1963-VIL-36-GAU-DT

Equivalent Citation: [1964] 52 ITR 637

ASSAM HIGH COURT

Civil Rules No. 195, 196, 197 and 198 of 1962

Dated: 15.07.1963

SENAIRAM DOONGARMAL AGENCY (P.) LTD AND OTHERS

K.E. JOHNSON AND OTHERS

For the Respondent: S. S. Roy, T. Bose, N. M. Lahiri, Dr. J. C. Medhi, Mrs. M. Roy, S. K. Ghose, J. P. Bhattacharjee, S. N. Meddhi

For the Respondent: Dr. D. P. Paul, H. Goswami, G. K. Talukdar, N. M. Dam and P. Chaydhuri

Bench

G. Mehrotra (CJ), C. S. Nayudu And S. K. Dutta

JUDGMENT

C. S. Nayudu, J.

These civil rules have been heard together as they involve a common question of constitutional law, namely, whether section 37(2) of the Indian Income-tax Act (Act XI of 1922) , infringes the fundamental rights guaranteed by the Constitution of India in articles 14 and 19(1) (f) and (g) thereof.

Before this question is taken up for consideration, it would be useful and necessary that the facts alleged in the petitions are briefly set out.

In Civil Rule 195 of 1962, the petitioner is one Senairam Doongarmall Agency (Private) Ltd., a company incorporated under the Companies Act and having its registered office at Tinsukia, in the Lakhimpur district, of the State of Assam. Shri K.E. Johnson, the Commissioner of Income-tax, Assam, Tripura and Manipur, is impleaded as the first respondent, apparently in his personal capacity. The second respondent is the Commissioner of Income-tax, Assam, Tripura and Manipur, having his office at Shillong, the headquarters of the State of Assam. The third respondent is the Inspecting Assistant Commissioner of Income-tax," Assam, holding his office at Shillong. The fourth respondent is the Additional Income-tax Officer, Dibrugarh, in the State of Assam. The fifth and the sixth respondents were the employees of the petitioner-company, whose services had been dispensed with by the petitioner. The seventh respondent is the Income-tax Officer, Dibrugarh, in the State of Assam. The eighth and the ninth respondents are the Income-tax Officers of Digboi and Tinsukia, respectively, in the State of Assam. The tenth respondent is the Additional Superintendent of Police at Dibrugarh, and the eleventh respondent is the Union of India, through the Secretary, Ministry of Finance (Revenue Division) , Government of India.

The petitioner company was carrying on extensive business as wholesale dealers of various foodgrains, mustard oil and other commodities having its sales depot as well as its own railway siding at the Siding Bazaar, Tinsukia. The petitioner-company was being regularly assessed with income-tax from year to year, by the Income-tax Officer, Dibrugarh, the fourth respondent, and had been duly and regularly paying its taxes in accordance with the orders of assessment passed in respect of its said business from time to time. There was never any default, failure or neglect on the part of the petitioner to produce any of the books, documents and papers necessary for completing the assessment proceedings, and the petitioner gave no occasion for the income-tax authorities at any time to have any complaint regarding the conduct of the petitioner and particularly in the production of the books, documents, etc., in the course of and required for the assessment proceedings from time to time. The petitioner fully co-operated with the income-tax authorities in arriving at a proper and correct assessment of the income of the petitioner's business and had been regularly paying the taxes according to assessment, as evidenced by the income-tax clearance certificate dated August 7, 1961, in respect of the petitioner's business for the assessment year 1959-60.

In respect of the year 1960-61, the petitioner had duly filed the income-tax return and on or about the 8th January, 1962, the fourth respondent took up the petitioner's assessment and completed the hearing after the petitioner had produced all the relevant books, papers and documents for the inspection and scrutiny by the fourth respondent. After such scrutiny, the fourth respondent returned the books to the petitioner's representative having been satisfied with the same. No assessment order, however, had been passed in respect of the petitioner for the said assessment year 1960-61.

The respondents Nos. 5 and 6 were the ex-employees of the petitioner and whose services had been dispensed with for alleged dishonesty and misconduct, in respect whereof a criminal proceeding had also been launched against the sixth respondent by the petitioner, in which a number of books were seized by the police and which were taken possession of by one Maheswary as Jimmadar. The sixth respondent was dismissed from the service of the petitioner with effect from January 8, 1962. As the books so seized contained valuable evidence in support of the criminal charge against the sixth respondent, the sixth respondent sought the aid of the fifth respondent to remove the said books. To this end and to humiliate the petitioner and its directors, the fifth respondent who was closely connected with the third respondent, the Inspecting Assistant Commissioner of Income-tax, as a friend and as a relative, influenced the said respondent to cause harsh and coercive measures to be taken against the petitioner by way of search and seizure, acting under section 37(2) of the Act, and, as a result of this, harsh and coercive measures were taken against the petitioner by the sudden search of the petitioner's premises and the residences of its directors on the 11th March, 1962, by the respondents Nos. 4, 7 to 9, the Income-tax Officers, and respondent No. 10, the Additional Superintendent of Police, Dibrugarh, accompanied by about one hundred policemen armed with rifles and guns, under four warrants of authorisation purported to have been issued by the Commissioner of Income-tax under section 37(2) of the Act, and they started raiding simultaneously the various premises and/or offices at Tinsukia belonging either to the petitioner or to one or the other of its directors or to the companies with which the petitioner company was associated, as well as one or the other of the directors of those companies not so associated. This search continued from about 10 a.m. on March 11,1962, till 11 p.m. on the same day. During the search, the various places searched were ransacked and diverse documents, papers and books, original contracts, hundis, title deeds, etc., were seized therefrom, some of which were listed and some destroyed. The search was also conducted in a highly objectionable manner by searching the apartments occupied by the ladies of the household of the directors of the petitioner-company, thus conducting an indiscriminate search and seizure of various properties belonging to the petitioner and others. This high-handed and illegal search and" seizure resulted in a complete paralysing of the business and trade of the petitioner and ruined its business reputation, thus causing serious loss to the petitioner. The petitioner accordingly claims that the search of the premises of the petitioner and the seizure of the various books and documents on March 11,1962, as well as the warrants of authorisation dated March 7,1962, issued by the Commissioner of Income-tax, the first respondent, were illegal, inoperative, null and void, devoid of jurisdiction, ultra vires of the Act and the Rules, and mala fide, and accordingly prayed for the issue of appropriate writs.

In Civil Rule No. 196 of 1962, the petitioner is one Gobardhandas Maheswary carrying on business under the name and style of Jagadamba Stores at Tinsukia. The gist of the complaint is the illegal search of the petitioner's premises and the seizure of the petitioner's books, which search is claimed on the same grounds as in the earlier Civil Rule to be unconstitutional, illegal and ultra vires. The petitioner further claimed that he was neither an assessee liable to any income-tax nor had he any connection with the business of the petitioner in Civil Rule No. 195 of 1962.

In Civil Rule No. 197 of 1962, the contention of the petitioner is that the petitioner-company is an assessee in Calcutta who had paid the entire tax due from it and that as a third party and as one who had nothing to do with the assessment proceedings relating to the petitioner in Civil Rule No. 195 of 1962, or its business, the petitioner claims that the search of its premises and seizure of the books, documents, etc, was high-handed, illegal, unconstitutional, ultra vires and mala fide.

The plea of the petitioner in Civil Rule No. 198 of 1962 is similar to the pleas raised in Civil Rule No. 197 of 1962. The petitioner claims that he was a tenant in respect of one room and kitchen and bath-room of the ground-floor of the premises belonging to the Himalayan Plywood Industries Private Ltd., at Tinsukia; that the petitioner had been regularly assessed to income-tax and had been paying the same, and that the assessment proceedings were completed up to the assessment year 1960-61, and the income of the petitioner was shown to be below the taxable limit; that he had nothing to do with the business activities of the petitioner in Civil Rule No. 195 of 1962, and that any search of his premises or seizure of his books and accounts, etc., was highly illegal, high-handed, ultra vires and unconstitutional.

As already indicated, all the petitioners claim that the action taken by the various Income-tax Officers purporting to act under the four warrants of authorisation issued by the Commissioner of Taxes under section 37(2) of the Act is unconstitutional, illegal and ultra vires, and that the provisions of section 37(2) of the Act itself is unconstitutional and illegal, and that the action of the authorities, apart from being high-handed, was clearly mala fide and caused serious hardship and loss to the petitioners.

