The Judgment of the Court was delivered by

Rajagopala Ayyangar, J.:— These four petitions are directed to challenge the validity of a notice issued to the respective Petitioners under Sec. 34(1-A) of the Indian Income-tax Act. This section was introduced by the Amending Act (XXXIII of 1954), and one of the points raised in these petitions is as regards the constitutional validity of this amending provision.

2. We shall state a few preliminary facts before dealing with the contentions urged by the learned counsel for the petitioners, Rajendra Mills Ltd., Salem are the petitioners in W.P No. 307 of 1955. The Meenakshi Mills Ltd. at Madura are the petitioners in W.P No. 308 of 1955 while W.P No. 309 of 1955 is by the Saroja Mills Ltd., Coimbatore and these three mills are managed by Sri Karimuthu Thyagarajan Chettiar, who has a controlling interest in each of these three companies; and Sri Thyagarajan Chettiar as an individual is the petitioner in W.P No. 310 of 1955. For the assessment years 1940–1941 to 1946–1947 the several petitioners were assessed to income-tax and they have been making payments towards the taxes as assessed, and appeals filed in regard to some of these assessments are pending before various tribunals. While so, on or about the 4th of August 1948 “the authorised official” under the Taxation on Income (Investigation Commission) Act, 1947 issued notices to the several petitioners, informing them that their cases had been referred to the Income-tax Investigation Commission under Sec. 5(1) of that Act.

3. Thereupon Messrs Meenakshi Mills Ltd., the petitioners in W.P No. 308 of 1955, filed an application before the Supreme Court under Article 32 of the Constitution for quashing the proceedings before the Commission. The Supreme Court accepted the petition and holding that Section 5(1) of the Investigation Act, 1947 was ultra vires the Constitution directed a writ of prohibition, by its judgment dated 12-10-1954, to issue against the Commission proceeding further with the case.

4. Meanwhile, as a result of the decision of the Supreme Court rendered on 28-5-1954 in Surajmall Mohta and Co. v. A.V Viswanatha Sastri, 1955-1 SCR 448 : (AIR 1954 SC 545) (A), the Indian In-come tax Act was amended by Ordinance (VIII of 1954) published on 17-7-1954, introducing a new sub-section 1-A into Sec. 34 of the Act. This ordinance was repealed and its operative provisions re-enacted by Parliament by Act (XXXIII of 1954) which received the assent of the President on the 25th September, 1954; and it is the validity of the new sub-sec. 34(1-A) that is impugned in these petitions.

5. The preamble to the amending Act stated that it was “an Act further to amend the Indian Income-tax Act, 1922, to provide for the assessment or re-assessment of persons who have to a substantial extent evaded payment of taxes during a certain period and for matters connected therewith.” Section 1(2) of the Act enacted that it shall be deemed to have come into force on the 17th day of July 1954, this being the date on which the Act which replaced the ordinance took effect.

6. This would possibly be a convenient stage where we can set out the relevant portion of Sec. 34(1-A) introduced by the Amending Act of 1954, which runs in these terms:

“If in the case of any assessee, the Income-tax Officer has reason to believe,

(i) That income, profits or gains chargeable to income-tax have escaped assessment for any year in respect of which the relevant previous year falls wholly or partly within the period beginning on the 1st day of September 1939 and ending on the 31st day of March 1946; and

(ii) that the income, profits or gains which have so escaped assessment for any such year or years amount or are likely to amount to one lakh of rupees or more;

he may, notwithstanding that the period of eight years or, as the case may be, four years specified in sub-sec. (1) has expired in respect thereof, serve on the assessee, or if the assessee is a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-sec. (2) of Sec. 22 and may proceed to assess or re-assess the income, profits or gains of the assessee for all or any of the years referred to in clause (i) and thereupon the provisions of this Act (excepting those contained in clauses (i) and (iii) of the proviso to sub-sec. (i) and in sub-sees. (2) and (3) of this section) shall, so far as may be, apply accordingly; provided that the Income-tax Officer shall not issue a notice under this sub-section unless he has recorded his reasons for doing so, and the Central Board of Revenue is satisfied on such reasons recorded that it is a fit case for the issue of such notice;

Provided further that no such notice shall be issued after the 31st day of March 1956.”

7. Notices were issued to these petitioners by the Special Income-tax Officer, Central Circle, (to whom the assessment proceedings in regard to these several petitioners were transferred by orders passed under Sec. 5(7-A) of the Income-tax Act) on 18th March, 1955, calling upon the petitioners to submit returns of their respective total assessable incomes for the assessment years, 1940–1941 to 1946–1947. The petitioners were given 3 days within which to comply with the notices and to submit the returns. The present writ petitions were thereupon filed for the issue of writs of prohibition, directing the Income-tax Officer to recall the notices and to forbear from proceeding under or in pursuance of the said notices.

