K.S. Rashid And Son vs The Income-Tax Investigation Commission
Rewritten Version Notice: This is a rewritten version of the original judgment.
Court: supreme-court
Case Number: Civil Appeals Nos. 118 to 121 of 1952
Decision Date: 22 January 1954
Coram: B.K. Mukherjea, Ghulam Hasan, Mehar Chand Mahajan, Vivian Bose
K.S. Rashid and Son filed a petition against the Income-Tax Investigation Commission and the matter was decided on 22 January 1954 by the Supreme Court of India. The judgment was authored by Justice B. K. Mukherjea, with Justices Ghulam Hasan, Mehar Chand Mahajan and Vivian Bose sitting on the bench. The petitioner, K.S. Rashid and Son, contested the actions of the Income-Tax Investigation Commission, which was the respondent in the case.
The official citation of the decision is 1954 AIR 207 and 1954 SCR 738, and the case has been referenced in several later reports, including the 1956 and 1957 Supreme Court law reports, the 1959 Supreme Court law reports, the 1961 All-India Reports, and the 1961 Supreme Court Reports (RF 1961 SC 1506). The legal issue centered on the jurisdiction of the Punjab High Court to issue a writ under Article 226 of the Constitution of India against the Income-Tax Investigation Commission, which was situated in Delhi and was conducting an investigation under Section 5 of the Taxation on Income (Investigation Commission) Act, 1947 (Act XXX of 1947), together with the provisions of Section 8(5) of the same Act.
The headnote of the judgment clarified that, although the petitioners were assessors within the State of Uttar Pradesh and their original tax assessments had been made by the income-tax authorities of that State, the Punjab High Court nevertheless possessed the authority to issue a writ under Article 226 to the Delhi-based Commission in respect of the investigation contemplated by Section 5 of the 1947 Act. Article 226 confers upon every High Court a broad and new power to issue writs, a power that did not exist prior to the Constitution. The Court identified two principal limitations on the exercise of this power. First, the writ must be directed “throughout the territories in relation to which it exercises jurisdiction,” meaning that the writ cannot extend beyond the geographic area over which the High Court has jurisdiction. Second, the person or authority against whom the writ is issued must be situated within that same territory, implying that the authority must be amenable to the Court’s jurisdiction either by residence or by location.
The Court further emphasized that the remedy under Article 226 is discretionary. A High Court may decline to grant a writ if it is satisfied that the aggrieved party can obtain an adequate or suitable relief by some other means. In support of this principle, the Court referred to the decisions in Ryots of Garabandho v. Zamindar of Parlakimedi (70 I.A. 129) and Election Commission v. Saka Venkata Subba Rao [1953] SCR 1144.
Procedurally, the case arose as Civil Appeals Nos. 118 to 121 of 1952, filed under Article 133(1)(c) of the Constitution, challenging the judgment and order dated 10 August 1950 delivered by the Punjab High Court at Simla (judges Khosla and Kapur) in Civil Miscellaneous Nos. 256, 260, 261 and 262 of 1950. Counsel appearing for the appellants included Dr Balkshi and Tek Chand, assisted by T N Sethi. Counsel for the respondents comprised M C Setalvad, Attorney-General for India, assisted by Porus A Mehta. The Supreme Court’s judgment was delivered on 22 January 1954, concluding the appellate proceedings.
In these four consolidated appeals, the Court heard a certificate that had been granted by the High Court of Punjab pursuant to article 133 (1)(c) of the Constitution. All four appeals were directed against a single judgment of a Division Bench of that High Court dated 10 August 1950. In that judgment the learned judges had dismissed four similar petitions that had been filed on behalf of different appellants. The petitions sought relief under articles 226 and 227 of the Constitution in relation to income-tax investigation proceedings that had been started against the appellants under Act XXX of 1947.
The factual backdrop involved a partnership firm that carried on business under the name and style of K.S. Rashid & Son. The original partnership was formed on 5 May 1934 with three partners: K.S. Rashid Ahmed, his son Saeed Ahmed, and Mrs Zafar Muhammed, who was the mother of K.S. Rashid. Mrs Zafar Muhammed died on 7 January 1946, and as a consequence the partnership was dissolved. On the very next day, 8 January 1946, a new partnership was created under the same name. The two surviving partners of the former firm continued, and a third partner, Saeeda Begum, a daughter of K.S. Rashid, joined the new firm.
