Pooran Mal v. Director of Inspection (Investigation), Income Tax Department

POORAN MAL ETC. ~. DIRECTOR OF INSPECTION (INVESTIGATION) OF INCOME TAX MAYUR BHAVAN, NEW DELHI & OTHERS. _December_ 14, 1973 '[A. N. RAY, C.J., D. G. PALE~AR, Y. V. CHANl>R,ACHUD, A. ALAGIRI SWAMI .AND P. N. BHAGWATI, JJ.] . _Income Tax_ _Act_ _(1961)--cSectlons_ 132, 132.A _and Rules_ 112, _112A-Search_ _and seizure-Whether violate Art._ 19(1) (f) _and_ (g) _of_ _the Constitution._ A B _Income Tax_ _Act_ 1961, _Sec._ 132(S)-8elzztre _of money, bullion,_ _ttc.-Whether_ _provision_ _confiscatory._ - C _income Tax Act,_ 1961, _Sec._ 132(1) _and_ _(S)-Search_ _and seizure-Whether_ _provisions_ _hit_ _by_ _Art._ 14 _of_ _the Coiistitution for following different procedure_ _/Or_ _the evaders_ _of_ _tax, who_ _are_ _believed_ _to_ _be_ _in possession_ _of_ _undl.rclo1ed_,,,... _come or property and evaders against whom no such belief is entertained_ _by_ _the_ _lluthorities._ . _Income Tax_ _Act_ 1961, _Sec._ _132-/Vhether evidence gathered_ _f*1m_ _the illegal_ _seizure_ _of_ _documents is excluded at the trial-Whether a_ _writ_ _of_ _prohibition· to_ D _restrain the_ _use_ _of_ _such_ _ev.idence_ _can be granted,_ _Income Tax_ _Act_ 1961, _sec._ _132-"Reason_ _to believe"-WMther Director_ _of_ . _Inspection can entertain reasonable belief as not being directly connected with_ _the assessment-Whether the_ _DireCttJr_ _can entertain necessary belief for ordering_ _searCh_ _and seizure where· the asstisnunt was already_ complet~d. _Income Tax Act,_ 1961, _Sec._ _132--Selzure_ _of_ _irrelevant- documents-Whether_ _renders .the search invalid .._ In the proceedings before the Supreme Court tWo of them being writ petitions under Art. 32. of the Constitution and two others being appeals from tjle orders of the Delhi High Court Jn writ petitions under Art. 22&-relief was claimed in respect of. the search 6f certain premises and seizure of account books, documents, cash, jewellery and other valuables by Incom! tax authorities purporting to act. u/s 132 of the Income Tax Act, 1961. The_ petitioners/ . appellants challenged the validity of Sec. 132(1) and (S) of Rule 112(A) on tho ground that they .violate Art. 14, Article 19(1) (f) and (g) and 31 of the Constitution. It was also contended that a writ of prohibition to restrain the authorities from Using the information gathered . from the documents seized should be issued.· In the writ petitions. the actual search and seizure were challenged on the ground that they were carried out in ·contravention of the provisions of Sec. 132 and Rule 112-A. The Court negatived all the contentions. . Dismissing the writ petitions and appeals, HELD: (I) When one has to consider the reasonableness of the restrictions or curbs placed on the freedoms mentioned in Art. 19(1) (fl and (g). one cannot possibly ignore how such evasions cat into the vitals of the economic life of the community. Therefore, in the interest of the community, it is only right that the fiscal authorities should have sufficient powers to prevent tax evasion. As a broad _proposition, it can be stated that if the s"ferruards while carryin2 out search and seizure are generally on the Jines adopted by the Criminal Procedur,. Code tb~v . would be regarded as adcauate and render the t;emporary restrictions imposed by these measure~ as reasonable. On dcta:ted examination of the provisions of Sec. 132 and Rule 112, it is clear that the E F G H ' ·~ _v._ l>IRECTOR OF !NSP P./CTION _(Palekar,_ J,) 7 0 5 A safeauards are adequate to rendor the provisiOJ;lS·. of seatch and seizure ns less onerous and restrictive u ia pouible under the circumstances. The provisions, therefore, relatinJ lo oearch and sel%ure in sec; 132 and Rule 112 cannot be reprded as violative of Arts. 190)(!) and (g), [714F, 717C] B c D E F 'G H Jn the course of hia duti01, the Director of Inspection h .. ample opportunl· ties to follow the courso of inveatigation and auessment 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 asael8ing authori· ties. It is not. therefore. correct to argue that the Director- of Inspection could not entertain honeet and rouonable belief before ordering search and seizure under, section 132(1)(a)(b) and (c). The second proviso to sub·section (5) of sec. 132 shoWB that the ass01see can get a release of all the aasets seized if be can make satisfactory arranaements for the payment of the estimated dues. So also, the exceaa collection ia refundable u/s 132-A with intereat after the regular enquiry. The provisiona of section 132(5) are not conliscatory in nature. [717F] _M._ _P._ _Sharma_ v. _Satish Chandra_ [1954] $.C.R. 1077 and _Commissioner_ _of_ _Commtrcial Taxes_ v. _R._ _S. Jhavtr_ [1968]1 S.C.R. 148 followed. (II) The provisions of section 132(1) and (5) cannot be challenged on the ground that they make uniust dilcrlmination between two sets of tax evaden in ordering search and seizure or retention of the seized wealth for reco\-ering the tax, in oome c- and not orderin1 the same in other .-. All evaders of taxes can be proceeded against u/s 132. Only in oome case., the search may be useful because of the information about the undiaclooed Income and wealth. Where lhOre ia 410 such information, search and oeizure would be futile. Therefore, there is no 11t1bstance in. tho contention that two different procedures for assessment are adopted an hence there is discrimination under Art. 14. [720C] _C._ _Vtnkata_ _Rtddy_ _and_ _Anothtr_ v. _Inoome-tax Of!ictr_ _1_ _(Central) I, Banga·_ _lore, and_ _othm,_ 66 Income-tax Reports, 212 and _Ramjiohal_ _KJJlldtu_ v. _I. G._ _Deiai, Income-tax Officer, and othtrs,_ 80 Income-tax Reports, 721, cited with approval. (Ill) The Income--tax authoritiee can use as ovidence ariy information gather· ed from the search of the documents and accounts and articles seized. Neither by invoking the spirit of our Constitution nor by strained construction of the fundamental ri,ahts can we spell out the exclusion of evidence obtained on an illegal search. [723FJ _A._ _K._ _<Jopalan_ v. _State_ _of_ _Madras,_ [1950] S.C.R. 88 and _M._ _P._ _Sharma_ v. _Satish Chandra_ [1954] $.C.R. 1077 .. Courts in India and_ in England have consistently refused to exclude rete ... vant evidence merely on the ground that it is obtained by illegal search or seizure. Where the teat of admissibility Qf evidence lies in relevancy, unless there is an expreas or implied prohibition in the Constitution or other law, evidence obtained as a ·result of illegal search or seizure is not liable to be &hut out. [7230] (IV) In writ petition No. 446/71, on facts it was found that the allegations of _mala_ _fide_ and oppressiveness and highhandedness in search and seizure were not proved. On examining the records, h~ld that the petitioner was not co· operating with the Director of Inspection. (V) _Htld_ further, that seizure of books of account atid other documonts which were afterwards found to be not a:levant, along with the documents relevant for the enquiry, does not make the search and seizure illegal. It may at the most be an. irregularity. On the material on record, the Director of Inspection had proJ)er wounds for a belief for orderinJ? search and seizure under sub-clauses (b) and (c) of sub-section {!) of Sec. 132. Merely because the auessment for the relevant year was already completed, it does not mean that on the information in the. possessio~ of the P.irector of Inspection, he cannot 706 STJPlllMB COUIT 11.BPOlTS (1974] 2 1.C.Jt.. entertain the -ary belle!, On t.cu, In Writ Petlllcici No, 16/72 _h1ld_ that the 1earcb end ieiz11111 were nellhor oppreulve nor dCtlllve,, OIUGINAL/CIVIL APPELLATE JUllSDICTION : Writ Petition Nos. 446 of 1971 and 86 of 1972. (Under An. 32 of the Constitution for the enforcement of fund,. mental rights). Civil Appeals Nos. 1319 a,nd 1320 of 1968. From the Judgment and Order dated the 22nd March 1968 of the Delhi High Court in Writ Petitions Nos. 798-D and '800-D of 1966. ' B N. D. Knrkhanis and Ram Lal, for the petitioner (in W.P. 446/ 71.) c _N._ _D._ _Karkhanis,_ _Bairam_ _Sanghai,_ _A._ _T._ _M._ _Sampath,_ _M,_ _M._ _J.,_ _Srivastava_ and _E._ C. _Agarwala,_ for the petitioner (in W.P. 86/72). _F._ _S._ _Nariman,_ _Additional_ _Solicitor_ ~ntral _of_ _India,_ _B. B._ _Ahu/a_ and _S._ _P._ _Nayar,_ for the respondents (in both W.Ps.) _M._ C. _Chagla,_ _L._ _M._ _Singvl,_ _S._ _Sadhu_ _Singh,_ _Jagmohan_ _Kha1111a,_ D _R._ _N._ _Kapoor,_ _Nirmala_ _Gupta_ and _Mohinder_ _Kaur_ and _Veena_ _Devi_ _Ta/war,_ for the respondents (in appeals). _F._ _S._ _Nariman;_ Additional Solicitor General of India, _S._ _T._ _Desai,_ _B. B._ _Ahuja_ and _S._ _P._ _Nayar,_ for the respondents. (in appeals) The Judgment of the Court was delivered by E .. PALEKAll, J.