Baburao Narayanrao Sanas vs Union of India

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 21 October, 1954

Coram: Ghulam Hasan, Mehr Chand Mahjan

In this case the petitioner, a resident of Poona in the State of Bombay, conducted business there and also owned property in the city of Bombay. Over eight consecutive assessment years, beginning with 1940‑41 and ending with 1947‑48, he was assessed on a total income of Rs 9,75,265. The Central Government, suspecting that the petitioner had evaded tax and concealed substantial profits, referred his matter in 1948 to a Commission constituted under Section 5(1) of the Taxation on Income (Investigation Commission) Act, 1947. The Commission was instructed to investigate the petitioner’s profits for the period from 1 January 1939 to 31 December 1947. After completing its investigation, the Commission submitted a report dated 1 May 1953, concluding that the income which had escaped taxation during the relevant years amounted to Rs 2,26,900 and that the petitioner’s tax liability for that escaped income was Rs 1,96,175.

During the investigation the petitioner applied for settlement of his liability pursuant to Section 8‑A of Act XXX of 1947. The Government accepted the application, entered into a settlement with the petitioner, and directed the Income‑Tax Officer to enforce payment of the evaded tax according to the settlement’s terms. The petitioner subsequently requested that the amount due be recovered through easy instalments of Rs 25,000 each. By an order dated 28 July 1952, the Government agreed to recover the sum in three instalments: Rs 50,000 payable on 1 March 1954, Rs 50,000 payable on 1 March 1955, and Rs 96,175 payable on 1 March 1956. Later the petitioner sought to have the amount recovered in ten yearly instalments. At this stage, apparently influenced by the Court’s decision in Suraj Mal Mohta’s case, the petitioner was advised to file an application alleging that the procedure leading to the imposition of a liability of Rs 1,96,175 was wholly illegal, ultra vires, void and unconstitutional. The grounds advanced were identical to those raised in Petition No. 315 of 1954 (Dewan Bahadur Seth Gopal Das Mohta v. Union of India and Others). The Court, relying on the reasoning expressed in its earlier judgment in that petition, held that the petition was misconceived. It observed that the petitioner’s liability to pay the evaded tax now arose under the settlement voluntarily entered into with the Central Government, and that such a settlement could not be challenged by invoking Article 32 of the Constitution.

The Court concluded that the petition did not succeed on any of the grounds presented and therefore it was deemed to have failed. Accordingly, the Court ordered that the petition be dismissed and directed that the costs of the proceedings be awarded against the petitioner. The order expressly recorded that the petition was dismissed, confirming that the remedy sought by the petitioner was not granted.