1. By this petition the petitioners seek a writ in the nature of prohibition or other appropriate writ, order or direction directed to respondent No. 1 who is the Income-tax Officer, Market Ward, Bombay, and respondent No. 2, the Union of India, restraining respondent No. 1 from taking any steps or proceedings in pursuance of a show cause notice issued by him on the firm of Purshottum Laxmidas, who are petitioners No. 2 before me. On April 30, 1955, respondent No. 1, acting under section 34 of the Income-tax Act, issued the notice :
'Whereas I have reason to believe that your income assessable to income-tax for the year ending March 31, 1943, has been under assessed, I, therefore, propose to reassess to income allowance that has been under-assessed :
I hereby require you to deliver to me within 35 days of the receipt of this notice a return in the attached form of your total income and total world income assessable for the said year ending March 31, 1943. This notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax, Bombay City, Bombay.'
2. The competence of the Income-tax Officer to issue this notice is challenged in this petition which raises an interesting question of processual law and the very interesting question whether the grant of a writ of prohibition is always discretionary or whether in some cases it is demandable of right.
3. I shall being by stating the undisputed facts as succinctly as I can. Petitioner No. 1 is the only heir and legal representative of Dwarkadas Vussonji, who died on April 1, 1946. Dwarkadas Vussonji and Parmanand Odhavji (respondent No. 3) carried on business in partnership in the name of Purshottum Laxmidas, which was a firm registered under the Indian Income-tax Act. Another firm in the name of Vasantsen Dwarkadas was started by Dwarkadas. The partners in that firm were Vasantsen Dwarkadas (petitioner No. 1), Narandas Shivji and Nandlal Odhavji, who is the brother of Parmanand Odhavji. The firm of Vasantsen Dwarkadas filed a return under the Act for the assessment year 1942-43 and claimed registration of the partnership. Registration was, however, refused to that firm on the ground that it was not a genuine partnership but a firm which really belonged to Dwarkadas Vussonji. The income of the firm of Vasantsen Dwarkadas for the assessment year 1942-43 was added to the individual income of Dwarkadas Vussonji. In subsequent years, that is, assessment years 1943-44 and thereafter the Income-tax Officer recorded a different finding and held that the firm of Vasantsen Dwarkadas was merely a branch of Purshottam Laxmidas and added the income of the firm of Vasantsen Dwarkadas to the income of Purshottam Laxmidas. In respect of these subsequent assessments the firm of Vasantsen Dwarkadas had applied for registration which was refused on the ground that there was no such genuine firm in existence.
4. Appeals were filed before the Income-tax Tribunal by the firm of Vasantsen Dwarkadas, both against the quantum of its income which had been assessed and against the refusal of the Income-tax Officer to register the firm for the assessment years 1942-43 to 1948-49.
5. These appeals filed by the firm of Vasantsen Dwarkadas, the appeal filed by petitioner No. 1 representing the estate of his father Dwarkadas, as also the appeals filed by the firm of Purshottum Laxmidas in the matter of excess profits tax with which it was charged were all consolidated and heard at the same time as they involved some common questions. All the consolidated appeals were decided by the Income-tax Tribunal by its order made on August 14, 1951.
6. By that order the Income-tax Tribunal recorded a finding that Dwarkadas Vussonji was not the sole proprietor of the business of Vasantsen Dwarkadas but that the business of Vasantsen Dwarkadas belonged to the firm of Purshottam Laxmidas. The finding was as follows :
'We are therefore of opinion that the addition of Rs. 62,732 to Dwarkadas's income or the modification directed by the Appellate Assistant Commissioner should be deleted from Dwarkadas's income. If the Income-tax Officer can include the same in the income of Purshottum Laxmidas, he is of course at liberty to do so. He can then apportion the income of Purshottam Laxmidas amongst the partners thereof as provided in section 23(5) of the Act.'
7. The Commissioner of Income-tax questioned the correctness of that finding of the Tribunal on a reference to this High Court (Reference No. 8 of 1952) which upheld the order of the Tribunal observing that a clear finding had been recorded by the Income-tax Tribunal that the business of Vasantsen Dwarkadas was the business of the firm of Purshottum Laxmidas. That reference was decided on October 8, 1952.
8. On April 30, 1954, the Income-tax Officer who is respondent No. 1 served the firm of Purshottum Laxmidas with a notice under section 34 of the Income-tax Act, which notice has already been set out above. There was correspondence thereafter in the course of which respondent No. 1 was asked to state the reasons submitted by the Income-tax Officer to the Commissioner of Income-tax for reopening of the assessment of the firm of Purshottum Laxmidas for the year 1942-43 under section 34 of the Act. The reason for starting proceeding under section 34 supplied to the firm of Purshottum Laxmidas was as follows :
'The income of the concern of Vasantsen Dwarkadas was originally included in the hands of Dwarkadas Vussonji. Dwarkadas Vussonji was also a partner in the registered firm of Purshottum Laxmidas. The Appellate Tribunal by its consolidated order dated August 14, 1951........... has come to the finding that the concern of Vasantsen Dwarkadas is the branch of Messrs. Purshottum Laxmidas. The income of the firm has therefore to be reassessed.'
9. The petitioners in their petition raise a number of contentions. According to them the notice under section 34 dated April 30, 1954, and the threatened action of respondent No. 1 to reopen the assessment of the firm of Purshottum Laxmidas are bad, Ultra vires and void and in excess of authority or jurisdiction. They also contend that the reopening of the case is vitiated by an error apparent on the face of the record. They further contend that there is no substantive provision anywhere in the Act under which any finding or direction could possibly have been given in the appeals filed by the firm of Vasantsen Dwarkadas or by petitioner No. 1 as the representative of Dwarkadas. They also contend that the second proviso to section 34(3), the relevant part of which section I shall presently set out, has no application to the present case. In suppors of that contention they state that the second proviso was enacted by the amending Act XXY of 1953 which received the assent of the President on May 24, 1953, and came into operation only on April 1, 1952. Another contention raised by the petitioners is that the proviso is void on the ground that it violates the provisions of article 14 of the Constitution, as it denies equality before the law and equal protection of the laws to, and discriminates against, a section of the assessees, namely, those against whom a finding or direction is given. According to the petitioners that proviso exposes some persons to the risk of having their assessments reopened without any time limit thereunder, while giving the protection of 4 years and 8 years time-limits to other assessees.
10. In opposition to the rule the Income-tax Officer, Market Ward Section II, has made an affidavit on behalf of both respondents Nos. 1 and 2. The grounds of opposition are that the petition is misconceived. It is also urged that there is an adequate and effective remedy provided by the Income-tax Act and that it is not competent to this Court to pass an order under article 226 of the Constitution so as to by-pass the provisions of that Act. It is submitted in that affidavit that there is ample an effective remedy with full rights of appeal under that Act. It is also stated in that affidavit that there is a valid finding recorded and the issue of the notice under section 34 was competent. As to the constitutionality of the second proviso challenged by the petitioners it is submitted in that affidavit that the proviso deals with a definite class of cases and that the classification is permissible.
11. It will be convenient at this stage to set out the relevant part of section 34 of the Income-tax Act as it stood before the second proviso to sub-section (3) was amended by Act XXV of 1953 :
'34. (1) If -
(a) the Income-tax Officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year, income, profits or gains chargeable to income-tax have escaped assessment for that year, or have been under-assessed, or assessed at too law a rate, or have been made the subject of excessive relief under the Act, or excessive loss or depreciation allowance has been computed, or
(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed, or assessed at too law a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may in cases falling under clause (a) at any time within eight years and in cases falling under clause (b) at any time within four years of the end of that year, serve on the assessee, or, if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22 and may proceed to assess or reassess such income, profits or gains or recompute the loss or depreciation allowance; and the provisions of this Act shall, so far as may be, apply accordingly as it the notice were a notice issued under that sub-section :
Provided that -
(i) the Income-tax Officer shall not issue a notice under this sub-section, unless he has recorded his reasons for doing so and the Commissioner is satisfied on such reasons recorded that it is a fit case for issue of such notice;
(ii) the tax shall be chargeable at the rate at which it would have been charged had the income, profits or gains not escaped assessment or full assessment, as the case may be;
(3) No order of assessment under section 23 to which clause (c) of sub-section (1) of section 28 applies or of assessment or reassessment in cases falling within clause (a) of sub-section (1) of this section shall be made after the expiry of eight years, and no order of assessment or reassessment in any other case shall be made after the expiry of four years, from the end of the year in which the income, profits or gains were first assessable :
Provided that where a notice under sub-section (1) has been issued within the time therein limited, the assessment or reassessment to be made in pursuance of such notice may be made before the expiry of one year from the date of the service of the notice even if such period exceeds the period of eight years or four years, as the case may be :
Provided further that nothing contained in this sub-section shall apply to a reassessment made under section 27 or in pursuance of an order under section 31, section 33, section 33A, section 33B, section 66, or section 66A.'
12. The second proviso to sub-section (3) as amended by Act XXV of 1953 is as follows :
'Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a reassessment made under section 27 or to an assessment or assessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A.
Section 1(2) of the amending Act of 1953 lays down that 'subject to any special provision made in this behalf in this Act, it shall be deemed to have come into force on the April 1, 1952.'
13. The first argument pressed strongly and clearly by Mr. Jhaveri, learned counsel for the petitioners, was in this form : The order of the Tribunal, in which the finding relied on by respondents Nos. 1 and 2 was recorded, was made on August 14, 1951. The notice under section 34 in respect of the assessment year 1942-43 was issued on the firm of Purshottum Laxmidas on April 30, 1954.
14. Both these were after the statutory period of eight years prescribed by sub-section (1) had expired. It was emphasised that the second proviso to sub-section (3) on which reliance was placed by respondents Nos. 1 and 2 was enacted by Act XXV of 1953, and came into force on April 1, 1952, that is, after the expiry of the period of eight years from March 31, 1943, which date was the end of the assessment year 1942-43. The argument proceeded that no retrospective operation could be given to the amended second proviso to sub-section (3) because when the notice was issued on April 30, 1954, the period of eight years for the issuance of the notice under sub-section (1) had already expired and the right or power of the Income-tax Officer to issue that notice had already become time barred. Learned counsel relied on a decision of this High Court Dhondi v. Lakshman, and two decisions of the Madras and Calcutta High Courts in support of the well established rule that a right to sue once lost by limitation cannot be revived by subsequent Act of Limitation. It is not necessary to examine these or other decisions on the subject because they are no more than an application of the principles which are now firmly established. The question whether any amendment in the law of limitation can have retrospective operation, and if so, when, is so well settled that it does not permit of any real doubt or difficulty being raised about it. Section 2 of the Limitation Act of 1877 in fact recognised the rule which had before that been recognised as a principle of law that a claim, right or remedy once barred could not be revived. Although in the present Limitation Act there is no similar provision, it has been accepted that the principle still operates and the Courts have consistently taken the view that a remedy that has once been barred cannot be revived by a subsequent change, unless the Legislature so lays down in express terms or by necessary implication. The general rule that limitation is a branch of the law of procedure and that the law of limitation is a branch of the law of procedure and that the law of limitation applicable to a suit is that in force at the time when it is instituted has always been invoked in such cases and was also invoked by learned counsel for respondents Nos. 1 and 2. The same argument is at time presented by saying that rules of limitation like rules of every procedural law are retrospective in their operation and that limitation is no more than a condition annexed to the enforcement of a substantive right and does not affect the right itself. But it is an equally well-established principle that unless the terms of a statute expressly so provide or necessarily require it, retrospective operation will not be given to a statute so as to affect, alter or destroy any right already acquired or so as to revive any remedy already lost by efflux of time. It is always presumed in such cases that Legislature does not intend to deprive a person from pleading that the right or remedy sought to be enforced against him has become barred before the new provisions of law come into operation. In this respect there is no difference between statutes dealing with procedure and those dealing with substantive rights. That the rule regarding vested rights is not confined to substantive rights but extends equally to remedial rights or rights of action including rights of appeal is also well established. See Colonial Sugar Refining Co. v. Irving. This principle was reiterated by their Lordships of the Privy Council in Delhi Cloth and General Mills Co. v. Income-tax Commissioner, Delhi, and it was held that :
'........... While provisions of a statute dealing merely with matters of procedure may properly, unless that construction be textually inadmissible, have retrospective effect attributed to them, provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively, in the absence of express enactment or necessary intendment. Their Lordships can have no doubt that provisions which, if applied retrospectively, would deprive of their existing finality orders, which, when the statute came into force, were final, are provisions which touch existing rights. Accordingly, if the section now in question is to apply to orders final at the date when it came into force, it must be clearly so provided. Their Lordships cannot find in the section even an indication to that effect.'