~In these proceedings-two of them Writ Petitions under Article 32 of the Constitution and two .others which are appeals from orders passed by the Delhi Hi&h Court under Article 226relief is claimed in respect of action taken under section 132 of the Income-tax, Act, 1961 (hereinafter called the Act) by way of search and seizure of, certain premises on the ground that the authori- F sation for the search as also the search and seizure were illegal. The challenge was based on constitutional and non-constitutional grounds. For the appreciation of the constitutional grounds it is not necessary to give here the detailed facts of the four cases, It is sufficient to state that in all these cases articles consisting of account books and documents and in the Writ Petitions, also cash, jewellery and other valuables, were seized by the Income-tax authorities purportiiig to act _G_ under the authorisation for search and seizure issued under section 132 of the Act. Broadly speaking the constitutional challenge is directed against sub-sections (I) 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 up on allegations to the effect that the H search and seizure were not in accordance with section 132 read with Rule 112. This challenge will have to be considered in the back· ground of the facts of the individual cases. **A** **B** ##### c **D** E F G H POORAN _v._ DIP.IC TOR OP . INIPBCT!ON _(Palekar,_ J,) ' 7 -07 Chapter XIII of the Act deall with Inc0me·tax authorities, their powers and Jurisdictions. The holrarchy of authorities as giv011 in section 116 shows that the class of authorities designated as I?lrector of Inspecti011 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 Commissioners of Income-tax. Incoine-tax Officers, and Inspectors of Income-tax. Section 117 shows by whom these various authorities are to be appoint· ed. Section 118 deals with subordination and control. Section 119 deals with the powers of the higher authorities to give instructions and directions to subordinate authorities. Under section 120 Directors of Inspection have to perform such functions of any other Income-tax authority as may be assigned to them by the Board. The Board, it is clear, might assign to the Director of Inspection the functions of any other authority under the Act. We may then turn to part 'C' of this Chapter which deals with the J?Owers. Section 131 says that the authorities from the Commissioner down to the Income-tax Officer shall have the same powers as are vested in a court under the Code .of Civil Procedure in .respect of several matters including the enforcing of attendance of any person or compelling the production of books of account and other documents. Section 132 provides for search and seizure. It appears that under section 3 7 ( 2) of the Income-tax Act, 1922 a limited power of search and seizure had been first given to the Income-tax authorities in 1966. The present Income-tax Act initially gave that power under section 132 on the same lines as the old section 37(2). But there were further amendments in section 132 in 1964 and 1965. Under the amendment of 1965, two sections namely sections 132 and 132A were substituted for the original section 13 2. We are concerned with these sections and it will be therefore, necessary in the first instance to reproduce the **same** : "132. (1) Where the Director of Inspection or the Commissioner, in consequence of information in his possession, has reason to believe that (a) any person to whom a summon under· sub-section (1) of section 37 of the Indian . Income-tax Act,·. 1922 (XI of 1922) or under sub-section (1) of section 131 of this Act, or a notice under sub-&ectiori ( 4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any bool<s of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a "summons" or notice as afore said has been or might be issued will not, or would 708 SUPltEME COURT 11.EPORTS [1974] 2 s.c.a. not, produce or cause to bC produced, any books of account or other documents which will be useful for, or relevant to, any proceedings under the Indian IDcome·tµ 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 sllCh money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been disclosed for the pur· pollCS 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, Ins~ peeling Assistant Commissioner Assistant Director of Ins pection or Incom&-tax Officer (hereinafter referred to as the authorised officer) to- . (i) enter and lleardJ. 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 things are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other reccetacle for exercising . the powers conferred by clause (1) where the keys thereof arc not available. (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search; (iv) Place marks of identification on any books of ac count or other documents or make or cause to be made extracts or copies therefrom; B c D B F G H ( v) make a note on an inventory of any such money. bullion, jewellery or other valuable article or thing. (2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub~ection (I) and it shall be the duty of everY such officer to comply with such requisition. (3) The authorised officer may, where it is not practicable to seize any such books of account, other document, money, bullion, jewellery or other valuable article or thing, serve an order on the owner or the person who is in imme· diate possession or control thereof that he s.hall not remove, part with or otherwise deal with it except with the previous permission of such offiCCt' arid such officer may take such steps as may be necessary for ensuring compliance with this sub-section. POOllAN _V,_ Dll\ECTOll. OP INSP&CTION _(Paltkar,_ /.) 709 A. B c D p G H Provided that If, after taking into account the materials available with him, the Jncome-taX Officer is of the view \hat It" is not possible to ascertain to which particular previous year o~ years such income or any part thereof relates, he may calculate the tax on such Income or part, as the case .. may be ns If 1uch Income or part .. were the total lilcome chargeable to tax at. the rates In. force In the financial year In wh!ch the assets were seized; · Provided further that where a person has paid or made 1at!sfactory arrangements for payment of all the amounts referred to In clause (U) and ·cw) or any part thereof, tl:c Income-tax Officer may, with the previous approval of · tho Commiuloner, release the assets or 1uth part thereof as he may deem fit In the clrcumstantes of the case, ·, (4) The authorised officer may, during the course of the - search or seizure, examine on oath any person who is found to be in possession· or control of any books of accQU!lt, · documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceedings under the Indian Income-tax Act,· 1922 (XI of 1922), or under this Act. . "(5) .·Where any money, bullion, jewellery or other article or thing (hereinafter in this section and section 132A re. ferred to as the assets). is seized under sub-section ( 1), the Income tu Oflicer, after affording a reasonable opportunity to the person concerned for being heard and making such enquiry as may be prescribed, shall, within ninety dar of the seimre, make an order, with the previous approva of the Commissioner : (i) estimating the undisclosed income (including the income from the undisclosed property) in a summary - mannCT to the best Of his judgment on the basis of such materials as are available with him; (ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian Income tax Act, 1922 (XI of 1922) or this _M;_ . (Iii) speclfy!ng the amount that will be required to satisfy any existing liabillty under this Act and any one or more of the Acts speQlied In clause (a) of sub. section (1) of section 230A In respect of which such penon Is In default or Is deemed to be In default, and retain In his custody such assets or part thereof as arc .In his opinion iufficient 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; 710 SUPRBMB COURT llBPOllTS [1974] 2 s.c.a. (6) The assets retained under sub-section _(S)_ may be dealt with in accordance with the provisions of section 132A. (7) If the Income-tax Officer is satisfied that the seized assets or any part thereof were held by such person for or on behalf of any other person, the Income-tax Officer may proceed under sub-section ( 5) against such other person and all the provisions of this section shall apply accordingly. (8) The books of account or other documents seized under sub-section (1) shall not be retained by the authorrised officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for rewining the same are recorded· by him in writing and the approval of the Commissioner for such retention is obtained : Provided that the Commissioner shall not,authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (XI of 1922), or this Act in respect .. £ the years for which the books of account or other documents are relevant are completed. (9) The person from whose custody any books of account or other documents are seized under sub-section (I) may make copies jhereof, or take extracts therefrom, in ·the presence of the authorised officer or any other person empowered by him in this behalf, at such place and time as the authorised officer may appoint in this behalf. (10) If a person legally entitled to the books of account 01' other documents s•ized under sub-section ( 1) objects for any reason to the approval given by the Commissioner under sub-section (8), he may make an. application to the Board stating therein the reasons ·f<ir such objection and requesting for the return of the books ot account or o_ther documents. . ( 11) I( any person objects for any reason to an order made under sub-si:ction (5), he may, within thirty days of the date of such order, make an application to such authority, as may be notified in this behalf by the Central Government in the Oflicial Gazette (hereinafter In this section referred fo as the notified authority, stating therein the reasons for such objection and requesting for appropriate relief in the matter, ( 12) On receipt of !\le application under sub-sect!Qn ( 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; B ###### c D E F H POOP.AN _V,_ 1>111CTOI QP INIPICTION· _(Pall/ur,_ /.) 