BASHESHAR NATH vs. THE COMMISSIONER OF INCOME-TAX, DELHI & RAJASTHAN & ANOTHER.

CIVIL APPEAL No. 208/1958Supreme Court1958 INSC 10219 November 1958Bench: 5 JudgesAuthor: SUDHI RANJAN DAS, NATWARLAL HARILAL BHAGWATI, S.K. DAS, J.L. KAPUR, K. SUBBA RAO96 pages
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What did the Supreme Court hold?

The Supreme Court held that both contentions of the revenue must fail. Firstly, it was not correct to assert that the Taxation of Income (Investigation Commission) Act, 1947, laid down two separate procedures. The Act established a single procedure, and the Commission exercised the same jurisdiction and powers whether conducting an investigation or entertaining a settlement proposal. Therefore, the settlement, being part of this unified procedure, was also affected by the Supreme Court's decision declaring Section 5(1) void as violative of Article 14. Secondly, the Court held that there could be no waiver of fundamental rights, including the right to equality under Article 14. Article 14 is a command to the State, imposing an obligation that cannot be relieved by the act or conduct of a citizen. The fundamental rights are enacted as a matter of constitutional policy in the public interest, not merely for individual benefit, and the doctrine of waiver has no application to them. The appeal was allowed, the Commissioner's order was set aside, and proceedings for implementation of the settlement were quashed.

What were the facts?

The assessee, Basheshar Nath, had his case referred to the Income Tax Investigation Commission in July 1948. By the end of 1953, the Commission concluded that Rs. 4,47,915 had escaped assessment. On May 20, 1954, the assessee applied for a settlement under Section 8A of the Taxation of Income (Investigation Commission) Act, 1947, agreeing to pay Rs. 3,50,000. The settlement was approved by the Commission and accepted by the Central Government, which directed recovery. The assessee paid Rs. 1,25,000 by September 5, 1957. Subsequently, relying on Supreme Court decisions, the assessee challenged the settlement's validity, arguing Section 5(1) of the Act was void. He sought release of attached properties and refund of amounts paid. The Commissioner of Income Tax rejected this claim on January 29, 1958, asserting the settlement's validity.

What were the issues?

1. Whether a settlement under Section 8A of the Taxation of Income (Investigation Commission) Act, 1947, made after the commencement of the Constitution, is constitutionally valid, particularly in light of the Supreme Court's declaration that Section 5(1) of the Act is void (turning on Article 14 of the Constitution)? 2. Whether the waiver of a fundamental right, specifically the right to equality under Article 14, is permissible under the Constitution of India? Assessee's Contentions: The assessee argued that the settlement was invalid because it was based on Section 5(1) of the Act, which had been declared void by the Supreme Court. He relied on the decisions in Suraj Mall Mohta and Co. v. A. V. Visvanatha Sastri and M. Ct. Muthiah v. The Commissioner of Income-tax, Madras. He also contended that his fundamental right under Article 14 was not waived by entering into the settlement. Revenue's Contentions: The revenue contended that the Act provided two distinct procedures: one for investigation and another for settlement. They argued that only the investigation procedure was affected by the Supreme Court's decisions, not the settlement procedure. Furthermore, they argued that the assessee, by voluntarily entering into the settlement, had waived his fundamental right under Article 14.

Which sections of the Income-tax Act were involved?

Section 8A,Section 5(1)

AI-generated summary — verify with the full judgment below

November 19. 528 SUPREME COURT REPORTS [1959] Supp. BASHESHAR NATH ti. THE COMMISSIONER OF INCOME-TAX, DELHI & RAJ ASTHAN & ANOTHER. (S. R. DAS, c. J., N. H. BHAGWATI, s. K. DAS, J. L. KAPUR a.nd K. SUBBA RAO, JJ.)

Income-tax-Evasion of taxation-Case referred tq Investigatio11 Commission-Comme11cement of the Constitution-Settlement of case -·-Constitutional, validity of-Waiver of fundamental right, if permis- sible-Taxation of Income (Investigation Commission) Act, I947 (.JO of' I947l. s. BA-Constitution of India, Art. I4, Part III.

The two questions for determination in this appeal were, (r) whether a settlement under s. SA of the Taxation of Income (In- vestigation Commission) Act, 1947 (30 of 1947) made after the commencement of the Constitution was constitutionally valid and (2) whether the waiver of a fundamental right was permissible under the Constitution. The appellant's case was on July 22, 194S, referred by the Central Government under s. 5(r) of the Act to the Investigation Commission for investigation and report.

The Commission directed the authorised official under s. 6 of the Act to examine the appellant's accounts. He submitted his final report

The order continues below.

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