S. K. Kapur, J.

(1) IT will not be an unfaithful summary of the history to say that for ages

searches and seizures of documents and objects alleged to be incriminating have

been responsible for many a battle at the bar. The safeguards of liberty of the

subjects in this behalf have been forged out of conflicts between overzealous

prosecutors on the one hand and not very nice people on the other. In preserving

this liberty of the subjects the Courts always bear in mind that under our

Constitution the concept of liberty is wider and the prisoners dream of freedom

from custody alone is not liberty. The present writ petition is directed against

searches conducted on 10/8/1966 at the residence of the petitioners at 35, Rajpur

Road, Delhi, and other places occupied by the petitioners in connection with their

business by a group of officers headed by Shri Rajendra Mohan, Income-tax Officer,

respondent No. 2. The search was held in pursuance of the various authorization

issued by the Director of Inspection (Investigation) under section 132 of the

Income-tax Act, 1961, and rule 112 (1) of the Income-tax Rules, 1962. It is

sufficient to reproduce one of the authorization forms signed by the Director of

Inspection (Investigation) as all other forms are exactly in the same language : (SEE

Rule 112)WARRANT of Authorisation under section 132 of the Income- tax Act, 1961

and Rule 112 (1) of the Income-tax Rules, 1962.

(2) WHERE as information has been laid before me and on the consideration

thereof, I have reason to believe that: -IF a summons under sub-section (1) of

Section 37 of the Indian Income-tax Act, 1922 or under sub-section (1) of section

131 of the Income-tax Act, 1961 or a notice under subsection (4) of section 22 of

the Indian Income-tax Act, 1922 or under sub-section (1) of section 142 of the

Income-tax Act, 1961 is issued to S. Balwant Singh to produce, or cause to be

produced, books of account or other documents which will be useful for, or relevant

to proceedings, under the Indian Income-tax Act,1922 or under the Income-tax Act,

1961 he would not produce, or cause to be produced such books of account or other

documents as required by such summons or notice;

(3) S. Balwant Singh 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 or the Income-tax

Act, 1961:and whereas I have reason to suspect that such books of account, other

documents money, bullion, jewellery or other valuable article or thing have been

kept and are to be found at the premises of S. Balwant Singh at Bawa House, 35,

Rajpur Road, Delhi, including out houses, garages and other appurtenances thereto;

(4) THIS is to authorize and require you as over leaf (name of the Inspecting

Assistant Commissioner of Income-tax or the Income-tax Officer)-A. to enter and

search the said premises; b. to place identification marks on such books of account

and documents as may be found in the course of the search and as you may

consider relevant to or useful for the proceedings aforesaid and to make a list

thereof together with particulars of the identification marks; c. to examine such

books of account and documents and make or cause to be made, copies or extracts

from such books of account and documents. to seize any such books of account,

documents, money, bullion, jewellery or other valuable article or thing found as a

result of such search and take possession thereof; e. to make a note or an inventory

of any such money, bullion, jewellery or other valuable article or thing; f. to convey

such books of account, documents, money, bullion, jewellery or other valuable

article or thing to the office of the Inspecting Assistant Commissioner of Income-tax

or any other authority not below the rank of the Income-tax Officer employed in the

execution of the Income-tax Act, 1961; and g. to exercise all other powers and

perform all other functions under section 132 of the Income-tax Act, 1961 and the

rules relating thereto. YOU may requisition the services of any Police Officer or

any Officer of the Central Government, or of both, to assist you for all or any of the

purposes specified in sub-section (1) of section 132 of the Income-tax Act, 1961.

SD/- R. D. Shah

(5) IN pursuance of the said authorization a number of Income-tax Officers went

to the various premises set out in the authorisation forms, searched the said

premises and seized a large number of documents. There has been some

controversy at the bar as to how many people were comprised in the raiding party

and that controversy will be dealt with later. There has, however, been no dispute

about the documents seized.

(6) PETITIONERS 1 to 5 are brothers and petitioner No. 6 is their mother. All the

petitioners live at 35-Rajpur Road, Delh. Petitioners 1 to 5 have another brother who

is not a petitioner. It is alleged that petitioners 1 to 4 and 6 carry on business while

the fifth petitioner is engaged in cultivating land. There was no authorisation for

search and seizure of any documents belonging to the fifth petitioner. It is also not

in dispute that assessments of the petitioners were completed in some cases up to

the assessment year 1962-63 and in some cases up to the assessment year 1963-

64. The assessments were completed at Calcutta as the petitioners gave Calcutta

address to the Revenue and the respondents assert that it was a ghost address as

in fact the petitioners neither resided nor had any office in Calcutta and that was

done to facilitate the petitioners escaping assessment or detection of various

activities not disclosed to the Revenue. The respondents have to their affidavit dated

24/10/1966, sworn by Shri R. D. Shah, Director of Inspection (Investigation),

annexed various charts showing inter alia as to which assets and income had been

disclosed and which concealed. It has also been asserted by the respondents that

the petitioners all along maintained that they had no banking account while,

according to the information received by the respondents, the petitioners had a

large number of accounts with banks. The petitioners have by their writ petition

raised several points challenging the search and seizure and even the continuality

of section 132 of the Income- tax Act. They have also challenged the right of the

respondents to retain the books and documents illegally seized or to use any

information derived therefrom. I will deal with the various points raised one by one.

(7) MR. Veda Vyasa, the learned counsel for the petitioners, first contended that

the search and seizure was had in law as the condition precedent to the applicability

of section 132, namely, the existence of "reason to believe" in the mind of the

Director of Inspection was missing. Since admittedly section 132, as amended by Act

1 of 1965, applies to this case, I propose to confine myself to that section except to

the extent it may be necessary to refer to the legislative history in aid of its

interpretation. (After reading Section 132 of the Income Tax Act 1961 as amended

by Act I of 1965, His Lordship proceeded as follows :)

(8) SECTION 131, which had section 37 (1) as its predecessor in the Indian

Income-tax Act, 1922, gives power to the Income-tax Officer, Appellate Assistant

Commissioner, and Commissioner of Income-tax, regarding discovery and

production of evidence etc. Section 132-A prescribes the mode of application of the

assets retained by the Revenue under section 132 (5 ). Section 135 provides that

the Director of Inspection, the Commissioner and the Inspecting Assistant

Commissioner shall be competent to make any enquiry under this Act, and for his

purpose shall have all the powers that an Income-tax Officer has under this Act in

relation to the making of enquiries. Section 37 (2) of the Indian Income-tax Act,

1922, conferred powers on the Income-tax Officers specially authorised by the

Commissioner to search any building or place and seize any books of account or

documents. Section 37 (2) was as under:-" (2) Subject to any rules made in this

behalf, any Income- tax Officer specially authorised by the Commissioner in the

behalf may,- (I) enter and search any building or place where he has reason to

believe that any books of account or other documents which in his opinion will be

useful for, or relevant to, any proceeding under this Act may be found and examine

them, if found; (II) seize any such books of account or other documents or place

marks of identification thereon or make extracts or copies therefrom; (III) make a

note or an inventory of any other article or thing found in the course of any search

under this section which in his opinion will be useful for, or relevant to, any

proceeding under this Act; and the provisions of the Code of Criminal Procedure,

1898, relating to searches shall apply so far as may be to searches under this

section. "mr. Veda Vyasa, the learned counsel for the petitioners, presented two

alternative arguments regardig the scope of the expression has "reason to believe"

in section 132. He said- (1) In view of the fact that provisions of the Criminal

Procedure Code relating to searches and seizures apply "so far as may be" to

searches and seizures under sub-section (1) of section 132, even the sufficiency of

the grounds leading to the reason to believe are justifiable; and (2) in any case,

even if the scrutiny by Courts as to the existence of reason to believe is limited in

any manner the Courts can still strike down search and seizure carried out in

pursuance of an authorisation if the Court finds that:- (A) the reason to believe was

not bonafide: (B) there are no grounds justifying the existence of the reason to

believe; (C) the grounds given in support of such existence of the reason to believe

are extraneous to the cause; and (D) at least some of such grounds are irrelevant or

extraneous to the matter in issue.