On 31 December 1947 the Central Government referred the affairs of this newly formed firm, as well as those of the individual partners, to the Income-Tax Investigation Commission for inquiry and reporting under section 5 of Act XXX of 1947. The referral was apparently made on the ground that substantial evasion of income-tax had occurred in those cases. The authorised official appointed under section 5 (4)(3) of the Act, who is identified as respondent No. 2 in each of the appeals, commenced investigations against the firm and its partners. The appellants alleged that, in violation of the provisions of the Act, the official extended his investigations beyond 31 March 1943, which was the date up to which the income-tax assessments in all the matters had been completed.
To articulate this grievance, a petition was presented to the authorised official on 8 April 1949. No order was issued on that petition because the Commission anticipated an imminent amendment of the law on the subject. An ordinance dated 5 July 1949 indeed amended the relevant statutory provisions, but the appellants maintained that the amendment was not retrospective and did not empower the authorised official to continue investigations past 31 March 1943. Nonetheless, the official was shown the account books of the firm, albeit under protest.
Subsequently, on 17 September 1949 three separate applications were filed before the Commission. The first application concerned the estate of the deceased Mrs Zafar Muhammed, asserting that no investigation could be conducted against her because she had already died. The second application dealt with the affairs of Saeeda Begum, arguing that, as a new partner who had never before been assessed, she fell outside the jurisdiction of the Commission. The third application sought a declaration that the newly formed partnership, which had come into existence on 8 January 1946, could not be subject to inquiry under the provisions of Act XXX of 1947.
In the present matter the firm that had been created on 8 January 1946 was alleged to be outside the scope of the Act, and therefore its affairs could not be examined under the provisions of that legislation. Subsequently, in June 1950, four miscellaneous petitions were presented on behalf of the appellants before the High Court of Punjab. Each petition contained a three-fold set of prayers. The first prayer sought the issuance of a writ of prohibition directing the Income-Tax Investigation Commission and the authorised official not to continue investigations of the matters that had been referred to the Commission under section 5 of Act XXX of 1947. The second prayer requested a writ of certiorari to annul the proceedings that had already been started. The third prayer, offered as an alternative, asked that the proceedings before the Commission be reviewed under article 277 of the Constitution and that appropriate orders be made in accordance with the requirements of justice. After the filing of these petitions, the Commission was asked to submit a report and, on the basis of that report, the Court issued rules on 25 July 1950.
On behalf of the respondents, who opposed the petitions, several preliminary objections were raised against the petitioners’ claims. Firstly, it was argued that the petitioners were assessee of Uttar Pradesh and that their assessments were to be made by the Income-Tax Commissioner of that State; consequently, the mere fact that the Investigation Commission was situated in Delhi could not confer jurisdiction upon the Punjab High Court to issue writs under article 226 of the Constitution. Secondly, the respondents contended that the Act was a special statute that created new rights and liabilities, and that the remedies provided within the Act itself were the exclusive recourse available to any aggrieved party; therefore, the constitutional remedies under articles 226 or 227 were not open to the petitioners. Thirdly, the respondents relied on sections 5(3) and 9 of Act XXX of 1947, asserting that these provisions barred the Court from granting any relief. The learned Judges who heard the petitions accepted the first two objections. Although they did not express a definitive view on the third ground, they dismissed the petitioners’ applications on the basis of the first two objections. The dismissed orders were subsequently appealed to this Court, and counsel appearing for the appellants challenged the correctness of the High Court’s decision on both points. Regarding the first point, which concerned the jurisdiction of the Punjab High Court to issue writs of certiorari or prohibition in the present cases, the learned Judges based their reasoning entirely on the decision of the Judicial Committee in the well-known case of Ryots of Garabandho v. Zamindar of Parlakitnedi. The issue in that case was whether the High Court of Madras possessed jurisdiction to
In this case, the Court explained that the question before the Judicial Committee concerned whether a High Court could issue a writ of certiorari to review an order made by the Collective Board of Revenue, which acted as an appellate authority in proceedings concerning the settlement of rent between the Zamindar of Parlakimedi and the ryots of certain villages situated in the Ganjam district. The land in question lay wholly outside the limits of the Presidency town of Madras, and the order under challenge had been passed by the Board of Revenue in that distant district. The Judicial Committee answered the query in the negative. It held that the three Chartered High Courts of Calcutta, Madras and Bombay possessed the authority to issue the so-called high-prerogative writs because they were the successors of the Supreme Courts that formerly exercised jurisdiction over the Presidency towns. However, the exercise of those powers under the Charter was limited to persons who fell within the ordinary original civil jurisdiction of the three High Courts. Outside that ordinary jurisdiction, the Charter extended the writ-making power only to “British subjects” as defined in the Charter itself. Consequently, the Committee concluded that the Supreme Court of Madras had no jurisdiction, under the Charter that created it, to correct or control a country court of the East India Company when that court was deciding a dispute between Indian inhabitants of the Ganjam district about the rent payable for land situated in that district. Moreover, the Committee observed that no subsequent legislation had conferred on the successor, the High Court of Madras, any power to entertain such a writ.