711 #### ( 13) The ~ · of . the Code of Criminal Proce• dure,, 1898 CV of 1898), rel1tin1 to IO&l'Ches and 1elzure shall apply, 10 far 11 may be, to seirehes and seizure under sub-1eetlon ( 1). **B** **D** I ## ' . II ( 14) The' Board. may make rules in relation to any search or seizure under this section; in particular, and without prejudk:o eo lt!Je genei:ality of the foreJIOing power, such rules may provide for the procedure to be followed'· by the authorisCd officer. ' (i) fbr obtainina ingreBB into such buiiding or place to be - the discharle of an..v Juch liability referred to In cla1110' m as remains ~ ml for thla purpose such ~·sl!all be deemed to be _Ulldet_ dist sCarched ·where free inps thereto is not available; (ii) felt ensuring safe custody of any books of account _oi_ other docuinents or asseis seized. . . _E11pl0natlon_ 1.-In computiii.a the period of ninety days for the purposes of 1ul>-sec11on (S), any period durin1 which any procMdlna under thil iection Is stayed by an o'rder or lnJllllC~On of any Court shall be exi:lude_\I. _E11plantlon_ 2.-In th11 IO()tion, the word "proceedina" mean• any lll'OCeedina In respect of any year, whether under the Indian Income-tu: Aft, 1922 (XI of 1~2) or this Act, which may be pend· ~ on the date on which a search Is authorised under· this section or · wl:iich mav have been completed oa Or before· such date and includes . also all . proceedings under this. Act which may be commenced afte~ such date In resoect of any, year. Sec. 132A. ( 1) The aueta retai~ under sub-section ( S) of section 132 may be dealt with in the followina manner, namely (i) Tho 11111011nt of the oxlstin~ liability referred to .. In clause (ill) of the laid sub-section and the [1] amount of tho. liability dctcrml)ied on completion of the re&ular uaeHl!lfllt · or reauossment for all the auesunent . years relevant to the previous years to which the Income referred to In clause m of that sub-tectlon relates. and ill re1pe¢ of which he is In default or Is d~ to be In default may be recovered out of such llletl. ' Cii\ If the useta colllist llQl.ely of money, _ot_ partly of monev and partly of other assets, the Income-tu: Oftlcer may apply such money In the dlscharp of the llabllltiee referred to In clause (!) and the **use1·** see shall be dlacharaed oe such llablllty to tho utent of the money 10. applied. - . (Iii) Tho .a•11eta other than money mav also be applied for # 712 SUPREME COURT lEPOP.TS --· [1974] 2 1.C,R, raint as if such distraint was effected by the Incometax Officer under authorisation from the Commissioner under sub-section (5) of section 226 and the Income-tax Officer may recover- the amount of such liabilities by the sale of such assets and such 11ale shall be effected in the manner laid down in the Third Schedule. (2) Nothing contained in sulHection ( 1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act; _(_ 3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section (1) are discharged shall be forthwiih made over or paid to the persons from whose custdiy the assets were seized. ( 4) (a) The Central Government shall pay simple interest at the rate of n:ile per cent per annum on the amount by which the aggregate of money retained under section 132 and of the proceeds, if any, of the assets sold towards the discharr· of the existing liability referred to in clause (iii) of sub-section (5) of that section exceeds the aiwegate of the amounts requirell to meet the liabilities referred to in clause (I) of sub·scction (1) of this section. (b) Such interest shall run from the date immediately followin2 the expiry of the period of six months from the date of the order under sub-section (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 reasse11ments, Rule 112 A which Is also challen2ed as It prescribes the procedure for the enquiry under section 132(5) is as follows: B ###### _c_ D "112A. Inquiry under section 132(1) where any money, bullion, jewellery or other valuable article or thin& (hereinafter referred to as F assets) are seized. the Income-tax Officer shall within fifteen days of the seizure issue to the person in respect of whom eOC1uiry under subsection (5) of section 132 is to be made requiri!lj blm on the date to be specified therein (not beln~ earlier than fifteen days from the date of sel'\'.lce ol such notice) either to attend at. the oftlce of the Income-tax Olllcer to explain or to produce or cau1e to bl thtte Produced evidence on whlch 1uch person may rely for explalnlDI tho G nature of the POSlmion ankl the source of the 1cqul1ltlcin of Iha assets. _(_ 2) The Income-tax Oftlcc.r may Issue a notice to the person referred to In sub-rule ( 1) rcquirins him on a date 1pec!W thmln to produce or cause to be produced at 1uch time and at 1uch place II the Income-tax Oll!cer may specify such accounts or documents or H evidence as the Income-tax Oftlcer may require and may from t1me to time issue further notices requirinl production of •uch further accounts or documents or other evlden~ as be may require. A POOi.AN _.V,_ DllllCTOI. OP INSHCT!ON (Pq~kar, /,) 713 ( 3) The Jnco~·tax Officer may examine on oath any Qther person or make such other inqujry as he may deem fit. _(_ 4) Before any material gathered in the course of the examination or inquiry under sub-rule ( 3) is used by the Income-tax Officer a~ainst the person referred to \!). sub-rule ( 1) the lncome·tax Officer sliall irive a · r~asanable notice to that person to show cause why SllCb B material should be used a~ai~t him .. It will be seen in the fi!'st 1>lace that the power to ~lirect a search and seizure is ~ven to the Direeto,r of JDBpection or the Commissioner. Secondly, the the authorisation for suc.h .search and seizure must be in .favour of office.rs ~t below the -graile of an Jl1come-tax Officer. Thirdly the pow~r to authorise search and seizure can be C exercised ouly when the Director of Inspection ar the Commissioner has reason to believe ( 1) iliat in spite of the requisitions under the relevant provisions mentioned in section 132(l)(a) the required books and documents have net been produced: (2) ihat any· person, whether requisition under the ~bove provisions is made or not, will not, or would not, produce or cause to be produceij, any books of B account and other documents which will be useful for, or relevant to, D any proceeding under the ~ncome-tax Act; qr (3) that any person is in possession of any money, bullion, jewellery or any other valuable article 9r thing representing either wholly or partly undisc!Oled Income or property. Whe~ th~ authorisation is given by the Director of Inspection or the Commissioner, as the case may be, it must be limited to the five purposes mention!ld in sub-clauses (i) to (v) of E sub-section (1). Sub-section (14) provide1 fQr the making of rules In relation to any search or seizure. Accordinaly, rule 112 has been framed which says that the powers of search and seizure under section 132 shall be exercised in att0rdance with sub-rules (2) to (14) under rule 112. These are detailed rules setting out the procedure for male• ing the search and seizure and· for the custody of what has beeiseized. F G H Sub-section (5) of section ~32 deals with the special cases where, on. search, money, bullion, jew~llery and other valuables believed to be undisclosed inCOJ!lle or pro~rty are ·seiz.el:!. What 11 seized cannot be kept by the departmental authorities with them indefinitely, Sub-section ( S) requires tl)at a 1ummary enquiry mu1t be made . by Income-tax Officer with a view to ascertain how much of the Hlad valuable should be retained aaalnst un1'ald tax due1. The balance must be forthwith roleated. The aecond provl10 to 1u'o-lectlon (5) further 1how1 that the mon.ev and vlluablN m1,v not lllo be retained bv the Income-tax Olllctr If .th• ptrlOll co11C1rned hH !'aid or mldt 1ati1factory arranpmentl for payment of all the Income-tax dUH which arc 1ummuily 01tlmated under 1ub-tectlon ( 5). The 1um. marv enquiry under 1ub-!Jectlon _(5)_ mu1t be ftnllhed within _90_ dtys of the teizure and the order which !1 mid• thtrtUllder Is 1ublect to the 'Previous approval of th~ ~mluloner. 