.
r transfer because the same relevant provisions of the Act as applied to others similarly situat- ed, were applied after the transfer and any resulting inconveni- ence to the asscsscc was sought to be minimised by transferring his case either to the nearest area or, where that was not feasible, by examining his accounts or evidence, if required by him, at a place suited to his convenience and that the wholesale omnibus orders of transfer were covered by the explanation : Held, that s. 5(7A) of the Indian Income-tax Act was a measure of administrative convenience, was con~titutionally valid 2nd did not infringe any of the fundamental rights conferred by Arts. 14 and (19)(g) of the Constitution and the orders of transfer in question were saved by the explanation to that section and wen: constitutionally valid. D1e1mher, 21. 1956 P•M-1. J Binjraj v. Ullio11 If India 234 SUPREME COURT REPORTS [1957] The right conferred on the assessec by s.
64( I) and ~2) of the Act was hot an absolute right and must be subject to the- primary- objcct of the Act itself, namely, the assessment and collection of incomc~tax, and \Vhc:rc the . exigencies of tax colli:ction so required, the Co111missioncr of lncomc~tax or the Central Board, o{ Revenue had the power under s. 5(7A) of the A transfer his case to some other officer outside the area where he resided or carried on business and any difference in his pos1t1on created thereby as compared to that of others similarly situa · cec:dings in the transferred case and also instituted further proceedings against the petitioner and assessed him under s. 23( 4) of the Act for the assessment years 1946-47 and 1947-48.
Demands were made upon the petitioner for payment of the: amount of income-tax thus assessed whereupon he filed this petition impeach- ing the validity of the order of the Central Board of Revenue dated June: 29, 1955, and the proceedings entertained by the Income-tax Officer, Special Circle:, Ambala, on the ground that s. 5 (7A) of the Act was ultra vires the Constitutipn. Petition No. 85/56 was filed by M/s. Bhagwan Das Sud & Sons, Merchants, Hoshiarpur, carrying on busi- ness in rosin and turpentine there. Before October 20, 1953; they were being assessed by the Income-tax Officer, Hoshiarpur, but on that date their case was transferred under s. 5(7A) of the Act by the Com- missioner of Income-tax to the Income-tax Officer, Special Circle, Ambala. The said officer continued the said case and reopened the assessment for the years 1944-45 to 1950-51 and complc:tc:d the assessment for the assessment years 1947-48, 1950-51 and 1951-52.
These: petitioners also thereupon filed the: petition challenging validity of the: order of transfer made by the Commissioner of Income-tax on October 20, 1953, and the proceedings entertained by the Income- tax Officer, Special Circle, Ambala, thereafter, on the same ground of the ultra vires character of s. 5(7A) of the Act. Shri A. L. Sud, the petitioner in Petition No. 44/56 is a member of the Hindu undivided family carrying on business in the name and stylt ·of M/s. Bhagwan Das Sud & Sons and the cases oi both these petitioners were transferred to the Income-tax Offier, Special 195b PannalaJ Binjra v. Union of lntia Bhagwali]. 1956 P•nt1alal Binjraj v. UflliOJI of l'Niia 238 SUPREME COURT REPORTS [1957] Circle, Ambala, as above by the said respective orders. Petitions Nos. 86, 87, 88, 111, 112, and 158 of 1956: These petitions may be compendiously described as the Amritsar group. The petitioner in Petition No. 86/56 is Sardar Gurdial Singh, son of S.
Narain Singh, The petitioner in Petition No. 87 /56 is Dr. Sairmukh Singh, son of S. Narain Singh. The petitioner in Petition No. 112/56 is S. Ram Singh, son of S. Narain Singh. These three arc brothers and the petitioner in Petition No. 88/56 is the father, S. Narain Singh, son of S. Basdcv Singh. The father and the three sons were the directors in the Hindustan Embroidery Mills (Private) Ltd. , petitioner No. l in Petition No. 111/56, which is located at Chheharta near Amritsar. All these petitioners were, prior to the or - ducts. Income-tax was first imposed in the Hyderabad State in 1946 by a special Act of the Legislature and the· petitioner was assessed under the Hyderabad Income-tax Act by the Additional Income-tax Officer, Raichur, for the assessment years 1948-49 and 1949-50. As from April l, 1950, the Indian Income- tax Act was applied to Hyderabad but the Additional Income-tax Officer, Raichur, continued to assess the pet1t1oner.
