R.N. Misra, J.
1. This application under Article 226 of the Constitution challenges the vires of the provisions of the Taxation Laws (Amendment) Act, 45 of 1972, by which with effect from November 15, 1972, a new Chapter being XX-A was added to the Income-tax Act of 1961 (hereinafter referred to as the 'Act') providing for acquisition of immovable properties in certain cases of transfer to counteract evasion of tax.
2. Petitioner purchased the land covered by plot numbers 1515/A/1 and 1515/A/2 in holding No. 6 including a pucca building standing thereon for a consideration of Rs. 55,000 under a registered sale deed dated 30th of January, 1973, from opposite party No. 6, the owner of the property. The Inspecting Assistant Commissioner of Income-tax, Acquisition Range, Bhubaneswar (opposite party No. 4) being the competent authority as provided under Section 269A(b) of the Act issued a notice to the petitioner under Section 269D(1) on April 21, 1973, for acquisition of the said property. At that stage the petitioner made this application to this court challenging the vires of the new Chapter on the following grounds :
(i) The provisions of Chapter XX-A offend Article 19(1)(f) of the Constitution as they interfere with the fundamental right of citizens to acquire, hold and dispose of property ;
(ii) The right to acquire, hold and dispose of property would carry with it the right of fixing consideration and to bargain for the highest consideration in respect of one's property. That right cannot be abridged by a provision as contained in the impugned Chapter;
(iii) The acquisition proceeding taken under Section 269D of the Act is not in the interest of general public or for the protection of the interest of any Scheduled Tribe and, therefore, is not within the purview of the reasonable restriction contemplated under Sub-article (5) of Article 19 ;
(iv) The provisions of Chapter XX-A confer unrestricted, unguided uncanalised power on the authorities to acquire properties of a citizen. They are, therefore, hit by Article 14 of the Constitution ;
(v) The initiation of the proceeding for acquisition is not for any public purpose. The Land Acquisition Act is a special Act and an existing statute made for the said purpose. There having already been provision for checking evasion of tax by imposition of penalty in the event of evasion and there being already a pre-existing statute for acquisition of property for public purpose, making of special provision in the new Chapter for penalising tax evaders by the process of acquisition of property is illegal ; (vi) Entry 82 of List I of the Seventh Schedule of the Constitution authorises Parliament to make law for taxation on income other than agriculture. Parliament has, therefore, no authority to legislate for acquisition of property under this entry ;
(vii) Chapter XX-A of the Act incorporates essentially a taxing provision and is not a law for compulsory acquisition of property. A legislative power of taxation cannot be used either primarily or even incidentally for the acquisition of property. Law for such acquisition would not be a law for the purpose of imposing or levying any tax or penalty within the meaning of Article 31(5)(b)(i) of the Constitution nor for the purpose of 'giving effect to the policy of the State towards securing the principles specified in clause (b) or clause (c) of Article 39' within the ambit of Article 31C of the Constitution. Therefore, the restriction is unreasonable.
3. In the counter-affidavit filed on behalf of the opposite parties 1 to 5, the historical background of the statute has been provided and it is claimed that Parliament has legislative competence to enact the provisions of the new chapter and the claim of the petitioner that the provisions are ultra vires is disputed.
4.The Direct Taxes Enquiry Committee under the Chairmanship of Mr. Justice Wanchoo submitted an interim report in December, 1970, suggesting ways and means to deal with black money and tax evasion. With a view to giving effect to some of the recommendations of the Committee and to meet the appalling challenge of evasion of tax, Parliament brought in the Taxation Laws (Amendment) Act, 45 of 1972. The objects of this legislation were claimed to be :
(i) To counter evasion of tax through understatement of the value of the immovable property in sale deeds and also to check the circulation of black money by empowering the Central Government to acquire immovable properties including agricultural land at prices which correspond to those recorded in the deeds of conveyance ;
(ii) To curb the practice said to be widespread of benami holding of property for the purpose of tax evasion by debarring the real owner from enforcing his claim on such property in a court of law unless he has declared the income from the property or the property itself for the purposes of income-tax and wealth-tax, or has given notice of his claim to the property to the income-tax authorities; and
(iii) To improve the existing arrangements for valuation for purposes of income-tax, wealth-tax and gift-tax laws, of buildings, lands and other assets by augmenting the existing set up of official machinery and enhancing its powers on one hand and by bringing about better discipline over non-official valuers on the other.