It is thus clear that what is attacked in all these civil rules, inter alia, is the vires and the constitutionality of section 37(2) of the Act. It would, therefore, be necessary in this connection to refer to section 37(2) of the Act, which is as follows :

"37 (2) Subject to any rules made in this behalf, any Income-tax Officer specially authorised by the Commissioner in this 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 (V of 1898) , relating to searches shall apply so far as may be to searches under this section."

Mr. Roy, the learned counsel for the petitioner in Civil Rule No. 195 of 1962, who addressed the main and leading argument in these matters, placed reliance on the following points :

(1) Section 37(2) of the Act is ultra vires of article 14 of the Constitution.

(2) Section 37(2) of the Act is ultra vires of article 19(1) (f) and particularly of article 19(1) (g) of the Constitution.

(3) Even if section 37(2) of the Act is held to be intra vires, the power in the instant case is not exercisable unless (1) on the facts it is established that the exercise of power under section 37(1) will not yield results, and (2) the person against whom the power under section 37(2) is to be exercised is guilty of evasion of income-tax, concealment of books and of manufacturing or alteration of books. And, as none of these conditions are fulfilled in these cases, the power under section 37(2) could not have been validly exercised.

(4) In any event, the power under the section has not been-exercised properly and in accordance with section 37(2) in the instant case for the following reasons :

(i) The Income-tax Officer conducting the search and seizure had neither reason to believe nor did he form any belief or opinion as required under section 37(2) .

(ii) No books, documents, etc., to be seized have been specified in the warrants.

(iii) No proceedings have been mentioned in the warrants as pending.

(5) Rule 2 of the Rules framed under the Act and the prescribed form of authorisation under section 37(2) are ultra vires.

(6) In any event, the power under section 37(2) had been exercised in a whimsical and capricious manner and mala fide.

(7) The authorisation issued by the Commissioner of Income-tax did not empower (i) the seizure of the petitioner's books from the premises of Lohia Properties, (ii) sealing of rooms, and (iii) posting of police.

The various points relied on by the learned counsel for the petitioners in these cases may be conveniently dealt with under the following heads:

(1) Is section 37(2) ultra vires of article 14 of the Constitution ?

(2) Is section 37(2) ultra vires of article 19(1) (f) and more particularly of article 19(1) (g) of the Constitution ?

(3) Assuming that it were held that the section did not infringe the above articles of the Constitution, whether the power under section 37(2) of the Act could have been validly exercised on the facts of the instant cases both in respect of letters of authorisation issued by the Commissioner of Income-tax and the execution thereof by the Income-tax Officers ?

(4) Whether the action taken under section 37(2) of the Act by the various Income-tax Officers is valid and can be supported under law?

We shall now deal with these points in detail and in seriatim. On the first question, article 14 of the Constitution requires to be extracted, and it reads as follows :

"Right to Equality

14. Equality before law.--The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India."

This article contains a mandatory prohibition against the State. "The State" for the purpose of this article is defined in article 12, which runs as follows:

"In this part, unless the context otherwise requires, 'the State', includes the Government and Parliament of India and the Government and the Legislature of each of the States and all local or other authorities within the territory of India or under the control of the Government of India."

Reading this definition into article 14, the compelling prohibition contained in article 14 is operative against (i) the Government of India, (ii) the Parliament of India, (iii) the Government of the States, (iv) the Legislature of each of the States, (v) all local or other authorities within the territory of India, and (vi) all local or other authorities under the control of the Government of India. It may thus be seen that the prohibition is against the executive Government of the Union as well as of the States, the Parliament, and the Legislatures of the States, and also against all local or other authorities within the territory of India or under the control of the Government of India. So that, executive action of the Government, legislative action and the action of any of the officers of the Government or local authorities are controlled by the article. Further, having regard to the use of the expression "any person" in the article, it is clear that the article applies to any one who can be called a person in the eye of law, thus including juridical persons as well as persons who may not even be citizens of India.

Between persons, what the article guarantees is that they should enjoy ( i) equality before the law and (ii) equal protection of the laws within the territory of India.

Before examining the attack made against section 37(2) of the Act in this regard, it would be necessary to note that the present section 37(2) of the Act originally was not part of the Indian Income-tax Act, 1922. This provision was introduced by way of an amendment, by the Finance Act, 1956 (Act XVIII of 1956) , which was enacted to give effect to the financial proposals of the Central Government for the financial year 1956-57, as seen from its preamble. Section 20 of that Act is as follows :

"20. Substitution of new section for section 37.--For section 37 of the Income-tax Act, the following, section shall be substituted, namely:

'37. Powers of income-tax authorities.--(1) The Income-tax Officer, Appellate Assistant Commissioner, Commissioner and Appellate Tribunal shall, for the purposes of this Act, have the same powers as are vested in a Court under the Code of Civil Procedure, 1908 (V of 1908) , when trying a suit in respect of the following matters, namely :

(a) discovery and inspection;

(b) enforcing the attendance of any person, including any officer of a banking company, and examining him on oath ;

(d) issuing commissions.

(2) Subject to any rules made in this behalf, any Income-tax Officer specially authorised by the Commissioner in this behalf may,--

(ii) seize any such books of account or other documents or place marks of identification thereon or make extracts or copies therefrom ;

and the provisions of the Code of Criminal Procedure, 1898 (V of 1898) relating to searches shall apply so far as may be to searches under this section.

(3) Subject to any rules made in this behalf, any authority referred to in sub-section (1) may impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act:

Provided that an Income-tax Officer shall not--

(a) impound any books of account or other documents without recording his reasons for so doing; or

(b) retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Commissioner therefor.

(4) Any proceeding before any authority referred to in this section shall be deemed to be a judicial proceeding within the meaning of sections 193 and 228, and for the purposes of section 196 of the Indian Penal Code (XLV of 1860) ."

Before the amendment made by the Finance Act of 1956, section 37 stood as follows :

"37. The Income-tax Officer, Appellate Assistant Commissioner, Commissioner and Appellate Tribunal shall, for the purposes of this Chapter, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (V of 1908) , when trying a suit in respect of the following matters, namely :

(a) enforcing the attendance of any person and examining him on oath or affirmation;

(b) compelling the production of documents ; and

and any proceeding before an Income-tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal, under this Chapter shall be deemed to be a 'judicial proceeding' within the meaning of sections 193 and 228 and for the purposes of section 196 of the Indian Penal Code (XLV of 1860) ."

It may be seen, therefore, that prior to the amendment, the powers which the Income-tax Officer, or Appellate Assistant Commissioner, or Commissioner or Appellate Tribunal could exercise are the powers as set out in the present section 37(1) , which figured as the old section 37, which powers are the same as are vested in a court under the Code of Civil Procedure, 1908 (V of 1908) , when trying a suit, as regards the matters specifically enumerated in the sub-section, namely, (a) discovery and inspection, (b) enforcing the attendance of any person, including any officer of a banking company, and examining him on oath, (c) compelling the production of books of account and other documents, and (d) issuing commissions.

It is clear from a perusal of this sub-section that the powers exercisable by the authorities enumerated in the sub-section are the powers of a court, and, therefore, judicial powers exercisable in the course of the proceedings before the said authorities. This proposition has been accepted by the Supreme Court in the case of Suraj Mall Mohta & Co. v. Visvanatha Sastri [1954] 26 ITR 1 , 13 ; [1955] 1 SCR 448, wherein it is observed :

"Under the provisions of section 37 of the Indian Income-tax Act the proceedings before the Income-tax Officer are judicial proceedings and all the incidents of such judicial proceedings have to be observed before the result is arrived at."

An examination of sub-section (2) of section 37 of the Act leaves the matter in no doubt whatsoever, that the powers conferred by this subsection on an Income-tax Officer specially authorised by the Commissioner in that behalf, are police powers, similar to the powers exercisable by the police under the Code of Criminal Procedure. In their very nature, they are executive and administrative powers similar to those exercisable by competent police officers under the Code of Criminal Procedure, 1898.

From a comparative study of the powers conferred by section 37(1) and the powers conferred by section 37(2) , the distinction would be quite apparent. While the powers under section 37(1) are judicial powers exercisable by the authority before whom the proceedings under the Act are pending, the powers under section 37(2) are not judicial powers, the exercise whereof may or may not involve the requirement that any proceedings under the Act should actually be pending, and what is required to be satisfied before those powers could be exercised is, that the Income-tax Officer concerned had been specially authorised by the Commissioner to exercise those powers.

