Pannalal Binjraj And Another vs The Union Of India And Others

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

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 21 December, 1956

Coram: BHAGWATI, J.

In this matter the Supreme Court considered several petitions filed under article 32 of the Constitution that raised a common question of law as to whether section 5 (7A) of the Indian Income‑tax Act, hereinafter referred to as the Act, was ultra vires the Constitution because it infringed the fundamental rights guaranteed by article 14 and article 19 (1) (g). The first two petitions, numbered 97 and 97A of 1956, were filed by the petitioners Messrs Pannalal Binjraj, who were oil‑mill owners, merchants and commission agents conducting business at Sahibganj in the district of Santhal Parganas and maintaining a branch at 94 Lower Chitpur Road, Calcutta, and by R. B. Jamuna Das Chowdhury, a resident of the same place and the former Karta of the Hindu undivided family that carried on business under the name and style of Messrs Pannalal Binjraj. Before 28 September 1954 the two petitioners were being assessed by the Income‑tax Officer of the Special Circle, Patna. On 28 September 1954 the Central Board of Revenue issued an order transferring their cases to the Income‑tax Officer of Central Circle XI, Calcutta. Subsequently, on 22 January 1955 the Central Board transferred the case of petitioner No. 2 to the Income‑tax Officer of Central Circle VI, Delhi, and on 12 July 1955 it transferred the case of petitioner No. 1 to the same officer. After these transfers the officer of Central Circle VI, Delhi, instituted several proceedings against the petitioners. The petitioners challenged the validity of the transfer orders and all subsequent proceedings, including the assessment orders and the order imposing a penalty for non‑payment of income‑tax that had been previously assessed, on the ground that section 5 (7A) of the Act was unconstitutional and that any proceedings initiated by the Delhi officer were therefore without jurisdiction and void. The next set of petitions, numbered 44 of 1956 and 85 of 1956, concerned Shri A. L. Sud, the sole proprietor of Messrs Amritlal Sud (Construction), originally from Hoshiarpur district in Punjab but residing and carrying on business in Calcutta since 1948. Prior to 29 June 1955 he had been assessed by the Income‑tax Officer of the Special Survey Circle VII, Calcutta. On 29 June 1955 the Central Board of Revenue transferred his cast to the Income‑tax Officer of Special Circle, Ambala. The officer in Ambala continued the proceedings in the transferred case and also instituted further proceedings, assessing him under section 23 (4) of the Act for the assessment years 1946‑47 and 1947‑48, and thereafter made demands for payment of the income‑tax so assessed.

The petitioner was required to pay the income‑tax that had been assessed against him. Consequently, he instituted a petition challenging the validity of the Central Board of Revenue order dated 29 June 1955 and also contesting the proceedings that had been taken up by the Income‑tax Officer of the Special Circle in Ambala. The basis of his challenge was the claim that section 5 (7A) of the Act was beyond the constitutional powers. In Petition No. 85 of 1956, the firm Messrs Bhagwan Das Sud & Sons, merchants of Hoshiarpur, also filed a petition. Their case had, on the same date, been transferred under section 5 (7A) of the Act by the Commissioner of Income‑tax, who was the Officer of the Special Circle in Ambala. The Commissioner continued the proceedings, reopened the assessment for the years 1944‑45 to 1950‑51, and finalized assessments for the years 1947‑48, 1950‑51 and 1951‑52. Following these actions, the petitioners lodged separate petitions contesting the validity of the transfer order issued by the Commissioner, again relying on the argument that section 5 (7A) was ultra vires the Constitution. Shri A. L. Sud, who was the petitioner in Petition No. 44 of 1956, belonged to a Hindu undivided family that conducted business under the name Messrs Bhagwan Das Sud & Sons. Both his case and that of Messrs Bhagwan Das Sud & Sons had been transferred to the Income‑tax Officer of the Special Circle in Ambala by the respective orders previously described.

Petitions Nos. 86, 87, 88, III, 112 and 158 of 1956 may be collectively referred to as the “Amritsar group.” The petitioner in Petition No. 86 of 1956 was Sardar Gurdial Singh, son of S. Narain Singh, who in turn was the son of S. Narain Singh. Petition No. 87 of 1956 was filed by Dr Sarmukh Singh, also a son of S. Narain Singh. The petitioner in Petition No. 112 of 1956 was S. Ram Singh, another son of S. Narain Singh; thus, these three petitioners were brothers. Petition No. 88 of 1956 was filed by their father, S. Narain Singh, who was the son of S. Basdev Singh. The father and his three sons all served as directors of Hidustan Embroidery Mills (Private) Ltd., which was the petitioner identified as No. 1 in Petition No. 111 of 1956 and was situated at Chheharta near Amritsar. Prior to the transfer orders made by the Commissioner of Income‑tax Officer “A” Ward, Amritsar, their cases had been pending with the Income‑tax Officer “A” Ward, Amritsar. Around 29 June 1953, those cases were transferred to the Income‑tax Officer of the Special Circle, Amritsar. The Special Circle Officer continued the matters and issued notices under section 34 of the Act to the petitioners for the assessment years 1947‑48 through 1951‑52. Each of the petitioners thereafter filed an individual petition challenging both the transfer order made by the Commissioner and the subsequent proceedings before the Special Circle Officer, relying on the claim that section 5 (7A) of the Act was unconstitutional. The petitioner in Petition No. 158 of 1956 was Shri Ram Saran.

In this case the petitioner identified as Das Kapur, who acted as the head and karta of a Hindu undivided family that conducted business outside Ghee Mandi Gate in Amritsar, had his tax matters originally before the Income‑tax Officer of “F” Ward, Amritsar. An order issued in 1954 by the Commissioner of Income‑tax, who was then the officer of the Special Circle, Amritsar, transferred Das Kapur’s file to that officer. The petitioner did not contest the transfer at the time it was made; his objection arose only after the assessment order had been passed. Subsequently he challenged both the validity of the transfer order and the proceedings that the Special Circle officer continued, relying on the same constitutional argument concerning the validity of section 5 (7A) of the Act that other petitioners had advanced.

The petitions numbered 211 of 1956 through 215 of 1956 may be collectively described as the Sriram Jhabarmull group. Although each petition was filed separately, all were brought by the same individual, Nandram Agarwalla, who was the sole proprietor of a business carried on under the name Sriram Jhabarmull. The business was engaged, among other activities, in the import and export of piece‑goods, acted as commission agents, and dealt in raw wool and related materials. Its main place of business was located at Kalimpong in the Darjeeling district, with an additional branch situated in Calcutta. These petitions concerned the assessment of income‑tax for the fiscal years 1944‑45, 1945‑46, 1946‑47, 1947‑48 and 1948‑49. Before the Commissioner of Income‑tax issued orders under section 5 (7A) of the Act that were later challenged, the petitioner’s matters were being assessed by the Income‑tax Officer of Jalpaiguri, Darjeeling. On 15 March 1946 the petitioner’s cases were transferred from Jalpaiguri to the Income‑tax Officer of Central Circle I, Calcutta, and a few months later they were transferred again to the Income‑tax Officer of Central Circle IV, Calcutta. On 8 June 1946 a further transfer assigned the cases back to the officer of Central Circle I, Calcutta, and on 27 July 1946 the Commissioner of Income‑tax, Central, Calcutta, exercised his power under section 5 (7A) to move the petitioner’s files to the Income‑tax Officer of Central Circle IV, Calcutta. The petitioner challenged these orders as unconstitutional and void, arguing that they invalidated the subsequent proceedings that the Central Circle IV officer instituted on the ground of the same constitutional objection to section 5 (7A). It should be noted that all these transfers and the order of 27 July 1946 occurred before the Constitution came into force; nevertheless, they were followed by completed assessment proceedings for the respective years and also gave rise to certificate proceedings under section 46 (2) of the Act. Later orders dated 15 December 1947 and another in September 1948 again transferred the petitioner’s files between the officers of Central Circle I and Central Circle IV, Calcutta, but those later movements were not material to the petition, as the only order under challenge remained the Commissioner’s order of 27 July 1946 made under section 5 (7A).

