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TMI Blog1961 (4) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... of Section 37 (2) of the Income-tax Act and (2) the question of the statutory legality of the steps taken under the same, section of the same Act. This application challenges the constitutional validity of the statutory powers of search and seizure under Section 37 (2) of the Income-tax Act. 4. Section 37(2) of the Income-tax Act deals "with the powers of the Income-tax Authorities to enter and search any building or Place and to seize books of account and other documents. It will be necessary to set out the section whose constitutional validity has been challenged. Before doing so the facts may be briefly stated. 5. The search relates to premises Nos. 57, 61 and 63/1, Harrison Road and also .premises No. 212, Cornwallis Street and 8/A, Beniatolla Lane. The search continued from 4th July, 1956. Certain books and papers were seized. It is against this search and seizure that the present application is directed. It is said that search and seizure were illegal and unconstitutional. 6. The search was conducted both by the Customs as well as by the Income-tax authorities but it is the action of the Income-tax authorities which is under challenge in this application. 7. The peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e useful for, or relevant to, any proceeding under this Act: and the provisions of the Code of Criminal Procedure. 1898 (V of 1898) relating to searches shall apply so far as may be to searches under this section." 10. This authority to enter search and seize stems from the Commissioner of Income-tax and the Income-tax Officer executes it. The Commissioner has to 'specially authorise' the. Income-tax Officer to do it. This is clear from the section. In this case the authorisation reads as follows:- Office of the Commissioner of Income-tax (Central Calcutta) 4, Hastings Street. Calcutta. Authorisation under Section 37 (2) of the Indian Income-tax Act. Whereas on information received by you, you have reason to believe and I am satisfied on your report that books of account and other documents which in your opinion will be useful for, or relevant to the Income-tax cases of the assessees noted in the margin (here in ( )) (M/s. Soorajmull and Nagarmull and their partners) under the Indian Income-tax Act may be found at premises No. 63, Harrison Road, Calcutta, and compound, offices and outhouses or other places in connection with the said premises. This is to speci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the premises concerned although the specific municipal number of this particular premises is not mentioned in the authorisation letters. The language used in the authorisation letters is "or other places in connection with the said premises." This to my mind, means that other places connected with the premises mentioned will be included within the authorisation. Particular places could be identified not merely by municipal number but also by any other reasonable expression to identify or indicate reasonably the place intended. After all premises are not always numbered and such numbers are not available, for instance,, in the districts or in the rural areas. Secondly, the fact is established beyond doubt that premises No. 63/1, Harrison Road is not at all a separate and independent building apart from the premises No. 61, Harrison Road, but that premises No. 63/1, Harrison Road forms a single building with No. 61, Harrison Road not visibly divided or partitioned and access can be obtained from one place to the other from within and without having to go on the public road for this purpose- This is clear not only from paragraph 13 of the affidavit of the Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax Officer by Parliament only on condition that power would be exercisable only after the Rules had been made by the Central Government under Section 59 of the Act. He contends that an unregulated power of search and seizure unguided by the Rules was not the intention of Parliament and that is why the words used were 'subject to any rules made in this behalf.' No Rules for search and seizure had been made when this particular search and seizure took place between the 4th July and the 7th July, 1956. The Rules have been framed since then. The search and seizure Rules were framed subsequently by Notification No. S. R. O. 1953 dated the 6th. June, 1957 and called "The Income Tax (Search of Premises and Seizure of Documents) Rules, 1957." In other words, the argument in short is this that this power to search and seize springs from the Rules and not from the Section. 15. In aid of this argument Mr. Sanyal has referred us to two sections such as, Sections 58D and 58J(3) which use the words "subject to any Rules which the Central Government (or the Central Board of Revenue) may make in this behalf" in order to show that the words 'may make* indica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al legislation which according to its well-known features, it is not. The only reasonable and proper interpretation appears to be that the power contained in the section is ,to be regulated by such Rules as are either allready made or may be made in future. But they cannot be construed as a condition precedent to the exercise of the power itself. The Rules are regulatory of the power but their existence is not a pre-condition for the operation of the power under statute. For these reasons I hold that I cannot interpret Section 37 (2) to mean that the power, conferred thereby remains suspended until Rules are made and becomes operative when such Rules are current. 17. The next attack on the search and seizure under the statute is that the letter of authorisation quoted above does not satisfy the requirements of the statute. It is said that the use of such words by the Commissioner of Income Tax ns "you have reason to believe", "I am satisfied on your report" and "books of account and other documents which in your opinion will be useful for or relevant to" do not satisfy the conditions laid down in ,this statute. Under this objection it is contended tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me, this authorisation by the: Commissioner under Section 37 (2) is not a mere mechanical act or a rubber stamp consent to the request of the Income tax Officer, but is prima facie check by the Commissioner. At that prima facie stage naturally the Commissioner has to see whether the Income tax Officer himself has reason to believe and whether he himself has formed an opinion, that the books of account or documents are relevant to or useful for the purpose of assessment proceeding under the Act which the Income tax Officer is conducting. That test is met in the letter of authorisation in this case. The Commissioner himself says 'I am satisfied'. It is true he says that he is so satisfied on the Income-tax Officer's report that the Income tax Officer has reason to believe and that the Income tax Officer has formed an opinion. But that is just what it should be. It is the Income tax Officer's reason and the Income-tax Officer's opinion which must first be there and then if upon, that, the Commissioner says that he is satisfied, then I think the requirements and conditions of Section 37(2) are fulfilled. I hold they are wholly satisfied in the authorisation letters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of making a summary, 'first because, all summaries; including even the perfect ones, if there be any, if they are intended as a summaries, must suffer for what they leave out and in law nothing really can be left out as irrelevant for all purposes, and: if they do not leave out anything then they no longer remain summaries. Secondly, constitutional principles are always live, far-reaching and; necessarily complex and are always bound to suffer by any over-simplified attempt to put them- into any straight jacket of so-called formulae of neat seductive rules and categories. 23. I shall take up first the challenge under Article 14 of the Constitution. It is argued that this power of search and seizure without a warrant is an extensive power and not to be easily assumed; then it is said that this extensive power to search and seize without warrant under the Incometax Act can be used indiscriminately against any assessee and there is no classification reasonable or otherwise to guide the policy of the statute in respect of such search and seizure. For this purpose a comparison is drawn between the different sub-sections of Section 37 of the Incometax Act. Under Sub-section (i) s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and therefore such classification as evaders with no other distinctiveness was irrational. Vide the observations of Mahajan C. J. in . In the Meenakshi case; the Supreme Court dealt with the problem after the amendment of the Incometax Act by the Amending Act XXXIII of 1954. It was again held by the Supreme Court! by Mahajan, C J. that after coming into force of the Indian Incometax Amendment Act, 1954 which operated on the same field as Section 5(1) of the Taxation on Income (Investigation Commission) Act, 1947 and therefore, assuming the provisions of Section 5(1) of the latter Act were based on a rational classification, such provisions had become void and unenforceable as being discriminatory under Article 14 of the Constitution. The result of Meenakshi case, is