1972 PLP 205 (PTD)

It is to be mentioned that N. S. Mani, who even according to the affidavit filed by Ramaswamy, slipped away when the search was in progress, was later examined on oath by the Income‑tax Officer on March 18, 1966, and this is the statement he gave then: "Statement on oath given by Sri N. S. Mani, aged 35 years, son of Nageswara Ayyar, 223‑C, Krishna Bhavan, Maredpalli, Secunderabad. I have attended your office today in response to a summons under section 131 of the Income‑tax Act, 1961, I was asked to identify some papers which were said to have been seized by the income‑tax authorities on January 5, 1966, from the premises of Sri Venkateswara Lodge, Lakdi‑ka‑pool. The papers have been identified by me as relating to the business done in the name and style of Sri Venkateswara Lunch Home, Venkateswara lodge, etc. Some of them are in my handwriting. They came in my posses sion when I was the paid manager of Sri Venkateswara Lodge (inclusive of branches). I left the services of Sri Venkateswara Lodge in May. 1965. Thereafter, my services were required again in about September 1965. Some of the voucher books, etc., shown to me are in my handwriting while others are in the handwriting of others. They came into my possession in the normal course of my duties and were returned to the owners on January 5, 1966.'' These are the material facts pertaining to the search and seizure, which were effected on that fateful day. We will now advert to the contentions advanced by Mr. Kodanda Ramayya, learned Advocate for the petitioners. The first point made by him was that the power of search and seizure conferred by section 132 of the Income‑tax Act is ultra vires the Constitution, because it offends Articles 14 and

19. The learned Advocate first advanced his arguments on Article 19(1)(f) and (g) of the Constitution. Article 19(1) lays down: "All citizens shall have the right‑ . . . . ( f ) to acquire, hold and dispose of property ; and (g) to practise any profession, or to carry on any occupation, trade or business." Clauses (5) and (6) of Article 19 make all the fundamental rights conferred by Article 19 and in particular Article 19(1)(f) and (g) subject to reasonable restrictions imposed by law made by the State. So the question in this case would be whether the right to property or to carry on business is subjected to reasonable restrictions by law. The learned Advocate for the petitioners did not advance the conventional argument that the power of search and seizure is per se violative of Article 19(1)(f) and (g) for the obvious reason that the Supreme Court has in M. P. Sharma v. Satish Chandra (AIR 1954 S C 300) repelled such a contention. In that case, Jagannaduadas J., delivering the judgment of the Court, said this at page 306 : "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 no justification to import it, into a totally different fundamental right, by some process of strain ed construction. " No doubt, in that case their Lordships were dealing wield searches and seizures under the provisions of the Criminal Procedure Code, but the same reasoning would apply to searches and seizures under the various tax laws conducted with a view to unearthing material for the purpose of detecting tax evasion and levying and collecting taxes which are legitimately due to the State. But what was contended by Mr. Kodanda Ramayya was that in Sharma's case their lordships upheld the constitutional validity of searches and seizure because, under the Criminal Procedure Code, the power of issuing search warrants, which is a judicial function, is entrusted to judicial functionaries like Magis trates. The learned Advocate relied on the following passage in the above judgment at page 307: "Nor is it legitimate to assume that the constitutional protec tion under Article 20(3) would be defeated by the statutory provisions for searches. It is to be remembered that searches of the kind we are concerned with are under the authority of a Magistrate (excepting in the limited class of cases falling under section 165 of the Criminal Procedure Code). Therefore, issue of a search warrant is normally the judicial function of the Magistrate. When such judicial function is interposed between the individual and the officer's authority for search, no circum vention thereby of the fundamental right is to be assumed. We are not unaware that in the present set up of the magistracy in this country, it is not infrequently that the exercise of this judicial function is liable to serious error, as is alleged in the present case. But the existence of scope for such occasional error is no ground to assume circumvention of the constitutional guarantee." It is difficult to see how this passage lends support to the contention of the learned Advocate that only search warrants issued by Magistrates or other judicial officers would not infringe the fundamental right of the citizen under Article 19(1)(f) and (g), but if search warrants are issued by an executive or administrative officer, however highly placed he may be, the fundamental right is defeated. That certainly is not the ratio of the decision of their Lordships in Sharma's case. They were merely pointing out in that particular case that the warrant had been issued by a Magistrate who was a judicial officer and, therefore, circumvention of the fundamental right could not readily be assumed. In the present case, the authorisation warrant was issued by the Com missioner of Income‑tax, who is a highly placed official in the departmental hierarchy of income‑tax, and even a bare perusal of the warrant issued by him and the reasons recorded by him before he issued the warrant make it clear that he had applied his mind and given the matter serious thought and consideration which it deserved, and had only thereafter issued the warrant of authorisa tion