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PETITIONER: RAMJILAL

       Vs.

RESPONDENT: INCOME-TAX OFFICER, MOHINDARGARH.

DATE OF JUDGMENT: 12/01/1951

BENCH: DAS, SUDHI RANJAN BENCH: DAS, SUDHI RANJAN KANIA, HIRALAL J. (CJ) FAZAL ALI, SAIYID SASTRI, M. PATANJALI MUKHERJEA, B.K.

CITATION:  1951 AIR   97            1951 SCR  127  CITATOR INFO :  D          1952 SC 115  (7)  D          1954 SC 297  (10)  R          1955 SC   3  (5)  F          1955 SC 661  (6)  RF         1959 SC 149  (52)  R          1959 SC 395  (28)  RF         1961 SC  65  (5,37)  RF         1961 SC 232  (16,37)  R          1961 SC 552  (32)  RF         1962 SC1006  (34,72,75,80,81)  O          1962 SC1563  (15)  RF         1962 SC1621  (12,31,44,46,122,165)  R          1963 SC 630  (25)  R          1966 SC 619  (7)  R          1970 SC 470  (33)  RF         1971 SC 870  (10)  D          1974 SC1105  (12)

ACT:     Constitution of India, Arts. 14, 31 (1), 32,265--Patiala and East Punjab States Union General Provisions (Administra- tion) Ordinance (XVl of 2005)--Union of States-Law  relating to  Income-tax--Uniform  law introduced in all  States  from August 20, 1948--Provision that pending proceedings shall be governed  by existing law--Assessment at different rates  in different States--Equality of law--Infringement of fundamen- tal right--Assessment of income which accrued before  August 20, 1948--Legality--Fundamental right not to be deprived  of property  save  under authority of law--Whether  applies  to taxation--Scope  of Arts. 31 (1) and 265--Application  under Art. 32 for protection against tax laws--Maintainability.

HEADNOTE:     Section  3  (1) of the Patiala and  East  Punjab  States Union General Provisions (Administration) Ordinance (No. XVI of 2005) which came into force on February 2, 1949, and  re- enacted s. 3 of an earlier Ordinance which was in force from August  20,  1948, provided that as from the  appointed  day (i.e.,  August  20, 1948) all laws in force in  the  Patiala

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

JUDGMENT: ORIGINAL JURISDICTION: Petition No. 135 of 1950. Application under  Art. 32 of the Constitution for a writ in the  nature of a writ  of certiorari and prohibition.     Dr. Tek Chand (Hardayal Hardy and Jindra Lal, with  him)

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for the petitioner.     M.C.  Setalvad,  Attorney.  General for  India,  (S.  M. Sikri, with him) for the respondent.     1951. january 12.  The Judgment of the Court was  deliv- ered by     DAS J -- This is an application under article 32 of  the Constitution  for appropriate orders for the  protection  of what  the  petitioner claims to be  his  fundamental  rights guaranteed by articles 14 and 31. This is said to be a  test case,  for, on its decision, we are told, depend the  rights of  numerous  other persons whose interests are  similar  to those of the petitioner.     There is no serious controversy as to the facts material for  the purposes of this application.  They are shortly  as follows:   On May 5, 1948, the then Rulers of  eight  Punjab States including. Patiala and Nabha with the concurrence and guarantee of the Government of India entered into a covenant agreeing  to  unite and integrate their territories  in  one State with a common executive, legislature and judiciary  by the name of Patiala and East Punjab States Union,  hereinaf- ter  compendiously referred to as the Pepsu. By article  III (6)  of  the covenant the then Ruler of Patiala  became  the first President or Raj Pramukh of the Council of Rulers  and he is to hold the office during his lifetime. Article VI  of the covenant is as follows :--     "(1) The Ruler of each Covenanting State shall, as  soon as  may be practicable, and in any event not later than  the 20th  of August, 1948, make over the administration  of  his State to the Raj Pramukh, and thereupon,     (a) all rights, authority and jurisdiction belonging  to the Ruler which appertain, or are incidental to the  Govern- ment of the Covenanting State shall vest in 130 the  Union and shall thereafter be exercisable only as  pro- vided  by this Covenant or by the Constitution to be  framed thereunder;     (b)  all duties and obligations of the Ruler  pertaining or  incidental  to the Government of the  Covenanting  State shall devolve on the Union and shall be discharged by it;     (c)  all the assets and liabilities of  the  Covenanting State shall be the assets and liabilities of the Union, and     (d)  the  military forces, if any,  of  the  Covenanting State shall become the military forces of the Union."     Article  X provides for the formation of  a  Constituent Assembly  to frame a constitution of a unitary type for  the Union within the framework of the Covenant and the Constitu- tion of India.  This Constituent Assembly was also to  func- tion  as  the interim Legislalature of the  Union  until  an elected legislature came into being.  The proviso to  clause (2) of that Article runs as follows :-     "Provided  that until a Constitution framed by the  Con- stituent  Assembly comes into operation after receiving  the assent of the Raj Pramukh, the Raj Pramukh shall have  power to  make  and promulgate Ordinances for the peace  and  good government  of the Union or any part thereof, and any  Ordi- nance  so  made shall, for the space of not  more  than  six months  from its promulgation have the like force of law  as an  Act  passed  by the Constituent  Assembly;but  any  such Ordinance may be controlled or superseded by any such Act."     This Union was inaugurated on July 15, 1948, and the Raj Pramukh  thereafter  took  over the  administration  of  the different  Covenanting States. The Administration  of  Nabha State was taken over by the Raj Pramukh on August 20,  1948. On  the same day the Raj Pramukh, in exercise of the  powers