that Section 5(1) of the Taxation on Income (Investigation Commission) Act was declared ultra vires under Article 14 of the Constitution. In Muthiah's case, the Supreme Court again held that Section 5(1) of the Taxation on Income (Investigation Commission) Act, 1947 was ultra vires the Constitution as it was discriminatory and violative of the fundamental right guaranteed by Article 14 of the Constitution by reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can travel far and wide to examine the background and the surrounding circumstances. To do so, he has endeavoured to show that the Court has-taken notice of such "background and surrounding circumstances", (1) by affidavit and (2) by-judicial notice as in Kedarnath Bajoria v. State of West Bengal, and (3) also from various other sources Such as were considered in Hamdard Dawakhana v. Union of India, and Kathi Ranning Rawat v. State of Saurashtra, . He therefore contends and quotes to explain the background and the surrounding circumstances of this-impugned Section 37(2) of the Incometax Act by (1) the report of the Incometax Investigation Commission dated the 10th January, 1948 paragraphs 286 (page; 131) and 295 emphasising the plea for power to search and seize as showing the urgent need and the birth struggles of Section 37 (2) of the Incometax Act, (2) Budget Speech of 1956-57, at pages 40-41 in Parliament reported also in 29th Volume of the Incometax Report, (3) the-Report of the Taxation' Enquiry Commission 1953-54, 2nd Volume page 201 and (4) finally the provisions of the Finance Act, 1956 introducing: Section 37(2) of the Incometax Act by Section 20 thereof sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the court has to examine whether such classification is or can be reasonably regarded as based on some intelligible differentia which distinguishes such persons or things grouped from those left out of the group and whether such differentia has a reasonable relation to the 'Objects sought to be achieved by the statute. In the State of West Bengal v. Anwaiali Sarkar, two classic tests were put forward (1) that the classification must 'be founded on an intelligible differentia which distinguishes those that were grouped together from others and (2) that the differentia must have a rational relation to the objects sought to be achieved by .the Act. In other words, the differentia and the objects are distinct and there must be a nexus between them. 29. The question now raised here is whether the test that under Article 14 of the Constitution there must be a rational relation between the differentia and the objects sought to be achieved is introducing a kind of similar standard applicable to reasonable restriction contemplated in Article 19 of the Constitution. On a broad comparison between Article 14 and Article 19 of the Constitution and the specific language used in both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional enough and although the word 'substantial' was a vague expression, it passed the test against "the background and the surrounding circumstances". In Kantrshari Haldar v. State of West Bengal, , Gajendragadkar, J. delivering the majority judgment upheld the validity of the impugned provisions contained in Section 2(b) and proviso to Section 4(a) of the West Bengal Tribunals of Criminal Jurisdiction Act 14 of 1952 under Article 14 of the Constitution even though the preamble to the Act referred to the 'speedy trial' of the offences. 31. These illustrations make it clear that the words 'speedy trial' are not by themselves magic tests by which it could be invariably said that speedy trial is never a sufficient policy of, classification but they have to be taken in the con-text of the particular legislation, special facts and mischief's intended to be remedied. Gajendra-gadkar, J. at page 459 in makes this point essentially clear by the following observation:-- "Thus the enunciation of the principles which flows from the fundamental rights enshrined in Article 14 now presents no difficulty; it is however in the application of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that Section 37(2) does not expressly say that when the taxing authorities are of that opinion and reason that they should exercise the power to search and seize but that is left to their discretion and in exercising that discretion their act will be judged by the Courts in that light and whims of taxing authorities will certainly not be considered by Courts as due discretion. Whimsical acts will not amount to exercise of discretion and will not be bona fide and will be struck down as such but that does not make the statute unconstitutional. It has been laid down that such discretion or choice to refer to one or other procedure or authority is itself not discriminatory or violative of Article 14 of the Constitution. The Supreme Court decision in Niemla Textile Finishing Mill Ltd. v 'The Second Punjab Tribunal. (S) AIR 1957 SC 329 is an answer to Mr. Sanyal's argument on this point Bhagawati, J. in that case observed at pages 334-35 as follows:-- "It follows from this survey of the relevant provisions of the Act that the different authorities which are constituted under the Act are set up. with different ends in view and are invested with any powers and duties necessa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ground of constitutional validity of the impugned section of the Incometax Act was successfully met not only by reference to the preamble of this very Incometax Act which only mentioned "an Act to consolidate and amend the law relating to incometax and supertax" and the purpose of this Incometax Act but also with reference to the preamble of the first Indian Incometax Act of 1886 (Act 2 of 1886). See the observations of Bhagawati J. at page 255 of the Supreme Court Reports: (at p. 407 of AIR). It was then held that that the right conferred on the assessee by section 64(1) and (2) of the Incometax Act of 1922 was not an absolute right and must be subject to the primary object of the Act itself, namely, the assessment and collection of incometax; and where the exigencies of tax collection so required, the Commissioner of Incometax or the Central Board of Revenue had the power under Section 5(7A) of the Act to transfer his case to some other officer outside the area where he resided or carried on business and that any difference in his situation created thereby as compared to that of others similarly situated would be no more than a minor deviation from the general standa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to pick and choose individual assessee and place that assessee at a disadvantage in comparison with other assessees because it was enough for the purpose of this case to say that the omnibus order made in this case was not contemplated or sanctioned by subsection (7A) and that, therefore the petitioner was still entitled to the benefit of the provisions of sub-sections (1) and (2) of section 64. Bose, J-delivering the dissentient judgment in Bidi Supply case held Section 5 (7A) of the Indian Income-tax Act ultra vires Article 14 of the Constitution and so also section 64 (5) (b) in so far as it made the , order under Section 5 (7A) inviolate. 37. The attempt to distinguish Pannalal Binjraj's 'case from the present case on the ground of distinction between fundamental and statutory rights cannot in my opinion succeed not only because it is debatable under our Constitution whether it is a fundamental right to be protected against search, and seizure as under the American Constitution, and which I shall presently discuss in the light of the Supreme Court authority on the point, but also because the principle laid down, in Pannalal Binjraj's case, particularly by Bhagawa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner himself, who is the highest executive officer of the Income-tax Department. Thirdly, the Income-tax Officer has to state his Opinion that the documents are useful for or relevant to any proceeding under the Act. Fourthly, the provision of the Code of Criminal Procedure relating to searches shall apply so far as it may to searches under Section 37 (2) of the Income-tax Act. Therefore, the broad allegation that the statutory provision for search and seizure under Section 37 (2) of the Income-tax Act is an absolute, naked, arbitrary and unregulated power cannot succeed. Whether these regulatory conditions are enough, which is a totally different question, I shall presently discuss. I cannot however help adding that the constitutional enthusiasm for challenging naked powers stimulated the normally sedate Solicitor-General to make the unconventional argument that sufficient clothes and nakedness were not absolute but purely relative concepts determined by the fashions of the place and occasion. What is enough on the sea beach, says he, is not enough for Chowringhee, or Con-naught Circus or Malabar Hills. If by this analogy, he was doing no more than restating in the garb of const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts object and purpose. The authority on which I rely to answer the assessee is, again and the observations of Bhagawati, J. at page 257 (of SCR) : (at p. 408 of AIR), about power vested in top-ranking officials, which I have already quoted elsewhere in this judgment on another point. Again at page 261 (of SCR) : (at p. 410 of AIR), Bhagawati, J. in defending the constitutional validity of Section 5 (7A) of the Income-tax Act against the charge of naked, arbitrary and uncontrolled power observed as follows : "The power is guided and controlled by the purpose which is to be achieved by the Act itself-viz., the charge of income-tax, the assessment and collection thereof, and is to be exercised for the more convenient and efficient collection of the tax." 43. On the strength of the above observations and other observations at page 252 (of SCR) : (at p. 406 of AIR) of Bhagawati, J. in Pannalal Binjraj's case, , it can in my view be successfully contended that if Section 5 (7A) of the Income-tax Act relating to transfer of cases is good in Pannalal Binjrajs case, , with dis-cretion vested in high "official and the exigency of tax collection as a guide then Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r's opinion and reasons that the documents concerned are relevant to or useful for the purpose of the assessment, (3) the provisions of the Criminal Procedure Code relating to searches shall be applied to such income-tax searches and (4) sub-feet to any Rules made in this behalf. On this point reference may also be made to the observation 'of the Supreme Court in and of the Special Bench decision of this Court in Paschim Banga Malbahi Cycle Mazdoor Union v. Commr. of Police, Calcutta, . 