5. Sections 269A to 269S have been provided with a view to achieving the first object while Section 281A is intended to serve the second problem. The remaining provisions of the Amending Act were intended to deal with the third objective.
6. Though in the writ application several contentions had been raised, at the time of its hearing Mr. Mohanty for the petitioner mainly pressed the contentions in relation to (1) the impugned provisions being hit by Article 19(1)(f) of the Constitution ; (2) the statute being beyond legislative competence in view of entry 82 of List I of the Seventh Schedule of the Constitution ; and (3) the amending provisions being not within the purview of Article 31(5)(b)(i), the statute would be affected being contrary to Article 31(2) of the Constitution, These contentions of Mr. Mohanty may now be dealt with. Contentions Nos. 1 & 3 :
7. It is convenient to deal with the first and last contentions together. Article 19(1)(f) of the Constitution provides that all citizens shall have the right to acquire, hold and dispose of property. Sub-article (5) provides :
'Nothing in Sub-clauses (d), (e) and (f) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, reasonable restrictions on the exercise of any of the rights conferred by the said sub-clauses either in the interests of the general public or for the protection of the interests of any Scheduled Tribe.'
8. Sub-articles (2) and (5) of Article 31 which have relevance in this connection may now be extracted :
'(2) No property shall be compulsorily acquired or requisitioned save for a public purpose and save by authority of a law which provides for acquisition or requisitioning of the property for an amount which may be fixed by such law or which may be determined in accordance with such principles and given in such manner as may be specified in such law ; and no such law shall be called in question in any court on the ground that the amount so fixed or determined is not adequate or that the whole or any part of such amount is to be given otherwise than in cash:
(5) Nothing in clause (2) shall affect--...
(b) the provisions of any law which the State may hereafter make-
(i) for the purpose of imposing or levying any tax or penalty, or......'
9. While the right to property has been protected by Articles 19(1)(f) and 31, reasonable restrictions over the said right in the interests of the general public have been built into the right from the commencement of the Constitution. Property rights of the individual citizen have to be balanced by the interests of the society embodied in the Directive Principles of State Policy contained and enumerated in Part IV of the Constitution. Since Article 37 holds out a mandate to the State to apply the Directive Principles of State Policy into the process of legislation, a law enacted to implement one or more of the directive principles so enumerated cannot be considered as introducing an unreasonable restriction. A harmonious construction of the two articles has to be adopted to give effect to the constitutional provisions. Legislation giving effect to a directive principle has got to be regarded as a reasonable restriction on the corresponding fundamental right, otherwise the provisions in Part III and Part IV cannot co-exist.
10. In the case of Kesavananda Bharati v. State of Kerala : AIR1973SC1461 Ray J. (as the learned Chief Justice then was) observed :
' ... Every citizen asserts enjoyment of fundamental rights under the Constitution. It becomes the corresponding duty of every citizen to give effect to fundamental rights of all citizens, dignity of all citizens, by allowing the State to achieve the Directive Principles. The duty of the State is not limited to the protection of individual interest but extends to acts for the achievement of the general welfare in all cases where it can safely act ...... Popular sovereignty means that the interest which prevails must be the interest of the mass of men. If rights are built upon property those who have no property will have no rights. That is why the State has to balance interest of the individual with the interest 6f the society ...... '
11. Sub-article (5) of Article 19 authorises reasonable restrictions on the exercise of the right to acquire, hold and dispose of property in the interests of the general public. As already indicated, the menace of black money and evasion of tax which had been ruining the economy of the country had to be tackled and it is for the said purpose that the provision of Chapter XX-A of the Act was incorporated by amendment. It is difficult to accept Mr. Mohanty's contention that Chapter XX-A does not introduce a scheme which is in the interest of the general public. We are, therefore, of the view that the amending provision is covered by Sub-article (5) of Article 19.
