1. The constitutionality of Sub-sections (7A) and (7B) of Section 5, Income-tax Act, has been challenged in. the present petition on the ground that they contravene the equal protection of the law clause in Article 14 of the Constitution. The former section was inserted by Section 3, Income-tax (Amendment) Act, 1940 (Act 40 of 1940) and the latter by Section 4, Income-tax (Amendment) Act, 1953 (Act 28 of 1953) which came into force retrospectively as from 1-4-1952. When quoted these Sub-sections are as under--
'(7A) The Commissioner of Income-tax may transfer any case from one income-tax Officer subordinate to him to another, and the Central Board of revenue may transfer any case from any 'one Income-tax Officer to another, such transfer may be made at any stage of the proceedings, and shall not render necessary the reissue of any notice already issued by the Income-tax Officer from whom the case is transferred.
(7B) The Director of Inspection, the Commissioner or the Inspecting Assistant Commissioner, as the case may be, may issue such instructions as he thinks fit for the guidance of any Income-tax Officer subordinate to him in the matter of any assessment, and for the purposes of making any inquiry under this Act (which he is hereby empowered to do), the Director of Inspection, the Commissioner and the Inspecting Assistant Com-missioner shall have all the powers that an Income-tax Officer has under this Act in relation to the making of inquiries'.
2. The petitioners carry on business at Hoshiarpur. A general notice under Section 22 (1), Income-tax Act, was first issued by the Income-tax Officer, Hoshiaipur, and then another under Section 22(2), Income-tax Act, was issued calling upon the petitioners to file a return of their income for the assessment year 1950-51 and it is submitted by the Commissioner that the petitioner did not file any return upto December 1954. The assessees have submitted that they have paid all their demands up to the assessment year 1949-50,
3. By a notification dated 27-7-1953, the Commissioner of Income-tax, Punjab, created a special circle with headquarters at Ambala with effect from 27-8-53 and the I.-T. Officer appointed to this circle was under the notification to perform all the functions of the Income tax Officer in respect of cases allotted to him from time to time under Section 5(7A), Income-tax Act. A Special Officer was appointed at Ambala on 10-10-1953. It is wrongly given as 1954 in the affidavit.
By a notification dated 20-10-1953 (annexure 'B') six cases including the case of the petitioners were transferred under Section 5(7A), Income-tax Act, to the Income-tax Officer, Special Circle, Ambala, and it was directed that he shall exercise the powers of an Income-tax Officer in regard to these persons with effect from 22-10-1953. On 1-12-1853 (annexure 'C'). the Income-tax Officer, Special Circle, Ambala, issued a notice to the petitioners informing them that the Jurisdiction in regard to their assesment had been transferred to him from the Income-tax Officer, Jullundur, and their case would be dealt with by him.
4. It appears that the petitioners' assessments in regard to assessment years 1944-45 to 1950-51 have been reopened under Section 34, Income-tax Act. Objection has now been taken that by the transfer of their assessment cases from the Income-tax Officer, Jullundur, to the Income-tax Officer, Special Circle, Ambala, the petitioners are subjected to a discriminatory treatment which is contrary to the fundamental right given in Art 14 of the Constitution of India.
5. It was admitted before us that the department offered to order the Income-tax Officer, Special Circle, Ambala, to take the assessment proceedings against the petitioners at Hoshiarpur instead of at Ambala but the assessees did not take advantage of this offer and preferred to have the proceedings at Ambala and therefore really there should be no objection on the ground of the place of assessment although the petitioners' counsel did make this a ground of grievance basing It on Section 64(1), Income-tax Act, by which assessment is to be made at the place of business of the asses-see and by the Income-tax Officer of that area.
6. Under Section 34, Income-tax Act if an Income-tax Officer has reason to believe that the Income, profits or gains chargeable to income-tax of any person have escaped assessment or have been assessed at too low a rate, he can issue a notice to such person within the time specified in the Act and may proceed to assess or reassess such profits income or gains. The ordinary place of assessment of income-tax and the officer to take assessment proceedings are mentioned in Section 64, Sub-section (1) of which provides--
'64(1) Where an assessee carries on a business, profession or vocation at any place, he shall be assessed by the Income-tax Officer of the area in which that place is situate or, where the business profession or vocation is carried on in more places than one, by the Income-tax Officer of the area in which the principal place of his business, profession or vocation is situate'.