45. I, therefore,, hold that even without right . of representation or right of appeal, Section 37 (2) of the Income-tax Act is saved from the charge of 1 constitutional invalidity on the ground of unreason-able restriction within the meaning Of Article 19(1) (f)) of the Constitution. 46. But then it may not be even a case where, there is no right of representation or appeal. The scheme of the Income-tax Act for this purpose is this respect is relevant as was also thought in Pannalal Binjraj's case, , by the Supreme Court. I shall therefore make reference to some of the sections of the Income-tax Act to support a possible right of representation even though such right is not expressly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r words, there must be some assessment proceeding under this Act or some proceeding under the Act and the actual seizure will therefore naturally be an order by the Income-tax Officer himself seizing the books and documents and therefore will be an order in the course of a proceeding under the Act. That being "so, the provisions of Section 33-A of the Income-tax Act can be attracted against the Income-tax Officer's order of seizure. This' section deals with the power of revision by the Commissioner himself. The relevant portion of Section 33-A for the purposes of this judgment is quoted below: "Section 33-A (1) -- The Commissioner may of his own motion call for the record in proceeding under the Act in which an order has been passed by authority subordinate to him and may make such enquiry or cause such enquiry to be made, and subject to the provisions o£ this Act, may pass such order thereon not being an order prejudicial to the assessee as he thinks fit.'' There are certain provisos which follow with which we are not concerned. Therefore it follows from Section 33-A (1) that if an aggrieved party has really a genuine grievance he can always ask t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct at page 470 by quoting the following classical observation by Patanjali Sastri C. J. in the State of Madras v. V. J. Row, : "It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual'' statute impugned, and no abstract standard, or general pattern of reasonableness can be laid down as ap-plicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restriction imposed, the extent and legitimacy of the evils sought to be remedied thereby, the disproportion of the imposition, the prevailing condition at the time, should all enter into the judicial verdict.'' 51. Taking therefore an overall view of the various considerations, leading to this statutory amendment by the introduction of Section 37(2) of the Income-tax Act against the background of large scale evasion of taxes and the need for preventing such evasion and for providing power of searching and seizing documents and books of account for the purposes of assessment, as exemplified! from the report of the Income-tax Investigation! Commission dated the 10th January, 1948, the B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annadhadas, J. in observed as follows:-- "A power of search and seizure is in any system of jurisprudence an overriding power of the State for the protection of social security and that power is necessarily regulated by law. When the Constitution makers have thought fit not to subject such regulation to constitutional limitations by recognition of a fundamental right to privacy analogous to the American Fourth Amendment, we have mo justification to import it, into a totally different fundamental right by some process of strained construction." 53. The American Fourth Amendment in the American Constitution expressly provides:-- "The right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seizures, shall not be violated, and no warrant shall issue, but upon probable cause, supported by oath or affirmation and particularly describing the place to be searched, and the persons or things to be seized.' 54. The reasons for the decision of the Supreme Court for coming to this conclusion were based not only on the distinction between the American and the Indian Constitutions but also upon the principle stated b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the structure in, and exceptions, under Article 19 of the Indian Constitution are logically different and the framers of the Indian Constitution did not think it any more necessary to include the American Fourth Amendment, because they thought that it was otherwise provided for under the doc- trine of reasonable restriction in respect of property and business under Article 19 of the Indian Constitution. But as I said, this argument was no longer available after the' clear decision in M. P. Sharma's case, . I am, therefore, bound to hold on this authority of the Supreme Court that this search and seizure under Section 37 (2) of the Income-tax Act cannot be said to infringe any fundamental right under Article 19 of the Constitution. 56. The argument that absence of any provision for the return of the documents in Section 37(2) of the Income-tax Act makes it an unreasonable restriction does not also appear to be sound. It is argued that as the statute makes no provision for the return of documents, the taxing authorities, once they seize the books and documents, they can retain them for ever and indefinitely. I am not impressed by this sinister possibility. Section 37 (2) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firm of Suraj-mull Nagarmull. The petitioners Nos, 2 to 7 and 9, are partners of the said firm. The petitioner No. 8 is the widow of one K.D. Jalan, a partner of the firm since deceased. This application is in respect of action taken by the Income-Tax Authorities under the provisions of Section 37(2) of the Indian Income-Tax Act, 1922 (hereinafter referred to as the "Act"). The relevant part of that provision has been set out in the judgment of Mukharji, J. 61. Sub-section (1) of Section 37 grants to the Income-tax Officer etc., the same powers as are vested in a Court under the Code of Civil Procedure, 1908 (V of 1908) when trying a suit, for the purposes of ordering discovery and inspection, and enforcing the attendance of witnesses and examining them on oath, compelling the production of books of account and other documents and issuing commissions. Sub-section (3) deals with the power of impounding books and documents. Subsection (4) lays down that all proceedings under Section 37 will be deemed to be judicial proceedings within the meaning of sections 193 and 228 and for the. purposes of Section 196 of die Indian Penal Code. 62. On the 4th July, 1956 the Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other adjoining premises, we find that you require several books of accounts, documents, letters etc., in addition to those which you have already seized and for which you 'have already prepared regular inventories copies of which have been supplied to us. The Search is going on for the last three days and the papers and' documents etc., still to be listed are so numerous and voluminous that it may (take ?) a couple of days more if complete inventories are to be taken of the papers and documents that still remain, to be listed. We have been completely exhausted by the search and are unable to sit with you any longer to complete the onerous task of listing the papers - and documents. 