(9) THE arguments on the justifiability of the sufficiency of grounds were put by

Mr. Veda Vyasa thus: Under sub-section (13) of section 132, of the Income-tax Act,

1961, the provisions of the Code of Criminal Procedure, relating to searches and

seizure, apply, so far as may be, to searches and seizure, to under section 132 (1 ).

Sub-section (2) of section 4 of the Criminal Procedure Code provides that "all words

and expressions used here in and defined in the Indian Penal Code, and not

hereinbefore defined, shall be deemed to have the meanings respectively attributed

to them by that Code. "

(10) THE expression "reason to believe" has not been defined in section 26 of the

Indian Penal Code which section reads-"a person is said to have reason to believe a

thing if he has sufficient cause to believe that thing but not otherwise. "

(11) WHETHER or not a person has reason to believe is fully justifiable and even

the sufficiency of grounds can be gone into by Court where such question arises

under the Indian Penal Code, and consequently the same meaning should be

attributed to the said expression in section 132 (1 ). The argument of Mr. Veda

Vyasa suffers from several fallacies- (1) "reason to believe" in section 26 of the

Indian Penal Code and the various provisions thereof, such as section 202, 411, 412,

413 and 414, has been used in the Penal Code in a different context; that is to say,

in the context of mens rea for the purpose of finding out whether or not a person

has committed an offence, while in section 132 of the Income-tax Act, 1962, power

has been given to an authority to authorise the search and seizure subject to certain

conditions if he has reason to believe that it is necessary so to do under section (2)

Under section 26 of the Indian Penal Code a person is said to have reason to believe

a thing if "he" has sufficient cause to believe that thing. In this context, therefore,

the Courts have to see whether the person concerned had sufficient cause to

believe. Take a case where grounds exist on which two views may reasonably be

possible. The Court will not hold a person guilty if it comes to the conclusion that

though the grounds may provide to the offender sufficient cause to believe but the

Court holds a different opinion. This section, therefore, is confined to finding out

whether an alleged offender could have sufficient cause to believe and, therefore,

could be said to have "reason to believe". Such a provision cannot obviously be

equated with a provision like section 132 (1); and (3) the search and seizure

provisions of the Criminal Procedure Code apply only "so far as may be", which

means that those provisions should be applied only consistently with the scheme

and the purpose of section 132 and the said Act. When so applied the power to

issue search warrants has been, subject to fulfillment of certain conditions, made

dependent on the reason to believe of the specified authorities.

(12) MR. Veda Vyasa referred to K. Hoshide and another vs. Emperor, and said

that even the adequacy of the grounds on which Courts issue search warrants under

section 96 of the Criminal Procedure Code is justifiable. I prefer not to express any

opinion on the question whether the adequacy of grounds on which the Court issues

search warrants under the Code of Criminal Procedure is open to scrutiny by Courts

particularly in such collateral proceedings and I would rather decide this question

assuming that it is so. For the purposes of this case, it is sufficient to say that the

language of section 132 does not permit the interpretation suggested by Mr. Veda

Vyasa. I cannot also lose sight of the fact that we are not sitting in appeal over the

decision of the Director of Inspection regarding the existence of the reason to

believe for none has been provided and when exercising writ jurisdiction the Courts

cannot, in my opinion, test the adequacy of grounds as a court of appeal. The

existence of "reason to believe" in section 132 is subject only to a limited scrutiny

and the Courts cannot substitute their own opinion for that of the Director of

Inspection. Of course, the Director of Inspection must not lightly or arbitrarily invalid

the privacy of a subject. Before he acts, he must be reasonably satisfied that it is

necessary to do so but the decision must still remain his and not that of the Courts.

If the grounds on which reason to believe is founded are non-existent or are

irrelevant or are such on which no reasonable person can come to that belief, the

exercise of power would be bad; but short of that, the Courts cannot interfere with

the reason to believe bona fide arrived at by the Director of Inspection. It is also

open to the Courts to examine whether the reasons for the belief have a rational

connection or a relevant bearing to the formation of the belief. In that sense the

expression "reason to believe" is both subjective and objective but the area of

objectivity is limited.

(13) IN S. Narayanappa v. Commissioner of Income-tax their Lordships of the

Supreme Court while dealing with the same expression as used in section 34 of the

Indian Income-tax Act, said-"again the expression reason to believe in section 34 of

the Income-tax Act does not mean a purely subjective satisfaction on the part of the

Income-tax Officer. The belief must be held in good faith: it cannot be merely a

pretence. To put it differently, it is open to the Court to examine the question

whether the reasons for the belief have a rational connection or a relevant bearing

to the formation of the belief and are not extraneous or irrelevant to the purpose of

the section to this limited extent, the action of the Income- tax Officer in starting

proceedings under section 34 of the Act is open to challenge in a Court of Law. "

(14) IN Barium Chemicals Ltd. v. Company Law Board, Hidaya- tullah,. (as he then

was) observed-"no doubt the formation of opinion is subjective but the existence of

circumstances relevant to the inference as the sine qua for action must be

demonstrable. If the action is questioned on the ground that no circumstances

leading to an inference of the kind contemplated by the section exist, the action

might be exposed to interference unless the existence of the circumstances is made

out. As my brother Shelat has put it trenchantly: it is not reasonable to say that the

clause permitted the Government to say that it has formed the opinion on

circumstances which it thinks exist. . . . . . Since the existence of circumstances is

a condition fundamental to the making of an opinion, the existence of the

circumstances, if questioned, has to be proved at least prima facie. It is not

sufficient to assert that the circumstances exist and give no clue to what they are

because the circumstances must be such as to lead to conclusions of certain

definiteness. "

(15) SIMILARLY, Shelat,. , while dealing with the expression "reason to believe",

observed-"therefore, the words, reason to believe or in the opinion of do not

always lead to the construction that the process of entertaining reason to believe or

the opinion is an altogether subjective process not lending itself even to a limited

scrutiny by the court that such a reason to believe, or opinion was not formed on

relevant facts or within the limits or as Lord Radcliffee and Lord Reid called the

restraints of the status as an alternative safeguard to rules of natural justice where

the function is administrative. "

(16) MR. Veda Vyasa also referred to Shibban Lal Saksena v. The State of Uttar

Pradesh and others, and said that even if some of the grounds leading to the

formation of the opinion are extraneous or irrelevant, the exercise of power must be

struck down. It is unnecessary to resolve this controversy as I am satisfied on

perusal of the ground that there is no extraneous ground on which the opinion has

been formed. I, therefore, propose to scrutinise these grounds Within the area of

objectivity mentioned by me.

