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PETITIONER: A.   THANGAL KUNJU MUSALIAR

       Vs.

RESPONDENT: M.   VENKITACHALAM POTTI AND ANOTHER(with connected appeal)

DATE OF JUDGMENT: 20/12/1955

BENCH: BHAGWATI, NATWARLAL H. BENCH: BHAGWATI, NATWARLAL H. DAS, SUDHI RANJAN BOSE, VIVIAN JAGANNADHADAS, B. SINHA, BHUVNESHWAR P.

CITATION:  1956 AIR  246            1955 SCR  (2)1196

ACT: Constitution  of  India-Article  14-Travancore  Taxation  on Income  (Investigation  Commission)  Act,  1124(Act  XIV  of 1124),  s.  5(1)-Whether ultra vires  the  Constitution-Read along with s. 47(1) of Travancore Income-Tax Act, 1121  (Act XXIII  of  1121)High Court-Jurisdiction-Article 226  of  the Constitution-Writ   Petition  against  authorise   Official- Appointed  under s. 6 of the Travancore Act (XIV  of  1124)- Investigation   Commission-Whether   competent   under   the provisions of the Travancore Act XIV of 1124 to  investigate cases not referred to it by Government.

HEADNOTE: The petitioners native of Quilon within the Travancore State -had  been  assessed to income-tax for the  years  1942  and 1943, the final orders in his assessment having been  passed by  the  Chief Revenue authority of Travancore  in  December 1946 and November 1946 respectively.  Travancore Taxation on Income  (Investigation  Commission) Act, 1124  (Act  XIV  of 1124)  modelled on the Indian Act XXX of 1947 was passed  by the Travancore Legislature, to provide for an  investigation into matters relating to taxation on income.  In July 1949 , the  United State of Travancore and Cochin was brought  into existence as a result of integration between the two States. All existing laws of Travancore were to continue in force by virtue of Ordinance I of 1124 which was later enacted as Act VI of 1125.  In November 1949 the Government of the  ’United State of Travancore- 1197 Cochin issued orders under s. 5(1) of the Travancore Act XIV of 1 124 referring the cases of the petitioner for the years 1942 and 1943 (called Evasion Cases Nos. 1 & 2 of 1125)  for investigation  by  the Travancore  Income-Tax  Investigation Commission.  Before the Commission could make its report the Constitution  of India came into force and the United  State of  Travancore-Cochin became a part of India (Part B  State) and  the Travancore Act XIV of 1124 was continued  in  force until altered, amended or repealed by a competent authority. In  April 1950 Parliament passed Act XXXIII of 1950  whereby

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Taxation on Income (Investigation Commission) Act, (Act  XXX of  1947) was extended to Travancore-Cochin and the  law  of Travancore corresponding to Act XXX of 1947 was to  continue in  force  with certain modifications.  In October  1951,  a notification  issued by the Indian Investigation  Commission appointed  Respondent No. 1 as an authorised official  under s.  6 of Travancore Act XIV of 1124 read with Act XXXIII  of 1950.  Respondent No. I sent a copy of that notification  to the  petitioner on 21st November, 1951 for  his  information and further intimated to him that the investigation proposed to  be conducted will not be confined to the years 1942  and 1943  but that it would be necessary for him to  investigate the petitioner’s income for the period from 1940 to the last completed assessment year. The petitioner filed a writ petition in the Travancore  High Court against Respondent No. I and Respondent No. 2  (Indian Income-Tax   Investigation   Commission)  for  a   writ   of prohibition  or any other writ prohibiting  the  Respondents from holding an enquiry into the cases registered as Evasion Cases  Nos. 1 & 2 of 1126 or from holding  an  investigation into the income of the petitioner from the year 1940 to  the last  completed assessment year.  The Travancore High  Court held  that the Respondent No. 2 had all the powers that  the Travancore  Commission had under Travancore Act XIV of  1124 and  no  more and granted the writ  prohibiting  respondents from  conducting an enquiry into years other than  1942  and 1943.   Both  the  parties appealed  to  the  Supreme  Court against  the  order  of  the  High  Court.   A   preliminary objection to the jurisdiction of the High Court to entertain the  writ petition was repeated in the Supreme Court by  the Attorney-General. Held, that the High Court bad jurisdiction under Art. 226 of the  Constitution to issue a writ against Respondent  No.  1 because  under the provisions of s. 6 of the Travancore  Act XIV  of 1124 the authorised official (Respondent No. 1)  had considerable powers conferred upon him in the conduct of the investigation, and if he did anything as authorised official which  was  not authorised by law or was  violative  of  the fundamental rights of the petitioner as in the present  case be  would be amenable to the jurisdiction of the High  Court under Art. 226 of the Constitution. Held,  further that under the provisions of  the  Travancore Act  XIV  of  1124  the  Commission  had  no  authority  ’to investigate  any case suo motu.  It could  only  investigate cases referred to it by 1198 Government.  All that was done in the present case was  that by  two  separate orders made under s. 5(1) of the  Act  the Government referred two cases of the petitioner for the  two years  1942 and 1943 to the Commission.  There was no  other order  under s. 5(1) at any time before 16th  February  1950 and  none  could be made under that sub-section  after  that date.  Therefore neither Respondent No. 2 nor Respondent No. 1   who  had  been  appointed  as  authorised  Official   by Respondent No. 2 had jurisdiction to cover any period beyond the  two specific years 1942 and 1943 and the  notice  dated 21st November 1951 issued by Respondent No. 1 to investigate the petitioner’s income for the period from 1940 to the last completed  assessment year was clearly illegal  and  without jurisdiction. Held,  also that s. 5(1) of the Travancore Act XIV  of  1124 which  is  to be read in juxta-position with s.  47  of  the Travancore  Inc6me-Tax  Act,  1121 (XXIII of  1121)  is  not discriminatory  and  violative  of  the  fundamental   right guaranteed under Art. 14 of the Constitution.

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Section  47(1)  of  the Travancore Act  XXIII  of  1121  was directed only against those persons concerning whom definite information  came  into the possession  of  the,  Income-tax Officer  and in consequence of which the Income-tax  Officer discovered  that the income of those persons had escaped  or been  under-assessed  or assessed at too low a rate  or  had been the subject of excessive relief.  The class of  persons envisaged by s. 47(1) was a definite class about which there was definite information leading to discovery within 8 years or  4 years as the case may be of definite item or items  of income which had escaped assessment.  The action to be taken under  Travancore  Act  XXIII of 1121 was  not  confined  to escapement  from  assessment of income made during  the  war period  (September 1939 to 1946).  Action could be taken  in respect  of income which escaped assessment even before  the war and also more than 8 years after the end of the war. On the other hand under s. 5(1) of the Travancore Act XIV of 1124  the  class of persons sought to be  reached  comprised only  these  persons  about  whom  there  was  no   definite information  and no discovery of any definite item or  items of  income  which  escaped  taxation  but  about  whom   the Government had only prima facie reason to believe that  they had evaded payment of tax to a substantial amount.  Further, action under s. 5(1) read with s. 8(2) of the Travancore Act XIV of 1124 was definitely limited to the evasion of payment of  taxation  on  income  made during  the  war  period  and therefore s. 5(1) of the Travancore Act XIV of 1124 was  not discriminatory in comparison with s. 47(1) of the Travancore Act XXIII of 1121. Election  Commission,  India  v. Saka  Venkata  Rao  ([1953] S.C.R.  1144),  K.  S.  Rashid  &  Son  v.  The   Income-tax Investigation  Commission, etc. ([1954] S.C.R.  738),  Azmat Ullah v. Custodian, Evacuee Property, U.P., Lucknow  (A.I.R. 1955 All, 435), Burhanpur 1199 National   Textile  Workers  Union,  Burhanpur   v.   Labour Appellate  Tribunal  of India at Bombay and  others  (A.I.R. 1955  Rag.  148), Joginder Singh Waryam Singh  v.  Director, Rural Rehabilitation, Pepsu, Patiala and others (A.I.R. 1955 Pepsu  91),  Chiranjit Lal Chowdhuri v. The Union  of  India ([1950]  S.C.R.  869), Budhan Chowdhury and  others  v.  The State  of Bihar ([1955] 1 S.C.R. 1045), Suraj Mall  Mohta  & Co. v. A. V. Visvanatha Sastri and another ([1955] 1  S.C.R. 448),  Shree  Meenakshi Mills Ltd. v. Sri A.  V.  Visvanatha Sastri  and  Another  ([1955] 1 S.C.R.  787),  Aswini  Kumar Ghose’s  case  ([1953] S.C.R. 1), Subodh Gopal  Bose’s  case ([1954] S.C.R. 587, 628), Kathi Baning Bawat v. The State of Saurashtra  ([1952] S.C.R. 435), Palser v. Grinling  ([1948] A.C. 291) and Kedar Nath Bajoria v.     The  State  of  West Bengal ([1954] S.C.R. 30), referred to.

JUDGMENT:  CIVIL  APPELLATE JURISDICTION: Civil Appeals Nos. 21 and  22  of 1954.  Appeals  under  Article 133(1) (c) of  the  Constitution  of  India  from the judgment and order dated the 18th  September  1953 of the Travancore-Cochin High Court at Ernakulam in  O.  P. No. 41 of 1952.  M.K.  Nambiar,  (N.  Palpu, Sri Narain Andley  and  Rajinder  Narain)  for  the  appellant in C. A. No.  21  of  1954  and  respondent in C. A. No. 22 of 1954.  M.C. Setalvad, Attorney-General of India (G.  N. Joshi),  R.  Ganapathy  Iyer, Porus A. Mehta and R. H. Dhebar),  for  the

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respondents in C. A. No. 21 of 1954 and appellants in C.  A.  No. 22 of 1954.  1955.  December 20.  The Judgment of the Court was delivered  by  BHAGWATI  J.-These  two  appeals  with  certificates   under  article  133  of  the Constitution are  directed  against  a  judgment  of  the High Court of TravancoreCochin in  a  writ  petition filed by one A. Thangal Kunju Musaliar, hereinafter  called the petitioner.  The  petitioner is a native of Quilon within the  Travancore  State  which  was originally under the  sovereignty  of  the  Maharaja  of  Travancore.  He is the  Managing  Director  of  Messrs A. Thangal Kunju.  Musaliar & Sons Ltd., Quilon,  and  bad been assessed to income-tax for the years 1942 and  1943  and  the final orders in his assessment for the  said  years  were  1200  passed  by the Chief Revenue Authority of Travancore on  the  6th December 1946 and 30th November 1946 respectively.  On the 7th March 1949, the Travancore Legislature passed Act  XIV  of 1124 (M.E.) modelled on our Act XXX of 1947,  styled  the Travancore Taxation on Income (Investigation Commission)  Act,  1124,  to provide for an  investigation  into  matters  relating  to  taxation on income.  Section 1(3) of  the  Act  provided that it was to come into force on such date as  the  Travancore Government may by notification in the  Government  Gazette  appoint.   ’Under  section 3, a  Commission  to  be  called  the  Income-tax Investigation Commission was  to  be  constituted inter alia to investigate in accordance with the  provisions  of the Act cases referred to it under section  5  and report thereon to the Government.  The Commission was to  be appointed to act in the first instance up to the last day  of  Karkadakom  1125  (16-8-1950)  but  the  Government  was  empowered to extend its appointment to any period up to  the  last  day  of  Karkadakom 1126  (16-8-1951).   Section  5(1)  enacted  that the Government might, at any time  before  the  last day of Makaram 1125 (15-2-1950) refer to the Commission  for investigation and report any case or points in a case in  which the Government had prima facie reasons for belief that  a  person had to a substantial extent evaded payment of  tax  on income together with such material as might be  available  in support of such belief.  Section 6 prescribed the  powers  of   the  Commission  and  inter  alia  provided   for   the  appointment  by the Commission of an authorised official  to  examine accounts or documents, interrogate persons or obtain  statements from persons.  On  the 1st July; 1949, the Travancore State and the  Cochin  State integrated with each other and there was brought  into  existence  the  United State of Travancore and  Cochin.   By  virtue  of Ordinance I of 1124 promulgated on the same  day,  called the United State of Travancore and Cochin Administra-  tion  and Application of Laws Ordinance, 1124  (Ordinance  I  was enacted later as Act VT of 1125),         1201 all  existing laws of Travancore were to continue  in  force till  altered, amended or repealed by  competent  authority. The  existing law of Travancore was defined to mean any  law in force in the State of Travancore immediately prior to the 1st July 1949.   On the 26th July 1949, a notification was published in the Travancore-Cochin Government Gazette whereby, in exercise of the  powers  conferred  by section 1(3)  of  the  Travancore Taxation oN Income Investigation Commission) Act XIV of 1124 as continued in force By the United State of Travancore  and Cochin Administration & Application of Laws (Ordinance, 1124

