TMI Blog1963 (7) TMI 85X X X X Extracts X X X X X X X X Extracts X X X X ..... f the State of Assam. Shri K.E. Johnson, the Commissioner of Income-tax, Assam, Tripura and Manipur, is impleaded as the first respondent, apparently in his personal capacity. The second respondent is the Commissioner of Income-tax, Assam, Tripura and Manipur, having his office at Shillong, the headquarters of the State of Assam. The third respondent is the Inspecting Assistant Commissioner of Income-tax, Assam, holding his office at Shillong. The fourth respondent is the Additional Income-tax Officer, Dibrugarh, in the State of Assam. The fifth and the sixth respondents were the employees of the petitioner-company, whose services had been dispensed with by the petitioner. The seventh respondent is the Income-tax Officer, Dibrugarh, in the State of Assam. The eighth and the ninth respondents are the Income-tax Officers of Digboi and Tinsukia, respectively, in the State of Assam. The tenth respondent is the Additional Superintendent of Police at Dibrugarh, and the eleventh respondent is the Union of India, through the Secretary, Ministry of Finance (Revenue Division) , Government of India. The petitioner company was carrying on extensive business as wholesale dealers of various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valuable evidence in support of the criminal charge against the sixth respondent, the sixth respondent sought the aid of the fifth respondent to remove the said books. To this end and to humiliate the petitioner and its directors, the fifth respondent who was closely connected with the third respondent, the Inspecting Assistant Commissioner of Income-tax, as a friend and as a relative, influenced the said respondent to cause harsh and coercive measures to be taken against the petitioner by way of search and seizure, acting under section 37(2) of the Act, and, as a result of this, harsh and coercive measures were taken against the petitioner by the sudden search of the petitioner's premises and the residences of its directors on the 11th March, 1962, by the respondents Nos. 4, 7 to 9, the Income-tax Officers, and respondent No. 10, the Additional Superintendent of Police, Dibrugarh, accompanied by about one hundred policemen armed with rifles and guns, under four warrants of authorisation purported to have been issued by the Commissioner of Income-tax under section 37(2) of the Act, and they started raiding simultaneously the various premises and/or offices at Tinsukia belongin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the petitioner claims that the search of its premises and seizure of the books, documents, etc, was high-handed, illegal, unconstitutional, ultra vires and mala fide. The plea of the petitioner in Civil Rule No. 198 of 1962 is similar to the pleas raised in Civil Rule No. 197 of 1962. The petitioner claims that he was a tenant in respect of one room and kitchen and bath-room of the ground-floor of the premises belonging to the Himalayan Plywood Industries Private Ltd., at Tinsukia; that the petitioner had been regularly assessed to income-tax and had been paying the same, and that the assessment proceedings were completed up to the assessment year 1960-61, and the income of the petitioner was shown to be below the taxable limit; that he had nothing to do with the business activities of the petitioner in Civil Rule No. 195 of 1962, and that any search of his premises or seizure of his books and accounts, etc., was highly illegal, high-handed, ultra vires and unconstitutional. As already indicated, all the petitioners claim that the action taken by the various Income-tax Officers purporting to act under the four warrants of authorisation issued by the Commissioner of Taxes un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en validly exercised. (4) In any event, the power under the section has not been-exercised properly and in accordance with section 37(2) in the instant case for the following reasons : (i) The Income-tax Officer conducting the search and seizure had neither reason to believe nor did he form any belief or opinion as required under section 37(2) . (ii) No books, documents, etc., to be seized have been specified in the warrants. (iii) No proceedings have been mentioned in the warrants as pending. (5) Rule 2 of the Rules framed under the Act and the prescribed form of authorisation under section 37(2) are ultra vires. (6) In any event, the power under section 37(2) had been exercised in a whimsical and capricious manner and mala fide. (7) The authorisation issued by the Commissioner of Income-tax did not empower (i) the seizure of the petitioner's books from the premises of Lohia Properties, (ii) sealing of rooms, and (iii) posting of police. The various points relied on by the learned counsel for the petitioners in these cases may be conveniently dealt with under the following heads: (1) Is section 37(2) ultra vires of article 14 of the Constitution ? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it is clear that the article applies to any one who can be called a person in the eye of law, thus including juridical persons as well as persons who may not even be citizens of India. Between persons, what the article guarantees is that they should enjoy ( i) equality before the law and (ii) equal protection of the laws within the territory of India. Before examining the attack made against section 37(2) of the Act in this regard, it would be necessary to note that the present section 37(2) of the Act originally was not part of the Indian Income-tax Act, 1922. This provision was introduced by way of an amendment, by the Finance Act, 1956 (Act XVIII of 1956) , which was enacted to give effect to the financial proposals of the Central Government for the financial year 1956-57, as seen from its preamble. Section 20 of that Act is as follows : 20. Substitution of new section for section 37.--For section 37 of the Income-tax Act, the following, section shall be substituted, namely: '37. Powers of income-tax authorities.--(1) The Income-tax Officer, Appellate Assistant Commissioner, Commissioner and Appellate Tribunal shall, for the purposes of this Act, have the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame powers as are vested in a court under the Code of Civil Procedure, 1908 (V of 1908) , when trying a suit in respect of the following matters, namely : (a) enforcing the attendance of any person and examining him on oath or affirmation; (b) compelling the production of documents ; and (c) issuing commissions for the examination of witnesses, and any proceeding before an Income-tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal, under this Chapter shall be deemed to be a 'judicial proceeding' within the meaning of sections 193 and 228 and for the purposes of section 196 of the Indian Penal Code (XLV of 1860) . It may be seen, therefore, that prior to the amendment, the powers which the Income-tax Officer, or Appellate Assistant Commissioner, or Commissioner or Appellate Tribunal could exercise are the powers as set out in the present section 37(1) , which figured as the old section 37, which powers are the same as are vested in a court under the Code of Civil Procedure, 1908 (V of 1908) , when trying a suit, as regards the matters specifically enumerated in the sub-section, namely, (a) discovery and inspection, (b) e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct. Being distinct powers and being powers which covered the same field of operation and calculated to achieve the same end and purpose, the more onerous and drastic of the two powers should be struck down as they created a discrimination prohibited by article 14 of the Constitution. He pointed out that there can be no doubt that the powers under section 37(2) , which are merely executive or administrative, are much more severe and drastic than the powers under section 37(1) which are judicial, in that, in the former case, there is no opportunity given to the party affected, before action is taken, to show cause; that there is no provision for any representation being made by the person affected against the action ; and that there is no provision for any notice being given, or for the return of the books seized; and that the power is so general, that any books, from any place, belonging to any person, could be seized under the section. This being the case, according to him, so long as there is section 37(1) , which covers the same field and is much less drastic and much more favourable to the person affected, the power under section 37(2) must be struck down as violative of the fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The State can by classification determine who should be regarded as a class for purposes of legislation and in relation to a law enacted on a particular subject, but the classification permissible must be based on some real and substantial distinction bearing a just and reasonable relation to the objects sought to be attained and cannot be made arbitrarily and without any substantial basis. Classification means segregation in classes which have a systematic relation, usually found in common properties and characteristics. There is nothing uncommon either in properties or in characteristics between persons who are discovered as evaders of income-tax during an investigation conducted under section 5(1) and those who are discovered by the Income-tax Officer to have evaded payment of income-tax. Both these kinds of persons have common properties and have common characteristics and, therefore, require equal treatment. We thus hold that both section 34 of the Indian Income-tax Act and sub-section (4) of section 5 of the impugned Act deal with all persons who have similar characteristics and similar properties, the common characteristics being that they are persons who have not truly d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le not only guarantees equal protection as regards substantive laws but procedural laws also come within its ambit. The implication of the article is that all litigants similarly situated are entitled to avail themselves of the same procedural rights for relief, and for defence with like protection and without discrimination. The procedural provisions of Act 30 of 1947 had therefore to stand the challenge of article 14 and could only be upheld provided they withstood that challenge. Lower down it is observed : The class of persons alleged to have been dealt with by section 5(1) of the impugned Act was comprised of those unsocial elements in society who during recent years prior to the passing of the Act had made substantial profits and had evaded payment of tax on those profits and whose cases were referred to the Investigation Commission before 1st September, 1948. Assuming that evasion of tax to a substantial amount could form a basis of classification at all for imposing a drastic procedure on that class, the inclusion of only such of them whose cases had been referred before September 1, 1948, into a class for being dealt with by the drastic procedure, leaving other t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substantial evaders, thereafter to ask as to why some of them were subjected to the summary and drastic procedure prescribed in Act XXX of 1947 and others were subjected to the normal procedure prescribed in section 34 and the cognate sections of the Income-tax Act, the procedure prescribed in Act XXX of 1947 being obviously discriminatory and, therefore, violative of the fundamental right guaranteed under article 14 of the Constitution. The principle laid down by these decisions is that where there are two legislative provisions both of which could be applied to the same category persons, one of which is much more drastic and discriminatory than the other, the application of the more drastic procedure to the same category persons, instead of the less drastic procedure, would amount to discrimination which is prohibited under article 14 of the Constitution. In other words, assuming that both sections 37(1) and 37(2) are intended to apply to tax evaders, if the provisions of section 37(1) are applied to a certain set of persons and the more drastic provisions of section 37(2) are set in motion in the case of other persons similarly placed the latter are entitled to ask Why thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 37(1) and 37(2) of the Act are alike applicable to all persons that there is no classification of the persons to whom one provision should apply and not the other; that the power under section 37(2) was merely an additional power, in addition to that in section 37(1) ; and that, therefore, these provisions did not violate the fundamental right contained in article 14 of the Constitution. In reply to this Mr. Roy stated that the power under section 37(2) could not in the nature of things be an additional power; that it is an entirely different power, of quality different, inasmuch as while the powers under section 37(1) are judicial and are exercisable by a number of authorities enumerated therein, the powers under section 37(2) could only be exercised by the Income-tax Officer concerned, on a letter of authorisation issued by the Commissioner, and is of a purely administrative character. In this context he distinguished the case of Purshottam Govindji halai v. B.M. Desai, Additional Collector of Bombay [1955] 28 ITR 891 ; [1955] 2 SCR 887 by pointing out that section 46(2) of the Income-tax Act, which fell to be considered in that case, provided for two different and alte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ute are intended to apply only to particular persons or things or only to a certain class or group of persons or things, and that, as in the instant case, as there is no classification indicated in the statute itself, but the selection or choice for classification is left to the arbitrary decision of the executive authority indicated in the section, it has to be examined and ascertained if the statute has laid down any principles or policy to serve as a guidance in the exercise of the discretion by the executive authority in, the matter of the selection or classification, and that as no such principle and policy had been laid down as a guide for the exercise of discretion by the executive authority in the matter of selection or classification in applying section 37(2) , the court will strike down the statute on the ground that the statute provided for the delegation of arbitrary and uncontrolled power to the executive authority so as to enable it to discriminate between persons or things similarly situated, and that, therefore, the discrimination is inherent in the statute itself, and that, consequently, the statute has to be struck down along with the executive action taken under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference from external factors or matters. He further pointed out that in order to save a section of an enactment from the challenge of article 14 of the Constitution, the legislature itself must have enunciated the policy and the principles which are to guide the executive in exercising the power given by the section, and the enactment itself has to give any other guidance useful and necessary for the exercise of that power by the executive, and, that, in the instant case, there is nothing in section 37(2) of the Act laying down any policy or principle and no other indications to afford any guidance to the executive in regard to the exercise of the power under that section. It was contended by Dr. Paul that as the policy of the Act is prevention of evasion and that as that policy is quite clear from the scheme of the Act and the preamble, etc., section 37(2) must be put into force in order to achieve the policy, and that this would afford sufficient guidance to the executive in exercising the power under the sub-section. To this Mr. Roy replied that it was not sufficient to find out why a particular power was granted, but it was also necessary to determine how, and in what manne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brancer of Legal Affairs to the Government of West Bengal [1955] 1 SCR 224 ; AIR [1954] SC 424, hereinafter referred to as Dhirendra Kumar's case (Supra) , the question arose whether a notification issued by the State Government altering the previous notification granting a right of trial by jury, was wide as offending article 14 of the Constitution, on the ground that the classification involved in the notification is not based on substantial distinction. In that case, the notification revoked the right of trial by jury in respect of certain cases only, and not in respect of certain other offences, and it did not in express terms indicate the grounds on which the former set of cases had been segregated from the latter set of cases, although both fell under the same sections of the Indian Penal Code, and it was observed that the classification had no relation to the object in view, namely, withdrawal of jury trial in these cases, and, it was, therefore, held that the notification made under section 269(1) of the Criminal Procedure Code travelled beyond the limits of that section and contravened article 14 of the Constitution. In that connection Mahajan C.J., who spoke for the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iple as to the construction or scope of article 14 of the Constitution, and that whether an enactment providing for special procedure for the trial of certain offences is or is not discriminatory and violates article 14 of the Constitution must be determined in each case as it arises, and that no general rule applicable to all cases can be laid down. In fact, from a careful scrutiny of the majority judgment in Kedar Nath Bajoria's case (Supra) it would be clear that the ground of decision in that case was based on a classification which, in the context of the abnormal post-war economic and social conditions was readily intelligible and obviously calculated to subserve the legislative purpose, and, as such, did not in any manner affect the correctness of the decision in Anwar Ali Sarkar's case (Supra) . The next case of importance that requires to be referred to and which may be regarded as containing an able analysis of the category of cases that might have to be dealt with under article 14 of the Constitution, is that of Ram Krishna Dalmia's case (Supra) , hereinafter referred to as the Dalmia's case (Supra) . In that case, the Central Government published in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only by a substantive law but also by a law of procedure. It was further held in that case that the decisions of the Supreme Court established the following principles which would have to be constantly borne in mind by the courts when called upon to adjudge the constitutionality of any particular law attacked as discriminatory and violative of the equal protection of the laws : (a) That a law may be constitutional even though it relates to a single individual if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as a class by himself ; (b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles; (c) that it must be presumed that the legislature understands and correctly appreciates the needs of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds ; (d) that the legislature is free to recognise degrees of harm and may confine its restrictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [1954] SCR 1117 ; AIR [1954] SC 314 and Budhan Choudhury v. State of Bihar [1955] 1 SCR 1045 ; AIR [1955] SC 191. (2) A statute may direct its provisions against one individual person or thing or to several individual persons or things but no reasonable basis of classification may appear on the face of it or be deducible from the sur rounding circumstances, or matters of common knowledge. In such a case, the court will strike down the law as an instance of naked discrimination, as it did in Ameerunnissa Begum v. Mahboob Begum [1953] SCR 404 ; AIR [1953] SC 91 and Ramprasad Narayan Sahi v. State of Bihar [1953] SCR 1129 ; AIR [1953] SC 215. (3) A statute may not make any classification of the persons or things for the purpose of applying its provisions, but may leave it to the discretion of the Government to select and classify persons or things to whom its pro visions are to apply. In determining the question of the validity or otherwise of such a statute, the court will not strike down the law out of hand only because no classification appears on its face or because a discretion is given to the Government to make the selection or classification, but will go on to exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iples and arrived at the conclusion in the case before them that no arbitrary or uncontrolled power had been delegated to the Government, and that, therefore, the law itself could not be regarded as bad, and the Supreme Court further held that they were not satisfied that the circumstances indicated in the notification in question and the affidavits filed on behalf of the Union of India may not have the true basis of further inquiry into the matter. The subsequent decisions of the Supreme Court in the case of J . Pandu-rangarao v. Andhra Pradesh Public Service Commission [1963] 1 SCR 707 ; AIR [1963] SC 268 or in Khandige Sham Bhat v. Agricultural Income-tax Officer, Kasaragod [1963] 48 ITR (SC) 21 do not usefully add to the able analysis of the law contained in Dalmia's case (Supra) , and, therefore, do not require any detailed reference. On a plain reading of article 14 of the Constitution, it would be clear that so far as the article goes, which contains no limitation, as already pointed out, it prohibits the denial to any person within the territory of India (i) equality before the law and (ii) equal protection of the laws. Although it is not said in so many words, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equality referred to in the article, obviously, applies to laws made applicable to persons who are similarly situate in all respects. For example, the penal law of the land. This law does not depend for its applicability on any status or position or condition of life of the individual. The penal law can be applied and should be applied equally to all persons within the territory of India. In other words, if the same offence is committed by two different individuals, the same law should apply to them and govern the disposal of the punitive action to be taken against them. So that if A and B commit the same offence, they should be dealt with under the same law, both substantive and procedural, and if they are dealt with by different laws, whether substantive or procedural, the equality guaranteed by the article is disturbed, and immediately the article would come into play. Hence, it is necessary to assume that the article in question must be deemed to recognise the need and justification for applying separate sets of laws to individuals or groups of individuals not similarly placed and not belonging to the same group, and in the nature of things, therefore, the set of laws app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us between the basis of the classification made, and the object sought to be achieved by the legislature in making the classification, the classification itself being based on an intelligible differentia between the classified categories. Otherwise, the statute must be struck down as violative of article 14. (ii) Where the statute makes no such classification but merely provides for two sets of laws, and, apparently, leaves it to the executive authority to apply the same to different sets of persons similarly placed, the conditions laid down in No. (i) must be fulfilled by the executive when it makes the classification for the separate application of the different sets of laws in question, and, in addition, the statute itself must lay down the policy and the principles which would guide the executive in the application of those different laws to the different persons or sets of persons, and that policy and those principles must be implemented fully in making this classification by the executive. Where, therefore, the nexus between the basis of possible classification and the object of the Act is not established, and where no intelligible differentia is indicated in the statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be guided by Order 11 of the Code of Civil Procedure which involves the giving of notice to the person proceeded against. Similar is the rule contained in Order 13 relating to the production, impounding and return of documents, and Order 26 dealing with the issue of commissions. All