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Dewan Bahadur Seth Gopal Das Mohta v. The Union Of India And Another
Factual and Procedural Background
The petitioner, a businessman of Akola (State of Madhya Pradesh), was alleged to have made substantial war-time profits that were not subjected to income-tax. On 25 February 1948, the Central Government, acting under Section 5(1) of the Taxation on Income (Investigation Commission) Act, 1947 (“Act 30 of 1947”), referred his case to the Investigation Commission for inquiry into profits earned between 1 January 1939 and 31 December 1947. The Commission reported on 28 February 1951 that the petitioner had concealed Rs 27,25,363 of income and owed Rs 18,44,949 in tax.
Before final action was taken, the petitioner invoked Section 8-A of the Act and proposed a settlement, agreeing to pay the full tax in instalments spread between June 1951 and March 1954, with credit for sums already deposited. The Central Government accepted this proposal and later granted extensions. From 16 July 1951 to 10 April 1954 the petitioner remitted about Rs 14 lakh, leaving Rs 4.5 lakh due by 25 March 1955. One term of settlement forbade him from encumbering his assets without permission, save for raising funds to meet the tax.
Following this Court’s decision in Suraj Mal Mohta (AIR 1954 SC 545), the petitioner filed the present petition under Article 32 of the Constitution (June 1954), asserting that Sections 5, 6, 7 and 8 of Act 30 of 1947 violated Articles 14, 19(1)(f) and 31, and seeking (i) quashing of all proceedings and orders under the Act, (ii) refund of Rs 13,99,715-10-6 with interest, and (iii) an injunction against recovery of the remaining Rs 4.5 lakh with interest.
Legal Issues Presented
- Whether the assessment-related provisions of Act 30 of 1947 (particularly Sections 5–8) are unconstitutional for contravening Articles 14, 19(1)(f) and 31 of the Constitution.
- Whether, in proceedings under Article 32, the petitioner can repudiate a tax-settlement he himself proposed and which the Government accepted.
Arguments of the Parties
Petitioner's Arguments
- Sections 5, 6, 7 and 8 of Act 30 of 1947 create an unreasonable and inequitable classification, giving the executive arbitrary power “to pick and choose” assesseees, thereby offending Article 14.
- The procedure under the Act is more onerous than that under Section 34 of the Indian Income-tax Act, infringing the petitioner’s fundamental rights under Articles 19(1)(f) and 31.
- The settlement application was made under “pressure of circumstances” arising from the “coercive machinery” of Act 30 of 1947, rendering the agreement non-binding and unenforceable.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Suraj Mal Mohta v. A. V. Visvanatha Sastri, AIR 1954 SC 545 | Validity of proceedings under Act 30 of 1947 (contextual background prompting present petition). | Referenced as the decision that motivated the petitioner to challenge the Act; the Court did not rely on it for its reasoning in disposing of the case. |
Court's Reasoning and Analysis
The Court characterised the petition as “wholly misconceived” because the tax liability arose entirely from a settlement voluntarily proposed by the petitioner and accepted by the Central Government. No assessment had been made under the ordinary income-tax procedure. Consequently:
- Article 32 affords no remedy against obligations voluntarily assumed; the petitioner cannot invoke fundamental-rights jurisdiction to escape a consensual arrangement.
- To avoid the settlement, the petitioner would have to establish that his consent was improperly obtained; such allegations require adjudication in an appropriate alternative forum, not under Article 32.
- The solitary contention that the settlement was executed under “pressure” cannot be entertained within the limited scope of Article 32 proceedings.
Holding and Implications
Petition dismissed with costs.
Immediate consequence: the petitioner remains bound by the settlement and liable for the outstanding Rs 4.5 lakh. The judgment turns exclusively on the voluntary nature of the agreement and sets no wider constitutional precedent on the validity of Act 30 of 1947.
Mehr Chand Mahajan, C.J— The petitioner in this matter is a resident of Akola in the State of Madhya Pradesh and carries on business in various lines i.e oil mills, banking, money lending, etc. It is alleged that during the war years he made huge profits but evaded payment of tax. In the year 1948 the Central Government, acting under Section 5(1) of the Taxation on Income (Investigation Commission) Act, 1947, referred his case to the Investigation Commission for investigation and report, in respect of the profits made by him during the period commencing with 1st of January 1939 and ending on 31st of December 1947. The Commission, after investigation, reported on the 28th of February, 1951 that the income of the petitioner concealed and withheld from taxation was in the sum of Rs 27,25,363 and the tax payable by him amounted to Rs 18,44,949.