12. Again, Article 31C inserted by the 25th amendment of the Constitution is a pertinent provision which must be taken note of at this stage. It provides:
'Notwithstanding anything contained in Article 13, no law giving effect to the policy of the State towards securing the principles specified in clause (b) or clause (c) of Article 39 shall be deemed to be void on the ground that it is inconsistent with, or takes away or abridges any of the rights conferred by Article 14, Article 19 or Article 31 ; and no law containing a declaration that it is for giving effect to such policy shall be called in question in any court on the ground that it does not give effect to such policy.
Provided ...... '
13. The named clauses of Article 39 are as follows :
' 39. The State shall, in particular, direct its policy towards securing--...
(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good ;
(c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment ... '
14. Can it be said that the legislation introducing Chapter XX-A of the Act is in furtherance of these principles Undoubtedly, land is a scarce goods and is an important factor in the process of production. There can be little doubt that it is a material resource of the community. It does not require much of argument to appreciate the position that the mischief which the Amending Act of 1972, seeks to hit and eradicate is concentration of land in the hands of a few. Parliament realised that ownership of lands was being concentrated in the hands of a few and while on the one hand there was avoidance of tax and other public dues, on the other by the surreptitious process acquisition of lands resulting in concentration of the economic power in the hands of few citizens was going on. One of the principal objectives of the impugned law is to check that evil. The impugned provisions, therefore, squarely come within the ambit of Article 31C of the Constitution and even if we accept the petitioner's contention that the right to acquire, hold and dispose of property conferred under clause (f) of Sub-article (1) of Article 19 is affected, he is not entitled to raise any challenge. These two contentions of Mr. Mohanty must, therefore, fail. Contention No. 2:
15. We shall now deal with the residuary contention of the petitioner. Entry 82 of List I of the Seventh Schedule of the Constitution authorises legislation relating to taxes on income other than agricultural income. Mr. Mohanty's contention is that it is under this entry that the impugned provisions have been enacted, the true purpose of Chapter XX-A of the Act is beyond the purview of the entry and, therefore, Parliament had no legislative competence to enact the Amending Act of 1972. Legislative power has been distributed between the Union and the States and some heads of legislation had been kept in the concurrent list under Schedule VII. The ambit of each entry is of the widest amplitude and law is settled beyond doubt that if by the pith and substance test the legislative entry supports legislation, a statute is not open to attack on the ground of want of competence. Undoubtedly, the Income-tax Act is a legislation in exercise of legislative powers under entry 82. So is the provision now impugned before us. The impugned Chapter makes provision for imposition of penalty and for checking evasion of tax, because such a position is concomitant to the power to raise taxes. Such supplementary provisions are necessary for administering the statute effectively and for meeting the purpose for which the law is made. The scheme under the impugned provision for compulsory buying of the property at the stated consideration together with fifteen per cent. thereof in the event of a clandestine deal to evade tax is not foreign to the law of income-tax. Parliament was initially satisfied with levy of penalty. By experience it appeared that that was not sufficient to meet the growing evil. The background of the legislation clearly indicates that as evasion of tax and black money became a growing menace, a high-power commission had to be appointed and, after probing into the matter, some of its recommendations were laid before Parliament and emerged in the shape of the amending Act of 1972. The amending Act in these circumstances cannot be held to be beyond the range of legislative competence. The second contention of Mr. Mohanty must, therefore, be repelled.
16. We find support for the view we have taken from a decision of the Delhi High Court in the case of Mahavir Metal Works P. Ltd. v. Union of India : 95ITR197(Delhi) where a challenge on the basis of the present contentions and some others was rejected.
17. The factual aspects of the dispute need not be examined by us because the petitioner is free to appear before the competent authority and satisfy him that it is not a fit case where a proceeding under Section 269D of the Act need be initiated. An examination of that aspect of the claim of the petitioner by us is premature. We, therefore, do not go into that question.
18. The writ application fails and is accordingly dismissed. We make no order as to costs.
19. I agree.