the safeguards as laid down by the Civil Procedure Code come into play in the exercise of the judicial power under section 37(1) whereas there are no such guiding factors or controlling provisions of law subject to which the executive power is to be exercised under section 37(2) and, although the provisions of the Code of Criminal Procedure, 1898 (Act V of 1898) , relating to searches are declared to apply under the section, none of the safeguards provided in the Criminal Procedure Code are made applicable. The sections of the Criminal Procedure Code dealing with searches are contained in sections 96 to 105 of the Code of Criminal Procedure. Everyone of these sections contemplates the issue of warrant by a court or a Magistrate, whereas section 37(2) merely empowers an Income-tax Officer to exercise practically all the powers of search and seizure under the Code of Criminal Procedure, without th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case. However, as the matter had been argued at great length and in detail, we would like to briefly advert to those arguments and examine and consider the same for the sake of completeness. It was contended by Mr. Roy, as already pointed out, that section 37(2) of the Act was violative of the fundamental right guaranteed under article 19(1) (f) and more particularly under article 19(1) (g) of the Constitution, namely, the right of freedom to hold and enjoy property and to practise any profession, or to carry on any trade, occupation or business. His main contention is that the provisions for the search and seizure contained in section 37(2) of the Act are extremely onerous and are clear restrictions on the fundamental rights guaranteed under article 19(1) (f) and certainly under article 19(1) (g) of the Constitution. In this context he pointed out: (1) that there was a concentration of naked, arbitrary and uncontrolled power on the executive, without any check, control and guidance; (2) that no principle, standard or condition had been laid down for the exercise of the power by the executive; (3) that no representation could be made, nor any provision made to the eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 903, Diwan Sugar General Mills (P.) Ltd. v. Union of India [1959] Supp. 2 SCR 123 ; AIR [1959] SC 626, 632, Lord Krishna Sugar Mills Ltd v. Union of India [1960] 1 SCR 39 ; AIR [1959] SC 1124, 1132 and Hamdard Dawakhana case (Supra) . He further placed reliance on the cases of Raghubir Singh v. Court of Wards, Ajmer [1953] SCR 1049 ; AIR [1953] SC 373, Dwarka Prasad Laxmi Narain v. State of Uttar Pradesh [1954] SCR 803, State of Rajasthan v. Nath Mal [1954] SCR 982, Ganpati Singhji v. State of Ajmer [1955] 1 SCR 1065, Mohd. Hanif Quareshi's case (Supra) , Abdul Hakim Quraishi v. State of Bihar [1961] 2 SCR 610, State of Madhya Pradesh v. Baldeo Prasad [1961] 1 SCR 970 ; AIR [1961] SC 293 and Kameshwar Prasad v. State of Bihar AIR [1962] SC 1166. Dr. Paul, the learned counsel for the respondent, placed reliance on the case of M.P. Sharma v. Satish Chandra [1954] SCR 1077 ; AIR [1954] SC 300, 302 in support of his contention that mere search and seizure do not violate any fundamental right, and that all that section 37(2) of the Act authorises is the search of premises for the seizure of books, documents, etc. In that case, the Registrar of Joint. Stock Companies, Delhi Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity is a matter for redress in other proceedings. We are unable to see how any question of violation of article 19(1) (f) is involved in this case in respect of the warrants in question, which purport to be under the first alternative of section 96(1) of the Criminal Procedure Code. It is clear from the above passage that the learned judges of the Supreme Court were of the view that the search and seizure do amount to a temporary interference with the right to hold and enjoy the premises searched, and the possession and enjoyment of the articles seized. But they, nevertheless, held in the particular circumstances of that case, that the statutory regulation in that behalf was a necessary or a reasonable restriction, and hence could not per se be considered to be unconstitutional, and that the damage, if any, caused by such temporary interference, if found to be in excess of legal authority, would be a matter for redress in other proceedings. In connection with this case, Mr. Roy pointed out that Sharma's case (Supra) was one under article 19(1) (f) and not under article 19(1) (g) , and that although the search and seizure were accepted as temporary invasions of the rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reliance in the case of Bengal Immunity Co. Ltd. v. State of Bihar [1955] 2 SCR 603 ; [1955] 6 STC 446 ; AIR [1955] SC 661, 668 for the proposition that it was held in that case that the various penalties provided under section 26 of the Bihar Sales Tax Act, 1947, including obstruction to search and seizure of documents under section 17, are no doubt restrictions upon the fundamental right under article 19(1) (g) of the Constitution. He further placed reliance in the case of Wazir Chand v. State of Himachal Pradesh [1955] 1 SCR 408 ; AIR [1654] SC 415 and in the case of Hamdard Dawakhana v. Union of India [1960] 2 SCR 67 ; AIR [1960] SC 554 in support of the proposition that the Supreme Court has granted the relief against the exercise of power of search and seizure, in those cases. In the former case, the police in India seized goods of the petitioners therein, at the instance of the police of Jammu and Kashmir, and the seizure was not under any authority of law inasmuch as they were not under the orders of any Magistrate nor were they effected under any of the sections 51, 95, 98 and 165 of the Criminal Procedure Code, and the whole matter was a hole-and-corner affair betwe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in him under law, may be regarded in the particular circum stances of the case as amounting to a reasonable restriction on the fundamental right under article 19(1) (f) . (2) Such search of the premises and seizure of various account books, documents, etc., necessary and useful for carrying on the trade or business of a person, undoubtedly constitute invasions of the fundamental right to practise any profession, or to carry on any occupation, trade or business, guaranteed under article 19(1) (g) of the Constitution, particularly when any such invasion is not the result of or effected during the enforcement of a judicial process or warrant issued by a Magistrate under the Criminal Procedure Code. Hence, I experience no difficulty in coming to the conclusion that section 37(2) of the Act, which gives uncontrolled and unrestricted power to an Income-tax Officer to enter into any premises and to seize any document which he may regard as relevant for the purpose of any proceedings that may be taken or pending would, undoubtedly, amount to an invasion of and interference with the fundamental rights guaranteed under article 19(1) (g) of the Constitution. The only question, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on before the Commissioner, and that farther, the scope of section 33A is limited to orders in respect of assessment. It would be useful and necessary to refer to the rules framed by the Central Board of Revenue in this behalf published in the Notification S.R.O. 1953 dated 6th June, 1957, styled : Income-tax (Search of Premises and Seizure of Documents) Rules, 1957 . These Rules are as follows : S.R.O. 19 53.--In exercise of the powers conferred by sub-section (1) of section 59 of the Indian Income-tax Act, 1922 (XI of 1922) , the Central Board of Revenue hereby makes the following rules for the purposes of subsection (2) of section 37 of the said Act, the same having been previously published as required by sub-section (4) of section 59 of the said Act namely:-- 1. These rules may be called the Income-tax (Search of Premises and Seizure of Documents) Rules, 1957. 2. The Commissioner of Income-tax may, for reasons recorded, issue a written order under his own signature and bearing his seal, specially authorising any Income-tax Officer, subordinate to him to enter any building, or place to be specified therein where he has reason to believe that books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasonable facility for withdrawing and may then break open the apartment and enter it. 5. Where any person in or about such building or place is reasonably suspected of concealing about his person any article for which search is being made, such person may also be searched by the Income-tax Officer, with such assistance as he may consider necessary. If such person is a woman, the search shall be made by another woman with strict regard to decency. 6. Before making a search, the Income-tax Officer about to make it shall call upon two or more respectable inhabitants of the locality in which the building, or place to be searched is situate to attend and witness the search and may issue an order in writing to them or any of them so to do. 7. The search shall be made in the presence of the witnesses aforesaid and a list of all things seized in the course of such search and of the places in which they were respectively found shall be prepared by the Income-tax Officer and signed by such witnesses ; but no person, witnessing a search, shall be required to attend as a witness of the search in any proceedings under the Act unless specially summoned. 8. The occupant of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax may enter and search any building or place where he has reason to believe that any books of account or other documents may be found which, in his opinion, will be useful for purposes of any proceeding under the said Act. He may also seize any such books or documents and make a note or inventory of any other article or thing found in the course of the search which, in his opinion, will be useful for or relevant to any proceedings under the Act. As provided in the section, these rules have been framed for the purposes mentioned above. On the question whether a right of representation was, in fact, necessary before the restriction could be accepted as reasonable, Dr. Paul contended that as the power was merely administrative, such a provision is not necessary. In support of this submission, he relied on Pannalal Binjraj's case (Supra) , Diwan Sugar and General Mills (P.) Ltd.'s case (Supra) and Kishan Chand Arora's case (Supra) . In our opinion, Pannalal's case (Supra) has no application to the instant case as the judgment in that case proceeded on the assumption that the power given in that case was a discretionary power and not necessarily discriminat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act No. IV of 1866) together, it is in our opinion fair and reasonable to come to the conclusion that the discretion of the Commissioner in this matter is guided by the two objects mentioned in the section and by the necessary implication contained in it that the person applying must be in actual and effective control and possession of the place where he is going to keep the eating house. The argument therefore that section 39 confers an arbitrary and uncanalised power without any criteria for guiding the discretion of the licensing authority must fail and the section cannot be held to be an unreasonable restriction on the right to carry on trade on this ground. Dealing with the argument that no provision has been made under the Act for a hearing oral or written of the person applying for a licence, the majority Judges observed in that context, that it could not be laid down as a general proposition that where in the case of licensing statute no provision is made for hearing and there is no provision for giving reasons for refusal, the statute must be struck down as necessarily an unreasonable restriction on a fundamental right, and that no case had been cited before them whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n by an executive officer without the intervention of any judicial tribunal amounts to an unreasonable restriction upon the right of property of the superior of the religious institution which is blended with his office. Sections 38 and 39 of the Act must, therefore, be held to be invalid. In the third case, Dwarka Prasad Laxmi