15. I have referred to some decisions not because any authority need be cited in support of a well-settled rule but because I am far from anxious to put my judgment on a mere ipse dixit.
16. Therefore, the short question that I have to determine is, whether there is anything in section 34 read with the newly amended proviso to sub-section (3) of the section which can be said to affect any right of the 'assessee, or any other person' or to revive a remedy which was already barred by the section as it stood prior to the amendment. There is a simple answer to this. It is a firmly established principle of income-tax law that once a final assessment is arrived at and the assessment is complete, it cannot be re-opened or re-agitated except in the circumstances detailed in sections 34 and 35 of the Act and within in time limited by those sections. Since this is the general rule it is extremely difficult to say that to give retrospective operation to the newly amended proviso which permits of a notice under the section being issued after any lapse of time would not be to affect any right or revive any remedy. Therefore, if the proviso is to apply to orders final at the date when it came into force and after the period of eight years prescribed for the issuance of the notice under the section had already expired, it must be clearly so provided. I am unable to find in the proviso even an indication to that effect.
17. There is another and still more simple answer to this question. There is the clearest indication in the amendment Act XXV of 1953, which received the assent of the President on May 24, 1953, that its provisions were to come into force, not on the date of the enactment, but on April 1, 1952. Therefore the Legislature has in terms already given some retrospective operation to the proviso under consideration, and when this has been done in words of sufficient clarity, it is impossible to give still further retrospective effect to the proviso, even assuming that such effect can, on general principles, be given to it. In such a case the date to which it came into operation cannot be pushed back further. The terms of the amending statute in section 1(2) of it gives to my mind a complete answer to the present question.
18. But is was argued by Mr. Seervai, relying on a recent decision of Calcutta High Court, Income-tax Officer v. Calcutta Discount Co. Ltd., that section 1(2) of the amending Act of 1953 is really concerned with the retrospective operation of the provisions of the amended Act and not of the amendments themselves, which must be judged by their own language and the places assigned to them in the Act. In that case section 34 of the Income-tax Act and certain amendments made in it by the amending Act of 1948 came up for consideration by the Court. I respectfully agree with the meaning given in that case by the learned Chief Justice to section 1(2) of the amending Act of 1948. Since great reliance was placed by Mr. Seervai on certain observations of the learned Chief Justice in that case I would have briefly stated the facts of that case and then considered its effect. But it is not necessary to do so as I and that the necessary facts and the pertinent observations are to be found in the following passage in the judgment of the Chief Justice at pages 481-2 of the report :
'.......... The effect of section 8 of the amending Act so operating with inspect to section 34 was that it placed the section on the statute-book is on the March 30, 1948, and made it a part of the Income-tax Act on and from that date. But what was the effect of such introduction of the new section 34 of the income-tax Act, itself The effect was that the Income-tax Act, speaking on and from the March 30, 1948, with the new section as a part of it, began to say in the words of the section itself, and therefore expressly by its own words, that in cases coming under clause 1(a) of the section, the Income-tax Officer would be entitled is issue a notice within eight years from the end of any assessment year in respect of which proceedings or further proceedings seemed to be called for. One has only to read the Act standing so amended on the March 30, 1948, and one finds at once a clear provision that all assessment years, ending within eight year from that date, are covered by it, as also all assessment years ending within eight years from subsequent dates. It is immaterial that some of them may be years ended before the March 30, 1948. The question is not one of retrospective operation at all but a question of what the section says and how far the section, having come into force on the March 30, 1948, extends by its own words. Had the section merely created a right in favour of the Income-tax Officer to issue a notice in respect of escaped or under-assessed income and not included a provision as to the period upto which, computed from the end of the assessment year concerned, the right could be exercised, a question might conceivably arise as to whether it was intended to be retrospective in operation, but in view of its clear terms, the section gives rise to no such question. The plain effect of the substitution of the new section 34 with effect from the March 30, 1948, is that from that date the Income-tax Act is to be read as including the new section as a part thereof and if it is to be so read, the further effect of the express language of the section is that so far as cases coming within clause (a) of sub-section (1) are concerned, all assessment years ending within eight years from the March 30, 1948, and from subsequent dates, are within its purview and it will apply to them provided the notice contemplated is given within such eight years. What is not within the purview of the section is an assessment year which ended before eight years from the March 30, 1948. All the three assessment years in question in the present case ended within eight years from the March 30, 1948, and also within eight years from the dates of the notices and accordingly the proceedings taken are authorised by the section and are valid.'
19. It is essential to note that the learned Chief Justice in this case took particular care to emphasise that what was not within the purview of the amended section was a notice in respect of any assessment year which ended before eight years from the date on which the amended section came into operation. I have carefully read this decision but there is in it no support to be derived for the contention urged on behalf of respondents Nos. 1 and 2.
20. The inevitable conclusion, therefore, seems to me to be that the Income-tax Officer, in issuing the notice on April 30, 1954, which was clearly more than eight years after March 30, 1943, was obviously in error, because the newly amended proviso cannot apply to the assessment year 1942-43 which did not fall within eight years from April 1, 1952.
21. The next question for consideration is whether in issuing the notice in the purported exercise of the power conferred on him by the newly amended second proviso to section 34(3) the Income-tax Officer acted without any jurisdiction or committed an error of law apparent on the fact of the record. Now in the case of the provisions before me I find that on the face of the statute conditions are enumerated which alone give competence or jurisdiction to the Income-tax Officer to issue the requisite notice on the ground that any income had escaped assessment. Apart from section 34 it was not competent to the Income-tax Officer to taken any action against the firm of Purshottum Laxmidas in respect of their assessment year 1942-43. The very foundation of the authority or jurisdiction to issue the requisite notice was derived from section 34(1), and if, as I have already held, the provisions contained in the newly amended second proviso to section 34(3) could not be invoked and the case was governed by the provisions of the section as they stood prior to the amendment, that foundation was not there. It is undisputable that under the section read with the second proviso as it stood prior to the amending Act it was not competent to the Income-tax Officer in any case to issue a notice under the section after eight years from the end of the assessment year. It was an essential condition of that competence or jurisdiction that the notice should be issued within the prescribed time-limit. Once the time-limit expired, there was no power to act, and any purported action thereafter was without power or competence, whatever be the merits of the matter. It is not necessary to refer to the decisions on the subject in their relation to the question of time-limit and it will suffice to say that in such cases the error has been treated as error of jurisdiction. I shall only mention one case cited by Mr. Jhaveri. See Rex v. Hammersmith Profiteering Committee. It is also necessary to refer to the decisions of this Court which explain what is meant by the expression 'error of law apparent on the face of the record'. A simple perusal of the notice challenged in this petition along with section 34 as it stood prior to the amendment in 1953 of the second proviso to sub-section (3) and the amendment made in that sub-section by the amending Act is enough to point to the conclusion that in issuing that notice the Income-tax Officer committed a substantial error which went to the root of the matter. It was not a case of usurpation of the jurisdiction he did not have. The writ being ex debito justitiae this Court will not withhold the writ where a judicial or quasi-judicial authority has acted without or in excess of jurisdiction even on the ground that the applicant has no merits.
22. One other point can be shortly disposed of. It was contended by Mr. Seervai at the outset of the hearing of this petition, although not as a preliminary objection, that when a provision of a revenue statute like the Income-tax Act, which was a complete code in itself, was attacked, this Court cannot interfere by issuing a writ of prohibition unless some fundamental right was involved. Learned counsel relied on Raleigh Investment Co. Ltd. v. Governor-General in Council to which I shall refer later on in my judgment. The argument was that remedy by way of a suit or petition for a writ would not lie in case of a provision of any such enactment although there was an error of law apparent on the face of the record that even if a question of usurpation of jurisdiction was involved. Raleigh's case no doubt does lend some support to this contention. But the question of prohibition was not before their Lordships. Moreover this case has lost much of its binding value because of a recent decision of the Supreme Court. The point, however, was not persisted in and it is, therefore, not necessary to examine it in any detail. Of course, the Income-tax Act is a complete code and this Court in the exercise of its discretion will not readily interpose by issuing a writ simply because it is pointed out that some clear error of law has been committed by any authority acting under that Act. But there is nothing sacrosanct and no element of untouchableness about any such legislation when the question arises whether any writ under article 226 of the Constitution can lie or not. In a somewhat similar case Scrutton, L.J., observed :
'We are not prepared to agree that there is any such Alsatia in which the judicial writs do not run.'
23. Mr. Seervai, who argued the case with his usual fairness has, however, made a valiant attempt to persuade me that in any event in a case under the Income-tax Act this Court, although it has power to do so, should not issue the writ of prohibition, and has referred me to a number of decisions, some of which I shall presently examine. The propositions pressed for my acceptance were that a writ of prohibition cannot be asked for as of right but the grant of it is discretionary and the discretion should not be exercised when the question in dispute arises under a revenue law, such as the Income-tax Act, which itself provides effective and appropriate machinery for the review of any assessment on grounds of law, which include any question as to the validity of any taxation provision under the Act. The question has been debated before me at length. I shall make some prefactory observations and then pass on to consider the arguments presented by learned counsel and sought to be supported by a number of citations. It is well settled that the very purpose of issuing a writ of prohibition is to prevent a person or body of persons having legal authority to determine questions affecting the right of a subject judicially, from acting in excess of their legal authority, and in such a case the writ being ex debito justitiae would issue. It has been said that the Court should not be chary of exercising it. The writ is granted not only when a question relating to usurpation or abdication of jurisdiction is involved but also against judicial and quasi-judicial authorities and administrative tribunals to keep them from straying from the sphere of their powers and acting in contravention of any statute or principle of law. It commands inactivity instead of kinetic excesses. In any such case : where a material question is involved, it is competent to the superior Court to issue a writ, and the Court is not to be fettered or obsessed by the fact of the existence of an alternative remedy. In Burder v. Vely, Lord Denman, C.J., said :
'The cases......... seem to establish, and consistency of reasoning requires, that the power of prohibition is in no case taken away by the privilege of appeal.