2. We, therefore, request you to please put all the papers and documents, that have not yet been listed in steel trunks which will be sealed jointly by us as well as by you. You may remove these trunks to our office. We undertake to attend your office on the 17th of July, 1956 at 12 noon and at such other time on such other dates as the prepa-ration of the list may require, when the seals will be opened in oar presence and inventories of documents and papers prepared. We are agreeable that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry to make an order under Rules 2 and 3 of Chapter V of the Original Side Rules, referring the matter to the learned Chief Justice to constitute a larger Bench. Such a Bench has now been constituted and the matter has been heard by us. 65. Mr. H.N. Sanyal, the Additional Solicitor-General who argued the matter with great ability on behalf of the petitioners, has taken the following points: (1) That the provisions of Sub-section '(2); of Section 37 of the said Act are violative of Article 19(1) (f) and (g) of the Constitution because:'- (i) Power has been given to executive authority which is naked, arbitrary and uncanalised, dependent upon the subjective satisfaction of such an authority; without any rules and regulations to-guide him in the exercise of it; (ii) No provision is made for making a representation, objecting to the arbitrary exercise of. the said powers by an executive authority. There is also no provision for making any application in revision or appeal; (iii) There is no provision for the return of documents etc., which may be retained for an indefinite period; (iv) That it applies, not only to assessees but also to outsiders, whose books and docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red into and books, documents etc., were searched for seized and taken away. (v) That only books of account and other documents, which are considered useful for or relevant to any proceeding under the Act may he seized, whereas in this case books, documents and other articles or things have been seized and taken away which do not come tinder such a category. 66. Before I proceed to consider these points, I must mention that in exercise of the power conferred by Sub-section (1) of Section 59 of the said Act, the central Board of Revenue has made rules for the purpose of Sub-section (2) of Section 37, called the 'Income-tax (Search of Premises and Seizure of Documents) Rules, 1957' by notification No. SRO 1953 dated 6th June, 1957. Rule 2 lays down that the Commissioner of Income-tax may, for reasons recorded, issue a written order under his own signature and bearing his seal, specially authorising an Income-tax Officer, subordinate to him to enter any building or place specified therein where he has reason to believe that books of account and other documents which in his opinion will be useful for or relevant to any proceeding under the said Act may be found. The form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in this behalf." In my opinion it is possible to give effect to the provisions off law contained in Sub-section (2) of Section 37, even without rules. Consequently, this argument fails.. Our attention has been drawn to Sec. 41 of the Arbitration Act, 1940 which lays down that "subject to the provisions o£ this Act and Of Rules-made thereunder," the provisions of the Code of Civil Procedure should apply to all proceedings-before the Court etc. It has never been argued that the Code did not apply until rules were framed. 68. I now come to the ground No. 1 namely, as to whether the provisions of Section 37 (2) are violative of certain fundamental rights granted to the petitioners. The first point to be considered is as to whether there is at all any fundamental right involved in such a case. Let us take the question of the fundamental rights guaranteed under Article 19(1) (f) and (g) of the Constitution. Before I deal with the question, it will be necessary to visualise the circumstances involved. The assessee may be carrying on a business of his choice, the power to do so being guaranteed to him under the provisions of Article 19(1)(g). For that purpose, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... But, a search by itself is not a restriction on the right to hold and enjoy property under Article 19(1)(f). No doubt a seizure and carrying away is a restriction of the possession and enjoyment of the property seized. This, however, is only temporary and for the limited purpose of investigation. 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 a necessary and reasonable restriction and 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 question of violation of Article 19(1)(f) is involved in this case in respect of the warrants in question which purport to be under the first alternative of S. 96 (1) of the Criminal P. C." 69. The learned Judge pointed out that in America, protection against search and seizure is afforded by the 4th and 5th Amendments of the American Constitution, and that there are no corresponding provisions in our Constitution. If the matter sto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on dictates. Legislation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a proper balance between the freedom guaranteed under Article 19(1)(g) and the social control permitted by Clause (6) of Article 19, it must be held to be wanting in (hat quality. Clause (6) in the concluding para particularises certain instances of the restrictions that were in the mind of the Constitution-makers and which have the quality of reasonableness. They afford a guide to the interpretation of the clause and illustrate the extent and nature of the restriction which according to the statute could be imposed on the freedom guaranteed in Sub-clause (g) (Per Mahajan, J., in Chintaman Rao v. State of M. P., ). 2. It is not possible to formulate an effective test which would enable us to pronounce any particular restriction to be reasonable or unreasonable per se. All the attendant circumstances must be taken into consideration and one cannot dissociate the actual contents of the restrictions from the manner of their imposition or the mode of putting them into practice. The question of reasonableness of the restrictions im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons for making the order and revise or review the decision of the subordinate officer it was violative of Article 19(1)(g) of the Constitution and, therefore; invalid- (Per Mukherjea, J., in ). 6. Where the wordings of a statute left it entirely to the Government to requisition stocks of grains at any rate fixed by it and to dispose of such stocks at any rate in its discretion, it obviously vested an unrestrained authority to requisition stocks at an arbitrary price. In other words, it would be open to the Government to requisition the stocks at a price lower than the ceiling price thus causing loss to the persons whose stocks are freezed and at the same time the Government was free to sell the same stock at a higher price and make a profit. It is a typical case which illustrates how the business of a grain dealer can be paralysed. Such a law is invalid, as violative of inter alia Article 19(1)(g) of the Constitution. (Per Ghulam Hasan J., in ). 7. The policy underlying the Cotton Textiles (Control of Movement) Order, 1948 which was an order framed in exercise of power granted by the Essential Supplies (Temporary Powers) Act, 1946 was to regulate the transport of cotton te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no time limit laid down for its operation and no provision: was made for any representation. (Per Das C. J. in . 11. Where power was given to the Central Government to fix die price at which sugar might be sold it was held that as long as the Central Government exercised this power in the manner provided by the Act and the order, namely the Sugar (Control) Order 1955 it could not be said that an appeal from the decision of the Central Government should have been provided. (Per Wanchoo J., in ). 12. When the constitutionality of an enactment is challenged on the ground of violation of any of the Articles in Part. III o£ the Constitution, the ascertainment of its true nature and character becomes necessary i.e., its subject-matter, the area, in which it is intended to operate, the purport and intent have to be determined. In order to do so, it is legitimate to take into consideration all the factors such as history of the legislation purposes thereof, the surrounding circumstances and conditions, the mischief which it is intended to suppress,. the remedy for the disease which the legislature resolves to cure, and the true reason for the remedy. (The Court took in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... later. That being so, we have next to find out whether the impugned provision contains any rule, regulation or indication guiding the exercise of powers vested in executive authority. It must at once be admitted that the powers granted upon executive authority in the impugned subsection are wide and drastic. The learned Solicitor-General argued however that Sub-section (2) of Section 37, itself contains restrictions on the exercise of executive power and they are as follows: 1. The Income-tax Officer can only act if he is specially authorised by the Commissioner, who is one of the highest authorities constituted under the Act. 2. The Income-tax Officer cannot act under this provision, in all cases, but only where he has reason to believe that any books of account and other documents, which in his opinion will be useful for, or relevant to, any proceeding under the Act, may be found in any building or place. The books of account and other documents are not, any books of account and documents, but only such as will be useful for, or relevant to, any proceeding under the Act and, consequently the Income-tax Officer must exercise his mind and with 'his knowledge of income-tax a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be conducted according to the Cr. P. C. The procedure of search & seizure, as contained in the Cri. P. C. is quite elaborate and has stood the test of time. Reference may be made to the provisions contained in Chapter