'Under 1ul>-aectlon (6) of 5ectlon 132 the u1et1 retained under 1ub-11etlon (5) _m_ to be dealt with In accorllance with the provltlolll of •~tlon 132-A 714 SUPREME COURT REPQRTS [1974] 2 s.c.11. which clearly aoes to ~ thai the Income-tax Officer shall proceed with the regular a1Ses1me11t o~ reassessment of the tax payable by the person concerned and a!ter such assessment the amount of tax so held payable is to be recouped from the assets retained under sub· section ·5 of section 132. The balance, if any, is to be returned with interest at the rate of 9 % if the assessment and reassessment is not comoleted within six months of the date of the retention order made under sub-section (5) of section 132. Even in regard to the books of account and othe~ documents which are seiz.ed the authorised officer" is not entitled to retain the same for a period exceeding 180 days unless he records his reasons in writing for retaining the same and the Commissioner approves of the retention. The person from whose custody the books of account and other documents are seized, is, however, entitled to receive copies or take extracts therefrom. Any person aggrieve~ by the retention of the documents is entitled to make a representation to the Boartl which is also the authority to which a representation could lie made under' sub-section (.11) by any person objecting to tho order passed under sub-section (5) retaining the assets. Broadly it will be seen that section 132 and rules 112 and 112A deal with search and seizure and the diSposal of articles seized afte'r ~earch. Tho challenge under Articles 19 and 14 is directed against sui>1ections (I) and (5) .of section 132 and rule 112A. - D:alin& first with the challenge under article 19 (I )(f) and (g) of the Constitution it is to be noted that the impugned provisions are evidently direct•.d against perSOllS who arc believed on good grounds to have illegally evadetl the. paymen(of tax on their income and property. Therefore, drastic measures . to . get at such income and pro perty with a view to recover the government dues would stand justified in themselves. When one· has to consider the reasonableness of the reetrictions or curbs placed on the freedoms mentioned in article 19(f) and (g), one cannot possibly igJloro how such evasions eat into the vitals of. tho ecooomic life of tho commumty. It is a well-known fact of our economic life that huge sums of unaccolinted money are In circulation eodan~ering Its very fabric. In a country which bas adopted high rates of taxation a maior portion of the unaccounted monet ahould normally fill tho Government coffers. · Instead of &inR: 10 ':it distorts the ec0!10l!1Y· Therefore, in the interest ol the community "it is only right that the fiscal authorities should have sufficient POWers to prevent tax evasion. ' Search and seizure arc 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 recoJ!llised In all civilized countries. Our own Criminal Law accepted its neceAsity ·and usefulness in sections 96 to l 03 and section 165 rJ. the Qiminal Proctklui'e Code. . In _M.._ _P._ _Shllrma_ v. _Sail.sh_ _Chandra(•)_ the challene 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 p<>Wer of search and seizure ·is tn (I) (19541S.C.R.1077. B c D E G ff A _B_ ###### c D E F G .H ###### l'OORAN v. DIRECTOR OP INSPECTION (Palekar, I.) ns any system of jurisprude11C9 an over-riding power of the State for the protection of social security ll)d that power ii neceasarily reiuJated by law. As polntell out in ~~ case a search by itself ii not a res triction on the right to hold and enjoy property though a seizure is a restriction on the right of possession and enjoiment of the property seized. That, however, is only temporary and for the limited purpose of investigation. Then the CQlirt proceeds_ to say "A search and seizure is, therefore, only a temporary interference with the right to hold the premises searched and the articles seized. Statutory regulation in this behalf is necessary and reasonable restriction cannot _per se_ be considered to be unconstitutional. The damage, if any, caused by such temporary interference if found to be in excess of legal authority is a matter for redress in. other proceedings. We are unable to see how any qucstiqn 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." D· 1081. Similar powers entrusted to those whose duty it was to enforce taxation laws were upheld by this Court !n The _Commllslonar_ _of_ _Commercial_ _Taxes_ _and_ _others_ v. _R._ _S._ _/haver_ _and_ _others(')._ In that' case section 41 of the Madras General Sales Tax Act of 1969 . was under challenge. It was held by this Court that an officer empower e~ by the Gove1'11111Cnt under sub-&ection (I) of section 41 was entitled to effect a search Bnd seir.o goods and articles as provided in that section. Dealing with the question of search and seizure in a taxing stafilte the court observed at page 158 : ''Now it has not heen and cannot be disouted that the entries in the ·various Lists of the Seventh Schedule must. be given the widelt pouible interprets.. tion. It is also not in doubt that while making a law under any entry in the. Schedule it is competent to the legislature to make all such incidental and ancillary provisions as may be. necessary to effectuate the law; particularly it cannot be difputcd that in the cas' of a taxin~ statute it is open to the legislature to enact provisions which would check evasion of tax. It ill under this power to. check evasion that provision for search and seizure ill made in many tax!na: statutes. It ~t' therefore be held that the legislature has power to orovide for search and seizure in connection with taxation laws in or<ler that evasion may be checked." n ill, now too late in the day to challenge the measure of search and seizure when It ii entrusted to income-tax authorities "'.ith a view to prevent large 11¢ale tax evasion. Indeed the measure would be obfectionable if its implementation is not accomoanied by safe~ards apinst its undue and lmoropcr exercise. As a broad prooosition It is now possible to state that if the safeguardR are generally on the lines adopted J:iy the Criminal Procedure Code they would be regarded as adequate and render the. temporary restrictions imposed by the meuure reasonable. Jn the case just cited there was a proviso to sub-section (2) of section 41 (t) [1968] (I) S.C.ll. 148 716 SUPREME COURT REPORTS (1974] 2 s.c.a. which prescribed that all searches under the sub-section shal~ so far as may be, made in accordance with the provisions of the 1,;ode 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 s. 165 also apply to searches made under sub-s. (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 jurisdictio!Jo (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 specify in such writing so far as possi])le the thing for which search is to be made. After he has done these things, he can make the search. These safeguards, which in our opinion apply to searches under sub-s. (2) also clearly show that the power to search under sub-s. (2) is not arbitrary. In view of these safeguards and other safeguards provided in Chapter VII of the Code of Criminal Procedure, which also apply so far as may be to searches made under sub-s. (2), we can see no reason to hold that the restriction, if any, on the right to hold property and to carry on trade, by the search provided in sub-s. (2) is not a reasonable restriction keeping in view the object of the search, namely, pre...ention of evasion of tax." We are, therefore, to see what are the inbuilt safeguards in section 132 of the Income-tax Act. In the first place, it n1uit be noted that the power to order search and seizure is vested in the highest officers of the department. Secondly the exercise of this power can only follow a reasonable belief entertained by such officer that any of the three conditions mentioned in section 132(1)(a), (b) and (c), exists. In this connection it may be further pointed out that under sub-rule (2) of rulet12, the Director of Inspection or the Commissioner. as the dlse may be, has to.record bis reasons before the authorisation is issued to the officers mentioned in sub-section ( 1). Thirdly, the authorisation for the search cannot be in favour of any officer below the rank of an Income-tax Officer. Fourthly, the authorisation is for sreciftc purposes enlljtlerated in (i) to (v} . in sub-section (1) all - which are strictly limited to the obiect of the search. Fifthly when money, bullion etc. II seized the Income-tax Officer Is to make a summary enquiry with a view to determine how much of what is seized will be retained by him to cover the estimated tax liability and bow much will have to be returned forthwith. The object of the enquiry under rub-section CS) Is to reduce the !neon· venicnce to the use11cie as much 11 po11lblt to that within a reason. able time what ts estimated due to the Oovornment may be retah1ed and what 1hould be uturned to tho •a11e11oe may be Immediately returned to him. Bven with reaard to the book1 of account and documents ieizod, their return Is guaranteed after a reasonable time. In the meantime the person ftom whose custody they are te!zed I• permitted to make cople1 and take extracts. Sixthly, where money, bultion etc, is •cized, it can al•o be im111ed!ately returned to the peraon concerned after ho makea appropriate provlllon for the pay· A B c D E F G H POOlAN _v._ DlllECTOR OP INSPECTION _(Palekar,_ _I.)