For the purpose of the present adjudication, the only order that was contested was the order issued by the Commissioner of Income‑tax, Central, Calcutta on 27 July 1946, which had been made under section 5 (7A) of the Income‑tax Act. All other subsequent orders relating to the transfer of the petitioner’s case were held to be irrelevant to the issues that the Court was called upon to consider.

The petitions numbered 225 of 1956 through 229 of 1956 may be collectively identified as the Raichur group of petitions. Each of these petitions concerned the assessment of the assessment years 1950‑51, 1951‑52, 1952‑53, 1953‑54 and 1954‑55. In every petition the petitioner was the same person, namely Kalloor Siddanna, who resided in Raichur in the State of Hyderabad and carried on business there as a commission agent and distributor of agricultural products. Income‑tax liability in Hyderabad had first been imposed by a special statute enacted by the Hyderabad Legislature in 1946, and the petitioner had been assessed under that Hyderabad Income‑tax Act by the Additional Income‑tax Officer, Raichur, for the years 1948‑49 and 1949‑50.

With effect from 1 April 1950, the Indian Income‑tax Act was extended to the State of Hyderabad. Nevertheless, the Additional Income‑tax Officer, Raichur, continued to assess the petitioner for the subsequent years. The assessments for the years 1950‑51, 1951‑52 and 1952‑53 remained pending before that officer and proceedings were instituted in connection with those assessments.

On 21 December 1953 the Commissioner of Income‑tax, Hyderabad, exercised his power under section 5 (7A) and issued a notification ordering that the petitioner’s case be transferred from the Additional Income‑tax Officer, Raichur, to the Income‑tax Officer, Special Circle, Hyderabad. After the transfer, the Special Circle officer pursued the assessment proceedings and issued notices under section 22 (4) of the Act on 1 July 1954, 2 November 1954, 30 November 1954, 19 December 1954 and 11 March 1955, each notice relating to the respective assessment years. The assessments for those years were finally determined on 21 March 1955.

Subsequently, on 24 April 1955 the petitioner filed an application under section 27 of the Act seeking to reopen the assessment for the year 1950‑51 on the ground of a default under section 23 (4). Shortly before 19 May 1955 the Commissioner of Income‑tax, Hyderabad, issued another order, again invoking section 5 (7A) together with section 64 (5)(b), which transferred all of the petitioner’s outstanding cases to the main Income‑tax Officer, Raichur.

The petitioner contested both of the transfers – the one dated 21 December 1953 and the later one made in May 1955 – on the basis that they were unconstitutional and void because section 5 (7A) was alleged to be ultra vires the Constitution. Although the later order placed the petitioner under the jurisdiction of the main Income‑tax Officer, Raichur, the petitioner maintained that the proceedings initiated under the transferred orders were invalid. The central issue that arose in each of the petitions of the Raichur group was therefore the constitutional validity of section 5 (7A) of the Act. While this question of ultra vires character was common to all the petitions, each group also presented specific factual questions, particularly concerning the alleged discriminatory nature of the individual orders that had been issued, and those factual matters would be examined in their appropriate contexts later in the judgment.

In this part of the judgment the Court turned its attention to the nature of the specific orders that had been issued, and indicated that those orders would be examined later in the appropriate sections of the judgment. The Court then set out the wording of section 5(7A) of the Income‑Tax Act, which provides that the Commissioner of Income‑Tax may transfer any case from one Income‑Tax Officer who is subordinate to him to another Income‑Tax Officer, and that the Central Board of Revenue may also transfer any case from any one Income‑Tax Officer to another. The provision further states that such a transfer may be made at any stage of the proceedings and that the transfer does not require the re‑issuance of any notice that has already been issued by the officer from whom the case is transferred. The Court noted that this sub‑section was introduced by section 3 of the Indian Income‑Tax Amendment Act, 1940 (Act XL of 1940), which itself was enacted in response to the Bombay High Court decision in Dayaldas Kushiram v. Commissioner of Income‑Tax. Later, by way of the Indian Income‑Tax Amendment Act, 1956 (Act XXVI of 1956), an explanation was added to section 5(7A). The Court explained that this explanation was inserted following the Supreme Court’s decision in Bidi Supply Co. v. Union of India and Others. The explanation reads that ‘case in relation to any person whose name is specified in the order of transfer’ means all proceedings under the Act that are pending on the date of the transfer for any year, and it also includes all proceedings that may be started after the date of transfer for any year. The Court therefore held that section 5(7A) together with its explanation must be considered by it in deciding the present petitions. The petitioners argued that sections 64(1) and 64(2) of the Act confer a valuable right on the assessee, namely the right to tell the tax authorities that he should not be required to appear at different locations, a requirement that would disrupt his business. According to the petitioners, section 5(7A) gives the Commissioner of Income‑Tax and the Central Board of Revenue an unfettered and arbitrary power to move any case from one Income‑Tax Officer to another at any time, without any guiding principle or limitation. They contended that this power is discriminatory because it allows the Commissioner or the Board to single out a particular assessee’s case and transfer it from one state to another, or from one end of the country to the other, without stating any purpose or providing any reason. Such a transfer would subject that assessee to discriminatory treatment, while another assessee in a similar situation would continue to be assessed where he resides or carries on business, as provided by sections 64(1) and 64(2). The petitioners further pointed out that section 64(5) gives retrospective effect to the provision that sections 64(1) and 64(2) shall not apply where an order has been made under section 5(7A). They argued that this retrospective clause was inserted at the same time as section 5(7A) and could not save the latter from being unconstitutional.

The Court observed that if section 5(7A) were valid, it would deprive an assessee of the valuable right granted under section 64(1) and 64(2) of the Act. However, the Court held that section 5(7A) is discriminatory in nature and therefore exceeds the authority of the Constitution. Because of this ultra‑vires character, section 5(7A) cannot preserve section 64(5), which is merely consequential to the earlier provisions. The discrimination embedded in section 5(7A) was described as substantial, and the Court found that it directly infringes the fundamental right to equality enshrined in article 14 of the Constitution. In addition, the Court noted that the provision also contravenes article 19(1)(g), since it imposes an unreasonable restriction on the fundamental right to carry on trade or business, referring to the precedent set in Himmatlal Harilal Mehta v. State of Madhya Pradesh. The same constitutional issue regarding the legality of section 5(7A) had previously arisen before this Court in the case of Bidi Supply Co. v. Union of India and Others, where the facts involved the Central Board of Revenue transferring the assessee from the Income‑Tax Officer of District III, Calcutta, to the Income‑Tax Officer of the Special Circle, Ranchi, pursuant to section 5(7A). The order was an omnibus, wholesale transfer expressed in general terms without any temporal limitation and was challenged on the ground that the empowering provision, section 5(7A), was unconstitutional.

In that earlier case, a majority of the Judges, after discussing the general principles underlying article 14, refrained from deciding the constitutionality of sub‑section (7A) of section 5. Their judgment, quoted at page 724, stated that it was unnecessary for the present case to pause and consider whether the provision could be supported by any reasonable classification laid down by this Court, whether the Act provided any guiding principle for the discretion of the Commissioner or the Board of Revenue, or whether the sub‑section conferred an unguided and arbitrary power to select individual assessees and place them at a disadvantage compared with others. The Court clarified that the omnibus order in question was not contemplated or sanctioned by sub‑section (7A); consequently, the petitioner remained entitled to the benefits under sub‑section (1) and (2) of section 64. The judgment further explained that all assessees are entitled to those benefits, except in circumstances where specific cases of a particular assessee for a particular year or years are transferred under sub‑section (7A), assuming that provision to be valid, and even then the right under section 64 continues to apply to the assessee’s other cases. After making this observation, the majority proceeded to examine the impact of an unlimited, time‑free omnibus order on the rights of the assessee, and further observations were recorded on pages 724‑5 of the report.