The appellants then advanced a further contention. They argued that the High Court’s jurisdiction to issue a writ could be based on the fact that the Board of Revenue, which functioned as the appellate authority in the rent-settlement matter, was physically located within the town of Madras, and that the order complained of had been made in that town as well. To support this view, they relied on the decision in Nundo Lal Bose v. The Calcutta Corporation, wherein the Calcutta High Court had issued a certiorari to quash an assessment made by the Commissioners of the town of Calcutta on a dwelling house. The Judicial Committee repelled this line of reasoning. It observed that the issue was whether the principle laid down in the Calcutta case could be extended to the present dispute merely because the Board of Revenue was ordinarily resident in Madras or because the order had been passed there. The Committee warned that accepting such reasoning would allow the jurisdiction of the High Court to be avoided simply by moving the Board of Revenue out of the town’s limits, thereby rendering the writ jurisdiction-dependent on the location of the Board rather than on the substantive nature of the dispute. The Committee emphasized that jurisdiction must be regarded as a matter of substance; it would not have been within the competence of the Supreme Court to claim jurisdiction over a settlement of rent for land in Ganjam on the basis of the Board’s location. In other words, the Court could not extend its writ-making power to matters involving parties and lands situated outside its ordinary civil jurisdiction simply because the administrative body that issued the order was located within the town of Madras.
The Court observed that issuing a certiorari to the Board of Revenue solely on the basis of the Board’s physical presence in the town would improperly extend jurisdiction. Such an approach would allow the Supreme Court to intervene in the settlement of rents for ryoti holdings in Ganjam, even though the parties were not otherwise subject to its authority. The Judicial Committee had expressed similar concerns, noting that jurisdiction must be determined by substantive factors rather than mere geographical location. Relying on those observations, the learned judges concluded that the simple fact that the Investigation Commission was situated in Delhi did not automatically grant the Punjab High Court the power to issue a writ. They held that such a writ could not be issued in the present matter solely on the basis of the Commission’s location. The petitioners were identified as assessees within the state of Uttar Pradesh, and their original tax assessments had been made by income-tax officers of that state, as recorded in (1)I.L.R. II Cal. 275. The subsequent steps required by the Investigation Commission’s report had to be pursued by the income-tax authorities of Uttar Pradesh, and any suit arising would have to be filed in the High Court at Allahabad. Referring to the Privy Council, the court noted that jurisdiction is a question of substance and therefore held that no jurisdiction could be vested in the Punjab High Court for the present case. The reasoning was that the Punjab High Court’s jurisdiction could be avoided simply by relocating the Investigation Commission from Delhi to another location. The court expressed disagreement with that line of reasoning and stated that the decision in Parlakimedi’s case (1) did not assist in determining the High Courts’ jurisdiction under article 226 of the Constitution.
The court further observed that the earlier line of reasoning lacked persuasive force and that the Parlakimedi’s case was not useful for deciding the scope of article 226 jurisdiction. The matter had been fully examined in the recent decision of Election Commission v. Venkata Rao, cited as (2), where the Judicial Committee’s observations in Parlakimedi’s case were explained in detail. That judgment noted that before the Constitution came into force, only the High Courts of Calcutta, Madras and Bombay possessed the authority to issue prerogative writs, and even then within very strict limits. The writs could be issued only to the extent that the civil and criminal procedure codes had not removed that power. They could be directed solely toward persons or authorities that fell within the original civil jurisdiction of those High Courts. The Constitution brought about a fundamental transformation by preserving the pre-existing powers of the High Courts under article 225 while simultaneously granting all High Courts new, expansive authority under article 226. Article 225 thus retains the jurisdiction that each High Court possessed before the Constitution, whereas article 226 empowers every High Court to issue writs for the enforcement of fundamental rights and for any other purpose. The court therefore concluded that the Punjab High Court could not claim jurisdiction merely because the Investigation Commission was located in Delhi, and that jurisdiction must be assessed on substantive grounds. The judgment also cited earlier authorities, including (1) 70 I.A. 139 and (1) [1953] S.C.R., to illustrate the evolution of writ jurisdiction before and after the Constitution.
