9911796707
TMI Blog1973 (12) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... and documents and in the writ petitions, also cash, jewellery and other valuables, were seized by the income-tax authorities purporting to act under the authorisation for search and seizure issued under section 132 of the Act. Broadly speaking, the constitutional challenge is directed against sub-sections (1) and (5) of section 132 of the Act and incidentally also against rule 112A on the ground that these provisions are violative of the fundamental rights guaranteed by articles 14, 19(1)(f), (g), and 31 of the Constitution. The non-constitutional grounds of challenge are based upon allegations to the effect that the search and seizure were not in accordance with section 132 read with rule 112. This challenge will have to be considered in the background of the facts of the individual cases. Chapter XIII of the Act deals with income-tax authorities, their powers and jurisdictions. The hierarchy of authorities as given in section 116 shows that the class of authorities designated as Director of Inspection is shown below the Central Board of Direct Taxes and above the class of authorities known as Commissioner of Income-tax. The other authorities mentioned are Assistant Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (XI of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been disclosed for the purposes of the Indian Income-tax Act, 1922 (XI of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), he may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer (hereinafter referred to as the authorised officer) to--- (i) enter and search any building or place where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept ; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r this Act ; (iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in clause (a) of sub-section (1) of section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in clauses (ii) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized : Provided that if, after taking into account the materials available with him, the Income-tax Officer is of the view that it is not possible to ascertain to which particular previous year or years such income or any par thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized: Provided further that where a person has paid or made satisfactory arrangements for payment of all the amounts referred to in clauses (ii) and (iii) or any part thereof, the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he application under sub-section (10) the Board, or on receipt of the application under sub-section (11) the notified authority, may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit. (13) The provisions of the Code of Criminal Procedure, 1898 (V of 1898), relating to searches and seizure shall apply, so far as may be, to searches and seizure under sub-section (1). (14) The Board may make rules in relation to any search and seizure under this section; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer--- (i) for obtaining ingress into such building or place to be searched where free ingress thereto is not available ; (ii) for ensuring safe custody of any books of account or other documents or assets seized. Explanation 1.---In computing the period of ninety days for the purposes of sub-section (5), any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. Explanation 2.---In this section, the word ' proceeding' means any proceeding in respect of any yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (5) of that section exceeds the aggregate of the amounts required to meet the liabilities referred to in clause (i) of sub-section (1) of this section. (b) Such interest shall run from the date immediately following the expiry of the period of six months from the date of the order under subsection (5) of section 132 to the date of the regular assessment or reassessment referred to in clause (i) of sub-section (1) or, as the case may be, to the date of last of such assessments or reassessments. Rule 112A which is also challenged as it prescribes the procedure for the enquiry under section 132(5) is as follows : " 112A. Inquiry under section 132.---(1) Where any money, bullion, jewellery or other valuable article or thing (hereinafter referred to as assets) are seized, the Income-tax Officer shall within fifteen days of the seizure issue to the person in respect of whom enquiry under sub-section (5) of section 132 is to be made requiring him on the date to be specified therein (not being earlier than fifteen days from the date of service of such notice) either to attend at the office of the Income-tax Officer to explain or to produce or cause to be there produced evidence on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 132 shall be exercised in accordance with sub-rules (2) to (14) under rule 112. These are detailed rules setting out the procedure for making the search and seizure and for the custody of what has been seized. Sub-section (5) of section 132 deals with the special cases where, on search, money, bullion, jewellery and other valuables believed to be undisclosed income or property are seized. What is seized cannot be kept by the departmental authorities with them indefinitely. Sub-section (5) requires that a summary enquiry must be made by the Income-tax Officer with a view to ascertain how much of the seized valuables should be retained against unpaid tax dues. The balance must be forthwith released. The second proviso to sub-section (5) further shows that the money and valuables may not also be retained by the Income-tax Officer if the person concerned has paid or made satisfactory arrangements for payment of all the income-tax dues which are summarily estimated under sub-section (5). The summary enquiry under sub-section (5) must be finished within 90 days of the seizure and the order which is made thereunder is subject to the previous approval of the Commissioner. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dangering its very fabric. In a country which has adopted high rates of taxation a major portion of the unaccounted money should normally fill the Government coffers. Instead of doing so it distorts the economy. Therefore, in the interest of the community, it is only right that the fiscal authorities should have sufficient powers to prevent tax evasion. Search and seizure are not a new weapon in the armoury of those whose duty it is to maintain social security in its broadest sense. The process is widely recognized in all civilized countries. Our own criminal law accepted its necessity and usefulness in sections 96 to 103 and section 165 of the Criminal Procedure Code. In M. P. Sharma v. Satish Chandra the challenge to the power of issuing a search warrant under section 96(1) as violative of article 19(1)(f) was repelled on the ground that a power of search and seizure is in any system of jurisprudence an overriding power of the State for the protection of social security and that power is necessarily regulated by law. As pointed out in that case a search by itself is not a restriction on the right to hold and enjoy property though a seizure is a restriction on the right of posse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccompanied by safeguards against its undue and improper exercise. As a broad proposition it is now possible to state that if the safeguards are generally on the lines adopted by the Criminal Procedure Code they would be regarded as adequate and render the temporary restrictions imposed by the measure reasonable. In the case just cited there was a proviso to sub-section (2) of section 41 which prescribed that all searches under the sub-section shall, so far as may be, made in accordance with the provisions of the Code of Criminal Procedure. After pointing out that section 165 of the Criminal Procedure Code would apply mutatis mutandis to searches made under sub-section (2), this court observed : " We are, therefore, of opinion that safeguards provided in section 165 also apply to searches made under sub-section (2). These safeguards are---(i) the empowered officer must have reasonable grounds for believing that anything necessary for the purpose of recovery of tax may be found in any place within his jurisdiction, (ii) he must be of the opinion that such thing cannot be otherwise got without undue delay, (iii) he must record in writing the grounds of his belief, and (iv) he must spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose custody they are seized is permitted to make copies and take extracts. Sixthly, where money, bullion, etc., is seized, it can also be immediately returned to the person concerned after he makes appropriate provision for the payment of the estimated tax dues under sub-section (5), and, lastly, and this is most important, the provisions of the Criminal Procedure Code relating to search and seizure apply, as far as they may be, to all searches and seizures under section 132. Rule 112 provides for the actual search and seizure being made after observing normal decencies of behaviour. The person in charge of the premises searched is immediately given a copy of the list of articles seized. One copy is forwarded to the authorising officer. Provision for the safe custody of the articles after seizure is also made in rule 112. In our opinion, the safeguards are adequate to render the provisions of search and seizure as less onerous and restrictive as is possible under the circumstances. The provisions, therefore, relating to search and seizure in section 132 and rule 112 cannot be regarded as violative of articles 19(1)(f) and (g). A minor point was urged in support of the above content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction. Under section 119(2) every Income-tax Officer employed in the execution of the Act is required to observe and follow such instructions as may be issued to him for his guidance by the concerned Director of Inspection. Moreover, under section 120, the Director of Inspection is required to perform such functions of any other income-tax authority, apparently, including the Income-tax Officers and his direct superiors, as may be assigned to him by the Board. Under section 135 the Director of Inspection is competent to make any enquiry under the Act and for that purpose he is invested with all the powers that an Income-tax Officer has under the Act in relation to the making of enquiries. It would, therefore, follow that in the course of his duties the Director of Inspection has ample opportunities to follow the course of investigation and assessment carried on by the Income-tax Officers and to check the information received from his sources with the actual material produced or not produced before the assessing authorities. It is not, therefore, correct to argue that the Director of Inspection could hardly be expected to entertain, honestly, any reasonable belief for the purposes o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etely satisfied that the returns are correct. But it might so happen that this apparently honest assessee has invested large funds in properties and other financial deals, reliable information about which finds its way to the Director of Inspection. In such a case no oracle is needed to tell the Director of Inspection that if a requisition is made on the assessee to produce his documents in connection with these financial deals and investments, the assessee will most certainly omit to produce or cause to be produced such documents. On the other hand, there is danger that all these documents may be destroyed because the very fact that a requisition is made with a view to investigate concealed deals would