(17) THE Director of Inspection has filed his affidavit supported by the charts

about which I have mentioned already. In the said affidavit, it is stated that- (A) the

statements of account filed before the Income-tax Officer in support of the income-

tax returns of the petitioners who were being assessed clearly show that the books

of account containing their complete and true financial affairs and income have

never been produced before the Income-tax Officer; (B) the petitioners, who were

being assessed, had been filing returns and getting assessed by giving a fictitious

address at Calcutta though their principal place of business was in Delhi; (C) a

person connected with the affairs of the petitioners gave information making various

allegations of extensive tax evasion and he made the following points- (I) The

petitioners have acquired wealth, and have been spending, on a scale quite

disproportionate to their declared incomes; (II) The petitioners have filed returns

before an Income- tax Officer of Calcutta though they do not have their business at

the address given at Calcutta and have extensive business in Delhi and elsewhere;

(III) The petitioners have not disclosed large transactions through bank accounts;

(IV) The petitioners have not disclosed business activity in various names; and (V)

the petitioners have been closely connected with other persons for making

manipulations by virtue of which they could make extensive secret profits for

themselves and such other persons;- (D) the assessment records of the petitioners

1, 2, 3 and 4 disclosed certain peculiar features such as declaration of income

almost entirely from brokerage, denial of any bank accounts and failure to disclose

assets proportionate to apparent wealth; (C) the ghost address in Calcutta was

adopted so as to keep the Income-tax authorities in the dark as to the real extent of

their financial activities and income; (F) "independent enquiries were also made by

the officers of the Directorate of Inspection (intelligence), New Delhi, which: showed

the following : - (I) The petitioners were carrying on extensive business at various

places which had apparently not been disclosed; (II) The petitioners had acquired

several licences in several scarce commodities and had disposed them of secretly

and at fantastic profits; (III) The petitioners had been incurring lavish expenditure

which was quite inconsistent with their declared resources; (IV) The petitioners had

acquired assets worth several lakhs of rupees which is also inconsistent with their-

declared resources; (V) The petitioners were co-accused in a certain case filed by

the Special police Establishment, Central Bureau of Investigation and some of their

books of account were still in the custody of the Special Police Establishment,

Central Bureau of Investigation. Scrutiny of these books of account had disclosed

that while the petitioners had acquired quotas in Stainless Steel in a number of

trading names and the books of account kept for this purpose showed substantial

profits, these activities and this income had not been disclosed to the Income-tax

authorities. Moreover, there were hundi loans of about Rs. 10,50,000. 00 introduced

in these books of account and there was reason to believe that these were really a

disguise for introduction of secret monies of the petitioners; and (VI) It was

gathered that Shri Balwant Singh in particular had been instrumental in organising

affairs in such a manner that in violation of normal laws and rules secret profits

could be made by him and a number of persons associated with him in the matter of

import of nylon yarns in Bombay against entitlements for export promotion quota,

and import of motor spare parts, brandy, pharmaceutical goods etc. , against

Customs Clearance Permits obtained by various persons of Pondicherry. The profits

made by the syndicated formed for such purposes were reported to be enormous,

running into crores of rupees. ENQUIRIES also showed that the petitioners, their

brothers, their mother and other relatives had been freely intermingling their

financial affairs and adopting one anothers name for various activities of benami

trade names"; (G) " On the basis of the information mentioned above, the 1st

respondent came to the following conclusion : (I) The petitioners had been

completely misleading the Income-tax authorities and there was no occasion for the

assessing Income-tax officer to suspect that the real state of financial affairs and the

real books of account and documents which would show the same were being

withheld from his knowledge. There was no occasion, therefore, for the Income-tax

Officer to call for any such books of account or documents; (II) The petitioners had

been deliberately following the policy of not producing before the Income-tax

Officer, the books of account and documents which would show their real state of

financial affairs and their income. It was also evidence that if called upon to produce

such books of account and documents, the petitioners would not comply and would,

on the contrary, destroy all such evidence; and (III) the petitioners were in

possession of money, bullion, jewellery and other valuable articles and things which

represent wholly or partly the income or property which was not disclosed for the

purpose of assessment to income-tax. "

(18) MR. Veda Vyasa strenuously urged that "reason to believe" must exist when

authorizations were issued under section 132 and formulation of the reasons in the

counter-affidavit could be of no avail to the Revenue. It was for this reason that we

directed the Revenue to file the grounds in Court and Mr. Desai, the learned Counsel

for the Revenue, immediately, on our enquiry, expressed complete willingness to do

so. We were taken through the grounds and I find that they are such as could lead

any reasonable man to believe that action under section 132 was called for. It is not

necessary to discuss them in detail as they are now part of the record and it is

sufficient to say that the reasons would meet even the scrutiny of adequacy.

Reasons and the counter-affidavit further show that the Director of Inspection fully

applied his mind to the matter before issuing the authorisations.

(19) MR. Veda Vyasa next contended that the Director of Inspection and the

Income-tax Officers did not apply their minds to the various aspects which required

their attention. Before I deal with this argument, it is necessary to consider the

scope of section 132 in so far as this has a bearing on this question. Under Section

132, the Director of Inspection or the Commissioner can authorise search and

seizure, if he has reason to believe that any person to whom a summons or notice

under any of the provisions of Income-tax Act, 1961, mentioned in sub-section (1)

(a), has been or might be issued, will not or would not, produce or cause to be

produced, any books of account or documents which will be useful for or relevant to

any proceedings. The reason to believe must, therefore, be that the person

concerned will not produce any books or documents and those books and

documents will be useful for relevant to any proceedings. This aspect of the matter

will be considered further when dealing with the argument regarding specification of

documents in the authorisations. The authorisation may authorise certain officers

specified in the section to enter and search any building or place where the

authorised officer has reason to suspect that such books of account or other

documents etc. , that is to say, books of account and documents etc. which will be

useful for or relevant to any proceedings are kept. While conducting the search the

authorised officer has, therefore, necessarily to apply his mind and look for only

such books of account and documents which will be relevant or useful to any

proceedings. This scheme of the section shows that mind has to be applied by two

officers at two different stages- (1) by the Director of Inspection or the

Commissioner when authorising an officer to search. Such application of mind

extends to two matter- (a) that the person concerned will not produce the books of

account; and (b) he will not produce the books which will be useful or relevant to

any proceedings and (2) by the authorised officer that the books searched or seized

will be useful or relevant to any proceedings. That follows from the use of the words

"such books of account" etc. in clause (i) and (iii) of sub-section (1) of Section 132.

The question, therefore, is, whether or not, the Director of Inspection in this case

applied his mind as expected of him under the provisions of sub-section (1) of

section 132. The extracts from the Counter-affidavit of the Director of Inspection

and the reasons for search quoted above clearly show that the Director of

Inspection did apply his mind and could have reason to believe that search and

seizure was necessary.

(20) MR. Veda Vyasa, the learned counsel for the petitioner, emphasised two

aspects in this behalf- (1) the assessments up to 1962-63 having been completed

there could have been no occasion to issue any notices under section 37 of the

Indian Income-tax Act 1922 or sub-section (4) of section 22 of the Income-tax Act

and yet in the authorisation quoted above these sections have been mentioned

which shows that the Director of Inspection blindly quoted the authorisation form,

being Form No. 45, prescribed under the Rules without applying his mind as to

which provisions could be attracted in the case. Mr. Veda Vyasa drew our attention

to Section 297 of the Income-tax Act, 1961, and said that even if action is to be

taken against any person for escaped assessment the sections applicable would be

sections 147 and 148 of the 1961 Act and, therefore, sections 37 and 22 (4) of the

1922 Act could, in no case, apply. And (2) the respondents had failed to show that

the Director applied his mind and came to the conclusion that relevant or useful

books existed and were likely to be withheld.

(21) MR. Desai, the learned counsel for the Revenue, on the other hand, drew our

attention to the following : (A) The authorisation has been issued in Form 45, the

prescribed form; (B) sub-rule (14) of rule 112 provides that the authorisation "shall

be in Form 45" and (C) in the cyclostyled form of authorisation two inapplicable

classes have been struck off indicating the care bestowed upon the matter by the

Director of Inspection; (D) even in the part of authorisation retained the section

cyclostyled is "137" but figure "i" has been struck off; and (E) merely because

sections 37 and 22 have been added to avoid the possibility of any omission, it does

not show that the Director of Inspection did not apply his mind.