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(I  of  1124), the Government appointed the  7th  Karkadakom 1124 (22-7-1949) to be the date on which the said Act was To have come into force.   On  the  26th November 1949 the Government of  the  United State  of Travancore and Cochin issued orders under  section 5(1)  of the Travancore Act XIV of 1124 referring the  cases of   the  petitioner  for  the  years  1942  and  1943   for investigation  by  the Travancore  Income-tax  Investigation Commission.   These  orders had specific  reference  to  the years 1942 and 1943 and the investigation to be made by  the Commission was with reference to the alleged evasion of  tax by  the  petitioner for those respective years.   The  cases were registered as Evasion Cases I and 2 of 1125.   On the 10th December 1949 the petitioner received from the Secretary  of the Commission a notice in regard to the  said cases.  The relevant portion of the said notice stated:   "Whereas  the Income-tax Investigation  Commission  having been informed that a substantial portion of your income  for 1942   and   1943  has  escaped  assessment,   has   ordered investigation  into the matter, you are hereby  required  to produce  the  following on or before 21-12-1949  before  the Commission. 1.   The account books (day books and ledgers) for the years 1942 and 1943. 2.        ....          .....               ....... 3.        .....         .....                ....... 4.        .....         ......                ....... 1202 5.     .....      ......         ..... 6.    ....        .....         .....   Pursuant  to  this  notice  the  petitioner  produced  the relevant  books  and  the  Commission  duly  completed   its investigation  under the terms of the Travancore Act XIV  of 1124.   Before the Commission could, however, make its report, the Constitution  of India came into force on the  26th  January 1950 and the United State of Travancore and Cochin became  a part of the territory of India,, forming, a Part ’B’  State. Under  article  372(1) of the Constitution,  the  Travancore Taxation  on  Income (Investigation  Commission)  Act,  1124 (Travancore  Act XIV of 1124) was continued in force  "until altered, amended or replaced by a competent authority"    An  Indian  States  Finance Enquiry  Committee  had  been appointed  in  1948-49 and it had made  its  recommendations regarding  the  agreements to be entered  into  between  the President  of  the Union and the Rajpramukhs  in  regard  to financial    arrangements.    In   accordance    with    the recommendations  of the Committee, an agreement was  entered into on the 25th February 1950 between the President of  the Union  and the Rajpramukh of Travancore-Cochin in regard  to these  matters and on the 31st March 1950 the  Finance  Act, 1950  (Act  XXV  of 1950) came into  force  and  the  Indian Income-tax   Act,  1922  (XI  of  1922)  was   extended   to Travancore-Cochin.   On  the  18th  April  1950, the  Opium  and  Revenue  Laws (Extension  of Application) Act, 1950, being Act  XXXIII  of 1950,  was  passed by Parliament  extending  to  Travancore- Cochin  the  Taxation on Income  (Investigation  commission) Act,  1947 (XXX of 1947) and section 3 of that Act  provided that the law of Travancore corresponding to the Taxation  on Income  (Investigation Commission) Act, 1947 (XXX  of  1947) shall  continue  to  remain  in  force  with  the  following modifications, viz.,    (a)    that  all cases referred to or pending before  the State  Commission  (by whatever name called) in  respect  of

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matters relating to taxation on income 1203 other  than agricultural income shall stand  transferred  to the Central Commission for disposal; and    (b)    that the State law shall, so far as may be,  apply to  determine the procedure that may be followed and  powers that  may  be  exercised by the Central  Commission  in  the disposal of cases transferred under clause (a).    The Travancore Commission bad been appointed in the first instance  to  act  up to the last -day  of  Karkadakom  1125 116-8-1950).   Neither  the Travancore  Commission  nor  the Indian  Commission  to which the pending  cases  before  the Travancore Commission were transferred as aforesaid made any report on these cases of the petitioner before the expiry of this period nor was any extension of the term of appointment of  the  Travancore Commission made up to the  last  day  of Karkadakom 11 26 (16-8-1951) as originally contemplated.  On the 25th August 1951, therefore, the Opium and Revenue  Laws (Extension  of Application) Amendment Act, 1951,  being  Act XLIV of 1951, was passed amending Act XXXIII of 1950 whereby it was provided that in the place of clause (b) of section 3 of  Act  XXXIII  of  1960, the  following  clause  shall  be substituted  and  shall  be  deemed  always  to  have   been substituted, viz., "in the disposal of cases transferred  to the  Central  Commission,  the  Commission  shall  have  and exercise  the  same powers as it has and  exercises  in  the investigation of cases referred to it under the Taxation  on Income  (Investigation Commission) Act, 1947 (XXX  of  1947) and  shall  be entitled to act for same term as  under  sub- section  (3)  of section 4 of that Act" and it  was  further provided  that  any  decision given  by  the  Chief  Revenue Authority  of  Travancore or of Travancore-Cochin  shall  be deemed  a  decision  of the  Income-tax  Authority  for  the purposes  of sub-section (2) of section 8 of the  Travancore Act XIV of 1124.    On  the 18th October 1951, a notification was  issued  by the Indian Income-tax Investigation Commission appointing M. Venkitachalam  Potty,  Income-tax Officer on  Special  Duty, Trivandrum, as an 152 1204 authorised  official  under  section  6  of  the  Travancore Taxation on Income (Investigation Commission) Act, 1124 read with   Act  XXXIII  of  1950.   The   authorised   official, hereinafter  referred to as respondent 1, forwarded  to  the petitioner  on the 21st November 1951 for his information  a copy of that notification, investing him with the powers  of an authorised official and intimated that the  investigation proposed  to be conducted will not be confined to the  years 1942  and 1943, the two years originally covered by  Evasion Cases  Nos. 1 and 2 of 1125 but that it would  be  necessary for  him  to  investigate the petitioner’s  income  for  the period  from  1940  to the last  completed  assessment  year notwithstanding the fact that the erstwhile State Commission had not specifically intimated to him that they proposed  to cover the full period.  The  petitioner,  by his registered letter dated  the  23rd February 1952 pointed out to respondent 1 the illegality  of the steps proposed to be taken by him to which, however, the latter  replied  by  his letter dated the  13th  March  1952 stating  that  he proposed to consider income for  the  full investigation period, viz., from 1940 to the last  completed assessment year.  The  petitioner thereupon filed on the 6th May 1952 a  writ petition in the High Court of Travancore-Cochin, being 0. P.

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41  of 1952 against respondent 1 as also the Indian  Income- tax Investigation Commission, hereinafter called  respondent 2,  for a writ of prohibition or any other appropriate  writ or  direction prohibiting the respondents from  holding  any enquiry  into the cases registered as Evasion Cases Nos.   I and  2  of  1125 on the  file  of  Income-tax  Investigation Commission  of Travancore or from holding any  investigation into  the  income of the petitioner from 1940  to  the  last completed assessment year or for any other period.   Respondent  1  filed a counter-affidavit in which  it  was inter alia submitted:     "that the Commission by these proceedings is not  trying to  clutch  at non-existent jurisdiction.   They  are  fully prepared  to shape their proceedings in accordance with  the directions of this Hon’ble Court". 1205    This  affidavit  was  stated to have been  filed  as  the answer of both the counter-petitioners, viz., respondents  I and  2  and  respondent  I stated that  he  had  been  fully authorised to do so. The  writ petition was heard by a Bench of three  Judges  of the  High Court consisting of K. T. Koshi, C. J. and  P.  K. Subramonia Iyer and M. S. Menon, JJ. The learned Judges held that  respondent  2 bad all the powers that  the  Travancore Commission  had under the Travancore Act XIV of 1124 and  no -mote and accordingly issued a writ prohibiting respondent I from conducting an investigation into years other than  1942 and 1943 observing that any attempt to enlarge the scope  of the enquiry was without legislative warrant.  The petitioner appealed in so far as the order of the  High Court  was against him permitting the enquiry for the  years 1942 and 1943, his appeal being Civil Appeal No. 21 of 1954. Respondents  I and 2 appealed against the order of the  High Court  in  so  far  as  it  prohibited  respondent  1   from conducting  investigation  for  the  years  which  were  not covered  by the Evasion Cases Nos.  I and 2 of  1125,  their appeal being Civil Appeal No. 22 of 1954.  Both  these  appeals came for hearing  and  final  disposal before  us on the 20th September 1955.  After the  arguments had   proceeded  for  some  time  Shri  Nambiyar,  for   the petitioner,  asked  for leave to  urge  additional  grounds, viz.,  (a) that section 5(1) of Travancore Act XIV  of  1124 was   ultra  vires  under  articles  14  and  19,   of   the Constitution,  and (b) that in particular,the  said  section 5(1) infringed article 14 of the Constitution inasmuch as it was not based on any rational classification whatsoever, and the word "substantial" therein could not possibly be  deemed to  be any form of classification.  On, our giving him  such leave   the   learned   Attorney-General,   appearing    for respondents  I and 2 asked for time to put in  an  affidavit showing  the background against which Travaneore Act XIV  of 1124  bad  been passed by the, Travancore  Legislature.   An affidavit was accordingly filed before us by Gauri  Shanker, Secretary of 1206 respondent  2 setting out facts and events as and by way  of answer to these new contentions of the petitioner.  A  preliminary  objection to the jurisdiction of  the  High Court  to  entertain  the writ petition may  be  dealt  with first.   This  objection  was  not  taken  in  the  counter- affidavit  filed by the respondents, they  having  expressed their  readiness to shape their proceeding,s  in  accordance with  the  directions of the Court.  The  learned  Advocate- General of Travancore-Cochin, however, urged before the High Court  that  the Court was not competent  to  entertain  the

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petition  in  view  of the fact that respondent  2  was  not amenable  to i s jurisdiction and the argument was  that  as respondent  2  functioned outside the State  of  Travancore- Cochin and respondent I was a mere subordinate of respondent 2  it was beyond the competence of the High Court  to  grant the  prayer  embodied  in  the  petition.   The  High  Court overruled  the  objection observing that  respondent  I  was resident within the State of Travancore- Cochin, his  office was  situated at Trivandrum, all his communications  to  the petitioner  had  emanated  from within  the  State  and  the activities complained about were activities confined to  the State.   It  was  of  the opinion that  the  prayer  in  the petition was, in essence, a prayer to paralyse the hands  of respondent I and thus prevent the mischief and that, by  his residence  and the location of his office within the  State, respondent 1 was clearly amenable to the jurisdiction of the Court under article 226 of the Constitution.  It was further of  opinion that the writ against respondent 1,  if  issued, was  sufficient for stopping the mischief  complained  about and therefore it was unnecessary for it to decide whether or not  a  writ  could be issued so far  as  respondent  2  was concerned.   It,  therefore, issued the  necessary  writ  of prohibition against respondent 1.  The  learned  Attorney-General  pressed  this   preliminary objection at the outset while arguing Civil Appeal No. 22 of 1954.   He pointed out that respondent 2 had its  office  in New  Delhi  and was permanently located there and  the  mere fact of its having appointed res- 1207 pondent 1 to function and carry on the investigation  within the State. of Travancore under its direction did not make it amenable  to  the  jurisdiction of  the  High’  Court.   He, therefore, contended that the High Court had no jurisdiction to  entertain  the writ petition against  respondent  2.  He further   contended  that  the  High  Court  could  not   do indirectly  what it was not able to do directly and that  it could not issue any writ of prohibition against respondent 1 either even though he had his office at Trivandrum and had a permanent location within the jurisdiction of the High Court inasmuch  as  he was merely an arm of respondent 2  and  any writ  issued against him would have the indirect  effect  of prohibiting  respondent  2 from  exercising  its  legitimate functions   within  the  ambit  of  its  powers  under   the Travancore  Act XIV of 11 24 read with Act XXX of  1950  and Act XLIV of 1951. Reliance was placed by him on the decision of this Court  in Election Commission, India v. Saka Venkata Rao(1).     The respondent in that case bad applied to  the  High  Court  of Madras under article 226 for a writ restraining the Election Commission,   a  statutory  authority  constituted  by   the President  and having its office permanently located at  New Delhi, from enquiring into his alleged disqualification  for membership  of the Assembly, and a single Judge of the  High Court  had  issued  a writ of  prohibition  restraining  the Election Commission from doing so.  The Election  Commission filed  an appeal to this Court and agitated the question  of the  jurisdiction  of the High Court under  article  226  to issue the writ against it.  While discussing this  question, Patanjali  Sastri, C.J., who delivered the judgment  of  the Court, observed as under:-   "But  wide as were the powers thus conferred,  a  two-fold limitation  was  placed upon their exercise.  In  the  first place,  the  power  is  to  be  exercised  "throughout  the, territories in relation to which it exercises jurisdiction", that  is  to say, the writs issued by the Court  cannot  run