8. Pour points were urged by Mr. Rajah Aiyar learned counsel for the petitioners, in support of this challenge to these notices dated 18th March, 1955: (1) Sec. 34(1-A) introduced by Act (XXXIII of 1954) was beyond the legislative power of the Parliament. The ground upon which this contention was rested was that, assuming that income had escaped assessment, as the tax payable in respect of this escaped income was in relation to the assessment years 1940 to 1947, it represented sums due to the Government of British India, a state which had long ago ceased to exist, and that this asset or property of the British Indian Government did not vest in the Union of India and therefore could not be demanded by it. This contention is thus detailed in the affidavit filed in support of the writ petition:

“The petitioner is advised that consequent on the passing of the Indian Independence Act, two independent sovereign States came into existence; and there has been no transfer or assignment of these taxes from the Crown and the Government of India to the new States; and after the advent of the Indian Republic and the ushering in of the new Constitution the position became even clearer…… The taxes due to the British Crown and the British Indian Government are different from the taxes due to the Republic of India. There is no provision either in the Indian Independence Act of 1947 or in any of the orders made by the Governor General or orders in Council for any devolution or for transference in favour of the Union of India of any right to recover the arrears of income-tax, if any, due to the erstwhile British Government.”

(2) Under Section 34 of the Indian Income-tax Act, as it stood before the impugned amendment, the liability to have an assessment reopened was barred, at the most, at the end of eight years from the relevant assessment year, and as such a period had elapsed, the petitioners had acquired an absolute and irrefragable immunity from the reopening of the assessments, which could not be disturbed by the legislature. The point was also put in a different form by raising a contention, that on a proper construction of the newly introduced sub-section its language was not act to confer power to reopen assessments barred by limitation under the provisions of the Income-tax Act before the impugned amendment.

(3) That Parliament which was brought into existence by the Constitution on 28th January, 1950 could not retrospectively impose taxes in regard to a pre-constitution period or to collect arrears which accrued due before that date.

(4) That there was no valid transfer of the income-tax assessment proceedings in relation to the Special Income-tax Officer, Central Circle, who issued the impugned notices dated 18th March, 1955, with the result that the notices being by an unauthorised person were invalid. We shall consider these objections in the order in which we have set them out.

9. As regards the first point Mr. Rajah Aiyar formulated his contentions thus: Up to 1947 India was a Dominion under the British Crown whose governance was regulated by the Government of India Act, 1935. The Indian Income-tax Act of 1922 was “an existing law” which continued to be in force by reason of Section 292 of the Government of India Act, 1935. It was under that law that the tax liability now sought to be enforced had been incurred by the petitioners, as the assessments sought to be reopened are as regards the years 1940–1941 to 1946–1947.

10. These arrears of tax were therefore an asset which vested in His Majesty in right of the Government of India. On the passing of the Indian Independence Act, 1947, two new self-governing Dominions, those of India and Pakistan, emerged. There was then a complete break with the past, and the entities which came into existence Were new States endowed with a new personality. Unless the Act of Parliament of the United Kingdom, which brought into existence these new States, the Dominion of India and the Dominion of Pakistan (we shall confine our attention nere-after to the Dominion of India with which alone we are concerned) specifically transmitted this item of asset or property to the self-governing Dominion of India, that asset, which was the property of the British Indian Government Would on the extinction of that government also cease to exist.

11. The next step in the argument was that, even assuming that the Dominion of India created by the Independence Act of 1947 became entitled to this asset, namely, the arrears of income-tax due to British India, a second new state emerged on the coming into force of the Constitution, viz., the Sovereign Democratic Republic named India or the Indian Union. In further support of these submissions, which we shall examine in detail presently, learned counsel also urged that Public International Law did not recognise the continuity of the personality of a State, where one State succeeded another in a certain territory or where a State split up into two or more States or where new States appeared in the former territory of a dismembered State.

12. We find ourselves wholly unable to accept the main thesis of the learned counsel's arguments, that there is such a discontinuity between the Indian Union and its past, as to support the contention regarding the extinction of the rights possessed by the previous government. This apart, we are satisfied that there is a continuity as regards municipal law relevant to the matter now in controversy, as to obviate any necessity for an investigation as to whether the changes that have taken place between 1947 and the present day serve in reality to bring in a succession of States or merely a succession of governments in a State.