If called upon, we are bound to issue our writ of prohibition, as soon as we are duly informed that any Court of inferior jurisdiction has committed such a fault as to found our authority to prohibit, although there may be a possibility of correcting it by appeal. For there is no reason for driving the subject to that expensive process, to abide the chance of repetition of error.................'
24. This principle was reaffirmed by Lord Goddard, C.J., very recently in R. v. Comptroller-General of Patents where the learned Chief Justice observed :
'.............. Objection to jurisdiction can always be taken by plea, and, if an appeal lies from the court or tribunal in which such a plea is raised, the appellate court could, no doubt, decide the question of jurisdiction, but it by no means follows that, because there is an appeal, the power of this court to issue a prohibition is taken away. There is no technical obstacle to the co-existence of a right to appeal and to a prohibition.'
25. This power of control is to be widely exercised by the Court, but the remedy being of a summary and extraordinary nature, the Court always has regard to certain self imposed limitations inherent in the very nature of this prerogative writ.
26. Now the argument very strongly pressed before me by Mr. Jhaveri was that under section 34 of the Act the Income-tax Officer had no jurisdiction to issue any notice at any time beyond the period prescribed by sub-section (1). It was urged that there was total absence of jurisdiction appearing on the face of the notice read with section 34 and this Court was bound to issue a prohibition. The case of Farquharson v. Morgan was cited in support of the present argument. It was there held that where total absence of jurisdiction appears on the face of the proceedings in an inferior Court, the Court is bound to issue a prohibition, although the application for the writ has consented to or acquiesced in the exercise of the jurisdiction by the inferior Court. At page 557 of the report Lopes, L.J., observed :
'This case raises the much vexed question whether the grant of prohibition is discretionary, or whether it is demandable of right.
It seems to me that there has always been recognised a distinction between what I will call a latent want of jurisdiction, i.e., something becoming manifest in the course of the proceedings, and what I will call a patent want of jurisdiction, i.e., a want of jurisdiction apparent on the face of the proceedings.
Whilst in cases of latent want of jurisdiction there has always been a great conflict of judicial opinion, as to whether the grant of the writ was discretionary or not, the authorities seem unanimous in deciding that, where the want of jurisdiction is patent, the grant of the writ of prohibition is of course.'
27. At page 559 of the report the learned Lord Justice said :
'The result of the authorities appears to me to be this : that the granting of a prohibition is not an absolute right in every case where an inferior tribunal exceeds its jurisdiction, and that, where the absence or excess of jurisdiction is not apparent on the face of the proceedings, it is discretionary with the Court to decide whether the party applying has not by laches or misconduct lost his right to the writ to which, under other circumstances, he would be entitled. The reason why, notwithstanding such acquiescence, a prohibition is granted where the want of jurisdiction is apparent on the face of the proceedings, is explained by Lord Denman in Bodenham v. Ricketts to be for the sake of the public, lest the 'case might become a precedent if allowed to stand without impeachment', and, I will add for myself, because it is want of jurisdiction of which the Court is informed by the proceeding before it, and which the judge should have observed, and of which he himself should have taken notice.'
28. Lord Halsbury in this case reluctantly felt bound to grant the writ, although the applicant had no merits, and Davey, L.J., at page 560 of the report observed :
'It has always been the policy of our law to keep inferior courts strictly within their proper sphere of jurisdiction.'
29. It may be of some interest to note that certain observations of Davey, L.J., in this case were cited with approval by Beaumont, C.J., in Devidatt v. Shriram Narayandas. I must, however, point out that in that case there was no question of prohibition before the Court. This decision of the Court of Appeal in England has been referred to with approval by Courts in England in a number of later decisions and certainly lends support to the argument of Mr. Jhaveri.
30. Now I turn to the decisions cited by Mr. Seervai. In Raleigh Investment Co. Ltd. v. Governor-General in Council, a case under the Income-tax Act, the assessee paid tax under protest and instituted a suit in the Calcutta High Court for a declaration that certain provisions of the Act, in so far as they purported to authorise the assessment and charging of tax of a non-resident in respect of dividends declared or paid outside British India, were ultra vires the Federal Legislature and for consequential reliefs.
31. In holding that in substance the suit was directed exclusively to a modification of the assessment and was barred by section 67 of the Act and negativing the contention that an assessment based on a provision which was ultra vires the Indian Legislature was not an 'assessment made under this Act' within the meaning of section 67 their Lordships observed (page 337) :
'............. The obvious meaning, and in their Lordships' opinion, the correct meaning of the phrase 'assessment made under this Act' is an assessment finding its origin in an activity of the assessing officer acting as such. The circumstance that the assessing officer has taken into account an ultra vires provision of the Act is in this view immaterial in determining whether the assessment is 'made under this Act.' The phrase describes the provenance of the assessment : it does not relate to its accuracy in point of law. The use of the machinery provided by the Act, not the result of that use, is the test.'
32. Relying on this decision of the Privy Council the learned counsel argued with considerable emphasis that where effective and proper machinery was provided for by the Act itself the Court would refuse to interfere by a writ of prohibition unless some fundamental right of the subject was involved. The decision of the Privy Council was recently considered by the Supreme Court in The State of Tripura v. The Province of East Bengal. It was pointed out that in Raleigh's case the main and relevant claim was repayment of the tax alleged to have been wrongfully levied under colour of an ultra vires provision under the Income-tax Act and that the position was quite section 24(2) of the Bengal Agricultural Income-tax Act, 1944, was entitled to file a suit for a declaration that the Act was ultra vires if the gist of the wrongful Act complained of was that it subjected the plaintiff to harassment and trouble by commencing against him an illegal and unauthorised assessment proceeding which may result in unlawful levy of tax. There is no doubt that the decision of the Supreme Court has considerably modified the effect of the decision of the Privy Council in Raleigh's case.
33. Mr. Seervai also relied on the following observations of their Lordships of the Supreme Court in K.S. Rashid & Son v. The Income-tax Investigation Commission :
'......... For purposes of this case it is enough to state that the remedy provided for in article 226 of the Constitution is a discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere.'
34. Reliance was also placed by learned counsel on the following passage from Halsbury's Laws of England, (Hailsham Edition), Vol. XVII, at pages 368-69 (paragraph 756) :
'A writ of prohibition is an appropriate remedy where the facts establish clearly that on the hearing of an appeal against an assessment the only course open to the Commissioners hearing the appeal is to discharge the assessments. Where, however, there is any doubt as to the facts, the appropriate remedy is by way of appeal and not by way of writ of prohibition.
A writ of prohibition is issued when there is something done in the absence of jurisdiction or in excess of jurisdiction, and is inappropriate where there is a question to be determined which can be determined on an appeal against an assessment.'
35. Great reliance was placed by Mr. Seervai on the observations of their Lordships of the Supreme Court in the case of K.S. Rashid & Son v. Income-tax Investigation Commission, which I have set out above. Writs of prohibition and certiorari were asked for by the petitioners before the Punjab High Court. The view taken by the learned Judges who decided the petition was that they had no jurisdiction to issue a writ under article 226 of the Constitution to the Income-tax Investigatiop Commission located in Delhi and investigating the case of the petitioners although the petitioners were assessees within the Uttar Pradesh State and their original assessments were made by the Income-tax authorities of that State. The Supreme Court reached the conclusion that this view taken by the Punjab High Court could not be sustained. A contention urged before the Punjab High Court on behalf of the respondents was that the Income-tax (Investigation Commission) Act, XXX of 1947, being an enactment of a special nature which created new rights and liabilities, the remedies provided in the Act itself for the breach or violation thereof where the only remedies which could be pursued by the aggrieved parties and articles 226 or 227 of the Constitution was not available to the petitioners. It would seem from the judgment of the Supreme Court that this contention had not found favour with their Lordships, but they did not deem it necessary to express any final opinion on the point in that case. After considering these two points their Lordships went on to dismiss the appeal on the ground that the remedy provided for in article 226 is a discretionary remedy and the High Court has always the discretion to refuse to grant any writ if it is satisfied that the aggrieved party can have an adequate or suitable relief elsewhere. It does appear, however, from the judgment that it was not a case where want of jurisdiction on the part of the respondents was patent on the face of the proceedings. Therefore, it is not possible to read the observations relied on by Mr. Seervai as an expression of the opinion that where a revenue statute is a complete code the entire procedure permitted by it should be exhausted before any petition for a writ of prohibition may lie or that in such a case the High Court would refuse to exercise its discretion because under that code a question of absence of jurisdiction can also at a later stage be agitated before the High Court and the Supreme Court.
36. But it was urged that these observations do suggest that the writ of prohibition can in no sense be regarded as a matter of right even when an inferior Court is clearly shown to be acting without jurisdiction. I have already pointed out that the argument pressed before me by Mr. Jhaveri, learned counsel for the petitioners, relying on the decision of the Court of Appeal in England in Farquharson v. Morgan, was that where there was total absence of jurisdiction which was apparent on the face of the proceedings, a writ of prohibition would go as of right. It does seem that in the case of K.S. Rashid & Son v. The Income-tax Investigation Commission the Supreme Court was inclined to take the view that the grant of a writ of prohibition is always discretionary and is never demandable of right and the decision of the Court of Appeal in Farquharson v. Morgan, might at first blush seem to create some difficulty. But, as I shall presently point out, no real difficulty can arise on this point. Basically and in a broad general sense both in India under our constitution and in England where these prerogative writs owe their origin in the prerogatives of the Crown always to be safeguarded by the King's Courts, the grant of them is discretionary. An exception sought to be made in decisions of Courts in England, that a writ of prohibition is in case of patent usurpation of jurisdiction demandable of right is, if those decisions are scrutinised, a result of the historical background of this prerogative writ. The root principle of the English law about jurisdiction is that the Judges stand in the place of the sovereign in whose name they administer justice. Any usurpation of authority jurisdiction is in England regarded as without royal authority and an usurpation of the prerogative of the sovereign and, therefore, necessarily to be restrained by prohibition. Such usurpation when it is patent has been judicially characterised as in contempt of the Crown. It is with this background that in England it has been held that in such a case the writ of prohibition is demandable of right. But no such considerations need weigh with this Court in appreciating the broad principle that granting of all writs under article 226 of the Constitution including the writ of prohibition is always discretionary though of course different considerations may prevail in case of different writs. But I need not pursue this difficulty because in respect of a decision of the Supreme Court to raise any such difficulty would be impertinent and I shall give the decision all the effect I am bound to give it. An elaborate review of the authorities cited before me is not necessary. Such a review would be unduly long. I think that the cases I have selected for reference can be regarded as sufficiently expounding and illustrating the principles that can be gleaned from an exhaustive review of citations. The following propositions though not exhaustive of the subject are sufficient for the purposes of this case and I venture to think that the true measure and scope of the exercise of this jurisdiction and the discretion of this Court to issue a writ of prohibition under our law, in respect of proceedings in excess of jurisdiction, may be thus stated :
(i) The High Court has always the power and the discretion to grant or refuse to grant this writ which though it is primarily intended for enforcement of fundamental rights must also issue where necessity demands immediate and decisive interposition.