7. In 'Dayaldas Khushi Ram v. Commissioner of Income-tax, Central', 1940 Bom 234 (AIR V27) (A), it was held that this section was intended to ensure that an assessee should be assessed locally and the area to which an Income-tax Officer is appointed must as far as the exigencies of tax collectiofi allow bear some reasonable relation to the place where the assessee carries on business or resides (per Beamount C. J. p. 237 and Kania J. p. 238.) It was also held that the right to transfer cases or classes of cases under Section 5(2), Income-tax Act, applied to pending assessments & did not apply to a case in which an assessment had been completed (Per Beaumont C. J. pp. 237-238).
To get over the effect of this judgment Sub-section (5) was added to Section 64, Income-tax Act by Section 6 of the Income-tax Law (Amendment) Act, 1940 (Act 12 of 1940). It enumerates the cases to which the ordinary rules regarding place of assessment laid down in Sub-sections (1) and (2) -- viz., assessment by Income-tax Officers of the area in which the assessee carries on business or resides -- do not apply: see 'Commissioner of Income-tax v. Govind-ram Seksaria', 1955 Bom 387 ( (S) AIR V42) (B); 'Sarup Chand Hukam Chand a firm v. Commissioner of Income-tax', 1949 Bom 178 (180-181) (AIR V36) (C), see also 'Dayaldas Kashiram v. Commissioner of Income-tax, (Central) Bombay, 1943 Bom 110 (AIR V30) (D) and 'Govindram Seksaria v. Commissioner of Income-tax (Central), Bombay', 1943 Bom 122 (123) (AIR V30) (E).
8. The object of the addition of Sub-section (7A) to Section 5 was to give power to the Income-tax Commissioner and the Central Board of Revenue to transfer any case from one Income-tax Officer to another at any stage & it also automatically kept alive all notices issued by the previous Income-tax Officers in relation to proceedings before the new Income-tax Officer: see 'Gayaram Gabbulal v. Commissioner of Income-tax, U. P.', 1952 All 325 (AIR V39) (P) and 'Kamakshya Naraln Bingh v. Commissioner of Income-tax B and O.', 1949 Pat 83 (AIR V36) (G).
As a matter of fact even before the introduction of this subjection in 1940 on a case being transferred, re-issue of notice Under Section 22(2) of the Act was held unnecessary. See 1949 Bom 178 (AIR V36) (C). Otherwise there would be unavoidable delay and assessments under Section 34 of the Act have to be completed within a particular time. It has now been held that there is no bar to the transfer of a case even after the first Income-tax Officer has made an assessment: see 'M. K. Ispahani Ltd. v. Commissioner of Excess Profits Tax', 1933 Cal S14 (AIR V40) (H).
9. By Act 30 of 1947, the Taxation on Income (Investigation Commission) Act, 1947, a Special Investigation Commission was set up for the purpose of investigating substantial evasions of payment of income-tax, and under Section 5(4) of this Act certain powers were given to the Commission and this Sub-section was declared 'ultra vires' of the Constitution in 'Suraj Mall Mohta and Co. v. A. V. Vlsvanatha Sastri', 1954 EC 545 (AIR V41) (I), on the ground that it was a discriminatory legislation which offended against the provisions of Article 14 of the Constitution.
10. Because of this judgment of the Supreme Court the Legislature added by Section 2 of the Indian Income Tax (Amendment) Act, 1954 (Act 33 at 1954) Sub-sections (1A to ID) to Section 34(1) of the Income-tax Act. As a result of this enactment the constitutionality of Section 6 (X) of the Taxation on Income (Investigation Commission) Act (30 of 1947) was successfully challenged in Shree Meen-akshi Mills Ltd. v: Sri A. V. Visvanatha Sastri 1955 SO 13 ( (S) AIR V42) (J).
11. As a consequence of the recommendation made by the Investigation Commission that the Income-tax Officer should be enabled to obtain advice in difficult cases from his superiors, Sub-s, (7B) was added to Section 5 of the Act and as a corollary superior authorities have been empowered to exercise the powers of an Income-tax Officer in making the required enquiries.
12. The petitioners relying on the rule laid down by the Supreme Court in these two and other cases contend that Sub-sections (7A) and (7B) of Section 5, Income-tax Act, are void because they enable the Commissioner to discriminate in regard to various cases and individuals, that the assessees residing or carrying on business in the same area assessable by the same Income-tax Officer, can because of these added Sub-sections, be divided into two categories and treated differently, one dealt with under the ordinary law and the other by the Special Income-tax Officers acting under the guidance and directions of superior officers under Section 6(7B). and that as a consequence of this discrimination the persons assessed by the Special Income-tax Officers will in effect be denied their ordinary legal remedies because in their case the Director is entitled to and will give directions and guidance whereas no such thing would and could be done in the case of ordinary assessments by the Income-tax Officers who are not Special Officers.