13. As Mr. Rajah Iyer laid great stress on certain provisions of the Government of India Act, 1935, and on the contrast between them and the provisions to be found in the later enactments touching the Constitution, we consider it convenient to set out these provisions first before considering the terms of the Indian Independence Act, 1947, which effected the transfer of power to Indian hands and the subsidiary provisions enacted under the rule-making power conferred by that Act.

14. Mr. Rajah Iyer sought to place some reliance on the terms of Section 2 of the Government of India Act, 1935. The purpose of this provision was to resume into the hands of the Crown all rights, authority and jurisdiction in and over the territories of British India, whether they be vested in the Secretary of State, the Governor General in Council or the provincial Governments and redistribute them in the manner prescribed by the Act between the Central Government on the one hand and the provinces on the other.

15. We see no relevance in Sec. 2 to the matter now before us. Before the Government of India Act, 1935, British India had a unitary Government with the central legislature competent to enact laws on every topic over the entire territory of British India, and the local governments and legislatures exercised their powers subject to central control by the Governor General in Council. The Government of India Act, 1935 introduced Provincial Autonomy, and thereafter the Centre was disabled from interfering with the provinces (except in an emergency or breakdown) on topics of legislation and administration committed to them under List II of Schedule VII. Sec. 2 was designed to point out that the legal basis of provincial autonomy was not any devolution from a unitary Centre, as under the Government of India Act, 1919, but was a direct grant from the Parliament of the United Kingdom.

16. Secs. 136 and 138 were next referred to Sec. 136 defined “Revenues of the Federation” while Sec. 138 provided for the distribution and collection of “income-tax” which was levied and collected by the Centre under the power conferred on it by item 54, List I of schedule VII. As sec. 173(4) was the provision on which the greatest reliance was placed by Mr. Rajah Iyer, though we shall postpone the discussion of its place in the scheme of the Government of India Act, 1935, we shall here set out the provision in full.

17. Sec. 173 occurs in Chapter III, Part VII, bearing the caption “Property, Contracts, Liabilities and suits”. Sec. 172 with which that chapter opens, distributed lands and buildings, which were theretofore vested in His Majesty for the purpose of the Government of India, between the respective authorities the Crown representative, the Government of the Federation and the Provinces. Sec. 173(1) dealt with property other than lands and buildings. Its terms ran:

“Subject to the provisions of this and the last preceding section, all property vested in His Majesty which by virtue of any delegation from the Secretary of State in Council or otherwise is immediately before the commencement of part III of this Act in the possession or under the control of, or held on account of the Governor-General in Council or any local Government shall as from the commencement of Part III of this Act vest in His Majesty,

(a) for the purposes of the Government of the Federation; or (b) for the purposes of the exercise of the functions of the Crown in its relation with Indian States; or (c) for the purposes of the Government of a province according as the Purposes for which the property was held immediately before the commencement of Part III of this Act will thereafter be purposes of the Government of the Federation, purposes of His Majesty's Representative for the exercise of the said functions of the Crown or purposes of the Government of a province.”

18. After making provision for other descriptions of property including monies, securities, and other moveable Property, sub-sec. (4) enacted “Arrears of any taxes outstanding immediately before the commencement of Part in of this Act shall be deemed to be due to and may be recovered by the Federal Government or a provincial Government according as the proceeds of any such tax imposed after the commencement of Part III of this Act would be due to and recoverable by the Federal Government or the Provincial Government.” This was the position when India was a dependency of the Crown of the United Kingdom and was subject to legislation by the Parliament of the United Kingdom.

19. Then came the Indian Independence Act, (10 and 11 Geo. 6 Ch. 30). Its preamble stated that it was “an Act to make provision for the setting up in India of two independent Dominions, to substitute other provisions for certain provisions of the Government of India Act, 1935 which apply outside those Dominions, and to provide for other matters consequential or connected with the setting up of those dominions.” The operative portion of this enactment provided in Sec. 1 that as and from the fifteenth day of August 1947 two independent Dominions shall be set up in India to be known respectively as India and Pakistan.”

(2) The said Dominions are hereafter in this Act referred to as “the new Dominions” and the said 15th day of August is hereafter in this Act referred to as the “appointed day.”

20. The existing legislatures in India were given the power of law-making without the restrictions imposed toy the Government of India Act, 1935, and this was under Sec. 6 which enacted: “The Legislature of each of the new Dominions shall have full power to make laws for the Dominion, including laws having extra-territorial operation” and sub-sec. 2 stated that no law and no provision of any law made by the legislature of either of the new Dominions shall be void or inoperative on the ground that it is repugnant to the law of England or to the provisions of this or any existing or future Act of Parliament of the United. Kingdom, or to any order, rule or regulation made under any such Act, and the powers of the legislature of each Dominion include the power to repeal or amend any such Act, order, rule or regulation in so far as it is part of the law of the Dominion.