In the present case the Court recorded that the order under consideration was deliberately designed to cause serious inconvenience and harassment to the petitioner. It noted that the petitioner would be required to present its books of account before the Income‑Tax Officer of the Special Circle at Ranchi, a location situated hundreds of miles away from the petitioner’s place of business in Calcutta. The Court observed that the partners or principal officers of the firm would have to leave the head office for an extended period, thereby neglecting the ordinary operations of the business. The Court added that there might be no suitable accommodation available for the partners during that period, and that the petitioner would inevitably incur additional expenses such as railway fares, freight charges and hotel costs. On the basis of these facts the Court concluded that the discrimination described could not be denied. It further held that the substantial discrimination had been imposed on the petitioner by an executive fiat that lacked any legal foundation, and that no question of reasonable classification for legislative purposes could arise. The Court explained that the State, including its Income‑Tax Department, by issuing an illegal order had denied the petitioner, in comparison with other bidi merchants similarly situated, the guarantee of equality before the law and the equal protection of the laws, thereby infringing the petitioner’s fundamental right under Article 14 of the Constitution.

The Court clarified that the issue of the constitutionality of Section 5(7A) of the Act remained unresolved and that the decision was limited to the interpretation of the impugned order. Counsel for the petitioners placed particular emphasis on the observations made by Justice Bose in the minority judgment, wherein he had held that Sections 5(7A) and 64(5)(b) of the Act themselves violated Article 14 and were not merely the product of an erroneous order of the Central Board of Revenue. The minority judgment cited a passage from the decision of Justice Fazl Ali in State of West Bengal v. Anwar Ali Sarkar and also referred to the Court’s earlier ruling in Dwarka Prasad Laxmi Narain v. State of Uttar Pradesh and Two Others. In that context the minority judgment stated: “What is the position here? There is no hearing, no reasons are recorded: just peremptory orders transferring the case from one place to another without any warning; and the power given by the Act is to transfer from one end of India to the other; nor is that power unused. We have before us in this Court a case pending in which a transfer has been ordered from Calcutta in West Bengal to Ambala in the Punjab.” (page 729). The judgment went on to observe: “If the Legislature itself had done here what the Central Board of Revenue has done and had passed an Act in the bald terms of the order made here transferring the case of this petitioner, picked out from others in an alike situation, from one state to another, or from one end of India to the other, without specifying any object and without giving any reason, it would, in my judgment, have been bad. I am unable to see how” (page 730).

The Court observed that the situation was not improved merely because the Central Board of Revenue, rather than Parliament, had undertaken the transfer. The Court further expressed the view that a power to transfer cases may be validly conferred only when it is accompanied by reasonable restrictions that can ultimately be examined by the Courts. The exercise of such a power, the Court held, must adhere to the principles of natural justice; that is, the parties whose rights are affected should be given an opportunity to be heard whenever it is reasonably possible, and the reasons for any order must be recorded in writing, even if only briefly, so that it is clear that the quasi‑judicial bodies are exercising their authority in a just and proper manner.

The State responded to this argument with a four‑point submission. First, it contended that section 5(7A) of the Income‑Tax Act is a measure of administrative convenience designed to enable the Commissioner of Income‑Tax or the Central Board of Revenue to transfer a case from one Income‑Tax Officer to another when such a transfer is considered necessary or desirable. The State relied on an affidavit dated 19 November 1956, submitted by Shri V. Gouri Shankar, Under‑Secretary of the Central Board of Revenue, which explained that the provision was inserted by the Income‑Tax Amendment Act XL of 1940 to minimise procedural difficulties. Prior to that amendment, there was no specific provision for transferring a case between officers except through a lengthy and indirect process, even when the assessee requested it or when cases involved complex, widespread activities or inter‑related transactions. Consequently, the power to transfer was vested in the Central Board of Revenue or the Commissioner of Income‑Tax as appropriate, and the provision is characterised as administrative in nature.

Second, the State argued that an assessee whose case is transferred is not subjected to any discriminatory procedure in the assessment process. The Income‑Tax Officer who receives the transferred case must apply the same procedural rules laid down in the Act. The decision of that officer remains appealable before the Appellate Assistant Commissioner, and the assessee retains the further right to appeal to the Income‑Tax Appellate Tribunal, to the High Court, and ultimately to the Supreme Court, as provided by the statute. Thus, all assessees, whether their cases are handled by the officer in the area where they reside or by an officer to whom the case has been transferred, are subject to the same procedure and enjoy the same rights and privileges for redress of grievances, with no discrimination between them.

Third, the State maintained that any right conferred upon an assessee under sections 64(1) and 64(2) of the Act is not an absolute right. That right is limited by the practical necessities of tax collection and may be denied when the Commissioner of Income‑Tax or the Central Board of Revenue, as the case may be, deems it necessary or desirable to transfer the case under section 5(7A), taking into account all the circumstances. The affidavit further sought to address the argument of inconvenience by stating that any transfer made under the provision would be justified in the interests of effective administration.

It was observed that an Income‑tax Officer who is attached to the area where a taxpayer resides or conducts business, or an officer to whom the taxpayer’s case has been transferred from another officer, must follow exactly the same procedural rules and must be entitled to the same rights and privileges for addressing any grievance that may arise. The judgment emphasized that there is absolutely no discrimination between one taxpayer and another in this respect. Further, the Court explained that any right that may be claimed by a taxpayer under sections 64(1) and 64(2) of the Income‑Tax Act is not an unconditional right. Such rights are limited by the practical necessities of tax collection and may be denied when the Commissioner of Income‑tax or the Central Board of Revenue, as the situation requires, deems it necessary or desirable to transfer the case from one officer to another under section 5(7A) of the Act, taking into account all the relevant circumstances of the case. The argument that the transfer causes inconvenience was addressed in the affidavit filed by the petitioner, which stated: “I further say that as a result of any transfer that may be made under the provisions of section 5(7A), there is no discriminatory treatment with regard to the procedure and that the privileges and rights given to the assessee are not exposed to any increased prejudice, punitive consequences or differential treatment.” The Court noted that when a transfer is effected without a request from the taxpayer, the authorities still consider the taxpayer’s convenience by assigning the case to an Income‑tax Officer who is located nearest to the place where the taxpayer can attend conveniently. If, because of administrative exigencies, this is not feasible and the taxpayer requests that the examination of accounts or the taking of evidence be conducted at a location convenient to him, the Income‑tax Officer is required to comply with that request and to hold the hearing at the place specified by the taxpayer. The judgment further observed that even if there are minor differences between taxpayers who reside or carry on business in a particular area as a result of such transfers, those differences are not material; they represent only a slight deviation from a general standard and do not amount to a denial of equal rights.

In addition, the Court held that the power to transfer cases under section 5(7A) is a discretionary power and is not inherently discriminatory. The Court cautioned that the mere existence of discretion in the hands of high‑ranking officials does not automatically give rise to an assumption of abuse of power. Even if occasional abuse were to occur, the validity of the provision itself could not be challenged on the basis of such apprehension. What could be struck down, according to the judgment, is not the statutory provision but its discriminatory application in specific instances. The petitioners, in support of their argument, relied upon a passage from the judgment of Justice Fazl Ali in State of West Bengal v. Anwar Ali Sarkar, invoking the earlier authority to bolster their claim that the provision, taken in its proper construction, does not discriminate when applied correctly.

In the minority opinion authored by Bose, J., in the case of Bidi Supply Co. v. The Union of India, the judge cited a passage from a judgment of Fazl Ali, J., in State of West Bengal v. Anwar Ali Sarkar, recorded at page 281, which observed: “It was suggested that the reply to this query is that the Act itself being general and applicable to all persons and to all offences, cannot be said to discriminate in favour of or against any particular cases or classes of persons or cases, and if any charge of discrimination can be leveled at all, it can be leveled only against the act of the executive authority if the act is misused. This kind of argument however does not appear to me to solve the difficulty. The result of accepting it would be that even where discrimination is quite evident one cannot challenge the Act simply because it is couched in general terms; and one cannot also challenge the act of the executive authority whose duty it is to administer the act, because that authority will say: I am not to blame as I am acting under the Act. It is clear that if the argument were to be accepted article 14 could be easily defeated. I think the fallacy of the argument lies in overlooking the fact that the insidious discrimination complained of is incorporated in the Act itself, it being so drafted that whenever any discrimination is made such discrimination would be ultimately traceable to it.” The petitioners built their principal argument on the provisions contained in section 64(1) and (2) of the Income‑Tax Act, which prescribe the place of assessment. Section 64(1) provides that when an assessee carries on a business, profession or vocation at any place, the assessment shall be made by the Income‑tax Officer of the area in which that place is situated, or, if the activity is conducted in more than one place, by the Income‑tax Officer of the area in which the principal place of the business, profession or vocation is situated. Section 64(2) states that in all other cases an assessee shall be assessed by the Income‑tax Officer of the area in which he resides. These provisions were interpreted by the Bombay High Court in Dayaldas Kushiram v. Commissioner of Income‑tax, (Central), and Another, where Chief Justice Beaumont observed at page 146 that, in his opinion, section 64 was intended to ensure that, as far as practicable, an assessee should be assessed locally and that the area to which an Income‑tax Officer is appointed must, insofar as the exigencies of tax collection allow, have a reasonable relation to the place where the assessee carries on business or resides. Justice Kania, then serving on the bench, went further at page 149, stating that a plain reading of the section shows that the requirement is imperative in terms and that it confers a valuable right on the assessee, allowing him to inform the taxing authorities that he shall not be called upon to attend at different places, thereby protecting his business interests.

