1973 (12) TMI 2 - SC - Income Tax

Section 132 of Income-tax Act, 1961 & Rule 112 of 1962 IT Rules do not violate the fundamental rights under article 19(1)(f) and (g) of the Constitution - no substance in the contention that the income-tax authorities could not have possibly entertained the required belief. The search and seizure, therefore, impugned in this writ petition cannot be regarded as illegal

Issues Involved:
1. Constitutionality of Section 132 of the Income-tax Act, 1961.
2. Alleged violations of Articles 14, 19(1)(f), 19(1)(g), and 31 of the Constitution.
3. Legality of search and seizure operations.
4. Use of evidence obtained from allegedly illegal searches.
5. Allegations of mala fides, high-handedness, and oppressive behavior by tax authorities.

Detailed Analysis:

1. Constitutionality of Section 132 of the Income-tax Act, 1961:
The petitioners challenged the constitutionality of Section 132, arguing it violated fundamental rights under Articles 14, 19(1)(f), (g), and 31. The court emphasized that the provisions are directed against individuals believed to have evaded taxes and justified the measures as necessary to combat tax evasion, which undermines economic stability. The court noted that search and seizure are recognized legal processes globally and are necessary for maintaining social security. The court found that the safeguards in Section 132, such as the requirement for reasonable belief and the involvement of high-ranking officers, rendered the provisions reasonable and non-arbitrary.

2. Alleged Violations of Articles 14, 19(1)(f), 19(1)(g), and 31 of the Constitution:
The court examined whether the restrictions imposed by Section 132 were reasonable. It held that the measures were justified given the significant issue of tax evasion and the need for fiscal authorities to have sufficient powers to prevent it. The court found the safeguards in Section 132 adequate, including the requirement for reasonable belief, authorizations by high-ranking officers, and adherence to procedures similar to those in the Criminal Procedure Code. The court dismissed the argument that Section 132 discriminated between different classes of tax evaders, stating that the provision applied equally but was effective only when undisclosed income could be located.

3. Legality of Search and Seizure Operations:
The court reviewed the specific instances of search and seizure in the cases at hand. It found no evidence of mala fides or excessive behavior by the tax authorities. In both writ petitions, the court noted that the searches were conducted based on reasonable belief and were not arbitrary. The court also dismissed allegations of high-handedness and oppressive behavior, stating that the inconvenience caused by search and seizure was an inherent part of the process.

4. Use of Evidence Obtained from Allegedly Illegal Searches:
The court addressed whether evidence obtained from an allegedly illegal search could be used in proceedings. It referred to the Indian Evidence Act, which permits the use of relevant evidence regardless of how it was obtained. The court cited precedents, including M.P. Sharma v. Satish Chandra, to support its position that evidence obtained from illegal searches is admissible. The court rejected the argument based on the "spirit of the Constitution," emphasizing that the admissibility of evidence is governed by statutory law, not abstract constitutional principles.

5. Allegations of Mala Fides, High-Handedness, and Oppressive Behavior by Tax Authorities:
The court examined the specific allegations in the writ petitions. In Writ Petition No. 446 of 1971, the court found no substantial evidence to support claims of mala fides or high-handedness during the search of the petitioner's residence and business premises. Similarly, in Writ Petition No. 86 of 1972, the court dismissed allegations of oppressive behavior and found the search and seizure operations justified based on reasonable belief. The court also addressed procedural objections, such as the selection of panchas and the seizure of documents, finding no irregularities that would invalidate the searches.

Conclusion:
The court upheld the constitutionality of Section 132 of the Income-tax Act, 1961, and found that the provisions did not violate Articles 14, 19(1)(f), (g), or 31 of the Constitution. It ruled that evidence obtained from searches, even if allegedly illegal, is admissible in proceedings. The court dismissed the writ petitions and appeals, finding no illegality in the search and seizure operations conducted by the tax authorities.

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