The cases in · respect of the assessment years 1950-51, 1951-52 and 1952-53 were pending before that officer and proceedings were tal f the argument lies in overlooking the fact that the 'insidious discrimination complained of is incorporated in the Act itself', it being so drafted S. C. R. SUPREME COURT REPORTS 249 that whenever any discrimination is made such discrimination would be ultimately traceable to it. " The pivot of the whole argument of the petitioners is the provisions contained in s. 64(1) and (2) of the Act which prescribe the place of assessment. They are:- "64. (1) Where an assessee carries on a business, profession or vocation at any place, he shall be assessed by the ' Income-tax Officer of the area in which that place is situate or, where the business, profession or vocation is carried on in more places than one, by the Income-tax Officer of the area in which the principal place of . his business, profession or vocation is situate.
(2) In all other cases, an assessee shall be assessed by the Income-tax Officer of the area in which he resides. " . These provisions were construed by the Bombay High Court in Dayaldas Kushiram v. Commissioner lncome- ta:t, (Central), (supra), and Beaumont, C. J. , observed at p. 657: "In my opinion section 64 was intended to ensure that as far as practicable an assessee should be assessed locally, and the area to which an Income-tax Officer is appointed must, so far as the exigencies of tax collection allow, bear some reasonable relation to the place where the assessee carries on business or resides. " Kania, J. , as he then was, went a step further and stated at p. 660 : "A plain reading of the section shows that the same is imperative in terms. · It also gives to the assessee a valuable right. He is . entitled to tell the taxing authorities that he shall not . be called upon to attend. at · different places and thus upset his busi- ness.
" The learned Judges there appear to have treated the provisions ·of s. 64(1) and (2) more as a question of right than as a matter of convenience only. If there were thus a . right conferred upon the assessee by the provisions of s. 64(1) and (2) of the Act and that right continues to be enjoyed by all the assessees except the . 1956 Pannalal Bi,Yraj . v. Union of lntfia Bhagwati]. 1956 Pannalal Bi,Yraj v. Union of India BhagwatiJ. 250 SUPREME COURT REPORTS [1957] assessee whose case is transferred under s. 5(7A) of the Act to another Income-tax Officer outside the area where he resides or carries on business the assessee can urge that,- as compared with those other assessees, he is discriminated against and is subjected to incon- venience and harassment. It is, therefore, necessary to consider whether any such right is conferred upon the assessee by s. 64(1) and (2) of the Act.
Prima facie it would appear that an assessee is entitled under those provisions to be assessed by the Income-tax Officer of the particular area where he resides or carries on business. Even where a question arises as to the place of assessment such question is under s. 64(3) to be determined by the Commissioner or the Commissioners concerned if the question is bet- ween places in more States than one or by the Central Board of Revenue if the latter are not in agreement and the assessee is given an opportunity of representing his views before any such question is determined. This provision also goes to show that the convenience of the assessee is the main consideration in determining the place of assessment. . Even so the exigencies of tax collection have got to be considered and the primary object of the Act, tJiz. , the assessment of income-tax, has got to be achieved.
The hierarchy of income-tax authorities which is set up under Chapter II of the Act has been so set up with a view to assess the proper income-tax payable by the assessee and whether the one or the other of the authorities will proceed to assess a particular assessee has got to be determined not only having regard to the convenience of the assessee but also the exigencies of tax collection. In order to assess the tax payable by an assessee more conveniently and efficiently it may be necessary to have him assessed by an Income-tax Officer of an area other than the one in which he resides or carries on business. lt may be that the nature and volume of his business operations are such as require investiga- tion into his affairs in a place other than the one where he resides or carries on business or that he is so connected with various other individuals or organiza- tions in the way of his earning his income as to render S. C. R.