13. In a later affidavit which was filed on the day the hearing of this petition started before us and to which objection was taken by counsel for the opposite party allegations have been made that certain instructions were given to Mr. Jagdish Chandra, Income-tax Officer, Special Circle, Ambala, by Mr. Goel, Deputy Director, Investigations. Whether that is so or not is not necessary to investigate because if the Impugned sections are valid, then these allegations become irrelevant unless the petitioners wish to attack the 'bona fides' of the officers acting under the powers given to them by the statute.
14. The petitioners in order to support their plea of discriminatory treatment also relied on a judgment of the Supreme Court in 'State of West Bengal v. Anwar All Sarkar', 1952 SC 75 (AIR V39) (K), where it was held that because Sections 3 and 5, West Bengal Special Courts Act, constituting special Courts and empowering State Government to refer cases or offences or classes of cases or classes of offences to such Courts were in violation of Article 14 of the Constitution of India the Act was 'ultra vires'.
The reason for the enactment of the statute was the necessity of speedier trial of cases. It was found that the procedure laid down by the Act for trial by the Special Courts varied substantially from that laid down for trial of offences in the Code of Criminal Procedure and the Act did not classify or lay down any basis for classification of the cases which may be directed to be tried by the Special Courts but left it to the uncontrolled discretion of the State Government.
Mr. Justice Das in that case was of the opinion that Section 5(1) of the Act in so far as it empowered the State Government to direct offences or classes of offences or classes of cases to be tried by a Special Court did not confer an uncontrolled or unguided power on the State Government and was not void, but that part of the section which empowered the Government to direct cases as distinct from classes of cases to be tried by Special Courts was void. Patanjali Sastri C. J. held that the Act was not void or unconstitutional wholly or in part.
Explaining at p. 88 the implication of Article 14 of the Constitution Mukherjea J. who gave one of the majority judgments said that the principle underlying the Article is not that the same rules of law should be applicable to all persons or some remedies available irrespective of differences of circumstances: see 'Charanjit Lal v. Union of India1, 1951 SC 41 (AIR V38) (L). It only means that all persons similarly circumstanced shall be treated alike both in privileges conferred and liabilities imposed.
The learned' Judge observed (p. 88):
'Equal law a would have to be applied to all in the same situation, and there should be no discrimination between, one person and another if as regards the subject-matter of the legislation their position is substantially the same'.
But at page 90 the learned Judge was careful to say that' if one's interests are not at all affected by a particular piece of legislation, he will have no right to complain and also that if the differences are not material, there may not be any discrimination in the proper sense of the word and minor deviations from the general standard would not amount to denial of equal rights. It must be noted that as a result of the Act impugned in that case the procedure adopted for trial was materially different from that provided for ordinary trials under the Criminal Procedure Code and it was more punitory in effect.
15. Reference may now be made to 'Saurash-tra case', 'Kathi Raning Rawat v. State of Saurashtra', 1952 SC 123 (AIR V39) (M). Section 11 of the Ordinance under which the trial took place in that case was in identical terms with Section 5(1) of the West Bengal Act: see Mahajan J.'s judgment at p. 129. But the Ordinance was upheld on the ground that the clear recital of a definite objective furnished a tangible and rational basis of classification to the State Government' for the purpose of applying the provisions of the Ordinance: Per Fazl All J. at p. 128.
16. In 'Qasim Razvi v. State of Hyderabad', 1953 SC 156 (AIR V40) (N) and in 'Habeeb Moha-med v. The State of Hyderabad', 1953 SO 287 (AIR V40) (O), the trials were held to be 'Ultra vires' because the procedure provided by the Special Tribunal Regulation was substantially the same 88 that provided' by the ordinary law.
17. I would now come to the two income-tax cases decided by the Supreme Court which I have already mentioned and on which a great deal of reliance was placed by the petitioners' counsel. The first is 1954 SO 545 (AIR V41) (I).
In that case Section 5(1) and 3. 5(4), Taxation on Income (Investigation Commission) Act, 1947, were attacked on the grounds (1) that under the former section the Central Government was entitled to discriminate between one person and another in the same class and could pick and choose the cases of persons who fell within the group of those who had substantially evaded taxation, and (2) in the latter section arbitrary power was given to the Commission to pick and choose, and (3) because it was highly discriminatory as an evasion whether substantial or insubstantial, came within its ambit as well as within the ambit of Section 34. Income-tax Act.