Narain v. Slate of Uttar Pradesh [1954] SCR 803 ; AIR [1954] SC 224, 227, dealing with the U. P. Coal Control Order, 1953, the same learned judge observed as follows : but the mischief arises when the power conferred on such officers is an arbitrary power unregulated by any rule or principle and it is left entirely to the discretion of particular persons to do anything they like without any check or control by any higher authority. A law or order, which confers arbitrary and uncontrolled power upon the executive in the matter of regulating trade or business in normally available commodities cannot but be held to be unreasonable. As has been held by this court in Chintaman Rao v. Stale of Madhya Pradesh [1950] SCR 759 ; AIR [1951] SC 118 (A) , the phrase 'reasonable restriction' connotes that the limitation imposed upon a person in enjoyme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dras v. V.G. Row [1952] SCR 597 ; AIR [1952] SC 196, Md. Hanif Quareshi v. State of Bihar [1959] SCR 629 ; AIR [1958] SC 731. (iii) The restriction must strike a balance between the guaranteed freedom under the article and the seizure or control sought to be exercised by the restriction. In other words, there should be a nexus between the restriction and the object and purpose of the control sought to be imposed by the restriction. That is, the restriction must have a reasonable relation to the object to be gained by the section of the statute: Chintaman Rao's case (Supra) . (iv) In arriving at a decision as to the reasonableness of the restriction, the court would have to take into consideration the following : (a) the nature of the right affected, (b) the underlying purpose of the restriction, (c) the extent and urgency of the evil sought to be remedied, and, (d) the disproportion of the imposition and the prevailing conditions in which the restriction is imposed. 4. Bearing these principles in mind, the further conclusion that would inevitably follow may be set out : (i) Concentration of naked, arbitrary and uncontrolled power on the executive, even i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained only so long as may be necessary for their examination or for any inquiry or proceedings under the Act. Mr. Roy pointed out that all these safeguards are totally absent from section 37(2) of the Act. Next, reference was made to section 44(3) of the Assam Sales Tax Act, provisions of which are similar to those of the Andhra Pradesh Sales Tax Act. Section 37(3) of the Bihar Sales Tax Act was also referred to for a similar purpose. Section 49(3) of the Bombay Sales Tax Act contains also similar conditions and restrictions. According to section I7(2A) of the Kerala Sales Tax Act, documents, accounts, etc., shall be returned within ten days of the seizure, except when they are required for prosecution. Section 29(3) of the Madhya Pradesh Sales Tax Act is similar to the provisions of section 49(3) of the Bombay Sales Tax Act. Section 41(3) of the Madras Sales Tax Act prescribed the maximum limit of 30 days for the retention of the documents. Section 28(3) of the Mysore Sales Tax Act and section 16(3) of the Orissa Sales Tax Act are similar. Section 13(3) of the Uttar Pradesh Sales Tax Act is more meticulous in the restrictions placed for exercising the power to seize account bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t forthwith for the documents seized ; and (5) he shall retain the same documents, etc., only for so long as may be necessary for the purpose of this Act, and in many cases the maximum period for which the documents can be retained is also specified. Mr. Roy drew our attention to certain provisions of the Central Acts, such as section 9 of the Central Sales Tax Act, 1956, section 96 of the Code of Criminal Procedure, section 172 of the Sea Customs Act, 1878, and sections 19(2) and 19A of the Foreign Exchange Regulation Act, 1947. Section 9 of the Central Sales Tax Act is as follows : 9.(1) The tax payable by any dealer under this Act shall be levied and collected in the appropriate State by the Government of India in the manner provided in sub-section (2) . (2) The authorities for the time being empowered to assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India and subject to any rules made under this Act, assess, collect and enforce payment of any tax payable by a dealer under this Act in the same manner as the tax on the sale or purchase of goods under the general sales t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re Code, is exercisable under a warrant issued by a court, the power is obviously a judicial power and in spite of the fact that what is exercisable is a judicial power, Parliament found it necessary to prescribe conditions controlling and restricting even the exercise of the judicial power. It is contended, and in our opinion quite rightly, that a similar power exercisable by a non-judicial authority under section 37(2) of the Act, is not in any manner similarly controlled, inasmuch as the section does not lay down as a condition to the exercise of the power--to give an example --that there should be reason to believe that the person against whom the power is exercised is intending or attempting to evade the payment of income-tax or would not produce the document or thing by the issue of notice or summons under section 37(1) of the Act or by the making of an order under section 94 or a requisition under section 95(1) , Criminal Procedure Code. Again looking into the Sea Customs Act, 1878, we find section 172 thereof runs as follows : Any Magistrate may, on application by a Customs-collector, stating his belief that dutiable or prohibited goods are secreted in any place wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is not known to the Magistrate to be in the possession of any person, or where the Magistrate considers that the purposes of any investigation or proceeding under this Act will be served by a general search or inspection, he may issue a search warrant and the person to whom such warrant is directed may search or inspect in accordance therewith and seize any book or other document, and the provisions of the Code of Criminal Procedure, 1898 (Act V of 1898) , relating to searches under that Code shall, so far as the same are applicable, apply to searches under this sub-section : Provided that such warrant shall not be issued to any police officer below the rank of sub-inspector. Explanation.--In this sub-section, 'place' includes a house, building, tent, vehicle, vessel or aircraft. Section 19A provides for the custody of documents seized in pursuance of order made under section 19(2) or section 19(3) , and is as follows: Where, in pursuance of an order made under sub-section (2) of section 19 or of a search warrant issued under sub-section (3) of the said section, any book or other document is furnished or seized, and the Director of Enforce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction could be taken under that section only after notice, as contemplated by the Code of Civil Procedure. Again, the power under section 37(1) is properly restrained by adequate safeguards. In this connection section 37(3) may be noticed, which runs as follows : Subject to any rules made in this behalf, any authority referred to in sub-section (1) may impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act : Provided that an Income-tax Officer shall not-- (a) impound any books of account or other documents without recording his reasons for so doing; or (b) retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Commissioner therefor. Strangely enough, even this safeguard is only made applicable to action taken under section 37(1) and not to action taken under section 37(2) . Hence, on examination of section 37(2) vis-a-vis the other provisions and enactments in pari materia, as well as the other provisions in the Indian Income-tax Act itself, I experience no dif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in any way by reason of introducing section 37(2) , and, therefore, cannot throw any light on the policy of the legislature in the matter of the exercise of the power and authority given to the executive under section 37(2) . Hence, I find no indication of the policy of the legislature in regard to section 37(2) in the statute itself, and this is necessary having regard to the Supreme Court decisions which lay down that the policy governing the exercise of power should be enacted by the statute itself and must be found in the statute which introduced the impugned provision. (2) There are also no principles or standards laid down in the section to serve as a guidance, help or direction to the executive when exercising the power conferred on it by section 37(2) . The section merely gives power to the Income-tax Officer when authorised by the Commissioner to exercise the powers under the section. Hence, the conclusion appears to be inevitable that neither do we find any guiding policy nor do we find any principle laid down requiring to be complied with by the executive when exercising the power under the section, and, consequently, the section must be deemed to have conferred nak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficulty in coming to the following conclusions : (1) There is nothing in the section (section 37(2) ) to indicate any special legislative policy or any principles which could serve as a guide in the application of the said sub-section ; nor are any principles laid down in the Act which could serve as a guide to the executive in the exercise of the power under the said sub-section ; (2) the rules framed, as seen above, afford no guidance in the matter except that they lay down that the Commissioner before he issues the authorisation should record his reasons; (3) no guidance is to be found in the section as to the circumstances in which the Commissioner would be justified in authorising the search and seizure ; (4) the power of the Commissioner is not judicial; (5) there is no guidance in the sub-section as to when and in what circumstances the Income-tax Officer could form the opinion or entertain the belief referred to therein; (6) there is no right of representation before the search and seizure; (7) section 37(2) does not provide for any right of representation or appeal either against the Commissioner issuing the authorisation or against the Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecial Bench of the Calcutta High Court in Surajmull Nagarmull v. Commissioner of Income-tax AIR [1961] Cal. 578. We have been taken closely and carefully through that judgment, and with the greatest respect to the learned judges constituting the Special Bench, I regret, for the reasons already recorded earlier in my judgment, I am unable to agree with either the reasoning adopted by the learned judges in that case, or with the conclusions reached by them on the issues arising therein. As the learned judges in that case were dealing with the same provision, namely, section 37(2) of the Act, with which I have had the occasion to deal in this judgment, I gave anxious thought to the deliberations of that Bench recorded in that judgment, but I feel I am unable to agree with the same. As that decision is, however, not binding on us in any way, I do not consider it necessary to further elaborate and examine the conclusions reached therein. The next question to consider is the method and manner in which this power under section 37(2) of the Act has, in fact, been exercised in the instant cases. In this connection, it would be necessary to make reference to the allegations contained in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax department is annexed hereto and marked F Your petitioner states that the income-tax officials seized and removed original contracts, hundis, railway receipts, receipts vouchers, title deeds, which were in a loose form without making any list and without taking any signature of your petitioner's employees thereon. (iv) In the course of the said search and seizure the employees and the officers of the income-tax department and police under the direction of the respondent No. 10 acted in an extremely high-handed manner, tore up various documents, voucher receipts including requisition slips of certain cheque books, went and searched apartments occupied by the ladies of the