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beyond   the  territories  subject  to   its   jurisdiction. Secondly, the person or authority to (1)  [1953] S.C.R. 1144. 1208 whom the High Court is empowered to issue such writs must be "within those territories", Which clearly implies that  they must be am-enable to its jurisdiction either by residence or location within those territories".  The  learned  Chief  Justice then  traced  the  origin  and development.  of the power to issue prerogative writs  as  a special remedy in England and observed at page 1151:-   "These  writs  were  thus  specifically  directed  to  the persons  or authorities against whom redress was sought  and were made returnable in the Court issuing them and, in  case of   disobedience,  were  enforceable  by   attachment   for contempt.   These  characteristics of the  special  form  of remedy rendered it necessary for its effective use that  the persons or authorities to whom the Court was asked to  issue these  writs should be within the limits of its  territorial jurisdiction".   The  mere  functioning,  of  the  tribunal  or   authority permanently located and normally carrying on its  activities elsewhere, within the territorial limits was not  considered sufficient to invest the High Court with jurisdiction  under article  226  nor  was the accrual of the  cause  of  action within   the  territories  considered  sufficient  for   the purpose.   The residence or location within the  territories of the person or authority was considered a condition of the High  Court  being empowered to issue such  writs  with  the result  that  the  Election  Commission  having  its  office permanently  located at New Delhi was held not  amenable  to the  jurisdiction of the High Court for the issue of a  writ under article 226.  This  decision in Saka Venkata Rao’s case was  followed  by this  Court  in  K.  S.  Rashid  &  Son  v.  The  Income-tax Investigation   Commission,  etc.(1).  In  that  case,   the assesses  who  were  within  the state  of  U.P.  and  whose original assessments were made by the income-tax authorities of  that State had filed writ petitions in the  Punjab  High Court  for  the  issue of writs tinder article  226  to  the Income-tax  Investigation-Commission  located in  Delhi  and investigating  (1) [1954] S.C.R. 738. 1209 their  cases  under  -section 5 of the  Taxation  on  Income (Investigation Commission) Act, 1947.  The Punjab High Court had   sustained  the  objection  urged  on  behalf  of   the respondents to the effect that the assesses having  belonged to the State of U.P. their assessment was to be made by  the Income-tax Commissioner of that State and the mere fact that the  location of the Investigation Commission was  in  Delhi would  not confer jurisdiction on the Punjab High  Court  to issue  writs  under  article  226  and  had  dismissed   the petitions.    This  Court,  on  appeal,  distinguished   the decision in Parlakimidi’s case which was sought to be relied upon by the respondents before it and followed the  position in law as it bad been enunciated in Saka Venkata Rao’s case, supra, and held that the Punjab High Court had  jurisdiction to  issue  a  writ under article 226  to  the  Investigation Commission  which was located in Delhi in spite of the  fact that  the assesses were within the State of U.P.  and  their original assessments were made by the income-tax authorities of that State.     The principle of these decisions would, it was urged  by the learned Attorney-General, eliminate respondent 2 and the

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High  Court of Travancore-Cochin would have no  jurisdiction to entertain the writ petition against it.   It  was, however, urged on behalf of the petitioner  that, in  the  affidavit  filed  by  the  respondents,  both   the respondents  had submitted that they were fully prepared  to shape their proceedings in accordance with the directions of the  Court.   This,  it  was  submitted,  was  a   voluntary submission  to the jurisdiction of the High Court  investing the  High Court with jurisdiction to issue the  appropriate, writ against respondent 2. We need not, however, express any opinion on this point because no writ was in fact issued  by the High Court against respondent 2 nor was any appeal filed by  the petitioner against that part of the decision of  the High Court.    The real question, however, is whether a writ could issue against respondent 1 who is, it was submitted, a mere arm of respondent 2 and a writ against whom 1210 would  be  equivalent  to a writ issued by  the  High  Court against respondent 2 which it had no jurisdiction to do.   An  authorised official derives his appointment  from  the Commission  under  section 6 of the Travancore  Act  XIV  of 1124.   Section  6(4)  of the Act provides that  if  in  the course  of any investigation conducted by the Commission  it appears  to  the Commission to be necessary to  examine  any accounts  or  documents or to interrogate any person  or  to obtain  any  statement from any person  the  Commission  may authorise any income-tax authority not below the rank-of  an income-tax  officer  (called the "authorised  official")  in that  behalf subject to such directions as may be issued  by the Commission from time to time and the authorised official shall  examine  the accounts or documents,  interrogate  the persons  and  obtain the statements from the  persons.   The authorised  official  is  invested, under  section  6,  sub- section  (5),  subject to the direction of  the  Commission, with  the same powers as the Commission  under  sub-sections (1), (2) and (3) which empower the Commission to require any person  or banking or other company to prepare  and  furnish written   statements   of  accounts   and   affairs   giving information  on such points or matters as in the opinion  of the  Commission  may  directly or indirectly  be  useful  or relevant to any case referred to it; to administer oaths and exercise all powers of a Civil Court under the Code of Civil Procedure  for  the  purpose of  taking  evidence  on  oath, enforcing attendance of witnesses and of persons whose cases are  being investigated, compelling the production of  docu- ments  and  issuing  commissions  for  the  examination   of witnesses and to impound and retain in its custody for  such period  as it thinks fit any documents produced  before  it. The  authorised  official is, under section  6,  sub-section (10),  to have full and free access to all documents,  books and  other papers which in his opinion are relevant  to  the proceedings  in  any  case or cases under  the  Act  and  if specially authorised in this behalf by the Commission to any buildings  and  places where he may have reason  to  believe that such books, 1211 documents  or papers may be found and also to have power  to place  identification  marks  on such  books,  documents  or papers  and  to make extracts or copies therefrom or  if  he considers it necessary to take possession of or seize  -such books,  documents or papers.  Under section  6,  sub-section (11),  the  authorised  official is deemed to  be  a  public servant  within the meaning of section 16 of the  Travancore Penal Code (I of 1074).

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 It is clear from the above provisions that the  authorised official  has considerable powers conferred upon him in  the conduct  of  the investigation and even though he  could  be called  a mere arm of the Commission or an authorised  agent of  the Commission, he has important functions to  discharge and is not merely a mouth-piece of the Commission or a  con- duit-pipe  transmitting the orders or the directions of  the Commission.   He is no doubt under the general  control  and supervision  of the Commission but he performs  the  various functions  assigned to him on his own initiative and in  the exercise of his discretion.  If, therefore, he does anything in  the  discharge of his functions as  authorised  official which  is  not  authorised by law or  is  violative  of  the fundamental  rights of the petitioner, he would be  amenable to the jurisdiction of the High Court under article 226.  Even though this is the prima facie position, it was  urged that he is acting under the directions of the Commission  as its  authorised agent and as such no writ can issue  against him,  because the principal who directs the  activities  and not the agent would be liable for the same.  This contention is  unsound.   There can be no agency in the matter  of  the commission  of a wrong.  The wrong doer would  certainly  be liable  to be dealt with as the party  directly  responsible for his wrongful action.  The relationship between principal and  agent  would  only  be  relevant  for  the  purpose  of determining whether the principal also is vicariously liable for  the wrong perpetrated by his agent.  On the analogy  of criminal liability, the 153 1212 offender  could  certainly not be heard to say that  he  was committing the offence under the behest or directions of his principal.  On the analogy of a civil wrong, the  tortfeasor could certainly not protect himself against liability on the ground of having committed the tort under the directions  of his principal.  The agent could in no event exculpate himself from liability for the  wrongful act done by him and if he is thus amenable  to the  jurisdiction  of the High Court the  High  Court  could certainly  issue  an  appropriate  writ  against  him  under article   226.   The  jurisdiction  under  article  226   is exercised  by  the  High  Court  in  order  to  protect  and safeguard  the rights of the citizens and wherever the  High Court finds that any person within its territories is guilty of  doing  an  act  which is not authorised  by  law  or  is violative  of  the  fundamental rights of  the  citizen,  it exercises that jurisdiction in order to vindicate his rights and  redress his grievances and the only conditions  of  its exercise  of  that jurisdiction are those laid down  in  the passage from Patanjali Sastri, C.J.’s judgment cited  above. The argument that by issuing a writ against the agent  under those circumstances the High Court would be putting him in a position  whereby  he  would be  compelled  to  disobey  the directions  of  his principal is also of no  avail  for  the simple  reason  that an agent is bound to  obey  all  lawful directions  of  his principal and not directions  which  the High  Court  holds to be unlawful or not justified  in  law. The agent could certainly be prohibited from obeying the un- lawful directions of his principal and even if the principal cannot  be  reached  by  reason of  his  being  outside  the territories,  the arm of the law could certainly  reach  the agent  who is guilty of having committed the wrong  and  the High  Court could certainly issue a writ against  him  under article 226.   It  was  further  contended that by issuing  such  a  writ

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against  the  authorised official the High  Court  would  be indirectly  prohibiting the Commission from  conducting  the investigation  within the territories even though  it  could not directly prohibit the Com- 1213 mission  from  doing  so.   If  the  Commission  was   doing something  within  the territories  through  its  authorised official which was not justified in law, it would not lie in the  mouth  of the Commission to urge that  the  High  Court could not issue a writ of prohibition against its agent, the authorised  official,  who had his  residence  or  permanent location  within the territories merely because it would  be indirectly  prohibited from perpetrating a wrong within  the territories.   The principal could, in no event,  urge  that his  agent should be allowed to function for him within  the territories  in a manner which was not warranted by  law  or had no justification in law.  It is expected that once  this Court  has  declared the law  the  Investigation  Commission would comply with it and not place its agent in the wrong by directing him to act contrary to the law so declared.    Our  attention was drawn by the learned  Attorney-General in  this  connection to three recent decisions of  the  High Courts  of Allahabad, Nagpur and Pepsu which,  according  to him,   supported  his  contention,  viz.,  Azmat  Ullah   v. Custodian,  Evacuee  Property, U.P.,  Lucknow(1),  Burhanpur National   Textile  Workers  Union,  Burhanpur   v.   Labour Appellate  Tribunal  of India at Bombay  and  others(2)  and Joginder    Singh   Waryam   Singh   v.   Director,    Rural Rehabilitation,   Pepsu,  Patiala  and   others(2).    These decisions, however, are clearly not in point for, in each of them,   the  order  passed  by  the  authority  within   the territories  and accordingly within the jurisdiction of  the High Court concerned had merged in the order of the superior authority which was located outside the territories and was, therefore,  beyond the jurisdiction of that High Court.   In that situation, a writ against the inferior authority within the  territories  could  be of no avail  to  the  petitioner concerned and could give him no relief for the order of  the superior  authority  outside the  territories  would  remain outstanding  and operative against him.  As,  therefore,  no writ  could be issued against that outside authority and  as the (1) A.I.R. 1955 All. 435.  (2) A.I.R. 1955 Nag. 148.  (3) A.I.R. 1955 Pepsu 91. 1214 orders  against the authority within the territories  would, in  view of the orders of the superior authority, have  been infructuous, the High Court concerned had, of necessity,  to dismiss  the petition.  Such, however, was not the  position in the present petition before the High Court of Travancore- Cochin.   There  was  here  no question  of  merger  of  any judicial  order of respondent I into the judicial  order  of respondent  2.  In  this  case  respondent  1  was  actually claiming  to exercise powers conferred upon him  by  certain sections  of  the Travancore Act XIV of 1124 which,  it  was submitted,  were  contrary  to  law  or  discriminatory  and consequently  ultra vires the Constitution.  The  fact  that respondent  1  was the agent of respondent  2,  which  being beyond  its  jurisdiction could not be reached by  the  High Court, could not make his acts any the less objectionable or discriminatory  and  ultra vires.  It is sufficient  to  say that if his action was contrary to law-or if the  provisions of law under which he was claiming to act became, after  the commencement  of the Constitution, void under article  13(1) as being repugnant to article 14 and the doer of the illegal

