T.C. Shrivastava, J.
1. This is a petition under Article 226 of the Constitution filed by the Hukumchand Mills Ltd., Indore against the orders of the assessing authority passed in 1951 assessing the petitioner to Industrial Tax for the years 1940-48 and Excess Profits Duty for the years 1943-46.
2. The undisputed facts in this case are these. In the year 1927 a tax was imposed on the cotton mills at Indore in respect of income, profits and gains earned by them. This was under the Industrial Tax Rules 1927 (hereinafter referred to as 'the original Rules') promulgated by the Holkar Government. Under the Rules as amended from time to time, provisional assessments were first made and the amount of tax used to be realized.
Later, the assessments were finalised by a Board against whose orders a first appeal lay to the Member-in-charge Commerce and Industry and a second appeal lay to the Government. In 1949 the Rules were amended by the Indore Industrial Tax (Amendment) Rules, 1949 (hereinafter referred to as 'the amending Rules') by providing for an assessment by an officer nominated by the Finance Department, a first appeal to an officer nominated by the Minister-in-charge Finance and a second appeal on a point of law to the High Court.
Later, when Madhya Bharat became a Part B State, these taxes were abolished by the Finance Act of 1950 except for assessment, levy and collection of the tax under a liability already incurred but Section 13(1) thereof provided for the completion of the assessment proceedings by the Income-tax Authorities. In spite of this, the Authorities appointed under the 1949 Rules continued the proceedings in Madhya Bharat and completed them in 1951.
Later, an Act was passed in 1954 called the Madhya Bharat Taxes on Income (Validation) Act under which the proceedings taken by these Authorities were validated and pending proceedings were also required to be completed by them. It is admitted by the parties that second appeals against the assessments are pending for decision in this Court.
3. The petitioner contends that the Rules promulgated in 1949 were without legal authority and the appointment of assessing Authorities by the Government as also the assessments made by these authorities are without jurisdiction. Further, after the Finance Act of 1950 they had no power to continue the proceedings as they were replaced by the Income-tax Authorities. According to the petitioner, the validating Act of 1954 does not have the effect of validating the assessment.
The petitioner has also stated that both the Amending Rules and the validating Act are discriminatory and contrary to Article 14 of the Constitution. The Amending Rules are further attacked on the ground that they introduce a procedure which is disadvantageous to the petitioner and cannot have a retrospective effect. Lastly, it is stated that the appointment of officers as Assessing Authorities was in bad faith only to complete assessments hurriedly to appropriate the amounts of excess profits deposited by the petitioner which were otherwise due for refund.
4. We need not refer to the provisions of the Excess Profits Duty Rules of 1944 as the assessments in this respect are not challenged. The subject has been referred to by the petitioner to show that an amount of 8 1/2 lacs was refundable under those Rules. This has been appropriated towards the Industrial Tax of about 9 lacs which was assessed finally in 1951.
5. On behalf of the State Government, it is contended that the amending Rules of 1949 are valid and are not discriminatory. The Rules only lay down a procedure for assessment and replace the defunct Authorities by new ones, who could validly continue and complete the pending assessments. It is denied that the appointments of the assessing officers were actuated by any ulterior motive or that the assessments made by them were in bad faith. It is conceded that after the Finance Act of 1950, the Assessing Authorities could not function but the irregularity was due to a mistake in overlooking the relevant provisions.
At any rate, it is contended that the validating Act of 1954 completely legalises the assessment and it is not now open to the petitioner to challenge it. The learned Government Advocate contends that the Act is not hit by Article 14 and is a valid piece of legislation. He also points out that the procedure laid down by the 1949 Rules is applicable to the petitioner in respect of the years 1940-48 and if the petitioner has any grievances on the merits of the assessment, these can be raised in the appeals filed by him before this Court which are pending for hearing.
6. It will be convenient to state in brief the provisions in the original Rules of 1927 and the amending Rules of 1949. In the original Rules, the Industrial Tax is imposed by Rules 3 to 7 on the cotton mills carrying business in the Holkar State. Under Rule 2, assessing board is constituted consisting of the Accountant General, the Director of Industries and an officer nominated by the Prime Minister. Under Rule 7 the principal officer of every cotton mill is required to submit a return of the income within six months from the date of the closing of the accounts for each year.