It was held that both Section 34, Income-tax Act and Section 5(4), Taxation on Income (Investigation Commission) Act, deal with all persons who have similar characteristics and similar properties, that is, persons who have not truly disclosed their Income and have evaded payment of taxation on Income are deprived of the substantial and valuable privileges which they would otherwise nave, and therefore, there was discrimination in procedure which was substantially different under the Taxation on Income (Investigation Commission) Act from that under 8. 34, Income-tax Act.
The section was declared to be 'ultra vires because the findings of fact given by the Commission as to factum and extent of evasion were final and conclusive under Section 8, Taxation on Income (Investigation Commission) Act, whereas asses-sees dealt with under Section 34, Income-tax Act, were entitled to go up in appeal, second appeal and revision, and also because there were certain valuable rights under Section 34, Income-tax Act, which were denied to an assesses under Section 5(4) of the Taxation on Income (Investigation Commission) Act; as this amounted to discrimination Section 5(4) was held to be 'ultra vires'.
18. The second case arose as a consequence of this decision, as a result of which Sub-sections (1A) to (1D) were added to Section 34, Income-tax Act. This addition led to the constitutionality of Section 5(1) of the Taxation on Income (Investigation Commission) Act being challenged in 1955 SC 13 ((S) air V42) (J), and it was held that it became void and unenforceable as being discriminatory in character because Sub-section (1A) of Section 34, Income-tax. Act, deals with the same class of persons as those dealt with under Section 5(1) Taxation on Income (Investigation Commission) Act, and both the procedure prescribed and punitory consequences were more detrimental to an assessee under Section 5(1) of the impugned Act than under Section 34, Income-tax Act.
19. Now all these cases show that where there are special statutes which give rise to discrimination in regard to procedure to be followed, remedies provided and as to their punitory nature they infringe the equal protection clause of Article 14 of the Constitution. But the two impugned sections in the present case, in my opinion, suffer from no such defect.
Under Section 64 of the Act a person is to be taxed at the place where he carries on business but 5. 5(7A) gives power both to the Commissioner of Income-tax and the Central Board of Revenue to transfer any case from one Income-tax Officer to another and the transfer can be ordered at any stage of the proceedings. It is not suggested that as a result of this transfer the procedure becomes different or any of the privileges & rights which are given by the Income-tax Act are taken away. or the assessee is exposed to any increased pre-judice or punitory consequences.
20. But it is suggested that in this particular case the assessment of the petitioners has been entrusted to a special officer and that would be discrimination. I am unable to agree with this. The two Sub-sections are of universal application and do not on the face of them import any discrimination.
In 'M. K. Gopalan v. State of Madhya Pra-desh', 1954 SO 362 (AIR V41) (P), a Special Magistrate was appointed under Section 14, Criminal P. C. to try the case of the petitioner in that case. It was held that this did not violate the guarantee under Article 14 of the Constitution as the Special Magistrate had to try the case entirely under the normal procedure and there was no kind of discrimination as was contemplated by the decision in 1952 SC 75 (AIR V39) (K) and a law vesting discretion in an authority under such circumstances cannot be discriminatory.
1952 SC 75 (AIR V39) (K), was distinguished on the ground that that decision applied to cases where on the allotment of an individual case to a special Court the procedure authorised was substantially different from the normal procedure and prejudiced the persons tried under the special procedure.
21. In 'Kedar Nath v. State of West Bengal', 1963 SC 404 (AIR V40) (Q) it was held that the equal protection clause does not prohibit special legislature. At page 406 Patanjali Sastri, O. J., said:
'Now, it is well settled that the equal protection of the laws guaranteed' by Article 14 of the Constitution does not mean that all laws must be general in character and universal in application and that the State is no longer to have the power of distinguishing and classifying persons or things for the purposes of legislation.'
The two Impugned Sub-sections, taking into consideration the history and the provisions as given above, are not violatlre of the equal protection clause.
22. The learned Advocate-General then rightly submitted that in order to show that Article 14 of the Constitution has been violated it must be proved that the Sub-sections are substantially different in procedure and in the safeguards provided and in regard to the punitory nature and are to the disadvantage of the assessee, which, in my view, has not been shown here.
It is not suggested that there is any difference in the procedure to be followed by the Income-tax Officer or in the matter of appeal, second appeal and revision and application to the High Court, but it was suggested that the Sub-sections were purposeful and intentional and would be administered 'with an evil eye and uneven hand'. Of that there is no proof, nor is there anything to show that the action taken by the Income-tax Commissioner is unlawful and unwarranted by the Act.
