TITLE – Basheshar Nath V. The Commissioner of Income Tax
EQUIVALENT CITATION – AIR 2018 SC 357
BENCH – CJI S.R. Das, N.H. Bhagwati, S.K Das, J.L. Kapur, K. Subba Rao
LAW POINT – Section 8A of the taxation of Income (Investigation and Commissioner) Act, 1947 and Article 14 of Constitution of India
The case was filed on 22nd July 1948 to the Commission for alleged that the assessee has evaded payment of taxation on income to a substantial extent. The case against the assessee was based on the business of supplying tents, executing contract works, and commission agency for some textile mills on a fairly extensive scale and business was done on an individual basis and in partnership with his brother.
On 19th May 1954, the Commission stated that the income, profits and gains that had escaped assessment in the hands of the assessee for the period beginning with 1st April 1939, and ending on 31st March 1947 were Rs. 4,47,915, that the Commission also held that should the assessee should accept the finding which was granted for the benefit of a settlement on the lower concessional basis of payment of 75% and shall pay the small penalty of Rs. 14,064 and it was that situation in which the assessee has no other substitute than to make the best of the bad job by requesting a settlement under section 8A offering to pay Rs. 3,50,000 by way of tax and penalty. The Commission on 24 May 1954, made a report under section 8A (1) to the Central Government that it was of the opinion that the terms of settlement contained in the application might be approved. The Central Government accepted the proposed settlement. The assessee was also allowed to make payments in instalments of Rs. 5,000, per month.
This began with the case of Suraj Mall Mohta and Co. v. A.V. Visvanatha Sastri 1, the Court held that both section 34 and section 5 (4) of the Investigation Act dealt with persons who have same characteristics of being persons who had not truly reveal their income and had avoided payment of tax on their income, but as the procedure prescribed by the Investigation Act was reasonably more unjust than the procedure under the Indian Income Tax Act, 1922. Section 5(4) and the procedure prescribed by the Investigation Act, while it affected persons proceeded against under that sub-section was a piece of unfair legislation which offended Article 14 of the Constitution and hence, it was considered void and unenforceable.
Consequently, many applications were made under Article 32 of the Constitution and were disposed of by the judgment in Shree Meenakshi Mills Ltd. v. Sri A.V. Visvanatha Sastri 2, in which the Court held that section 34 of the Income Tax Act, as amended by the Indian Income Tax Amendment Act, 1954 regulated on the similar field and, therefore, section 5(1) had become void and unenforceable as the procedure applied to persons dealt with thereunder became unfair in character.
In another case M. CT. Muthiah v. The Commissioner of Income Tax 3, Madras the court held that section 5(1) of the Act was ultra vires the Constitution, as it was unfair and violative of the fundamental right guaranteed by Article 14 of the Constitution and that different person, falling under the similar class or category of substantial avoiders of income-tax, were being subjected to different procedures, and the normal procedure which gave to the assesses rights which were denied to those persons who were specially treated under the procedure prescribed by the Investigation Act and, hence, the appraisal made under section 8(2) were void and unenforceable.
The Income Tax Officer had sent a certificate requesting the Collector of Delhi for the recovery of the balance due by the assessee under the settlement. In execution of that certificate, some of the properties of the assessee were situated in Dharamshala and Hisar were also attached. Then, the special appeal has been filed by the Assessee questioning on the validity of a settlement made under Section 8A of the Taxation on Income (Investigation Commission) Act, 1947 which was ordered on 29 January, by the Commissioner of Income Tax, Delhi.
- Whether the settlement made under section 8A of the Taxation on Income (Investigation Commission) Act, 1947is valid?
- Can a fundamental right guaranteed by the Constitution be waived?
CONTENTION OF PARTIES
- The report of the Investigation Commission dated on 24 May 1954 was quashed.
- On the basis of the report and the directions are given by the Central Government, the settlement was made in pursuance and the proceedings for recovery of liability of tax shall quash and the amounts which have already recovered should be refunded.
- Under section 5(1) of the Investigation Act which has already been held unconstitutional then the settlement under section 8A could not be enforced, for the foundation of the proceedings under section 8A was the reference under section 5(1) and the very foundation for the report of the Investigation Commission has disappeared and settlement can neither be valid, nor it can be enforced.
- None of the decisions held in section 5(1) is wholly void and inoperative.
- The Investigation Act was a pre-Constitution Act and before the commencement of the Constitution when there was no such thing as a fundamental right, its provisions could not be questioned however discriminatory the procedure has been enhanced. After the commencement of the Constitution the assessee can be laid down coercive procedure by the Investigation Act, which was voluntarily proposed and accepted by the Central Government on the recommendation of the Commission.
- If there had been a breach in the fundamental right by subjecting him to a discriminatory procedure laid down in the Investigation Act, and then assessee, can voluntarily enter into the settlement.
Supreme Court held that Fundamental Rights cannot be waived. In the above case there were different opinions there were four different judgments wherein Sudhiranjan Das, C.J. had written for J.L. Kapur, J. Bhagwati, S.K. Das and K. Subba Rao, JJ. had given separate judgments. It is interesting to note that although the Constitution of India has borrowed the concept of Fundamental Rights from the United States of America, where the Fundamental Rights can be waived.
The doctrine of waiver is basically established on the principle that a right or statutory which is for the welfare of a person can be waived by him. This test is for whose benefit the right has been primarily granted for the general public or for individuals?
In the provisions of Part III of the Constitution, there are some rights which are given for the benefit of the general public. For example, Article 23 which prohibits traffic in human beings, etc.; as well as Article 24 states that no child below the age of 14 shall be employed to work as in hazardous employment. Hence, many of these rights are primarily not meant for the benefit for an individual but for a general public
No fundamental right can ever be waived. A person who has waived that protection in any situation may not afterwards raise the issue that the particular constitutional rights have been infringed in that situation as well as whatever injury he may suffer is due to his own act. According to the Constitution, the State is forbidden from making any law which takes away the rights as stated in Part III of the Constitution. Therefore, the State is not expected to impose any right which is contradicting to the constitutional prohibition on the reason that the party waived his fundamental right.
Majority people of India are economically poor, educationally backward and politically due to which they are unaware of their rights. In such a situation, it is the duty of the court to protect their rights. Hence, it was held that the fundamental rights set up by the Constitution are spiritual in nature and enacted public interest, and hence cannot be waived. In the present case, Justice Das and Kapur were of the opinion that Article 14 cannot be waived while Justice Subba Rao and Bhagwati were having another opinion that no fundamental right can be waived and the minority dissenting view of S.K. Das stated that only the rights which were for the individual benefit of a person can.
After these judgments, the position was clear that a fundamental right cannot be waived. This judgment has been quoted and upheld innumerable times by various courts in the Country. According to the case of Justice KS Puttaswamy V. Union of India 4, Right to Privacy was held to be a fundamental right, while in the case of Basheshar Nath and Behram Singh it was observed that the Right to Privacy includes that there can be a waiver in accordance to the Right to Privacy. Fundamental rights still cannot be waived unless the whole judgment by the Apex Court is overruled.
- 1955 (1) SCR 448
- 1955 (1) SCR 787
- 1955 (2) SCR 1247
- (2017) 10 SCC 1
By- Tanya Singh, Banasthali University