Rule 8 provides for summary assessment and payment by the mill concerned within one month of the date of such assessment. It also provides that the assessing officers shall as soon as the provisional assessment is complete, make the final assessment. Rules 9 to 11 lay down the procedure to be observed in making the final assessment and provide for a penalty being imposed in the case of incorrect returns. Rule 12 then provides for an appeal from the order of the assessing officers to the Member-in-charge Commerce and Industries Department, Rule 13 provides a second appeal to the Government.
7. In the amending Rules of 1949, Rule 2 which provided for a board of assessors has been amended giving the power to the Minister-in-charge of the Finance Department to appoint one or more assessing officers. A new Rule 10-A has been inserted clarifying the powers of the assessing officers making final assessment. Under Rule 12, the first appeal against the order of final assessment now lies to an officer appointed by the Minister-in-charge of the Finance Department, Rule 13 has been amended to provide a second appeal on a point of law to the High Court.
8. The first contention which has been raised by Shri Parpia on behalf of the petitioner is that the Rules framed in 1949 are ultra vires and ineffective. The amending Rules of 1949 were published in the notification dated 28th December, 1949 and state that they were made by 'the Government of Madhya Bharat under Rule 17 of the Indore Industrial Tax Rules 1927'. The original Rules of 1927 were framed 'by the Government of His Highness' after approval of the Cabinet as stated in the preamble. It has been conceded by the learned counsel on both sides that these Rules are analogous to Acts made by a Sovereign Legislative Authority. The term 'Rules' is loosely used obviously to mean an Act or a Statute. Rules 17 and 19 of the original Rules are as follows:
'17. The power of making rules on the subject of Industrial Tax is vested in Government. Such power shall, except on the first occasion of exercise thereof, be subject to the condition of previous application.
19. The Member-in-charge Commerce and Industry Department shall have power to make subsidiary rules not inconsistent with the above Rules.'
It is contended by Shri Parpia that the power granted to the Government under Rule 17 is in the nature of the rule making power in modern Acts and therefore any rules framed in exercise of this power must be consistent with the provisions of the original Rules themselves.
We do not agree that this contention is correct. Under Rule 19 the Member-in-charge of Commerce Department has been given power to make subsidiary rules and it has been specifically stated that these Rules shall not be inconsistent with the above rules (i.e., the original Rules). Obviously, it is this provision in Rule 19 which corresponds to the normal rule making power of a subordinate authority. Rule 17 deals with quite a different type of power.
That power is of 'making rules on the subject of Industrial Tax'. The subject of Industrial Tax is certainly much wider than what is contained in the original Rules. Further, in the second sentence there is reference to the 'first occasion of the exercise thereof which clearly refers to the promulgation of the original Rules themselves. Thus it appears that the power which is mentioned in Rule 17 is the general power of framing a law on the subject of Industrial Tax.
Shri Parpia's objection to this interpretation is that it renders the recital in the Act superfluous inasmuch as the Government always had such power of legislating on the subject. We see that this defect exists in the interpretation which we are accepting but the wordings of Rules 17 and 19 when read together make it clear that the subordinate legislative power is the subject-matter of Rule 19 only and Rule 17 has no reference to the power corresponding to the power of making delegated legislation.
These Rules were framed in 1927 in the Holkar State and the same standard of drafting accuracy cannot be expected in them as would be expected in a modern statute. It may be that mention of the power to make rules on the subject of Industrial tax in Rule 17 was unnecessary but the provision may have been inserted by the draftsman ex abundanti cautila to clarify the position as the exercise of legislative powers in those days may have been vague and uncertain.
Any way, we find the wordings in Rule 17 quite clear and capable of only one meaning which is that the Government has been given the power to make any rule on the subject of industrial tax which rules may be in addition to or in modification of the Rules which have been framed in 1927. Accordingly, we hold that the Rules framed in 1949 which amend the original Rules could be framed under this power.