The Court observed that the judges had interpreted the provisions of section 64 (1) and (2) of the Act more as conferring a right on the assessee rather than merely providing a matter of convenience. The Court explained that if those provisions indeed created a right for every assessee to be assessed by the Income‑tax Officer of the area where he resides or carries on business, then an assessee whose case is transferred under section 5 (7A) to an Income‑tax Officer outside that area would be treated differently from the others. Such a difference could be described by the affected assessee as discrimination, inconvenience, or even harassment. Consequently, the Court deemed it necessary to examine whether section 64 (1) and (2) actually grant such a right.

At first glance, the language of those subsections appears to entitle an assessee to be assessed by the Income‑tax Officer of the specific area in which he lives or conducts his business. The Court noted that when a dispute arises concerning the appropriate place of assessment, section 64 (3) provides that the matter must be decided either by the Commissioner of the relevant jurisdiction, if the dispute involves places in more than one state, or by the Central Board of Revenue, should the Commissioners fail to reach agreement. In either case, the assessee must be given an opportunity to present his views before a decision is reached. This procedural safeguard indicates that the assessee’s convenience is a primary consideration in determining the assessment location.

Nevertheless, the Court emphasized that the practical needs of tax collection and the overarching purpose of the Act—to assess income‑tax—must also be taken into account. The hierarchy of Income‑tax authorities established under Chapter II of the Act is designed to ensure that the correct tax liability is determined. Whether a particular authority proceeds with the assessment of a given assessee depends not only on the assessee’s convenience but also on the exigencies of tax collection. To assess tax more efficiently, it may sometimes be necessary for an assessee to be assigned to an Income‑tax Officer in a different area than his residence or place of business. For example, the nature or volume of the assessee’s business, or his connections with various individuals or organisations that generate his income, might require an extra‑territorial investigation before a proper assessment can be made. These scenarios illustrate circumstances in which the Income‑tax Officer of the assessee’s home area might deem it appropriate to refer the case to another Officer, whether within the same state or in a different one. The Court highlighted that this aspect of the matter had been stressed by Beaumont, C.J., in the earlier decision of Dayaldas Kushiram.

In the case of Kushiram v. Commissioner of Income‑tax (Central), the Court observed that the expression “as far as practicable” was used to describe the assessee’s right to be assessed locally, while the phrase “so far as exigencies of tax collection allow” was employed to justify the appointment of an Income‑tax Officer to assess the tax payable by a particular assessee. The Court later referred to a subsequent decision, Dayaldas Kushiram v. Commissioner of Income‑tax (Central), in which Chief Justice Beaumont articulated that the Income‑tax Act does not prescribe the place of assessment. According to the Chief Justice, the Act merely identifies the officer who possesses the authority to assess, and it sometimes does so by reference to locality. However, the Court expected that an appeal would not be directed against the Commissioner’s order concerning the place of assessment, but rather against the assessment order issued by the Income‑tax Officer. This observation underscored the view that the statutory provisions related to the place of assessment are essentially matters of administrative convenience rather than questions of jurisdiction.

The Federal Court reinforced this approach in Wallace Brothers and Co. Ltd. v. Commissioner of Income‑tax, Bombay Sind and Baluchistan, where Chief Justice Spens noted that clause (3) of section 64 provides that any dispute regarding the place of assessment shall be determined by the Commissioner or by the Central Board of Revenue. The third proviso to that clause further provides that if the assessee challenges the place of assessment, the Income‑tax Officer must, unless satisfied with the correctness of the claim, refer the matter for determination under the same subsection before an assessment is made. The Court emphasized that these provisions indicate that the issue concerns administrative convenience rather than jurisdiction, and that it is not a matter for judicial adjudication.

The majority judgment in Bidi Supply Co. v. The Union of India and others (page 719) treated the benefit conferred by sections 64(1) and 64(2) of the Act as a right for the assessee to be assessed by the Income‑tax Officer of the area where he resides or carries on business. Nevertheless, the authorities previously cited qualified this right by stating that it must yield to the exigencies of tax collection. Consequently, the prevailing position is that the determination of whether a specific Income‑tax Officer should assess an assessee’s case depends on two factors: first, the convenience of the assessee as outlined in sections 64(1) and 64(2) of the Act; and second, the exigencies of tax collection. Moreover, the Commissioner of Income‑tax and the Central Board of Revenue, being the highest authorities under the Act, retain the power to transfer a particular assessee’s case from the Income‑tax Officer of the area in which the assessee resides or conducts business to any other Income‑tax Officer, provided that such a transfer is warranted by the exigencies of tax collection. It is further to be noted that the

The Court held that the transfer of an assessment case under section 5 (7A) of the Act did not constitute a material infringement of the right conferred by sections 64 (1) and 64 (2). It explained that such a transfer represented only a minor deviation from the general standard and did not necessarily amount to a denial of equal rights, because even after the transfer the case continued to be dealt with under the normal procedure prescribed in the Act. The Court emphasized that the duties of producing and investigating the books of account, and the enquiries to be made by the Income‑tax Officer, remained exactly the same in a transferred case as they were in cases that stayed with the Income‑tax Officer of the area where the other assessee lived or carried on business. Consequently, the Court found no differential treatment and ruled that there was no ground for claiming that the particular assessee was discriminated against in comparison with others similarly situated.

The Court then referred to its earlier observation in M. K. Gopalan v. State of Madhya Pradesh, quoting that “In support of the objection raised under article 14 of the Constitution, reliance is placed on the decision of this Court in Anwar Ali Sarkars case. That decision, however, applies only to a case where on the allotment of an individual case to the special court authorised to conduct the trial by a procedure substantially different from the normal procedure and prejudicing them thereby. In the present case, the Special Magistrate under section 14 of the Criminal Procedure Code has to try the case entirely under the normal procedure, and no discrimination of the kind contemplated by the decision in Anwar Ali Sarkars case, and the other cases following it, arises here. A law vesting discriminatory as such, and is therefore not hit by article 14 of the Constitution. There is, therefore, no substance in this contention.” The Court added that similar reasoning was expressed by Mukherjea, J., then sitting as a judge, in State of West Bengal v. Anwar Ali Sarkar, page 325, where he said, “I agree with the Attorney‑General 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 might not amount to denial of equal rights.”

Finally, the Court noted that, as the statute stands, section 64 (5) now excludes the operation of sections 64 (1) and 64 (2) for any assessee whose case has been transferred under section 5 (7A) to a different Income‑tax Officer. It pointed out that section 64 (5) had been introduced by the Income‑tax Law Amendment Act, 1940 (XL of 1940) at the same time as section 5 (7A). The argument that a transferred assessee therefore loses the right under sections 64 (1) and 64 (2), while only those not subject to section 64 (5) retain that benefit, was rejected because it ignored the continuing applicability of section 64 (5) itself.