VIII of the Code. Elaborate provisions have been made therein to regulate search and seizure. Reference may be made to Section 103 which provides that such a search must be made in presence of witnesses and how the list of things seized should be made out. It also makes it compulsory to permit the occupant of the place searched or some other person on his behalf, to attend when the search takes place. That the provision in the Code contains some safeguards is not denied, but what is argued is that the safeguards are not sufficient when applied to Sub-section (2) of Section 37. It is argued that under the Cr. P. C. the matter is dealt with by a Magistrate, which, is a Court, and a person affected has a right to prefer objections to a Court, which would be judicially considered. Then again, it is pointed out that when articles are seized, Section 517 of the Cr. P. C. provides that after the completion of the enquiry or a trial in any criminal court, the court may make a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the powers of search and seizure should be conferred on all Income-tax Officers but should be subject to obtaining the previous approval of the Inspecting Assistant Commissioner, or where this was not possible to report to him immediately after the action had been taken. In 1948, rules were framed under Act 30 of 1947 and such powers were included. Thereafter, however, some of, the operative 'sections of the Act were declared ultra vires. In 1956 the Taxation Enquiry Commission reported that such powers should be conferred. The following statement appears in the report:- "We gather from the report of the Income-tax Investigation Commission that important evidence is deliberately kept away by some assessees from, the Income-tax authorities, and that subsidiary books which contain valuable clues to concealments are not, many a time, produced along with the main account books. We are, therefore, of the opinion that the income-tax authorities should be placed in a position to be able to discover such evidence that) is withheld from them." 75. This was followed by a report made by the Direct Taxes Administration Enquiry Committee, in the year 1958-59. It not only end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atural result of such action would be the immediate disappearance thereof. The Question however remains as to whether, after the search and seizure have been completed, there should be granted in opportunity of making representations against the action taken. There can be no doubt that such a right should exist in some form or other. In other words, a person whose fundamental rights have been affected, must be given some opportunity of ventilating his objections against such action, and to seek redress. It is obvious that if such opportunities do not exist at all, in any shape or form, the restriction cannot be called reasonable, for it would open the way to executive tyranny. The question naturally arises as to whether in this impugned provision there is any opportunity given for making a representation, or preferring an objection, with the object of redressing any wrong that may have been committed by executive action. I must state at once that there is no express provision, Strong reliance has been placed by learned counsel appearing on behalf of the petitioners on the Supreme Court decision in (Supra). In that case, the validity of the Punjab Special Powers (Press) Act, 1956 wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion is an administrative order, and the action taken is an administrative action taken by Income-tax Officers. It has been pointed out that under the scheme of the Income-tax Act, an Income-tax Officer has been made subordinate to certain other officials, and there is nothing in, the Act! which precludes an application to such higher officials for redress. Under Section 5(7) (ii), Income-tax Officers have been made subordinate to certain Director of Inspection, the Commissioner of Income-tax and the Inspecting Assistant Commissioner of Income-tax within whose jurisdiction they perform their functions. This power is expressly recognised by Section 5 (7-B) which runs as follows: "The Director of Inspection, the Commissioner or the Inspecting Assistant Commissioner, as the case may be, may issue such instructions as he thinks fit for the guidance of any Income-tax Officer subordinate to him in the matter of any assessment, and for purposes of making any enquiry under this Act (which he is hereby empowered to do), the Director of Inspection, the Commissioner and the Inspecting Assistant Commissioner shall have all the powers that an Income-tax Officer has under this Act in rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for setting aside any unreasonable action taken by their subordinates. They have not only the power of superintendence, but have been expressly given the power to issue instructions to their subordinates for the guidance in any matter regarding inquiries and investigations made under the Act, in respect of assessment proceedings. It is, of course, very desirable that Provisions should be made under the rules framed under the impugned provision, for regulating the making of representations and I hope such rules will speedily be framed. In this respect, there is however, very little scope for distinguishing this case from (S) (supra), where the question raised was the validity of Section (5) (7-A) of the said Act, Section 5 (7-A) is also a measure of administrative convenience, and the action taken thereon was an administrative action. There is no express provision made there for any right of representation, except such as is contained in the scheme of the Act itself. That provision was upheld as valid. It was also pointed out that if in a particular case, the assessed seeks to impeach the administrative1 order as an abuse, of power, he could come to Court by way of a writ petition a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight which is being taken away, it would depend upon the circumstances and the conditions under which the authority is empowered to take away the right, and it also depends upon the safeguards pro--vided by the Legislature." 81. For the reasons aforesaid, I am of the opinion that the provision of Sub-section (2) of Section 37 of the Income-tax Act does n0t impose unreasonable restrictions upon the fundamental rights of the petitioners, and is not violative of the provisions of Article 19(1) (f) and (g) of the Constitution. 82. I now come to the point No. 2, namely that the provisions arc violative of Article 14 of the Constitution. It is argued that Sub-section (1) of Section 37 deals with discovery and inspection and compelling the production of books of account and other documents. This is done as if the matter was an ordinary action in a' Civil Court, governed by the provisions relating to discovery, inspection etc. as are to be found in the Code of Civil Procedure-1908. It is argued that the same result is sought to be achieved by Sub-section (2) of Section 37, but in a much more drastic manner. It is stated that) the provision of Sub-sections (1) and (2) have the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of persons. Sub-section () deals with the normal procedure for discovery and inspection, and the Production ' of documents. At first the assessee would be called upon to make discovery of documents in his possession or power. His affidavit would prima facie be conclusive. Sub-section (2), however, is intended to apply to a different class altogether. As will appear from the reports of the various committees mentioned above, Sub-section (2) was introduced to cope with assessees who concealed their real books of account and in many cases concocted several sets of account, and in whose cases it was apprehended that the relevant documents would not be produced when called upon to do so. In order to get at them, it was necessary to introduce a procedure which may be characterised as a surprise attack. The idea was to get at these concealed books of account and documents by an unexpected search and seizure. Therefore, these two sub-sections were not intended to apply to the same class of persons or in similar circumstances. There is. therefore, no element of discrimination involved. The intention of the Legislature, as to what class of person or persons were to be affected by Sub- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to apply. In such a case the Court must examine and ascertain if the statute has laid down any Principle or policy for the guidance and the exercise of discretion by the Government in the matter of selection or classification. If the statute does not lay down any such principle or policy, but delegates arbitrary and uncontrolled power to Government so as to enable it to discriminate between persons Or things similarly situate, the Court will strike down both the law as well as executive action taken under it. (see (supra), (supra) and Dhirendra Kumar Mondal v. Superintendent and Remembrancer of Legal Affairs, AIR 1954 SC 424.) 4. A statute may not itself make any classification of the persons Or things for the purpose of applying its provisions but may leave it to the discretion of Government to select and classify the persons or things to whom its provisions were to apply, laying down a policy Or principle for the guidance of the exercise of such discretion, in the matter of such selection or classification. Such a law must be upheld as constitutional. See (supra). 