(22) THE fact that authorisation has been issued in the statutory form in

accordance with the requirements of sub-rule (14) of rule 112 does not, however,

necessarily lead to the conclusion that the Director of Inspection applied his mind as

the mandate of sub-rule (14) of rule 112 extends to no more than reciting only the

applicable provisions in the Form. But the other factors pointed out by Mr. Desai

read with the grounds and the counter affidavit do lead me to the conclusion that

the Director of Inspection applied his mind. On the second aspect also there is

abundant material on the record to show that the Director considered the matter

and came to the conclusion that search and seizure was necessary.

(23) SO far as the authorised officers are concerned, various circumstances were

relied on by both sides in support of their respective pleas. Mr. Veda Vyasa said

that- (1) the seizure list showed that bundles of papers were seized without

scrutiny; (2) papers like medicine bills, prescriptions, writ petitions and copies of the

judgments of Courts had been seized, although merely signing them or putting on

them marks of identification and leaving them with the petitioners would have

served the purpose because such like records could never have been destroyed or

withheld by the petitioners, and (3) even plan of a building to be made in Faridabad

was seized, showing that the authorised officers searched and seized all the papers

upon which they could lay their hands without considering whether or not they were

useful or relevant. According to Mr. Veda Vyasa it was impossible for an authorised

officer to scrutinise thousands of papers in one day. The authorised officers have

filed affidavits in which they say that the seizure was made under a reasonable

belief that the papers seized belong to the petitioners and were relevant or useful

for the "income-tax purposes". They have also denied that the seizure was

indiscriminate.

(24) SHRI Rajinder Mohan, respondent No. 2, in his affidavit also stated that

petitioners Nos. 2 and 3 were present at the time of the search, the authorisations

were shown to them and he took their signatures thereon. The fact that the

authorisations are signed by them has not been denied.

(25) MR. Desai, the learned counsel for the respondents, in support of his plea that

there was a proper application of mind, mainly relied on the circumstance that some

of documents were not seized while on some marks of identifications were put and

the documents left with the petitioners and that showed that the authorised officers

considered their relevance or usefulness before seizing them. With respect to the

bundles of papers and several files, Mr. Desai contended that it was sufficient

compliance with the Act and the Rules if the authorised officer broadly looked into

the files and found that some of the papers, in any event, were relevant or useful

and the entire file should be taken so that the order of the papers of the petitioners

was not disturbed and the files not dismentled. Mr. Desai conceded that looking into

the contents of each and every paper was practically impossible but said that the

authorised officers did broadly look into every file and bundle and seized the same

only when satisfied that they had a bearing on the proceedings pending or proposed

to be taken.

(26) BEFORE I proceed to answer the question, it is important to mention the

particular papers seized which, according to Mr. Veda Vyasa, would have not even a

remote connection with any assessment proceedings taken or even to be taken. He

underlined in the list of seizures the following:- (1) One file styled Dass Commission

Inquiry containing some correspondence in the case regarding A. S. Kalia. (2)

Papers regarding Mars, Rubber and General Industries shifting of factory. (3) File-

Metro Engineering and Metal Works- Electricity. (4) Metro Engineering and Metal

Works writ petition. (5) List of photo-stat copies 12-Import licence application. (6)

Several files containing statements and documents in the case State v. N. S. Gian.

(7) Petition under Article 226 in the Punjab High Court- Baldeo Singh v. Director

General, Development Wing. (8) File containing correspondence with Chief

Settlement Commissioner and Administrative Officer in Faridabad in the name of

Metro Cinema, Faridabad. (9) Two blank papers signed by Baljit Bawa (10) Two

blank papers signed bo Mohi Bawa.

(2 ) MR. Veda Vyasa also filed a long list of documents which according to him,

were utterly irrelevant and from that list drew our particular attention to the

following :- (A) Receipt for payment of sales-tax of Jagat Ram and Sons, dated

15/1/1952 for Rs. 4112.- and of payment of sales tax dated 21/1/1653 for Rs. 345.

00. (B) Some sales tax orders of Jaxon Traders, Qutab Road, Delhi; (C) One rough

sales book relating to the year 1952-53; (D) file containing documents pertaining to

imports by Messrs Jagat Ram and Sons; (E) files of Jaxon Traders from 1954-56

containing import applications, import licences and letters of Controller of imports;

(F) one delivery voucher book from 27/7/1961 onwards of Greenfield Potteries; (G)

import quota certificate dated 21/5/1966; (H) one bundle of papers showing

transactions of Roshan Lal Jali for the year 1952-56, which include general power of

attorney and various petitions addressed to civil Court and share certificates; and (I)

copy of the letter from Chief Controller of Imports and Exports addressed to Shri

Sadhu Singh, Advocate.

(28) MR. Desai said that in the petition there was only a general allegation that

some irrelevant papers were seized and, therefore, the respondents had no

opportunity to deal with specific items. He, however, sought to justify the seizure of

each and every document. He said that, for instance, A. S. Kalia was an ex-partner

of the petitioners.

(29) SIMILARLY, petitioners 1 and 3 and N. S. Giani are being prosecuted in

connection with Stainless Steel quota. Files containing the names of different firms

would be relevant to show that the petitioners were engaged in business under the

name and style as one of the allegations against the petitioners is that they have

been carrying on business in various names without disclosing the income

therefrom. Books of 1949 and of other earlier years as well as the note-book relating

to poultry would be relevant to arrive at the capital structure of the petitioners and

find out whether the expenses on their living are within their available disclosed

resources.

(30) ACCORDING to Mr. Veda Vyasa, however, it was enough for the petitioners to

allege that irrelevant papers were seized and it was always for the respondents to

justify the seizure of each and every document. Once I am satisfied that the

authorised officers applied their mind to the usefulness or relevance of the

documents the matter assumes a different shape. For, then the decision will have to

be left to the authorised officers to see, whether or not, the documents were useful

or relevant. If the conclusion is that a reasonable man acting bona fide could believe

that the documents were useful or relevant, it will not be open to the Courts to

substitute their own opinion or sit in appeal over the judgment of the authorised

officer. Of course, if the Courts come to the conclusion that the documents have no

connection with any proceedings the seizure would be bad. Similarly, if the seizure is

held to be not bona fide it will be struck down. Looking from that angle, a

reasonable man acting bonafide would, in the circumstances of this case, come to

the conclusion that books and files relating to several years back would be useful and

relevant for constructing the capital structure or the income accumulations of the

petitioners. Similarly, the writ petitions and judgments of the Courts may be useful

sources of information. Papers relating to quota licences would also indicate the

extent of business done by the petitioners or other concerns in which they were

interested. Even the signatures of some person on blank papers may serve a useful

clue to several relevant matters. There may be a few documents-one or two-like

prescriptions and medicine bills which may have no bearing, but such seizure cannot

and does not go to show that there was a complete absence of the application of

mind. At the most the appropriate order may be in such cases to return those

documents. Mr. Veda Vyasa also showed us some of the documents which have

been returned and used that fact to show that even the department did not consider

those documents relevant or useful. That may not be necessarily so, for they may

have returned them after gathering the necessary information. In any case, where

by and large, all the documents seized appear to be such as could lead a reasonable

man to believe that they were useful and relevant the search and seizure itself

cannot be struck down on the ground of absence of application of mind. Mr. Desai

expressed his inability to show the relevance of each and every document by

reference thereto as the documents are lying sealed under the orders of this Court.

In these circumstances, it must be held that the authorised officers also properly

applied their minds.