Section 5 (7A) forms the foundation for the enactment of the relevant provision in Section 64 (5); consequently, if Section 5 (7A) were held to be invalid because it is discriminatory, the corresponding part of Section 64 (5) must also be invalid. It is therefore argued that Section 5 (7A) itself is discriminatory and violates the fundamental right guaranteed by Article 14. The authority conferred on the Commissioner of Income‑tax and the Central Board of Revenue by this provision is described as a naked and arbitrary power that operates without any governing rules. No regulations have been framed, and no directions have been issued to guide or restrict the discretion exercised in making transfers, leaving the entire exercise of this power to the unrestrained will of the Commissioner of Income‑tax or the Central Board of Revenue. Because there is no mechanism to ensure proper execution or to provide a check against possible injustice arising from improper use of the power, the argument is that the transfer power is fundamentally unchecked. In support of this view, the judgment quotes Mr Justice Matthews in Yick Wo v. Hopkins: “when we remember that this action or non‑action may proceed from enmity or prejudice, from partisan zeal or animosity, from favoritism and other improper influences and motives easy of concealment and difficult to be detected and exposed, it becomes unnecessary to suggest or comment upon the injustice capable be brought under cover of such a power, for that becomes apparent to every one who gives to the subject a moment’s consideration.” The submission further observes that, as expressed by Das, J. in The State of West Bengal v. Anwar Ali Sarkar (p. 346), the issue is not merely an unconstitutional administration of an otherwise valid statute but a complete unconstitutionality inherent in the statute itself. It must be remembered that the purpose of the Income‑tax Act is to levy, assess and collect income‑tax. Although the preamble does not state explicitly that the Act is an “Act to consolidate and amend the law relating to income‑tax and super‑tax,” that purpose is evident from the preamble of the first Indian Income‑tax Act of 1886 (Act II of 1886). Accordingly, every provision of the Act is designed to achieve this purpose. First, the charge of income‑tax is imposed; subsequently, a hierarchy of authorities is established, with the Central Board of Revenue at the apex, to carry out the assessment function. An Appellate Tribunal is also created to hear appeals against decisions of the Appellate Assistant Commissioners, and the Act contains detailed provisions concerning taxable income, modes of assessment and related matters. The Income‑tax Officers are entrusted with the duty of assessing the income‑tax of the assessees.

The Court explained that Income‑tax Officers were responsible for assessing the income‑tax of assessors at the first level. The Assistant Commissioners of Income‑tax and the Income‑tax Appellate Tribunal functioned as the final appellate authority, except for references under section 66 (1) of the Act to the High Court on questions of law. The Commissioners of Income‑tax and the Central Board of Revenue acted mainly as administrative heads over the Income‑tax Officers and the Assistant Commissioners, and they distributed and controlled the work to be performed by those officers. All officers and persons employed in executing the Act were required to observe and follow the orders, instructions and directions of the Central Board of Revenue, which occupied the highest position in the hierarchy. Although, in accordance with sections 64 (1) and (2), the assessment work was ordinarily to be carried out by the Income‑tax Officer of the area where the assessors resided or conducted business, section 5 (7A) conferred power on the Commissioner of Income‑tax to transfer any case from one subordinate Income‑tax Officer to another, and likewise authorised the Central Board of Revenue to transfer any case from one Income‑tax Officer to any other. This constituted the administrative machinery set up for assessing the incomes of assessors liable to income‑tax. Consequently, the Court recognised that the contention advanced on behalf of the State, that section 5 (7A) served as a provision for administrative convenience, possessed considerable force. Nevertheless, the Court stressed that the power granted to the Commissioner of Income‑tax and to the Central Board of Revenue had to be exercised in a manner that was not discriminatory. Since no rules or directions had been laid down regarding the exercise of that power in particular situations, the appropriate authority was required to determine the proper cases in which such power should be exercised, bearing in mind the object of the Act and the ends to be achieved. The Court observed that the cases of assessors varied widely and no two cases were identical. The nature of the business carried on by assessors could introduce complications, and in certain instances the assessors might be engaged in extensive activities, large ramifications or inter‑related transactions that warranted, for the sake of convenient and efficient assessment, the transfer of the case from one Income‑tax Officer to another. In such circumstances, the Commissioner of Income‑tax or the Central Board of Revenue, as the case required, had to exercise discretion with due regard to the exigencies of tax collection. The Court further noted that although there might be a common attribute between an assessor whose case was transferred and those whose cases remained with the Income‑tax Officer of the area where they resided or carried on business, other attributes would differ. For example, one assessor might have such widespread activities and ramifications that his case needed to be transferred from the Income‑tax Officer of the particular area to an officer in another area, either within the same State or in a different State, whereas another assessor, although belonging to a similar category, might be more conveniently and efficiently assessed in a different area. The Court concluded that the considerations influencing the decision to transfer cases to an area “X” or “Y” depended on the particular circumstances of each case, and no rigid rule could be prescribed for determining whether a case should be transferred at all or to which Income‑tax Officer it should be assigned. Accordingly, the discretion to transfer cases was required to reside with the concerned authority, and the mere fact that a particular assessor’s case was transferred from the Income‑tax Officer of his own area to another officer, whether within or outside the State, was not sufficient by itself to characterize the exercise of discretion as discriminatory.

In this case the Court explained that an Income‑tax Officer may transfer a taxpayer’s file to another officer either within the same State, which the Court designated as area “X,” or to an officer in a different State, referred to as area “Y.” The choice of transferring a case to area X or area Y depends on the specific facts and circumstances of each individual case, and therefore no fixed rule can be prescribed for deciding whether a transfer should occur at all or to which particular officer the case should be sent. The Court emphasized that this discretion must reside in the appropriate authority, and that the mere fact that a taxpayer’s file is moved from the officer of the jurisdiction where the taxpayer lives or conducts business to another officer, whether inside or outside the State, does not by itself constitute discriminatory exercise of discretion. The Court further observed that even if there is a theoretical possibility that persons belonging to the same category might be treated differently, such a possibility does not automatically render the legislation invalid. It was noted that the power to transfer cases is vested not in junior officials but in senior officials such as the Commissioner of Income‑tax and the Central Board of Revenue, who act on information supplied to them by the concerned Income‑tax Officers. This power is discretionary and not inherently discriminatory, and an accusation of abuse of power cannot be readily inferred merely because the discretion rests with high‑ranking officials, as was held in Matajog Dobey v. H. S. Bhari. The Court also reiterated the general presumption that public officials will perform their duties honestly and in accordance with the law, citing the decision of People of the State of New York v. John E. Van De Carr. Moreover, the Court referred to its earlier ruling in A. Thangal Kunju Musaliar v. M. Venkitachalam Potti & Another, stating that, unless the contrary is proved, it is to be presumed that the administration of a law will not be carried out with an “evil eye and unequal hand,” and that the selection of cases for referral to the Income‑tax Investigation Commission will not be discriminatory. However, the Court warned that this presumption is not absolute and cannot be stretched to the point where it automatically infers a hidden or unknown motive for hostile or discriminatory treatment, as observed in Gulf, Colorado, etc. v. W. H. Ellis. While the Court acknowledged that improper exercise of the discretionary power may lead to injustice for the parties involved, it clarified that the mere possibility of discriminatory treatment does not, by itself, invalidate the statute; only an actual abuse of the power would do so.

