Judgement

S. R. DAS, CJI. (FOR HIMSELF & KAPUR J.) This appeal by special leave filed by one Shri Besheshar Nath hereinafter referred to as "the assessee" calls in question the validity of a settlement made under S. 8A of the Taxation on Income (Investigation Commission) Act,1947 (30 of 1947), hereinafter referred to as "the Investigation Act." This Act, which came into force on May 1, 1947, by a notification issued by the Central Government under S. 1 (3) thereof, has had a short but chequered career, as will appear from the facts hereinafter stated.

2. In order to appreciate the several questions canvassed before us it is necessary to refer to the prrovisions of the impugned Act Section 3 authorised the Central Government to constitute an Income Tax. Investigation Commission (hereinafter called the Commission) and imposed on it the following duties:

"(a) to investigate and report to the Central Government on all matters relating to taxation on income, with particular reference to the extent to which the existing law relating to, and procedure for, the assessment and collection of such taxation is adequate to prevent the evasion thereof ;

(b) to investigate in accordance with the provisions of this Act any case or points in a case referred to it under section 5 and make a report thereon (including such interim reports as the Commission may think fit) to the Central Government in respect of all or any of the assessments made relation to the case before the date of its report or interim report, as the case may be."

We may skip over S. 4 which dealt with the composition of the Commission. Section 5, which is of importance was as follows :

"5. (1) The Central Government may at any time before the 30th day of June 1948 refer to the Commission for investigation and report any case or points in a case in which the Central Government has prima facie reasons for believing that a person has to a substantial extent evaded payment of taxation on income, together with such material as may be available in support of such belief, and may at any time before the 30th day of June 1948 apply to the Commission for the withdrawal of any case or points in a case thus referred, and it the Commission approves of the withdrawal, no further proceedings shall thereafter be taken by or before the Commission in respect of the case or points so withdrawn.

(2) The Commission may, after examining the material submitted by the Central Government with reference to any case or points in a case and making such investigation as it considers necessary, report to the Central Government that in its opinion further investigation is not likely to reveal any substantial evasion of taxation on income and on such report being made the investigation shall be deemed to be closed.

(3) No reference made by the Central Government under sub-section (1), at any time before the 30th day June, 1948 shall be called in question, nor shall the sufficiency of the material on which such a reference has been made be investigated in any manner by any Court.

(4) If in the course of investigation into any case or points in a case referred to it under sub-section (1), the Commission has reason to believe-

(a) that some person other than the person whose case is being investigated has evaded payment of taxation on income, or

(b) that some points other than those referred to it by the Central Government in respect of any case also require investigation,

it may make a report to the Central Government stating its reasons for such belief and, on receipt of such report, the Central Government shall, notwithstanding anything contained in sub-section (1), forthwith refer to the Commission for investigation the case of such other person or such additional points as may be indicated in that report."

The date "30th day of June, 1948" appearing in sub-ss. (1) and (3) was, by Act 49 of 1948, substituted by the words "1st day of September, 1948." Section 6 set out the various powers conferred on the Commission and