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act  was within the reach of the High Court, the High  Court had  jurisdiction under article 226 to issue a writ  against respondent I and thereby prevent further infringement of the petitioner’s fundamental rights.  The preliminary  objection urged by the learned Attorney-General against the  jurisdic- tion of the High Court, therefore, fails.    The  next  question canvassed in Civil Appeal No.  22  of 1954  was that respondent 2 was entitled to investigate  the alleged  evasion of tax by the petitioner not only  for  the years  1942 and 1943 but also the other years from  1940  to the  last completed assessment year.  The decision  of  this question  turns  on  a construction of  the  terms,  of  the references  made  by the Government of the United  State  of Travancore  and Cochin under section 5(1) of the  Travancore Act XIV of 1124.  A report dated the 17th November 1949  had been  made by the Board of Revenue in regard to the  income- tax  assessment  of the petitioner for the years 11  19  and 1120(M.E.) and two orders were passed 1215 on the 26th November 1949 by the Government on -the strength of  that  report.   The first of  these  orders  related  to taxation on the petitioner’s income for 1119 and the  second related to the taxation on his income for 1120.  The  return of income for the year ending the 31st December 1942 was the subject-matter of the first order and after setting out  the materials  in the order the Government stated that they  had prima facie reasons for believing that the petitioner had to a substantial extent evaded payment of tax on his income for 1119  and  they  considered that this was  a  fit  case  for reference to the Income-tax Investigation ’Commission  under section  5(1) of the Act.  The second order referred to  the petitioner’s  return of income for the year ending the  31st December 1943 and after ,setting out the materials, wound up similarly  by  stating that the Government had  Prima  facie reasons   for  believing  that  the  petitioner  bad  to   a substantial  extent evaded payment of tax on his income  for 1120  and they considered that this was a fit case for  ref- erence  to  the Income-tax  Investigation  Commission  under section 5(1) of the Act.    A cursory perusal of the Travancore Act XIV of 1124  will show that the Commission had no authority to investigate any case suo motu.  It could only investigate cases referred  to it  by the Government.  Thus under section 5(1),  Government might  refer to it for investigation and report any case  or points  in  a case in which the Government had  prima  facie reasons  for  believing that a person had to  a  substantial extent   evaded  payment  of  taxation  on   income.    Such reference, however, could be made at anytime before the 16th February  1950 but not later.  Again, under sub-section  (4) of the same section, if in the course of investigation  into any  case  or  points in a case referred to  it  under  sub- section  (1) the Commission bad reason to believe that  some other  person  had evaded payment of taxation on  income  or some  other points required investigation, it might  make  a report to the Government and the Government would  forthwith refer  to the Commission for investigation the case of  such other person or such additional points as might 1216 be  indicated  in  that report.  All that was  done  in  the present  case  was that by two separate  orders  made  under section 5(1) of the Act the Government referred two cases of the  petitioner  for  the two years 1942  and  1943  to  the Commission and they were registered as Evasion Cases Nos.  1 and 2 of 1125.  There was no other order under section  5(1) at any time before the 16th February 1950 and none could  be

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made  under  that sub-section after that date.  It  was  not suggested that there was any report by the Commission or any reference  of any case or additional points in a case  under section   5(4).   It  was,  therefore,  contended  for   the petitioner  that  the  Commission  had  no  jurisdiction  to enquire  into  any  alleged evasion in  any  year  prior  or subsequent  to  the  years  1942  and  1943.   The   learned Attorney-General,  on  the other hand,  contended  that  the Government could, under section 5(1) of the Act, only  refer the  case of the petitioner who was reasonably suspected  to have  evaded the tax and, therefore, the whole case  of  the petitioner for all the years referred to in section 8(2)  of the  Act was the subject-matter of the  investigation  which bad been entrusted to the Commission.   We  are unable to accept this contention.   Under  section 5(1)  the  Government could refer any case or  points  in  a case.   There is nothing in that sub-section which  requires that  a  "case" referred thereunder must  cover  the  entire period  mentioned in section 8(2).  Indeed,  the  Government might have reason to believe that an assessee evaded the tax only in, say, two years and not in others and in such a case the  Government could only refer the case for  investigation of  evasion during those two years only but could not  refer any case for other years as to which they had no  reasonable belief Therefore, in such a situation the reference must  be limited  to  the particular years in which the  evasion  was believed  to  have  taken place.   It  makes  no  difference whether one calls the matter referred a "case" or "points in a case".  It follows, therefore, that, in order to ascertain whether,  in a given case, the reference covers  the  entire period or only a shorter period, one has only to look at the order 1217 of  reference.   The operative parts of the  two  orders  of reference  dated the 26th November 1949 in the present  case clearly record the fact that the Government had prima  facie reasons   for  believing  that  the  petitioner  had  to   a substantial extent evaded payment of taxation on his  income for 1119 and 1120 (M.E.) and that they considered that "this was a fit case for reference to the Income-tax Investigation Commission under section 5(1) of Act XIV of 1124".  What was a  fit  case  for reference was described  as  "this"  which clearly referred back to the evasion of payment on  taxation on income for the two specific years in the two orders.   It is,   therefore,  clear  that  neither  respondent   2   nor respondent  I  who was appointed an authorised  official  by respondent  2  had jurisdiction to cover any  period  beyond those specific years 1942 and 1943 and the notice which  was issued  by  respondent  I on the  21st  November  1951  was, therefore,  not  warranted  by law.   Respondent  I  had  no warrant  or authority whatever for issuing the  said  notice and  we are of the opinion that the High Court was right  in the  conclusion  to  which  it  -came  that  the  action  of respondent  1 was clearly illegal, without jurisdiction  and unsupported by law.  The writ of prohibition issued  against respondent  I was, therefore, in order and Civil Appeal  No. 22 of 1954 must stand dismissed with costs.   As  regards  Civil Appeal No. 21 of 1954,  the  petitioner contended  that  respondent 2 had no power or  authority  to conduct an investigation in regard to the alleged evasion of tax  by  the petitioner for the years 1942  and  1943  also. Shri Nambiyar urged that:  (1)The  Travancore Act XIV of 1124 was not a law  in  force prior  to  the  integration and was not  an  "existing  law" continued in force by Ordinance I of 1124;

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 (2)The  notification  dated  the  26th  July  1949   which purported to bring the Travancore Act XIV of 1124 into force as from the 22nd July 1949 was in effective and invalid; (3)  Even if the Travancore Act XIV of 11 24 was 1218 in  force, it could not apply to or override the  assessment orders concluded by the Chief Revenue Authority, Travancore;   (4)     The  Rajpramukh’s agreement read with article  245 of  the Constitution precluded any investigation  except  in accordance  with  the  Travancore Act XIV of  1124  and  Act XXXIII  of 1950 amended by Act XLIV of 1951 was  invalid  to the  extent that it authorised investigation otherwise  than in accordance with the Travancore Law;   (5)     Assuming  all  the  foregoing  points  were   held against  the petitioner, section 5(1) of the Travancore  Act XIV  of 1124 was in any event unconstitutional and  void  as being inconsistent with article 14 of the Constitution.    Re. (1): The Travancore Act XIV of 1124 was passed by the Travancore  Legislature  on  the 7th March  1949.   It  was, however, under section 1(3) to come into force on such  date as  the Travancore Government might by notification  in  the Government Gazette appoint.  No such notification was issued by  the Travancore Government UP to the 1st July  1949  when the  Travancore State and the Cochin State  integrated  into the United State of Travancore and Cochin.  On the 1st  July 1949, the United State of Travancore and Cochin  promulgated Ordinance I of 1124 whereby all existing laws of  Travancore were  continued in force till altered, amended  or  repealed by-competent authority and the "existing law of  Travancore" was therein defined to mean any law in force in the State of Travancore  immediately prior to the 1st July 1949.  It  was only  on the 26th July 1949 that a notification  was  issued under  section  1(3) by the United State of  Travancore  and Cochin  bringing Act XIV of 1124 into force  retrospectively from 22nd July, 1949.   The contention put forward on behalf of the petitioner was that  as  no notification under section 1(3) of Act  XIV  of 1124  had been issued up to the 1st July 1949, that Act  had not  been  brought into force and was not in force  on  that date  and, therefore, was not then an "existing  law"  which alone was given conti- 1219 nuity  by Ordinance I of 1124 which was promulgated on  that very   day.   The  contention  further  was  that,  in   the circumstances  the Act was not continued by Ordinance  I  of 1124   but  had  lapsed  and,  therefore,   the   subsequent notification  issued  on  the  26th  July  1949  was  wholly ineffective  and consequently the reference of the cases  of the  petitioner  to the Commission for  investigation  under section  5(1),  the  appointment  of  respondent  I  as  the authorised  official  and  the notices issued  by  him  were unauthorised and wholly devoid of any authority of law.  The question for our consideration is whether Act XIV of 1124 or any part of it was, on the 1st July 1949, an existing law.    The  general rule of English law, as to the date  of  the commencement of a statute, since 1797, has been and is  that when  no  other  date is fixed by it  for  its  coming  into operation it is in force from the date when it receives  the royal  assent  (33 Geo. 3. c. 13).  The same rule  has  been adopted  in section 5 of our General Clauses Act, 1897.   We have not been referred to any Travancore Law which  provides otherwise.   If, therefore, the same principle prevailed  in that State, Travancore Act XIV of 1124 would have come  into force  on  the  7th March 1949 when it  was  passed  by  the Travancore  Legislature.  What prevented that  result?   The

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answer obviously points to section 1(3) which authorises the Government  to bring the Act into force on a later  date  by issuing  a notificated.  How could section 1(3)  operate  to postpone  the  commencement of the Act unless  that  section itself  was  in force?  One must,  therefore,  concede  that section  1(3)  came into operation immediately the  Act  was passed, for otherwise it could not postpone the coming  into operation  of the Act.  To put the same argument in  another way,  if  the entire Act including section 1(3) was  not  in operation  at  the  date  of  its  passing,  how  could  the Government  issue any notification under that very  section? There  must be some law authorising the Government to  bring the Act into force.  Where is that law to be found unless it were in section 1(3)?  In answer, Shri Nambiyar referred 154 1220 is  to the principle embodied in section 37 of  the  English Interpretation  Act which corresponds to section 22  of  our General  Clauses  Act.   That  section  does  not  help  the petitioner  at  all.  All that it does is to  authorise  the making  of  rules  or bye-laws and  the  issuing  of  orders between  the passing and the commencement of  the  enactment but  the  last  sentence of the section  clearly  says  that "rules, bye-laws or orders so made or issued shall not  take effect  till  the commencement of the  Act  or  Regulation". Suppose Shri Nambiyar is right in saying that the Government could  issue a notification under section 1(3) by virtue  of the principle embodied in section 22 of the General  Clauses Act, it will not take his argument an inch forward, for that notification,  by reason of the last sentence of section  22 quoted above, will not take effect till the commencement  of the  Act.   It  will  bring  about  a  stalemate.   It   is, therefore,  clear that a notification bringing an  Act  into force  is  not  contemplated by section 22  of  the  General Clauses  Act.  Seeing, therefore, that it is section  1  (3) which operates to prevent the commencement of the Act  until a  notification is issued thereunder by the  Government  and that  it  is section 1(3) which operates  to  authorise  the Government  to issue a notification thereunder, it  must  be conceded  that section 1(3) came into force  immediately  on the  passing  of the Act.  There is, therefore,  no  getting away  from the fact that the Act was an "existing law"  from the  date of its passing right up to the 1st July  1949  and was,  consequently, continued by Ordinance I of 1124.   This being the position, the validity of the notification  issued on  the 26th July 1949 under section 1(3), the reference  of the case of the petitioner, the appointment of respondent  1 as  the  authorised official and all proceedings  under  the Travancore  Act  XIV  of 1124 cannot be  questioned  on  the ground  that  the  Act  lapsed  and  was  not  continued  by Ordinance I of 1124.   Re.  (2): It is urged that the notification issued on  the 26th July 1949 was bad in that it purported to bring the Act into  operation  as  from the 22nd July  1949.   The  reason relied upon is that the Govern- 1221 meat  could  not,  in  the  absence  of  express  provision, authorising  it in that behalf, fix the commencement of  the Act  retrospectively.   The  reason  for  which  the   Court disfavours  retroactive  operation of laws is  that  it  may prejudicially  affect  vested rights.  No  such,  reason  is involved   in  this  case.   Section  1(3)  authorises   the Government  to bring the Act into force on such date  as  it may,  by  notification, appoint.  In exercise of  the  power conferred  by  this section the Government  surely  had  the