(3) The Governor General of each of the new Dominions shall have full powers to assent in His Majesty's name to any law of the legislature of that Dominion and so much of any Act as relates to the disallowance of laws by His Majesty or the reservation of laws for the signification of His Majesty's pleasure thereon or the suspension of the operation of laws until the signification of his Majesty's pleasure thereon shall not apply to laws of the legislature of either of the new-Dominions.

(4) No Act of Parliament of the United Kingdom passed on or after the appointed day shall extend, or be deemed to extend to either of the new Dominions as part of the law of that Dominion unless it is extended thereto by a law of the legislature of the Dominion.

(5) No order in Council made on or after the appointed day under any Act passed before the appointed day, and no order, rule or other instrument made on or after the appointed day under any such Act by any United Kingdom Minister or other authority shall extend or be deemed to extend, to either of the new Dominions as part of the law of that Dominion.

21. It is unnecessary to add that these constituted merely an application of the provisions of the. Statute of Westminster to India.

22. In view of India becoming a full-fledged Dominion her legislatures being vested with plenary powers of legislation Sec. 7 enacted consequential provisions. Sec. 7(1)(a) enacted that “as from” the appointed’ day, His Majesty's Government in the United Kingdom have no responsibility as respects the Government of any of the territories which, immediately before that day were included in British India.” Sec. 9 enabled the Governor-General

“by order, to make such provision as appears to him to be necessary or expedient:

(a) for bringing the provisions of this Act into effective operation;

(b) for dividing between the new Dominions and between the new provinces to be constituted under this Act, the powers, rights, property duties and liabilities of the Governor-General in Council or, as the case may be, of the relevant provinces which under this Act are to cease to exist;

(c) for making omissions from additions to and adaptations and modifications of, the Government of India Act, 1935 and the orders in Council, rules and other instruments made thereunder, in their application to the separate new Dominions;

(d) for removing difficulties arising in connection with the transition to the provisions of this Act.”

23. Section 18 is the only other relevant provision of this statute which was referred to before us, and in particular sub-sec. (3) thereof, which ran as follows:

“Save as otherwise expressly provided in this Act, the law of British India and of the several parts thereof existing immediately before the appointed day shall so far as applicable and with the necessary adaptations, continue as the law of each of new Dominions and the several parts thereof until other provision is made by laws of the legislature of the Dominion in question or by any other legislature or other authority having power in that behalf.”

24. Under the powers conferred in that behalf by the Indian Independence Act, the Governor General made “the India (Provisional Constitution) Order, 1947” amending or adapting the provisions of the Government of India Act, 1935 to the situation created by the emergency of India as a full-fledged dominion. Of these our attention was particularly drawn to the repeal of Secs 2 and 173 of the Government of India Act, 1935.’ On the same day, 14th of August 1947, the Governor General made the Indian Independence (Rights, Property and Liabilities) Order, 1947, under which the rights and liabilities between India and Pakistan and between the divided provinces were distributed between the respective dominions particularly in relation to income-tax.

25. The Indian Independence (Income-tax Proceedings) Order, 1947 was promulgated on 12th August, 1947, and its operative provision, Sec. 3 ran thus:

“Where before the appointed day the jurisdiction of a tax officer under the relevant tax Act has been altered in connection with the setting up of the Dominions of India and Pakistan, or where after the appointed day the case of an assessee is transferred from one Dominion to the other by agreement between the Central Boards of Revenue of the two Dominions, and by reason of such alteration of jurisdiction or transfer the case falls to be dealt with on or after the appointed day by the Tax authorities of India or as the case may be of Pakistan all proceedings relating to the case pending before any tax authority of Pakistan or as the case may be of India, shall be transferred to the corresponding tax authority of India or as the case may be of Pakistan, and shall be disposed of by the last mentioned “tax authority” in accordance with law.’

26. We shall now revert to the consideration of the discussion of the contentions raised by the learned counsel based on the exact scope of the provisions we have extracted. But before doing so we shall set out the provisions bearing on the next stage of the constitutional development, on which some reliance was placed on behalf of the petitioners. The Constitution of India came into force on 26th January, 1950.

27. By its preamble it recited that the people of India “having resolved to constitute India into a Sovereign Democratic Republic have adopted, enacted and given to themselves this Constitution.” The Constitution repealed the Indian Independence Act as well as the Government of India Act, 1935, that is such portions as had not been omitted by the orders in Council made under the Indian Independence Act.