_ 717 ment ·of the estimated tax dues under sub-section (5) and lastly, and this la moat important, the ·provisions of .the Criminal Procedure Code relating to aearch and seizure apply, as far as they may be, ·to all searches and eeizures under section 132. Rule 112 provides for the actual search and ·seizure being made after observing normal decen· cies 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 ofJhe articles after seizure is also made in rule 112.' In our opinion, the safeguards are adequate to render the provisions of search and llQizure as less onerous and restrictive as is possible under the cir· cumstances. The provisions, thcrofore, relating to search and seizure in section 132 and rule 12 cannot be regarded as violative of articles 19(f) and (g). A minor point was urged in support of. the above contention that section 132 .contains provisions which are likely to affect even innocent pel'IOns. For example, it was submitted, an innocent person who is merely in c.ustody of cash, bullion o~ othel' valuables etc. not knowing that it was concealed income is likely to be harassed by a raid for the purposes of search and seizure. That cannot be helped. Since the obiect of the search is to get at concealed incomes, any person, who is in custody without enquiring abou; its true nature, exposes him.self to search. Sub-section ( 4) of section 132 shows the way how such an innocent person can make the impact of the . ~elarch on him bearable. All tlia! he has to do is. to tell the true facts to the searching officer explaining on whose behalf he held the custody of the valuables. It will· be then for the lncome·tax Officer to .ascertain . the person concerned under sub-section ( 5) . ~t was next argued that the power for directing a search is p;iven to an authority like the Director of Inspection who, it is submitted, is, in the very nature of things, incapable of forming any reasonable belief with regard to the requirements of section 132(1)(a)(b) & ( c). The contention was that the assessee has no contact in the matter of. assessment with the Director and, therefore, he can hardly entertain any belief, reasonable or otherwise. It is conceded that the Income-tax Officer or his superiors in !he direct line, like the Inspecting As~istant Commissioner or the Commissioner, may be in a posi tion to entertain . the requisite belief on account of their having direct and first hand knowledge of the financial circumstances of the assessee, thll defaults he has committed or 'is likely to commit, etc. But the Director of Inspection has no opportunity and is, therefore, thoroughly unable to form any opinion. This would only mean that any belief entertained by him would be an .arbitrary belief and legislation investing such an officer with the power to direct a search _is_ _per· se_ unreasonable. In our opinion, there is no substance in this argument. The Director of Inspection, as already seen in section 116 of" the Income-tax Act, is an officer in the Income·tax Department next only in authority to the. Board of Direct Taxes. Section - 118 shows that all Inspecting Assistant Commissioners and Income tax Officers, besides being subordinate to the Commissioners, are also subordinate to the ·Director of Inspection. Under .section 119(2) __n_ A B ###### c D E F G H 718 SUPlBME COURT iBPOlTI [19741 2 1.c a. every income-tax Officer employed In the execution _ci._ the . Act II required to observe and follow 1uch instructiolll u may be lnued to him (or his guidance by the . concerned Director of Iliapecdon. Moreover under section 1 ~O Iha Director• of Inapecdon II requlzecl to perform such functions of any other Income-tax autliority, apparently, including the In~om&-tax Ofllcen and his direct superiors, as may be assigned to bim by the Board: Under secdon 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. relatjon to the lllllkinl!I of enquiries. It would, therefore, follow that in the coune 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 ar~ue that the Director of Inspection could hardly be expected to entenam, honestly, any reasonable belief for the purposes of scetion 132(1)(a)(b) &(c). A subsidiary point relating to the entertainment of reasonable belief under section 132 was also raised by Mr. Karkhanis. He sub mitted that it wls possible to say that the Director of Inapecdon or the Commissioner, as the case may be, could, in conceivable cases, entertain reason to believe the existence of conditions referred·- to in sub-clauses (a) and ( c) of sub-section ( I). For example, where the necessary requisition is made under su!KlaUSe (a)~ the authority concerned may from the record ascertain whether the person to whom the requisition is issued has omitted or failed to produce or cause to be produced the required documents. Similarly under su!Klause ( c) if the authority, has received any secret information :Which, in its opinion, was reliable, it may be possible for it to have reason to believe that any person is in possession of any money, bullion, jewellery etc. which is undisclosed income or property and such property is secreted in some place. But Mr. Karkhanis submitted that so far as sul>-clause (b) is concemed, it will be impoaible for one to say that the authority can reasonably entertain the belief that if a requtsition is made the person concerned will not or would not produce or cause to be produced the required documents. In his submission, the authority can entertain that belief only when a requisition is made and within reasonable time given the document is not produced. That is provided for in sul>-clause (a). But to say that the authority can also have reason to believe that if a requisition is made the person concerned will ·not in future produce the document is, according to Mr. Karkhanis, a conclusion which is impossible to draw on any conceivable facts. We must say th.at if Mr. Karkhanis really thinks that there is substance in this argument, than he must be blissfully unaware of the manner in which income-tax is evaded. It is impossible to enumerato all the circumstances in which the necessary reasonable belief may be entertained under subclause (b). As an illusll'ation, however, we may point out a case which falls completely under sul>-clause (b). An assessee may be B ##### c D E F G H A PoOMN v. l:>lllCTOll. OP ~SPICT!ON _(Pal1kar,_ _lo)_ - 71t tllina his return• from year to year regularly and his assessments may be also completed in due course ovct years. His books of acc~t and doeuments have. been duly che1:ked from year to year and the assessina officer is also completely satisfied that the returns arc correct. But it might so happen that thls apparently honest assessee has invested large funds in properties and other financial deals, reliable information about which finds its way to ·the Director B of Inspeetion. 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 as5cssee will most certainly olliit 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 C 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 documen\s. But in the nature of things such an assessee would be rare. The question for us to consider is whe.ther the authority under section 132(1) may entertain the reasonable 'belief that in such circumstances the assessec will 11ot or would not produce the documents. In D · our opinion though in a very rare case a tax evader may comply with a requisition, the Director of Inspection who has reliable information that the assessei' 'has consisteritly concealed his income derived from certain financial deals. may be justified in entertaining the reasonable belief that the assessee, if called upon to produce the necessary docu ments, will not produce the same. There is no substance, therefore, E in the contention that sub-clause (b) has over-reached itself. The argument that section 132(5) is confiscatory in its effect has also no force. It must be remembered that the. object of this provision is to expedite the return of the seized assets after retaining what is due by way of tax to Government and has been illegally withheld by the person concerned. The seizur~ of the assets has been made in the belief, honestly held, that the assets represents undisclosed income or property. But the Income-tax Officer cannot merely rest on this belief. He must. take a summary enquiry after notice to the person concerned and the latter has an o. pportunity to show that he had duly disclosed thls income. If he cannot do this the officer is entitled to proceed on th~ basis that it is undisclosed income and on the relevant material make a broad estimate of the tax withheld The amount of such tax which truly belongs to Government is r~tain· ed by the Income-tax Officer and the balance forthwith released We do not see how this can be described as confiscation. In fact, the second proviso to sub-section (5) shows that the assessee can get a release of all the assets seized if he can make satisfactory arrangements for the payment of the estimattd dues. Moreover it must be· noted that tl.e enquiry under sub-section (5) is no. substitute, for regular assessment or re-assessment. The Income-tax Officer, having jurisdiction, Will proceed with the assessment in due course and determine the correct amount of tax payable. In the meantime the assets retained are only by way of sequestration to meet the tax dues. 6-784 Sup Cl/74 ( •• G H 720 SUPREME COURT REPORTS (1974] 2 ~.C.R. found to be eventually payable. If by reason of the enquiry under section 132(5), which is admittedly a summary enquiry, an amount in excess of ihe dues is retained, the same is liable to be returned with interest at 9 per cent under section 132A. We are not, therefore, inclined to hold that the restrictions placed by any of the provisions of section 132, 132A or rn1e 112A are unreasonable restrictions on the freedoms under section 19(1)(f). & (g). It was next argued that sections 132(1), and (5) are violative 01 .the fundamental right under Article 14 on the ground (I) that they make unjust discrimination b~tween 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 14 7 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 loc.ation, he can . direct a search and seizure. Otherwise, it is futile to direct a search and seizure because the whole maneouvre will be fruitless. The provision for seizure is designed with the object of getting at the income which has been concealed illegally by the assessee. Only when he is honestly satisfied that some undisclosed income of a person is likely to come to his hands if a search is directed, he will be in a position to issue the necessary authorisation. He cannot, however, direct a search in respect of ·an evader of tax who is astute enough to spend all his income or otherwise make it impossible to . be traced. For the purposes of section 14 7 of the Act all evaders of tax are subject to the sanie procedure for assessment of tax including those