9. The amending Rules of 1949 can be justified as valid under another power. When the United State of Gwalior, Indore and Malwa was formed in 1948, Ordinance No. 1 of 1948 was promulgated which was subsequently replaced by an Act called Regulation of Government Act, Samvat 2005. Ry the Ordinance and the Act, the existing laws in the merged States were continued and power was given to the Government to make regulations for the peace and good Government of all the territories comprised in the Union.
These regulations were to have the force of law until they were replaced by laws made in the normal course. Regulations framed by the Government could repeal or amend any law in force in the State of that time. The amending Rules of 1949 amended the existing law, namely, the original Rules of 1927. This could have been done by the Government under the power of making regulations which was vested in it under the Regulation of Government Act.
It is true that the amending Rules do not purport to have been made under this power. But as long as the amending Rules can be supported, if not under the power purported to be exercised, under any other lawful power existing in the Authority making them, the same can not be held invalid. It has been held in Emperor v. Shriballabh AIR 1925 Nag. 393 that it is permissible to refer to any power on which bye-laws framed under an Act could be justified even though the bye-laws in question purport to have been made under a different power. The following observations in Secretary of State v. Appa Rao, AIR 1924 Mad 92 were relied upon in support of this proposition :
'Before a rule framed by a rule making authority is declared ultra vires, the Court must be satisfied not only that it had no power to act under the power under which it purported to act but also that it had no power at all under any law to so act.'
The principle was stated in the context of rule making power but we see no reason why it cannot be extended to the power to make regulations which was granted to the Government in 1948 under unusual conditions, In our opinion, even though the power to frame regulation has not been referred to in framing the amending Rules of 1949, the validity of the rules can be supported on the basis of that power as it existed in the Government at the relevant time.
10. Accordingly, we hold that the rules of 1949 are valid and have the force of law. They are in the nature of an amending Act modifying the original Rules of 1927.
11. It is next urged by Shri Parpia on behalf of the petitioner that these Rules introduce a procedure which is disadvantageous to the petitioner and cannot apply to the assessment proceedings which were pending when the Rules were framed. According to his contentions, the petitioner had a vested right in having the assessment made by an assessing board constituted under Rule 2 of the original Rules as also the right of first appeal being heard by the Member-in-charge, Commerce Department and the second appeal being heard by the Government.
The corresponding provisions of the amending Rales of 1949 should, according to him, apply only to assessment commenced after the rules came into force. It may be mentioned that after the formation of the United State of Gwalior, Indore and Malwa--and later Madhya Bharat the Authorities mentioned in Rules 2 and 12 of the original Rules ceased to exist. The Accountant General and the Director of Industries referred to in Rule 2 were the officers bearing that designation in the Holkar State. They were replaced by other officers in the new State.
The Prime Minister and the Member-in-charge Commerce and Industries Department also did not exist after the new State came into existence. Accordingly, it was not possible to constitute the assessing board or the first appellate authority in the manner contemplated by Rules 2 and 12. It was therefore necessary for the Government to supply an alternative forum in which the assessment proceedings could be continued and first appeals by the assessees could be heard. Accordingly, the amending Rules provided these authorities. So far as second appeal is concerned, an appeal has been provided to the High Court instead of to the Government.
12. To support his contention that the petitioner had a vested right of appeal, Shri Parpia has relied upon Daji Saheb v. Shankar Rao, (S) AIR 1956 SC 29, wherein it has been held that the defendants in that case had a vested right of appeal to the Supreme Court on the date on the decree and that right could not be affected by a subsequent law unless it was expressly taken away. However, in the same judgment, the following observations occur :
'If the Court to which the appeal lies, is altogether abolished without any forum substituted in its place, for the disposal of pending matters or for the lodgement of appeals, the vested right perishes, no doubt.'
It is clear from these observations that if the forum of appeal is abolished, the vested right also disappears. In the instant case, the first appeal lay to the Member-in charge, Commerce and Industries Department which office ceased to exist after the formation of the United State and therefore the right of appeal, even though it may be considered to be a vested right, ceased to exist.