Based on the above distinction, Mr. Roy, the learned counsel for the petitioners, contended that these two being two distinct powers, nevertheless covered the same field and were intended to achieve the same purpose, namely, securing books of accounts and other documents relevant to or useful for any proceedings under the Act. Being distinct powers and being powers which covered the same field of operation and calculated to achieve the same end and purpose, the more onerous and drastic of the two powers should be struck down as they created a discrimination prohibited by article 14 of the Constitution. He pointed out that there can be no doubt that the powers under section 37(2) , which are merely executive or administrative, are much more severe and drastic than the powers under section 37(1) which are judicial, in that, in the former case, there is no opportunity given to the party affected, before action is taken, to show cause; that there is no provision for any representation being made by the person affected against the action ; and that there is no provision for any notice being given, or for the return of the books seized; and that the power is so general, that any books, from any place, belonging to any person, could be seized under the section. This being the case, according to him, so long as there is section 37(1) , which covers the same field and is much less drastic and much more favourable to the person affected, the power under section 37(2) must be struck down as violative of the fundamental rights guaranteed under article 14 of the Constitution.

In support of his contention Mr. Roy placed reliance on the following decisions of the Supreme Court in the case of Suraj Mall Mohta and Co. v. A.V. Visvanatha Sastri [1954] 26 ITR 1 ; [1955] 1 SCR 448, Shree Meenakshi Mills Ltd. v. A.V. Visvanatha Sastri [1954] 26 ITR 713 ; [1955] 1 SCR 787, M. Ct. Muthiah v. Commissioner of Income-tax [1955] 2 SCR 1247 ; [1956] 29 ITR 390, Basheshar Nath v. Commissioner of Income-tax [1959] 35 ITR 190 ; [1959] Supp. 1 SCR 528, and S.M. Nawab Ariff v. Corporation of Calcutta AIR [1960] Cal. 159.

In Suraj Mall Mohta & Co's. case (Supra) the principal question that was canvassed was, whether certain sections of the Taxation on Income (Investigation Commission) Act, 1947 (XXX of 1947) , had become void from the date of the commencement of the Constitution, by reason of article 14 of the Constitution. The Supreme Court found that having regard to the true scope or construction of sub-section (4) of the said Act, it obviously dealt with the same class of persons who fell within the ambit of section 34 of the Indian Income-tax Act and were dealt with in sub-section (1) of that section, and whose income could be caught by proceedings under that section, and that the assessees who had failed to disclose fully and truly all material facts necessary for the assessment under section 34 could be equated with persons who were discovered in the course of the investigation conducted under section 5(1) to have evaded payment of income-tax on their incomes. Accordingly, the Supreme Court pointed out that the result was that some of those persons could be dealt with under Act XXX of 1947 at the choice of the Commissioner, though they could also be proceeded with under the provisions of section 34 of the Indian Income-tax Act. In that connection Mahajan C.J. observed as follows Suraj Mall Mohta & Co. v. Visvanatha Sastri [1954] 26 ITR 1 , 10, 12 :

"It is well settled that in its application to legal proceedings, article 14 assures to everyone the same rules of evidence and modes of procedure ; in other words, the same rule must exist for all in similar circumstances. It is also well settled that this principle does not mean that every law must have universal application for all persons who are not by nature, attainment or circumstance, in the same position. The State can by classification determine who should be regarded as a class for purposes of legislation and in relation to a law enacted on a particular subject, but the classification permissible must be based on some real and substantial distinction bearing a just and reasonable relation to the objects sought to be attained and cannot be made arbitrarily and without any substantial basis. Classification means segregation in classes which have a systematic relation, usually found in common properties and characteristics. There is nothing uncommon either in properties or in characteristics between persons who are discovered as evaders of income-tax during an investigation conducted under section 5(1) and those who are discovered by the Income-tax Officer to have evaded payment of income-tax. Both these kinds of persons have common properties and have common characteristics and, therefore, require equal treatment. We thus hold that both section 34 of the Indian Income-tax Act and sub-section (4) of section 5 of the impugned Act deal with all persons who have similar characteristics and similar properties, the common characteristics being that they are persons who have not truly disclosed their income and have evaded payment of taxation on income."

Lower down dealing with the procedures indicated in the two sections, with which the Supreme Court was dealing, the learned Chief Justice observed Suraj Mall Mohta & Co. v. Visvanatha Sastri [1954] 26 ITR 1 , 10, 12 :

"There is thus a material and substantial difference between the two procedures, one prescribed by the impugned Act and the other prescribed by the Indian Income-tax Act."

And further down it is observed Suraj Mall Mohta & Co. v. Visvanatha Sastri [1954] 26 ITR 1 , 13-14 :

"The procedure thus prescribed in this matter by the impugned Act is substantially prejudicial to the assessee than the procedure prescribed under the Indian Income-tax Act…

For the reasons given above we are of the opinion that sub-section (4) of section 5 and the procedure prescribed by the impugned Act in so far as it affects the persons proceeded against under that sub-section being a piece of discriminatory legislation, offends against the provisions of article 14 of the Constitution and is thus void and unenforceable."

Adopting the reasoning in this decision, Mr. Roy contended that there being a substantial discrimination between the procedure to be followed under section 37(1) and under section 37(2) , and as the provisions of section 37(2) are definitely and clearly more drastic and prejudicial to the assessee, must, on the parity of the reasoning adopted in this decision, be struck down as violative of the principle of equality laid down in article 14 of the Constitution.

In the case of Shree Meenakshi Mills Ltd. v. A.V. Visvanatha Sastri [1954] 26 ITR 713, 715, 719 (SC) , a similar reasoning was accepted and adopted, and section 5(1) of the Taxation on Income (Investigation Commission) Act, 1947 (XXX of 1947) was struck down as offending the equality clause in article 14 of the Constitution, in view of the amendment to the Indian Income-tax Act which introduced section 34(1A) as both covered the same field and the provision in section 5(1) of the earlier Act was found to be discriminatory and more prejudicial to the assessee. In that context the Supreme Court observed :

"Article 14 of this Part (Part III of the Constitution) guarantees to all persons the right of equality before the law and equal protection of the laws within the territory of India. This article not only guarantees equal protection as regards substantive laws but procedural laws also come within its ambit. The implication of the article is that all litigants similarly situated are entitled to avail themselves of the same procedural rights for relief, and for defence with like protection and without discrimination. The procedural provisions of Act 30 of 1947 had therefore to stand the challenge of article 14 and could only be upheld provided they withstood that challenge."

Lower down it is observed :

"The class of persons alleged to have been dealt with by section 5(1) of the impugned Act was comprised of those unsocial elements in society who during recent years prior to the passing of the Act had made substantial profits and had evaded payment of tax on those profits and whose cases were referred to the Investigation Commission before 1st September, 1948. Assuming that evasion of tax to a substantial amount could form a basis of classification at all for imposing a drastic procedure on that class, the inclusion of only such of them whose cases had been referred before September 1, 1948, into a class for being dealt with by the drastic procedure, leaving other tax evaders to be dealt with under the ordinary law, will be a clear discrimination for the reference of the case within a particular time has no special or rational nexus with the necessity for drastic procedure."

And the Supreme Court finally concluded as follows Shree Meenaksi Mills Ltd. v. A.V. Visvanatha Sastri [1954] 26 ITR 713 , 721 :

"For the reasons given above we are of the opinion that assuming the provisions of section 5(1) of Act XXX of 1947 could be saved from the mischief of article 14 of the Constitution on the basis of a valid classification, that defence is no longer available in support of it after the introduction of the new sub-section in section 34 of the Income-tax Act, which sub-section is intended to deal with the same class of persons dealt with by section 5(1) of the impugned Act. The result is that proceedings before the Investigation Commission can no longer be continued under the procedure prescribed by the impugned Act. We, therefore, direct that an appropriate writ be issued against the Commission prohibiting it from proceeding further with the cases of these petitioners under the provisions of Act XXX of 1947."

In the case of M. Ct. Muthiah v. Commissioner of Income-tax [1956] 29 ITR 390, 400 ; [1955] 2 SCR 1247, referring to the provisions of Act XXX of 1947, which contained a drastic and summary procedure, and the provisions of section 34(1) of the Indian Income-tax Act, the Supreme Court observed :

"Different persons, though falling under the same class or category of substantial evaders of income-tax, would, therefore, be subject to different procedures, one a summary and drastic procedure and the other a normal procedure which gave to the assessees various rights which were denied to those who were specially treated under the procedure prescribed in Act XXX of 1947.