(ii) The considerations that arise when this writ is asked for on the ground that any inferior Court or person or body of persons having legal authority is committing or has committed an error of law apparent on the face of its proceedings and those that arise in a case of excess or usurpation of jurisdiction by any such Court or authority must necessarily be differentiated for in the former case there is an erroneous exercise of jurisdiction which exists while in the latter case there is no jurisdiction at all.
(iii) Absence of jurisdiction may be patent that is apparent on the face of the proceedings, or latent in the sense that it is not so apparent. Where the defect is not apparent, the Court in its discretion may refuse the writ if the facts or circumstances attending the case show undue delay, insufficient materials, misconduct, laches or acquiescence on the part of the party applying for it or are such as would render it unjust on the part of the Court to interpose.
(iv) Where, however, there is patent lack of jurisdiction and the Court is immediately satisfied that the inferior Court or authority has exceeded its jurisdiction, the Court will very readily interpose. The discretion to grant or refuse to grant the writ is of course there. But since discretion contemplates an exercise of arbitrium and not arbitrariness, the writ must go though not of right nor of course yet almost as a matter of course unless an irresistible case for withholding the writ is made out.
37. Now, as the conclusion already reached by me is that there was usurpation of jurisdiction by the Income-tax Officer, which is apparent on the face of the notice read with section 34 of the Income-tax Act, the case must fall under the last category stated above. It was strenuously urged that the petitioners had tried all along to escape assessment by adopting lengthy proceedings which terminated after ten years. It was also said that their intention was not honest and that this was a clear case at an attempt to dodge assessment by petitioner No. 2 who also carried on business under another name. In my opinion this is not a fact which can weight with the Court in a case of apparent lack of jurisdiction. The uberrima fides essential on the part of petitioner are in the matter of the petition itself. Such for instance would be the case where there is a suppression of a material fact in the petitioner's affidavit in support of his case for the writ, here the question is whether there was an excess or absence of jurisdiction on the face of the proceedings. When I am satisfied that there was such total absence, I would not be justified in rejecting this petition on the ground pressed before me.
38. The greatest stress was laid by Mr. Seervai as I have already indicated on the ground that there was an adequate and appropriate machinery in the Income-tax Act itself even for the determination of this question of jurisdiction. It was said that even if it be assumed that the Income-tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal might have taken an erroneous view of this question of jurisdiction, there was the remedy provided by sections 66 and 66A to go to the High Court and the Supreme Court. Now I do not want to make any assumption as suggested by learned counsel. I shall only state that the remedies suggested are not the adequate alternative remedies that they were said to be. They often turn out to be onerous and burdensome. Moreover, I am unable to acquiesce in the broad general proposition pressed for my acceptance that when there is such a complete income-tax code the discretion to issue a prohibition should not be exercised even in case of apparent usurpation or excess or excess of jurisdiction. There may conceivably be a case where the petitioner who himself may have taken part in the various proceedings permissible under the Act may, at a very late stage, for instance, when an application by him under section 66(1) to make a reference to the High Court is pending before the Appellate Tribunal, seek the assistance of the Court by asking for prohibition on the ground that the order passed against him by the income-tax authorities was without jurisdiction and the defect was patent on the face of the proceedings. Indubitably that would be a very strong case for withholding the writ. It is not my endeavour to formulate the irresistible grounds on which this writ may be withheld in a case of patent lack of jurisdiction. I desire to guard myself against the dangerous ambition of suggesting rules that should regulate this discretion of the Court or of trying to foresee everything. The use of the term 'discretion' in this connection though of course accurate is apt at times to be misconceived. The matter has to be decided with discretion and not at discretion. In the case before me there is no ground for withholding the writ, and since there has been apparent excess of jurisdiction, there is little scope for judicial discretion. It is in this sense that I have ventured to observe that in such a case the writ would go though not of right, nor of course, yet almost as a matter of course. And if I may respectfully say so, this also seems to me to be one of the reasons underlying the decisions of Courts in England which lay down that in such a case the grant of the writ of prohibition is not a matter of discretion but is demandable of right.
39. On the view expressed above the challenge to the notice must succeed. I may did that in my judgment this challenge would succeed even if this were to be regarded as not a case of absence of jurisdiction but as simply one of an error of law apparent on the face of the proceedings. It is not possible on the facts of this case to take the view that the conduct of the petitioners is such as should deprive them from asking for prohibition. Nor do I regard this as a case where the completeness of the income-tax code should outweigh the considerations which prevail where there is a clear error of law apparent on the face of the proceedings and the error is in respect of a material question. Therefore, even if I had reached the conclusion that respondent No. 1, the Income-tax Officer, had jurisdiction to issue the notice challenged before me, I should have held that it was issued clearly beyond the period prescribed for it by section 34 as it stood before the amendment by Act XXV of 1953 and, therefore, bad.
40. It was but faintly urged on behalf of the respondents that respondent No. 1 in issuing the notice under section 34 was acting in a purely administrative capacity and that the issuance of that notice was not even a quasi-judicial act. It was said that the initiation of the matter by the requisite notice was a purely subjective administrative act although subsequent proceedings are quasi-judicial. The submission was that this was by itself a sufficient reason for not granting prohibition. I do not agree with the contention that respondent No. 1 acted in an administrative capacity. I do not think it is necessary to discuss this point in any detail. A similar question arose before this Court in case of a notice under section 22(1) of the Act in Harakchand Makanji & Co. v. Commissioner of Income-tax, Bombay, and the view was expressed that a public notice under that section calling the return of income is the first step in assessment proceedings and there was no obligation upon the Income-tax Officer to serve an assessee individually as well. It was also held that notice under section 34 was only necessary if at the end of the assessment year no return had been made by the assessee. It is not necessary to examine this decision and other decisions to which reference was made by learned counsel for the petitioners. There is to my mind little scope for the present argument and the contention must fail. If I had any doubt on the point, I should have proceeded to consider the question whether in any event mandamus should or should not issue in this case as prayed for alternately by the petitioners. In my opinion it is not necessary to do so.
41. I now pass to consider the aspect of the matter which was based on the contention that the second proviso to section 34(3) of the Act was void as it violated the provisions of article 14 of the constitution, in that it denied equality before the law and equal protection of the laws to and discriminates against a section of the assessees, that is, persons against whom a finding or direction has been given. It was urged with considerable force that the second proviso to that sub-section as amended in 1953 not merely deprived an assessee in whose case a finding or direction had been given in any order under the sections mentioned in the proviso but any other person against whom any finding was recorded or direction given in proceedings to which he was not even a party. It was said by Mr. Jhaveri that the whole proviso was ultra vires the Legislature because it roped in any person against whom a finding or direction of the nature therein specified had been made. It was also stated that a new and unequal treatment was being given to such person and he was being deprived of his right to plead limitation which he could otherwise have done under the first part of sub-section (3) of the section. The contention so grounded was that the proviso had the effect of creating two classes of assessees, viz., those entitled to plead limitation and these now disentitled to do so. This it was urged was unequal treatment and creation of classification for which there was no rational basis.
42. Mr. Seervai, learned counsel for respondents Nos. I and 2, submitted that there was a clear and valid justification for the class of cases sought to be affected by the second proviso to sub-section (3) of the section. It was said that this very case afforded an instance where a finding of superior authority could only be given effect to by the presence of the impugned proviso. The argument was that the classification, if any, was inherent in the scheme of taxation, and that it was reasonable having regard to the subject-matter.
43. There does not seem to be much difficulty in understanding the section or the impugned proviso. The section provides for additional or supplemental assessment in a case where income has escaped full assessment. It also provides for income which has altogether escaped assessment in the relevant assessment year. After laying down the requisite conditions which must be fulfilled before this may be done it goes on to lay down a time-limit for a valid assessment under it. The notice which initiates the proceedings under the section must be served within the period prescribed in sub-section (1). The assessment or reassessment envisaged by the section must be completed within the period prescribed in sub-section (3). Then there are two provisos, the first one of which permits the assessment or reassessment being completed within one year from the date of the service of the notice provided the notice was issued within the prescribed period. In such a case the period of completion may exceed by one year the period otherwise prescribed for completion of the assessment, viz., eight years or four years as the case may be. The second proviso engrafts an important exception on the rule relating to the application of time-limit in all cases falling under the section. The effect of the section read with this proviso so far as the question of time-limit is concerned may for convenience be summarised :
(a) A person who has escaped assessment altogether may if the requisite conditions laid down in the section are fulfilled, be served with a notice within the time-limit prescribed and assessed within the time-limit prescribed for completion of the assessment.
(b) A person who has not been fully assessed may, if the requisite conditions laid down in the section are fulfilled, be served with a notice within the time-limit prescribed and reassessed within the time-limit prescribed for completion of reassessment.
(c) An assessee against whom any finding is recorded or direction is given in an order under section 31, 33, 33A, 33B, 66 or 66A and whose case falls within the purview of the section cannot claim protection of any time-limit even though the finding or direction was given in proceedings to which the order was made cannot claim protection of any time-limit if his case is otherwise within the purview of the section.
(d) Any person against whom any finding is recorded or direction is given in an order under section 31, 33, 33A, 33B, 66 or 66A and whose case falls within the purview of the section cannot claim protection of any time-limit even though the finding or direction was given in proceedings to which he was not a party.
44. It is to be observed, therefore, that the section read with the second proviso to sub-section (3) provides for three categories of persons in relation to the question of time-limit :
Firstly, those who have escaped assessment, or have not been fully assessed, but are entitled to the benefit of the period of limitation prescribed by the section;
Secondly, those assessees against whom any finding is recorded or direction given in any order or proceedings to which they were parties and the order was made in any proceedings under any of the sections mentioned in the second proviso to sub-section (3); and
Thirdly, strangers to those proceedings, that is, any persons against whom any finding is recorded or direction given in orders made in proceedings to which they were not parties. Under this category would fall all persons who cannot be regarded as 'assessees' within the meaning of that expression as used in the second proviso.
45. In effect both the second and third categories have been challenged on behalf of the petitioners as laying down classes without any rational basis and as amounting to discrimination.