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vested  in  him, promulgated an Ordinance (No.  1  of  2005) called the Patiala and East Punjab States Union (Administra- tion) 131 Ordinance,  2005.  The  following provisions of  this  Ordi- nance are relevant for our purpose:     "1.  (2) It shall extend to the territories included  in the  Covenanting  States on and from the date on  which  the administration  of any of the said State or States has  been or is made over to the Raj Pramukh. 2.            *            *     3.   As  soon as the administration of  any  Covenanting State  has been taken over by the Raj Pramukh as  aforesaid, all  laws, Ordinances, Acts, Rules,  Regulations,  Notifica- tions, Hidayats and Firrnans-i-Shahi having force of law  in Patiala State on the date of commencement of this  Ordinance shall apply mutatis mutandis to the territories of the  said State  and with effect from that date all laws in  force  in such covenanting State immediately  before that  date  shall be repealed:     Provided  that  proceedings  of  any  nature  whatsoever pending  on such date in the Courts or offices of  any  such Covenanting State shall, notwithstanding anything  contained in   this  Ordinance or any other Ordinance, be disposed  of in  accordance with the laws governing such  proceedings  in force for the time being m any such Covenanting State."     Section  6 provides for the adaptation of the laws  etc. enforced  under  section 3 and, amongst  other  things,  any reference  in these laws etc. to the Patiala State  and  the like was to be construed as a reference to the State of  the Union.   A notification (No.35 dated 27-5-05/11-9-1948)  was issued over the signature of the Revenue Secretary notifying that the Patiala Income-tax Act of 2001 and the Rules there- under had come into force in the various Covenanting  States from  August 20, 1948, thereby repealing the law or laws  in force  in  that  behalf in those States  before  that  date, except as to pending proceedings.  It may be mentioned  here that prior to that date there was no law in the Nabha  State imposing  income-tax  on  the subjects of  that  State.   On November  14, 1948, the Commissioner of Income-tax issued  a Notification (No. 4, dated 132 29-7-2005)  intimating that persons belonging to  the  Cove- nanting  States of Nabha and Nalagarh would be  assessed  to income-tax  under the Patiala Income Tax Act, 2001.  It  was mentioned that persons of those States whose income  reached the  taxable limit ’ ’should henceforward keep  regular  and proper  accounts  for purposes of audit by  the  Income  Tax Department"  on  February 2, 1949, Ordinance 1 of  2005  was repealed  and replaced by Ordinance No. XVI of 2005  promul- gated  by  the Raj Pramukh and called the Patiala  and  East Punjab  States  Union General  Provisions   (Administration) Ordinance, 2006.  Section 3 (1) runs as follows:     "3.  (1) As from the appointed day, all laws and  rules, regulations, bye-laws and notifications made thereunder, and all  other  provisions having the force of law,  in  Patiala State  on the said day shall apply mutatis mutandis  to  the territories of the Union and all laws in force in the  other Covenanting States immediately before that  day shall  cease to have effect;     Provided  that  all suits, appeals,  revisions  applica- tions, reviews, executions and other proceedings, or any  of them,  whether Civil or Criminal or Revenue, pending in  the Courts  and  before authorities of  any  Covenanting  States shall, notwithstanding anything contained in this Ordinance,