household with the sole object of bringing your petitioner and/or its directors down in the estimation of the people of the locality and generally subjecting your petitioner and/or its directors to hatred, contempt and ridicule and also to ruin your petitioner's business (x) In the course of their said operations the said respondents Nos. 4, 7, 8, and 9 proceeded under 4 warrants of authorisation purported to be issued under section 37(2) of the said Act and rule 2 of the said rules wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome-tax Officers concerned formed any opinion or had reasons to believe that any books or documents to be seized would be relevant or useful for any assessment proceedings pending against the petitioner, and that, unless and until such an opinion or belief, as the case may be, is formed, the exercise of jurisdiction under section 37(2) would be contrary to the language and tenor of the section, and would be illegal. On the factual submissions made by Mr. Roy, Dr. Paul made no effective reply, except stating that the conduct of the officers was entirely bona fide and tree from any bias or mala fides. On a careful consideration of the contentions of the parties, I am satisfied that the search of various premises and the indiscriminate seizure of the documents, books, valuable securities, papers, correspondence, etc., that was done in this case, are in the nature of things extremely highhanded, and cannot be justified under section 37(2) of the Act. Conducting a search from 10 a. m. to 11 p. m. is itself a most unreasonable act and the search of a large number of premises and of the various rooms contained therein, and the seizure of as many as 683 items in all, leaves the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or may be relevant to or useful for proceedings under the above Act in the case (name of the assessee with G.I.R. Senairam Doongarmal Agency (P.) Ltd., G.I.R. No. 2-S) have been kept and are to be found at (The Sales Depot and Office of Senairam Doongarmal Agency (P.) Ltd., situated in Siding Market, Tinsukia Town, Dist. of Lakhimpur) . This is to authorise and require you Shri R.N. Bagchi (Name of the Income-tax Officer) (a) to enter and search with such assistance of police officers as may be required, the said premises; (b) to place identification marks on such books and documents as may be found in the course of the search and as you may consider relevant to or useful for the proceedings aforesaid and to make a list thereof together with particulars of the identification marks ; (c) to examine such books and/or documents and make copies of extracts from such books and documents; (d) to seize such books of account and/or documents, take possession thereof; (e) to convey such books or documents to the office of the Income-tax Officer or any other authority not below the rank of an Income-tax Officer, employed in the execution of the Act; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inasmuch as the executive action contravened articles 19(1) (f) and (g) of the Constitution. I would accordingly make the rules absolute in all these petitions, which we allow with costs, and declare (1) that section 37(2) of the Act is ultra vires of the Constitution and (2) set aside the executive action taken by the contesting respondents, and(3) by the issue of a mandamus directing them to return at once, all the documents, books, etc., seized during these abortive searches to the respective petitioners. Dutta, J. Civil Rules Nos. 195 to 198 of 1962 are analogous and they are heard together. The facts giving rise to Civil Rule No. 195 are as follows : Messrs. Senairam Doongarmall of Tinsukia was a firm in the Dibrugarh sub-division carrying on business in food-grains, mustard oil and other commodities and also as indigenous bankers. It had been in existence for over 100 years and established enormous credit which extended throughout the whole of Northern India. Later on, the various businesses carried on by this firm were taken over by different limited companies and the petitioner was one of these companies incorporated in 1951, and it took over the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the directors, or to the other companies, which took over the businesses of the parent firm, were all raided and searched. The search continued from 10 A.M. till 11 P.M. and various documents, papers, books, original contracts, hundis, and title deeds were seized. A copy of the seizure-list was prepared by the income-tax department, but the petitioner does not accept the same as correct. The search was carried out in a very high-handed manner and even the apartments occupied by the ladies of the household were not spared and the directors of the petitioner-company were greatly humiliated and lowered in public estimation. The presence of an armed police force of about 100 strong and of so many Income-tax Officers at the search created a great sensation throughout the Tinsukia town which is an important commercial centre and by the evening anonymous leaflets were distributed proclaiming that another Mundhra Episode had been unearthed. Exaggerated reports were published in several newspapers including some Calcutta papers. During the search the Income-tax Officer (respondent No. 4) was taking instructions all along over the phone from the Inspecting Assistant Income-tax Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lleges that the Inspecting Assistant Commissioner (respondent No. 3) , at the instance of Beharilal and Motichand, submitted false reports to the Commissioner of Income-tax (respondent No. 1) and thereby brought the whole income-tax machinery into action with a design to remove the books and documents which were seized by the police in connection with the criminal case and also to discredit the petitioner. These books and documents were, however, not seized in course of the search on the 11th March, 1962; but on the 12th March a petition was filed before the Magistrate at Dibrugarh for permission to seize these books and documents. The Magistrate passed an ex-parte order on that day asking the officer-in-charge of Tinsukia police station to make over all the books and documents, which had been seized by them, to the Income-tax Officer, Dibrugarh, for scrutiny and return after necessary action. On coming to know this, Durgadutt, on behalf of the petitioner-company, submitted an application before the Magistrate and obtained an order from him to the effect that before the said books and documents were handed over to the Income-tax Officer every page thereof should be signed by the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich in his opinion will be useful for, or relevant to, any proceeding under this Act may be found and examine them, if found; (ii) seize any such books of account or other documents or place marks of identification thereon or make extracts or copies therefrom ; (iii) make a note or an inventory of any other article or thing found in the course of any search under this section which in his opinion will be useful for, or relevant to, any proceeding under this Act; and the provisions of the Code of Criminal Procedure, 1898 (5 of 1898) , relating to searches shall apply so far as may be to searches under this section. (3) Subject to any rules made in this behalf, any authority referred to in sub-section (1) may impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act: Provided that an Income-tax Officer shall not-- (a) impound books of account or other documents without recording his reasons for so doing ; or (b) retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a list of the things seized. Rule 8 provides for giving copy of the list to the occupant and for sending a copy to the Commissioner. Rule 9 provides that when a person is searched a list of things seized from him shall be prepared and a copy of it shall be given to that person. Rule 9 also prescribes the warrant of authorisation which is as follows : To (The Income-tax Officer) . Whereas information has been laid before me and on the consideration thereof I have been led to believe that certain books of account and/or documents which are or may be relevant to or useful for proceedings under the above Act in the case (name of the assessee with G.I.R. No. . . .) have been kept and are to be found at (specify particulars of the building or place) . This is to authorise and require you--(Name of the Income-tax Officer) (a) to enter and search with such assistance of police officers as may be required, the said premises ; (b) to place identification marks on such books and documents as may be found in the course of the search and as you may consider relevant to or useful for the proceedings aforesaid and to make a list thereof together with particulars o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Supra) the validity of section 5(4) of the Taxation on Income (Investigation Commission) Act, 1947, i.e., Act 30 of 1947, was considered and it was held that it was a discriminating piece of legislation and as such was hit by article 14 of the Constitution. Under the said section 5(4) if the Investigation Commission had reason to believe that any person other than the person whose case was being investigated had evaded payment of income-tax, it could make a report to the Central Government and on receipt of this report the. Central Government had to refer the case to the Commission for investigation. Under section 34 of the Income-tax Act also the case of an income-tax evader could be dealt with. Thus section 5(4) of Act 30 of 1947 and section 34 of the Income-tax Act applied to the same class of persons and as the procedure laid down for investigation in section 5(4) was more onerous, this section was declared void by the Supreme Court. Section 5(1) of the Act of 1947 was challenged in the other case, viz ., Meenakshi Mills case ( Supra) . Under this section the Central Government could refer to the Commission for investigation the case in which it has prima facie reasons to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Collector might proceed under the provision of the relevant law of the State for recovery of arrears of land revenue which in this case was section 13 of the Bombay City Land Revenue Act, 1876, under which the Collector could issue a warrant against a defaulter and keep him in detention for a period much longer than six months ; or, the Collector could proceed under the Code of Civil Procedure and arrest and detain a defaulter for the maximum period of six months. It was further argued that the Collector had unguided and unfettered power to adopt one procedure or the other and thus discriminate between two defaulters and hence section 46(2) was violative of article 14 of the Constitution. This argument was repelled by the Supreme Court which pointed out that there were not two modes of recovery of dues but only one mode, viz., through a certificate. But the Collector was given some additional powers for effective application of the only mode. It was observed as follows Pur-shottam Govindji Halai v. B.M. Desai, Additional Collector of Bombay [1955] 28 ITR 891 , 896 (SC) : All that the sub-section directs the Collector to do is to proceed to recover the certified amount as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 46(5A) was more arduous. A (1) A Division Bench of this court held that there was no substantial discrimination and that no fundamental right was impinged upon. The Supreme Court has laid down that for violation of article 14 of the Constitution the discrimination must be substantial and a fundamental right must be impinged upon (vide Pannalal Binjraj v. Union of India [1957] SCR 233 ; AIR [1957] SC 397 discussed below) . The above decisions are thus of no assistance to Dr. Pal in his contention that sub-section (2) of section 37 of the Income-tax Act only gives some additional powers to the income-tax authorities. The mode laid down in sub-section (1) of this section is the mode of a civil court and there is always a judicial approach in its adoption. Proceedings under this subsection are judicial proceedings whereas a search and seizure under subsection (2) is carried out at the discretion of the administrative authority and it depends on his subjective satisfaction whether a particular search and seizure