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power to issue the notification bringing the Act into  force on  any  date subsequent to the passing of the  Act.   There can,  therefore, be no objection to the notification  fixing the commencement of the Act on the 22nd July 1949 which  was a date subsequent to the passing of the Act.  So the Act has not  been given retrospective operation, that is to say,  it has not been made to commence from a date prior to the  date of its passing.  It is true that the date of commencement as fixed  by  the notification is anterior to the date  of  the notification  but  that circumstance does  not  attract  the principle  disfavouring  the  retroactive  operation  of   a statute.   Here  there is no question  of  affecting  vested rights.   The  operation of the notification itself  is  not retrospective.  It only brings the Act into operation on and from  an  earlier  date.   In  any  case  it  was  in  terms authorised  to issue the notification bringing the Act  into force  on any date subsequent to the passing of the Act  and that  is all that the Government did.  In this view  of  the matter,  the  further  argument  advanced  by  the   learned Attorney-General  and  which  found favour  with  the  Court below, namely, that the notification was at any rate good to bring the Act into operation as on and from the date of  its issue need not be considered.  There is no substance in this contention also.   Re. (3): It was urged that, even if the Travancore Act XIV of  1124 was in force on the 1st July 1949 and  was  validly brought into operation from the 22nd July 1949, the terms of section  8(2) of the Act could not apply to or override  the assessment  orders of the petitioner for the years 1942  and 1943 which 1222 were concluded by the Chief Revenue Authority of Travancore. Section 8(2) of the Act provided that, after considering the report of the Commission, the Government shall, by an  order in  writing, direct that such proceedings as they think  fit under  the  various Income-tax Acts  of  Travancore  therein mentioned or any other law shall be taken against the person to whose case the report relates in respect of the income of any period commencing after the last day of Karkadakom  1115 (16-8-1939)  and  upon  such a direction  being  given  such proceedings may be taken and completed under the appropriate law notwithstanding any decision to a different effect given in  the  case  by any  income-tax  authority  or  Income-tax Appellate Tribunal.  It was contended that the Chief Revenue Authority  was  not  included in  the  description  of  "any income-tax authority" and, therefore, even if the report  of respondent  2 was adverse to the petitioner  the  assessment orders  which were concluded by the Chief Revenue  Authority could not be affected by the provisions of section 8(2)  and could not be reopened.   This  argument  is based on a misconception  of  the  true position of the Chief Revenue Authority.  The Chief  Revenue Authority  was  an  income-tax authority  mentioned  in  the hierarchy  under the Travancore Act VIII of 1096.  When  the Travancore Act XXIII of 1121 came to be passed, the  income- tax  authorities  enumerated therein included the  Board  of Revenue at the apex., substituting the Board of Revenue  for the  Chief  Revenue  Authority  which  occupied  a   similar position  in the old Act.  By section 10 of  the  Travancore Act XIV of 1124, the Travancore Act VIII of 1096 was  deemed to be in force for the purpose of the Act and to the  extent necessary, with the result that in construing the provisions of section 8(2) of the Act, the words "any income-tax  auth- ority"  would include the Chief Revenue Authority which  was an  income-tax  authority under the Travancore Act  VIII  of

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1096.  It may also be noted that section 4 of the Travancore Act  XVII  of 1122 continued all proceedings  and  petitions pending before the 1223 Chief  Revenue Authority and provided that the same  may  be disposed  of by the said authority or by such  authority  as may be appointed by the Government for the purpose as if the ’Said  Travancore  Act VIII of 1096 bad not  been  repealed. It, therefore, follows that the Chief Revenue Authority  was included within the expression "any income-tax authority" in section  8(2)  of the Act and the assessment orders  of  the petitioner for the years 1942 and 1943 which were  concluded by  the  Chief  Revenue  Authority  could  be  affected   or overridden  by  any  order  which might  be  passed  by  the Government  under section 8(2) of the Act.  This  contention of the petitioner also, there-fore, does not avail him.   Re. (4): The Indian States Finance Enquiry Committee 1948- 49  made two interim reports.  It recommended in  the  first interim report that subject to certain limitations indicated therein which were designed to secure -legal "continuity" of pending proceedings and "finality and validity" of completed proceedings  under the pre-existing State  legislation,  the whole  body  of  State  legislation  relating  to  "federal" subjects  should be repealed and the corresponding  body  of Central  legislation extended proprio vigore to  the  States with  effect  from the prescribed date or as  and  when  the administration of particular "federal" subjects was  assumed by the Centre.  All matters and proceedings pending under or arising out of preexisting States Acts should be disposed of under  those Acts by, so far as may be,  the  "corresponding authorities"  under  the  corresponding  Indian  Acts.   The income, profits and gains accruing and arising in States  of all  periods  which  were ’previous  years’  of  the  States assessment  years  1949-50  or earlier  should  be  assessed wholly  and in accordance with the States’ laws and  at  the States’  rates respectively, appropriate to  the  assessment years concerned.  Except in Travancore, there was no Income- tax  Investigation  Commission  in any  State.   Should  the Travancore  Commission still be functioning at the  time  of the federal financial integration, all cases pending  before it should be taken over by 1224 the Indian Commission.  The disposal of those cases  should, however,  (as  in  the case of pending  assessments)  be  in accordance   with  the  pre-existing  Travancore  Law.    It recommended in the Second Interim Report that the Travancore Commission  should be wound up and the cases referred to  it should  be  transferred to the corresponding  Commission  in India.   These  recommendations of the Committee in so far as  they applied   to   Travancore-Cochin  were   accepted   by   and incorporated  into  the agreement entered into  between  the President  of India and the Rajpramukh of  Travancore-Cochin on  the 25th February 1950 subject to certain  modifications which  are  not  relevant for the  purpose  of  the  present enquiry.   The result of the agreement was the enactment  of Act  XXXIII of 1950 which extended to Travancore-Cochin  the Act XXX of 1947 and section 3 of that Act provided that  the law  of  Travancore corresponding to Act XXX of  1947  shall continue  to remain in force with the modification that  all cases   referred  to  or  pending  before   the   Travancore Commission shall stand transferred to the Central Commission for  disposal  and that the State law  shall  determine  the procedure  to be followed and the powers to be exercised  by the  Central  Commission  in the disposal  of  those  cases.

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Evasion Cases Nos. 1 and 2 of 1125 which were pending before the  Travancore Commission thus became transferred  to  res- pondent 2 and were to be disposed of in accordance with  the procedure  laid  down  and  the  powers  conferred  on   the Travancore  Commission  by the Travancore Act XIV  of  1124. Two  questions,  however,  arose  in  the  matter  of   this investigation by respondent 2, viz., (1) whether the life of the  Travancore Commission, not having been extended  beyond 16-8-1950,  respondent  2  had the power  and  authority  to continue  the investigation of the cases of  the  petitioner after  16-8-1950, and, (2) whether any orders passed by  the Government on the report made by respondent 2 would have the effect of overriding the assessment orders concluded by  the Chief  Revenue  Authority,  Travancore,  in  cases  of   the petitioner for the years 1942 and 1943. 1225 In  regard  to  the first question, it  was  urged  by  Shri Nambiyar  that the life of the Travancore Commission  having come  to an end on the 16th August 1950, respondent 2  also, which  was its successor and to which the pending  cases  of the  petitioner were transferred, could not function  beyond 16-8-1950.  Parliament, however, passed, on the 26th  August 1951,  Act XLIV of 1951 amending Act XXXIII of 1950  whereby it provided with retrospective effect that, in the  disposal of  cases  transferred to respondent 2, it  shall  have  and exercise  the  same powers as it has and  exercises  in  the investigation  of cases transferred to it under Act  XXX  of 1947 and shall be entitled to act for the same term as under sub-section (3) of section 4 of that Act thus extending  the life  of  respondent  2  beyond  16-8-1950.   This)  it  was submitted,  Parliament was not competent to do by reason  of the  terms of the agreement dated the 25th  February,  1950, the  effect  of the enactment of Act XLIV of 1951  being  to amend  the law of the Travancore State which was  to  govern the  investigation  of pending cases by  respondent  2.  The agreement  was one which was contemplated under article  295 of the Constitution and, being provided by the  Constitution itself,  was  a  bar to the legislative  competence  of  the Central   Legislature  under  article  245.    The   Central Legislature, it was submitted, was, therefore, not competent to pass Act XLIV of 1951 extending the life of respondent  2 beyond  16-8-1950  and  respondent  2  was,  therefore,  not entitled  to  carry  on any  further  investigation  in  the Evasion Cases Nos. 1 and 2 of 1125.   Considerable argument was addressed to us on the effect of the  agreement on the legislative competence of the  Central Legislature under article 245.  We do not, however, consider it necessary to decide this question as, in our opinion, the life of respondent 2 was not a part of the law of Travancore State  which  was to govern the procedure  followed  or  the powers exercised by it in the investigation of the cases  of the petitioner.  Respondent 2 to which the pending cases  of the  petitioner were transferred, was a body -with a  longer lease of life and the fact that the Travancore 1226 Commission had a shorter lease could not have the effect  of curtailing the life of respondent 2. The life of  respondent 2  depended  upon the law which established it  and  it  was extended  from time to time by subsequent legislation up  to December, 1955, and that accident which gave to respondent 2 a  longer lease of life did not contravene any provision  of the  Travancore  law which determined the  procedure  to  be followed  and the powers to be exercised by  the  Travancore Commission.   The  transfer  to respondent 2  of  the  cases pending  before  the  Travancore  Commission,  of  necessity

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involved that those cases would be dealt with by  respondent 2  which had a longer lease of life and respondent  2  could conduct  the investigation of these cases and  complete  the same  within the span of life which had been allotted to  it by  the  relevant  provisions of the Indian  Law,  the  only limitations  imposed upon the conduct of such  investigation being  that the procedure to be followed as also the  powers to  be  exercised  by it would be  those  obtaining  in  the Travancore  Law.   Act  XLIV of 1951  merely  accepted  this position and there was nothing in that Act which ran counter to the agreement.   As  regards  the second question also, the  Chief  Revenue Authority,  as observed before, was an income-tax  authority within  the meaning of the term as used in section  8(2)  of the Travancore Act XIV of 1124 read with section 10 of  that Act   which  continued  in  force  the  provisions  of   the Travancore  Act VIII of 1096 so far as it was necessary  for the purpose of the Act.  There also Act XLIV of 1951 did not make any changes in the existing Travancore Law which was to govern the investigation of the pending cases by  respondent 2. This contention of the petitioner, therefore, is  equally untenable.   Re. (5): This contention urged by Shri Nambiyar  questions the vires of section 5(1) of the Travancore Act XIV of 1124. This section provides:      "Section5(1):Our Government may at any time before  the last  day  of  Makaram  1125 refer  to  the  Commission  for investigation and report any case or 1227 points  in a case in which our Government have  prima  facie reasons  for  believing that a person has to  a  substantial extent  evaded payment of taxation on income, together  with such material as may be available in support of such belief, and may at any time before the last day of Meenam 1125 apply to  the Commission for the withdrawal of any case or  points in  a case thus referred, and if the Commission approves  of the  withdrawal, no further proceedings shall thereafter  be taken by or before the Commission in respect of the case  or points so withdrawn".   It  corresponds to section 5(1) of the Taxation on  Income (Investigation  Commission)  Act, 1947 (XXX of  1947)  which reads as under:   "Section  5  (1): The Central Government may at  any  time before  the  last  day  of  September  1948  refer  to   the Commission  for investigation and report any case or  points in  a case in which the Central Government has  prima  facie reasons  for  believing that a person has to  a  substantial extent  evaded payment of taxation on income, together  with such material as may be available in support of such belief, and  may at any time before the first day of September  1948 apply  to the Commission for the withdrawal of any  case  or points  in  a  case thus referred,  and  if  the  Commission approves  of  the withdrawal, no further  proceedings  shall thereafter  be taken by or before the Commission in  respect of the case or points so withdrawn".    We  may  also at this stage refer to  the  provisions  of section 47 of the Travancore Act XXIII of 1121 which relates to income escaping assessment:    "Section 47(1): If in consequence of definite information which  has come into his possession the  Income-tax  Officer discovers  that  income,  profits  or  gains  chargeable  to income-tax have escaped assessment in any year, or have been under-assessed, or have been assessed at too low a rate,  or have been the subject of excessive relief under this Act the Income  tax Officer may, in any case in which he has  reason