13. The amending Rules of 1949 on the question of providing the assessing and the appellate Authorities are merely procedural. It is well settled that procedural laws are retrospective. Pending proceedings of assessment in 1949 would, therefore, be governed by the procedure laid down in the amending Rules.
14. It has been contended on behalf of the petitioner that Rule 10-A which was inserted by the amending Rules of 1949, makes a departure in the manner in which the assessment of income has to be made. It is suggested that under the original Rules the report of the auditor was conclusive and there was no power given to the assessing Authority to make the assessment in its best judgment in cases where it did not consider the accounts of the assessees as correct.
We may state that an appeal against the assessment has been filed by the petitioner in this Court and the scope of the power of the assessing Authority is a question of law which will have to be determined in those proceedings. The petitioner will have adequate opportunity of canvassing his contentions on this point and the assessment will be regulated according to the decision which may be taken there.
It is not therefore necessary for us to consider the merits of the contention in these proceedings. Suffice it to observe that the change in the constitution of the assessing and appellate Authorities was rendered necessary on account of the constitutional changes and the petitioner can have no grievance that the Authorities which were substituted by the amending Rules had no power to continue the assessment, in his case.
15. In the year 1950, the Finance Act of 1950 was passed repealing all the laws relating to income tax in Part B States except for the purpose of levy, assessment and collection. The first proviso to Section 13 of that Act further provided that any reference to an officer or authority in the repealed law shall be construed as a reference to the corresponding officer or authority under the Income-tax Act.
The effect of this provision in Section 13 of that Act was that although the proceedings for assessment of Income-tax etc., for the years prior to 1950 were governed by the relevant law in the Part B States, yet, the proceedings for assessment were to be completed by the corresponding authorities under the Indian Income-tax Act. The Industrial Tax Rules of 1927 undisputedly form a law relating to Income-tax.
The provisions of Section 13 of the Finance Act of 1950 apply to them and the assessments could not therefore be continued by the authorities which were functioning under the amending Rules of 1949. This work should have been undertaken by the corresponding Income-tax Authorities and it was illegal for the State Authorities to continue it. The assessments made in 1951 by the State Authorities were therefore contrary to the provisions of Section 13 of the Finance Act of 1950 and were illegal.
16. It was to validate the illegal orders passed by the State Authorities that the Madhya Bharat Taxes on Income (Validation) Act, 1954 was passed. This Act provided in Section 3 that proceedings taken by any officer or authority purporting to Act under the relevant Madhya Bharat law in connection with the assessment of any tax under such law shall be valid and shall not be called in question on the ground only that such proceedings were not taken by the Authority referred to in the proviso to Section 13 of the Finance Act of 1950.
Section 4 of that Act provided for completion of the pending proceedings by the State Authorities. In short, the effect of these two validating sections was that the State Authorities were given the power to assess the tax which power was taken away under Section 13 of the Finance Act of 1950. It is contended on behalf of the State Government that the validation Act of 1954 cures any defects or illegality arising out of the assessment having been made by the State Authorities.
17. On behalf of the petitioner, it is contended that the validation does not extend to the acts of the authorities specified in the amending Rules of 1949 as the only Madhya Bharat law referred to in me definition or 'Relevant Madhya Bharat Law' in Section 2 of the Validity Act is the 'Indore Industrial Tax Rules, 1927.' According to Shri Parpia, as the amending Rules of 1949 have not been mentioned in the list of the laws covered by the expression 'relevant Madhya Bharat Law', nothing in Sections 3 and 4 of the validating Act would apply to the amending Rules.
18. We have already stated that the amending Rules of 1949 are in the nature of an amending Act by which the text of the original Act has been modified. In such a case the modifications made by the amending Act become a part and parcel of the original Act and any reference to the original Act subsequent to the date of the amendment would automatically be a reference to the Act as amended. In Shamrao v. District Magistrate, Thana, AIR 1952 SC 324, the question for consideration was whether a detention order, which was valid till the expiry of the Preventive Detention Act, was automatically extended by the extension of the life of that Act by an amending Act. It was observed:
'The rule is that when a subsequent Act amends an earlier one in such a way as to incorporate itself, or a part of itself, into the earlier, then the earlier Act must thereafter be read and construed (except where that would lead to a repugnancy, inconsistency or absurdity) as if the altered words had been written into the earlier Act with pen and ink and the old words scored out so that thereafter there is no need to refer to the amending Act at all.'