46. There was no time-limit before 1939 for completion of assessment either in the case of original assessment or in the case a reassessment. The general principle of income-tax law is that office a final assessment is arrived at and the assessment is complete, it cannot be reopened or re-agitated. That being the general principle, express provision was made in section 34 to embrace cases of income escaping assessment. It is now well-established that once a final assessment is arrived at, it cannot be reopened except in the circumstances detailed in sections 34 and 35, and within the time-limit prescribed by these sections. A right of appeal to the Appellate Assistant Commissioner against the order of the Income-tax Officer is given by the statute and the Appellate Assistant Commissioner is authorised by section 31 inter alia to record his findings and to give certain directions. Then section 33 provides for a second appeal to the Income-tax Tribunal. Under that section 'any assessee objecting to an order passed by an Appeal to the Appellate Commissioner under section 28 or section 34 may appeal to the Appellate Tribunal..........' Section 33(4) empowers the Appellate Tribunal after giving an opportunity of being heard to the parties to pass such orders in the appeal as it thinks fit. Sections 33A and 33B confer a power of revision on the Commissioner Income-tax. The penultimate stage is reached when under section 66 a reference on any question of law is made to the High Court at the instance of the assessee or the Commissioner which can be only in respect of an order passed by the Appellate Tribunal under section 33(4). Lastly under section 66A an appeal lies to the Supreme Court from any judgment of the High Court delivered on a reference made under section 66 in any case which the High Court certifies to be a fit one for appeal to the Supreme Court. These are the sections stated in the impugned proviso to sub-section (3) of section 34. They indicate and chart out the long trek and the hard way on which the assessee if so inclined may tread in his endeavour to seek relief or refuge in what Lord Maugham described as 'the twists and turns of the income-tax maze.' It is easy to conceive that findings may be recorded or directions given at one or more of these various stages. It is equally easy to conceive that more than eight years may elapse before the final pronouncement is made. That being the position, I put to myself the question : Can it be said in any such case by any assessee against whom a finding is recorded or direction given and in whose case assessment or reassessment is sought to be made after the time-limit prescribed by a general rule that the non-application to such cases of the time-limit creates a classification devoid of reasonable basis Or can it be said that there is created a class on reasonable basis having regard to the difference pertinent to the subject
47. Now equality before the law guaranteed by article 14 of the Constitution is an affirmation of the well-known fundamental principle that among equals the law should be equal and should be equally administered; that like should be treated alike. This principle is applicable to all matters whether great or small and is evidently one which requires only to be stated to be at once assented to as being just. No case upon this subject in relation to income-tax legislation can be referred to with greater advantage than Suraj Mall Mohta and Co. v. Visvanatha Sastri very recently decided by the Supreme Court, where the learned Chief Justice observed as follows :
'........... It is well settled that in its application to legal proceedings article 14 assures to everyone the same rules of evidence and modes of procedure; in other words, the same rule must exist for all in similar circumstances. It is also well settled that this principle does not mean that every law must have universal application for all persons who are not by nature, attainment or circumstance, in the same position. The State can by classification determine who should be regarded as a class for purposes of legislation and in relation to a law enacted on a particular subject, but the classification permissible must be based on some real and substantial distinction bearing a just and reasonable relation to the objects sought to be attained and cannot be made arbitrarily and without any substantial basis. Classification means segregation in classes with have a systematic relation, usually found in common properties and characteristics. There is nothing uncommon either in properties or in characteristics between persons who are discovered as evaders of income-tax during an investigation conducted under section 5(1) and those who are discovered by the Income-tax Officer to have mode payment of income tax. Both these kinds of persons have common properties and have common characteristics and therefore require and equal treatment. We thus hold that both section 34 of the Indian Income-tax Act and sub-section (4) of section 5 of the impugned Act deal with all persons who have similar characteristics and similar properties, the common characteristics being that they are persons who are not truly disclosed their income and have evaded payment of taxation on income.'
48. A classification is reasonable when it is not an arbitrary selection and rests on differences pertinent to the subject in respect of which the classification is made. The ostensible purpose for and the circumstances in which the classification or category is made is always a pertinent inquiry and not the sole test of the matter. Decided cases show that Courts have sustained differentiations where the difference might not be apparently rently divorced from the purpose and circumstances in which any category was sought to be established by legislation. After all, laws are not abstract propositions and each classification has to be considered substantially and qualitatively and not superficially. The article is a pledge of equality before the law and equal protection of laws, but is does not garnet to all persons the benefit of the same laws and same remedy or the identical procedure. I shall only add this coming from the faintly academic to the purely practical that the differentiation between assessees entitled to claim protection of the time limit and those entitled to do so by virtue of the fact that a finding was recorded or direction given in any of the proceedings enumerated in the section is not in any way divorced from the purpose and circumstances under which it was sought to be established. The assessee himself being a party to the various proceedings envisaged in the impugned proviso and often himself being responsible for adopting some or all of those proceedings can hardly be heard to complain of the absence of the time limit in any such case. Obviously the proviso, so far as it relates to an assessee who has been a party to these long drawn out proceedings, is directed to prevent him from escaping assessment or supplemental assessment. The rule derives justification from the difficulties arising in such cases and is clearly addressed to attain a specific purpose and the end sought to be attained by the section itself, namely, preventing income from escaping assessment. In my judgment the classification is based on real and substantial distinction. It is not arbitrary but rests on a substantial basis. I am, therefore, of opinion that the challenge to the proviso so far as it relates to the assessee who was a party to the various proceedings enumerated in it must fail.
49. On the other hand are to my mind formidable difficulties with which respondents Nos. 1 and 2 are faced in their attempt to meet the challenge against the constitutionality of that part of the second proviso to sub-section (3) of section 34, which renders the bar of time limit applicable to the case of any person alleged to have escaped assessment and who is sought to be assessed or reassessed in consequence of or to give effect to any finding or direction contained in any order in the various proceedings enumerated in that proviso. The person sought to be affected is not the assessee who was a party to the proceedings but any person who was not a party to those proceedings, and the expression 'any person' would include even a person who was not in any way concerned in those proceedings. The main ground on which the second category mentioned by me above is sustainable as a reasonable and just classification is obviously lacking in the case of this third category. Separate considerations do affect this category. In support of his contention that the second proviso so far as it embraced 'any person' was intra vires the Legislature Mr. Seervai had not much to urge. It was said that the classification was inherent in the scheme of taxation and must be held to be reasonable having regard to the subject-matter. Learned counsel also relied on the observations of Mahajan, C.J., in the case of Suraj Mall Mohta v. Visvanatha Sastri which I have already set out. He argued that there was nothing uncommon in characteristics between persons who were assessees who had participated in any of the proceedings enumerated in the second proviso and other persons against whom finding was recorded or direction given in any such proceedings. Both these kinds of persons, so it was urged, had common characteristics and, therefore, required equal treatment. It was said that the fact that they had escaped assessment was the real characteristic to be considered. I am unable to acquiesce in this argument. Nor am I able to read anything in the observations of the learned Chief Justice which lends any support to this argument. The observations were made in a totally different context to emphasize the principle that classification which is permissible means segregation in classes based on some real and substantial distinction bearing a just and reasonable relation to the objects sought to be attained and not segregation made arbitrarily and without any substantial basis. To my mind the arguments urged by learned counsel are not sufficient to prop up a classification which on the face of it seems unreasonable. A finding, if it is to be binding on a party, should, as a general rule, be in proceedings inter partes. It cannot bind strangers. As to strangers the maxim must apply res inter alios acta alteri nocere non debet. There are some limitations to the application of the fundamental principle which underlies this maxim, but they have no bearino on the present point. It would not only be highly inconvenient but also grossly unjust to deprive a person of the benefit of an express provision of law prescribing limitation simply because in some income-tax proceedings to which he was not a party-and of which he may possibly be unaware-some finding was recorded or direction given affecting his position or his rights. No substantial reason has been suggested why a stranger to proceedings mentioned in the proviso should have to answer the notice under section 34 after the expiry of the period of limitation prescribed by the section. Nor has any satisfactory reason been suggested why after inordinate lapse of time he should have to face proceedings which may be fraught with serious consequences. He may have for years ceased to carry on the business in respect of which he is sought to be assessed or reassessed and may not even be in a position to produce his books of account. It was faintly urged that there was no possibility of the difficulties of such person being overlooked or ignored by the Income-tax Officer, and in any event by the appellate authorities. There is to my mind no scope here for any such argument. Moreover I am concerned here not with any particular case but with the challenge to the constitutionality of the proviso in so far as it can and does affect strangers. Of course, the burden is on the one attacking the legislative arrangement to negative every conceivable basis which might support it. Therefore, it is for the petitioners who impeach the proviso to show that the classification does not rest upon any reasonable basis. There is always strong presumption that the Legislature understands and correctly appreciates the needs of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds. It is well understood that the Court need not be ingenious in searching for grounds of distinction to sustain a classification that may be subjected to criticism. It is well established that with reference to taxing statutes, the Legislature has considerable latitude in making classifications. It can select persons or things as it chooses for purpose of taxation. But after giving full consideration to all these well established general principles it is extremely difficult for me to see how persons who may well have been total strangers to the various proceedings enumerated in the second proviso to section 34(3) can be regarded as a category resting on a rational basis. Such a classification, in my judgment, is without a rational distinction and obnoxious to the constitutional guarantee which applies to all matters great or small. Very readily I feel bound to extend to such persons the benefit of the time-limit expressly prescribed by the section and to hold that legislation segregating such persons in a class which has no systematic relation to a class or persons benefiting by the time-limit is a classification arbitrary and unjustifiable. The proviso, so far as it affects persons other than assessee not parties to the proceedings enumerated in it must, therefore, be held to be ultra vires the Legislature.
50. Now the argument pressed before me was that the whole second proviso to section 34(3) was bad as contravening article 14 of the Constitution. The argument proceeded that even if a part of this newly enacted proviso to section 34(3) was held to be bad, the whole of it must fail. There is no warrant for this contention. Then it was urged that in any event petitioner No. 2, the firm of Purshottam Laxmidas, were not 'assessees' within the meaning of the newly enacted second proviso and must be regarded as strangers to the proceedings in which the finding in question was regarded by the Appellate Tribunal. The argument ran that no question of construction or application, retrospect or otherwise, of this new proviso would arise if the proviso itself so far as it affected persons other than 'assessees' was held to be in violation of article 14. And, therefore, so it was argued, in any event the notice must be held to be issued without competence or jurisdiction. I agree that this conclusion would have to be arrived at qua petitioners No. 2 if they are to be regarded as not 'assessee' but 'any person' within the meaning of this proviso.
51. The argument advanced by learned counsel for the respondents Nos. 1 and 2 upon this point ranged over the decision of the Appellate Tribunal. It was urged that the decision in which the finding relied on by respondents Nos. 1 and 2 was recorded and on which the notice in question was issued, was in proceedings to which the firm of Dwarkadas Laxmidas were parties and not strangers. The finding, it was said, was given in consolidated appeals and both the firm Vasantsen Dwarkadas and Dwarkadas Laxmidas were parties present before the Tribunal when the consolidated appeals were decided. It was further said that in any even the firm of Vasantsen Dwarkadas were parties to their income-tax appeals which were consolidated with the other appeals, and in view of the finding that the firm of Vasantsen Dwarkadas belonged to the firm of Dwarkadas Laxmidas, the latter must be regarded as assessees, who were parties to the consolidated income-tax appeals. On the other hand it was strenuously contended that the fact that the appeals were consolidated did not make any difference. The firm of Dwarkadas Laxmidas which was a firm registered under the Income-tax Act was a separate unit for the purposes of the Act and it was party not to the income-tax appeals but only to the excess profits tax appeals. I am not prepared to subscribe to this narrow view which may perhaps find some support in a doctrinaire technicality. On this part of the case, therefore, I have reached the conclusion that even though that part of the newly enacted second proviso to section 34(3) which affects 'any person' other than an assessee is hit by article 14 of the Constitution the petitioners must be regarded as parties to those proceedings and falling within the category of 'assessee' and, therefore, within the ambit of the proviso.
52. This conclusion that I have reached does not, however, affect the conclusion arrived at by me that the newly enacted proviso does not reach the assessment year 1942-43 and that it was not competent to the Income-tax Officer to issue the notice challenged in this section.