The legislative competence being there, these provisions, though discriminatory, could not have been challenged before the advent of the Constitution. When, however, the Constitution came into force on 26th January, 1950, the citizens obtained the fundamental rights enshrined in Part III of the Constitution including the right to equality of laws and equal protection of laws enacted in article 14 thereof, and whatever may have been the position before the 26th January, 1950, it was open to the persons alleged to belong to the class of substantial evaders, thereafter to ask as to why some of them were subjected to the summary and drastic procedure prescribed in Act XXX of 1947 and others were subjected to the normal procedure prescribed in section 34 and the cognate sections of the Income-tax Act, the procedure prescribed in Act XXX of 1947 being obviously discriminatory and, therefore, violative of the fundamental right guaranteed under article 14 of the Constitution."

The principle laid down by these decisions is that where there are two legislative provisions both of which could be applied to the same category persons, one of which is much more drastic and discriminatory than the other, the application of the more drastic procedure to the same category persons, instead of the less drastic procedure, would amount to discrimination which is prohibited under article 14 of the Constitution. In other words, assuming that both sections 37(1) and 37(2) are intended to apply to tax evaders, if the provisions of section 37(1) are applied to a certain set of persons and the more drastic provisions of section 37(2) are set in motion in the case of other persons similarly placed the latter are entitled to ask "Why this discrimination, why is it that we are given a differential and discriminatory treatment ?"

It is in recognition of this principle that the Supreme Court has in the above decisions struck down the more drastic provision, as violative of article 14 of the Constitution. As both these sub-sections are applicable to the same strip of the territory, to use the language of the Supreme Court, and are calculated to achieve the same purpose or object, namely, to secure the documents, books, etc., obviously section 37(2) would require to be struck down as involving a discrimination between one and another, which is prohibited under article 14 of the Constitution.

Reliance is also placed on a decision of the Calcutta High Court in the case of S.M. Nawab Ariff v. Corporation of Calcutta AIR [1960] Cal. 159, 163 ; 64 CWN 1, 13. In that case, the recovery of taxes due to the Calcutta Corporation from the defaulter, could be secured by a distress warrant issued under section 237 of the Calcutta Municipal Act by sale of moveable property of any ratepayer, whereas under section 251 of the said Act, the remedy by way of a suit in a court of competent jurisdiction for the recovery of the amount due is provided. It was contended in that case that the provisions contained in section 237 offended against article 14 01 the Constitution as containing discriminatory reliefs, and that the more drastic remedy, namely, to proceed by way of distraint and sale of moveable property, should be struck down as violative of the equality clause of article 14 ol the Constitution. In that context the majority judges in that case held as follows :

"1 have no hesitation, therefore, in coming to the conclusion that the procedure of distraint as provided under section 237 of the Calcutta Municipal Act is very much more onerous and prejudicial to a defaulting rate-payer than the procedure of suit under section 251. The necessary conclusion is that the law as laid down in section 237 is discriminatory and violative of article 14 of the Constitution and so void under article 13 of the Constitution."

And, accordingly, a writ in the nature of mandamus was issued commanding the Corporation of Calcutta to forbear from executing the distress warrant issued against the petitioner therein.

In reply to this, Dr. Paul, learned counsel for respondents Nos. 1 to 4 and 7 to 9, contended that sections 37(1) and 37(2) of the Act are alike applicable to all persons that there is no classification of the persons to whom one provision should apply and not the other; that the power under section 37(2) was merely an additional power, in addition to that in section 37(1) ; and that, therefore, these provisions did not violate the fundamental right contained in article 14 of the Constitution.

In reply to this Mr. Roy stated that the power under section 37(2) could not in the nature of things be an additional power; that it is an entirely different power, of quality different, inasmuch as while the powers under section 37(1) are judicial and are exercisable by a number of authorities enumerated therein, the powers under section 37(2) could only be exercised by the Income-tax Officer concerned, on a letter of authorisation issued by the Commissioner, and is of a purely administrative character. In this context he distinguished the case of Purshottam Govindji halai v. B.M. Desai, Additional Collector of Bombay [1955] 28 ITR 891 ; [1955] 2 SCR 887 by pointing out that section 46(2) of the Income-tax Act, which fell to be considered in that case, provided for two different and alternative methods of recovery of the dues, and clothes the Collector with the power to apply either of the two methods, that is to say, he may issue a warrant of arrest under section 13 of the Bombay City Land Revenue Act, 1876, against one defaulter, and keep him in detention for a period which may work out to be much longer than six months, and he may proceed against another defaulter under the Code of Civil. Procedure, and arrest and detain him under that Code. The Supreme Court pointed out that the Sub-section merely directed the Collector to proceed to recover the certified amount as if it were an arrear of land revenue, that is to say, he was to adopt the procedure prescribed by the appropriate law of the state for the recovery of land revenue, and that, in that proceeding, he was, under the proviso, to have ail the powers a civil court has under the Code, and that, therefore, the sub-section did not prescribe two separate procedures at all, and that the provision did not indicate a different and alternative mode of recovery of the certified amount of tax, but only conferred additional powers on the Collector, for the better and more effective application of the only mode of recovery authorised by the body of sub-section (2) of section 40, and that there was no question of the possibility of any discrimination at all.

An additional argument advanced by Mr. Roy in support of his contention that section 37(2) . is violative of article 14 of the Constitution is that Parliament gave to the executive authority, namely, the Income-tax Officer, an unbridled, naked and arbitrary power, without laying down any principles and any policy which would afford as guidance to the executive authorities in exercising the power so given. Mr. Roy contended that normally, if the legislature intended that a particular provision should apply to a particular class of persons, it should specifically say so in the section itself, and, if such a classification is made, that classification must satisfy the requirement that it can be reasonably regarded as based upon some intelligible differentia which distinguishes the persons or things grouped together, from those left out of the group, and that such a differentia has a reasonable relation to the object sought to be achieved by the statute by making the classification, irrespective of the fact whether the provisions of the statute are intended to apply only to particular persons or things or only to a certain class or group of persons or things, and that, as in the instant case, as there is no classification indicated in the statute itself, but the selection or choice for classification is left to the arbitrary decision of the executive authority indicated in the section, it has to be examined and ascertained if the statute has laid down any principles or policy to serve as a guidance in the exercise of the discretion by the executive authority in, the matter of the selection or classification, and that as no such principle and policy had been laid down as a guide for the exercise of discretion by the executive authority in the matter of selection or classification in applying section 37(2) , the court will strike down the statute on the ground that the statute provided for the delegation of arbitrary and uncontrolled power to the executive authority so as to enable it to discriminate between persons or things similarly situated, and that, therefore, the discrimination is inherent in the statute itself, and that, consequently, the statute has to be struck down along with the executive action taken under it.

Dr. Paul in reply contended that where the statute does not expressly lay down the policy, the background and the past history leading to the passing of the enactment could be looked into to ascertain the policy, and that, in any case, the preamble and the scheme of the Act could always be taken into consideration in ascertaining the policy of the legislation. He placed reliance on the following decisions of the Supreme Court in the cases of A. Thangal Kunju Musaliar v. M. Venkatachalam Potti [1956] 29 ITR 349 ; [1955] 2 SCR 1196 ; Hamdard Dawakhana v. Union of India [1960] 2 SCR 671 ; AIR [1960] SC 554, 559; Union of India v. Bhana Mai Gulzari Mal Ltd. [1960] 2 SCR 627 ; AIR [1960] SC 475, 479 ; Kathi Raning Rawat v. State of Saurashtra [1952] SCR 435 ; Kedar Nath Bajoria v. State of West Bengal [1954] SCR 30 ; and Ram Krishna Dalmia v. Justice S.R. Tendolkar [1959] SCR 297 ; AIR [1958] SC 538 in support of his contention that the background and the past history, etc., could be looked into to ascertain the policy. He also placed reliance on the cases of Pannalal Binjraj v. Union of India [1957] SCR 233 ; [1957] 31 ITR 565 ; Babulal Amthalal Mehta v. Collector of Customs, Calcutta [1957] SCR 1110 ; AIR [1957] SC 877 ; Biswambhar Singh v. State of Orissa [1954] SCR 842 ; AIR [1954] SC 139, 144 Collector of Customs, Madras v. Nathella Sampathu Chetty [1962] 3 SCR 786 ; AIR [1962] SC 316, 325, Niemla Textile Finishing Mills Ltd. v. Second Punjab Tribunal [1957] SCR 335 ; AIR [1957] SC 329, 336, 337 and Surajmull Nagar mull v. Commissioner of Income-tax AIR [1961] Cal. 578.