28. The repeal of the Government of India Act, 1935, however, was not intended to operate as a vacuum by obliterating the operation of previous existing statute law in the country, and accordingly Article 372 enacted:

“372(1) Notwithstanding the repeal by this Constitution of the enactments referred to in Article 395, but subject to the other provisions of this Constitution all the law in force in the territory of India immediately before the commencement of this Constitution shall continue in force therein until altered or repealed or amended by a competent Legislature or other competent authority.

(2) For the purpose of bringing the provisions of any law in force in the territory of India into accord with the provisions of this Constitution, the President may by order make such adaptations and modifications of such law whether by way of repeal or amendment as may be necessary or expedient and provide that the law shall, as from such date as may be specified in the order have effect subject to the adaptations and modifications so made, and any such adaptation or modification shall not be questioned in any court of law.”

29. In exercise of the powers conferred to adapt the existing Indian laws into the frame work of the changes brought about by the Constitution, the Income-tax Act among others was amended, and the expression “British India” was replaced by the term “taxable territories”. Taxable territories means:

(a) as respects any period before the 15th day of August, 1947, the territories then referred to as; British India but including Berar,

(b) as respects any period after the 14th day of August, 1947 and before the 26th day of January, 1950, the territories for the time being comprised in the provinces of India, but excluding the merged territory of Cooch-Behar,

(c) as respects any period after the 25th day of January and before the 1st day of April 1950 the territories comprised in Part A States but excluding the merged territory of Cooch-Behar, and the territories comprised in Part C state but excluding the States of Manipur, Tripura, and Vindya Pradesh”.

30. We shall now restate the steps in the arguments advanced by the learned counsel for the petitioners in support of his first contention. When the diarchic constitution which was established by the amendment of the Government of India Act, 1919, gave place to the Government brought into existence by the Government of India Act, 1935, there was a specific provision made by Sec. 173(4) by which arrears of taxes including income-tax due to the Government prior to 1st April, 1937 were dealt with and distributed as between the Centre and the provinces.

31. It was by virtue of this provision that it became legally possible for the Government of India to collect arrears of Income-tax which had accrued prior to 1st April, 1937. This provision was enacted notwithstanding that Sec. 292 of that Act continued in force the Income-tax Act as a piece of existing Indian law. This must have been because Sec. 292 was not considered sufficient to enable arrears of tax to be claimed by the Central Government.

32. The Independence Act extinguished British India, and in its place there emerged two new States, namely, the Dominions of India and Pakistan. Section 18 of the Indian Independence Act no doubt enabled the existing law which was in force in British India to continue in operation in the Dominion of India, which newly emerged, without a provision in terms of Section 173(4) of the Government of India Act, 1935, is not sufficient to vest in the new dominion the right to the arrears of tax due to the British Crown in right of British India.

33. With the extinction of British India that property also got extinguished, as there was no provision in the Indian Independence Act whereby the Crown transferred that property right to the new dominion. If the learned counsel was right so far, the Union Government could not make any claim to an asset which ceased to exist on the extinction of British India. The Dominion of India, as created by the Independence Act, transformed itself into a Sovereign Democratic Republic under the Constitution which the people of India gave unto themselves, and, therefore, there came into existence a third new state.

34. If the right to these arrears was not Part of the property or the asset of the Dominion of India, the Union Government, even if they were treated as successors to the Dominion of India, could not claim the right. The Constitution itself has not made any specific provision as in Section 173(4) of the Government of India Act, 1935, in regard to this item of property. Article 372 has no doubt continued the operation of the Indian Income-tax Act as it remained at the time when it was a Dominion of India, but the mere continuance of the Act cannot enable the Union Tax officials to make a claim to arrears of tax which had not become the property of the Republic of India. This, in brief outline, was the argument addressed to us by Mr. Rajah Aiyar.

35. In our judgment this argument breaks at every point. In the first place it is not contended and indeed it cannot be, that the Government of India Act, 1935, extinguished any old State or brought a new one into being. In other words by reason of that statute no new international personality was created, but only there was a change in the relative distribution of power between the Parliament of the United Kingdom and the Government of India brought about by an enactment of a Parliament which continued to possess legal authority to enact legislation.

36. It is in such a context that the real significance of the provision contained in Section 173(4) of the Government of India Act, 1935 has to be viewed and understood. The Government of India Act, 1915, which consolidated the previous enactments relating to the Constitution of the Government of India, as amended by the Government of India Act, 1919, having been repealed by the Government of India Act, 1935, there was a need to continue the Previously existing law. This was based upon the theory, that when a statute is repealed any bye-law made thereunder ceases to be operative except as to transactions in regard to which rights had accrued or by which liabilities were incurred, unless there were a saving clause in the new statute preserving subordinate legislation.