2. During the pendency of the investigation the petitioner applied for settlement under the provisions of Section 8-A of Act 30 of 1947. This application was forwarded along with the report by the Commission to the Central Government. In the settlement application the applicant proposed that he was prepared to pay the sum of Rs 18,44,949 as under:
On or before 25-06-1951 — Rs 3,44,949 On or before 25-03-1952 — Rs 5,00,000 On or before 25-03-1953 — Rs 5,00,000 On or before 25-03-1954 — Rs 5,00,000
and that he be given credit for a sum of Rs 32,034,4-4-6 already paid by him The Central Government accepted this proposal and the claim for evaded income tax was thus finally settled by mutual agreement. The assessee, subsequently, asked for more time to pay these instalments and this was also granted from time to time.
3. Commencing from 16th of July, 1951, and till the 10th April, 1954 the petitioner paid a total sum of about Rs 14,00,000 towards discharge of the liability voluntarily agreed to by him on account of the tax evaded. A sum of Rs 4,50,000 still remains due and is payable in instalments up to the 25th of March 1955. By one of the terms of the settlement the petitioner undertook not to transfer, mortgage, charge or alienate or encumber in any manner whatsoever any of his movable or immovable properties, barring stock-in-trade of the business, except with the permission of the Commissioner of Income Tax and except for the purpose of the payment of the tax due under the settlement.
4. In June, 1954, after the decision by this Court of Suraj Mal Mohta's case AIR 1954 SC 545, the petitioner preferred this petition under the provisions of Article 32 of the Constitution alleging that he had been advised that the entire proceedings under the Act which had resulted in the imposition upon him of a liability of Rs 18,44,949 and in the payment already made of an aggregate amount of Rs 13,99,175 were wholly illegal, ultra vires, void and unconstitutional and that the Income tax authorities were not legally entitled to recover the amount of Rs 4,50,000 from him. In the grounds of the petition it was stated that Sections 5, 6, 7 and 8 of Act 30 of 1947 were invalid and ultra vires insofar as they contravene the provisions of Articles 14, 19(1)(f) and 31 of the Constitution and that under the Act there was no reasonable or equitable basic for classification, and that the Act gave to the executive unrestrained and absolute right to pick and choose and to differentiate between the same class of tax payers. It was also alleged that the procedure prescribed by the Act for discovering concealed profits was substantially different and was more prejudicial to the assessees than the procedure prescribed under the Indian Income Tax Act by Section 34. In the concluding paragraph of the petition it was prayed that an appropriate writ or direction be issued quashing the entire proceedings, and all orders passed under the Act by the Central Government and the respondent Commission, and restraining them from taking any proceedings whatsoever under the Act against the petitioner. It was further prayed that a direction be issued for restoration to the petitioner of a sum of Rs 13,99,715-10-6 with interest at 6 per cent, and that the respondents be further restrained from taking any action against the petitioner for the recovery of the sum of Rs 4,50,000 with interest.
5. In our judgment this petition is wholly misconceived. Whatever tax the petitioner has already paid, or whatever is still recoverable from him, is being recovered on the basis of the settlement proposed by him and accepted by the Central Government. Because of his request for a settlement no assessment was made against him by following the whole of the procedure of the Income Tax Act. In this situation unless and until the petitioner can establish that his consent was improperly procured and that he is not bound thereby he cannot complain that any of his fundamental rights has been contravened for which he can claim relief under Article 32 of the Constitution. Article 32 of the Constitution is not intended for relief against the voluntary actions of a person. His remedy, if any, lies in other appropriate proceedings.
6. The learned counsel for the petitioner contended that apparently the application for a settlement seems to have been made under the pressure of circumstances and in view of the coercive machinery of Act 30 of 1947 and the settlement arrived in such circumstances was not binding and could not be enforced. Whatever be the merits of such a contention, it obviously cannot be raised in an application made under the provisions of Article 32 of the Constitution. The forum for investigating such allegations is elsewhere.
7. The result is that this petition fails and is dismissed with costs.
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