In this connection we may also refer to Section 6-A of the General Clauses Act, 1897 which is as follows:
'Where any Central Act or Regulation made after the commencement of this Act repeals any enactment by which the text of any Central Act or Regulation was amended by the express omission, insertion or substitution of any matter then, unless a different intention appears, the repeal shall not effect the continuance of any such amendment made by the enactment so repealed and in operation at the time of such repeal.'
It is clear from this provision that textual amendments become a part of the amended Act and even the repeal of the amended Act does not affect the textual amendments which are so incorporated in the principal Act. Though this section did not apply to Indore State in 1949, amendments made in the text of original Act would stand on the same footing. That being the position, a reference to the original Act would include a reference to all such subsequent amendments made therein and thus a reference to the Indore Industrial Tax Rules 1927 in the validating Act of 1954 would include a reference to the amending Rules of 1949. The validating Act would therefore extend to validate any action taken under the Amending Rules also.
19. The power to pass a validating Act to legalize executive action wag not seriously challenged in arguments. Such a power is implicit in the power to make laws on any item in the legislative lists. The observations of Gwyer C.J. in United Provinces v. Mt. Atiqa Begum, AIR 1941 F.C. 16 (at p. 26) in this connection are as follows :
'It is true that 'validation of executive order' or any entry even remotely analogous to it is not to be found in any of the three Lists; but I am clear that legislation for that purpose must necessarily be regarded as subsidiary or ancillary to the power of legislating on the particular subjects in respect of which the executive orders may have been issued.'
In the context of validating orders of assessments and acts connected with taxation laws, validating Acts are all the more necessary. In Werrin v. The Commonwealth, 59 CLR 1950, the following observations occur:
'The prompt collection of revenue is of the utmost public importance both for the performance of the functions of Government and the meeting of the public liabilities. It would upset public finance unless some safeguards were provided against mistakes in assessment or the illegal exaction and collection of taxes..... It might be necessary as inthe present case, where apparently large sums of moneys were involved, to safeguard revenue that had been paid and collected and protect it in the manner prescribed by Section 12-A and of that the Parliament alone can judge.'
It is thus amply clear that the Legislature had power to validate the assessments made in Madhya Bharat by wrong assessing Authorities and the validating Act of 1954 cannot be challenged on the ground that no such power existed.
20. We now pass on to the contention raised on behalf of the petitioner that the validating Act of 1954 is contrary to the provisions of Article 14 of the Constitution and is therefore void. It is argued that while the Finance Act of 1950 placed all the assessees in all Part B States in one class and provided that their assessments would be made by the Income-tax Authorities, the validating Act has placed the Madhya Bharat assessees in a separate class without any adequate reason. This amounts to discrimination inasmuch as the assessees are as Shri Parpia puts it, thus deprived of the benefit of the seasoned experience of the Income-tax Authorities and have to be satisfied with the assessments made by officers nominated by the Madhya Bharat Government.
21. The scope and the implications of Article 14 of the Constitution have been considered in a series of cases by the Supreme Court. The leading case on the point is Budhan Choudhry v. State of Bihar, AIR 1955 S. C. 191, in which the law has been thus laid down :
'It is now well established that while Article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (ii) that that differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases, namely, geographical or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. It is also well established by the decisions of this Court that Article 14 condemns discrimination not only by a substantive law but also by a law of procedure.'
