1961 (4) TMI 138 - HC - Income Tax

Summary

Issues Involved:
1. Constitutional validity of Section 37(2) of the Income-tax Act.
2. Statutory legality of the steps taken under Section 37(2) of the Income-tax Act.
3. Validity of the search and seizure conducted without specific authorisation for premises No. 63/1, Harrison Road.
4. Compliance with the procedural requirements under Section 37(2) of the Income-tax Act.
5. Alleged violation of Articles 14 and 19 of the Constitution.

Issue-Wise Detailed Analysis:

1. Constitutional Validity of Section 37(2) of the Income-tax Act:
The petitioners challenged the constitutional validity of Section 37(2) on the grounds that it violates Articles 14 and 19 of the Constitution. The court held that the section was not unconstitutional. The court found that the section had a clear policy of preventing tax evasion and was designed to apply to cases where the normal procedure under Section 37(1) would not be effective. The classification based on the necessity to prevent tax evasion was deemed reasonable and had a rational nexus to the object of the statute. The court also noted that the discretion given to the Income-tax Officers was subject to the control of the Commissioner, providing a sufficient check against arbitrary use of power.

2. Statutory Legality of the Steps Taken Under Section 37(2) of the Income-tax Act:
The court examined whether the steps taken under Section 37(2) were in compliance with the statutory requirements. It was held that the authorisation letters issued by the Commissioner satisfied the requirements of the statute. The Commissioner had to be satisfied on the report of the Income-tax Officer that the search and seizure were necessary. The court found that the authorisation letters in the present case met this requirement, as they stated that the Commissioner was satisfied based on the report of the Income-tax Officer.

3. Validity of the Search and Seizure Conducted Without Specific Authorisation for Premises No. 63/1, Harrison Road:
The petitioners argued that there was no specific authorisation for the search and seizure at premises No. 63/1, Harrison Road. The court held that the language used in the authorisation letters, which included "other places in connection with the said premises," was sufficient to cover premises No. 63/1, Harrison Road. The court noted that premises No. 63/1, Harrison Road was interconnected with premises No. 61, Harrison Road, forming a single building. Therefore, the search and seizure at premises No. 63/1 were deemed valid.

4. Compliance with the Procedural Requirements Under Section 37(2) of the Income-tax Act:
The court examined whether the procedural requirements under Section 37(2) were followed. It was argued that the power to search and seize was subject to the existence of rules under Section 59 of the Income-tax Act. The court held that the words "subject to any rules made in this behalf" did not mean that the power to search and seize was conditional upon the prior existence of rules. The court found that the power under Section 37(2) was not suspended until rules were made and could be exercised even in the absence of such rules.

5. Alleged Violation of Articles 14 and 19 of the Constitution:
The petitioners argued that Section 37(2) violated Articles 14 and 19 of the Constitution. The court held that the section did not violate Article 14 as it provided a reasonable classification based on the necessity to prevent tax evasion. The court also held that the section did not violate Article 19 as the restriction imposed by the section was reasonable and in the interest of the general public. The court noted that the power to search and seize was subject to the control of the Commissioner and the procedural safeguards provided by the Code of Criminal Procedure.

Conclusion:
The court dismissed the petitions, upheld the constitutional validity of Section 37(2) of the Income-tax Act, and found that the steps taken under the section were in compliance with the statutory requirements. The search and seizure conducted without specific authorisation for premises No. 63/1, Harrison Road were deemed valid, and the procedural requirements under Section 37(2) were found to have been followed. The court also held that the section did not violate Articles 14 and 19 of the Constitution.