23. It has to be remembered in the language of Mr. Justice Frankfurter in 'Snowden v. Hughes', (1944) 321 US 1, (R) that 'The Constitution does not assure uniformity of decisions or Immunity from merely erroneous action, whether by the Courts or the executive agencies of a State'. This passage was quoted with approval by Das J. to 'Budhan Choudhury v. State of Bihar', 1055 SC 191 (195) ((S) AIR V42) (S), and he also points out that--
'The Judicial decision must of necessity depend on the facts and circumstances of each particular case and what may superficially appear to be an unequal application of the law may not necessarily amount to a denial of equal protection of law unless there is shown to be present in it an element of intentional and purposeful discrimination. (See per Stone, O. J. in 'Snowden v. Hughes', (R) (supra)'.
24. In 'Dhirendra Kumar v. Supdt. and Remembrancer of Legal Affairs, West Bengal', 1954 SC 424 (428) (AIR V41) (T) where the question to be decided was the legality of a notification taking away the right of trial by jury, it was held following 1953 SC 404 (AIR V40) (Q) that whether an enactment providing for special procedure for the trial of certain offences is or is not discriminatory and violates Article 14 of the Constitution must be determined in each case as it arises, and no general rule applicable to all cases can be laid down.
It was also pointed out that different views have been expressed on the question of application of Article 14 of the Constitution, but there is no difference on any principle as to the construction or ,1scope of that Article.
25. The learned Advocate-General relied on an American case 'Sunday Lake Iron Co. v. Township of Wakefield', (1918) 247 US 350 (U), where it was held that the good faith of tax officials and the validity of their actions are presumed, and when assailed, the burden of proof is upon the complaining party. At page 352 while dealing with the equal protection clause Mr. Justice Mc-Reynolds said:
'The purpose of the equal protection clause of the 14th Amendment is to secure every person within the State's Jurisdiction against intentional and arbitrary discrimination, whether occasioned by express terms of a statute or by its improper execution through duly constituted agents'.
But he was careful to point out:
'It is also clear that mere errors of Judgment by officials will not support a claim of discrimination. There must be something more, -- something which in effect amounts to an intentional violation of the essential principle of practical uniformity. The good faith of such officers and the validity of their actions are presumed; when assailed, the burden of proof is upon the complaining party'.
Thus the good faith of officials exercising power under the Income-tax law has to be presumed and If the assessee attacks it the burden is on him and mere errors committed by an official is not proof of discrimination. The complainant must go further and establish intentional violation of some essential principles. Mere suspicion that they may act prejudicially is not enough.
26. In another American case 'Mackay Telegraph and Cable Co. v. City of Little Rock', (1919) 250 US 94 (V), the municipal telegraph franchise ordinance imposed the same poll tax which was exacted by a general ordinance from other companies maintaining polls in the city. It was held that it could not be said necessarily to deny the equal protection of the laws merely because such general ordinance had not been enforced against such other companies in the same manner that it was proposed to enforce the franchise ordinance against the complaining company, which had made no offer to show an arbitrary and intentionally unfair discrimination in the administration of the ordinance.
27. The learned Advocate-General then referred to another American case (1944) 321 US 1, (R) where it was held:
'The unlawful administration by State officers of a state statute fair on its face resulting in its unequal application to those who are entitled be treated alike, is not a denial of the equal protection of the law as guaranteed by the Fourteenth Amendment unless there is shown to be present in it an element of intentional or purposeful discrimination'.
In order to establish discrimination therefore the complainant must establish Intentional abuse of the power to his detriment.
28. In 'Budhan Chodhry's case', which I have referred to above, 1955 SC 191 ( (S) AIR V42) (S) emphasis was laid on purposeful discrimination.
29. A review of all the authorities therefore shows:
(1) that in order that a statute is unconstitutional and contravenes the equal protection clause it must be shown that as a result of that statute the person affected by it will be subjected to a different treatment in the matter of procedure, remedies available and punitory consequences;
(2) that it must be shown that the law is purposeful and intentional and would be administered to the disadvantage of the complainant;
(3) that the good faith of the officials acting within the ambit of a statute is to be presumed and mere suspicion that they may act in another manner is not enough; and
(4) that the mere fact that under a particular statute one particular' person is proceeded against and another is not is not destructive of the equal protection clause unless what I have said in Nos. (1), (2) and (3) is established. In my view and for the reasons I have given above the two Sub-sections by themselves do not contain any element of discrimination and affect neither the procedure nor the remedies, nor do they increase the punitory burden on an assessee.
30. I would therefore dismiss this petition and discharge the rule. The petitioners must pay the costs of the opposite party. Counsel fee Rs. 250/-.
31. I agree.