The Court noted that a party who believes it has been wronged is not without adequate remedies under the law, a principle that was expressly stated in Dinabandu Sahu v. Jadumoni Mangaraj & Others. It clarified that, in cases where a difficulty arises, the judicial action will not attack the statutory provision that empowers the authority; rather, it will target the misuse or abuse of that power. The Court pointed out that it would be exceedingly difficult for an assessee to challenge a specific order issued by the Commissioner of Income‑Tax or by the Central Board of Revenue on the ground that the order is discriminatory, because the reasons that prompted the authority to issue the order are generally known only to the authority itself, are not recorded in the operative part of the order, and are not communicated to the assessee. Consequently, the initial burden rests on the assessee to show that the transfer order was issued as an exercise of power that was abused by the concerned authority. The Court described this apprehension as unfounded, noting that the burden of proof is not required to be “to the hilt.” It cited authority where, in criminal proceedings, an accused may rely on a presumption or an exception that, if proven, would exonerate him, and where the burden is satisfied by evidence that convinces the jury of the probability of the alleged fact, as in Rex v. Carr‑Briant. Similarly, under the Preventive Detention Act, a detainee who seeks to demonstrate lack of bona fides on the part of the detaining authority is not required to meet the highest standard of proof; rather, the burden is met by showing that the absence of bona fides is reasonably probable, as discussed in Ratanlal Gupta and Another v. District Magistrate of Ganjam and in Brundaban Chandra Dhir Narendra v. State of Orissa (Revenue Department) and Others. The Court explained that if an assessee attempts to set aside a transfer order by alleging that the circumstances, taken at face value, render the exercise of power discriminatory as against him, then the authority must be called upon to explain the factual matrix that led to the order. In that situation, the Court will scrutinise the explained circumstances, giving particular attention to the purpose intended to be achieved by section 5(7A) of the Act, as referenced in paragraph 4 of the affidavit of Shri Gouri Shankar, Under Secretary, Central Board of Revenue. The Court will form its own view on the bona fides of the order and, if it is not satisfied that the order was made in good faith within the authority conferred by section 5(7A), it will set aside the order. The Court further observed that the level of satisfaction required will vary according to the facts of each case, and that the Court will reach its conclusion after considering all the relevant circumstances.

The Court examined the facts of the case were set out in the record and evaluated whether any abuse of power had occurred. It held the Court was not powerless to set aside an order that amounted to an abuse of power and the assessee was not left without remedy. The Court noted the observations of Fazl Ali, J., in State of West Bengal v. Anwar Ali Sarkar at pages 309‑310, where authority might say ‘I am not to blame as I am acting under Act’. The Court held that such a claim would not automatically protect the order from being challenged on its face. Even when the authority says it is acting under the Act, its action remains subject to scrutiny and may be set aside if found mala fide or discriminatory against the assessee. The petitioners emphasized the observations at page 724 of the majority judgment in Bidi Supply Co. v. Union of India and Others. Those observations, in the context of the omnibus wholesale order under review, highlighted substantial discrimination suffered by the assessee compared with similarly situated bidi merchants. The inconvenience and harassment that the assessee experienced were said to violate article 14 of the Constitution, and it was argued that section 5 (7A) was unconstitutional because it permitted the Commissioner of Income‑tax or the Central Board of Revenue, as the case may be, to issue a transfer order. Such an order could subject the assessee to inconvenience and harassment at the discretion of the authority. The Court stated, however, that this argument of inconvenience was not conclusive because other considerations were relevant in the context of tax administration. The Court observed that there is no fundamental right for an assessee to be assessed in a particular area or locality. Even when the provision is read in conjunction with section 64 (1) and (2) of the Act, the right conferred upon the assessee to be assessed in a particular area or locality is not absolute. That right is subject to the exigencies of tax collection and therefore may be limited by administrative requirements. The Court held that any difference between the position of the assessee and that of others who be assessed by the Income‑tax Officer in the area where they reside or carry on business did not constitute a significant difference. It was characterized as only a minor deviation from the general standard and therefore did not amount to a denial of equal rights. The Court also noted that the inconvenience to the assessee was intended to be minimized by the authority in the circumstances. It transferred the case to the Income‑tax Officer nearest to the area where it would be convenient for the assessee to attend. Because of administrative exigencies, this was not always possible, and the assessee requested that the examination of accounts or evidence be conducted at a place convenient to him. The Income‑tax Officer was expected to comply with that request, thereby ensuring procedural fairness in accordance with the law.

In the present case, the Court noted that the affidavit of Shri V. Gouri Shankar, specifically paragraph 5, must be accepted on its face value. The Court observed that if the authorities follow the request contained therein—namely that the hearing be conducted at the venue chosen by the assessee—then the assessee would not suffer any inconvenience or harassment, and the appropriate balance between the individual’s rights and the public interest would be maintained.

The Court then examined the scope of the power vested in the Commissioner of Income‑Tax or, as appropriate, the Central Board of Revenue under section 5(7A) of the Income‑Tax Act. It held that this power is not a naked, arbitrary, or unfettered authority that permits the revenue officials to select certain assessee for differential treatment. Rather, the power is directed and constrained by the purpose of the statute, which is to levy, assess, and collect income tax in a manner that is both convenient and efficient. The Court explained that the statute authorises a broad discretion for the transfer of cases from one Income‑Tax Officer to another in order to achieve this purpose, and such discretion cannot be characterised as discriminatory in nature.

Furthermore, the Court distinguished between discretion that affects a fundamental right guaranteed by the Constitution and discretion that relates to a statutory right that is not fundamental. It observed that where a statute deals with a non‑fundamental right, the legislature may regulate or even withdraw that right, but it may not do so with respect to a fundamental right. As an illustration, the Court referred to discretionary powers in the issuance of licences for trade, profession, or business, and to restrictions on freedom of speech, which must be exercised within clear, reasonable rules.

The Court emphasized that the discretion concerning the transfer of tax cases does not involve any fundamental right. Although a transfer may cause inconvenience because of a change in venue, such inconvenience does not amount to an infringement of a fundamental right. Accordingly, the Court outlined a two‑fold test for assessing the validity of the discretion: (1) whether the discretion permits real and substantial discrimination, and (2) whether it encroaches upon a fundamental right guaranteed by the Constitution. Both conditions must be satisfied before Article 14 can be invoked. Applying this test, the Court concluded that the discretion granted under section 5(7A) does not satisfy either condition and therefore is not violative of Article 14.

The Court observed that the power granted under section 5 (7A) of the Act does not create any discrimination. Consequently, the provision is not in conflict with article 14 of the Constitution, and it does not impose an unreasonable limitation on the fundamental right to carry on trade or business protected by article 19 (1) (g). The Court further explained that any misuse of this power could be addressed by invoking the remedies available under article 226 or article 32 of the Constitution. In such a scenario, it would be the specific order issued under section 5 (7A) that could be set aside if it were found to be mala fide or violative of the aforementioned fundamental rights, rather than the statutory provision itself. Accordingly, the contention that section 5 (7A) is constitutionally invalid was rejected. While concluding this point, the Court advised that, where practicable, the principles of natural justice should be observed before the Commissioner of Income‑tax or the Central Board of Revenue, as the case may be, issues an order of transfer under section 5 (7A). The Court suggested that the affected party should receive notice and be afforded a reasonable opportunity to present his views, and that the reasons for the order, even if brief, should be recorded in writing.

The Court noted that a parallel procedure already exists under section 64 of the Act. When a question concerning the place of assessment arises, the Commissioner or the Central Board of Revenue must give the assessee an opportunity to be heard under section 64 (3) before deciding the matter. The Court found it striking that, in contrast, when a transfer order under section 5 (7A) moves an assessee’s case from one Income‑tax Officer to another—regardless of the assessee’s residence or place of business—no such hearing is ordinarily provided. The Court emphasized that there is no presumption against the honesty or bona fides of an assessee, and that the Income‑tax authorities would generally be unjustified in denying a reasonable chance to be heard when an order that departs from the normal procedure set out in sections 64 (1) and (2) is contemplated. This principle applies whether the transfer is within the same state or to an officer in another state, except in the limited circumstance where giving notice would defeat the very purpose of the transfer. The Court further stated that documenting the reasons for the transfer, even in a brief written form, would help the assessee understand the necessity or desirability of the action and would assist the Court in evaluating the bona fides of the order should it be challenged as being mala fide or discriminatory. The Court concluded that these procedural safeguards should be observed wherever feasible before a transfer is effected under section 5 (7A) of the Act to transfer his case under