is necessary. The two modes are therefore substantially different. This difference is also confirmed by the fact that while acting under sub-section (2) the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d uncontrolled power to the Government so as to enable it to discriminate between persons or things similarly situated. The discrimination in such a case is inherent in the statute itself. There is also no doubt that the procedure laid down in sub-section (2) of section 37 of the Income-tax Act for the income-tax department to get books and documents considered relevant for an assessment proceeding is much more drastic than the procedure laid down in sub-section (1) of the same section. How drastic is the procedure laid down in the said subsection (2) can be realised from the fact that the person whose house is searched need not be an assessee at all. Thus if the assessment of X, a shop-keeper, is pending and the Income-tax Officer has reason to believe that X gave a cash memo. of ₹ 100 to Y, although in his book he entered ₹ 50, the Income-tax Officer, if duly authorised, may proceed to search the house of Y instead of asking him to produce the cash memo. Mr. Roy contends that the legislature has not indicated the persons to whom sub-section (2) of section 37 should be applied. Nor has it laid down in the statute any policy or principle to guide the income-tax au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial year 1956-57. Dr. Pal argues that these preambles lay down the policy inherent in the Income-tax Act. This policy, according to Dr. Pal, is to collect income-tax and to prevent the evasion of the same. The preamble to the Finance . Act of 1956 speaks of giving effect to the financial proposals of the Government and Dr. Pal contends that if we interpret the term financial proposals in light of the budget speech of the Finance Minister, it will be found that the power of search and seizure was introduced in order to prevent tax evasion and hence the income-tax authorities are to select the field of application of sub-section (2) of section 37 according to this principle. At this stage I may discuss the principles laid down by the Supreme Court in certain cases cited at the Bar Which will help us to consider how far the discretion vested in the income-tax authorities for the application of section 37(2) is naked and unguided. In Thangal Kunju Musaliar v. M. Venkaitchalam Potti [1956] 29 ITR 349 ; [1955] 2 SCR 1196 the question arose whether there was any guidance for selective application of section 5(1) of the Travancore Taxation on Income (Investigation Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zari Mal Ltd. [1960] 2 SCR 627 ; AIR [1960] SC 475, the question arose as to whether clause 11B of the Iron and Steel (Control of Production and Distribution) Order, 1941, was valid or not. It was argued that this clause gave uncanalised and unguided power to the Controller to fix maximum prices of iron and steel. The clause was held by the Supreme Court to be valid on the ground that a procedure for fixing the maximum prices was prescribed in a scheme found in the Order itself and some of the factors which had to be considered by the Controller for fixing the maximum prices were clearly laid down. The Supreme Court observed : As we have already indicated the object which was intended to be achieved and the means which were required to be adopted in the achievement of the said object have been clearly enumerated by the legislature as a matter of legislative decision. (vide paragraph 8 in the report) . When a preamble to an Act enunciates a definite policy or objective on the basis of which a proper classification can be made, it has been held that there is a guiding principle to enable the executive or administrative authority to make selective application of the law. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es which are set out in a Schedule annexed to the Act. It was argued that under section 4 the Government had an unfettered discretion to choose any particular case of a person alleged to have committed an offence falling under any of the specified categories for allotment to the special judge and hence this section offended article 14 of the Constitution. The Supreme Court, however, held that there was no such unfettered power. The legislative purpose was clearly stated not only in the preamble but also in section 9 of the aforesaid Act which provided for special compensatory fines equal in value to the amount procured by the offender by means of the offence. When this section was interpreted with the help of the history of the legislation, it was evident that the purpose was to deprive some persons in public services who enriched themselves through corrupt practices during the post-war period of their ill-gotten gains. Thus there was a complete guidance in the Act itself for the Government as to whose case should be picked and chosen for refernce to the special judge. In Niemala Textile Finishing Mills Ltd. v. Second Punjab Tribunal [1957] SCR 335 ; AIR [1957] SC 329, sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as discriminatory. Under this section the State Government by notification issued from time to time could declare the estate specified in the notification as vested in the State free from all encumbrances. It was argued that this section gave unfettered discretion to the Government to issue or not to issue a notification in respect of an estate and hence it enabled the Government to issue a notification only in respect of zamindars who opposed the ruling party. This contention was rejected by the Supreme Court. It was pointed out that the long title of the Act and the two preambles to the Act clearly indicated that the object and purpose of the Act was to abolish all rights, title and interest in land of intermediaries by whatever name known. This was a clear enunciation of the policy which was sought to be implemented by the operative provisions of the Act. Whatever discretion was vested in the . Government under section 3, must be exercised in the light of this policy and, therefore, it could not be said to be an absolute or unfettered discretion, for sooner or later all estates must perforce be abolished. In Pannalal Binjraj v. Union of India [1957] SCR 233 ; [1957] 31 ITR 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does it impinge on a fundamental right guaranteed by the Constitution ? Article 14 can be invoked only when both these conditions are satisfied. Applying this test, it is clear that the discretion which is vested in the Commissioner of Income-tax or the Central Board of Revenue, as the case may be, under section 5(7A) is not at all discriminatory. From the above discussion of the various decisions of the Supreme Court we may draw certain conclusions. If for the selective application of any provision of law, no classification is made by the legislature, the guidance to the executive or administrative authority for making the classification must be found in the statute itself. The preamble is certainly a part of the statute and often a key to the understanding of it. If the preamble lays down the object of the enactment in a precise and clear-cut way, this may be a sufficient guidance for the executive or administrative authority to make selective application of an operative provision of the law. Even the title of a statute is an important part of the Act and may throw light on its scope and construction. But when a preamble is in very general terms, the object becomes no guidan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e preambles any policy or principle for selecting the field of operation of sub-section (2) of section 37 can be found. The said preambles only disclose that the object of the Indian Income-tax Act is the assessment and collection of income-tax. But every Act dealing with taxation is based on such an object which cannot be of any assistance to the executive or administrative authorities to make a classification for the selective application of a law providing for search and seizure. I have already pointed out that section 37(2) was inserted in the Income-tax Act only by the Finance Act of 1956. If the object of the Income-tax Act was to prevent evasion of income-tax, section 37(1) which was there before insertion of sub-section (2) of that section also applies to tax evaders. Then also both the sub-sections operate on the same field and the income-tax authorities have unguided discretion to apply sub-section (1) to some tax evaders, and sub-section (2) to some other tax evaders. Dr. Pal tries to obviate this difficulty by submitting that sub-section (2) of section 37 is to be applied only when sub-section (1) of the said section will yield no result. But I do not understand w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ic. As observed by the Supreme Court in M. P. Sharma v. Satish Chandra [1954] SCR 1077 ; AIR [1954] SC 300 a seizure and carrying away is a restriction on the possession and enjoyment of the property seized. But in that case it was held that when the seizure was only for a temporary period for the purpose of investigation, it was a reasonable restriction and thus it was saved from unconstitutionality by clause (5) of article 19 of the Constitution. So, the next question is how far the restriction imposed by sub-section (2) of section 37 of the Indian Income-tax Act on the right to hold property and to carry on business and trade, is reasonable. The test of reasonableness, wherever prescribed, should be applied to each individual statute impugned and no abstract standard or general pattern of reasonableness can be laid down as applicable to all cases (vide State of Madras v. V. G. Row [1952] SCR 597) . It is true that there is always a presumption in favour of constitutionality of a statute and that it has to be borne in mind in considering the reasonableness of a provision, that the legislature understands and appreciates the need of the people, that its laws are directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pal, however, submits that books and documents which are relevant to a pending proceeding can alone be seized and it follows that they must be returned when the proceeding is over. I am inclined to accept this argument and it appears to me that section 37(2) cannot be violative of clause (f) of article 19 of the Constitution as the deprivation of the books and documents is only temporary and as such the restriction on the right to hold property imposed by a seizure cannot be called unreasonable. But, as already pointed out above, seizure and search is also a restriction on the right to carry on trade or business. Even temporary seizure of books and documents of a concern may cause great dislocation of its trade or business. Moreover, there is the question of goodwill. A search and seizure may completely destroy the goodwill of a concern and may bring about its ruin. It is said that credit is like fire. If it is once extinguished it is difficult to rekindle it. A reputation once broken may perhaps be repaired but the public eyes will always be on the spot where the crack was. In such circumstances, a search and seizure is a restriction on the fundamental right guaranteed by artic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the following words : The formula of subjective satisfaction of the Government or of its officers, with an advisory board thrown in to review the materials on which the Government seeks to override a basic freedom guaranteed to the citizen, may be viewed as reasonable only in very exceptional circumstances and within the narrowest limits I may only add that there is no provision in the Income-tax Act for any authority to review the materials on which the income-tax authorities decide to search a house or place. But the worst feature of section 37(2) of the Income-tax Act is that there is no provision in the Act for any representation against the decision to search one's house or place. The decision to search is based on a belief of executive and not judicial officers. The person whose house is searched may or may not be an assessee. He does not know for what reasons the income-tax authorities are satisfied that books and documents relevant to a proceeding may be found in his house or place. He does not know on