37. This was the ratio behind Section 292 of the Government of India Act, 1935. This, on its language would have continued the operation of the Indian Income-tax Act, so as to permit the taxing authorities to take proceedings for the assessment, levy and collection of taxes, notwithstanding that they accrued or arose at a period anterior to the coming into force of the Government of India Act, 1935. Sec. 292 having provided for the continued operation of the law, there could be no hiatus, no break with the past, leaving a gap to be bridged.

38. Thus understood, it would be seen that it was not Section 173 of the Government of India Act, 1935, which vested in the Central Government, constituted by the Government of India Act, 1935, the right to the arrears of tax which accrued or arose prior to the 1st April, 1937. The function of Sec. 173 on the other hand was merely to effect a distribution between the centre and the Provinces of the right to these arrears as an item of property.

39. Sub-sec. (4) of Sec. 173 related to the right to the arrears of taxes and related it to the distribution of legislative power in regard to taxation. If the right to levy a tax was conferred under Schedule VII on the Centre, the arrears could be collected only by that authority. On the other hand, if whatever be the source of the original law-making authority the Centre or the Province the levy of the tax was under schedule VII within the legislative powers of the province, the arrears would have become its property.

40. It was just the necessity for effecting this distribution that brought in Sec. 173(4), and it would he a mistake to consider that it was Sec. 173(4) which continued the exigibility of the arrear as an asset of the respective governments. The absence, therefore, of a provision corresponding to Section 173(4) in the Indian Independence Act or in the Constitution does not lead to the inference which the learned counsel sought to draw therefrom.

41. We shall next consider the changes effected by the Indian Independence Act of 1947. At the outset we feel bound to mention that the magnitude of the change should not blur our view of its juridical basis, namely, the transition from a government for which the ultimate responsibility rested with the Parliament of the United Kingdom to one where this latter authority specifically absolved itself from further legal obligations.

42. We are here having in mind the terms of Sec. 7(1)(a) of the Indian Independence Act which we have extracted above. In addition, it removed every fetter on the legislative capacity of the Indian legislatures. In regard to this, the key provision in the Government of India Act, which emphasised the British Control of India, was to be found in the limitations imposed upon the powers of the Indian legislatures, by Section 110 of the Government of India Act, 1935, which enacted:

“Nothing in this Act shall be taken (a) to affect the power of Parliament to legislate for British India, or any Dart thereof or (b) to empower the Federal legislature, or any Provincial legislature

(i) to make any law affecting the Sovereign or the Royal family, or the succession to the Crown or the Sovereignty, dominion or suzerainty of the Crown in any part of India or the law of British; nationality or the Army Act, the Air Force Act or the Naval Discipline Act or the Law of Prize or Prizes Courts or

(ii) except in so far as is expressly permitted by any subsequent provisions of this Act to make any law amending any provision of this Act or any, order in council made thereunder or any rules made under this Act by the Secretary of State, or by the Governor General or a Governor in his discretion or in the exercise of his individual judgment; or

(iii) except in so far as is expressly permitted by any subsequent provisions of this Act to make any law derogating from any prerogative right of His Majesty to grant special leave to appeal from any court.”

43. The Indian Independence Act, 1947, in effect repealed this section, and enabled the legislature of the Dominion of India to enact laws repealing or amending parliamentary legislation (Vide Sec. 6). It will be seen, therefore, that the change, though momentous, was really effected in a legal manner. In its ultimate analysis and in strict theory of law the Independence was one conferred by Parliament, by removing the legal fetters that previously detracted from complete sovereignty or independence of the Indian Dominion.

44. No doubt there was the partition of the country into two dominions of India and Pakistan. But this really does not affect the legal continuity, except so far as concerns the territory which ceased to be part of the Dominion of India. The British Crown went out of the picture as an authority possessing any legal powers in the Dominion of India. There is, however, no basis for the theory on which the entire argument for the petitioners rests, that these arrears of taxes which was the property of the Crown, in right of the Government of India were withdrawn from the Government of India and retained by the British Crown.

45. On the other hand, if the Crown held that property in the right of the Government of India, then on the emergence of the new dominion it would become the property of the dominion, the Crown, however, being eliminated. It is just on this basis that Section 9 of the Indian Independence Act proceeds and when sub-sec. (1) sub-clause (b) provides for division between the new dominions and between the new provinces the property which before that date vested in the Governor-General-in-Council there is no warrant for the assumption or the theory, that the property represented by arrears of taxes were not to be the subject of division under Section 9(1)(b) of the Independence Act.