This argument of Dr. Paul was sought to be repelled by Mr. Roy, who pointed out that the background and the past history could be looked into, if at all, where the statute itself makes a classification, in order to determine the basis of the classification. He contended that where the statute itself made no classification whatsoever, and laid down no policy or principles for guidance in the exercise of the discretion by the executive, to whom power is left to be exercised, then the background and the past history could have no bearing whatsoever, and cannot therefore be looked into, and the policy or the principles for the guidance of the exercise of the discretion by the executive, in exercising the power, have got to be laid down by the statute itself and cannot be deduced by inference from external factors or matters. He further pointed out that in order to save a section of an enactment from the challenge of article 14 of the Constitution, the legislature itself must have enunciated the policy and the principles which are to guide the executive in exercising the power given by the section, and the enactment itself has to give any other guidance useful and necessary for the exercise of that power by the executive, and, that, in the instant case, there is nothing in section 37(2) of the Act laying down any policy or principle and no other indications to afford any guidance to the executive in regard to the exercise of the power under that section.

It was contended by Dr. Paul that as the policy of the Act is prevention of evasion and that as that policy is quite clear from the scheme of the Act and the preamble, etc., section 37(2) must be put into force in order to achieve the policy, and that this would afford sufficient guidance to the executive in exercising the power under the sub-section. To this Mr. Roy replied that it was not sufficient to find out why a particular power was granted, but it was also necessary to determine how, and in what manner, and in what circumstances the power has got to be exercised. He further contended that if the policy of the whole Act is prevention of evasion, then both sections 37(1) and 37(2) apply in the same field and serve the same purpose, namely, the prevention of evasion.

Dr. Paul contended in reply that the preamble of the Finance Act of 1956, which introduced section 37(2) by way of an amendment, in the Income-tax Act, disclosed the policy, namely, the giving effect to the finance proposals of the Central Government. To this, the reply given by the petitioner counsel is that section 37(2) was not a financial proposal at all.. The object of the Finance Acts, which have to be passed annually, is only to fix the rate of the taxes for the year, and that it is only after the Finance Act for the year in question is passed and the budget proposals are placed before the Parliament and passed, that the Appropriation Act authorising the Government to appropriate moneys from the consolidated and contingency funds of the State would be passed. He further pointed out that the preamble of the Finance Acts passed from year to year has always been the same, and, therefore, cannot afford any guidance whatsoever in the matter of the scope and application of a special provision like section 37(2) introduced as an amendment to the Indian Income-tax Act of 1922, by one of these Finance Acts.

To meet the contention of Mr. Roy that the power given by section 37(2) is naked and arbitrary, Dr. Paul claimed that the power was subject to the rules; that it can be exercised only under the authorisation by the Commissioner who had to record reasons for granting the authorisation under the rules ; that the Income-tax Officer must have reason to believe that the books and documents to be seized are relevant to and useful for a proceeding, and must have formed an opinion to that effect; that the provisions relating to searches in the Criminal Procedure Code are made applicable to the procedure followed under section 37(2) , and that, therefore, the power must be held to have been entrenched in adequate safeguards and hence, cannot be said to be naked and arbitrary.

I shall now refer to and deal with the other decisions of the Supreme Court having a bearing on the scope and interpretation of article 14 of the Constitution.

In the case of Dhirendra Kumar v. Superintendent and Remembrancer of Legal Affairs to the Government of West Bengal [1955] 1 SCR 224 ; AIR [1954] SC 424, hereinafter referred to as Dhirendra Kumar's case (Supra) , the question arose whether a notification issued by the State Government altering the previous notification granting a right of trial by jury, was wide as offending article 14 of the Constitution, on the ground that the classification involved in the notification is not based on substantial distinction. In that case, the notification revoked the right of trial by jury in respect of certain cases only, and not in respect of certain other offences, and it did not in express terms indicate the grounds on which the former set of cases had been segregated from the latter set of cases, although both fell under the same sections of the Indian Penal Code, and it was observed that the classification had no relation to the object in view, namely, withdrawal of jury trial in these cases, and, it was, therefore, held that the notification made under section 269(1) of the Criminal Procedure Code travelled beyond the limits of that section and contravened article 14 of the Constitution. In that connection Mahajan C.J., who spoke for the Bench, observed as follows Dhirendra Kumar's case (Supra) :

"Now it is well settled that though article 14 is designed to prevent any person or class of persons from being singled out as a special subject for discriminatory legislation, it is not implied that every law must have universal application to all persons who are not by nature, attainment or circumstance, in the same position, and that by process of classification the State has power of determining who should be regarded as a class for purposes of legislation and in relation to a law enacted on a particular subject; but the classification, however, must be based on some real and substantial distinction bearing a just and reasonable relation to the objects sought to be attained, and cannot be made arbitrarily and without any substantial basis. The notification, in express terms, has not indicated the grounds on which this set of cases has been segregated from other set of cases falling under the same sections of the Indian Penal Code……..In our opinion this classification has no relation to the object in view, that is, the withdrawal of jury trial in these cases. There can be mass of evidence in the case of persons accused of the same offence in other cases or sets of cases. The mere circumstance of a mass of evidence, and the suggestion that owing to the length of time the jurors might forget what evidence was led before them, furnishes no reasonable basis for denying these persons the right of trial by jury."

It may be pointed out with reference to this decision that the learned judges of the Supreme Court repelled the faint suggestion made by counsel that after the case of Kathi Raning Rawat v. State of Saurashtra [1952] SCR 435 ; AIR [1952] SC 123, and the case of Kedar Nath Bajoria v. State of West Bengal [1954] SCR 30 AIR [1953] SC 404, the decision in Anwar Ali's case (Supra ) had lost much of its force, and held that these decisions did not in any manner affect the correctness of the decision in Anwar Ali Sarkar's case (Supra) which had already been referred to. Emphasis was placed on the observation made by the Supreme Court in Kedar Nath Bajoria's case (Supra) , to the effect that although different views had been expressed on the question of application of article 14 of the Constitution to the facts and circumstances of each case, there was no difference on any principle as to the construction or scope of article 14 of the Constitution, and that whether an enactment providing for special procedure for the trial of certain offences is or is not discriminatory and violates article 14 of the Constitution must be determined in each case as it arises, and that no general rule applicable to all cases can be laid down. In fact, from a careful scrutiny of the majority judgment in Kedar Nath Bajoria's case (Supra) it would be clear that the ground of decision in that case was based on a classification which, in the context of the abnormal post-war economic and social conditions was readily intelligible and obviously calculated to subserve the legislative purpose, and, as such, did not in any manner affect the correctness of the decision in Anwar Ali Sarkar's case (Supra) .

The next case of importance that requires to be referred to and which may be regarded as containing an able analysis of the category of cases that might have to be dealt with under article 14 of the Constitution, is that of Ram Krishna Dalmia's case (Supra) , hereinafter referred to as the Dalmia's case (Supra) . In that case, the Central Government published in the Gazette of India dated 11th December, 1956, a notification in exercise of the powers conferred on it by section 3 of the Commissions of Inquiry Act, 1952, which was an Act to provide for the appointment of Commissions of Inquiry and for vesting the Commissions with certain powers, namely, to investigate into certain heads of charges in respect of certain companies. Under this notification, the Central Government appointed a Commission of Inquiry consisting of three members, the chairman of which was a judge of the Bombay High Court, and the Commission was charged with the duty of enquiring and reporting on the administration of the affairs of the various companies set out in the schedule, and the scope and details of such inquiry were set out in the notification, which undoubtedly gave extensive powers to the Commission by way of investigation into the affairs of the scheduled companies. Both the constitutional validity of the notification and of the Act under which the notification was issued, were called in question in that case. The Supreme Court, after rejecting the contention based on legislative competence, considered the question of the constitutionality of the Act, with particular reference to article 14 of the Constitution. They quoted with approval the following observations of the Constitution Bench of seven judges of the Supreme Court made in the case of Budhan Choudhury v. State of Bihar [1955] 1 SCR 1045, 1049 ; AIR [1955] SC 191 :

"It is now well established that while article 14 forbids class legislation, it does not forbid reasonable classification for the purposes of legislation. In order, however, to pass the test of permissible classification, two conditions must be fulfilled, namely, (i) that the classification must be founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group and (ii) that that differentia must have a rational relation to the object sought to be achieved by the statute in question. The classification may be founded on different bases, namely, geographical, or according to objects or occupations or the like. What is necessary is that there must be a nexus between the basis of classification and the object of the Act under consideration. It is also well established by the decisions of this court that article 14 condemns discrimination not only by a substantive law but also by a law of procedure."