(31) MR. Veda Vyasa then contended that although a few Income-tax Officers had

been authorised yet a large number searched and seized the documents. This

argument bears no merit because the affidavits filed by the authorised officers show

that they conducted the search and seizure and applied their minds to the

documents to be seized. Regarding the contention that even copies of the official

records such as writ petitions and judgments were seized showing the arbitrariness

at the hands of the authorised officers Mr. Desai contended that it was entirely for

the authorised officers under clause 3 of subsection (1) of section 132 to decide

which of the relevant or useful books and documents should be seized and which

left with the petitioners by only placing marks of identification. I am not prepared to

accept that broad proposition. Search and seizure is a serious invasion on the rights

of the subjects. The search and seizure was really not known at earlier stages to

common law. When it was for the first time, introduced it was confined only to

stolen goods, but its usefulness soon forced its recognition and was, from time to

time, extended to such like searches and seizures. It is true that sometimes the

over-zealousness of the authorities led to its abuse and it appears that for this

reason the Fourth Amendment was introduced in the American Constitution in

recognition of the fact that a mans house is his castle not to be invaded by any

general authority to search and seize his goods and papers. The only legal means

that can be applied to search a persons abode is a search warrant and in the

absence thereof neither any private person nor any officer can invade the privacy of

a home and subject its occupants to indignity. It is, therefore, imperative that

seizure should not be allowed to exceed the limits of absolute necessity and the

over-zealousness of the searching officers is not permitted to cross the permissible

limits. Such provisions must, therefore, be necessarily construed in the light of this

background and when two alternatives, namely, to seize the books or place marks

of identification and leave them with the persons concerned are available, the

seizure will be struck down on the ground that it is arbitrary and not in the public

interest. I say so because every provision of the Act has to be construed in the light

of Article 19 of the Constitution. My conclusion is that when two alternatives are

equally possible, namely, either to seize the books or to leave them with the

petitioners after placing marks of identification, the latter course must be resorted

to. But whether or not seizure is the only alternative depends on the facts and

circumstances of each case. For instance, there may be cases where immediate

information is necessary to avoid destruction of relevant materials by the assessee,

or to avoid any assessments becoming time-barred. In that situation, even the

seizure of such like documents would be justified. Similarly, if the authorised officers

are of the opinion that obtaining records from different Courts will be difficult and/or

would cause delay thereby frustrating the object of search, they may seize the

documents. Mr. Veda Vyasa did not press for the return of any particular document

possibly because both the parties were handicapped in view of the fact that the

documents are lying sealed with the Commissioner of Incomtax and none of them

could have access thereto. He merely under lined certain documents to show that

the search was arbitrary, high- handed and without the authorised officers applying

their minds. Mr. Veda Vyasa strongly relied on a decision of the Punjab High Court in

N. K. Textile Mills and another v. Commissioner of Income-tax, New Delhi and

others. In the circumstances that obtained in that case it was held that the search

and seizure was illegal as being arbitrary and an abuse of power. That case was

decided having regard to the fact that all documents were seized indiscriminately

and there was no proper affidavit showing that the authorised officers applied their

minds. That is not the case here. In the circumstances of this case and in the light

of discussion hereinbefore it must be held that the authorised officers did apply their

minds. In searching or seizing the documents they may have erred slightly here or

there and seized the documents which on closer scrutiny may ultimately turn out to

be irrelevant but that cannot vitiate the search.

(32) IT takes me to the next contention of Mr. Veda Vyasa that search and seizure

under section 132 (1) can be resorted to only if there are pending proceedings, and

not merely a remote possibility of some proceedings being taken at later stage. The

argument of Mr. Veda Vyasa was this : Section 131 applies only to pending

proceedings and so does section 132 (1) (a ). Clause (b) of sub-section (1) of

section 132. is only in aid of section 131 and section 132 (1) (a) A and must

necessarily be limited within the area of sections 131 and 132 (1) (a ). When faced

with the second Explanation to section 132 that the word "proceeding" includes

proceedings which may be pending on the date of the search or which may have

been completed on or before such date and includes also all proceedings which may

be commenced after such date in respect of any, Mr. Veda Vyasa sought to

overcome this difficulty by suggesting that though the proceedings might be

commenced after the date of the search but those proceedings must be in a

pending case. That, in my opinion, would be cutting down the scope of the second

Explanation. From the Explanation, it is obvious that the proceedings may not be

pending. In terms the Explanation expands the meaning of the word "proceeding"

and extends the power to issue search warrants where proceedings "have been

completed". The words "have been completed" obviously show that there may be no

proceeding pending when the search warrant is issued. Mr. Veda Vyasa emphasized

the words a summons or notice as aforesaid has been or might be issued" and said

that the summons or notice refers to summons or notices mentioned in clause (a) of

subsection (1) of section 132 which are all the in pending proceedings. That again is

not the correct reading of clause (b) of sub-section (1) of section 132. Clause (a)

refers to, for instance, a notice under section 142 (1 ). That notice may be issued

not only when proceedings for assessment are pending with respect to a particular

assessment year but even when action is taken for re-assessment for that

assessment year by resort to sections 147 and 148. Consequently, even if

assessment for a particular year has been made a notice under section 142 may still

issue for that very year after re-opening of the assessment. Similarly, there may be

cases where a person has not filed a return and the income has escaped assessment

as a result thereof. In that case also a notice under section 148 may have to be

issued followed by a notice under section 142. Read with the second Explanation

clause (b) of section 132 (a) would necessarily mean that a warrant for search or

seizure can issue even in a case where any proceedings have been closed or may be

commenced later. Mr. Dang, who followed Mr. Veda Vyasa for a short while,

suggested that, in any case, the proceedings must be imminent and a remote

possibility of taking the proceedings will not suffice. The section, however; does not

require that the proceedings should be imminent. All that is necessary is that the

Director of Inspection or the Commissioner must in consequence of the information

have reason to believe that the notices or summonses as mentioned in clause (a) of

sub-section (1) of section 132 might have to be issued. If there is only remote

possibility of such summonses or notices being issued the section would not be

satisfied not because there are no proceedings imminent but because a reasonable

person could not have, in those circumstances, reason to believe that the person

concerned will not produce the documents if summonses or notices are issued to

him. In that sense it may be said that search warrants cannot be issued merely with

a view to making a roving or fishing enquiry, but can be issued only when there

exists a good ground for believing that further proceedings may have to be taken.

Having regard, however, to the facts of this case it cannot be said that search

warrants were issued when there was not even a remote possibility of further

proceedings.

(33) THE next argument urged on behalf of the petitioners was that the Director of

Inspection or the Commissioner must specify the documents to be searched or

seized. This argument was based again on the existence of the words "to whom a

summons or notice as aforesaid has been or might be issued" in clause (b) of sub-

section (1) of section 132. Mr. Veda Vyasa said that the reason to believe must be

that the assessee concerned will not produce relevant or useful books of account

etc. when summoned to do so under any of the provisions mentioned in section 132

(1) (a) and since notices and summons mentioned in section 132 (1) (a) must

necessarily specify the books and documents the authorisation must also do so and

that the authorisation has to be confined only to useful and relevant books and

documents etc. and therefore, the authorised officer must be told exactly what

those useful and relevant books and documents are. According to Mr. Veda Vyasa,

the Director of Inspection or the Commissioner must firstly be satisfied having

regard to the particular documents that they will be useful or relevant to any

proceedings and are such as could be called for by notices or summonses mentioned

in clause (a) of sub-section (1) of section 132. Mr. Veda Vyasa sought to seek

further support from the use of the expression "such books of account" in section

132 (1) (i ). I am not convinced that any such specification is necessary. Sections 22

(4) and 142 (1) themselves do not require precise specification of the documents, to

be produced. For instance, under section 142 (1) the Income-tax Officer may

require an assessee to produce all books of account and even require the production

of documents generally showing that the assessee was carrying on business in a

particular name and style. Such notice would be in compliance with section 142 (1 ).