5. A statute may not make a classification of the persons or things to whom its provisions are intended to apply ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to these Principles and having regard to the decision of (S) (supra), it must be held that the provisions of Subsection (2) of Section 37 are not discriminatory or violative of Article 14 of the Constitution. In the case of Pannalal Binjraj. (S) (supra), the Income-tax Act was involved. The impugned section was Section 5(7-A) which had been brought in by an amendment, giving wide and drastic powers to the Commissioner of Income-tax and the Central Board of Revenue to transfer any case, from any one I. T. O. to another. Such transfer may be made at any stage of the proceeding, and an assesses may have his case transferred from one end of India to another. This provision was inter alia challenged as being discriminatory. It was argued that, amongst the same class of assessees similarly situate, the case of one may be transferred to a distant place, while the case of another need not be transferred at all. It was pointed out that there was no direct indication in the section itself as to the time and circumstance when such order should be made, and an absolute discretion is given to the Commissioner of Income-tax or the Central Board of Revenue as the case may be. Even so, it was uphe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ping authority, he has himself to be satisfied that there was prima facie reason for the action to be taken as proposed by the Income-tax Officer. Mr. Sanyal has referred us to the letters of authorisation, which are Exhibits A and B to the petition at pages 17-19 of the Paper Book. He pointed out that the wordings of the authorisation letters show that only the Income-tax Officer had reason to believe that certain documents which would be useful for Or relevant to, the Income-tax assessment of the assessees, were to be found at certain specified premises. It is argued that this is not a sufficient compliance with the provisions of Sub-section (2) of Section 37. In my opinion, however, this is not quite accurate. In each of these letters of authorisation, the Commissioner not only states that "you have reason to believe", but he also states that "I am satisfied on your report." I do not see what he could say to escape being accused of acting as a rubber-stamping authority. It is then argued that in the petition, paragraph 31 (ii) it has been specifically alleged that at the time of issuing the purported letters of authorisation, the Commissioner did not form any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rd. are connected premises, and it was never brought to the notice of the respondents that they were separate, and that no objection was taken at the time of the search. So far as seizure is concerned, it is not admitted that any books papers and documents were seized from the premises No. 63/1. Harrison Road. Calcutta It is significant that no such objection is mentioned in the letter dated 7th July, 1956, which speaks about "No. 63, Harrison Road, Calcutta, and our other adjoining premises," Apart from this, the real answer is that the letters of authorisation not only mention the premises Nos. 61 and 63, Harrison Head, but "other places connected therewith". That the premises No. 63/1, and 61 are inter-connectcd is not disputed. In paragraph 6 of the affidavit in reply by Deoki Nandan Jalan. affirmed on the 17th December, 1956, it is admitted that access can be obtained from each of the premises No. 61 and 63/1, Harrison Road and 8-A, Beniatola Lane from one premises to the other, without having to go out on the public road for the purpose. It is argued that a letter of authorisation cannot be issued in this manner. It is said that in a city like Calcutta, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... happened. At first, there was the letter of authorisation for the search of premises Nos. 57, 61 and 212, Cornwallis St., together with other places connected therewith. Then there was a separate authorisation with regard to No. 63, Harrison Rd and other places connected therewith. Armed with these letters of authorisation, there was search and seizure. In this case, the books and documents which were procured as a result of the search were looked into, and only such of them were seized as were considered to be relevant, after making an inventory. As this took some time, and it was apprehended that the search was going to take a long time, the parties agreed to follow a particular course which has been set out in the letter dated 7th July, 1956. It was agreed that the books and documents which were procured upon -search would be put in steel trunks and gunny hags, and removed to the office of the In" come-tax authorities, and later on would be scrutinised and inventories prepared. With regard to the inventory that was prepared on the spot, it has not been shown to our satisfaction that any irrelevant document was seized. With regard to the other group, an order was made by me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt, after the issue of a Rule Nisi with appropriate and interim injunction in each case, they were eventually referred by the learned Chief Justice to this Special Bench. 93. The References have been elaborately argued on both sides, the petitioners' case being ably put by the learned Additional Solicitor General Mr. H.N. Sanyal and the learned Standing Counsel Mr. A.C. Mitter and the opposite Parties' by the learned Solicitor General Mr. C.K. Daphtary and by their learned junior Counsel Mr. Ellis Meyer who followed Mr. Daphtary. The arguments covered a wide field and had, of necessity, to wade through a bewildering mass of case law. Either side had the apparent support of high authorities which made the Judges' task somewhat difficult. 93a. The relevant facts lie within a short compass and they stand as follows : 93b. Five Municipal Premises, belonging to the petitioners, namely, premises Nos. 57, 61 and 63/1, Harrison Road, 8/A, Beniatolla Lane and 212. Cornwallis Street, were searched by the Income-tax Authorities on July 4, 1956. The wsearches were carried out by the Income-tax Officers under Section 37 (2) of the Indian Income-tax Act under certain authorisati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction of the said section forms a major consideration. I would, therefore, proceed first to the said question of construction in its broad details, relevant for our present purpose, but, before I do so, I would make a few preliminary observations and state, in brief, the events which led to the introduction or enactment of the said impugned section (Section 37 (2) of the Indian Income-tax Act). 96. The entire section (Section 37), -- of which the impugned Section 37 (2) forms a part of sub-section, -- as it now stands, reads as follows : "37 (1): The Income-tax Officer, Appellate Assistant Commissioner, Commissioner and Appellate Tribunal shall, for the purpose of this Act, have the same powers as are vested in a Court under the Code of Civil Procedure, 1908 (V of 1908), when trying a suit, in respect of the following matters, namely, (a) discovery and inspection; (b) enforcing the attendance of any person, including any officer of a banking company, and examining him on oath; (c) compelling the production of books of account and other documents; (d) issuing commissions; (2) Subject to any rules made in this behalf, any Income-tax Officer, specially authorised by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission recommended conferring of powers on Income-tax Officers substantially on the lines as now appearing in Section 37 (2) (Vide Paragraphs 286, 290 and 293 of the Report, pp. 131, 132 and 133-4). The Taxation Enquiry Commission of 1953-54 affirmed the necessity and justification of such powers in the Income-tax Officers (vide paragraph 33, Chapter XII, pp. 201-2 of Volume II of the Report). That necessity arose because of large-scale evasion, of income-tax and the inadequacy of the existing machinery of law to deal with the tax-dodgers or tax-evaders in that state of things, came the financial proposals of the year J958, recommended by the Budget Speech of the said year. To give effect to the same, the new Section 37 (2) was inter alia enacted by Section 20 of the Finance Act of 1056. This is the short history of the events which led to the enactment of the impugned legislation and to which I shall return again in the course of this judgment, 99. On the question of construction of the section, various arguments were made. Of them the one, relating particularly to the scope of the section, is inextricably connected with the question of its vires or constitutional validity and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrect, the above searches and seizures would obviously be illegal and cannot be supported or sustained. 