It was further held in that case that the decisions of the Supreme Court established the following principles which would have to be constantly borne in mind by the courts when called upon to adjudge the constitutionality of any particular law attacked as discriminatory and violative of the equal protection of the laws :

(a) That a law may be constitutional even though it relates to a single individual if, on account of some special circumstances or reasons applicable to him and not applicable to others, that single individual may be treated as a class by himself ;

(b) that there is always a presumption in favour of the constitutionality of an enactment and the burden is upon him who attacks it to show that there has been a clear transgression of the constitutional principles;

(c) that it must be presumed that the legislature understands and correctly appreciates the needs of its own people, that its laws are directed to problems made manifest by experience and that its discriminations are based on adequate grounds ;

(d) that the legislature is free to recognise degrees of harm and may confine its restrictions to those cases where the need is deemed to be the clearest;

(e) that in order to sustain the presumption of constitutionality, the court may take into consideration matters of common knowledge, matters of common report, the history of the times and may assume every state of facts which can be conceived existing at the time of legislation ; and

(f) that while good faith and knowledge of the existing conditions on the part of a legislature are to be presumed, if there is nothing on the face of the law or the surrounding circumstances brought to the notice of the court on which the classification may reasonably be regarded as based, the presumption of constitutionality cannot be carried to the extent of always holding that there must be some undisclosed and unknown reasons for subjecting certain individuals or corporations to hostile or discriminating legislation.

Having thus laid down the above principles as established, the Supreme Court attempted to analyse the effect of these principles in their practical application to the cases that are likely to arise for consideration under article 14 of the Constitution and classified the same as follows :

(1) A statute may itself indicate the persons or things to whom its provisions are intended to apply and the basis of the classification of such persons or things may appear on the face of the statute or may be gathered from the surrounding circumstances known to or brought to the notice of the court.

In determining the validity or otherwise of such a statute, the court has to examine whether such classification is or can be reasonably regarded as based upon some differentia which distinguishes such persons or things grouped together from those left out of the group and whether such differentia has a reasonable relation to the object sought to be achieved by the statute, no matter whether the provisions of the statute are intended to apply only to a particular person or thing or only to a certain class of persons or things. Where the court finds that the classification satisfies the tests, the court will uphold the validity of the law, as it did in Chiran-jitlal v. Union of India [1950] SCR 869 ; AIR [1951] SC 41 State of Bombay v. F.N. Balsara [1951] SCR 682 ; AIR [1951] SC 318 Kedar Nath Bajoria v. State of West Bengal [1954] SCR 30 ; AIR [1953] SC 404, V. M. Syed Mohammad & Co. v. State of Andhra [1954] SCR 1117 ; AIR [1954] SC 314 and Budhan Choudhury v. State of Bihar [1955] 1 SCR 1045 ; AIR [1955] SC 191.

(2) A statute may direct its provisions against one individual person or thing or to several individual persons or things but no reasonable basis of classification may appear on the face of it or be deducible from the sur rounding circumstances, or matters of common knowledge.

In such a case, the court will strike down the law as an instance of naked discrimination, as it did in Ameerunnissa Begum v. Mahboob Begum [1953] SCR 404 ; AIR [1953] SC 91 and Ramprasad Narayan Sahi v. State of Bihar [1953] SCR 1129 ; AIR [1953] SC 215.

(3) A statute may not make any classification of the persons or things for the purpose of applying its provisions, but may leave it to the discretion of the Government to select and classify persons or things to whom its pro visions are to apply.

In determining the question of the validity or otherwise of such a statute, the court will not strike down the law out of hand only because no classification appears on its face or because a discretion is given to the Government to make the selection or classification, but will go on to examine and ascertain if the statute has laid down any principle or policy for the guidance of the exercise of discretion by the Government in the matter of selection or classification. After such scrutiny the court will strike down the statute if it does not lay down any principle or policy for guiding the exercise of discretion by the Government in the matter of selection or classification, on the ground that the statute provides for the delegation of arbitrary and uncontrolled power to the Government so as to enable it to discriminate between persons or things similarly situate, and that, therefore, the discrimination is inherent in the statute itself. In such a case the court will strike down both the law as well as the executive action taken under such law, as it did in State of West Bengal's case (Supra) , Dwarka Prasad v. State of Uttar Pradesh [1954] SCR 803 ; AIR [1954] SC 224 and Dhirendra Kumar's case (Supra) .

(4) A statute may not make a classification of the persons or things for the purpose of applying its provisions, and may leave it to the discretion of the Government to select and classify the persons or things to whom its provisions are to apply, but may at the same time lay down a policy or principle for the guidance of the exercise of discretion by the Government in the matter of such selection or classification; the court will uphold the law as constitutional as it did in Kathi Raning Rawat's case (Supra) .

(5) A statute may not make a classification of the persons or things to whom their provisions are intended to apply and leave it to the discretion of the Government to select or classify the persons or things for applying those provisions according to the policy or the principle laid down by the statute itself for guidance of the exercise of discretion by the Government in the matter of such selection or classification. If the Government in making the selection or classification does not proceed on or follow such policy or principle, it has been held by this court, in Kathi Raning Rawat's case (Supra) . that in such a case the executive action but not the statute should be condemned as unconstitutional.

Having thus formulated the types of cases that are likely to arise for consideration with reference to the constitutionality of a statute under article 14 of the Constitution, the Supreme Court applied those principles and arrived at the conclusion in the case before them that no arbitrary or uncontrolled power had been delegated to the Government, and that, therefore, the law itself could not be regarded as bad, and the Supreme Court further held that they were not satisfied that the circumstances indicated in the notification in question and the affidavits filed on behalf of the Union of India may not have the true basis of further inquiry into the matter.

The subsequent decisions of the Supreme Court in the case of J . Pandu-rangarao v. Andhra Pradesh Public Service Commission [1963] 1 SCR 707 ; AIR [1963] SC 268 or in Khandige Sham Bhat v. Agricultural Income-tax Officer, Kasaragod [1963] 48 ITR (SC) 21 do not usefully add to the able analysis of the law contained in Dalmia's case (Supra) , and, therefore, do not require any detailed reference.

On a plain reading of article 14 of the Constitution, it would be clear that so far as the article goes, which contains no limitation, as already pointed out, it prohibits the denial to any person within the territory of India (i) equality before the law and (ii) equal protection of the laws.

Although it is not said in so many words, the equality and the equal protection contemplated and guaranteed to any person is obviously vis-à-vis other persons within the territory of India. Every person shall be treated before the law on an equal footing with all other persons, and that every person shall receive protection of the laws to the same measure and extent as every other person receives within the territory of India. In other words, what the article means is that there shall be no discrimination before the law between one person and another or other persons similarly placed, and that there shall be no discrimination between one person and another or others in the matter of receiving the protection of the laws.

The difficulty lies in appreciating the scope and the practical application of the article. Does the article mean that every person within the territory of India should always and in all circumstances and conditions, enjoy equality before the law with every other person ? In the nature of things, this is impossible, because of the varied educational and cultural attainments of different persons, the great disparity in status and position in life which ordinarily obtains among human beings and the necessarily incidental differences in the matter of the facilities, the capacities and the power to command the resources, available in life. All these differences and disparities are fundamental in character, so that when laws are made to apply to these different categories of individuals, they have to be framed so as to conform to and be applicable for the individuals concerned, in the light of the different circumstances and conditions in which they are placed. To give a clear example, there may be laws framed under the Constitution which are expressly framed to apply to the servants of the State or to the members of the armed forces, which laws would become utterly irrelevant and totally inapplicable to the ordinary persons who have nothing to do with any employment in and in the defence of the State. Such framing of different laws may at first blush seem to infringe the article, taking the article in its plain language. But it could hardly have been in the contemplation of the Constitution makers that the equality clause should involve the framing of identical laws as applicable to every individual, irrespective of the conditions determining the framing of those laws. The expression "equality" referred to in the article, obviously, applies to laws made applicable to persons who are similarly situate in all respects. For example, the penal law of the land. This law does not depend for its applicability on any status or position or condition of life of the individual. The penal law can be applied and should be applied equally to all persons within the territory of India. In other words, if the same offence is committed by two different individuals, the same law should apply to them and govern the disposal of the punitive action to be taken against them. So that if A and B commit the same offence, they should be dealt with under the same law, both substantive and procedural, and if they are dealt with by different laws, whether substantive or procedural, the equality guaranteed by the article is disturbed, and immediately the article would come into play.