SUPREME COURT REPORTS 251 such extra-territorial investigation n,ecessary before he may be properly assessed. These are but instances of the various situations which may arise wherein it may be thought necessary by the Income-tax authorities to transfer his case from the Income-tax Officer of the area in which he resides or carries on business to another Income-tax Officer whether functioning in the same State or beyond it. This aspect of the question was emphasized by Beaumont, C. J. , in Dayaldas Kushiram v. Commissioner of Income-tax, (Central), (supra), at page 146, when he used the expression "as far as practicable" in connection with the assessee's right to be assessed locally and the expression "so far as exigencies of tax collection allow" in connection with the appointment of the Income-tax Officer to assess the tax payable by the particular assessee. In the later case of Dayaldas Kushiram v. Commissioner of Income-tax, ( Central)( 1 ), Beaumont, C. J.
, expressed himself as follows : "The Income-tax Act does not determine the place of assessment. What it does is to determine the Officer who is to have power to assess and in some cases it does so by reference to locality but I apprehend that an appeal would be not against an order of the Commissioner as to the place of assessment, but against the order of assessment of the Income-tax Officer," thus stating in effect that this section does not give a right to the assessee to have his assessment at a parti- cular place 'but determines the Income-tax Officer who is to have power to assess him. This aspect was further emphasized by the Federal Court in W a/lace Brothers & Co. v. Commissioner of Income-tax, Bombay, Sind & Baluchistan ( 2 ), where Spens, C. J. , observed : "Clause (3) of s. 64 provides that any question as to the place of assessment shall be determined by the Commissioner or by the Central Board of Revenue.
Proviso 3 to the clause enacts that if the place of assessment is called in question by the assessee, the Income-tax Officer shall, if not satisfied with the (1) [1943) 11 I. T. R. 67, 101. (2) A. I. R. 1945 F. C. g, 13. 1956 PaMalal Bi'lfraj v. Union of India Bhagwoti ]. 1956 Pdn. nalal BirfjraJ v. Union of India Bhatwoti J. 252 SUPREME COURT REPORTS [1957) correctness of the claim, refer the matter for determina- tion under this sub-section before assessment is made. These provisions clearly indicate that the matter is more one of administrative convenience than of jurisdiction and that in any event it is not one for adjudication by the Court. " It may be noted, however, that in the passage at page 276 of the majority judgment in Bidi Supply Co. v. The Union of India (supra), this court. regarded the benefit conferred on the assessee by these provisions of s.
64(1) and (2) of the Act as a right and it is too late in the day for us to say that no such right to be assessed by the Income-tax Officer of the particular area where he resides or carries on his business is conferred on the assessee. This right, however, according to the authorities above referred to, is hedged in with the limitation that it has to . yield to the exigencies of tax collection. The position, therefore, is that the determination of the question whether a particular Income-tax Officer should assess the case of the assessee depends on ( 1) the convenience of the assessee as posited in s. 64(1) and (2) of the Act, and (2) the exigencies of tax collec- tion and it would be open to the Commissioner of Income-tax and the Central Board of Revenue who are. the highest amongs,t the Income.
tax Authorities under the Act· to transfer the case of a particular assessee from the Income-tax Officer of the area within which he resides or carries on business to any other Income-tax Officer if the exigencies of tax collection warrant the same. It is further to be noted that the infringement of such a right by the order of transfer under s. 5(7A) of the Act is not a material infringement. It is only a deviation of a minor character from the general standard and does not necessarily involve a denial of equal rights for the simple reason that even after such transfer the case is dealt with under the normal proced- ure which is prescribed in the Act. The production and investigation of the books of account, the enquiries to be made by the Income-tax Officer and the whole of the procedure as to assessment including the further ) ) . , ... - ' •• S. C.
R: SUPREME COURT :c PORTS 253 appeals after the assessment is made by the I11come- tax Officer are the same in a transferred case as in others which remain with the Income-tax Officer of. the area in which the other assessees reside or carry on business. There is thus no differential treatment and no scope for the argument that the particular assessee is discriminated against with reference to others similarly situated. It was observed by this Court in M. K. Copa/an v. The State of Madhya Pradesh(') : "In support of the objection raised under article 14 of the Constitution, reliance is placed on the decision of this Court in Anwar Ali Sarkar' s case.