The question was considered recently in Ramkrishna Dalmia v. S. R. Tendolkar, AIR 1958 S.C. 538 in which after quoting the above observations in Budhan Choudhary's case, (S) AIR 1955 SC 191 their Lordships proceeded to lay down the principles which have to be borne in mind by the court when it is called upon to adjudge the constitutionality of any particular law attached as discriminatory and violative of the equal protection of the laws. These principles are:
(a) that a law may be constitutional eventhough it relates to a single individual if, on accountof some special circumstances or reasons applicableto him and not applicable to others, that singleindividual may be treated as a class by himself:
(b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles;
(c) that it must be presumed that the Legislature understands and correctly appreciates the need of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds;
(d) that the Legislature is free to recognize degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest;
(e) that in order to sustain the presumption of constitutionality the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation; and
(f) that while good faith and knowledge of the existing conditions on the part of a Legislature are to be presumed, if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the court on which the classification may reasonably be regarded as based the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile or discriminating legislation.'
The principles are thus fairly clear but the real difficulty arises in applying them to the facts of a particular case. The question, whether the classification made is reasonable and the differentia on the basis of which the particular classification has been made has a reasonable relation to the classification, is not always easy to answer.
22. In considering whether the classification made by a statute is reasonable for achieving its object, it is necessary to look into the circumstances which existed at the time when that statute was passed. It is incorrect to say that for appreciating the reasonableness of the classification in the validating Act of 1954, the conditions prevailing in 1950, when the Finance Act was passed, should be considered. The circumstances which are material are those which prevailed in 1954. This is clear from Principle (e) laid down in Ramkrishna Dalmia's case, AIR 1958 SC 538, quoted above, which expressly refers to 'the state of facts existing at the time of legislation'. We have therefore to see with reference to the relevant conditions prevailing in 1954, whether the classification made by the validating Act can be justified.
23. The reason for enacting the validating Act as given in the statement of objects and reasons annexed to the Bill is that the Madhya Bharat Government had overlooked the provisions in Section 13 of the Finance Act, 1950 and had continued to recover the arrears with the aid of their own officers. Thus the facts existing in 1954 were that assessments had been completed in most cases and first appeals from those assessments in many cases had been decided: Nay, even the collection of taxes had been made.
The assessments made by the Madhya Bharat Authorities were illegal and the consequences following from the illegality were that the assessments were liable to be set aside and the amounts collected had to be refunded. It would be necessary for the Income-tax Authorities to do the whole work over again and this would mean unnecessary heavy costs to several assessees and would delay the collection of revenue. The Legislature had to choose between the two courses and it selected the less harmful course of validating the assessments by wrong Authorities.
Under these circumstances, the Madhya Bharat assessees, whose cases had been decided, formed a class by themselves. Their classification cannot be challenged as discriminatory. The assessees in other States were not placed in the same situation as the Madhya Bharat assessees who would be put to considerable inconvenience and costs if their cases had to be reheard. In our opinion, therefore, the classification is reasonable and is not hit by Article 14 of the Constitution.
24. We may state here that pending proceedings at the time when a legislation introducing a new procedure is enacted, form a class by themselves and can be specially provided for. It is not discriminatory to allow them to be completed by the earlier procedure and by the earlier authorities. The question was considered in Shiv Bahadur Singh v. State of Vindhya Pradesh, AIR 1953 SC 394 when the Criminal Procedure Code was extended to Vindhya Pradesh.
In Section 4 of the Part C States Laws Act, it was, however, provided that the repeal of the old would not affect any pending proceedings. It was, therefore held that the trial commenced before the extending Act could be continued and completed by the old procedure. The saving clause was in that case objected to as discriminatory. Repelling the contention, their Lordships observed:
'But there is no reason why pending proceedings cannot be treated by the Legislature as a class by themselves having regard to the exigencies of the situation which such pendency itself calls for. There can arise no question as to such a saving provision infringing Article 14 so long as no scope is left for any further discrimination inter se as between persons affected by such pending matters.'
Similar view has been taken in another case, Ramjilal v. Income-tax Officer, Mohindergarh, AIR 1951 SC 97, in the context of proceedings for assessment of Income-tax. It has been laid down in that case that the provision that the proceedings should be concluded according to the law applicable at the time when the rights or liabilities accrued and the proceedings commenced, is a reasonable law founded upon a reasonable classification of the assessee to which no exception can be taken under the equal protection clause.