against whom action is taken under section 132. Assessees whose asset~ could be seized for the recovery of their tax liabilities do not stand in a different class, as such, but stand in a different situation from those others against whom the search and seizure process, though available, is futile. The finding of undisdqsed income in the form of cash, jewellery and the like makes the provisiOn of sub-section (5) imperative. The taxing authorities cannot keep the valuables with them indefinitely without trying to see how much of what is now seized will go to the Government by way of tax. Therefore, in fairness to the assessee, sub-section (5) has been deliberately introduced. In the nature of things such an enquiry is impossible in the case of tax evaders from whom nothing is or could be seized on a search. Sub-section ( 5) of section 132 does not contemplate a different procedure in the matter of regnlar assessment. See section 132A which shows that those who are found in possession of undisclosed income on a seizure are liable to be re~larly assessed or reassessed. Sub-section (5) only contemplates a provisional summary enquiry A B c D E F G H 8 ###### c 0 E G H P-OOJ;~N _v._ DIRECTOR OF INSPJlCTION _(Palekar, lo)_ 721 with a view· to :determine how much of the seized wealth cao' be. legitimately and rtasonably retained to cover the tax liability already incurred. Regular assessment follows under the law in the same manner as in the case of tax evaders who are not found in possession of concealed income. The utmost that can be said is that by reason of the seizure the Government is in a position to secure its tax dues before the regular assessment is concluded. But that does not introduce IU!y different procedure for the regular assessment of such an assessee's income which remains the same for all tax evaders. In one set of cases the. fiscal authorities make sure of ·recoveries, in the other, they are unable to do so-not because the provisions of section 132 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 he.nee 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 arc tax evaders. But if other evaders successfully dodge the collection of the tax by causing their concealed income to disappear, whv should we not get the same facility." Some l'Oints 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 no the other' grounds urged, it wa& impossible to bold that the impugned provisions were violative of either Articles 14, 19 or 31. We may however, mention in this context that these points had been raised in C. _Venkata Reddy and Another_ v: _Income-tax Officer (Cen-_ _tral) I, Bangalore,_ _and_ _others(')_ apd in _Ramjibhai Kalidas_ v. _I. G._ _Desai, lncome_ _[0]_ _tax Officer, and others(')_ where they have been quite adequately dealt with and rejected. Apart from the constitutional challenge there was also a further challenge on the ground that the actual search and seizure in all these cases, being in contravention of the requirements of section 132 and rule 112 was illegal. Several allegations have been made of malafides, high-handedness, oppressive behaviour and the like and we shall have to deal with them on the· facts of each case. But so far as the two Civil Appeals are concerned, Ii appears to us that it is not neceir: sary to enter into the question of. the alleged illegalities. The High Court bas not done so. The rtlief claimed in those petitions in the High Court was for the return of the account books and documents whlch had been seized and it would appear from the record that before the High Court disposed of that matte~s. the account books and documents had been already·returned. However, there was another relief claimed in the petitions and that was for a Writ of Prohibition restraining the.- Income-tax Department from using as evidence any information· gathered from the search.. of the articles seized. It would appear from th.e record that the High Court was prepared to assume for the purposes of those cases that the search and seizure was illegal. Even so the 'question remained whether these victims of illegal search (I) ~~66 Jncom•·tax Reports, 2~~ 12. (2) 80 Ine>me-tax Reports, 721. 722 IUPlliMI couar llEPOllTS [1974J 2 ~.C.R. were entitled to a Writ of Prohibi.tion that the Income·tax authorities shall not use any information gathered, from the documents which had been seiJed. The High Court held tli11t they ~ere not, and proceeded to pass th.e following identical order in the two cases. It is as follows: "In this case all the documents seized in pursuance of the search warrant have been returned to the petitioners and the only question is whether the information gathered as a result of such search and seizure could be used in evidence if it,be held that the search and seizure was illegal. In _Ba/want Sinah_ _and_ _others_ \I. _Director_ _of_ _Inspection_ (Civil Writ No. 750-D of 1966). announced today, we have held that such information can be used: It ia unnecessary, therefore, to proncrunce upon the validity of the search and seizure. This petition, therefore, fails and is dismissed with no order as to costs." _Ba/want_ _Singh's_ case referred to above is reported in 71 Incometax Reports, 550. We understand that an appeal had been filed to this Court but was not prosecuted. That decision not only upheld the constitutionality of section 132 of the Income-tax Act but also held that there was nothing in Article 19 of the 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 specitlc Article of the Constitution prohibiting the admission of evidence obtained in an illegal search and seizure. But he submitted that to admit such evidence i' against the spirit of the Constitution which has made our liber- 1 ties inviolable. Jn 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. _The State_ _of_ _Madras(')._ "There is considerable authority for the statement that the Courts are not at liberty to dee· !are 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 Legislature we cannot declare a limitation .under the notion of having discovered something in the spirit of the Constitution which is not even mentioned in the instrument. It is difficult upon any general principles to limit the omnipote1*'e of the sovereign legislative power by judicial interposition, except so far as the express words of a written Constitution give that authority." Now. if the Evidence Act 1871 which is a law consolidating, defining and amending the law of evi dence. no provision of which is chaU.onged as violating the Constitu (1) [19501 S.C.R. 88 at p. 120. B _a_ D E F G H A B c D E F G H POORAN _v._ DIRECTOR OF INSPECTION _(Palekar,_ I·) 723 tion-permits relevancy as the only test of adn)issibili\Y of evidence (See section 5 of the Act) and, secondly, that Act or any other simi· Jar law in force docs not exclude relevant evidence on the ground that it was obtailljCd under an illegal search or seizure, it will be wrong to invoke the supposed spirit of our Constitution for excluding such evi· dence. Nor .is it open to us to strain the language of the Constitu· tion, because some American Judges of the American Supreme Court have spelt out certain constitutional protections from the provisions of the American Constitution. In _M._ _P._ _Sharma_ v. _Salish Chander,_ already referred to, a search and seizure made under the Criminal Procedure Code was challenged as illegal on the ground of violation of the fundamental right under Article 20(3), the argument being that the evidence was no better than illegally compelled evidence. In support of that comention reference was made to the Fourth and Fifth ~endments of the American Constitution and also to some American cases which seemed to hold that the obtaining of incriminat· ing evidence by illegal seizure and search tantamounts to the violation of the Fifth amen)lment. The Fourth amendment does not place any embargo on reasonable searches and seizures. It provides that the right of the people to be secure in their persons, papers and effects against unreasonable searches and seizures shall' not be violated. Thus the privacy of a citizen's home was specifically safeguarded under the Constitution, although reasonable searches and seizures were not taboo. Repelling the submission, this Courtobserved at page 1096. "A power of search and seizure is in any system of jurispru· dence in overriding power of the State for the protection of social security and that power is necessarily regulated by law. When the Constitution makers have thought fit not to subject such regulation to constitutional .limitations by recogMtion 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 de· feated by the statutory provisions for searches." It, thefefore, 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. Jn _Barindra Kumar Ghose and others_ v. _Emperor(')_ the learned Chief Justice Sir Lawrence Jenkins says at page 500 : "Mr. Das has attacked the searches and has urged that · ev~ if there was jurisdiction to direct the issue of search warrants as I hold there was still the provisions of the Criminal Procedure c:xie have been com'. pl~tely dis:egarded. On this assumption he has contended that the evidence discovered by the searches is not admissible, but to this view I cannot accede. For without in any way counienancing disregar~ of <l) l.L.R. 37 Calcutta 467. SUPREME COURT REpORTS [1974) 2 S.C.R, lhe provisions prescribed by th~ Code, I bold that what would other· wise be relevant does not become irrelevant because it was discovered in tne course o! a search in which those provisions were disregarded. As Jimutavahana with his shrewd commonsense observes-"• tact cannot be altered by 100 texts," m\d as his commentator quaintly remarks : "If a Brahmana be slain, the precept 'slay not a Branmana' does not annul the murder." But the absence of the precautions designed by the le~lature len!