That apart, it appears to me that section 132 has been made wider still and the

Director of Inspection or the Commissioner is expected only to have reason to

believe that the person concerned will not, or would not, produce or cause to be

produced any books or documents, which will be useful for or relevant to any

proceedings. In other words, the authority concerned must show that he had reason

to believe on the materials before him that the person concerned is likely to

withhold books and documents and those books and documents will be useful or

relevant to the proceedings. Take a case where the Director of Inspection or the

Commissioner of Income- tax has information that some one is carrying on business

in 20 different names and that he has not disclosed those businesses to the

Revenue. There can be no doubt that section 132 is intended to meet such a

situation as well and yet it will be impossible for the authorities to specify the

documents. All that the authority issuing authorisation must believe is that there are

useful and relevant documents available in the premises to be searched. In Durga

Prasad vs. Supdt. (Prev.) Central Excise, Nagpur, the Supreme Court construed

section 105 of the Customs Act, which reads-"105. (1) if the Assistant Collector of

Customs, or in any area adjoining the land frontier or the coast of India an officer of

customs specially empowered by name in this behalf by the Board, has reason to

believe that any goods liable to confiscation, or any documents or things which in

his opinion will be useful for or relevant to any proceeding under this Act, are

secreted in any place, he may authorise any officer of customs to search or may

himself search for such goods, documents or things. (2) The provision of the Code

of Criminal Procedure, 1898, relating to searches shall, so far as may be, apply to

searches under this section subjects to the modification that sub-section (5) of

section 165 of the said Code shall have effect as if for the word "magistrate"

wherever it occurs, the words "collector of Customs" were substituted. "their

Lordships observed-"it was further submitted on behalf of the appellant that the

power of search under section 105 of the Customs Act cannot be exercise unless the

authorisation specifies a document for which search is to be made. In other words,

it is contended that the power of search under section 105 of the Customs Act is not

of general character. We do not accept this argument as 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 or 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. "

(34) MR. Veda Vyasa relied on R. S. Seth Gopikisan Agarwal v. R. N. Sen, Assistant

Collector of Customs and Central Excise, Raipur and others) which was again a case

inter alia under section 105 of the Customs Act, and referred to the following

observation: "doubtless he has to indicate broadly the nature of the documents and

the goods in regard to which the officer authorised by him should make a search,

for without that his mandate cannot be obeyed. "

(35) THE above observation has to be read in the context. Their Lordships said-

"obviously, no question of giving of particulars arises if he himself makes the search,

but if he authorises any officer to do so, he cannot give the particulars of the

documents, for they will be known only after the search is made. Doubtless he has

to indicate broadly the nature of the documents and the goods in regard to which

the officer authorised by him should make a search for without that his mandate

cannot be obeyed. The authorization issued by the Assistant Collector of Customs in

this case clearly mentioned that on information received it appeared that the

appellant was in possession of contraband goods and documents relating thereto

and also described the office and the residential premises wherein those goods and

documents would be found. In the circumstances of the case we are satisfied that

the specifications are sufficient to enable the officer authorized to make the search.

"

(36) IN this case also the authorization said that the person concerned will not

produce or cause to be produced books of account or other documents which will be

useful for or relevant to the proceedings under the Income-tax Act, 1922, or the

Income-tax Act, 1961. That specification was, in any case, sufficient so far as the

requirements of section 132 go.

(37) MR. Veda Vyasa then contended that provisions of section 165 of the Criminal

Procedure Code had not been complied with inasmuch as- (1) the search and

seizure was not conducted in the presence of Panchas as required by sub-section

(4) of section 165; (2) Copies of the records made at the time of search and seizure

were not sent to the nearest Magistrate as required by sub-section (5) of section

165. IN the alternative, Mr. Veda Vyasa said that even if under the Income-tax Act,

1961, the copies may not be required to be sent to the nearest Magistrate, sub-

section (5) must be applied mutatis mutandis to the searches under the Income-tax

Act and, therefore, copies of the record made should have been sent to some higher

authority such as the Director of Inspection or the Commissioner of Income-tax; and

(3) no reasons were recorded by the authorised officer.

(38) REGARDING the search being conducted in the presence of witnesses, Mr.

Veda Vyasa relied on the various affidavits filed by the witnesses to the search.

There is no firm allegation in the petition that the search or seizure was not

conducted in the presence of the witnesses. Subsequently, however, affidavits were

filed on behalf of the witnesses to the search wherein it has been stated that at the

time of the search the witnesses were made to sit in one room from where it was

practically impossible to keep a watch on the search and that the members of the

search party were constantly coming in and going out of the premises searched. The

facts alleged in these affidavits have been denied and on the basis of the material it

is impossible to conclude that the petitioners are right, particularly having regard to

the fact that there is no controversy between the parties that the list contains an

accurate statements of the documents searched and seized. Regarding the reasons

to be recorded by the authorised officers, there is no such requirement in section

132 or rule 112. The section and the rule merely require the authorising officer to

give reasons. Mr. Desai did not dispute that having regard to the provisions of

section 165 Criminal Procedure Code, and rule 112 the authorising officer must

record reasons. He, however, disputed the contention that even the authorised

officer must record reasons. Mr. Veda Vyasa suggested that under section 165 (1) of

the Criminal Procedure Code the officer in charge of a police-station etc. is required

to record in writing the grounds of his belief and applying section 165 it must be

held that the authorised officers must also record reasons in writing. There is no

warrant for this proposition. Under section 132 of the Income- tax Act the search

warrants can be issued upon reason to believe by the Director of Inspection or the

Commissioner. The section does not require the Director or the Commissioner to

record reasons though he may have to do so because if the action is challenged in

court the authorising officer will have to justify his action within the limited area of

objectively. Rule 112, however, provides this safeguard in terms and requires the

Director of Inspection or the Commissioner to record reasons for authorising the

search or seizure. Section 165 of the Criminal Procedure Code applies only "so far as

may be" and at the most it can be said that the effect of section 165 (1) is that the

person issuing the authorization must record reasons. The said section 165 cannot

be held to require the authorised officer to record reasons. Under the said section

the police officer concerned may either make the search or cause it to be made.

Even there the officer, who is authorised to make the search by the police officer

concerned, need not record reasons. All that is to be seen under section 132 of the

Income-tax Act is that the authorised officer searches or seizes only such documents

and books of account etc. which are useful or relevant to any proceedings. So far as

sending of the copies of the record to the nearest Magistrate or to a senior official of

the Income- tax Department is concerned, sub-section (5) of section 165 cannot in

terms apply because that sub-section requires copies of the record made under sub-

section (1) of section 165, that is, record of search or seizure conducted in

pursuance of the belief that anything is necessary for the purpose of an

investigation into any offence to the court. In investigations like the present there is

no investigation into any offence. Under sub-rule (8) of rule 122 a list of all the

things taken possession of has to be prepared and copies thereof sent to the

Director of Inspection or the Commissioner, as the case may be. There is no

allegation on behalf of the petitioners, that this sub-rule was not obeyed and even if

the argument of Mr. Veda Vyasa is to be accepted that by applying section 165

mutatis mutandis the copies must be sent to a senior official, it must be held that

that was complied with. Again, in sub-section (5) of section 165 of the Criminal

Procedure Code the copies of the record have to be forwarded to the nearest.