It is clear from this decision that there is no discrimination in leaving the old assessees to be dealt with under the old law. Thus in 1950, Parliament could have provided for them as a separate class and could have continued their assessments to be completed by the Madhya Bharat authorities. There is no reason why the same thing could not be done in 1954 when additional reasons for such a classification had come into existence.
25. The fact that classification of pending proceedings as a class is permissible, cannot in our opinion, be justified except on the ground that progress which has been made in those cases should not be undone and the continuation is necessary to save the parties from inconvenience, trouble and costs which will necessarily arise on account of new proceedings. Precisely, the same considerations arose in 1954 when the proceedings for assessment in Madhya Bharat had been completed by wrong authorities. Such considerations in matters of taxes become all the more weighty as the delay in the realization of public revenue would upset public finance. (See the extract from Werrin's case (Supra)).
26. On behalf of the petitioner, reference was made to the decisions of the Supreme Court in which the validity of Section 5 of the Taxation of Income (Investigation Commission) Act was considered. (Shree Meenakshee Mills Ltd. v. Visvanatha Sastri, (S) AIR 1955 SC 13 and Suraj Mall Mohta and Co. v. Visvanatha Sastri, AIR 1954 SC 545). In those cases, the provisions in Section 5(4) were considered to be discriminatory and thus invalid.
The ground on which these decisions proceeded was that all evaders of income-tax could be dealt with under Section 34 of the Indian Income-tax Act but only some of them were picked up to be dealt with by the Investigation Commission by a procedure which was drastic and prejudicial to those assessees. There were two provisions of law in existence which equally applied to the evaders and some of them were deprived of the normal procedure without any reason. In a later case Muthiah v. Commr. of Income-tax Madras, (S) AIR 1956 SC 269 it was held that there was no objection to the classification of the substantial evaders as a class to be dealt with by special procedure as is clear from the following observations:
'This affidavit furnished the background and the surrounding circumstances obtaining at the time when Act XXX of 1947 was enacted and if this background is taken into account it would be obvious that the substantial evaders of payment of income-tax whose cases were referred by the Central Government to the Commission formed a class by themselves and there was a rational basis of classification in the enactment of Section 5(i) of the Act.'
The conditions prevailing in the year 1947 when the Act was passed, were taken into consideration in determining whether the classification could be justified. The classification was held to be reasonable but the validity of Section 5(i) was not upheld as there were overlapping provisions in Section 34 of the Income-tax Act under which also the evaders could be dealt with.
Actually, in Thangal Kunju Musaliar v. Venkatachalam Potti, (S) AIR 1956 SC 246, the classification was upheld in the context of Travancore Taxation on Income (Investigation Commission) Act, as the provision did not overlap with the Income-tax Act. There the reference of cases of evaders to the Commission was held valid. These decisions do not help the petitioner as the Madhya Bharat assessees were not governed by two provisions which were equally applicable to them. Their cases were governed by the provisions in the Finance Act of 1950 only but by mistake they had been dealt under the Madhya Bharat Law and it was this illegality which had to be cured in 1954.
27. Sri Parpia has referred to Ameerunnissa Begum v. Mahboob Begum, AIR 1953 SC 91 and Ram Prasad Narayan Sahi v. State of Bihar, AIR 1953 SC 215. In the first case, the law providing specially in the matter of a succession dispute between private parties was held to be invalid as the parties in that case were chosen for discriminatory treatment when other persons similarly situated were left to be governed by personal law. The reason given for the enactment that it was necessary to end a prolonged litigation, was considered inadequate to deny them the benefit of decision 'by normal court and it was held that this could not form a reasonable differentia.
In the second case, the legislation declaring certain leases by Court of Wards as invalid was declared void under Article 14 as in the first place other leases were not similarly dealt with and the reason that the leases were made on account of the carelessness of the Court of Wards was considered inadequate to support the classification. A further circumstance which was noticed was that there were other lessees similarly placed whose leases were not touched. The decisions in these two cases do not advance the case of the petitioner. There is no question of any assessees similarly placed being left out. All the assessees in Madhya Bharat are governed by the validating Act.