to the Income‑tax Officers to search the premises of Venkates wara Lodge and other premises belonging to the writ petitioners. Moreover, under the scheme of the Income‑tax Act, the Commissioner does exercise quasi‑judicial functions in some matters. In any view of the matter, the contention of the learned Advocate must be negatived. Although the learned Advocate mentioned Article 14 of the Constitution, he did not elaborate his argument and show how article 14, which guarantees equality before the law and the equal protection of the laws, has been infringed in this case by the conferment of power to search and seize under section 132 of the Income‑tax Act. The main plank of the learned Advocate on behalf of the petitioners was that the search and seizure effected in this case was in disregard of the mandatory provisions of section 132 of the Act and rule 112 of the Rules, and that the search and seizure effected by the Income‑tax Officers was mala fide in the sense that it amounted to an abuse of power. It was contended that the provisions of section 132 have not been complied with inasmuch as there is nothing to show that the Commissioner of Income‑tax had in his possession any information whereby he had reason to believe that the writ petitioners would not produce books of account or other relevant documents if notice was issued to them to do so. Section 132 of the Income‑tax Act provides, inter alia: (1) Where the Director of Inspection or the Commissioner, in consequence of information in his possession, has reason to believe that‑. . . (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income‑tax Act, 1922 (XI of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been disclosed for the purposes of the Indian Income‑tax Act, 1922 (XI of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), he may authorize any Deputy Director of Inspection‑inspect ing Assistant Commissioner, Assistant Director of Inspection or Income‑tax Officer (hereinafter referred to as the authorised officer) to‑ (i) enter and search any building or place where he has reason to suspect that such books of account, other documents, money, bullion, jewellery, or other valuable article or thing are kept ; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not 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 account or other documents or make or cause to be made extracts or copies therefrom (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing . . . (13) The provisions of the Code of Criminal Procedure, 1898 (V of 1898), relating to searches and seizure shall apply, so far as may be, to searches and seizure under subsection (1)." In this connection, it is material to refer to Explanation 2 to the section, which is as under: "Explanation 2.‑In this section, the word `proceeding' means any proceeding in respect of any year, whether under the Indian Income‑tax Act, 1922 (XI of 1922), or this Act, which may be pending on the date on which a search is authorized under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year." Here we may refer to rule 112 also, which has to be read as supplementary to section

132. Rule 112, so far as material, runs as follows : "(1) The powers of search and seizure under section 132 shall be exercised in accordance with sub‑rules (2) to (14). (2) The Director of Inspection or the Commissioner may, after recording his reasons for doing so, authorise any Deputy Director of Inspection or any Inspecting Assistant Commis sioner or any Assistant Director of Inspection or any Income tax Officer for the purposes of section 132 of the Act; such authorisation shall‑ (i) be in writing under his signature ; (ii) bear his seal ; and (iii) authorise the Deputy Director of Inspection or the Inspect ing Assistant Commissioner or the Assistant Director of Inspec tion or the Income‑tax Officer, as the case may be (hereinafter referred to as the `authorised officer'), to enter and search any building or place specified therein and to exercise the powers and perform the functions under subsection (1) of section 132, with such assistance of police officers or of officers of the Central Government, or of both, as may be required . . . (6) Before making a search, the authorised officer about to make it shall call upon two or more respectable inhabitants of the locality in which the building or place to be searched is situate to attend and witness the search and may issue an order in writing to them or any of them so to do. (7) The search shall be made in the presence of the witnesses aforesaid and a list of all things seized in the course of such search and of the places in which they were respectively found shall be prepared by the authorised officer and signed by such witnesses ; but no person witnessing a search shall be required to attend as a witness of the search in any proceedings under the Indian Income‑tax Act, 1922 (XI of 1922), or the Act unless specially summoned, (8) The occupant of the building or place searched or some person in his behalf shall be permitted to attend during the search and a copy of the list prepared under sub‑rule (7) shall be delivered to such occupant or person. A copy shall be forward ed to the Commissioner and also to the Director of Inspection where the authorisation under sub‑rule (2) has been issued by him... (11) The authorised officer may convey the books of account and other documents, if any, seized by him in the course of the search made by him and the package or packages, if any, referred to in sub‑rule (10) to the office of any income‑tax authority not below the rank of Income‑tax Officer (hereinafter referred to as the Custodian). Any money seized in the search referred to above may also be deposited with the Custodian . . . (14) The authorisation of the Director of Inspection or the Commissioner referred to in sub‑rule (2) shall