Magistrate empowered to take cognizance of the offence. For this reason also no

copies can be sent to any Magistrate. This argument of the learned counsel for the

petitioners must also, therefore, fail. It may, however, be pointed out that search

being carried out in the presence of witnesses and the reasons to be recorded by

the authorising officer are the requirements of rule 112 itself and, therefore, it is

unnecessary to take recourse to section 165 of the Criminal Procedure Code for that

purpose. Mr. Desai wanted leave to file an affidavit, which he actually did, showing

that the authorised officers were properly briefed on the merits of the case so that

they could apply their minds to the documents to be searched or seized. The

petitioners filed a counter-affidavit and then Mr. Desai stated that "in view of the

lengthy and irrelevant contents of the counter-affidavit I do not press for filing of

the affidavit and want to withdraw the same. " Mr. Veda Vyasa contended that the

affidavit having been placed on the record it could not be withdrawn and relied on

In re Quartz Hil and C. Company. Ex. parte Young. No permission was given to Mr.

Desai to place on affidavit on the record and the matter had yet to be decided when

the affidavit was withdrawn. In view of my decision that the authorised officers did

apply their minds it is unnecessary to go into this question. Mr. Veda Vyasa also

pressed on as to permit him to cross-examine the deponents on behalf of the

respondents. He said that apart from the fact that the affidavits were vague and not

properly verified he would be able to show that the statements made therein are not

correct and neither had the Director of Inspection reason to believe nor did the

authorised officers apply their minds. I see no justification for allowing that request.

Paragraph 10, sub-paragraphs (a), (c) and (e) of paragraphs, and subparagraphs

(e) and (g) of paragraph 14 have been sworn by R. D. Shah as true to his

knowledge. Paragraphic of the affidavit deals with the protest letters etc. by the

petitioners and the offer by respondent No. 1 that the petitioners might approach

the officers concerned for inspecting the books and documents. In sub-paragraph

(c), which has been mentioned in detail above, respondent No. 1 swears to the

conclusions that he arrived at on the basis of the information mentioned in the

earlier paragraphs. In paragraph (e) of paragraph 13 he says that he had sufficient

information in his possession to give him reason to believe that action under section

132 was necessary, and these paragraphs have been sworn as true to the

knowledge of the Director of Inspection. Having regard to the nature of scrutiny by

the Court into the question of reason to believe, these are the relevant paragraphs

and have been properly sworn,

(39) MR. Veda Vyasas principal objection was that the Director of Inspection had,

with respect to some of the paragraphs, stated that "they are true to my knoweldge

based on official record and believed to be true" without disclosing the said records.

We have been taken through those paragraphs at length and I am not satisfied that

cross-examination should be allowed. Similarly, in the affidavits by Rajinder Mohan,

V. S. Rastogi, V. P. Mital, P. N. Malik and R. C. Narang, the facts have been sworn as

true to their knowledge. I am not unmindful of the fact that if a proper case is made

out, this Court has power to direct cross-examination of the deponents but in the

light of the discussions on various aspects I am satisfied that this is not a case

where such permission should be accorded.

(40) I then proceed to discuss the contention of Mr. Veda Vyasa that section 132

of the Income-tax Act is unconstitutional being violative of Articles 14 and 19. In

support of this contention he relied on the majority judgment of the Assam High

Court in S. Doongarmal Agency v. K. E. Johnson, In that case a majority of their

Lordships held that section 37 (2) of the Indian Income-tax Act, 1922, was violative

of Articles 14 and 19 (1) (g) of the Constitution. The majority of the learned Judges

in coming to that conclusion expressed dissent from Surajmull Nagarmull and others

v. The Commissioner of Income Tax,. So far as Article 14 is concerned, the ratio of

the Assam decision is that section 37 (1) and section 37 (2) are two distinct,

different and independent powers and the power under section 37 (2) is much more

drastic and onerous with the result that if section is permitted under section 37 (2)

instead of section 37 (1), it would involve discrimination. Regarding Article 19 the

majority view is that there were no guide-lines provided as to when and in what

circumstances the power in question was to be exercised or for the purpose or

object of the exercise of the power. The power could be exercised without notice to

the person concerned and there was no provision for an aggrieved party to make a

representation and, therefore, the restriction imposed on the fundamental rights

was not reasonable. In Surajmull Nagarmull and others v. The Commissioner of

Income-tax,, the Special Bench to the Calcutta High Court, however, came to the

conclusion that section 37 (2) did not violate either Article 14 or Article 19 of the

Constitution. In Board of Revenue, Madras v. R. S. Jhaver, their Lordship of the

Supreme Court upheld the validity of sections 41 (2) and (3) of the Madras General

Sales Tax Act relating to search and seizure of accounts and documents on the

ground that there were sufficient safeguards provided particularly in view of the

applicability of section 165, Criminal Procedure Code, and, therefore. Article 19 was

not violated. One of the factors taken by their Lordships of the Supreme Court into

consideration was that the officer seizing the books of account etc. had to record his

reasons. I have mentioned this fact specifically because Mr. Veda Vyasa sought to

distinguish this decision on the ground that if the authorised officers are not

expected to record their reasons that safeguard, which existed in section 41, did not

exist in section 132. Again, in R. S. Seth Gopikisan Agarwal v. R. N. Sen, Assistant

Collector of Customs and Central Excise, Raipur and others their Lordships of the

Supreme Court held that section 105 of the Customs Act, 1962, did not violate

Article 14 of the Constitution and observed:-THE legislative policy reflected in the

section is that the search must be in regard to the two categories mentioned

therein, namely, goods liable to be confiscated and documents relevant to a

proceeding under the Act. No doubt the power can be abused. But that is controlled

by other means. Though under the section the Assistant Collector of Customs need

not give the reasons, if the existence of belief is questioned in any collateral

proceedings, he has to produce relevant evidence to sustain his belief. That part,

under section 165 (5) of the Code of Criminal Procedure, read with section 105 (2)

of the Act, he has to send forthwith to the Collector of Customs a copy of any record

made by him. The Collector would certainly give necessary directions if the Assistant

Collector went wrong, or if his act was guided by mala fides. "

(41) IN C. Venkata Reddy and another v. Income-tax Officer (Central) Bangalore,

and others, a Division Bench of the Mysore High -Court held that section 132 of the

Income-tax Act, 1961, did not violate Article 14 or 19 of the Constitution. Mr. Veda

Vyasa contended on the lines of the Assam decision that section 132 violated

Articles 14 and 19 of the Constitution because it had been left to the absolute

discretion of the authorities concerned to either take recourse to section 131 or to

section 132, which is more drastic provision and no criterion had been laid down as

to in which cases section 132 had to be applied. Section 131 is a general power

given to the Income-tax officer etc. for enforcing the attendance of persons, for

issuing commissions or compelling the production of accounts or other documents.

Under section 131, for instance, the Income-tax Officer-may even compel a witness

to produce books of account and other documents which he may consider to be

helpful to the enquiry. Section 132, on the other hand, is directed to compel

compliance with notices already issued or which may be issued. Section 131,

therefore, gives power to compel production of persons and books while section 132

is intended to give power to search or seize documents which the persons

concerned are likely to withhold. There is, therefore, a valid classification and a

distinction based on the reason to believe by senior officials, which reason is to a

certain extent subject to judicial scrutiny, that the books will not be produced,

cannot be struck down as discriminatory particularly when sufficient safeguards

have been provided. The object of the Legislature in enacting section 132 is both to

avoid tax evasion and facilitate enquiry in proceedings. Search warrants may be

issued against an assessee who has filed a return or has failed to file a return and

the apprehension is that he will destroy the books so that the proper income-tax is

not assessed against him. It can also be issued to witnesses who are possessed of

books and documents which may help the assessee in arriving at a correct

assessment but it is apprehended that inter-alia out of vindictiveness or ill-will or

even indifference towards the assessee such person, if summoned as a witness, will

not produce the documents or may destroy the same. There is, therefore, in my

opinion, a valid classification of persons against whom proceedings under section

132 may be taken.