That decision, however, applies only to a case where on the allotment of an individual case to a special Court authorised to conduct the trial by a procedure substantially different from the normal procedure, discrimination arises as between persons who have committed similar offences, by one or more out of them being subjected to a pro- cedure, which is materially different from the normal procedure and prejudicing them thereby. In the pre- . sent case, the Special Magistrate under s. 14 of the Criminal Procedure Code has to , try the case entirely under the normal procedure, and no discrimination of the kind contemplated by the decision in Anwar Ali Sarkar' s case and the other cases following it arises here. A law vesting discretion in an authority under such circumstances cannot be said to be discriminatory as such, and is therefore not his by article 14 of the Constitution. There is, therefore, no substance in this . contention.
" To a similar effect were the observations of Mukher- jea, J. , as he then was, in The State of West Bengal v. Anwar Ali Sarkar, (supra), at p. 325: " I agree with the Attorney-General that if the retrospi:ctive effect and if, therefore, any action was taken before the commencement of the Constitution in pursuance of the provisions of any law which was a valid law at the time when such action was taken, such action cannot be challenged and the law under S. C. R. SUPREME COURT REPORTS 267 which such action was taken cannot be questioned as unconstitutional and void on the score of its infringing the fundamental rights enshrined in Part III of the Constitution (See Keshavan Madhava Menon v. The State of Bombay ( 1 )). The following observations of I:>as, l . , as he then was, at p.
235 of that case, may be appropriately referred to in this context : "As already explained, article 13(1) only has the effect of nullifying or rendering all inconsistent existing laws ineffectual or nugatory and devoid of any legal force or binding effect only with respect to the exer- cise of fundamental rights on and after the date of the commencement of the Constitution. It has no retrospective effect and if, therefore, an act was done before the commencement of the Constitution in contravention of ariy law which, after the Constitution, becomes void with respect to the exercise of any of the fundamental rights, the inconsistent law is not wiped out so far as the past act is concerned, for, to say that it is, will be to give the law retrospective effect ..... . So far as the past acts are concerned the law exists, notwithstanding that it does not exist with respect to . the future exercise of fundamental rights. " (See also Syed Qasim Razvi v.
The State of Hyderabad( 2 ) and Laxmanappa Hanumanthappa famkhandi v. Union -0f lndia(3) ). It is clear, therefore, that the petitioners are not entitled to complain against the said orders of transfer dated July 27, 1946. Petitions Nos. 225 to 229 of 1956, i. e. , the Raichur group, and Petitions Nos. 86, 87, 88, 111, 112 and 158 of 1956, i. e. , the Amritsar group, all belong to the same category. In the first group, there was an order of transfer on December 21, 1953, passed by the Commis- sioner of Income-tax, Hyderabad, transferring the cases of the petitioner from the Additional Income-tax Officer, Raichur, to the Income-tax Officer, Special Circle, Hyderabad. There was, however, an order passed by the Commissioner shortly before May 19, 1955, trans- ferring the cases of the petitioner from the Income-tax (~) [1951) S. C. R. 228, 235. (2) (1953) S. C. R. 589. (3) (1955] I S. C. R. 769. 1956 Pannalal Binjraj v. Union of India Bhagwati]. 1956 Pannalal Bil! iraj. v. u. ; ..
of 1ru11a BhapaJi J. 268 SUPREME COURT REPORTS [1957] Officer, Special Circle, Hyderabad, to the main Income. tax Officer, Raichur. The petitioner thus reverted to the Income-tax Officer, Raichur, and it passes one's imagination what possible argument he can urge on the score of inconvenience and harassment. The whole attitude of the petitioner is motivated by an intention to delay the payment of income-tax legitimately due by him to the Revenue trying to take advantage of a mere technicality. In the second group, there were orders passed by the Commissioner of Income-tax transferring the case. s of the petitioners from the Income-tax Officer, 'A' Ward, Amritsar, or the Income-tax Officer, 'F' Ward, Amritsar, to the Income-tax Officer, Special Circle, Amritsar. Both these offices were situated in the same building and under the same roof. The argument of inconvenience and harassment can, under these cir- cumstances, . be hardly advanced by them.