be in Form No. 45." (This form sets down the form in which warrant of authori sation under section 132 of the Income‑tax Act, 1961, and rule 1120) of the Income‑tax Rules, 1962, is to be issued). It will thus be seen that before the Commissioner of Income tax issues a warrant of authorisation, he has to record his reasons for issuing a warrant for search and seizure, and then issue the authorisation in accordance with the terms of rule 112(2). The authorisation issued in this case, as per Form No. 45 to the Income‑tax Officers named therein, showed on its face that it summons under subsection (1) of section 131 of the Income‑tax Act, 1961, were issued to the partners of Sri Venkateswara Lodge, Lakdi‑ka‑pool, to produce or cause to be produced books of account or other documents which would be useful for or relevant for the proceedings under the Indian Income‑tax Act, they would not produce or cause to be produced such books of account or documents as required by the summons or notice ; that the partners of Sri Venkateswara Lodge had in their possession money, bullion, jewellery or other valuable articles or things which represent either wholly or partly the property which had not beets disclosed for the purpose of the Income‑tax Act, and further that, as the Commissioner had reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable articles or things have been kept and are to be found at the entire business premises of Sri Venkateswara Lodge situated in Lakdi‑ka‑pool or specified portions on the premises that bad to be searched includ ing Nos. 4 and 5 of the boarding and restaurant section building, the Commissioner authorised four named Income‑tax Officers to enter the premises, search them and seize all relevant books, documents and the like which may be relevant or useful for the purpose of the Act. The complaint on behalf of the writ peti tioners that the Commissioner of Income‑tax had no reason to believe that a search of the petitioners' premises would yield any useful material nor had he recorded any reasons in that regard is devoid of substance for the simple reason that the learned income tax counsel has placed before us all the relevant papers and, on going through them, we find that the Commissioner had before him prima facie credible information regarding the various acts of omission and commission alleged to have been committed by the petitioners with a view to evade income‑tax and, on the basis of that information, he has in fact recorded reasons why he thought it necessary to issue a warrant authorising the Income‑tax Officers to make a search not only of Sri Venkateswara Lodge, but the premises of two other concerns, with which the petitioners were suspected to be connected. We are fully satisfied that in issuing the warrant of authorisation, the Commissioner has acted in strict conformity with section 132 and rule

112. Once such a warrant of authorisation is issued, the officers authorised therein have the power and are under a duty to search the premises and seize all relevant material. That is what has been done in the instant case. It was then contended on behalf of the petitioners that the warrant of authorisation did not specify with any particularity what account books, what documents or what papers had to be seized, and it gave a blank authorisation to the Income‑tax Officers to search and seize any papers that may be found in the premises, and, therefore, such authorisation is bad in law. A similar argument was advanced before the Supreme Court in Durga Prasad v. Superintendent (Prevention), Central Excise (A I R 1966 S C 1209), with regard to an authorization issued under section 105 of the Customs Act, 1962 and their Lordships repelled the contention as follows at page 1216: "It was further submitted on behalf of the appellant that the power of search under section 105 of the Customs Act cannot be exercised unless the authorisation specifies a document for which search is to be made. In other words, it is contended that tie power of search under section 105 of the Customs Act is no; of general character. We do not accept this argument correct. The object of grant of power under section 105 is not search for a particular document but of documents or things which may be useful or necessary for proceedings either pending or contemplated under the Customs Act. At that stage it is not possible for the officer to predict or even to know in: advance what documents could be found in the search and which of them may be useful or necessary for the proceedings. It is only after the search is made and documents found therein are scrutinised that their relevance or utility can be determined. To require, therefore, a specification or description of the documents in advance is to misapprehend the purpose for which the power is granted for effecting a search under section 105 of the Customs Act. We are, therefore, of opinion that the power of search granted under section 105 of the Customs Act is a power of general search. But it is essential that before this power is exercised, the preliminary conditions required by the. section must be strictly satisfied, that is, the officer concerned must have reason to believe that any documents or things, which in his opinion are relevant for any proceeding under the Act, are secreted in the place searched. We have already mentioned the reasons for holding that this condition has been satisfied in the present case." Those observations apply with full vigour to the facts and circumstances of the present case. We are, therefore, satisfied that the warrant of authorisation issued by the Commissioner does not suffer from any legal infirmity. The next point made by the learned Advocate for the petitioners was that the Income‑tax Officers, who were authorised to conduct the search, did no: apply their minds to the numerous