_ll support to the. arillDlent that the alle&ed discov,ery should b~ carefully scrutinized." In _Emperor_ v. _Allahdad Khan(_ _[1]_ _)_ the Superintendent of Police and a Sub-Inspector searched the house of a person susp_ected of being in illicit possession of excisable articres and such articles wer.> found in the house searched. It was held that the conviction of the owner of the house under section 63 of the United Provinces ~cise Act, 1910, was not rendered invalid by the fact that no warrant bad been issued for the search, although it was presumably the intention of the legislature that in a case under section 63, where it was necessary to search a house, a search warrant should be obtained beforehand. In _Kuruma_ v. _The_ _Queen(')_ where the Privy Council had to consider the English Law of Evidence in its application to Eastern Africa, their µ>rdsnips propounded the rule thus : "The test to be applied, both in civil and in criminal cases, ·in considering whether evidence is admissible is whether it is relevant to the matters in issue. If it is, it is admissible and the. court is not concerned with how it was obtained." Some American cases were also cited before the Privy Council. Their Lordships observed at p. 204 thus _:_ "Certain decisions of the Supreme Court of the United States of America were also cited in argument. Their Lordships do not think it necessary to examine them in detail. Suffice it to say that there appears to be considerable diffe· rcnce of opinion among the judges both in the State and Federal courts as to whether or not the rejection of evidence obtained by illegal means depends on certain articles in the American Constitution. At any rate, in _Olmstead_ v. _U11ited_ _State_ (1828) 277 U.S. 438, th.e majority of the Supreme Court were clearly of opinion that the com. mon 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 iiossession 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. _The_ _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 (I) 35 Allahabad, 358. (2) [19;;1 A.C. 197. (3) [1969) (!) A.C. 304. A _C'_ I> E F G H f'OORAN I'. DIRECTOR OF INSPECTION _(Palekar,_ _J.)_ 725 A search and seizure in the fol.owing provision of the J amJ.ca ( Constilut;onJ Order in Council 1962, Sch. 2, s. 19 "(!) Except with his own con.sent, no puson shall be subjected to the search of h's person or his property or the entry by other• on his premises. "(2) Nothing containod in or done under the authority of any law shall be held to be inconsistent with or in contravention of this section to the extent that the law in question makes provision which is re•soaabiy re11 qu1ted .... for the purpose of preventing or !letecting crime .... " In ,1ther words, search and seizure for the purposes of preventing or detecting crime reasonably enforced was not in·consistent with the constitutional guarantee against search and seizure. It was held in that case that the search of the appellant by a Police Officer was not justified by the warrant nor was it open to the Offi~er to search the c person of the appellant without taking hj,m before a Justice of the - Peace. Nevertheless it was held that the Court had a discretion to admit the evidence obtained as a result of the illegal search and the constitutional prote<:tion against search of person or property without D E F co~sent did not take. away the discretion of the court. Following _Kuruma_ v. _The_ _Queen_ the court held that it was open to the court not to admit the evidence against the ·accused .if the court WM of the view that the evidence had been obtained by conduct of which the prose· cution ought not to take advantage. But that wa• not a rule of evidence but a rule of prudence and fair play. It would thus be seen that in India, as in England, where the test of admissibility of evidence lies in relevancy, unless there is an express or necessarily implied prohibition in the CoI1Stitu.•ion or other law evidence. obtained as a rcsu1t o! illegal se!!tch or seizure is not liable to be shut out. In that view, even assuming. as was done by the High Court, that the search and seizure .were in contraven•ion of the ptpvisions of section 132 of the Income Tax Act, •till the material seized was liable to be used subject to law b~fore the Income-tax cu'.horities against the person from whose custody it was seized and, therefore_ no Writ of Prohibition in restraint of such use could be granted. It must be therefore, held that the High Court was right in dismissing the two Writ Petitions. The appeals must also fail and are dismissed with costs. The two Writ Petitions filed in this Court ·now remain for consideration and what is to be considered is whether there has been any illegality in the search and seizure because of the alleged contravenG tion of the provisions of section 132 of the Act or rule 112. _Writ_ _Petition_ _No._ 446 _of_ 1971 H The petitioner Pooran Mal is a partner in a number of firms-some of them doing busine11 in Bombay and some in Delhi. HiJ permanent residence is 12A Kamla Naaar, Delhi. His business pre. in11e1 in Delhi are A.14/16 Jamuna Bhavan, Asaf Ali Road, New Delhi. It would· appear that on an authorisation issued by th~ Director of Inspection, his residence and business premises in 'Delhi were searched on 15th and 16th October, 1971. On the l'Sth his 726 SUPREME COURT REPORTS (1974] 2 S.C.R. 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 bis house the petitioner's wife, two ' - three adult sons and his father who is said to have been ailing. It .vas alleged· on behalf of the petitioner that the search in the residential premises was malafide, 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 he wife's request to postpone the search; (2) it was Dhanteras day which is a festival day; ( 3) petitioner's wife was not informed that there was any authorisation; ( 4) her father-in-law was suffering from paralysis; (5) even children's small boxes containing their pocket money were seized; ( 6) jewellery includine; that of the mother-in-law of the petitioner, Kailashbai, who had died six years earlier was seized; (7) the panchas who helped in the search were unknown to the petitioner or the members of bis family; (8) the search went on from 8.00 A.M. on 15.10 till the early hours of 16.10 and the search was again resumed on the evening of 16.10. The ground' on which the wild allegations of malatides, oppression etc. had been made do not appear to be of any substance. It is un. doubteqly true that sear"h and seizure is a drastic process and is bound to be associated with some amount of unsavoury and inconvenient results. A sudden search and seizure may unnerve the inmates of the place where the search is made. But this is to be expected. When oppression and malafides are alleged, we should have more substantial grounds than these. On the other hand, the allegations of highhandedness, malafides etc. are wholly denied in the affidavit filed en behalf of the Department. That it was a Dhanteras day is denied. But assuming it was, there is no law which says that a search and seizure cannot take place on that day. It may be that the wife had requested that the search may be postponed, till her husband's return but obviously the officers . concerned could· not agree to this request because the whole purpose of the search would have been defeated. It is denied that the !nn1ates were not informed of the authorisation. In fact it is alleged that the petitioner's wife Smt. Sharda Devi was shown the authorisation and ln token of the same she bad put her sipature thereon. That the petitioner's father was suffering from paralysis might be unfortunate but it does not appear that the officers concerned caused him the least lncoavenlence. All throughout the search, it jg alleged, Sharda Devi and her two educated sons Dinesh and Vinod were present at the time of the search. It is not denied that considerable jewellery was seized. The jewellery seized in the house was worth Rs. 37,043/. and though it is the case of the petitioner that part of it belonged to bis mother-in. Jaw. Smt. Kailashbai, who is now dead, it is stated on oath on behalf of the Department that in the statements recorded on 15th and 16th October, 1971 Smt. Sharda l)evi had claimed the whole of the jewellery as her own, though in the last Wealth Tax Return she had valued. her .iewe!lery at Rs. 5,000/· only. So far as the Panchas are concerned, it is denied that they were not known to the inmates ol. the house. Jn fact, it is alleged by the Department that Pancha Matburadas was a resident in the same house and had been called A B c D E F G H A ll c 0 E F G H l'OORAN _v._ DIRECTOR OP INSPECTION _(Palekar,_ J.) 727 at the suggestion of Sharda Devi. It ia not denied that the aell'Ch went on for a long time becaUIC a num~r _cl._ documents and account books were seized in the COUl'BC of the search and so also a lot of jewellery and cash. The alleption that the 11111all boxes of the children containing their pocket money was seiz.ed 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 malafide, oppressive or exce1Bive etc. etc. The search in the buainess premises was made when a number of persons who usually worked there were present. Books of account, documents, some jewellery and a large amount o~ cash ##### amounting to about Rs. 61,000/- were seized. I On 16.10 there was a search in the Branch Offices of ' 'Laxrni Commercial Bank and the Punjab National Bank. 84 Silver bars were seized from Laxml Commercial Bank and 30 silver bars were seized from the Punjab National Bank. The value of these silver bars comes to nearly 18 lakhs. It is the case of the petitioner that these bars belongS to M/s Pooranmal and Sons of Bombay who sent the same to the Motor and Oeneral Finance Company of which the petitioner is a partner and this Finance Company, it is alleged, kept these bars with the two banks. 