In this case the Court observed that reference to section 5(7A) of the Income‑Tax Act would aid the Court in ascertaining the sincerity of any order that might later be challenged on the ground that it was issued in a mala‑fide or discriminatory manner. The Court expressed hope that the Income‑Tax authorities would, wherever practicable, follow the procedural safeguards that had been outlined. The next issue raised concerned the orders issued by the Commissioner of Income‑Tax or, as the situation required, by the Central Board of Revenue in the present petitions. Those orders were described as omnibus, wholesale transfers and were said to fall within the mischief addressed in Bidi Supply Co. v. Union of India and Others, and therefore were subject to the effect of the majority judgment rendered in that case. The State contended that the orders were nevertheless valid because an explanation had been appended to section 5(7A) by the Indian Income‑Tax Amendment Act, 1956 (XXVI of 1956). It was recalled that this explanation had been introduced specifically to overcome the difficulty created by the aforesaid majority judgment. The explanation was intended to bring within the scope of a transfer order all proceedings pending against a particular assessee, whether those proceedings related to the same assessment year or to earlier years, as well as any proceedings that might be commenced after the date of transfer with respect to any year, whether that year was the one of transfer or any year before or after it. Although the core structure of section 5(7A) remained unchanged, the added explanation expanded the meaning of the word “case” used in that provision. Critics argued that the word “case” had effectively been equated with the word “file”, so that when a case of a specific assessee was transferred under section 5(7A), the entire file of that assessee was moved from one Income‑Tax Officer to another. This approach, while perhaps inelegant, appeared to have been adopted out of necessity to preserve the existing form of section 5(7A). The Court noted that the decisive question was whether the desired result had been achieved by the manner in which the explanation was drafted. A careful reading of section 5(7A) together with its explanation made it clear that, when any case of a particular assessee pending before an Income‑Tax Officer is transferred—whether the transfer occurs within the same state or to a different state—all proceedings pending against that assessee under the Act in respect of the same year and also of previous years are to be transferred simultaneously. In addition, any proceedings that may be initiated after the date of such transfer, irrespective of the year to which they relate, are also to be encompassed within the transfer so that the Officer to whom the case is assigned is placed in a position to continue the pending proceedings.

The Court observed that the provision in the main body of section 5(7A) concerning the issuance of notices meant that a notice already issued by the Income‑tax Officer from whom a case was transferred did not have to be re‑issued. The provision applied to pending proceedings that were transferred, while leaving untouched any further proceedings that could be started against the assessee after the date of transfer, for which fresh notices would be required. It was argued, however, that cases of the assessee that had been closed in earlier years could not be reopened by the Income‑tax Officer to whom the case was transferred, and that the phrase “after the date of transfer in respect of any year” at the end of the explanation should be read as “after the date of transfer in respect of the year of transfer”. Such an interpretation, the petitioners claimed, would bar the officer to whom the case was transferred from instituting further proceedings in respect of matters that had already been closed before the transfer. The Court found this contention unsound. It emphasized that the words used were “in respect of any year” and not “in respect of the year”, and that they must be read together with the preceding words “may be commenced” rather than with “after the date of transfer”. A proper reading, according to the Court, held that the inclusive part of the explanation referred to all proceedings under the Act that may be commenced in respect of any year after the date of the transfer. The date of transfer related only to the particular year in which the case was transferred; attaching “in respect of any year” to “after the date of transfer” would be illogical. Consequently, the language of the explanation, when read in this manner, dispelled the petitioners’ contention.

The Court therefore concluded that the comprehensive, or omnibus, orders of transfer that had been issued against the petitioners by the Commissioner of Income‑tax, or, where appropriate, by the Central Board of Revenue, were protected by the explanation appended to section 5(7A). Consequently, those orders could not be struck down as unconstitutional or declared void. Having settled the question of validity of the wholesale transfers, the Court turned to the next issue, namely whether the specific, individual orders that had been made against each petitioner were in reality discriminatory, were motivated by mala fide intent, or amounted to an abuse of the authority conferred on the Commissioner of Income‑tax or the Central Board of Revenue under section 5(7A) of the Act. The Court indicated that this matter required separate consideration and would be examined in the subsequent portion of the judgment. To that end, the Court noted that the petitions numbered 211 to 215 of 1956, which involved the group of respondents headed by Sriram Jhabarmull, would be dealt with first. The Court therefore set aside a detailed inquiry into the alleged discriminatory character of the individual transfer orders until after it had addressed the substantive arguments raised in those particular petitions.

The orders that were the subject of the petitions had all been issued by the Commissioner of Income‑tax, Central, Calcutta, on 27 July 1946. Immediately after those orders, the Income‑tax Officer of Central Circle IV in Calcutta entertained further proceedings against the petitioners. Those subsequent proceedings ultimately resulted in assessment orders, and the authorities also initiated certificate proceedings under section 46(2) of the Act to recover the tax that had been assessed before the Constitution came into force.

The central issue that therefore arose was whether the petitioners could set aside those transfer orders on the ground that they were unconstitutional. It was well established that article 13 of the Constitution did not have any retrospective operation. Consequently, any action taken before the Constitution’s commencement, if done pursuant to a law that was valid at that time, could not be attacked as unconstitutional, nor could the law under which the action was taken be declared void for infringing the fundamental rights later enshrined in Part III of the Constitution, as explained in Keshavan Madhavan Menon v. State of Bombay.

The Court relied on the observations of Das, J., recorded at page 236 of that decision, which clarified the effect of article 13(1). He stated that article 13(1) merely nullifies or renders ineffective any existing law that is inconsistent with the fundamental rights, but only with respect to the exercise of those rights after the Constitution’s commencement. He emphasized that the provision has no retrospective effect; therefore, an act performed before the Constitution that later violates a law rendered void by article 13 does not become undone, for otherwise the law would acquire a retrospective character. He further explained that the law continues to exist for past acts, even though it ceases to have effect for future exercises of fundamental rights. The Court also referred to the authorities in Syed Qasim Razvi v. State of Hyderabad & Others and Laxmanappa Hanumanthappa Jamkhandi v. Union of India & Others to support this view.

Applying this principle, the Court concluded that the petitioners could not successfully challenge the transfer orders dated 27 July 1946. The Court noted that the petitions numbered 225 to 229 of 1956, commonly referred to as the Raichur group, and the petitions numbered 86, 87, 88, 111, 112 and 158 of 1956, known as the Amritsar group, fell within the same category of orders. In the Raichur group, an order of transfer dated 21 December 1953 had been issued by the Commissioner of Income‑tax, Hyderabad, moving the petitioner’s case from the Additional Income‑tax Officer, Raichur, to the Income‑tax Officer, Special Circle, Hyderabad. Subsequently, another order was issued by the Commissioner shortly before 19 May 1955, which further altered the jurisdiction of the petitioner's case.

The Commissioner of Income‑Tax later issued an order that transferred the petitioner’s case from the Income‑Tax Officer, Special Circle, Hyderabad, back to the principal Income‑Tax Officer at Raichur. Consequently, the petitioner returned to the jurisdiction of the Raichur officer, and it was difficult to imagine any legitimate claim of inconvenience or harassment that could be advanced on that basis. The Court observed that the petitioner’s attitude appeared to be aimed at postponing the lawful payment of income tax owed to the Revenue by exploiting a mere technicality. In the second category of cases, the Commissioner issued orders that moved the petitions of certain taxpayers from the Income‑Tax Officers designated as ‘A Ward, Amritsar’ and ‘F Ward, Amritsar’ to the Income‑Tax Officer of the Special Circle at Amritsar. Both the ward offices and the Special Circle were located in the same building and under the same roof, making any argument of inconvenience or harassment hard to sustain. Moreover, a common feature of both groups was that none of the petitioners had objected to the transfers when they occurred; instead, they had submitted to the jurisdiction of the officers to whom their cases were assigned. It was only after the Court’s decision in Bidi Supply Co. v. Union of India & Others, pronounced on 20 March 1956, that the petitioners raised objections, the Amritsar group on 20 April 1956 and the Raichur group on 5 November 1956. By having previously accepted the jurisdiction of the officers, the petitioners were not entitled to invoke the Court’s jurisdiction under article 32. The Court noted that such conduct by petitioners disqualifies them from obtaining relief, citing authorities such as Halsbury’s Laws of England (Vol. II, 3rd Ed., p. 140, para. 265), Rex v. Tabrum, ex parte Dash, and O. A. O. K. Lakshmanan Chettiar v. Commissioner, Corporation of Madras, and the Chief Judge, Court of Small Causes, Madras. Accordingly, the orders of transfer made by the Commissioner of Income‑Tax or the Central Board of Revenue against the three groups – the Sriram Jhabarmull group, the Raichur group, and the Amritsar group – could not be challenged as unconstitutional or void. This left two remaining sets of petitioners: those in Petitions Nos. 97 and 97A of 1956, and those in Petitions Nos. 44 and 85 of 1956. The petitioners in Nos. 97 and 97A were oil‑mill owners, merchants and commission agents who carried on business at Sahibganj in the Santhal Parganas district and maintained a branch at 97, Lower Chitpur Road, Calcutta. Their cases had been referred to the Income‑Tax Investigation Commission on the allegation that they had evaded a substantial amount of tax, concealed income exceeding eight lakh rupees, and conducted business over a wide area resulting in

In the matters before the Court, the petitioners were alleged to have earned large profits that were not recorded in their books of account or reflected in any of the tax returns they had filed. Following the decision of this Court in the Suraj Mull Mohtas case, approximately three hundred and twenty cases that had been referred to the Income‑Tax Investigation Commission under the Income‑Tax Investigation Commission Act, 1947, were found to be affected and consequently had to be reopened under section 34(1A) of the Income‑Tax Act.