put the assessee on his guard and the relevant documents may either disappear or be destroyed. Indeed, it is possible that an assessee may, after knowing that the game is up, produce the requisite documents. But, in the nature of things, such an assessee would be rare. The question for us to consider is whether the authority under section 132(1) may entertain the reasonable belief that in such circumstances the assessee will not or would not produce the documents. In our opinion, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e unreasonable restrictions on the freedoms under article 19(1)(f) and (g). It was next argued that section 132(1) and (5) are violative of the fundamental right under article 14 on the ground : (1) that they make unjust discrimination between evaders of tax, distinguishing those who are believed to be in possession of undisclosed income or property from those evaders of tax who are not believed to be in possession, and (2) that although all evaders are liable to be proceeded against under section 147 of the Act, yet only some of them who are found in possession of undisclosed income or property are liable to be subjected to the procedure under section 132(5). We find no substance in this argument. All evaders of tax can be proceeded against under section 132. Only in some cases the search may be useful ; in others it may not be. If the Director of Inspection gets timely information about the undisclosed income and its location, he can direct a search and seizure. Otherwise, it is futile to direct a search and seizure because the whole manoeuvre will be fruitless. The provision for seizure is designed with the object of getting at the income which has been concealed illegally by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not operate on them, but because action under that section by search and seizure is futile. Therefore, there is no substance in the contention that two different procedures for assessment are adopted and, hence, there is a discrimination under article 14. The plea on behalf of the assessees, in effect, only amounts to this : " It is true that we are tax evaders. But if other evaders successfully dodge the collection of the tax by causing their concealed income to disappear, why should we not get the same facility ? " Some points of lesser substance were mentioned in the petition memos in support of the challenge under articles 14 and 19(1)(f) and (g). They were, however, not urged at the time of the hearing, as on the other grounds urged, it was impossible to hold that the impugned provisions were violative of either article 14, 19 or 31. We may, however, mention in this context that these points had been raised in C. Venkata Reddy v. Income-tax Officer, (Central), Bangalore and in Ramjibhai Kalidas v. L G. Desai, Income-tax Officer, where they have been quite adequately dealt with and rejected. Apart from the constitutional challenge there was also a further challenge on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Constitution which forbids the use of evidence obtained as a result of an illegal search. Consistently with that view the relief for a writ of prohibition was rejected and hence the two Civil Appeals before us. Dr. Singhvi who appeared on behalf of the appellants in the two appeals frankly conceded that there was no specific article of the Constitution prohibiting the admission of evidence obtained in an illegal search and seizure. But he submitted that to admit such evidence is against the spirit of the Constitution which has made our liberties inviolable. In this connection he referred to some American cases which seem to recognize the validity of his submission. As to the argument based on " the spirit of our Constitution ". we can do no better than quote from the judgment of Kania C.J. in A. K. Gopalan v. State of Madras : " There is considerable authority for the statement that the courts are not at liberty to declare an Act void because in their opinion it is opposed to a spirit supposed to pervade the Constitution but not expressed in words. Where the fundamental law has not limited, either in terms or by necessary implication, the general powers conferred upon the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave thought fit not to subject such regulation to constitutional limitations by recognition of a fundamental right to privacy, analogous to the American Fourth Amendment, we have no justification to import it, into a totally different fundamental right, by some process of strained construction. Nor is it legitimate to assume that the constitutional protection under article 20(3) would be defeated by the statutory provisions for searches." It, therefore, follows that neither by invoking the spirit of our Constitution nor by a strained construction of any of the fundamental rights can we spell out the exclusion of evidence obtained on an illegal search. So far as India is concerned its law of evidence is modelled on the rules of evidence which prevailed in English law, and courts in India and in England have consistently refused to exclude relevant evidence merely on the ground that it is obtained by illegal search or seizure. In Babindra Kumar Ghose v. Emperor the learned Chief Justice, Sir Lawrence Jenkins, says at page 500 : " Mr. Das has attacked the searches and has urged that, even if there was jurisdiction to direct the issue of search warrants, as I hold there was, stil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... American Constitution. At any rate, in Olmstead v. United States, the majority of the Supreme Court were clearly of opinion that the common law did not reject relevant evidence on that ground." In Kuruma's case, Kuruma was searched by two police officers who were not authorised under the law to carry out a search and, in the search, some ammunition was