46. That asset was to be held by the Dominion of India, which had taken the place of British India, and as Section 18(3) of the Indian Independence Act effected a continuance of the previously existing laws including, of course, the Indian Income-tax Act there was machinery available for the realisation of this item of property, possibly as the Government of India Act, 1935, had not been repealed by the Indian Independence Act, 1947, the laws then in force would have continued, notwithstanding India becoming a self-governing dominion, and, therefore. Sec. 18 could be viewed as having been enacted only by way of abundant caution. In the face of the express provision, however, of Sec. 18(3), any argument as regards any break in the law by reason of the constitutional changes is put out of Court.

47. Learned counsel referred to the absence of any provision dealing with this asset in the several Orders in Council issued under the Indian Independence Act. What we have stated earlier is sufficient to indicate that this argument is without force. But this apart, the Arbitral Tribunal Order of 1947, promulgated in virtue of the power conferred by Section 9 of the Indian Independence Act, constituted bodies for the purpose of dividing between the two dominions the assets and liabilities of the Governor-General-in-Council.

48. This would, of course, include the arrears of taxes due to the Central Government in British India, which gave place to the Dominions of India and Pakistan. This particular provision in regard to income tax is also emphasised by the Indian Independence Income-tax Proceedings Order of 1947, which determined the jurisdiction of the Income-tax Officers in the two dominions over assessees residing in particular areas.

49. We are, therefore, clearly of the opinion that (1) the arrears of taxes due to the British Indian Central Government under the Government of India Act, 3935, vested in the self-governing Dominion of India which was brought into existence by the Indian Independence Act of 1947, subject to the distribution effected between India and Pakistan under the various Orders in Council including the Arbitral Proceedings Order promulgated under the latter statute;

(2) there is no basis for the theory that these arrears were retained by the British Government, and that they got extinguished when British India disappeared and India became a self-governing dominion,

(3) that there was no break or hiatus in the basic law governing income-tax by reason of the coming into force of the Government of India. Act, 1935 or the emergence of India as a self-governing dominion by reason of the Indian Independence Act of 1947,

(4) that Section 173 of the Government of India Act, 1935, which was repealed under the adaptations effected by virtue of the powers conferred under Section 18 of the Indian Independence Act, has no significance for the determination of the present question. The net result, therefore, is that these arrears of income-tax were demandable from the petitioners during the period from 15th August, 1947 to 26th January, 1950.

50. The next question to be considered is whether this property of the self-governing dominion of India ceased to exist or failed to become the property of the Republic of India on the Constitution of India coming into force. If the right to these arrears of taxes passed to the Dominion of India and continued to be demand-able by that Government, there cannot be any serious argument that this asset coupled with the right to realise it did not vest in the Union of India under the Constitution, for Article 294 of the Constitution provided for the vesting in the Union and in the States of all properties which theretofore were vested in His Majesty for the purposes of the Government of the Dominion of India. This article is in these terms:

“As from the commencement of this Constitution

(a) all property and assets which immediately before such commencement were vested in His Majesty for the purposes of the Government of the Dominion of India and all property and assets which immediately before such commencement were vested in His Majesty for the purposes of the Government of each Governor's province shall vest respectively in the Union and the corresponding State and

(b) all rights, liabilities and obligations of the Government of the Dominion of India and of the Government of each Governor's province, whether arising out of any contract or otherwise shall be the rights, liabilities and obligations respectively of the Government of India and the Government of each corresponding State,

subject to any adjustment made or to be made by reason of the creation before the commencement of this Constitution of the Dominion of Pakistan or of the Provinces of West Bengal, East Bengal, West Punjab and East Punjab.”

51. Confining ourselves to the item of property, with which we are immediately concerned, we have the provisions introduced by way of adaptation in the definition of “taxable property” in the Indian Income-tax Act of 1922.

52. So far as the Income-tax Act itself is concerned, its operation continued without a break by virtue of Article 372 of the Constitution. As to the effect of Article 372 of the Constitution the learned Advocate General cited to us the judgment of Lord Sankey in Performing Right Society v. Bray Urban District Council, 1930 AC 377 : (AIR 1930 PC 314) (B), and particularly to a passage therein at page 399 (of AC): (at p. 322 of AIR), where, dealing with the effect of Article 73 of the Irish Free State Act, which was in terms identical with Article 372 of our Constitution, the learned Lord said:

“The right view to take is that by virtue of Article 73 all such laws as were in force immediately before December 6, 1922 (the appointed date) continued and remained in force except so far as they were inconsistent with the Constitution.”