(42) IT was then contended by Mr. Veda Vyasa that search and seizure may be

ordered at the sweet will of the Director of Inspection or the Commissioner. That is

not so. The Director of Inspection and the Commissioner are very senior officials.

They must have reason to believe that relevant or useful books or documents will

not be produced. The existence of reason to believe is, to a certain extent,

justifiable, as discussed hereinbefore. The search and seizure is confined to relevant

or useful books of account. The provisions of the Criminal Procedure Code have

been made applicable and by virtue thereof and of rule 112 the search has to be

conducted in the presence of witnesses and the Director of Inspection or the

Commissioner has to record reasons. No official below the rank of Income-tax

Officer can be authorised to search or seize and that also only the useful and

relevant books. Under sub-section (8) of section 132 the books of account or other

documents cannot be retained by the authorised officer for a period exceeding 180

days except after recording reasons in writing and taking the approval of the

Commissioner, and the Commissioner can not authorise the retention for a period

exceeding 30 days from the completion of the relevant proceedings. The persons

concerned are entitled to object to the order of the Commissioner by an application

to the Board of Direct Taxes. They are also entitled to make copies or take extracts

from the books or documents seized. Search of a premises by itself no doubt

offends the right of a subject to hold property guaranteed under article 19 but

searches necessitated for avoiding tax evasion or facilitating the making of

assessment cannot but be termed as reasonable restrictions on the rights of the

subjects. Similarly, seizure of documents for a limited period for the purposes of

assessment would also constitute reasonable restriction. It follows that the section is

not hit either by Article 14 or by Article 19 of the Constitution.

(43) HAVING come to the conclusion that the search and seizure in this case was

legal I need not decide the question as to whether the documents searched and

seized in violation of Article 19 or of section 132 can be retained or not. It is,

however, necessary to decide one other question, namely, whether the information

collected by the Department in pursuance of an illegal search can be used as

evidence and this is so because in two other writ petitions, being writ petitions Nos.

798-D of 1966 and 800-D of 1966, we heard arguments only on this question and

not on the question whether the search or seizure in those cases was legal or illegal,

while Civil Writ No. 58 of 1966 was compromised without prejudice to the contention

of the petitioners that such evidence cannot be used, and, therefore, if the

conclusion is that such documents can be used, it will be unnecessary to decide the

question of legality of the search in those cases. In Weeks v. United States, it was

held that the Federal Court could not use as evidence something unreasonably

seized by a Federal Officer. In Burdeau v. Mc. . Dowell, however, it was decided that

if something was seized by some one acting without complicity on the part of the

United States and gives that to the Government the prosecution was entitled to use

it. The exception made to the Federal exclusionary rule in Me Dowells case to the

effect that the evidence obtained by an illegal search made by the State officers

without Federal participation is admissible was, however, repudiated in a later

decision. Similarly, it has been held in several cases that documents or things seized

in violation of the Fourth Amendment could not be used in evidence even in State

Courts. Mr. Veda Vyasa relied on Dollree Mapp. etc. v. Ohio, and Winston Massiah v.

United States. in support of his proposition that any document seized in violation of

the Fourth Amendment in United States and Articles 14 or 19 in India could not be

used in evidence. The reason of the rule, according to Mr. Veda Vyasa, is that unless

forbidden, the overzealous prosecutors or the investigators will cease to have any

regard for the Constitution and seize documents in violation thereof believing that

even if the seizure is held to be illegal, they will at least be entitled to use the

evidence. It was, therefore, necessary, according to Mr. Veda Vyasa, to exclude

such evidence wherever the seizing officer blundered so that the Constitution and

the laws were obeyed. Mr. Veda Vyasa reminded us that the Courts are the

guardians of the Constitution and protection against arbitrary searches and seizures

was to give effect to the determination by the people that they would for ever be

secure in the persons and effects from intrusion by the State except under a proper

warrant and if use of such evidence were to be allowed it will create a big hole in

the Constitution. Mr. Desai, on the other hand, relied on Kuruna v. The Queen,

where it was held that the law did not reject relevant evidence on the ground- that

it had been obtained by illegal means. Lord Goddard C.. , referring to some of the

American decisions, said-"certain decisions of the Supreme Court of the United

States of America were also cited in argument. Their Lordships do not think it

necessary to examine them in detail Suffice it to say that there appears to be

considerable difference of opinion among the judges both in the State and Federal

Courts as to whether or not the rejection of evidence obtained by illegal means

depends on certain articles in the American Constitution. At any rate, in Olmstead v.

United States. the majoriity of the Supreme Court were clearly of opinion that the

common law did not reject relevant evidence on that ground. "

(44) THOUGH in Ohios case the Supreme Court of the United States said that the

rule which excludes unconstitutional evidence from being admitted is an essential

part both of Fourth and Fourteenth Amendments, Mr. Veda Vyasa suggested that

the said rule as developed in the United States was not only a command of the

Fourth Amendment but also a judicially created rule of evidence and there was no

reason why the same rule of evidence should not be created by the Courts in India

because Article 19 in our Constitution is intended also to serve the same purpose as

the Fourth Amendment in the United States. There are two ways of looking at the

American decisions. One way of looking at those decisions may be, as suggested by

Mr. Veda Vyasa that the exclusionary rule is a judicially created rule of evidence. If

that be so then it would be open to the Legislature to override that rule and permit

use of evidence illegally obtained. In that situation the matter will depend on the

provisions of the Indian Evidence Act. Of course, it would be a different matter as to

what value should be attached to an evidence illegally seized. No provision of the

Evidence Act has been shown to us by Mr. Veda Vyasa which excludes such

evidence. It is the other angle which creates difficulty. If it be held that the

exclusionary rule is based on the Fourth Amendment than an illegal seizure would

be in as much violation of Article 19 in India as it would be in violation of the Fourth

Amendment in the United States. Even so Article 19 does not, in my opinion, forbid

the use of evidence obtained as a result of an illegal search. It may be argued in

support of the exclusionary rule that the Article 19 makes the right to acquire and

hold property sacred and any property seized in violation of Article 19 should be

completely resorted. There is no restoration unless the parties are placed in a

position in which they stood before the seizure and that unless such evidence is

completely excluded there will not be any perfect restitution. It is true that in

appropriate cases the Court may order restoration of the property illegally seized but

so far as the use of information gathered as a result of such seizure is concerned,

the Court, or the appropriate authority, has, in any case, acting within the law, the

power to call for such information and property and use the same in evidence. If it is

done in accordance with law, no violation of Article 19 arises. The information

gathered, therefore, can otherwise be reached by the Courts or other concerned

authorities. That information gathered serves a check on the person subjected to

search and seizure that he will not destroy the records or conceal the information. If

he produces it in pursuance of summons or notice it can undoubtedly be used. If on

the other hand, he withholds it, it cannot be said that Article 19 will exclude such

evidence because he has no fundamental right to withhold the records and in

formation. My conclusion, therefore, is that information gathered as a result of

illegal search and seizure can be used subject to the value to be attached to it or its

admissibility in accordance with the law relating to evidence. I will take an extreme

case where documents are illegally seized and not only is the information kept in the

minds of the concerned authorities but complete copies thereof are kept. On the one

hand. Article 19 may be construed to mean that complete restitution of property

would require restitution of those copies as well. On the other hand, it may be said

that since the Court or the authority has still the power to call for that information,

the authority may use those copies if the information or the documents are not

produced. In that situation it cannot be argued that Article 19 forbids the use of

such copies completely. What will be the situation if there is no power in law in the

authority concerned to call for such information or documents does not arise before

us and I need not consider that. I would like to make it clear that I am expressing

no opinion on the impact of article 20 on the use of such information.

(45) IN the circumstances, this petition fails and is dismissed but with no order as

to costs.

(46) I entirely agree.