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to  believe that the assessed has concealed the  particulars of his income or deliberately furnished inaccu- 155 1228 rate  particulars thereof, at any time within  eight  years, and  in any other case at any time within four years of  the end  of that year, serve on the person liable to pay tax  on such income, profits or gains, or, in the case of a company, on the principal officer thereof, a notice containing all or any  of the requirements which may be included in  a  notice under  subsection  (2)  of section 29, and  may  proceed  to assess  or re-assess such income, profits or gains  and  the provisions  of  this  Act shall, so far  as  may  be,  apply accordingly as if the notice were a notice issued under that sub-section: ...................."   The  corresponding provision of the Indian Income tax  Act was contained in section 34 which provided:   "Section 34(1): If in consequence of definite  information which  has come into his possession the  Income-tax  Officer discovers  that  income,  profits  or  gains  chargeable  to income-tax have escaped assessment in any year, or have been under-assessed, or have been assesses at too low a rate,  or have been the subject of excessive relief under this Act the Income-tax  Officer may, in any case in which be has  reason to  believe that the assessed has concealed the  particulars of   his   income  or  deliberately   furnished   inaccurate particulars thereof, at any time within eight years, and  in any  other case at any time within four years of the end  of that  year,  serve on the person liable to pay tax  on  such income,  profits or gains, or, in the case of a company,  on the  principal officer thereof, a notice containing  all  or any  of the requirements which may be included in  a  notice under  subsection  (2)  of section 22, and  may  proceed  to assess  or re-assess such income, profits or gains, and  the provisions  of  this  Act shall, so far  as  may  be,  apply accordingly as if the notice were a notice issued under that sub-section: ................."   Section 34 of the Indian Income-tax Act was amended by Act XLVIII  of 1948 which received the assent of  the  Governor- General  on the 8th September 1948.  It was further  amended by  the Indian Income-tax Act, 1954 (XXXIII of  1954)  which was assented to by the President on the 25th September 1229 1954 and introduced sub-sections (1-A) to (1-D) therein.  It  may,  however, be noted that no amendment was  made  in section  47  of  the Travancore Act XXIII  of  1121  at  any subsequent  period  and  the  question  as  to  whether  the provisions of section 5(1) of the Travancore Act XIV of 1124 became discriminatory and violative of the fundamental right guaranteed under article 14 of the Constitution will have to be determined with reference to the provisions of that  sec- tion set out above.   The  true  nature, scope and effect of article 14  of  the Constitution  have been explained by this Court in a  series of cases beginning with Chiranjit Lal Chowdhuri v. The Union of  India(1) and ending with Budhan Chowdhury and others  v. The  State of Bihar(2).  It is, therefore, not necessary  to refer to the earlier cases and it will suffice to quote  the principle as summarised in the decision of the Full Court in the last mentioned case at page 1049 in the following terms:    "It is now well-established that while article 14 forbids class   legislation,   it   does   not   forbid   reasonable classification  for the purposes of legislation.  In  order, however, to pass the test of permissible classification  two conditions   must  be  fulfilled,  namely,  (i)   that   the

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classification   must   be  founded   on   an   intelligible differentia  which distinguishes persons or things that  are grouped together from others left out of the group, and (ii) that differentia must have a rational relation to the object sought  to  be  achieved by the statute  in  question.   The classification  may be founded on different  bases,  namely, geographical, or according to objects or occupations or  the like.  What is necessary is that there must be a nexus  bet- ween  the basis of classification and the object of the  Act under  consideration.   It is also well-establisbed  by  the decisions   of   this  Court  that   article   14   condemns discrimination  not only by a substantive law but also by  a law of procedure".    The principles underlying article 14 of the  Constitution are well-settled.  The only difficulty which (1) [1950] S.C.R. 869.         (2) [1955] 1 S.C.R. 1045. 1230 arises  is in regard to the application of those  principles to  the  facts  of a particular case and the  Court  has  to consider the terms of the impugned legislation having regard to  the background and the surrounding circumstances so  far as  it  may be necessary to do so in order to  arrive  at  a conclusion  whether  it infringes the fundamental  right  in question.   Section 5(1) of Act XXX of 1947 (which is in pari  materia with  section  5(1) of the Travancore Act XIV of  1124)  was impugned  in  the case of Suraj Mall Mohta & Co.  v.  A.  V. Visvanatha  Sastri  and  another(1).   The  references   for investigation  in that case had been made in pursuance of  a report  made  by the Commission to  the  Central  Government under  the provisions of section 5(4) of the Act  requesting that the ’Case of the petitioner along with other cases  may be  referred  to  the  Commission  for  investigation.   The contention  urged on behalf of the petitioner was  that  the provisions of sections 5(1), 5(4), 6, 7 and 8 of Act XXX  of 1947 had become void being discriminatory in character after the coming into force of the Constitution.  The attack  made against  the provisions of section 5(1) of the Act was  two- fold:  "(1)  That  the section was not based  on  any  valid classification;  the  word  "substantial"  being  vague  and uncertain  and  having no fixed meaning,  could  furnish  no basis  for any classification at all; (2) That  the  Central Government was entitled by the provisions of the section  to discriminate  between  one person and another  in  the  same class and it was authorised to pick and choose the cases  of persons  who  fell  within  the  group  of  those  who   bad substantially evaded taxation.  It could, if it chose,  send the   case  of  one  person  to  the  Commission  and   show favouritism to another person by not sending his case to the Commission though both of these persons be within the  group of those who had evaded the payment of tax to a  substantial extent".   As  regards  section  5(4), it was urged that  it  bad  no independent  existence  and was bound to fall  with  section 5(1) if his contention regarding its invalidity (1)  [1955] 1 S.C.R. 448. 1231 prevailed.   In the alternative, it was urged that  assuming that  section 5(1) was valid, even then section 5(4) had  to be  declared  void because it gave arbitrary  power  to  the Commission  to  pick  and choose and  secondly  because  the clause was highly discriminatory in character inasmuch as an evasion,  whether substantial or insubstantial, came  within its  ambit as well as within the ambit of section  34(1)  of the Indian Income-tax Act.

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 This  Court considered it sufficient for the  decision  of that  case  to  examine the contentions  urged  against  the validity of section 5(4) of the Act because the case of  the petitioner  was  referred  to  the  Commission  under  those provisions of the Act and not under section 5(1) and decided that case on the assumption that section 5(1) of the Act was based  on a valid classification and dealt with a  group  of persons  who came within the class of  war-profiteers  which required  special  treatment, that  the  classification  was rational  and that reasonable grounds existed for  making  a distinction  between  those who fell within that  class  and others  who did not come within it, but without in  any  way deciding or even expressing any opinion on that question. This  Court compared the provisions of section 5(4)  of  the Act with those of section 34(1) of the Indian Income-tax Act and came to the conclusion that section 5(4) dealt with  the same  class of persons who fell within the ambit of  section 34(1)  of the Indian Income-tax Act and were dealt  with  in sub-section  (1) of that section and whose income  could  be caught  by  a proceeding under that section.  It  held  that there  was  nothing  uncommon either  in  properties  or  in characteristics  between persons who had been discovered  as evaders  of  income-tax during  an  investigation  conducted under  section  5(1)  of  the Act and  those  who  had  been discovered by the Income-tax Officer to have evaded  payment of  income  tax.   Both those kinds of  persons  had  common properties  and  had common  characteristics  and  therefore required  equal  treatment.  The Court thus held  that  both section 34(1) of the Indian Income-tax Act and sub-sec- 1232 tion (4) of section 5 of the impugned Act dealt with persons who had similar characteristics and similar properties,  the common characteristics being that they were persons who  had not  truly disclosed their income and had evaded payment  of taxation on income.    The   court   then  considered  whether   the   procedure prescribed by Act XXX of 1947 for discovering the  concealed profits of those who bad evaded payment of taxation on their income  was substantially different and prejudicial  to  the assesses than the procedure prescribed in the Indian Income- tax Act.  After comparing the provisions of section 8 of Act XXX  of  1947  and those of sections 31, 32 and  33  of  the Indian  Income-tax  Act, this court came to  the  conclusion that  there was material and substantial difference  between the two procedures and there was no doubt that the procedure prescribed  by  the impugned Act deprived a person  who  was dealt with under that Act of those rights of appeal,  second appeal  and revision to challenge questions of fact  decided by the judge of first instance.  The procedure prescribed by the impugned Act in sections 6 and 7 was also compared  with the procedure prescribed in sections 37 and 38 in the Indian Income-tax  Act  and  this Court  held  that  the  procedure prescribed  by  the  impugned  Act  was  substantially  more prejudicial  to the assessee than the  procedure  prescribed under  the  Indian Income-tax Act.  It was thus  clear  that persons dealt with under Act XXX of 1947 were submitted to a procedure  which was more drastic and prejudicial  than  the procedure  which was available to those who were dealt  with under section 34 of the Indian Income-tax Act.    This  Court, therefore, was of the opinion  that  section 5(4) and the procedure prescribed by the impugned Act in  so far as it affected the persons proceeded against  thereunder being a piece of discriminatory legislation offended against the  provisions of article 14 of the Constitution  and  were thus void and unenforceable.

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 It was after this decision of this Court in Suraj 1233 Mall  Mohta’s case supra that Parliament enacted the  Indian Income-tax Amendment Act, 1954 (XXXIII of 1954)  introducing sub-sections  (1-A)  to (1-D) in section 34  of  the  Indian Income-tax  Act.   Though Act XXXIII of  1954  received  the assent of the President on the 5th September 1954 it was  to come into effect from the 17th July 1954.   Section 34(1-A) purported to meet two criticisms which had been, in the main, offered against the constitutionality  of section  5(1)  of the Act in Suraj Mall  Mohtas  case.   One criticism  was that the classification made in section  5(1) of  the  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  Constitu- tion.   That  alleged defect was cured in section  34  (1-A) inasmuch as the Legislature clearly indicated there what  it meant  when it said that the said object of Act XXX of  1947 was  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’  bad been  made  definite and clear by enacting that  no  evasion below  a  sum  of one lakh was within the  meaning  of  that expression.   The other criticism was that section 5(1)  did not necessarily deal with the persons, who, during the  war, had  made  huge profits and evaded payment of tax  on  them. Section  34(1-A)  remedied  this defect  also.   It  clearly stated that it would operate on income made between the  1st September  1939  and 31st March 1946 tax on which  had  been evaded.    Section  5(1)  was again attacked in the  case  of  Shree Meenakshi  Mills  Ltd. v. Sri A. V.  Visvanatha  Sastri  and Another(1).   This  was a petition under article 32  of  the Constitution filed on the 16th July 1954 after the  decision in  Suraj  Mall Mohta’s case, supra,  had  been  pronounced. Section  5(1)  of  the Act-was attacked  on  the  very  same grounds which were mentioned in  (1) [1955] 1 S.C.R. 787. 1234 the judgment in Suraj Mall Mohta’s case, supra, but had  not been dealt with by this Court it being considered sufficient to  strike down section 5(4) of the Act  without  expressing any  opinion  on the vires of section 5(1).   Even  in  this case,  section  5(1)  was  not struck  down  as  void  on  a comparison of its provisions with those of section 34(1)  of the Indian Incometax Act as was done in the case of  section 5(4)  in Suraj Mall Mohta’s case, supra.  By the  time  this petition came to be heard by this Court, the Parliament  had enacted   Act  XXXIII  of  1954  which,  as  stated   above, introduced  section  34(1-A)  in section 34  of  the  Indian Income-tax  Act and this Court came to the conclusion  on  a comparison of the provisions of section 5(1) of the Act with section  34(1-A) of the Indian Income-tax Act that  the  new sub-section inserted in section 34 by Act XXXIII of 1954 was intended to deal with the class of persons who were said  to have  been classified for special treatment by section  5(1) of  Act XXX of 1947.  This Court reiterated the  conclusions to  which-  it had come in Suraj Mall Mohta’s  case,  supra, that  the  procedure prescribed by the Act  for  making  the investigation  under  its provisions was of  a  summary  and drastic  nature  and  it constituted a  departure  from  the ordinary  law of procedure and in certain important  aspects