Hence, it is necessary to assume that the article in question must be deemed to recognise the need and justification for applying separate sets of laws to individuals or groups of individuals not similarly placed and not belonging to the same group, and in the nature of things, therefore, the set of laws applicable to one individual or group of individuals may not always be made applicable to any other individual or group, not similarly placed. What is contemplated by the article, therefore, is not the difference in the laws applicable to different groups but in the application of different laws in the same group of persons similarly placed. This restriction is inherent in the article itself and must be recognised and borne in mind whenever the article is applied. So that the question whether this article had been violated by any particular law would only arise when different sets of laws are applied to the individuals in the same group or who are similarly placed, or to the persons in different groups, which groups are in all respects similarly placed with each other. Hence article 14 can be said to , be violated if different laws are made to apply to A and B persons who are similarly placed or to A and B groups which are similarly placed.

This leads us to the consideration of the question whether, where such discrimination is established and different sets of laws are applied to different persons or groups similarly placed, it would not offend article 14 of the Constitution ?

It is in this context that we would have to regard the decisions of the Supreme Court under this article. An analysis of these decisions seems to lend support to the following conclusions :

(1) Where there are two sets of laws or two different provisions of law, in respect of the same matter, which could be applied to the same group or groups of persons, are referable and applicable to the same field or territory in the legislative domain, and one of these is more drastic than the other, the more drastic of the laws must be struck down as discriminatory and offending article 14 of the Constitution :

Suraj Mall Mohta & Co. v. A.V. Visvanatha Sastri [1954] 26 ITR 1 ; [1955] 1 SCR 448, Shree Meenakshi Mills Ltd.'s case (Supra) and M. Ct. Muthiah's case (Supra) .

(2) Where two different sets of laws are sought to be applied to persons or groups of persons similarly placed, the legislature having classified these persons or groups of persons for the purpose of separate application of these laws, the course adopted by the legislature is obviously discriminatory, but may be supported provided the following conditions are fulfilled :

(i) That there is a reasonable nexus between the basis of the classification made, and the object sought to be achieved by the legislature in making the classification, the classification itself being based on an intelligible differentia between the classified categories. Otherwise, the statute must be struck down as violative of article 14.

(ii) Where the statute makes no such classification but merely provides for two sets of laws, and, apparently, leaves it to the executive authority to apply the same to different sets of persons similarly placed, the conditions laid down in No. (i) must be fulfilled by the executive when it makes the classification for the separate application of the different sets of laws in question, and, in addition, the statute itself must lay down the policy and the principles which would guide the executive in the application of those different laws to the different persons or sets of persons, and that policy and those principles must be implemented fully in making this classification by the executive.

Where, therefore, the nexus between the basis of possible classification and the object of the Act is not established, and where no intelligible differentia is indicated in the statute affording the basis in making the classification for the application of the different laws, and where the policy or principles which would enable the executive to make the selection for the application of the different laws, are not laid down clearly in the statute itself, the statute, obviously, has to be struck down along with the executive action taken on the basis thereof.

(iii) Where the conditions in (ii) are fulfilled by the statute, but the executive does not act in conformity with the policy and principles laid down in the statute, the executive action has to be struck down as violative of article 14, while the statute itself may be saved from the bar.

Bearing the above principles in mind, I shall now examine the instant case. It is clear that both sections 37(1) and 37(2) of the Act deal with the production of the documents, account books, etc., required in connection with any proceeding under the Act, for the purposes of the Act, namely, the proper assessment of the income-tax leviable on and payable by any person liable for such levy and payment. Both the provisions cover the same subject and answer the same purpose and are capable of being employed against probable income-tax assessees fulfilling the policy of the Act, namely, to secure correct assessment of the income-tax payable and to prevent the evasion of income-tax.

On a careful consideration of the provisions of section 37(1) side by side with section 37(2) , the following conclusions must inevitably be reached :

(1) The power under section 37(1) is judicial whereas that under section 37(2) is administrative or executive power, more in the nature of police powers contemplated by the provisions of the Code of Criminal Procedure with the difference that under the Code of Criminal Procedure there is the safety of the warrant of a judicial officer that authorised the action, where as under section 37(2) it is merely an authorisation of an executive officer, namely, the Commissioner of Income-tax, who, as the head of the income- tax department in the State, is himself very much interested in the action sought to be promulgated.

(2) Section 37(1) involves the obligation on the part of the authority concerned to be guided by the provisions of the Code of Civil Procedure for the exercise of the power, for example, for the discovery and inspection of documents, etc., the authority should be guided by Order 11 of the Code of Civil Procedure which involves the giving of notice to the person proceeded against. Similar is the rule contained in Order 13 relating to the production, impounding and return of documents, and Order 26 dealing with the issue of commissions. All the safeguards as laid down by the Civil Procedure Code come into play in the exercise of the judicial power under section 37(1) whereas there are no such guiding factors or controlling provisions of law subject to which the executive power is to be exercised under section 37(2) and, although the provisions of the Code of Criminal Procedure, 1898 (Act V of 1898) , relating to searches are declared to apply under the section, none of the safeguards provided in the Criminal Procedure Code are made applicable. The sections of the Criminal Procedure Code dealing with searches are contained in sections 96 to 105 of the Code of Criminal Procedure. Everyone of these sections contemplates the issue of warrant by a court or a Magistrate, whereas section 37(2) merely empowers an Income-tax Officer to exercise practically all the powers of search and seizure under the Code of Criminal Procedure, without the safeguards and guarantee of a judicial authority's warrant or direction, and all that is required being merely an authorisation by the Commissioner,

Hence, in the nature of things, the powers under section 37(1) and the powers under section 37(2) are two distinct powers, independent of each other, and at the same time operate on the same field or strip of territory or jurisdiction, and are calculated to achieve the same object and purpose, namely, the securing of documents, etc., from an assessee, to enable correct assessment of income-tax being made. In the nature of the things, therefore, the power under section 37(2) is neither ancillary nor an additional power; nor an alternative power to the power under section 37(1) . They are two distinct, different and independent powers; and, obviously, the power under section 37(2) , in the nature of the things, is much more drastic and onerous than the power under section 37(1) , as also conceded by Dr. Paul, the counsel for the respondents, and, hence, to permit action being taken under section 37(2) , instead of under section 37(1) , which is a less drastic and less prejudicial provision, would involve a clear discrimination prohibited by article 14 of the Constitution, as explained and laid down in the decisions of the Supreme Court referred to above.

I am, therefore, clearly of opinion that the provisions of section 37(2) of the Act must be struck down as being violative of the fundamental right enshrined in article 14 of the Constitution.

In view of the conclusions reached by me, it may not be necessary to examine whether the instant case fell within one or the other of the categories of cases in the analysis made herein earlier, and the groups or categories indicated in Dalmia's case (Supra) . I have accordingly refrained from dealing with those aspects of the matter which, in the view I have taken, ceased to be relevant or have any application in the instant case.

As I have found that section 37(2) of the Act is to be struck down as violative of article 14 of the Constitution, it may, strictly speaking, be not necessary for us to examine whether the impugned provisions offended against the fundamental right in article 19(1) (g) of the Constitution also, inasmuch as even if it be held that the provision did not offend article 19(1) (g) , it would make no difference to the disposal of the case. However, as the matter had been argued at great length and in detail, we would like to briefly advert to those arguments and examine and consider the same for the sake of completeness.

It was contended by Mr. Roy, as already pointed out, that section 37(2) of the Act was violative of the fundamental right guaranteed under article 19(1) (f) and more particularly under article 19(1) (g) of the Constitution, namely, the right of freedom to hold and enjoy property and to practise any profession, or to carry on any trade, occupation or business. His main contention is that the provisions for the search and seizure contained in section 37(2) of the Act are extremely onerous and are clear restrictions on the fundamental rights guaranteed under article 19(1) (f) and certainly under article 19(1) (g) of the Constitution. In this context he pointed out:

(1) that there was a concentration of naked, arbitrary and uncontrolled power on the executive, without any check, control and guidance;

(2) that no principle, standard or condition had been laid down for the exercise of the power by the executive;

(3) that no representation could be made, nor any provision made to the effect by the party likely to be affected before the exercise of the power under the section;

(4) that persons proceeded against could not know what were the sources or nature of the information upon which the belief and opinion of the Commissioner were based, or what the reasons for the belief or opinion formed by the Income-tax Officer were ;

(5) that there was no provision enabling a person affected to challenge the exercise of the power after the same had been exercised ;

(6) that no time-limit had been fixed for the return of books, etc., and there was no provision even for the return of the books, documents, etc., seized; and,

(7) that even strangers who had no connection with the proceedings could be affected without their having been given any right to object either before or after the search or seizure.

