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Rajasthan High Court
Nawal Kishore and Bapna, JJ.
Madan Gopal Kabra - Appellant
Versus
The Union of India - Respondents
D.B. Civil Miscellaneous Case No. 15 of 1950
Decided On : January 16, 1951
It is the income accruing during the previous year, that is, the year previous to the year of assessment, which is taxable. Such income must have been received, accrued or arisen or deemed to have been received, accrued or arisen in the taxable territory or the assessee must himself have been a resident of the taxable territory in the said previous year. (Paras 9 and 10)
It is the Income-tax Act which determines what persons in respect of what property are liable and how the tax is to be recovered, but the assessment is settled under the Finance Act which is an annual Act and only determines the rate. The Income-tax Act is the fiscal and taxing statute laying down the incidence of taxation.
The words "assessment of the year" in cl. III proviso (b) s. 2 (14-A) mean assessment for the year" and not assessment of the income for the year."
The word "assessment" in clause (III) proviso (b) section 2 (14-A) of the Income-tax Act has been used in the sense of determination of the amount of tax payable and not in the sense of "the whole procedure laid down in the Act for imposing liability upon the tax payer." (Para 18)
Clause (III) proviso (b) section 2(14-A) Income-tax Act makes the territory a taxable territory for the purpose of making any assessment but not for the purpose of chargeability. The chargeability is left to arise by some other law and that law is the previous State law referred to in s. I3 of the Finance Act 1950. The existence of this proviso only makes those persons liable whose income was chargeable to income-tax under any Jaw in force in those territories, but that law was superseded by the Income-tax Act. Only one of the Covenanting State of Rajasthan— Bundi—had law relating to levy of income-tax. So the State of Rajas-than, except Bundi, became taxable territory from 1st April 1950 and, therefore, income received, accruing or arising in Rajasthan for any period prior to April 1950 is not liable to assessment to income tax.
By means of proviso to Clause 3 of Instrument of Accession (Rajasthan) a limitation was imposed upon the power of the Dominion legislature to legislate and thereby impose a tax or duty in the territories of the United State of Rajasthan. Consequently, the Dominion legislature, before 26th January 1950, had no power to enact any law making Rajasthan a taxable territory before 26th January 1950.
Chapter I of Part XI of the Constitution, which relates to legislative powers of the Union, does not purport to expressly authorise the Parliament to legislate retrospectively specially in a matter where the Dominion legislature had no power to legislate under the Government of India Act, 1935. Consequently, the Parliament had no power to enact a law imposing income-tax in Rajasthan in respect of income prior to 26th of January 1950.
A plea of the act of the State affords no defence against the officers of the State for interference with the rights of the people. The doctrine of the act of State cannot be invoked to cover the case of a citizen of the Republic.
Under Art. 226, power is conferred upon the High Court to issue not only writs in the nature of various categories specified in the Article but those writs themselves as also direction and orders and they may be issued not only for the enforcement of fundamental rights but for any other purpose. (Para 26)
A notice by the , Income-tax Officer, who is acting on behalf of the Government of India, is a judicial act by the latter. Accordingly a writ may be issued against the Union of India. (Para 27)
"In pursuance of sub-section (1) of section 22 of the Indian Income-tax Act, 1922 (XI of 1922) we the Income-tax Officers mentioned in column 1 of the table below hereby give notice to every person subject to our jurisdictions as specified in the corresponding entry in column 3 whose total income during the previous year exceeded the maximum amount not chargeable to income-tax to furnish within sixty-five days from the date of publication of this notice a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as are required by the said form) his total income and total world income during that year.
Penalty.—Any person who fails without reasonable cause to furnish the return required by this notice or fails without reasonable cause to furnish it within the time allowed or in the manner re mired is liable under section 28 of the said Act to a penalty not exceeding one and a half times any tax paya-able by him."
2. Underneath the notice were published the names of various Income-tax Officers with their addresses and jurisdictions. Thereafter, on 7th of August 1950, a notice was served upon the petitioner requiring him to produce his account books on 11th of August 1950 in connection with the income-tax assessment. The Constitution of India came into force on the 26th of January 1950 giving the Dominion Parliament power to legislate in matters relating to income-tax for the whole of India, while according to the Finance Act of 1950, Rajasthan became taxable territory from 1st of April 1950, The petitioner has approached this Court with an application under Article 226 of the Constitution of India objecting to his income being assessed to income-tax which accrued prior to 1st of April 1950 and has based it on two principal grounds, namely:—
(1) That Rajasthan became taxable territory on 1st of April 1950 and, therefore, income accruing or arising before that date was not assessable to income-tax.
(2) That the Dominion Parliament did not make any law authorizing taxation on income accruing prior to 1st of April 1950 and had no jurisdiction to make any law relating to the imposition of income-tax in Rajasthan prior to the 26th of January 1950.
3. He accordingly prayed that the Union of India be restrained by means of a writ of mandamus, or certiorari or an appropriate writ, direction or order from taking any action under any provision of the Indian Income-tax Act for making any assessment of such a tax or for levying and realising the same on the income which accrue i to the petitioner prior to 1st of April 1950 and further be directed to direct its Income-tax Officers posted in Rajasthan not to harass the petitioner or to demand any account books or other information for the purpose of. making any assessment or to make any such assessment or realize the amount from the petitioner.
4. The Income-tax Officer, Jodhpur affirmed in an affidavit dated 6th of November 1950, that the petitioner had been called upon to produce his account books only in connection with his application for import and export licence and that with a view to ascertain the number of persons liable to income-tax, a survey of Jodhpur was undertaken and a notice was issued to him. No statutory notice under the Indian Income-tax Act was issued or served with a view to assess him to income-tax.
5. On 7th of December 1950, the Income-tax Commissioner supported the above position in his reply to the petition and further stated that the petitioner was liable to pay income-tax for the assessment year 1950-51 in respect of his total income for the year ending 31st March, 1950 comp
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