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was  detrimental to the persons subjected to it and as  such was discriminatory.  It did not again express an opinion  on the  validity  of  section 5(1) as being based  on  a  valid classification  and  being thus saved from the  mischief  of article 14 of the Constitution, but, on a comparison of  the provisions of section 5(1) of the Act with those of  section 34(1-A) of the Indian Income tax Act which came into  effect from  the 17th July 1954, came to the conclusion  that  this defence  of the provisions of section 5(1) being saved  from the mischief of article 14 of the Constitution on the  basis of a valid classification was no longer available in support of  it  after  the introduction of  the  new  subsection  in section  34 of the Indian Income-tax Act  which  sub-section dealt  with the same class of persons dealt with by  section 5(1) of the impugned 1235 Act.      The result was that proceedings could no longer be continued under the procedure prescribed by the   impugned Act   and   section   5  (1)  was  thus   struck   down   as unconstitutional and void after the coming into operation of section 34(1-A) of the Indian Income-tax Act.    These two cases, viz., Suraj Mall Mohta’s case supra  and Shree  Meenakshi  Mills’  case,  supra,  did  not   directly pronounce  upon  the  vires of section 5(1) of  the  Act  in comparison  with section 34(1) of the Indian Income-tax  Act though  the  vires  were  the subject  matter  of  a  direct challenge  therein.   The  ratio  of  these  decisions   is, however,  helpful in the determination of the question  that arises directly before us, viz., whether section 5(1) of the Act is discriminatory in its character and thus violative of the  fundamental  right guaranteed under article 14  of  the Constitution.   In both these cases, this Court was  of  the opinion  that the procedure for investigation prescribed  by Act  XXX of 1947 (corresponding with the Travancore Act  XIV of 1124) was of a summary and drastic nature and constituted a  departure  from  the ordinary law  of  procedure  and  in certain  aspects was detrimental to persons subjected to  it as   compared   with  the  procedure   prescribed   by   the corresponding  provisions  of  the  Indian  Income-tax   Act (corresponding to the Travancore Act XXIII of 1121) and -was as  such discriminatory.  The provisions of sections  5  (4) and  5  (1) of the Act were compared respectively  with  the provisions  of  section  34(1) and section  34(1-A)  of  the Indian  Income-tax Act and, on a comparison of these  provi- sions, this Court came to the conclusion that the classes of persons  who were said to have been classified  for  special treatment  by  those  respective sections of  the  Act  were intended  to be and could be dealt with under section  34(1) and  section 34(1-A) of the Indian Income-tax Act and  there could, therefore, be no basis of a valid classification  for special  treatment under the provisions of Act XXX  of  1947 (corresponding with the Travancore Act XIV of 1124).   The procedure prescribed by the Travancore Act XIV of 1124 being  thus  discriminatory as compared 156 1236 with the procedure prescribed in the Travancore Act XXIII of 1121,  the questions that arise for our  consideration  are, (1)  whether there is a rational basis of classification  to be  found in the enactment of section 5(1) of the  Act,  and (2)  whether the same class of persons were intended  to  be and  could be dealt with under the provisions of section  47 of the Travancore Act XXIII of 1121.   In  order  to  ascertain  the scope  and  purpose  of  the impugned  section  reference must first be made to  the  Act

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itself.   The  preamble of a statute has been said to  be  a good  means of finding out its meaning and as it were a  key to the understanding of it.  The preamble to the  Travancore Act  XIV of 1124, like that of Act XXX of 1947,  runs  thus: "Whereas  it  is expedient for the purpose  of  ascertaining whether  the actual incidence of taxation on income  is  and has  been in recent years in accordance with the  provisions of  law  and the extent to which the existing law  and  pro- cedure  for the assessment and recovery of such taxation  is adequate  to prevent the evasion thereof, to make  provision for  an investigation to be made into such matters.   It  is hereby enacted as follows".  It does not unfortunately  give any assistance in the solution of the problem before us.   Section 5(1) itself, however, gives some indication as  to the real object of it.  The condition on which the action of the Government under that section is made dependent is  that the  Government must have prima facie reasons for  believing that a person has to a substantial extent evaded payment  of taxation on his income.  The powers conferred on the Commis- sion  by  section  6 and the procedure  prescribed  for  the Commission by section 7 are clearly very drastic and  harsh. This unmistakably shows that the legislative authority  took the  view that these stringent measures were  necessary  for unearthing the tax evasions which had gone unnoticed  before when  the  usual  procedure under  the  Income-tax  law  was applied.   Then  comes  section 8(2)  which  authorises  the Government after perusal of the report of the Commission  to direct proceedings to, be taken against the person to whose 1237 case  the  report relates in respect of the  income  of  any period   commencing  after  the  16th  August  1939.    This provision   clearly  evinces  that  the  intention  of   the legislative  authority  is to catch the income  evaded  from after the 16th August 1939.  Section 5(1) also provides that the reference thereunder of a case must be made at any  time before the 16th February 1950.  From these sections it  will appear  that  the  object of this law  was  to  uncover  the evasion of tax on income made after the 16th August 1939 and before  the 16th February 1950 about the existence of  which evasion the Government had prima facie reason to believe.     The  question  at once arises as to why it was  that  the legislative authority took the view that there were possible cases  of tax evasion.  It has been said that  although  the statement of ’the objects and reasons appended to a bill  is not  admissible as an aid to the construction of the Act  as passed  (see  Aswini  Kumar Ghose case(1)), yet  it  may  be referred to only for the limited purpose of ascertaining the conditions  prevailing  at the time which  necessitated  the making  of  the  law  (see  Subodh  Gopal  Bose’s  case(2)). Similar  observations  were made by Fazl Ali, J.  with  ref- erence  to  legislative proceedings being relevant  for  the proper understanding of the circumstances under which an Act was  passed  and  the  reasons  which  necessitated  it   in Chiranjit  Lal Chowdhuri v. The Union of India(3).   Indeed, in  the  case  of  Kathi  Raning  Rawat  v.  The  State   of Saurashtra(4),  this  Court permitted the State to  file  an affidavit   stating  in  detail  the   circumstances   which prevailed at the time when the law there under consideration bad  been passed and which necessitated the passing of  that law.  In the present case also, an affidavit has been  filed by  Gauri  Shanker, Secretary of respondent 2,  stating  the reasons  why it was thought necessary to enact the  impugned Act  including section 5(1).  This affidavit clearly  brings out the serious problem that faced the revenue  authorities. A  war of unprecedented magnitude had raged  from  September

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1939 to 1946.  The (1)  [1953] S.C.R. 1.       (2)    [1954] S.C.R. 587, 628. (3)  [1950] S.C.R. 869, 879.  (4)  [1952] S.C R. 435. 1238 war  conditions brought in their train a sudden rise in  the demand of all kinds of goods, both consumer and  industrial, which,  naturally pushed up the prices to  abnormal  heights affording   a   great   opportunity   to   the    producers, manufacturers and merchants to reap huge profits.  There was good reason to believe that these abnormal profits were  not being   brought   into  regular  accounts   but-were   being concealed.   Faced  with  this situation, means  bad  to  be devised to enquire into the tax evasions and to realise  the legitimate  dues  of the State.  If regard be  had  to  this background it is obvious that section 5(1) had reference  to a class of substantial evaders of income-tax who required to be specially treated under the drastic procedure provided by Act XXX of 1947.      It  was,  however, urged that  the  words  "substantial extent"  were of such vague import that they did not  afford any reasonable-basis of classification.  Reference was  made to Stroud’s Judicial Dictionary, 3rd ed., Vol. 4, page 2901, where the word "substantial" has been described to be:       "A  word of no fixed meaning, it is an  unsatisfactory medium   for  carrying  the  idea  of   some   ascertainable proportion  of  the whole (Terry’s  Motors,  Ltd.  v.Binder, [1948] S.A.S.R. 167)".    The   word  "substantial"  has  been  used   in   various legislative  enactments and even though it is said to  be  a word  of  no  fixed meaning, Viscount  Simon  in  Palser  v. Grinling(1) observed:     "One  of the primary meanings of the word is  equivalent to considerable, solid, or big.  It is in this sense that we speak  of  a  substantial fortune, a  substantial  meal.,  a substantial  man,  a  substantial  argument  or  ground   of defence.   Applying the word in this sense, it must be  left to the discretion of the judge of fact to decide as best  he can according to the circumstances in each case......."  and it has been described at page 2902 of Stroud’s Judicial Dictionary to be "equivalent to considerable,solid or big".    Even though the word "substantial" by itself might  (1) [1948] A.C. 291, 817. 1239 not  afford a definite measure or yard-stick  for  including particular   individuals  within  the  classification,   the background and the circumstances mentioned in the  aforesaid affidavit   of  Gauri  Shanker  indicate   with   reasonable certainty  the  class  of persons who  are  intended  to  be subjected  to this drastic procedure.  It does  not  require much  effort to pick out persons who would fall within  this group  or category of substantial evaders of income-tax  and even  though a definite amount be not specified  in  section 5(1)  of  the Act as constituting a substantial  evasion  of income-tax the Government, to whom the process of  selection for the purposes of reference of the cases for investigation to   the  Commission  is  entrusted,  would  not  have   any difficulty  in  finding out the persons coming  within  this group  or category.  To use the language of Viscount  Simon, the  income-tax  which  has been evaded  would  have  to  be considerable,  solid  or big, and once that  conclusion  was reached  by the Government, the cases of such persons  would indeed  be  referred  by  them  for  investigation  by   the Commission under section 5(1) of the Act.    It  was,  however,  urged that it would be  open  to  the Government  within  the  terms of section 5(1)  of  the  Act

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itself to discriminate between persons and persons who  fell within  the  very group or category;  the  Government  might refer the case of A to the Commission leaving the case of  B to be dealt with by the ordinary procedure laid down in  the Travancore  Act  XXIII  of 1121.  The  possibility  of  such discriminatory treatment of persons falling within the  same group  or category, however, cannot  necessarily  invalidate this piece of legislation.  It is to be presumed, unless the contrary were shown, that the administration of a particular law  would be done "not with an evil eye and  unequal  band" and  the  selection made by the Government of the  cases  of persons  to be referred for investigation by the  Commission would not be discriminatory.   This  question was considered by this Court in two  cases, viz. , Kathi Raning Rawat v. The State of Sau- 1240 rashtra(1)  and  Kedar  Nath Bajoria v. The  State  of  West Bengal(2).   Mr.  Justice Mukherjea, as he then  was,  dealt with  the  argument in Kathi Raning Rawat v.  The  State  of Saurashtra(1) as under:-     "It is a doctrine of the American courts which seems  to be  well-founded  on  principle that  the  equal  protection clause  can  be  invoked  not  merely  where  discrimination appears on the express terms of the statute itself, but also when it is the result of improper or prejudiced execution of the law. (Vide Weaver on Constitutional Law, p. 404).  But a statute will not necessarily be condemned as discriminatory, because  it does not make the classification itself but,  as an  effective  way  of carrying out its  policy,  vests  the authority  to  do it in certain officers  or  administrative bodies.................... In my opinion, if the legislative policy  is clear and definite and as an effective method  of carrying  out  that  policy a discretion is  vested  by  the statute  upon a body of administrators or officers  to  make selective  application  of  the law to  certain  classes  or groups of persons, the statute itself cannot be condemned as a  piece of discriminatory legislation.  After all "the  law does  all  that  is needed when it does  all  that  it  can, indicates a policy .... and seeks to bring within the  lines all similarly situated so far as its means allow" (Vide Buck v. Bell, 274 U.S. 200,-208).  In such cases, the power given to the executive body would import a duty on it to  classify the  subject-matter  of legislation in accordance  with  the objective indicated in the statute.  The discretion that  is conferred on official agencies in such circumstances is  not an unguided discretion; it has to be exercised in conformity with  the policy to effectuate which the direction is  given and  it is in relation to that objective that the  propriety of  the classification would have to be tested.  If the  ad- ministrative body proceeds to classify persons or things  on a  basis which has no rational relation to the objective  of the  legislature,  its action can certainly be  annulled  as offending against the equal protection clause.  On the other hand, if the statute (1) [1952] S.C.R. 435, 459. (2) [1954] S.C.R. 30, 41, 1241 itself does not disclose a definite policy or objective  and it  confers  authority on another to make selection  at  its pleasure, the statute would be held on the face of it to  be discriminatory  irrespective  of  the way  in  which  it  is applied.................."   The  same  line  of demarcation  was  also  emphasized  by Patanjali  Sastri,  C. J., delivering the  judgment  of  the Court in Kedar Nath Bajoria v. The State of West Bengal(2).