102. I am, however, unable to accept Mr. Sanyal's contention. The words are plain and they do not suggest necessary pre-existence of the rules. The rules may be existing or future and, if, at the point of time, the Powers under the section are sought to be exercised, there be any rules, relevant for the purpose, the exercise of those powers must, of course, be subject to the same. The phrase, however, does not, in my opinion, necessarily suggest pre-existence of any rules and does not forbid the exercise of the powers in question without the framing of rules. The sub-section, again, as we shall see hereinafter^ would be perfectly constitutional even without rules and so there is no occasion here for construing the phrase differently to avoid unconstitutionality of this particular statutory provision. Mr. Sanyal relied on the decision of the Supreme Court in the case of Narendra Kumar v. Union of India, , in support of his suggested construction, but it is obvious that the said decision, far from supporting Mr. Sanyal, is really against his aforesaid contention. There the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 (2) (i), the words 'he' and his' in the two phrases, "where he has reason to believe" and "in his' opinion" refer to the Commissioner and not the Income-tax Officer. It is difficult to accept this argument for various reasons. Structurally and' according to plain rules of grammar, the section would abhor any such construction. To adopt it, again, would be to create an absurd impractical situation, as the relative or relevant Proceeding would clearly be one before the Income-tax Officer-and relevancy and/or usefulness of the books and documents would be for purposes of the said Proceeding and that, obviously, cannot be judged except by one who is acquainted with the details of the same. It would be absurd to require the Commissioner to get himself acquainted with and satisfy himself as to all those details before issuing, the special authorisation mentioned in the section. That, indeed, would practically defeat its Purpose. It is to be seen further that Clause (iii) of the subsection also contains a similar phrase "in his opinion" which cannot but refer to the opinion of the Income-tax Officer, actually conducting or present at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion and having the belief and the reason for it as envisaged or required by the statute, and that books and documents etc., relevant or useful to or for Purposes of the proceeding before the said Income-tax Officer, are likely to be found in the building or Place in question Further having regard to the stage, at which, and the circumstances, in which, this question may arise, the report of the said Income-tax Officer would ordinarily be the primary, -- though, not necessarily, the only, material for the Commissioner's examination or consideration, upon which he will have to satisfy himself as aforesaid, and such satisfaction will not necessarily be either improper or insufficient (vide at p. 408)). 105. In the above view, I would hold that the authorisation letters in the present case, in all of which the grant of the necessary sanction or authority to the Income-tax Officer concerned to "search and seize" followed the Commissioner's express statement: "Whereas on information, received by you, you have reason to believe and I am satisfied on your report that books of account which, in your opinion, will be useful for or relevant to the Income-tax asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s judgment of the Court, spoke on the point as follows:- "The principles underlying Article 14 of the Constitution are well-settled. The only difficulty which arises is in regard to the application of these Principles to the facts of a particular case and the Court has to consider the terms of the impugned legislation having regard to its background and the surrounding circumstances so far as may be necessary to do so in order to arrive at a conclusion whether it infringes the fundamental right in question." and, in the more recent case of , in the majority judgment, delivered by Gajendragadkar, J., the matter was elaborated further in the following manner:- "The scope and effect of the provisions of Article 14 have been considered by this Court on several occasions and the matter has been clarified beyond all doubt. The equality before law which is guaranteed by Article 14 no doubt prohibits class legislation, but it does not prohibit the Legislature ' from legislating on the basis of a reasonable classification. If the classification is reasonable and is found on intelligible differentia and the said differentia Rave a rational relation to the object, soug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ution, the ascertainment of its true nature and character becomes necessary, i. e., its object matter, the area, in which it is intended to operate, its purport and intent have to be determined. In order to do so, it is legitimate to take into consideration all the factors such as history of the legislation, the Purpose thereof, the surrounding circumstances and conditions, the mischief which it intended to suppress, the remedy for the disease which the legislature resolved to cure and the true reason for the remedy." and the test of reasonableness for purposes of Article 14 has also been formulated by the Supreme Court in the following Passage:- "A classification must have reasonable relation to the object, sought to be achieved. The standard or reasonableness is inextricably conditioned by the extent and nature of the evil and the urgency for eradicating the same. (Madhubhai Amathalal Gandhi v. Union of India, )." 112. For judging, then, the validity of a statute under Article 14 of the Constitution, it may be necessary to ascertain its terms, scope and object, its policy and purpose, its general scheme and its true nature, character and effect and this ascerta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat differentia must have a rational relation to the object, sought to be achieved by the statute in question. The classification may be founded on different bases, namely, geographical, or according to objects or occupation or the like. What is necessary, is that there must be a nexus between the basis of classification and the object of the Act under consideration. It is also well-established by the decisions of this Court that Article 14 condemns discrimination not only by a substantive law but also by a law of procedure." which may well be said to contain a full and exhaustive statement of the underlying principle or principles of the aforesaid Article of the Constitution. 115. Of the general Propositions or Principles, to which reference has been made above, it will be sufficient, for our present purpose, to recall only the following;- "(b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him, who attacks it, to show that there has been a clear transgression of the constitutional Principles; (c) that it must be presumed that the legislature understands and correctly appreciates the need of its own peop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iminate between persons or tailings, similarly situate, and that, therefore, the discrimination is inherent in the statute itself. In such a case, the Court will strike down both the law as well as the executive action taken under such law, as it did in the case of ; , and Dbirendra Krishna Mandal v. The Superintendent and Remembrancer of Legal Affair, . (iv) A statute may not made a classification rf the persons or things for the purpose of applying its provisions and may leave it to the discretion of the Government to select and classify the persons or things to whom its provisions are to apply but may at the same time lay down a policy or principle for the guidance of the exercise of discretion, by the Government in the matter of such selection Or classification; the Court will uphold the law as constitutional, as it did in . (v) A statute may not make a classification of the persons or things, to whom their provisions are intended to apply, and leave it to the discretion of the Government to select or classify the persons or things for applying those Provisions according to the policy or the principle, laid down by the statute itself, for guidance of the exercise of discret ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the said proposals were commended to Parliament, leading eventually to the enactment of the said new subsection. The relevant portion of the said Budget Speech was as follows:- "It is also proposed to give the Department powers of search and seizure of accounts and documents which the Investigation Commission had and which the Taxation Enquiry Commission have recommended the Department should have. The experience of the last year and a half has shown that unless the Department is armed with these powers it is not possible effectively to investigate cases of tax evasion. I have no doubt that the House will give its wholehearted support to measures taken to prevent and detect large-scale tax evasion and it may take my assurance that the new powers taken now will not be exercised unless they are absolutely necessary." 