RADHESHYAM MAKHANLAL Vs. UNION OF INDIA

JUDGEMENT

(1.) IN this petition two questions fall to be determined : (i) whether the Union Parliament was competent to enact Section 3 of the Indian Income -tax (Amendment) Act, 1959 (Act No. 1 of 1959) whereby Section 49EE was incorporated in the Indian Income -tax Act, 1922, prohibiting the entertainment of claims for refund of money paid or security furnished pursuant to settlements relating to assessment or re -assessment and conferring power upon the Income -tax Officer, Appellate Assistant Commissioner or the Commissioner to set off in certain cases moneys in the possession of Government against tax found due in proceedings for assessment under the provisions of Section 34 of the Indian Income -tax Act ? and (ii) whether this Court is competent to issue a writ under Article 226 of the Constitution of India compelling the Union of India to refund an amount of money or to return the securities collected or received pursuant to a settlement recorded under the procedure prescribed by Act 30 of 1947 which has since been declared ultra vires the Union Parliament ?

(2.) IN order to appreciate the contentions advanced at the Bar, it is necessary to set out in some detail the legislative history and the effect of certain decisions of their Lordships of the Supreme Court concerning the power of assessment or re -assessment of assessee for the levy and collection of income -tax. Under Section 34 of the Income -tax Act, before it was amended by Act 48 of 1948, the Income -tax Officer was competent to serve on the person liable to pay tax a notice requiring him to furnish a proper return and to proceed to assess or re -assess the income, profits or gains, if in consequence of definite information which had come into his possession the Income -tax Officer discovered that income, profits or gains chargeable to income -tax had escaped assessment in any year or had been under -assessed or had been assessed at too low a rate, or had been the subject of excessive relief under the Income -tax Act, or where the Income -tax Officer had reason to believe that the assessee had concealed the particulars of his income or deliberately furnished inaccurate particulars thereof. It is a matter of common knowledge that during the period of the last War large fortunes were made by business -men and controls imposed by States on prices and distribution of commodities were often evaded and secret profits were made and kept out of the books and were often invested in shares and immoveable properties acquired in the name of benamidars or in the purchase of gold, silver and jewellery. With a view to assess this evaded income, the Legislature enacted the Taxation on Income (Investigation Commission) Act, 1947 (Act 30 of 1947). By Section 3 of the Act power was conferred upon the Central Government to constitute a Commission to be called the Income -tax Investigation Commission to investigate and report to the Central Government on all matters relating to taxation on income with particular reference to the extent to which the existing law relating to, and procedure for, the assessment and collection of such taxation was adequate to prevent the evasion thereof, and to investigate in accordance with the provisions of the Act any case or points in a case referred to it under Section 5 and make a report thereon in respect of all or any of the assessments made in relation to the case. By Section 5(1) the Central Government was authorised to refer to the Commission before a specified date for investigation and report any case or points in a case in which the Central Government had prima facie reasons for believing that a person had to a substantial extent evaded payment of taxation on income, together with such material as may be available in support of such belief. By sub -sec. (2) of Section 5 the Commission was authorised to examine the material submitted by the Central Government with reference to any case or points in a case and make such investigation as it considered necessary, and the Commission was to report to the Central Government if in its opinion further investigation was not likely to reveal any substantial evasion of taxation on income. By sub -sec. (3) the jurisdiction of the Courts to call in question the reference made by the Central Government under sub -sec. (1) or to investigate into the sufficiency of the material on which such a reference was made was excluded. By sub -sec. (4) it was provided :

(3.) PURSUANT to Section 8, in several cases assessments were made by the Commission and in certain cases the persons concerned in the cases referred to or pending before the Commission agreed to settle the cases pending and settlements were duly recorded by the Commission.