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  It,  therefore.,  follows  that the mere  fact  that  the Government  is entrusted with the power to select  cases  of persons falling within the group or category of  substantial evaders of income-tax for reference to the Commission  would not render section 5(1) discriminatory and void.   The object sought to be achieved by the impugned piece  of legislation   is  quite  definite  and  that  is  to   catch substantial evaders of income-tax out of those who have made huge  profits during the war period.  They form a  class  by themselves  and  have  to be  specially  treated  under  the procedure   laid  down  in  the  Act.   Being  a  class   by themselves, the procedure to which they are subjected during the course of investigation of their cases by the Commission is not at all discriminatory because such drastic  procedure has  reasonable nexus with the object sought to be  achieved by the Act and therefore such a classification is within the constitutional  limitations.  The selection of the cases  of persons  falling  within  that category  by  the  Government cannot be challenged as discriminatory for the simple reason that  it  is not left to the-unguided  or  the  uncontrolled discretion  of the Government.  The selection is  guided  by the very objective which is set out in the terms of  section 5 (1) itself and the attainment of that object controls  the discretion which is vested in the Government and guides  the Government  in  making the necessary selection of  cases  of persons to be referred for investigation by the  Commission. It  cannot,  therefore, be disputed that there  is  a  valid basis  of classification to be found in section 5(1) of  the Act. (1)  [1954] S.C.R. 30, 41. 1242    The  validity of the classification was further  attacked on the ground that the limitation of the period within which the  cases of the substantial evaders of income-tax  falling within   this  group  or  category  may  be   referred   for investigation  by  the Government to the  Commission,  viz., 16th  February  1950 imports a discrimination in so  far  as those  persons  whose cases are referred  before  that  date would  be  treated  under the procedure  laid  down  in  the Travancore  Act XIV of 1124 whereas those whose  cases  have not been referred by that date would not be subjected to the same  treatment  even  though  they  fell  within  the  same category.   This would bring about a discrimination  between the same class of persons some of whom would be subjected to that special treatment and others who would escape the same. Section  5(4)  of the Act also would not  cure  this  defect because the cases contemplated therein are either the  cases which  have been already referred for investigation  to  the Commission  under section 5(1) of the Act or cases of  other persons  about  whose  alleged ’evasion  of  income-tax  the Commission  has  gathered information during the  course  of their  investigations.  Even if these other persons be  thus subjected  to  the special procedure prescribed in  the  Act there   would  remain,  outside  the  jurisdiction  of   the Commission, numbers .of persons whose cases are not  covered by  sections 5(1) or 5(4) but who nonetheless are  comprised within the class of substantial evaders of income-tax.  They would  have  to  be dealt with under the  ordinary  law  and presumably  under section 47 of the Travancore Act XXIII  of 1121 if they could be dealt with thereunder.  If they  could not  be  so dealt with, the only result would be  that  they would  escape  the surveillance of the  Government  and  the escapement of income-tax in their cases would be without any remedy.   This,  it was urged, was  discriminatory  and  was enough to strike down section 5(1) of the Act.

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  It would be impossible in the normal course to reach  all substantial  evaders of income-tax.  Those  persons  falling within that category in respect of whom the 1243   Government  had received the requisite information and  in whose  cases  the  Government had prima  facie  reasons  for believing  that  they  had to a  substantial  extent  evaded payment  of  taxation  on  income  would  have  their  cases referred   by  the  Government  for  investigation  by   the Commission.   Those  persons  in respect  of  whom  no  such information was available to the Government would  certainly escape  detection  but that is the position with  regard  to each  and every law which may be passed in order  to  detect evasion of payment of income-tax.  Even under the provisions of   section  47  of  the  Travancore  Act  XXIII  of   1121 (corresponding to section 34 of the Indian Income-tax Act as it  stood  before the amendment in 1948), those  persons  in respect of whom the Incometax Officer had gathered  definite information and consequently discovered that income, profits or gains chargeable to income-tax had escaped assessment  in any  year could be dealt with under the relevant  provisions of  that  Act.   Those persons in respect of  whom  no  such information  had  been received by  the  Income-tax  Officer could  not  be reached at all.  The fact that  some  persons falling  within a particular category may  escape  detection altogether is not necessarily destructive of the efficacy of the  particular  legislation.  The only  thing  required  is that,  as between persons who fall within the same  category and  who can be dealt with under the same  procedure,  there should  be no discrimination, some being treated in one  way and others being treated in another.    It was also urged that discrimination was inherent in the terms  of  section 5(1) itself by reason  of  its  operation being  limited  only  to  those  persons  whose  cases  were referred  to the Commission on or before the  16th  February 1950.   It  thus  arbitrarily left out  persons  who  evaded payment of taxation on income made during the war period but whose   cases  were  not  discovered  or  referred  to   the Commission on or before that date  although    they     were otherwise similarly situated. Reliance was placed in support of this position on the following passage from the  judgment of Mahajan, C. J. in Shree Meenakshi Mills’ case, 157 1244 supra, at pages 795-796:     "Assuming  that evasion of tax to a  substantial  amount could  form a basis of classification at all for imposing  a drastic procedure on that class, the inclusion of only  such of them whose cases had been referred before 1st  September, 1948,  into  a  class for being dealt with  by  the  drastic procedure, leaving other tax evaders to be dealt with  under the  ordinary  law will be a clear  discrimination  for  the reference  of  the  case within a  particular  time  has  no special  or  rational nexus with the necessity  for  drastic procedure............"     These observations were made to repel the first argument of   the   learned  Attorney-General  that  the   class   of substantial  evaders who fall within section 5(1) were  only those  whose cases had been referred within the date  fixed. It  was pointed out that if the class was  so  circumscribed then   that   by  itself  would  make   the   classification discriminatory  by  leaving out  those  substantial  evaders whose  cases  had not been referred by that date.   By  that passage,  however,  this  Court did not hold  that  in  fact section  5(1) was confined to such a limited class.  We  are

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of the opinion that the fixation of the date for  references for investigation by the Government to the Commission, viz., the 16th February 1950 was not an attribute of the class  of substantial evaders of income-tax which were intended to  be specifically treated under the drastic procedure  prescribed in  the Travancore Act XIV of 1124 but was a  mere  accident and  a measure of administrative convenience.  The  date  of such  references  could,  without touching  the  nature  and purpose of the classification, be extended by the Travancore Legislature by a necessary amendment of the Travancore  Act, XIV  of 1124, and if such an amendment had been  grafted  on the  Act  as  originally passed, no  one  belonging  to  the particular  class  or  category of  substantial  evaders  of income tax could have complained against the same.      The next question to consider is whether the same class of  persons dealt with under section 5(1) of the  Travancore Act XIV of 1124 were intended to and 1245 could  be dealt with under the provisions of section  47  of the Travancore Act XXIII of 1121.  Because, if that was  the position  at any particular period of time, section 5(1)  of the   Travancore  Act  XIV  of  1124  would   certainly   be discriminatory  in  so  far as there will  be  two  distinct provisions simultaneously existing in the statute book,  one of  which could be applied to some persons within  the  same class  or category and the other could be applied to  others also  falling  within  the  same  class  or  category,  thus discriminating between the two groups.    Section  47  of  the Travancore Act  XXIII  of  1121,  as already observed, was in the same terms as section 34(1)  of the  Indian Income-tax Act as it stood before its  amendment in  1948.   Each  of  the following  conditions  had  to  be fulfilled  before the Income-tax Officer could  take  action under this section, viz.:   (i)that definite information bad come into the  possession of the Income-tax Officer that income, etc. had escaped;    (ii)that  inconsequence of such definite information  the Income-tax Officer discovered that income, etc.       (a) had escaped assessment, or       (b) had been under-assessed, or       (c) had been assessed at too low a rate, or       (d) had been the subject of excessive relief; (iii)     that  the Income-tax Officer had reason to  belive that  (a) the  assessee  had  concealed the  particulars  of  his income, or (b)  deliberately furnished inaccurate particulars thereof    It is, therefore, abundantly clear that section 47(1)  of the  Travancore Act XXIII of 1121 was directed only  against those persons concerning whom definite information came into the  possession of the Incometax Officer and in  consequence of which the Incometax Officer discovered that the income of those persons bad escaped or been under-assessed or assessed at  too  low  a rate or had been the  subject  of  excessive relief.  The class of persons envisaged by 1246 section  47(1)  was a definite class about which  there  was definite information leading to discovery within 8 years  or 4  years  as the case may be of definite item  or  items  of income  which  had escaped assessment.  The  Travancore  Act XIII  of 11 21 was passed on the 9th July 1946.  The  action to  be  taken under it was not confined to  escapement  from assessment  of income made during the war period  (September 1939  to 1946).  Action could be taken in respect of  income which  escaped assessment even before the war and also  more

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than  8  years  after the end of the war.   Turning  now  to section  5(1) it will be noticed that the class  of  persons sought to be reached comprises only persons about whom there was no definite information and no discovery of any definite item  or  items of income which escaped taxation  but  about whom  the Government had only prima facie reason to  believe that  they  evaded payment of tax to a  substantial  amount. The  class of persons who might fall within section 5(1)  of the Travancore Act XIV of 1124 was, therefore, not the  same class  of  persons who may come under section 47(1)  of  the Travancore Act XXIII of 1121.  Further, action under section 5(1)  read with section 8(2) of the ’Travancore Act  XIV  of 1124  is  definitely limited to the evasion  of  payment  of taxation on income made during the war period.    It cannot, therefore, be urged that section 5(1) of     the  Travancore Act XIV of 1124 was discriminatory in    comparison     with section  47(1) of the Travancore Act-XXIII of 1121, for  the persons  who  came  under section 5(1)  were  not  similarly situated  as persons who came under section  47(1),  Section 5(1)  of Act XXX of 1947 was struck down in Shree  Meenakshi Mills’  case,  supra,  as it comprised  the  same  class  of persons  who were brought in the amended section 34(1-A)  of the Indian Income-tax Act, 1922 but the same cannot be  said about section 5(1) as compared to section 47(1).  These  two sections  do not overlap and do not cover the same class  of persons.    The  result,  therefore,  is that  section  5(1)  of  the Travancore Act XIV of 1124 which has to be read for 1247 this  purpose  in  juxtaposition  with  section  47  of  the Travancore   Act  XXIII  of  1121  cannot  be  held  to   be discriminatory  and  violative  of  the  fundamental   right guaranteed  under  article  14  of  the  Constitution.   The proceedings which took place in the course of  investigation by the Commission up to the 26th January 1950 were valid and so   also  were  the  proceedings  during  the   course   of investigation which took place after the inauguration of the Constitution  on  the  26th January  1950  under  which  the petitioner,  as  a  citizen  of  our  Sovereign   Democratic Republic  acquired inter alia guarantee of  the  fundamental right under article 14 of the Constitution.    The result, therefore, is that all the contentions  urged on behalf of the petitioner fail and Civil Appeal No. 21  of 1954 must be dismissed with costs.   Civil  Appeals Nos. 21 and 22 of 1954 will accordingly  be dismissed with costs.  There will be a set off for costs.