27a. The fact that the number of assessees in Madhya Bharat at that time was only six does not make any difference. The Industrial tax was against cotton mills in Indore only. There were only six such mills and naturally therefore they constituted the whole class of assessees to be dealt with in 1954. We have referred to the principles noted in Ramakrishna Dalmia's case, AIR 1958 SC 538 (supra). Principle (a) lays down that even a single individual may be treated as a class by himself.
28. There is a presumption in favour of the constitutionality of the law and a presumption that the legislature understands the needs of its. own people. The legislature is free to recognize degrees of harm and may confine its restrictions where the need is deemed to be clearest. See Dalmia's Case, AIR 1958 SC 538 (Supra). The need in the case of Madhya Bharat was clear and it is not shown that in any other State similar situation arose which the Legislature dealt with differently. We have to assume every state of facts which can be conceived as existing at the time of legislation.
We find that the situation which existed in 1954 justified the classification of Madhya Bharat assessees in one class. The fact that their cases had been completed by Madhya Bharat Authorities and the consideration that re-assessment by Income-tax Authorities would cause costs and inconvenience to assessees and delay realization of public revenue, was a reasonable differentia. Accordingly, we hold that the validating Act cannot be declared unconstitutional on the ground that it offends Article 14 of the Constitution.
29. The learned counsel for the petitioner did not challenge the amending Rules of 1949 as discriminatory in any sense.
30. The last contention raised on behalf of the petitioner is that the proceedings for assessment were continued by the State Government mala fide with the intention of grabbing the large sums which were in deposit with them and which would otherwise be required to be refunded. It is alleged that continuation of assessment by the Madhya Bharat authorities was not due to overlooking the provisions of the Finance Act but was deliberate; that the appointment of officers as assessing authorities were made for short periods with the deliberate intention of removing them if they did not act according to the wishes of the Government and the assessments were concluded by these officers with undue haste.
On behalf of the State Government, an affidavit has been filed stating that the State Government was not actuated by mala fides in continuing the proceedings or in appointing officers for short terms. So far as the allegation regarding the continuance of proceedings is concerned, there is nothing to show that this was not due to overlooking the provisions of the Finance Act. The appropriation of the deposit towards tax which has been assessed follows in the normal course of recovery of the taxes found due.
The appointment of officers cannot be said to have been made with the motive alleged by the petitioner and the explanation of the State Government that their appointments were made for short terms in the routine course appears correct. One should be slow to attribute mala fides to acts by Government or public authorities unless there is material clearly pointing to that conclusion. We are not satisfied in the instant case that the Government acted in bad faith in continuing the assessment by Madhya Bharat Authorities.
31. It is significant to observe that the petitioner had not raised any objections to the assessments being made by the authorities concerned. Not only that, he filed a first appeal against the order of assessment and have later filed a second appeal in the High Court. It is for the first time in this writ petition that he has mentioned about the mala fides of the Government in making the appointment.
If it were true that the appointments were made with an ulterior motive or that the Madhya Bharat assessing Authorities were continuing the assessments with the knowledge that they had no such power deliberately to harm the petitioner, he should have approached the High Court much earlier for a writ under Article 226. The assessments were completed in 1951, a year or more after the Constitution and the remedy of obtaining a writ had become available to the petitioner.
The fact that he did not then take any action to approach the High Court shows that he had no apprehension that the assessment proceedings were being continued by the Government with the motive which he now alleges. As regards the merits of the assessment which according to the petitioner had been concluded in haste and which is deliberately harsh and excessive, the petitioner has his remedy in the second appeal which is already pending.
32. The petitioner waited till the assessments by original Authorities were decided, obviously, to see whether their decision would be in his favour. He has come up under Article 226 only after he found the result not to his satisfaction. There is no reason to explain the delay. The remedy under Article 226 is extraordinary and the relief is discretionary. We would not be inclined to give any relief in this case to the petitioner on account of the unexplained delay in his coming to this Court.
33. In the light of the above discussion, the petition fails and is hereby dismissed with costs. Hearing fee shall be Rs. 250/- only.
V.R. Nevaskar, J.
34. I agree.