119. Earlier, the short history of the events, leading to this particular legislation, has been set forth. Therein, reference has been made to the reports of the Income-tax Investigation Commission (1948-49) and the Taxation Enquiry Commission (1953-54). These reports make it abundantly clear that there was large-scale tax evasion and grave necessity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r uncontrolled so as to ill-validate the particular statute as a piece of unwarranted or invalid delegated authority or legislation. If authority be needed for this view, reference may at once be made to the following observations of Mukherjea, J.. in , quoted with approval in ;- "But a statute will not necessarily be condemned as discriminatory, because it does not make the classification itself but, as an effective way of carrying out its policy, vests the authority to do it in certain officers or administrative bodies ..... In my opinion, if the legislative policy is clear and definite and as an effective method of carrying out that policy a discretion is vested by the statute upon it body of administrators or officers to make selective application of the law to certain classes or groups of persons, the statute itself cannot be condemned as a piece of discriminatory legislation... ..... in such cases, the power, given to the executive body, would import a duty on it to classify the subject-matter of legislation in accordance with the objective indicated in the statute. The discretion that is Conferred on official agencies to such circumstances is not an unguided discretio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at Article 14 of the Constitution, applies only to matters of fundamental rights as distinguished from statutory rights but I may just add, with respect, that it may well be contended, --and that was not seriously disputed by the learned Solicitor General, -- that Article 14 itself enshrines a fundamental right, namely, the right to equality or equal protection, be it in the matter of fundamental rights or statutory rights, and the above distinction may well be misunderstood. Nothing further need be said here on this particular subject. 122. It is to be noted here, that, under the impugned Section 37 (2) of the Indian Income-tax Act, the legislature has also provided other checks, requiring inter alia that the Income-tax Officer concerned must form the opinion that the books, documents, etc., to be searched and seized thereunder, are relevant and/or useful to the particular Proceeding or proceedings. Though such relevancy and/or usefulness of the aforesaid books and documents etc. will be determined in the first instance by the said Income-tax Officer concerned, his determination is expressly made subject to a prima facie check up by the Commissioner of Income-tax, who should also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable for such purpose. I do not think, however, that this charge is true I have ascertained the scope of the impugned statute from a reading of its title and preamble in the background of its history and surrounding circumstances and on a reckoning of the mischief or the evil which it was designed to suppress and which explains the necessity and the reason for its enactment, and, to the use of these materials for the aforesaid purpose, no legitimate objection can now be taken. Whatever view might have prevailed on this point in earlier times, -- and there the divergence of judicial opinion was somewhat acute, --. the modern tendency favours a bolder and more liberal outlook, marking a new orientation in the matter of the approach, and, particularly, when the scope of a statute falls to be determined, the above are, undoubtedly, relevant and legitimate matters or materials to be taken into consideration. There is abundant high authority for this point of view but it is unnecessary and obviously impossible to refer to all of them and it is enough to cite only the following:- 125. Thus in Poppatlal Shah v. The State of Madras, , their Lordships of the Supreme Court made the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent observations of Lord Simonds in (1957) 1 All ER 49 at pp. 53-4, may open a new chapter and serve as a new guide to the development of this branch of the law too in the light of requirements under modern conditions. Those observations echo the sentiments of many judicial minds and they are so very instructive and so pregnant with possibilities that it will be useful to recall them whenever difficult statutes will fall to be construed, from whatever standpoint such construction may arise or be deemed to be necessary." 126. The above statements and principles will support, sustain and justify the construction, placed by me On Sub-section (2) of Section 37, limiting its scope and applicability to cases where Sub-section (1) would be or would be deemed to he unlikely to yield any result. That construction would also be supported by the purpose, scheme and structure of the above two sub-sections (1) and (2) of Section 37 and two other recognised rules of construction to which I shall presently advert. 127. It is a well-established rule of interpretation that courts should try to construe a statute, wherever possible, so as to avoid a conflict between its various provisions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pose of the particular statute and as, in the ultimate analysis, it will also be the discretion of the highest officer in this Particular administration, it Cannot be held to be naked or arbitrary or unguided discretion, uncanalised Or uncontrolled, so as to bring the statute in question either within the mischief of Article 14 of the Constitution or of invalid delegation. 32. In the above view, which will also be supported by the more recent decision of the Supreme Court in (S) AIR 1957 SC 329, I would hold that Section 37 (2) is not violative of Article 14 of the Constitution. I am conscious that, in (S) AIR 1957 SC 329, their Lordships of the Supreme Court found, from the impugned section itself, its purpose and policy and the relative scope of its different provisions but, here, too, as seen above, the purpose, scope and policy of the impugned provision (Section 37 (2) has been found from the scheme, structure and contents of the entire Section 37 and the sequence and juxtaposition of its different parts, -- and, particularly, of Sub-sections (1) and (2) thereof, -- and, also, from other extraneous but legitimate materials. For Purposes of Article 14, therefore, the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat search and seizure violates a fundamental right under Article 19(1), Clauses (f) and (g), the only point will be whether or not the restriction or limitation of that right by reason of the impugned Section 37(2) of the Indian Income-tax Act is a reasonable restriction 'in the interests of the general public' within the meaning of Article 19, sub-Articles (5) and (6). 135. On this part of the case, it is necessary to observe, in the first instance, that the words 'in the interests of the general public" are of wide import and great amplitude (Vide . Vide also (SB)). It is also well to recall here the oft-quoted observations of the Supreme Court in , on the Point of application of the test of reasonableness to a particular restriction. Those observations run as follows : "It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned and no abstract standard, or general pattern of reasonableness can be laid down as applicable to all cases. The nature of the right, alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior to the impugned act can be reasonably claimed or conceded, as, obviously and from the very nature of things, that would defeat the purpose of the statute But, while, in Virendra's case, , there was no right of post-act representation also, the instant statute is materially different. And it seems to me that the party affected or aggrieved by any action under the impugned new Section 37 (2) would have a right to move against it, be it the action of the Commissioner or of the Income-tax Officer, either by way of review or revision administratively, to the Commissioner and even to die Central Board of Revenue. It is enough for this purpose to refer to Sections 5(7)(ii), 5(7B) and 5(8) of the Indian Income-tax Act and to Sec. 21 of the General Clauses Act, the last one applying to review, though, even apart from this last-quoted section, the power of administrative review always exists. 141. On behalf of the petitioners, particular reliance was placed on the three decisions of the .Supreme Court, reported in (1954) SCA 743, , (1955) SCA 1271, and . but, in my view, all of them are distinguishable and the instant cases are sufficiently and effectually covered by the other three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove Articles (Arts. 14 and 19), the question or reasonableness is relevant and is ultimately a matter for the Court. Under Article 14, however, the question is of reasonable classification on the above two tests of intelligible differentia and reasonable or rational relation or nexus to the object of the particular statute. Under Article 19, the question is one of reasonable restriction to be judged in the light of the observations of the Supreme Court in , quoted hereinbefore. Under neither, however, for the application of the relative teat or tests, is there any fixed standard or uniform approach. The matter, indeed, may differ from case to case and would depend upon the facts and circumstances, bearing upon the particular legislation, and its nature, necessity and purpose. 146. This disposes of all the constitutional attacks on the impugned sub-section and the said sub-section, in my view, survives the same. I need only add, that in substance and on principle, this view on the constitutional question Or questions, involved in these two eases, would also be amply supported by the decisions, already cited in the case of . 147. Finally, it was urged by Mr. Sanyal that, in any ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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