84 bars were kept in the account of M/s Udey Chand Pooranmal for an alleged overdraft limit whill! the 30 silver bars were pledged with the Punjab National Bank ii\'' the account of the Finance Company. In all these aforesaid Jlrnis Ille petitioner is a partner and it is the Department's case tha!'lfl il!;e1e bars are the undiscl06ed assets of the petitioner. It appears that die Income-tax Officer made a summary enquiry as required by sectfon 132(5) after issuin1 notice to the petitioner and his order dated 12-1-1972 shows, of course _prima_ _facie,_ that all the assets which had been seized in the house. the business premises nnd the banks. except for the val11e of the ornaments declnred by Mrs. Sharda Devi in her Wealth Tax Return, had to be retained for being approptlated a11ainst tax dues from 1969 onwards which amounted to nearly 42 lakhs. Indeed this _prima_ _facle_ liability was subject to reaular a11essment and re-a11e15ment. Mr. Karkhanis submitted that the petitioner had been very cooperative with the department before. and, therefore, the Director of Inspection could have no possible reason to believe that if any requisition for documents and account books were made the same would not be produced. This allegation about cooperation is denied by the Department and in this connection the Department has produced a chart at Annexure RI showing how the .petitioner has been throughout non-cooperative. Assessment . for the yeer 1967-68 is still pending and no return has been filed for the year 1968-69 or for later years. We are . not at all satis ft~ that the petitioner was· cooperative, .. and, therefore, the Director of Inspection would have no posuble ground for entcr talnin~ a reasonable ·belief as required by sub-clauses (a) (b) & (c) o! sub·sectlon (I) ·of section I 32, To Htis!y our1elve1 we called for _728_ SUPREME COURT REPORTS [1974] 2 s.c.R. the grounds recorded by the Director before the authorisation was A issued and we are quite satisfied that there were grounds for him to entertain r~asonable belief as required under the sub-clauses. As already. pomtcd out the summary enquiry made under sub-clause (5.) of s.ection I ~2 discloses that the assets seized were for the most part undisclosed rncome and property. Indeed the accident that undis· closed property ·is found on a search may not be a justification for the aut_h?risation of a search if, in fact there had been no grounds for B entertammg 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 be 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. c _Writ Petition No._ 86 _of_ 1972 The position in this Writ Petition is not different. The petitioner Ganeriwala is a businessman. His residence is 1, Raj Narain Road, Civil Lines, Delhi and 'ie runs a family business in Automobile parts in the name of Ganeriwala Trading Company. The business is at Ono. I Krishna Motor Market, Kashmiri Gate, Delhi. The family seems to be a partner in the firm of M/s Bisheshwar Lal Brlj Nath, Bar1elly, and is supposed to have income from ancestral agricultural lands in Haryana State. It is alleged by the petitioner that his 8llsessment of income had been completed upto the year 1970-71 and of Wealth Tax upto 1969·1970. The Return for 1970-71 was also filed. .Even so, it is alleged, on 8-10-1971 his residential house and E also the business premises were searchect and documents and books of account were seized. The search was started at 8 .00 A.M. and continued till the evening and, thereafter, the business premises were searched. The petitioner stated that though the raiding party made a very detailed search, they did not come across any concealed income-cash or bullion, ornaments or jewellery. General allegations regarding the search being oppressive and excessive are made. But F there is no substance in them. Objection was taken to the search on the ground that the authorities had deliberately selected Panchas who were inimical to the petitioner. This is denied. It is •lated in the affidavit on behalf of the Department that one of the pancha witnesses namely Lt. Col. Raj Behari Lal was actually sitting in the house of the petitioner even before the search party entered the premises. It is also stated that both the panchas are responsible persons of the c;. locality and the immediate neighbours of the petitioner-one of them being a responsible officer in the Army. The petitioner says that he had told the authorities that he had been on inimical terms with these panchas. But that is denied. There is, therefore, no reason to think that respectable panchas were not taken for the search. Another objection was made that two cash **books** relating to the years 1970-71 and 1971-72 were removed by the Income·tax authorities **H** but they were not duly entered in the inventory. This allegation also is denied. In para 21 of the co~nter·affidavit the Assistant J?i!ector of Inspection has stated that dunn8 the course of the petitioners A B c D E F G H POORAN v. DIRECTOR OF INSPECTION _'{Palekar,_ /.) 729 examination and the recording of his statement on October 8, 1971 the petitioner had stated that his Roker-Bahis for the accounting year 1970-71 and 1971-72 did not contain any entries regarding the expenditure on the construction of the godown, and as such those Roker-Bahis were not seized from the custody of the petitioner. The other reason was that the potitioner bad 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 6700 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 con_!.ain any entries for the past 30 days it was considered by the authorities not proper to take oossession of the same. We are inclined to think that this objection by the petitioner is an after-thought with a view to malign the . depart.mental authorities. It is not denied that the petitioner had been given a copy of the inventory of the documents seized from his c~tody on that very day. He did not raise the objection regarding the account books till November 5, 1971 _i.e._ nearly after one month. The petitioner is a businessman. He could not have been unaware that his Roker·Bahis for the current year and the previous year were missing for such a Jong time, It was next alleged that a very large number of documents were seized which were, really irrelevant. The authorised officer has to seize books of account and other documents which will be useful for and relevant to any proceeding under the Income-tax Act. When in the course of a search voluminous documents and books of account arc to be examined with a view to jud~e whether they would be reJe. vant a certain amount of latitude must be permitted to the authorities, It is true that when particularlv documents are asked to be seized· unnecessary examination of other documents may conceivably make the search excessive, But when the documents, pieces of paoer, exercise books, account books, small memoi; etc, have all to be examined with a view to see how far they are relevant for the proceedin~ under .the Act, an error of judgment is not unlikely, At the m,0st this would be an irregularity-not an illegality, Nor can it be a valid objection to the search that it continued for about 16 hours, By their very nature the search and seizure as shown above would consume a Jot of time, Jn this petition also it was alleged that the Director of Tnsoccti~n could possibly have no reason to b~lieve the existence oi circumstances requirr.d by sub-clauses (b)-& (c) of sub-section (1) of section 132 because the petitioner's assessment for the year 1970· 71 had been .alreadv completed and so also the Wealth Tax issessment· for the year 1969-70, But this does not mean that on the information 730 SUPREME COURT REPORTS [1974] 2 S.C.R. in the possession of the Director of Inspection he cannot entertain the necessary belief. The grounds for the belief recorded by the Director of Inspection before the authorisation were shown to us and we do not think that on the material the authority could not have entertained the belief. A big godown has been newly constructed by the petitioner but bis books of account _did_ not reftect the expenditure on account of this construction. It is alleged on behalf of the Department that, on search, certain documents in the nature of maps etc. were seized which showed that the petitioner had constructed the buj]ding in the month preceding the date of search and. the money with which the said building was constructed was unaccounted money. There is, therefore, no substance in the contention that the incometax authorities could not have possibly entertained the required belief. The search and seizll(e, therefore, impugned in this Writ Petition eannot be regarded as illegal. In the result the two Writ Petitions and the two appeals are dismissed with costs. S.B.W. _Petitions_ _and_ _appeals_ _dismissed._ A B c