whose report they are acting. He has no opportunity to raise any objection before the search. Once the search is made, his reputation is gone. As I have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds more indispensable. Even under the Criminal Procedure Code a search warrant can be issued only after a judicial inquiry and on proper materials. As I have said above a search warrant can be issued under section 96 of the Criminal Procedure Code only when the magistrate is satisfied that the person, against whom the search warrant is issued, will not produce the document or thing on a summons or requisition. It is pointed out to us that the Income-tax Commissioner has to record his reasons while issuing the order authorising the Income-tax Officer to search any building or place. But this can hardly be regarded as a safeguard. In Dwarka Prasad's case (Supra) , the validity of clause 4(3) of the U.P. Coal Control Order, 1953, was considered. Under that clause the licensing authority could grant or refuse to grant, renew or refuse to renew a licence and could suspend, cancel, revoke or modify a licence or any terms thereof granted by him under the Order for reasons to be recorded. No rules were framed or directions given to guide the discretion of the licensing officer. It was argued that there was sufficient safeguard as the licensing authority had to record his reasons f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be found in the premises that were searched. This court is thus not assisted to judge if there were materials on which a reasonable man could form such a belief. We may therefore infer that either the Commissioner did not honestly form his belief or that in forming it, he could not have applied his mind to the relevant facts. The Commissioner does not tell us what was the source of his information. The petitioner categorically charges that the Inspecting Income-tax Assistant Commissioner (respondent No. 3) made a false report to the Commissioner as a result of which the search and seizure followed. The Commissioner and the said Assistant Commissioner only deny that the said Assistant Commissioner made any false report , meaning thereby that he did make a report. On the other hand, the Income-tax Officer before whom the proceedings of 1960-61 (these were the only pending proceedings in respect of the petitioner-company) were pending does not say that he believed that certain books and documents, which he considered relevant for the proceedings, would be found in the premises of the petitioner, and that, therefore, he moved the Commissioner for authority to search. His whole co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner in his affidavit makes no mention of the proceedings of 1961-62. In the prescribed authorisation the Commissioner has to mention the general index register number of the case in connection with which the books and documents are considered necessary. Yet, these officers do not want to tell the court frankly for which case the seized books and documents were relevant. It is surprising that the petitioners who never concealed any book or document in all the proceedings prior to 1960-61 and paid all their tax dues up to that year and against whom there was no proceeding for any escaped assessment under section 34 of the Income-tax Act, should turn overnight into such a tax evader as to deserve drastic action under section 37(2) of the Income-tax Act. It is true that the income-tax authorities have a duty to collect tax for the public exchequer but at the same time they have an equally important duty to the public to see that no one is subjected to avoidable hardship and inconvenience. They should not take the invasion of the privacy of a man's premises as lightly as they did in this case. The petitioner alleges that the use of an armed force of about 100 policemen and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssam, Tripura and Manipur, has also been impleaded as opposite party No, 2, S.C. Varma (opposite party No. 3) was the Inspecting Assistant Commissioner of Income-tax, Assam, having his office at Shillong. Opposite Party No. 4, R.N. Bagchi, was the Additional Income-tax Officer, Dibrugarh, and has been impleaded as such. Opposite Party No. 5, Moti-chand Tandon, was an ex-employee of the petitioner and worked as the chief accountant of the petitioner from the 28th January, 1956, to 28th February, 10,58. Opposite party No. 6, Beharilal Lohia, is alleged to be an ex-employee of the petitioner, having worked as the sales manager from the 14th August, 1955, to 8th January, 1962, when he is alleged to have been dismissed from service by the petitioner. Opposite party No. 7, R.K. Choudhury, opposite party No. 8, P.L. Das, and opposite party No. 9, A. A. Barabhuyan, were the Income-tax Officers of Dibrugarh, Digboi and Tinsukia, respectively. Opposite party No. 10, N. Natarajan, was the Additional Superintendent of Police at Dibrugarh at the relevant time. The Union of India has been impleaded as opposite party No. 11 in this petition. The petitioner contends that it had been paying regu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pposite party No. 6. Thereafter, on the report of the directors on the 8th January, 1962, the opposite party No. 6 was dismissed. On the 9th January, 1962, at the instance of the petitioner, a first information report was lodged before the officer-in-charge, Tinsukia Police Station, against the opposite party No. 6, and two of his brothers, namely, one Girdharilal Lohia and one Murlidhar Lohia, and also against one Satyanarayan Malpani, another ex-employee of the petitioner, for taking action for the offence of criminal breach of trust, misappropriation of funds and falsification of accounts. The accused were arrested and a criminal case was started against them. They were all released on bail. In this criminal case, a large number of books, papers and documents belonging to the petitioner were seized from the sales depot. After these books were seized, they were ordered to be kept in the custody of one G. D. Maheswari, the accountant of the petitioner. These account books and other documents, which were seized from the sales depot of the petitioner, were necessary for the conduct of the petitioner's business and thus, they were kept in the custody of the petitioner's accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jagadamba Stores . The petitioner in this case also has set out the facts and circumstances under which his premises were searched and the documents were seized. The circumstances are similar to the one alleged in the petition numbered as Civil Rule No. 195 of 1962. In Civil Rule No. 197 of 1962, the petition is filed on behalf of Lohia Brothers (Private) Ltd. The contention of the petitioner is that the petitioner-company is an assessee in Calcutta, that the entire tax has been paid up by it and that it had nothing to do with the assessment proceedings relating to the petitioner in Civil Rule No. 195 of 1962, or with its business. The circumstances under which the premises belonging to the petitioner-company were searched and the documents were seized in a high-handed manner, are set out in the petition. The circumstances are similar to those set out in Civil Rule No. 195. The petition in Civil Rule No. 198 of 1962 is filed by Jashbhai Patel and the pleas raised by him are similar to the petition in Civil Rule No. 197. His case is that he was a tenant in respect of one room and one kitchen, and one bath room in the ground floor of the premises belonging to Himalayan Plywood ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - (a) impound any books of account or other documents without recording his reasons for so doing ; or (b) retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Commissioner therefor. (4) Any proceeding before any authority referred to in this section shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code (XLV of 1860) . The present section was substituted by the Finance Act, 1956, with effect from the 1st April, 1956, for the following section. 37. Power to take evidence on oath, etc.--(1) The Income-tax Officer, Appellate Assistant Commissioner, Commissioner and Appellate Tribunal shall, for the purposes of this Chapter, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (V of 1908) , when trying a suit in respect of the following matters, namely: (a) enforcing the attendance of any person and examining him on oath or affirmation; (b) compelling the production of documents ; and (c) issuing commissions for the examination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such books or documents with particulars of the identification marks thereon ; (c) to examine Such books or documents and to make copies of or extracts from such books or documents; (d) to take possession of or seize any such books or documents; (e) to make a note or an inventory of any other article or thing found in the course of such search which, in his opinion, will be useful for or relevant to any proceedings under the Act; (f) to convey such books or documents to the office of the Income-tax Officer or any other authority not below the rank of Income-tax Officer employed in the execution of the Act. Under rule 9, the form of the order of the Commissioner referred to in rule 2 has been prescribed and is as follows : Warrant of authorization under section 37(2) of the Indian Income-tax Act, 1922 (XI of 1922) , and rule 2 of the Income-tax (Search of Premises and Seizure of Documents) Rules, 1957. To (The Income-tax Officer) Whereas information has been laid before me and on the consideration thereof I have been led to believe that certain books of account and/or documents which are or may be relevant to or useful for proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zure of the books of account and documents is challenged upon the ground, firstly, that the Income-tax Officer did not form any opinion and/or he had no reason to believe that any such books or documents which would be useful for, or relevant to, any particular assessment proceedings pending against the petitioner, might be found in the premises. The condition precedent for the exercise of the powers under section 37(2) of the Act was thus not fulfilled. Secondly, it is urged that there is no pending proceeding in which the Income-tax Officer could possibly have any reason to believe that any books of account or other documents would be either relevant or useful. Thirdly, it is urged that the warrants of authorization show that it was only the respondent No. 1, namely, the Commissioner of Income-tax, who had reason to believe that certain books of account and other documents, which were or might be relevant or useful for some alleged proceeding against the petitioner, might be found in the premises, and this was in contravention of the provisions of section 37(2) . Fourthly, it is contended that in the warrants of authorization, there is no mention of any pending proceeding against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rant of authorization issued to Sri R. K. Choudhury, Income-tax Officer, Dibrugarh, to search the offices including the accounts office and other offices of Lohia Brothers (P.) Ltd., Senairam Doongarmal Agency (P.) Ltd., Chunilal Murlidhar and Senairam Doongarmal and residence of their directors and members situated in Tinsukia town in the district of Lakhimpur. By another warrant of authorization issued in similar terms, Shri A. A. Borbhuiyan, Income-tax Officer, Tinsukia, was authorised to search the residence of Gobardhandas Maheshwari, Khemani Quarters, opposite Khemani Rice Mills, Tinsukia. Similar in terms is the warrant of authorization issued to Shri P. L. Das, Income-tax Officer, Digboi, to search the premises of Himalaya Plywood Factory, its offices and residence of Dayabhai Patel at Rangagora Road, Tinsukia, in the district Lakhimpur. The Commissioner of Income-tax in his reply has stated as follows : That in this connection I further say that on information placed before me and on being satisfied of the reasonableness and reliability thereof I issued a warrant of authorization in favour of respondent No. 4, Sri R. N. Bagchi, to enter into and search the place re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e searched the premises specified in the warrant