There is moreover another feature which is common to both these groups and it is that none of the peti- tioners raised any objection to their cases being trans- ferred in the manner stated a. hove and in fact sub- mitted to the jurisdiction of the Income-tax Officers to whom their cases had been transferred. It w'as only after our decision in Bidi Supply Co. v. The Union of India, (supra), was pronounced on March 20, 1956, that these petitioners woke up and asserted their alleged rights, the Amritsar group on April 20, 1956, and the Raichur group on November 5, 1956. If they acquiesced in the jurisdiction of the Income-tax Officers to whom their cases were transferred, they were certainly not entitled to invoke the jurisdiction of this Court under Art. 32. It is well settled that such conduct ·of the petitioners would disentitle them to any relief at the hands of this Court (Vide Halsbury's 'Laws of England', Vol. II, 3rd Ed. , p. 140, para 265; Rex v. Tabrum, Ex Parte Dash(') ; 0. A.
0. K. Lakshmanan Chettiar. v. Commissioner, Corporation of Madras and Chief fudge, Court of Smalf'9auses, Madras(')). The orders ·of transfer made by the Commissioner of Income-tax or the Central Board of Revenue, as the (') [z907] 97 L. T. 55'· (') [1927] I. L. R. 50 Mad. z30. S. C. R. SUPREME COURT REPORTS case may be, against the three groups 0£ peut1oners, viz. , Sriram Jhabarmull group, the Raichur group and the Amristar group, cannot, therefore, be challenged by them as unconstitutional and void. This leaves two sets of petitioners, the petitioners in Petitions Nos. 97 & 97-A of 1956 and the petitioners in Petitions Nos. 44/56 and 85/56. Petitions Nos. 97 & 97-A of 1956:-The petitioners are oilmill owners, merchants and commission agents, carrying on business at Sahibganj in the district of Santhal Parganas and have · a branch ·at 97, Lower Chitpur Road, Calcutta.
Their cases were referred to the Income-tax Investigation Commission as they were believed to have evaded payment of tax on a sub- stantial amount. They were alleged to have . concealed income exceeding Rs. 8 lakhs and indulged in business activities spread over a wide area resulting in large pro- fits not disclosed in the books of account or in the various returns filed by them. -After the judgment of this Court in Surajmutl Mohta & Co. '" A. V. Viswanatha Sastri( 1 ), about 320 cases referred to the Income-tax · Investiga- tion Commission under s. 5(4) of Taxation on Income Investigation Commission Act (XXX of . 1947) were affected and had to be reopened under s. 34(1A) of the Income-tax Act. To dispose of these cases, "since they involved many back years' cases" quickly and promptly, special circles without reference to area were created at Bombay and Calcutta, because the ex1stmg circles, whose hands were full, could not take up this extra work.
These 320 cases were distributed between these circles on the basis of the geographical area to which these assessees belonged. The petitioners belonged to Bihar and had a branch at Calcutta and their cases were, therefore, allotted to one of the Central Circles at Calcutta. Later on in October 1954, this Court struck down s. 5(1) of the Taxation on Income Investigation Com- mission Act (XXX of 1947) in Meenakshi Mills Ltd . v. Viswanatha Sastri(') and as a result thereof cases referred under that section and pending with the (11 (1955] r $. C. R. 448. (2) (1955 r S. C. R. 787. 1956 Ptmaalal Binfr•j v. Union of lttdia B1tapali J. 1956 Pannalal~Binjraj T• L"nion;of India Ehagwati ]. 270 SUPREME COURT REPORTS [1957] Income-tax Investigation Commission on July 17, 1954, could not be proceeded with under the provisions of that Act. These cases numbering about 470 had t Blragwali]. 1957 January 3(}.
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