53. There will, therefore, issue a writ prohibiting respondent No. 1 and his successors in office from taking any further steps or proceeding in pursuance of the show cause notice dated April 30, 1954, or from assessing or reassessing the firm of Purshottam Laxmidas in respect of the assessment year 1942-43.
54. Respondents Nos. 1 and 2 will pay the petitioners' costs of this petition. The costs will be taxed costs.
55. The respondents appealed.
56. M. P. Amin (Advocate-General) with G. N. Joshi, for the appellants. N. A. Palkhivala with R. J. Kolah, for the respondents.
57. This appeal arises out of a petition filed challenging a notice issued by the Income-tax Officer under section 34 of the Income-tax Act and praying for a writ restraining the Income-tax Officer from proceeding further pursuant to that notice.
58. It appears that the firm of Purshottam Laxmidas, who are petitioners No. 2, was stated on October 28, 1935, and in this firm there were two partners Dwarkadas Vussonji and Parmanand Odhavji. Dwarkadas died on April 1, 1946, and Vasantsen, petitioner No. 1, is his son. Another firm by the name of Vasantsen Dwarkadas was started on January 28, 1941, and in that firm there were three partners, Vasantsen, petitioner No. 1, Narandas Shivji and Nanalal Odhavji, and this firm was dissolved on October 24, 1946. The firm of Vasantsen Dwarkadas filed a return of income for the assessment year 1942-43 and it also claimed registration as a firm. The Income-tax authorities refused registration and came to the conclusion that the firm of Vasantsen Dwarkadas belonged to Dwarkadas, the father of the petitioner No. 1, and it added the income of this firm to the income of Dwarkadas. In the subsequent assessment years Vasantsen Dwarkadas applied for registration but registration was refused. For the assessment years 1942-43 to 1948-49 several appeals were filed before the Income-tax Appellate Tribunal by the firm of Vasantsen Dwarkadas both against the quantum of income assessed and against the refusal of the Income-tax Officer to register the firm of Vasantsen Dwarkadas. An appeal was also filed by the firm of Purshottam Laxmidas against its assessment and there was also an appeal for the assessment year 1942-43 by petitioner No. 1 as the heir and legal representative of his father against the decision that the income of Vasantsen Dwarkadas should be included in the income of Dwarkadas. After the decision in Vasantsen's case in the assessment year 1942-43 the Income-tax Officer game a finding that the firm of Vasantsen Dwarkadas was only a branch of the firm of Purshottam Laxmidas and he added the income of Vasantsen Dwarkadas to the income of Purshottam Laxmidas, and this question also came up before the Income-tax Appellate Tribunal in the appeals filed by Purshottam Laxmidas against their assessments, and the Income-tax Tribunal by a consolidated order dated August 14, 1951, disposed of all these appeals, and its decision was that there was overwhelming evidence to come to the conclusion that the business done in the name of Vasantsen Dwarkadas belonged to the firm of Purshottam Laxmidas. With regard to the appeal filed by Vasantsen as the representative of his father for the assessment year 1942-43, the opinion expressed by the Tribunal was that the income of Vasantsen Dwarkadas should be deleted from the assessment of Dwarkadas. It further expressed the opinion that if the Income-tax Officer could include this sum in the income of Purshottam Laxmidas he was of course at liberty to do so. Therefore in substance what the Appellate Tribunal decided with regard to the income of Vasantsen Dwarkadas for the assessment year 1942-43 was that it was erroneous to include that income in the assessment of Dwarkadas, that in its opinion the income of Vasantsen Dwarkadas was the income of Purshottam Laxmidas, and that if effect could be given to that expression of opinion by the Income-tax authorities the Income-tax authorities should do so by including this income in the assessment of Purshottam Laxmidas. Armed with this opinion of the Income-tax Tribunal, the Income-tax Officer issued a notice under section 34 of the Income-tax Act on April 30, 1954, and by this notice the firm of Purshottam Laxmidas was called upon to submit a return of its total income for the year ending March 31, 1953. It is this notice which is challenged by the petitioners.
59. Under section 34, sub-clause(1)(a), if the Income-tax Officer has reason to believe that income has escaped tax owing to an omission or failure on the part of an assessee to make a return, or under sub-clause (b) notwithstanding that there has been a return of income, in consequence of information in the possession of the Income-tax Officer he has reason to believe that income has escaped tax, authority is conferred upon the Income-tax Officer to issue a notice upon the assessee calling upon him to make a return pursuant to the provisions of the Income-tax Act. A time limit is fixed for the issue of notice under clauses (a) and (b). Under clause (a) notice must be issued at any time within eight years from the end of the assessment year, and in cases falling under clause (b) notice must be issued within four years from the end of the assessment year. Sub-section (3) of section 34 provides a period of limitation for the making of an order of assessment and in the cases falling under clause (a) the order has to be made before the expiry of eight years and in the cases falling under clause (b) it has got to be made before the expiry of four years from the end of the year in which the income was first assessable. But the first proviso to sub-section (3) gives an additional period of one year where a notice under section 34 has been served and the assessment can be completed within one year after service of the notice even though such period may exceed eight years or four years as the case may be. There was a second proviso to sub-section (3) and that was to the effect :
'Provided further that nothing contained in this sub-section shall apply to a re-assessment made under section 27 or in pursuance of an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A.'
60. Therefore, the period of limitation laid down in sub-section (3) with regard to the making of the order of assessment was not apply to re-assessments made under the various sections enumerated in this second proviso. This second proviso was amended by Act XXV of 1953. That Act provided that it was deemed to have come into force on April 1, 1952, and it received the assent of the President on May 24, 1953, and the amended proviso was to this effect :
'Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a re-assessment made under section 27 or to an assessment or re-assessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A.'
61. The important alterations made in the second proviso will be immediately noticeable. In the first place, the second proviso was no longer a proviso to sub-section (3) but it is a proviso to the whole section. In the second place, no limitation was to apply in cases falling under the second proviso not only with regard to an assessment made on the assessee but also against any third person or against a person who was a stranger to the assessment, and whereas the original proviso limited its operation to all order made under the various sections enumerated, the amended provisos extended its ambit by providing that the assessment or reassessment may be made in consequence of or to give effect to any finding or direction contained in an order under the various sections.
62. It is under this amended second proviso that the Income-tax Officer has purported to issue this notice. It may be pointed out that as the assessment year 1942-43 ended on March 31, 1943, and inasmuch as the notice was issued on April 30, 1954, whether the period of limitation for the giving of notice was four years or eight years, the notice was beyond time judged by the period of limitation laid down in the body of section 34 itself, and therefore unless the Income-tax Officer could bring himself within the ambit of the proviso, the notice will be bad. The unamended proviso would not help the Income-tax Officer because he is not seeking to assess the assessee pursuant to an order made by the Income-tax Tribunal. He is seeking to assess a third party, a stranger to the assessment, and it is because of this that the Income-tax Officer is compelled to contend that the second proviso being in operation when the notice was issued on April 30, 1954, the notice must be governed by the amended second proviso and not by the original proviso.
63. Therefore, on the validity of the notice, the very short question that we have to consider is whether, if the remedy or the right to issue a notice under section 34 was already barred at the date when the amending legislation came into force, the amending legislation could revive the remedy by providing an extended period of limitation. The amending Act came into force on April 1, 1952, and on that date the period of eight years from March 31, 1943, had already expired. Therefore the remedy available to the Income-tax Officer of assessing the assessee in respect of escaped income had already become barred. Could a legislation by providing that from April 1, 1952, there would be no limitation at all in respect of that remedy revive the remedy which was already lost to the Income-tax Officer It seems to us that the proposition of law is settled beyond any doubt that, although limitation is a procedural law and although it is open to the Legislature to extend the period of limitation, an important right accrues to a party when the remedy against him of another party is barred by the existing law of limitation and that vested right cannot be affected except by thi clearest and most express terms used by the Legislature. It is not suggested that a sovereign Parliament cannot take away vested rights, but the Court must be loath to construe any legislation as interfering with vested rights unless the law-making authority has clearly so provided. What the Advocate-General is really contending for is to give retrospective effect to an Act which came into force on April 1, 1952, by depriving the assessee of the right which had accrued to him of no further action being taken against him under section 34. As the law stood, the assessee could say to himself on April 1, 1952, that any fear of proceedings being taken under section 34 was effectively at an end, and therefore unless there is anything in the second proviso which would leab us to the conclusion that the Legislature not only brought into force the Act, which received assent on May 24, 1953, on April 1, 1952, but it revived a remedy already lost, we could not possibly accede to the contention that the amended proviso has a retrospective effect in the manner suggested by the Advocate-General.
64. An argument was advanced by the Advocate-General that if the right is not barred and only the remedy is barred, the remedy could be revived by the Legislature, and a rather curious suggestion was made that the Income-tax Department had the right to collect income-tax from all persons who were liable to pay tax, that that right never got barred, and also the liability of every person to pay tax which was due from him also continued indefinitely, and therefore it was argued that all thab the Legislature was doing was to revive a remedy in respect of a right which was still subsisting. This distinction between right and remedy as far as section 34 is concerned is entirely out of place. In one sense the Income-tax Officer has the right to issue a notice under section 34 provided the notice is within the period of limitation. In another sense it may be said that the remedy of the Income-tax Officer to bring to tax escaped income is available to him under section 34 provided he avails himself of that remedy within the period of limitation. But no distinction can be drawn as far as section 34 is concerned between the right of the Income-tax Officer and the remedy available to him. If the remedy is lost, the right is also lost, and if the right is lost, much more so is the remedy. The Legislature itself has provided a complete answer to the argument advanced by the Advocate-General. If according to the Advocate-General on the passing of this Act and the enacting of the amended second proviso the remedy under section 34 was revived irrespective of when that remedy became barred, then it is difficult to understand why the Legislature in terms provided that the Act should come into force on April 1, 1952. Therefore, the Legislature provided the terminus for the purpose of considering questions of limitation as April 1, 1952. If one that date the remedy was not barred, then undoubtedly the extension of limitation by the amended second proviso would apply. But if the remedy was barred, then the Legislature did nop want to go further back than April 1, 1952.
65. In support of his proposition the Advocate-General has relied on a decision of the Calcutta High Court in Income-tax Officer v. Calcutta Discount Co. Ltd. In that case the Calcutta High Court was considering the amendment of section 34 introduced by Act XL VIII of 1948, and the question that arose was whether the amended section applied to assessments for the years 1942-43, 1943-44 and 1944-45, and the Calcutta High Court held that the amended section did apply. It should be noticed that the amended section 34 did not in any way affect question of limitation. The period of limitation under the amended section 34 continued to be the same as it was before the amendment, and the learned Chief Justice in his judgment is at pains to point out at two places that the amended sectiop would not have had retrospective effect if it had attempted to revive a remedy which had already been barred. At page 490 the learned Chief Justice says :
'... and since the time-limits for so proceeding were the same, the new section affects no rights previously unaffected.'
66. And at the bottom of that page :
'... It is true that if time is enlarged by a new enactment, but at the date when the enactment comes into force, no proceeding can any longer be commenced in a particular case under the previous law, the new enactment will not apply to such a case.'