of authorization issued in his favour and denied that any other premises was searched by him or that any books, documents and papers were seized other than from the premises mentioned in the said warrant of authorization. In paragraph 33, he further stated that the books, documents and papers specified in the seizure list were legally seized in execution of valid warrants of authorization issued by the Commissioner of Income-tax from the places mentioned therein. He further denied each and every allegation, which was contrary to or inconsistent with what was stated. In paragraph 34, he had also stated as follows : With reference to the allegations contained in paragraph 48 of the petition, I say that whatever action was taken was done bona fide in execution of a legal and valid warrant of authorization issued by respondent No.1 . In paragraph 35, he deals with the allegations contained in paragraph 49( b) of the petition, but he does not say anything about the allegations contained in paragraph 40(a) of the petition, in which it is specifically mentioned that the Income-tax Officer never applied his mind nor had reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he information, which is laid before him and on consideration of that information, if he is led to believe that certain books of account, which are or may be relevant and useful for any proceedings may be found, he may then order the Income-tax Officer to enter the building and seize the books. The form does not show that the Commissioner of Income-tax should have reason to believe that the books relevant will be found at the premises or that they are, in his opinion, useful for the proceedings. He has only to consider the information laid before him and has to record his reasons. Even if it be accepted that the Commissioner of Income-tax has to consider the information. laid before him and on the basis of that information has to make up his mind and form an opinion that certain books of account relevant or useful for the proceedings will be found at any premises, this requirement does not relieve the Income-tax Officer of his responsibility under section 37(2) of the Act. The Rules cannot substitute the requirement of the section itself. They may add to the requirement and when the section and the Rules are read together, it will be clear that first of all the information has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded. Rule 2 further requires that the building or place, where the Income-tax Officer is authorised to enter, is to be specified in the order itself. The form of the order also suggests that particulars of the building or place have got to be specified. In the order of authorization issued in favour of Shri R.K. Choudhury, the specification of the building or place is mentioned as follows : At offices including accounts office and other offices of Lohia Brothers (P.) Ltd., Senairam Doongarmal Agency (P.) Ltd., Chunilal Murlidhar and Senairam Doongarmal and residence of their directors and members situated in Tinsukia Town in the district of Lakhimpur. The specification of the building or place is very vague. In the authorisation letter issued in favour of Shri R. N. Bagchi, the specification of the place is stated to be at the sales depot and office of Senairam Doongarmal Agency (P.) Ltd., situated in Siding Market, Tinsukia Town. In this warrant of authorization, the building and the place have been clearly specified. In the other one, the specification is too vague and it had been left to the discretion of the Income-tax Officer to decide which of the buildings situ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... site party No. 5 and opposite party No. 3 and he was not actuated by any malice in the popular sense. But the fact remains that in the past, there was no charge of evasion of income-tax by the petitioner, and there was no charge that he suppressed any account books. Further, no materials were placed before us which could have given a reasonable belief in the mind of the Income-tax Officer that the documents will be found at those places, which were relevant to the enquiry. The proceedings so far as the assessment for the years concerned have already come to a close. All these facts lead to the inference that the exercise of the powers was not bona fide. That a large number of documents were seized irrespective of the fact whether the books had any relevance to the enquiry, and the manner in which the search was conducted, all these go to show that the exercise of the powers was not bona fide. As observed by Lord Halsbury in Susannah Sharp v. Wakefield [1891] AC 173, 179 : An extensive power is confided to the justices in their capacity as justices to be exercised judicially ; and 'discretion' means when it is said that something is to be done within the discretion of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution. For the first proposition that both sub-sections (1) and (2) of section 37 operate on the same field and the provisions of section 37(2) being more onerous, should be struck down, reliance has been placed on two decisions of the Supreme Court in Suraj Mall Mohta's case (Supra) and Shree Meenakshi Mills Ltd's. case (Supra) and a decision of the Calcutta High Court in S.M. Nawab Ariff v. Corporation of Calcutta AIR [1960] Cal. 159 ; 64 CWN 1. In the first case before the Supreme Court, the validity of section 5(4) of the Taxation on Income (Investigation Commission) Act was called into question. During the proceedings before the Income-tax Investigation Commission, it was found that the petitioner also evaded payment of tax. His case was sought to be referred under section 5(4) of Act XXX of 1947. It was urged that on a plain reading, section 5(4) is not limited only to persons who made extraordinary profits and to a substantial extent evaded payment of taxation on income, but applies to all persons who may have evaded payment of taxation on income, irrespective of whether the evaded profits are substantial or insubstantial. That being the true scope of section 5(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to assess or reassess the income, which had escaped assessment for the years 1940-41 to 1948-49. Thereupon, notices were issued under section 34 of the Income-tax Act and reassessments were made for the above period based on the findings of the Investigation Commission, which were treated as final and conclusive. These assessment orders for the years 1940-41, 1941-42 and 1948-49 were served on the assessees on the 20th February, 1954, and the assessment orders for the years 1943-44 to 1947-48 were served on 12th May, 1954. The reassessment proceedings for the year 1942-43, however, remained pending. Applications were then made for reference to the High Court against the orders of reassessment. Later in 1954, the petitioners filed petitions under article 32 of the Constitution before the Supreme Court. Two points were urged by the petitioners before the Supreme Court. Firstly, it was contended that after the amendment of section 34 of the Income-tax Act by Act XXXIII of 1954 by which the sub-sections (1A) to (1D) were added to section 34, the provisions of section 5(1) of the Act 30 of 1947 became discriminatory, as on a reading of both the enactments, Act 30 of 1947 and the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng one power or the other. The two sub-sections do not provide two separate procedures for dealing with persons, who belong to the same class. Both these sub-sections apply to persons who belong to the same class. In enacting this law, the legislature has not discriminated at all. The object of the Act, as disclosed from the preamble and the entire scheme of the Act, is to provide for an effective machinery to determine the amount of tax and for the collection and realisation of the tax and further to prevent evasion of the tax. In order to achieve this object, certain powers have been conferred on the Income-tax Officer and other income-tax authorities and the power will have to be exercised with a view to achieve that object. The income-tax authorities have been left with discretion to exercise any of the two powers having regard to the necessity and the circumstances of the case and having regard to the object of the Act. Which of the powers will be required to achieve the object of the Act in a particular set of circumstances has been left to the discretion of the authorities. The policy thus is clear under the Act and if the power has been exercised not in conformity with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be cases where improper execution of power will result in injustice to the parties. As has been observed, however, the possibility of such discriminatory treatment cannot necessarily invalidate the legislation and where there is an abuse of such power, the parties aggrieved are not without ample remedies under the law .What will be struck down in such cases will not be the provision which invests the authorities with such power but the abuse of the power itself. As I have said, the argument really resolves itself into this that the Income-tax Officer can pick up any person and exercise his powers under section 37(2) of the Act as against him, while in similar circumstances, other persons may not be dealt with under that section, and thus the section is discriminatory. If there are restrictions in the section itself to the exercise of the power and the power necessarily is to be exercised with a view to achieve the object of the Act, it cannot be said that the section has germs of discrimination. The Income-tax Officer has to be specially authorized by the Commissioner of Income-tax. Further, the exercise of the power is subject to the rules and further the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rantee and the provisions of the statute or the rule in question would have to be struck down. (2) The enactment or the rule might not in terms enact a discriminatory rule of law but might enable an unequal or discriminatory treatment to be accorded to persons or things similarly situated. This would happen when the legislature vests a discretion in an authority, be it the Government or an administrative official acting either as an executive officer or even in a quasi-judicial capacity by a legislation which does not lay down any policy or disclose any tangible or intelligible purpose, thus clothing the authority with unguided and arbitrary powers enabling it to discriminate. In summarising this law as pointed out above, their Lordships have referred to the cases of Harishankar Bagla v. State of Madhya Pradesh [1955] 1 SCR 380 ; AIR [1954] SC 465, Dwarka Prasad Laxmi Narain v. State of Uttar Pradesh [1954] SCR 803 ; AIR [1954] SC 224, State of West Bengal v. Anwar Ali Sarkar [1952] SCR 284 ; AIR [1952] SC 75, Kathi Railing Rawat v. State of Saurashtra [1952] SCR 435 ; AIR [1952] SC 123 and lastly, Kedar Nath v. State of Bengal [1954] SCR 30 ; AIR [1953] SC 404. It was furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connection with the violation of article 14 of the Constitution. The first question which arises in all cases where the constitutionality of an Act is challenged on the ground that it violates article 19(1) (f) and (g) is whether the petitioner has got any fundamental right and whether any such right has been restricted. If there is any restriction, then the question arises whether that restriction is reasonable and is saved under article 19(5) and (6) . Assuming that the petitioner has a fundamental right under article 19(1) (f) and ( g) , inasmuch as the account books, which are seized, are his property and further, the seizure affects his right to carry on business and the power granted to the Income-tax Officer to seize such account books, is a restriction on the said fundamental right, in my opinion, the restriction cannot be regarded as unreasonable. Applying the test laid down in the two cases mentioned above, section 37(2) of the Act cannot be struck down as being an unreasonable restriction. The power conferred on the Income-tax Officer is not arbitrary and uncanalised. I have already pointed out in dealing with article 14 as to why the power under section 37(2) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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