Judgement Briefs

Constitutional Law

Basheshar Nath v. Commissioner of Income Tax

AIR 1959 SC 149

Citation
AIR 1959 SC 149
Court
Supreme Court of India
Date
19 November 1958
Bench
Sudhi Ranjan Das C.J.; N.H. Bhagwati; S.K. Das; J.L. Kapur; K. Subba Rao

Facts

  • Basheshar Nath’s case was referred to the Investigation Commission in 1948 under Section 5(1) of the Taxation on Income (Investigation Commission) Act, 1947.
  • The Commission investigated his accounts and concluded that ₹4,47,915 had escaped taxation.
  • In 1954, Nath applied for a settlement under Section 8A of the Act.
  • He agreed to pay ₹3,50,000 as tax and penalty at a concessional rate.
  • The Central Government accepted the settlement, and Nath paid ₹1,28,000 through instalments.
  • In earlier decisions, the Supreme Court declared Section 5(1) unconstitutional because it subjected selected taxpayers to a discriminatory procedure contrary to Article 14.
  • Nath then argued that the settlement was also invalid because it arose from proceedings initiated under the unconstitutional provision.
  • The Government contended that Nath had voluntarily accepted the settlement and thereby waived his fundamental right under Article 14.

Issue

  • Whether the settlement under Section 8A could survive after the underlying investigation procedure was declared unconstitutional.
  • Whether a person may waive a fundamental right guaranteed by Part III.
  • Whether Nath’s voluntary request for settlement and payment of instalments prevented him from invoking Article 14.

Rule

  • Article 14 imposes a constitutional obligation upon the State not to deny equality before the law or equal protection of the laws.
  • A person cannot authorise the State to act in violation of this constitutional command.
  • Fundamental rights are not merely private benefits that may be surrendered through individual agreement.
  • They embody constitutional policy, protect the public order created by the Constitution and limit State power.
  • The doctrine of waiver cannot validate State action prohibited by a fundamental right.
  • A person cannot confer jurisdiction upon an authority acting under an unconstitutional provision merely by consent.

Application

  • The Court found that the settlement procedure was not genuinely separate from the unconstitutional investigation.
  • A settlement under Section 8A could arise only during an investigation initiated under Section 5(1).
  • The Commission had examined Nath’s accounts, determined the escaped income and then considered his settlement proposal using the powers and procedure provided by the impugned Act.
  • Once Section 5(1), which provided the jurisdictional foundation, was declared discriminatory, the settlement resting upon it could not independently survive.
  • The Government argued that Nath had voluntarily approached the Commission and benefited from the concessional settlement.
  • The majority rejected this argument.
  • Article 14 was expressed as a direct command to the State: the State “shall not deny” equality.
  • The individual affected by discrimination could not release the State from that constitutional obligation.
  • Allowing waiver would mean that the validity of discriminatory State action depended upon whether the affected person objected promptly.
  • Fundamental rights would become uncertain and could be weakened through pressure, unequal bargaining power or ignorance of constitutional law.
  • Several judges adopted slightly different approaches:
  • S.R. Das C.J. held specifically that a breach of Article 14 could not be waived.
  • Bhagwati and Subba Rao JJ. adopted the broader position that no fundamental right under Part III could be waived.
  • S.K. Das J. considered that some primarily individual rights might theoretically be waivable, but found no valid waiver on the facts because Nath did not knowingly relinquish an established right.
  • Despite the variation in reasoning, the Court agreed that the Government’s waiver argument failed in this case.

Conclusion

  • The Supreme Court held that the settlement under Section 8A was constitutionally invalid.
  • It formed an integral part of the discriminatory investigation procedure under Section 5(1).
  • Nath had not lost his right to challenge the proceedings by voluntarily entering the settlement or paying instalments.
  • A breach of Article 14 could not be waived.
  • The Income Tax Commissioner’s order enforcing the settlement was set aside.
  • All pending recovery proceedings under the settlement were quashed.