67. And lower down on page 491 :
'... As to time, none has a vested right in a period of limitation and a change of the period which does not altogether take away a right of action subsisting at the date of change or revive a right, then already barred under the old law, can always be made and the period applicable thereafter will be the new period, whether enlarged or abridged.'
68. Therefore, in our opinion, it is clear that the notice issued by the Income-tax Officer under section 34 which is challenged by the petition under appeal was a notice that was issued out of time, and is, therefore, invalid.
69. The second question that has been urged before us is that even so the petitioner had no right to maintain this petition and obtain an appropriate writ against the Income-tax Officer. The startling argument was seriously urged before the learnef Judge below, and perhaps not equally seriously was urged by the Advocate-General before us, that the High Court has no jurisdiction to issue a writ under article 226 of the Constitution in a case where a question arises under the Income-tax Act. What is said is that the Income-tax Act sets up its own machinery for the purpose of deciding question that arise under that Act, and if an assessee is dissatisfied with any action taken by the Income-tax Officer, then he must get his grievance redressed by resorting to the machinery under the Act and not by coming to the High Court for a prerogative writ under article 226. It is said that if thi notice under section 34 was bad and the assessment made under that notice was invalid, it was open to the assessee to appeal to the Appellate Assistant Commissioner, then to appeal to the Appellate Tribunal, and finally to come to the High Court under section 66. But the law does not permit, it is said, an assessee to by-pass the machinery specially set up and by a short cut to approach the High Court and get the necessary relief. It is too late in the day to argue that the powers of the High Court under article 226 and article 227 are not of the widest. Except for the territorial limitation placed upon it by the Constitution, there is no limit upon the right or the power of the High Court to issuv a writ under article 226 or article 227. Undoubtedly, the Courts for their own guidance have put limitations upon their very wide power, but those are self imposed limitations, they are not legal or constitutional limitations. The Supreme Court has emphasised this position in law in a recent decision in K.S. Rashid and Son v. The Income-tax Investigation Commission and others. The Supreme Court points out in that judgment :
'Article 226 of the Constitution confers on all the High Courts new and very wide powers in the matter of issuing writs which they never possessed before. There are only two limitations placed upon the exercise of sucd powers by a High Court; one is that 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 beyond the territories subject to its jurisdiction. The other is that the person or authority to whom the High Court is empowered to issue writs 'must be within those territories' and this implies that they must be amenable to its jurisdiction either by residence or location within those territories.'
70. Therefore, apart from these two limitations, it is for the High Court to decide whether in a particular case it will or it will not issue a writ.
71. Strong reliance was placed by the Advocate-General on a judgment of the Punjab High Court in Lala Lachhman Dass Nayar v. RE. In that case Mr. Justice Kapur and Mr. Justice Soni held that a challenge could not be made to the validity of a notice under section 34 by a writ of prohibition or mandamus under article 226 of the Constitution. When one looks at the facts of that case it is clear that in all the matters which were considered by the Punjab High Court in that decision not only notice had been issued under section 34 but assessment had been completed, and what was really challenged in substance was not so much the notice as the invalid assessment made pursuant to a bad notice. If an assessee does not challenge the notice issued under section 34 and allowx the Income-tax authorities to assess him and then challenges the assessment, the position may be very different, because then it may be said that the Income-tax Act itself gives him an adequate remedy for the purpose of challenging the assessment. But the case we are dealing with is where the assessee immediately on the issue of the notice under section 34 challenges the competency of the authority of the Income-tax Officer to take any assessment proceedings pursuant to that notice and attacks the very basis of the assessment proceedings which the Income-tax authorities propose to initiate.
72. This position is made clear and emphasised by the Supreme Court in its judgment in State of Tripura v. Province of East Bengal. In that case the Ruler of Tripura sought to challenge the validity of the Income-tax Act in so far as it purported to impose a liability to pay agricultural income-tax on the plaintiff, and he sought an injunction restraining the Income-tax authorities from taking any steps to assess him, and the Supreme Court points out :
'The position here is entirely different. The gist of the wrongful act complainef of in the present case in subjecting the plaintiff to the harassment and trouble by commencing against him an illegal and unauthorised assessment proceeding which may eventually result in an unlawful imposition and levy of tax.'
73. The Supreme Court distinguishes the judgment of the Privy Council in Raleigh Investment Co. Ltd. v. Governor-General in Council by pointing out that in that case the suit in substance was to modify or set aside the assessment already made, and it quotes a passage from the judgment of the Privy Council :
'In form the relief claimed does not profess to modify or set aside the assessment. In substance it does, for repayment of part of the sum due by virtue of the notice of demand could be ordered so long as the assessment stood. Further, the claim for the declaration cannot be rationally regarded as having any relevance except as leading up to the claim for repayment, and the claim for an injunction is merely verbiage. The cloud of words fails to obscure the point of the suit.'
74. Therefore, Tripura's case and Raleigh's case make it abundantly clear that there is a vital distinction between a case where the plaintiff is seeking to prevent illegal and unauthorised proceedings being commenced against him and his being subjected to harassment, and a case where he has already been assessed and he is challenging the validity of the assessment. But the importance of Tripura's case goes further. It lays down this important proposition that an illegal threat to assess can be challenged otherwise than by the machinery provided by the Income-tax Act. Therefore, to the extent that the Advocate-General argued that when the Income-tax Act provides a particular machinery the aggrieved party can challenge a threat to assessment only by means of that machinery. That contention has been held to be untenable by the Supreme Court. But it is pointed out that even so the only remedy which the aggrieved party has is by filing a suit and not by asking for a prerogative writ under the Constitution. It must be borne in mind that when Tripura's case was decided the Constitution had not been enacted and the right to issue prerogative writs was confined to the High Courts within the limits of the Presidency-towns, and therefore the Ruler of Tripura State could only challenge the illegal notice issued against him by filing a suit and no other remedy was open to him. But even though a suit may be an alternative and adequate remedy, all that that proposition establishes is that the Court in its discretion will not issue a writ but will compel the aggrieved party to resort to the ordinary remedy available to him at law, and therefore what we have really to consider is not whether the Court is precluded from issuing a writ in income-tax matters, but whether in the exercise of its discretion it would issue a writ under the circumstances of the case.
75. With regard to a suit being an adequate alternative remedy, the observations of the Supreme Court in Himmatlal Harilal Mehta v. The State of Madhya Pradesh may be looked at. The Supreme Court in that case was dealing with the Sales Tax Act and there, there was no assessment to tax but there was only a threat by the State to realise the tax from the assessee, and the Supreme Court held that such a threat without the authority of law was a sufficient infringement of the assessee's fundamental right under article 19(1)(g) and game him a right to seek relief under article 226 of the Constitution, and it further pointed out that the impugned Act requiring the assessee to deposit the whole of the tax before he can get the relief provided by it cannot be said to provide an adequate alternative remedy. Here also it is very difficult to accept the contention that a suit would be an adequate remedy. A notice would have to be given under section 80 and a suit usually results in dilatory proceedings.
76. But let us approach the matter, because the point raised is of considerable importance, and see whether, even if a suit in this particular case is an adequate alternative remedy, the challenge made by the petitioner constitutes an exception to the cases where the Court will not exercise its discretion in favour of the petitioner when he could resort to the ordinary remedy of law. The two exceptions to the ordinary rule that the Court will not give relief by means of a writ when the petitioner can get the same relief by ordinary legal remedies available to him which are well established are these : One is that if the threat involves an encroachment upon the fundamental right of the petitioner, the Court will interfere and will not compel him to exhaust his legal remedies, and the other exception which is equally well established is that if the authority against whom a complaint is made has violated rules of natural justice, the Court will interfere and protect the petitioner and not insist upon this going to a higher tribunal for relief. But the interesting question which was debated at the Bar was whether there was a third exception to this rule, and the third exception that was suggested was when there is complete absence of jurisdiction and that absence of jurisdiction is apparent on the face of the record. It is necessary to clarify this expression 'complete absence of jurisdiction.' If we are dealing with a judicial or quasi-judicial tribunal, the expression 'absence of jurisdiction' does not create any difficulty. But we have also to consider cases where the order challenged is the order of an administrative officer or an administrative tribunal and the allegation against him may be that he is acting without authority or beyond his competence. In such a case the expression 'absence of jurisdiction' would also apply, but with a different significance as just pointed out. In this particular case what is urged by the petitioner is that the Income-tax Officer in issuing the notice had no authority or competence to do so and that the assessment proceedings which he proposes to initiate pursuant to that notice would be proceedings without any jurisdiction at all. What is the meaning to be attached to the expression 'complete absence of jurisdiction apparent on the face of the record'. As we shall presently point out, two views are possible. One is that the absence of jurisdiction should be clear beyond any reasonable doubt on the construction of the statute which confers the jurisdiction or confers the power or competence, and that if two views are possible of construction of a section, then it would not be a case of absence of jurisdiction apparent on the face of the record. The other view is that if absence of jurisdiction can be established by reference to statute without more and no evidence was necessary and no facts had to be proved in order to establish want of jurisdiction, then absence of jurisdiction is one which is apparent on the face of the record, or, as one learned Judge has said, apparent on the face of the statute. In this particular case before us it is not necessary to decide which of the two views is the correct view, because even assuming that the Court will exercise its discretion in favour of the assessee when alternative remedy is open to him only in a case where the section which confers jurisdiction or authority is clear beyond reasonable doubt, in our opinion there could not be a stronger case than this where even on a cursory perusal of section 34 with its provisos it is clear that the Income-tax Officer has exceeded his competence and authority.
77. An attempt was made by the Advocate-General to suggest that all that the Income-tax Officer was doing was construing section 34 and in construing that section he came to the conclusion that he could issue a valid notice under the amended proviso and he did so, and according to the Advocate-General this was nothing more or less than an error of law in the exercise of his jurisdiction. This is a totally erroneous view to take of the action of the Income-tax Officer. No tribunal and no officer can confer jurisdiction or authority or competence upon itself or himself by misconstruing a section. It is inarguable that an authority could claim to exercise jurisdiction by construing a section erroneously and thereby contending that the section so wrongly construed gives him the necessary power. In such a case, if the section has been wrongly construed, it would be a clear case of absence of jurisdiction apparent on the face of the record because the Court has got to look at the section and to decide whether the Officer construing the section was in the right or in the wrong.
78. Turning to the authorities on this point, the most important is the decision of the English Court in Farquharson v. Morgan. In that case a Country Court Judge made an order to enforce an award by execution as on an ordinary County Court judgment under section 24 of the Agricultural Holdings Act and on the face of the award it was apparent that the compensation had been awarded to the tenant for matters not within the Act, and the Court of Appeal interfered by a writ of prohibition notwithstanding the fact that there was an agreement contained in the lease between the lessor and the tenant to refer all disputes to arbitration and also the fact that the lessor had by his conduct acquiesced in the exercise of jurisdiction by the County Court. Before we go further with this case it may be pointed out that there is a line of case where it has been held that if a party does not object to jurisdiction at the earliest stage and sits on the fence and takes his chance which way the Tribunal will decide, it is not open to him then to come to the Court and challenge the jurisdiction by asking for a writ under article 226 because he lost before that Tribunal. But as this judgment points out, those would be cases where the want of jurisdiction would not be apparent, where it may be that some fact would have to be proved by the party or some action to be taken by the party, and the Court would take into consideration the acquiescence of the party in submitting to the jurisdiction of the Tribunal. But as already pointed out, in that case, although the lessor had acquiesced in the exercise of jurisdiction by the County Court, even so the Court of Appeal felt that this was a case where it was obligatory upon the Court to issue a writ of prohibition, and Lord Halsbury points out (page 556) :
'... It has been long settled that, where an objection to the jurisdiction of an inferior Court appears on the f ace of the proceedings, it is immaterial by what means and by whom the Court is informed of such objection. The Court must protect the prerogative of the Crown and the due course of the administration of justice by prohibiting the inferior Court from proceeding in matters as to which it is apparent that it has no jurisdiction.'