The Court cited the decision in Besant v. Advocate General of Madras, reported in 46 I.A. 176, to demonstrate that before the Constitution was adopted the High Courts never possessed the authority to issue the kind of prerogative writs that are now available. In delivering the judgment, Chief Justice Patanjali Sastri observed that the framers of the Constitution, having decided to provide basic safeguards for the people in the new system and referring to those safeguards as fundamental rights, deemed it necessary to create a swift and inexpensive remedy for enforcing those rights. He explained that they recognised the English prerogative writs, which had historically been employed whenever urgent necessity demanded immediate and decisive court intervention, as being especially suitable for this purpose. Consequently, they conferred upon the High Courts, within the State’s sphere, new and expansive powers to issue directions, orders, or writs primarily for the enforcement of fundamental rights, and also included the power to issue such directions “for any other purpose,” apparently intending to place all High Courts in India in a position comparable to that of the Court of King's Bench in England.
The Court then articulated that article 226 of the Constitution imposes only two limitations on the exercise of these powers by a High Court. First, the power must be exercised “throughout the territories in relation to which it exercises jurisdiction,” meaning that any writ issued by the Court cannot extend beyond the geographical area over which the Court has jurisdiction. Second, the person or authority to whom a writ may be directed “must be within those territories,” which implies that the individual or body must be amenable to the Court’s jurisdiction by virtue of residence or location within the relevant territory. The Court explained that the determination of a High Court’s jurisdiction to issue writs under article 226 must be made with reference to these two conditions.
Turning to the observations of the Judicial Committee in Parlakimedi’s case, the Court held that, strictly speaking, those observations have no direct bearing on the present question. It acknowledged that the Privy Council in that case described jurisdiction as a question of substance, but stressed that the meaning and implication of that observation can be understood only by examining the specific facts and circumstances of the Parlakimedi case. The Court reiterated the earlier finding that the mere location of an appellate authority in the town of Madras was insufficient to confer jurisdiction when both the subject matter—namely the settlement of rent for lands in Ganjam—and the Revenue Officer authorized to make the original settlement lay outside the local limits of the High Court’s jurisdiction. The Court warned that if the Madras High Court were recognized as having jurisdiction to issue a writ of certiorari to the appellate authority situated in Madras, it would effectively be recognizing the Court’s jurisdiction over the Revenue Officer in Ganjam and the settlement of rents for lands there, a conclusion that the Privy Council had expressly refused to accept.
In the Court’s view, the first contention raised by Dr. Tek Chand must be accepted as well founded, and consequently the Punjab High Court’s conclusion on the question of jurisdiction cannot be upheld. Regarding the second point, the High Court relied on the general rule of statutory construction that when a legislature enacts a new statute providing a new remedy, that remedy alone is available for pursuit. The Taxation on Income (Investigation Commission) Act of 1947 indeed contains a specific remedy against any erroneous or illegal order of the investigating commission. Under section 8(5) of that Act, an aggrieved party may apply to the appropriate Commissioner of Income-Tax to have any question of law arising from such an order referred to the High Court. The reference is then governed by sections 66 and 66-A of the Indian Income-Tax Act, with the modification that the matter must be heard by a bench comprising not fewer than three High Court judges. The Court considered that it was not necessary to pronounce a final opinion on whether section 8(5) of the Act constitutes the exclusive remedy for the aggrieved party, thereby excluding the remedy available under article 226 of the Constitution. For the purposes of the present case it sufficed to note that the constitutional remedy under article 226 is discretionary, and the High Court retains the discretion to refuse a writ if it is satisfied that the aggrieved party can obtain adequate or suitable relief by another avenue. In the present matter, the appellants had already availed themselves of the remedy under section 8(5) of the Investigation Commission Act, and a reference to the Allahabad High Court pursuant to that provision was pending decision. Given these circumstances, the Court deemed it inappropriate to permit the appellants to invoke the discretionary jurisdiction of article 226 at this stage, and therefore refused to interfere with the High Court’s orders on that ground alone. Dr. Tek Chand further argued that the income-tax authorities had not referred all the matters to the High Court that the appellants desired. The Court observed that the Act itself provides a remedy for such a situation, and that where a proceeding results in a gross miscarriage of justice, this Court retains the jurisdiction to intervene by granting special leave. Accordingly, the appeals were dismissed, and no order as to costs was made.
The Court held that the appeals could not be sustained and therefore ordered that the appeals be dismissed. In arriving at this conclusion, the Court examined the specific circumstances of the matter and, while deciding to dismiss the appeals, elected not to make any order as to the liability for costs. As a result, each party was left to bear its own costs of the proceedings, without any further imposition by the Court. In addition to the decision on the appeals, the Court formally recorded the names of the individuals who acted as agents for the parties. For the appellant, the agent identified was Rajinder Narain, who appeared on behalf of the appellant throughout the proceedings. For the respondents, the agent recorded was R H Dhebar, who represented the respondents. No additional directions, remedies, or procedural orders were issued beyond the dismissal of the appeals and the observation that no costs order would be made.