Because these cases involved many previous years and required speedy disposal, the Revenue authorities created special assessment circles that were not limited by geographic jurisdiction. New special circles were established at Bombay and Calcutta, since the existing circles were already overburdened and could not take on the additional work. The three hundred and twenty cases were then allocated to these special circles according to the geographical area to which each assessee belonged. The petitioners were residents of Bihar but maintained a branch in Calcutta; therefore, their matters were assigned to one of the Central Circles located at Calcutta.

Subsequently, in October 1954, this Court declared section 5(1) of the Taxation on Income Investigation Commission Act, 1947, invalid in the Meenakshi Mills case. As a result, all cases that had been referred under that provision and were pending before the Income‑Tax Investigation Commission as of 17 July 1954 could no longer be processed under that Act. About four hundred and seventy such cases consequently required reopening under section 34(1A) of the Income‑Tax Act.

The Government reasoned that, similar to the earlier batch of cases, the new cases could be disposed of more quickly if they were allocated to Income‑Tax Officers who were appointed without reference to any specific area. Consequently, in addition to the special circles already created at Bombay and Calcutta, five further circles were created at Calcutta, four more at Bombay, and nine additional circles were established at important centres such as Kanpur, Ahmedabad, Madras and Delhi. The influx of cases created a situation where the nine circles at Calcutta were each handling roughly two‑hundred and eighty cases that pertained to assessees actually residing in Calcutta. To relieve this congestion, cases that did not belong to the Calcutta area were taken out of those circles and reassigned to the newly created circles that had lighter workloads.

It was then observed that Central Circle VI, which was based in Delhi, had a comparatively lighter workload than the other circles. Accordingly, the petitioners’ matters were transferred to the Income‑Tax Officer of Central Circle VI, Delhi. The affidavits of Shri Gouri Shankar, Under‑Secretary of the Central Board of Revenue, dated 19 November 1956 and 3 December 1956, explain that the transfers—from the Income‑Tax Officer of the Special Circle in Patna to the Income‑Tax Officer of Central Circle XI in Calcutta, and subsequently from Calcutta to the Income‑Tax Officer of Central Circle VI in Delhi—were made solely for reasons of administrative convenience.

Those affidavits further indicate that the examination of the petitioners’ accounts and the recording of evidence were conducted at places and times that the assessees themselves preferred. This procedural accommodation demonstrates that the transfers were not intended to disadvantage the petitioners and were carried out in a manner that respected their convenience.

The Court observed that the transfer of the petitioners’ cases was carried out solely for administrative convenience and that every effort was made to accommodate the petitioners’ preferred locations for the examination of their accounts and evidence. It noted that the Income‑tax Officer of Central Circle VI, Delhi, actually traveled to Sahibganj to examine the accounts of petitioner No. 1. When that assessee later asked that the examination be conducted in Delhi because his documents had been brought there for another purpose, the officer promptly shifted the case back to Delhi and carried out the examination there. The Court therefore concluded that, given the circumstances under which the cases moved from Patna to Calcutta and subsequently from Calcutta to Delhi, and considering that the petitioners were afforded all possible conveniences in the examination of their accounts and evidence, there was no foundation for any allegation that the transfer orders were discriminatory.

Regarding Petition No. 44 of 1956, the Court described the petitioner as Shri A. L. Sud, who originally hailed from Hoshiarpur District in Punjab but, since 1948, resided and maintained an office in Calcutta. He is the son of Shri Bhagwan Das Sud and a member of the Hindu undivided family styled Messrs. Bhagwan Sud & Sons, with Shri Bhagwan Das Sud serving as the family’s karta. The family conducted business in Hoshiarpur and in other locations such as Bareilly, Calcutta and Bombay. Shri A. L. Sud has been engaged in business both as a member of the family and in his individual capacity since 1946. The joint family was alleged to have evaded a substantial amount of income tax and to have engaged in inter‑related transactions, with the petitioner being a co‑parcener. To ensure a proper assessment of his income, it was deemed necessary that his case be handled by the same Income‑tax Officer who was assessing the joint family. He was assured that the hearing would cause him the least inconvenience. Consequently, his case was transferred from the Income‑tax Officer of the Survey Circle in Calcutta to the Income‑tax Officer of the Special Circle in Ambala by an order of the Central Board of Revenue dated 29 June 1955.

Petition No. 85 of 1956 involved Messrs. Bhagwan Das Sud & Sons. Their case had previously been transferred by the Commissioner of Income‑tax from the Income‑tax Officer in Hoshiarpur to the Income‑tax Officer of the Special Circle in Ambala under section 5(7A) of the Act by an order dated 20 October 1953. Although the petitioners maintained an office in Hoshiarpur, their business operations were dispersed across various parts of India, including Assam, Bombay, Bareilly, Calcutta and Kanpur, owing to contracts they had undertaken with the Government and other parties. They were alleged to have concealed assessable income exceeding Rs 30 lakhs, prompting the belief that a thorough investigation of their widespread activities was necessary.

In this matter, the Court observed that the transfer of the petitioners’ cases to the Income‑tax Officer of the Special Circle, Ambala, was required to enable a proper investigation of their extensive activities, which had resulted in a large scale of income‑tax evasion. The officer agreed to examine the accounts and evidence at Hoshiarpur itself so as to suit the convenience of the petitioners, but the petitioners declined on the ground that their counsel would travel from Delhi and therefore they preferred the venue of Ambala. Consequently, the cases of both petitioners were moved from the respective Income‑tax Officers who had been assessing them at Calcutta and Hoshiarpur to the Income‑tax Officer, Special Circle, Ambala, and all necessary conveniences were provided for the examination of their accounts and evidence. The Court held that the petitioners’ argument of discrimination, inconvenience and harassment therefore lost all force, and the orders of transfer could not be challenged as being discriminatory. It was further noted that in the four earlier petitions – namely Petitions Nos. 97 and 97‑A of 1956 and Petitions Nos. 44 of 1956 and 85 of 1956 – the Central Board of Revenue or the Commissioner of Income‑tax had directed the concerned Income‑tax Officers to minimise inconvenience to the assessees, even authorising them to proceed to the assessees’ residences or places of business for the examination of accounts and evidence. Although the assessees had denied such facilities in the affidavits filed in rejoinder, the Court presumed that such accommodations would continue to be afforded, thereby averting any inconvenience or harassment that might otherwise have been inflicted. The Court emphasized that a humane and considerate administration of the relevant provisions of the Income‑tax Act would greatly allay the assessees’ apprehensions and, if carried out in the true spirit, would prevent any assessee from charging the Revenue with administering the Act “with an evil eye and unequal hand.” Accordingly, the Court concluded that there was no substance in the petitions and ordered them to be dismissed with costs. The Court further directed that one set of costs be awarded between the respondents in each petition and an additional set of costs for each group of petitions, namely (1) Petitions Nos. 97 and 97‑A of 1956, (2) Petitions Nos. 44 of 1956 and 85 of 1956, (3) Petitions Nos. 86, 87, 88, 111, 112 and 158 of 1956, (4) Petitions Nos. 211 to 215 of 1956, and (5) Petitions Nos. 225 to 229 of 1956. All the petitions were dismissed.