79. And Lord Justice Lopes in his judgment points out (page 557) : 'It seems to me that there was always been recognised a distinction between what I will call a latent want of jurisdiction, i.e., something becoming manifest in the course of the proceedings, and what I will call a patent want of jurisdiction, i.e., a want of jurisdiction apparent on the face of the proceedings.
80. Whilst in cases of latent want of jurisdiction there has always been a great conflict of judicial opinion, as to whether the grant of the writ was discretionary or not, the authorities seem unanimous in deciding that, where the want of jurisdiction is patent, the grant of the writ of prohibition is of course.'
81. And at page 559 the learned Lord Justice points out :
'... The reason why, notwithstanding such acquiescence, a prohibition is granted where the want of jurisdiction is apparent on the face of the proceedings, is explained by Lord Denman in Bodenham v. Ricketts to be for the sake of the public, lest 'the case might become a precedent if allowed to stand without impeachment,' and, I will add for myself, because it is a want of jurisdiction of which the Court is informed by the proceedings before it, and which the judge should have observed, and of which he himself should have taken notice.'
82. And again at page 563 Lord Justice Davey draws a distinction between the case of a patent and latent want of jurisdiction and the distinction according to this learned Lord Justice is :
'... but the distinction does not, I think, depend on the existence of a formal record, but is one of substance, whether the defect is apparent or depends on evidence.'
83. And a little lower down on the same page he observes :
'... In the present case the limits of the jurisdiction appeared, I repeat, on the face of the statute, and the fact of the excess appeared on the face of the amended award which the Court asked to enforce.'
84. Then there is a recent judgment of the Queen's Bench Division reported in R. v. Comptroller-General of patents, and observation of the learned Chief Justice at page 865 are very pertinent :
'... Objection to jurisdiction can always be taken by plea, and, if an appeal lies from the court or tribunal in which such a plea is raised, the appellate court could, no doubt, decide the question jurisdiction, but it by no means follows that, because there is an appeal, the power of this court to issue a prohibition is taken away. There is no technical obstacle to the co-existence of a right to appeal and to a prohibition.'
85. And at page 866 he says :
'If the defect of jurisdiction is apparent on the face of the proceedings, the order of prohibition must go as of right and is not a matter of discretion.'
86. And further on the same page :
'... Where, however, the defect is not apparent, but depends on some fact in the knowledge of the applicant which he had the opportunity of bringing forward in the court below and has allowed that court to proceed without setting up the objection, the same cases show that the court has a discretion to refuse the writ and will leave the objector to his remedy by appeal.'
87. Therefore, these authorities clearly establish that a patent want of jurisdiction entitles the petitioner to obtain immediate relief from the High Court, even though he could raise the plea of want of jurisdiction in a higher tribunal even though, as the English cases point out, he may have acquiesced in the want of jurisdiction. But what is emphasised in those cases is that the want of jurisdiction must be a patent one. In our opinion, the want of jurisdiction pleaded by the petitioner in the case before us is undoubtedly a patent one, and if it is a patent want of jurisdiction, not only would we be rightly exercising our discretion in interfering, but according to the English Courts it would be our duty and our obligation to prevent an authority from assuming jurisdiction which it patently does not possess. In view of the conclusion we have come to it would perhaps be necessary to consider another plea urged by the petitioner which was accepted by the learned Judge below, and that was the amended proviso even assuming it applied was void as against him by reason of article 14 of the Constitution.
88. It will be remembered that the Tribunal gave it finding that the income of the firm of Vasantsen Dwarkadas was the income of Purshottam Laxmidas in the assessment of Dwarkadas and to that assessment Purshottam Laxmidas was a stranger, and what is urged is that although the amended proviso may be valid to the extent that it affects an assessee, it is bad to the extent that it affects a stranger. Before we consider this constitutional aspect of the matter, let us once more look at the language of this amended proviso. We suppose it is always difficult to draft a taxing statute, but whether it is always necessary to make it more difficult than it reasonably should be, we always find it hard to understand. The right to assess a stranger to assessment under section 34 arises in consequence of or to give effect to any finding or direction contained in an order under the various sections enumerated in the proviso, and here we are concerned with section 33. In the first place, it is difficult to understand how a Tribunal can give a finding or a direction affecting a third party who is not before the Tribunal. In this very case the assessee before the Tribunal was Vasantsen Dwarkadas, petitioner No. 1, as representing his father; in that appeal the firm of Purshottam Laxmidas was not before the Tribunal; and yet this proviso contemplates that a finding or a direction could be given by the Tribunal affecting Purshottam Laxmidas on which action can be taken by the Income-tax authorities, and it is precisely because the Tribunal in its order has given a direction or a finding, whichever way one looks at it, that the Income-tax Officer can include the income of Vasantsen Dwarkadas in the income of Purshottam Laxmidas in the assessment of Dwarkadas, that these proceedings have ensued.
89. What is the result of a stranger being liable to be proceeded against under section 34 The result is that if a stranger is in some way associated with an assessee and the assessee's assessment is under consideration and if he has the misfortune of having some finding or direction given by the Tribunal in respect of him, then, although otherwise no action could have been taken under section 34 because such action would have been barred by limitation, action can be taken under the proviso and he loses the right that he had of considering that any further proceedings under the Income-tax Act with regard to his income for past years were not competent or not open to the Income-tax authorities. The Advocate-General says that the persons who are sought to be roped in by this amended proviso are persons who are liable to pay tax and who have not paid the tax, and he says that that is perfectly good classification based on rational and reasonable considerations and does not come within the mischief of article 14. But the difficulty in the way of the Advocate-General is that the only persons liable to pay tax and who have not paid the tax who are affected by this proviso are the persons who are in some way associated with an assessment of some assessee. Admittedly, persons who are liable to pay tax and have not paid tax could not be proceeded against after the period of limitation unless a finding or direction with regard to them was given by some Tribunal under the various sections mentioned in the second proviso. Therefore, of the large category of people who may be liable to pay tax and have failed to pay tax, a certain number is selected for action and with regard to that small number the right of limitation given to them has been taken away. The question is whether there is any basis for distinguishing between persons who are liable to pay tax and who have failed to pay tax and with regard to whom a finding or direction is given, and persons who are liable to pay tax and who have failed to pay tax and with regard to whom no finding or direction is given. The Advocate-General says that the category of people who are liable to pay tax and who fail to pay tax is so large that it is not possible for the Legislature to embrace the whole of that class. That would be a perfectly valid argument if we could be satiesfied that it was not possible for the Legislature to reach all persons belonging to a particular category or that persons dealt with by the law and not dealt with by the law belong to different categories. Neither of these two factors are present in this case. As we have already said, the persons with regard to whom a finding or direction is given and persons with regard to whom no finding or direction is given belong to the same category, and as well shall presently point out, there is no reason why the Legislature should have excepted persons with regard to whom no finding or direction is given. The Advocate-General says that it is because of the finding or direction given that the attention of the Income-tax authorities is directed to the fact that a particular person has not paid tax which he was liable to pay. But the attention of the Income-tax authorities may be drawn by hundred different ways to the fact that other persons have also not paid tax which they were liable to pay. Why should persons who happen to be mentioned in an order of the Tribunal be treated differently from persons whose liability to pay tax has been communicated to the Income-tax authorities in a different manner. We see no rational basis whatever for the distinction made between these two types of people who fall in the same category and with regard to which there was not the slightest difficulty in having a uniform provision of law.
90. The case of Suraj Mall Mohta and Co. v. Visvanatha Sastri, which the Supreme Court was considering, is very similar to the case before us. In that case sub-section (4) of section 5 of the Taxation on Income (Investigation Commission) Act was challenged, and the Supreme Court pointed out that there was nothing uncommon either in properties or in characteristics between persons who were discovered as evaders of income-tax during an investigation conducted under section 5(1 and those who were discovered by the Income-tax Officer to have evaded payment of income-tax. Both these kinds of persons have common properties and common characteristics and therefore require equal treatment, and therefore they held that both section 34 of the Indian Income-tax Act and sub-section (4) of section 5 of the impugned Act dealt with persons who have similar characteristics and similar properties, the common characteristics being that they are persons who have not truly disclosed their income and have evaded payment of taxation on income, and on this ground they held the sub-section (4) of section 5 of the impugned Act to offend against article 14 of the Constitution. The position here is identical. Whether persons who evade tax are discovered by means of a finding given by a Tribunal or they are discovered by any other method, they have common characteristics, and therefore, to use the language of the Supreme Court, they require equal treatment. In this case the treatment is patently unequal. Those whose liability to pay tax discovered by one method can be proceeded against at any time and no limitation would apply in their case, and in the case of others the limitation is laid down in the body of section 34.
91. The Advocate-General finally relied in this connection upon a very recent decision of the Supreme court in Sakhawat Ali v. The State of Orissa, and there the section in the Orissa Municipal Act, by which a person who was employed as a paid legal practitioner on behalf of the Municipality or as legal practitioner against the Municipality was disqualified from standing from standing for election to a seat in the Municipality, was challenged as offending against article 14 of the Constitution. The challenge was repelled by the Supreme Court and what is relied upon is the observations of Mr. Justice Bhagwati at page 1010. The learned Judge says :
'The simple answer to this contention is that legislation enacted for the achievement of a particular object or purpose need not be all embracing. It is for the Legislature to determine what categories it would embrace within the scope of legislation and merely because certain categories which would stand on the same footing as those which are covered by the legislation are left out would not render legislation which has been enacted in any manner discriminatory and violative of the fundamental right guaranteed by article 14 of the Constitution.'
92. Social legislation would be impossible, social reform would be impossible, if the Legislature was to be expected to pass legislation embracing the whole people, and therefore if social reform in enacted by stages that would be permissible under article 14. Mr. Justice Bhagwati himself points out that it you go by stages you must apply the law to a particular category and postpone the application of the law to another category for a future time. If in this case we were satisfied that the Legislature was dealing with one category of tax evaders and will be dealing with another category or other categories in future, them undoubtedly this case would fall within the ratio of the judgment of the Supreme Court on which the Advocate-General has relied. But, as we have pointed out, in this case there are no different categories. The category is one and it is not pointed out, and it cannot be pointed out, that there would be any difficulty in the application of this particular proviso to other tax evaders besides those who have been discovered by the fortuitous circumstance of having the honour of being associated with the particular assessment and the further honour of being mentioned in the judgment of a particular Tribunal. In our opinion, the learned Judge below was right in the view that he took that this proviso offended against article 14 so far as it affects third parties.
93. The result is that the appeal fails and must be dismissed with costs. Costs to be taxed on the basis of a long cause.
94. Appeal dismissed.