books of account, documents and papers that were seized in the course of the search, but seized everything that came their way indiscriminately and without regard to its relevancy or usefulness for any of the purposes contemplated in section 132 of the Act and rule 112 of the Rules. This contention is again devoid of merit. One of the Income‑tax Officers, who participated in the search, has stated on oath in the counter‑affidavit filed by him that he and his colleagues examined every account book, every document and every paper that was found inside the premises of Sri Venkateswara Lodge with meticulous care and seized them only when they were satisfied about their relevancy or usefulness ; such documents were marked for identification and stamped with their departmental seal and also initialled by them ; and all this was done in the presence of two respectable witnesses and also in the presence of A. Ramaswamy, one of the proprietors who arriv ed at the premises some time after the search began. It is scarcely to be expected that at that stage there must be conclusive proof of the relevancy or usefulness of the material seized. In the nature of things that is not possible ; all that is necessary is that the officers must act honestly and believe as reasonable men that the material would be relevant or useful. If ultimately any document seized i3 found to be irrelevant or useless, it has certainly to be returned to the person from whom it was seized. But it is a far cry from that to saying that, even at the time of search and seizure, the relevancy or usefulness of every document seized must be made out conclusively. We are satisfied, on a scrutiny of the papers seized in the course of the search, that the officers conducting the search were fully alive to their respon sibility and conducted the search and effected the seizure of the accounts and papers with due regard to the provisions of the Act and the Rules. It was finally contended that, because of the large quantity of papers seized, the seizure was "enormous" and amounted to an abuse of power. The use of the word "enormous" is rather inappropriate with reference to the searches and seizures because in this, as in other things, the quantitative test is likely to be mislead ing. Whether, in a given case, the authorities effecting the search and seizure have exceeded their powers and acted arbitrarily and excessively depends upon the facts of that case. It may be that, in a given case, having regard to the nature of the assessment proceedings and the magnitude of the suspected eva sion, a large quantity of material may have to be seized. That by itself does not render the search excessive or mala fide. We were referred to two decided cases, one from Allahabad and the other from the Punjab. In Seth Brothers v. Commissioner of Income‑tax ((1966) 62 I T R 44), as well as in N. K. Textile Mills v. Commissioner of Income‑tax ((1966) 62 I T R 58), the Court found, on the facts and circumstances of that case, that the search and seizure were mala fide in the sense that they had been made arbitrarily and in excess of the needs of the situation. On the other hand, the Mysore High Court in C. Venkata Reddy v. Income‑tax Officer (Central) 1, Bangalore ((1967) 66 I T R 212), on an examination of the facts of that case, reached the conclusion that the search and seizure effected in that case were strictly within the letter and spirit of the law and that there had been no abuse of power by the concerned officials. Similarly, in the instant case, on a careful consideration of all the materials placed before us, we have no hesitation in hold ing that the seizure effected by the income‑tax officials was neither arbitrary nor indiscriminate nor high‑handed but, on the contrary it was done in strict conformity with the provisions of law, Indeed the 3rd respondent has stated in the affidavit filed by him that A. Ramaswamy, one of the partners of Siri Venkateswara Lodge, was quite co‑operative during the search and the question of using force, threat or coercion never arose. We are satisfied that there is no factual basis for the somewhat reckless allegation made in the affidavit filed in support of the writ petition that the officials making the search had acted high‑handedly even to the extent of invading the privacy of women folk. There is no warrant for this allegation at all. Mr. Ananta Bablu, the learned counsel for the Department, referred us to Annamalai Chettiar & Co. v. Deputy Commer cial Tax Officer ((1965) 16 S T C 687), wherein it was held that even material which comes into the possession of the taxing authority as a result of an illegal search and seizure could be used in assessment proceedings, if such evidence is relevant and admissible. In that judgment Veeraswami, J. referred to a decision of the Privy Council in Kurma v. Queen (1955 A C 197) in which the Judicial Committee quoted with approval the following observation of Crompton, J. in Reg v. Leatham ((1861) 9 Cox C C 498): "It matters not how you get it (evidence) ; if you steal it even, it would be admissible." The learned Judge held that the ratio deducible from those decisions was that irrespective of the means or the manner by which the evidence is secured, its admissibility is dependent on the question of relevancy of such evidence, and it cannot be ruled out on the mere ground that it had been procured by improper or illegal means. That, no doubt, is the correct principle and we are in respectful agreement with the learned Judge. That question however, is rather academic in this case because we have, as indicated above, reached the conclusion that the search and seizure do not suffer from any illegality, irregularity or impre priety. It follows that this writ petition is devoid of merits and is accordingly dismissed with costs. Advocate's fee‑Rs. 150.