53. In this connection we are tempted to quote a passage from Hyde's “International law” at page 397 which is in these terms:

“Law once established continues until changed by some competent legislative power. It is not changed merely by change of Sovereignty.” Quoting Beale the learned author says: in a foot note—

“There can be no break or interregnum in law. Ones created it persists until a change takes place and when changed it continues in such a changed condition until the next change, and so on for ever. Conquest or colonisation is impotent to bring law to an end; in spite of change of Constitution the law continues unchanged until a new sovereign by a legislative act creates a change.”

54. We are, therefore, clearly of the opinion, that the contention, that the right to claim arrears of tax due to the Central Government under the Government of India Act, 1935, did not pass to or vest in the government of the Indian Union under the Constitution, is without substance.

55. The next contention was as regards the power of the legislature to after retrospectively the period of limitation within which assessments once completed could be reopened. We find no basis for the argument, that on the expiry of the period of limitation within which such reopening could take place the assessee obtained complete immunity from reassessment. If the point urged were, that in the absence of an express provision therefor a barred claim could not be ???, it could be accepted without demur; but that, however, would be on the construction of the relevant enactment. We are wholly unable to entertain the argument of the learned counsel that Parliament he no power to enact legislation having such retrospective effect, as it is concluded by the authority of the Supreme Court in a decision which will be referred to presently.

56. The other way in which it was put was that on the proper construction of Sec. 34(1-A) as introduced by the Act 33 of 1954, the completed assessments of the petitioners could not be reopened. This point was formulated in this way: Act 33 of 1954 received the assent of the President on 25th September, 1954, and, therefore, normally it would have come into operation on that date and would have effect from that date. Parliament, however, had considered it expedient to give the enactment retrospective operation, and it therefore, enacted by Sec. 1(2) that it shall be deemed to have come into force with the amendment on the 17th day of July 1954.

57. By reason of the express provision the Amending Act could not have any retrospective operation further back than 17th July, 1954, and consequently, the provisions contained in the Amending Act including Sec. 2 which amended Section 34 of the Indian Income-tax Act, could not be availed of to reopen any assessment which had become completed before 17th July, 1954. In support of this proposition learned counsel relied on the decision of the Andhra High Court in Lakshminarayana Chetty v. First Additional Income-tax Officer, Nellore, (1956) 29 ITR 419 : (AIR 1957 Andh Pra 159) (C).

58. We see no substance in this argument. The date, 17th July, 1954, was obviously a reference to the date when the Ordinance which this amending Act replaced was promulgated, and the purpose of the mention of this date in the enactment was to confer on and continue, the validity of the notices which had already been issued and the proceedings initiated thereby. Sec. 34(1-A) expressly refers to the assessments which could be reopened by specific reference to particular assessment years, and in the face of this language the contention of the learned counsel does not merit serious consideration.

59. It was also suggested by the learned junior counsel for the petitioners, that an amendment of Sec. 34 alone would not enable the Income-tax Officer to reopen the assessments, but that there ought to be a retrospective amendment of the relevant Finance Acts of the respective assessment years. A number of decisions were cited on this point as supporting the proposition, that without an amendment of the relevant Finance Acts a liability could not be imposed. We refrain from referring to these decisions, because, in our judgment there is no substance in the point urged. What the department is trying to recover is the tax due to the Government on the basis of the liability imposed or quantified by the Finance Acts of the relevant years.

60. The next point urged was that under the Constitution Parliament was incompetent to make a retrospective provision for levy on collection of a tax renting to a period anterior to 26th January, 1950. This point, however, is concluded against the petitioners by the judgment of the Supreme Court in The Union of India v. Madangopal, 1954 SCJ 110 : (AIR 1954 SC 158) (D), and this contention, is, therefore, rejected.

61. The last of the points urged was as regards the validity of the proceedings for the transfer of the income-tax assessments of the petitioners to the not, respondent. But this, however, is also conclude by a decision of the Supreme Court in Pannlal v. Union of India, 1957-31 ITR 565: ((S) AIR 1957 SC 397) (F), in which judgment was delivered by Bhagwati, J. on 31st December, 1956. In this decision their Lordships of the Supreme Court had to consider the effect of the amendment introduced into Section 5(7-A) of the Indian Income-tax Act. Their Lordships held that the amendment was constitutionally valid and justified the transfer to the Income-tax officer. The same form has been adopted in the present case. We, therefore, reject this contention also. The result is that these writ petitions fail and the rule nisi issued will be discharged. The petitioners will pay the costs of the department. Counsel's fee Rs. 250 in each petition.

K.S.B

62. Petitions dismissed.