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be  disposed of in accordance with the laws  governing  such proceedings  in force in any such Covenanting State  immedi- ately before the appointed day."     By  section  2 (a) the "appointed day"  was  defined  as meaning the 5th day of Bhadon, 2005, corresponding to August 20,  1948.  There  was a section  providing  for  adaptation similar  to section 6 of the Ordinance 1 of 2005. There  was another Ordinance to which reference has to be made, namely, Ordinance No. 1 of 2006 called the Finance Ordinance promul- gated on April 13, 1949, which came into force on that  very date.  Section 5 of that Ordinance introduced several amend- ments to the Patiala Income Tax Act, 2001.   It  recast 133 sections  3 and 34 of that Act and introduced a new  section as section 23B.  Section 6 of that Ordinance runs thus:     "6. For the assessment year beginning on the 1st day  of Baisakh, 2006, that is to say, in respect of the  accounting the income, profits and gains of the previous year ending on the last day of Chet, 2005,-     (a)  income-tax shall be charged at the rates  specified in Part I of the Second Schedule to this Ordinance, and     (b)  rates of super tax shall, for the purposes of  sec- tion 55 of the Patiala Income Tax Act, 2001, be specified in Part II of the Second Schedule to this Ordinance."     It  is  in this setting that the facts  leading  to  the present petition have to be considered.    The petitioner is a resident of Ateli in the district  of Mohindargarh  now in Pepsu but  which  formerly formed  part of the Nabha State.  The petitioner has been carrying on his business at Ateli for a number of years under the’ name  and style   of   Raghunath Rai Ram Parshad.  He never  paid  any income-tax  as   no such tax was imposed by any law  in  the Nabha  State.   On  October ’20, 1949,  the  petitioner  was served  with  a notice under sections 22(2) and  88  of  the Patiala  Income  Tax Act, 2001, requiring him  to  submit  a return  for the  Income  Tax  year 2006 (13-4-1949 to  12-4- 1950)  disclosing  his  income  during  the  previous   year (13-4-1948  to 12-4-1949).  The petitioner, on  December  4, 1949, filed his return for the year 2006 and on February 14, 1950,  he was assessed to income-tax. On May 23,  1950,  the petitioner  received a notice under section 34 calling  upon him  to file his return for the year ending the last day  of Chet  2005,  i.e., for the year 13-4-1948 to  12-4-1949.  In this  return  he had to specify his income of  the  previous year,  namely, 2004 (i.e., 13-4-1947 to 12-4-1948).  It  ap- pears  that  the petitioner along with  other  assessees  of Ateli and Kanina submitted a petition before the Income  Tax Officer on July 9, 1950, asking him not to 134 proceed  with the assessment for the year 2005 but  on  July 13, 1950, the Income Tax Officer assessed him to the best of his judgment under section 34(4) read with section 22(4)  of the Income Tax Act.  The petitioner along with other  asses- sees  similarly situated moved the Income  Tax  Commissioner and the Central Board of Revenue, New Delhi, but without any success.  No formal appeal under the  Patiala Income Tax Act appears to have been filed by the petitioner against assess- ments  for either of the two years 2005 and 2006. On  August 10,  1950, the petitioner filed his present petition  before this Court under article 32 of the Constitution praying that a  writ in the nature of a writ of certiorari be issued  for quashing the assessments of the petitioner’s income  accrued in  the  years 2004 and 2005 and  other  ancillary  reliefs. During the pendency of this petition the income-tax authori- ties  have issued a notice under section 46 intimating  that

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penalty will be imposed if the tax was not paid up.     The  contention of the petitioner in the first place  is that  he has been denied the fundamental right  of  equality before the law and the equal protection of the laws  guaran- teed  to him by article 14 of the Constitution.  His  griev- ances  are formulated in paragraphs 10 and 11 of  his  peti- tion.  It is said that while the people of Kapurthala  which is  included in Pepsu have been asked to pay income-tax  for the  period prior to August 20, 1948, at the old rate  fixed by  the Kapurthala Income Tax Act which was lower  than  the rate  fixed by the Patiala Income Tax Act, 2001, the  people of  Nabha who had not to pay any income-tax prior to  August 20, 1948, at all have been made liable to pay at the  higher Patiala  rate and that such discrimination  offends  against the  provisions  of article 14.  This charge is  refuted  by paragraph  10 of the affidavit of Sardar Gurbax  Singh,  the Additional  Director of Inspection (income Tax), New  Delhi, who was formerly the Commissioner of Income Tax, Punjab  and Pepsu,  which  has been filed in opposition to  the  present petition.  It is there stated that for the  assessment  year 2005,  in Kapurthala the assessees whose cases were  pending on 135 August  20, 1948, were assessed under the Kapurthala  Income Tax  Act at rates fixed thereunder but that for the  assess- ment year 2006 the provisions of the Patiala Income Tax  Act and  the rates prescribed thereunder were uniformly  applied in all areas of the Pepsu, including Kapurthala  This  alle- gation  which is not denied in the affidavit  filed  by  the petitioner  in reply must be taken as correct.  The  assess- ment  of Kapurthala assessees for the year 2005 at  the  old Kapurthala  rate  was obviously made under  the  proviso  to section  3 of Ordinance No. 1 of 2005, which was  reproduced in  the proviso to section 3(1)of the Ordinance No.  XVI  of 2006  and both of which required all pending proceedings  to be  completed according to the law applicable to those  pro- ceedings when they were initiated. No case of assessment was pending  as against any Nabha assessee on August  20,  1948, for there was no Income Tax Act in Nabha prior to that  date and,  therefore, there could be no occasion  for  completing any  pending proceedings against any of such  assessees.  In the premises, there can be no grievance by them on the score of  discrimination.   The discrimination, if  any,  was  not brought about by the two Ordinances, but by the circumstance that  there was no Income Tax Act in Nabha and  consequently there  was no case of assessment pending against  any  Nabha assessees.  In any case the provision that pending  proceed- ings should be concluded according to the law applicable  at the  time  when the rights or liabilities  accrued  and  the proceedings  commenced  is a reasonable law rounded  upon  a reasonable classification of the assessees which is  permis- sible  under  the equal protection clause and  to  which  no exception can be taken. In our opinion the grievance of  the alleged  infringement of fundamental right under Article  14 is not well-founded at all.     Dr. Tek Chand appearing in support of the petition  next contends that the administration of Nabha State having  been taken  over by the Raj Pramukh only on August 20, 1948,  and the Patiala law including the Patiala Income Tax Act,  2001, having been brought 136 into  operation on and from August 20, 1948, the  assessment of the tax on the petitioner’s income which accrued prior to August  20, 1948, was wholly illegal and not  authorised  by the said Ordinances and the State by insisting on collecting