found in the unlawful possession of Kuruma. The question was whether the evidence with regard to the finding of the ammunition on the person of Kuruma could be shut out on the ground that the evidence had been obtained by an unlawful search. It was held it could not be so shut out because the finding of ammunition was a relevant piece of evidence on a charge for unlawful possession. In a later case before the Privy Council in Herman King, v. Queen, which came on appeal from a Court of Appeal of Jamaica, the law as laid down in Kuruma's case was applied although the Jamaican Constitution guaranteed the constitutional right against search and seizure in the following provision of the Jamaica (Constitution) Order in Council, 1962, Schedule 2, section 19 : " (1) Except with his own consent, no person shall be subjected to the search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contravention of the provisions of section 132 of the Act or rule 112. Writ Petition No. 446 of 1971.---The petitioner, Pooran Mal, is a partner in a number of firms---some of them doing business in Bombay and some in Delhi. His permanent residence is 12A, Kamla Nagar, Delhi. His business premises in Delhi are A. 14/16, Jamuna Bhavan, Asaf Ali Road, New Delhi. It would appear that on an authorisation issued by the Director of Inspection, his residence and business premises in Delhi were searched on 15th and 16th October, 1971. On the 15th, his premises in Bombay were also searched and at that time it appears the petitioner was present in Bombay. When his residence was searched on 15th and 16th, there were in his house the petitioner's wife, two or three adult sons and his father who is said to have been ailing. It was alleged on behalf of the petitioner that the search in the residential premises was mala fide, oppressive, excessive, indiscriminate and vexatious. The grounds for making these allegations seem to be,--- (1) that the search and seizure in the house took place in spite of the wife's request to postpone the search ; (2) it was Dhanteras day which is a festival da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th on behalf of the department that in the statements recorded on 15th and 16th October, 1971, Smt. Sharda Devi had claimed the whole of the jewellery as her own, though in the last wealth-tax return she had valued her jewellery at Rs. 5,000 only. So far as the panchas are concerned, it is denied that they were not known to the inmates of the house. In fact, it is alleged by the department that pancha Mathuradas was a resident in the same house and had been called at the suggestion of Sharda Devi. It is not denied that the search went on for a long time because a number of documents and account books were seized in the course of the search and so also a lot of jewellery and cash. The allegation that the small boxes of the children containing their pocket money was seized is denied. We may say, therefore, on the whole that there is nothing in the petition inducing us to take the view that the search in the house was either mala fide, oppressive or excessive, etc., etc. The search in the business premises was made when a number of persons who usually worked there were present. Books of account, documents, some jewellery and a large amount of cash amounting to about Rs. 61,000 were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grounds recorded by the Director before the authorisation was issued and we are quite satisfied that there were grounds for him to entertain reasonable belief as required under the sub-clauses. As already pointed out the summary enquiry made under sub-clause (5) of section 132 discloses that the assets seized were for the most part undisclosed income and property. Indeed, the accident that undisclosed property is found on a search may not be a justification for the authorisation of a search if, in fact, there had been no grounds for entertaining reasonable belief. But finding of assets as expected by the Director of Inspection on the information received by him would at least support the view that the authority concerned had reliable information on which he could entertain the necessary belief. On the whole, therefore, we are not inclined to hold that the search and seizure in this writ petition was vitiated by any illegality. Writ Petition No. 86 of 1972.---The position in this writ petition is not different. The petitioner, Ganeriwala, is a businessman. His residence is No. 1, Raj Narain Road, Civil Lines, Delhi, and he runs a family business in automobile parts in the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as such those Roker Bahis were not seized from the custody of the petitioner. The other reason was that the petitioner had requested that they may not be seized as otherwise the petitioner would face difficulties in carrying on his business. It must be remembered that the search and seizure had been ordered because the petitioner had recently constructed a huge godown near his residential premises with the floor area of approximately 6,700 sq. ft. on which a large investment was estimated to have been made from income which had not been disclosed in the books of account produced or returns filed by the petitioner. Since the petitioner himself told the authorities that the Roker Bahis for the two years did not contain any entries regarding the expenditure on the construction, the authorities inspected the Roker Bahis for the year 1971-72, and finding that it did not contain any entries for the past 30 days it was considered by the authorities not proper to take possession of the same. We are inclined to think that this objection by the petitioner is an after-thought with a view to malign the departmental authorities. It is not denied that the petitioner had been given a copy of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