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the tax so illegally assessed was threatening to invade  the petitioner’s  fundamental  right to property  guaranteed  by article 31(1) of the Constitution. Article 31(1) runs as follows: "(1)  No  person shall be deprived of his property  save  by authority of law."     It will be noticed that clause (1) reproduces subsection (1)  of  section 299 of the Government of India  Act,  1935, without the words "in British India." Reference has ’next to be  made  to article 265 which is in Part  XII,  Chapter  I, dealing  with "Finance." That article provides that  no  tax shall  be  levied or collected except by authority  of  law. There ’was no similar provision in the corresponding chapter of  the  Government of India Act, 1935.   If  collection  of taxes amounts to deprivation of property within the  meaning of article 31(1), then there was no point in making a  sepa- rate  provision again as has been made in article 265.   It, therefore,  follows  that clause (1) of article 31  must  be regarded as concerned with deprivation of property otherwise than  by the imposition or collection of tax, for  otherwise article 265 becomes  wholly redundant. In the United  States of  America  the power of taxation is regarded  as  distinct from  the exercise of police power or eminent  domain.   Our Constitution evidently has also treated taxation as distinct from  compulsory acquisition of property and has made  inde- pendent provision giving protection against taxation save by authority of law.  When Dr. Tek Chand was asked if that  was not the correct position, he did ,not advance any cogent  or convincing  answer to refute the conclusion put to him.   In our  opinion, the protection against imposition and  collec- tion  of taxes save by authority of law directly comes  from article 265, and is not secured by clause (1) of article 31. Article 265, 137 not being in Chapter IIi of the Constitution, its protection is  not  a  fundamental right which can be  enforced  by  an application  to this court under article 32.  It is not  our purpose to say that the right secured by article 265 may not be  enforced.   It  may certainly be  enforced  by  adopting proper proceedings.  All that we wish to state is that  this application in so far as it purports to be rounded on  arti- cle 32 read with article 31(1) to this Court is misconceived and must fail.     The whole of Dr. Tek Chand’s argument was rounded on the basis  that protection against imposition and collection  of taxes  save  by authority of law was guaranteed  by  article 31(1)  and  his endeavour was to establish  that  the  Pepsu Ordinances  could  not, in law, and did not,  on  a  correct interpretation of them, impose any income-tax retrospective- ly; that the Income Tax Officer on an erroneous view of  the law had wrongly assessed the tax on income accrued prior  to August  20, 1948, and that consequently the  petitioner  was being threatened with deprivation of property otherwise than by authority of law. In the view we have taken, namely, that the  protection  against imposition or collection  of  taxes save  by authority of law is secured by article 265 and  not by  article 31(1), the questions urged by Dr. Tek  Chand  do not  really  arise and it is not necessary  to  express  any opinion  on them on this application.  Those  questions  can only arise in appropriate proceedings and not on an applica- tion  under  article 32. In our  judgment  this  application fails on the simple ground that no fundamental right of  the petitioner  has  been infringed either under article  14  or under article 31(1) and we accordingly dismiss the  petition

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with costs.                               Petition dismissed. Agent for the appellant: Naunit Lal. Agent for the respondent: P.A. Mehta. 138