Accordingly Mr. Roy contended that the restrictions placed by the impugned sub-section are not at all reasonable, and, therefore, offend the fundamental rights guaranteed by article 19(1) (g) of the Constitution, inasmuch as the exercise of the right by the executive in this manner would directly have the effect of paralysing the trade and business and occupation of the persons affected, and consequently, violate the fundamental right so guaranteed. He placed reliance on the case of Gurbachan Singh v. State of Bombay [1952] SCR 737 ; AIR [1952] SC 221, 224, in support of the proposition that the condition of reasonableness as to the restrictions imposed would apply equally to the substantive law as well as to the procedural laws, and that the court had to look, in each case, to the circumstances and the manner in which the restrictions had been imposed, and that any restrictions before they could be justified under the saving clauses of article 19 must satisfy the test of reasonableness. Mr. Roy further contended that the court must apply its intellectuality to each individual statute for the purpose of ascertaining objectively the reasonableness thereof, there being no abstract standards of such reasonableness. In this connection he placed reliance on the cases of Chintaman Rao v. State of Madhya Pradesh [1950] SCR 759, 798, State of Madras v. V. G. Row [1952] SCR 597 ; AIR [1952] SC 196, 200, Md. Hanif Quareshi v. State of Bihar [1959] SCR 629 ; AIR [1958] SC 731, 744, Virendra v. State of Punjab [1958] SCR 308 ; AIR [1957] SC 896, 901, 903, Diwan Sugar & General Mills (P.) Ltd. v. Union of India [1959] Supp. 2 SCR 123 ; AIR [1959] SC 626, 632, Lord Krishna Sugar Mills Ltd v. Union of India [1960] 1 SCR 39 ; AIR [1959] SC 1124, 1132 and Hamdard Dawakhana case (Supra) . He further placed reliance on the cases of Raghubir Singh v. Court of Wards, Ajmer [1953] SCR 1049 ; AIR [1953] SC 373, Dwarka Prasad Laxmi Narain v. State of Uttar Pradesh [1954] SCR 803, State of Rajasthan v. Nath Mal [1954] SCR 982, Ganpati Singhji v. State of Ajmer [1955] 1 SCR 1065, Mohd. Hanif Quareshi's case (Supra) , Abdul Hakim Quraishi v. State of Bihar [1961] 2 SCR 610, State of Madhya Pradesh v. Baldeo Prasad [1961] 1 SCR 970 ; AIR [1961] SC 293 and Kameshwar Prasad v. State of Bihar AIR [1962] SC 1166.

Dr. Paul, the learned counsel for the respondent, placed reliance on the case of M.P. Sharma v. Satish Chandra [1954] SCR 1077 ; AIR [1954] SC 300, 302 in support of his contention that mere search and seizure do not violate any fundamental right, and that all that section 37(2) of the Act authorises is the search of premises for the seizure of books, documents, etc. In that case, the Registrar of Joint. Stock Companies, Delhi State, lodged information with the Inspector-General, Delhi Special Police Establishment, to the effect that an investigation into the affairs of the Dalmia Jain Airways Ltd. was ordered by the Government, and that the investigation report indicated that an organised attempt was made from the inception of the company, to misappropriate and embezzle the funds of the company and declare it to be substantial loss, and to conceal from the shareholders the true state of affairs. On the basis of the information, an application was made to the District Magistrate, Delhi, under section 96, Criminal Procedure Code, for the issue of warrants for the search of the documents, and in the places, as per schedules furnished, and permission was also sought for investigating into some other non-cognizable offences disclosed by the information. On the same day, the District Magistrate ordered investigation of the offences and issued warrants for simultaneous searches at as many as 34 places, and, accordingly, searches were made on subsequent days, and a voluminous mass of records was seized from various places.

The petitioners in that case prayed that the search warrants may be quashed as being absolutely illegal and asked for return of the documents seized. The petitioners urged two grounds on which they challenged the constitutional validity of those searches, namely, that their fundamental rights under article 20(3) and article 19(1) (f) had been violated by the searches in question.

Considering the contentions based on article 19(1) (f) , the Supreme Court felt that there was no arguable case, and in that context observed as follows at page 302 M.P. Sharma v. Satish Chandra [1954] SCR 1077, 1081, 1096 ; AIR [1954] SC 300 :

"But, a search by itself is not a restriction on the right to hold and enjoy property. No doubt a seizure and carrying away is a restriction of the possession and enjoyment of the property seized. This, however, is only temporary and for the limited purpose of investigation. A search and seizure is, therefore, only a temporary interference with the right to hold the premises searched and the articles seized. Statutory regulation in this behalf is a necessary and reasonable restriction and cannot 'per se' be considered to be unconstitutional. The damage, if any, caused by such temporary interference if found to be in excess of legal authority is a matter for redress in other proceedings. We are unable to see how any question of violation of article 19(1) (f) is involved in this case in respect of the warrants in question, which purport to be under the first alternative of section 96(1) of the Criminal Procedure Code."

It is clear from the above passage that the learned judges of the Supreme Court were of the view that the search and seizure do amount to a temporary interference with the right to hold and enjoy the premises searched, and the possession and enjoyment of the articles seized. But they, nevertheless, held in the particular circumstances of that case, that the statutory regulation in that behalf was a necessary or a reasonable restriction, and hence could not "per se" be considered to be unconstitutional, and that the damage, if any, caused by such temporary interference, if found to be in excess of legal authority, would be a matter for redress in other proceedings.

In connection with this case, Mr. Roy pointed out that Sharma's case (Supra) was one under article 19(1) (f) and not under article 19(1) (g) , and that although the search and seizure were accepted as temporary invasions of the right to hold and enjoy property, the invasion of the right was supported on the ground that the restriction involved was reasonable because of its temporary duration, and because of the fact that there was a guarantee of the issue of search warrant by a Magistrate exercising judicial functions. This contention no doubt receives support from the following observations of the learned judges of the Supreme Court at pages 306 and 307 of the same case, which are as follows Sharma's ( Supra) :

"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 strained construction. Nor is it legitimate to assume that the constitutional protection 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 circumvention 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."

Mr. Roy further pointed out that, in the instant case, the seizure was not of a temporary duration nor was it effected under a search warrant issued in exercise of the judicial power of a Magistrate, as the search and seizure were effected under an authorisation given by the Commissioner, who has no judicial power at all, and it could be effected even when no proceedings as such were pending. In this context Mr. Roy placed reliance in the case of Bengal Immunity Co. Ltd. v. State of Bihar [1955] 2 SCR 603 ; [1955] 6 STC 446 ; AIR [1955] SC 661, 668 for the proposition that it was held in that case that the various penalties provided under section 26 of the Bihar Sales Tax Act, 1947, including obstruction to search and seizure of documents under section 17, are no doubt restrictions upon the fundamental right under article 19(1) (g) of the Constitution. He further placed reliance in the case of Wazir Chand v. State of Himachal Pradesh [1955] 1 SCR 408 ; AIR [1654] SC 415 and in the case of Hamdard Dawakhana v. Union of India [1960] 2 SCR 67 ; AIR [1960] SC 554 in support of the proposition that the Supreme Court has granted the relief against the exercise of power of search and seizure, in those cases.

In the former case, the police in India seized goods of the petitioners therein, at the instance of the police of Jammu and Kashmir, and the seizure was not under any authority of law inasmuch as they were not under the orders of any Magistrate nor were they effected under any of the sections 51, 95, 98 and 165 of the Criminal Procedure Code, and the whole matter was a hole-and-corner affair between the officers of the Kashmir Police and the Indian Police. The learned judges of the Supreme Court held that the seizure of the goods from the possession of the petitioner amounted to an infringement of his fundamental rights both under article 19 and article 31 of the Constitution and that he was entitled to relief under article 226 of the Constitution.

In the latter case, the constitutionality of section 8 of the Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954, was challenged, on the ground that it had violated the fundamental rights guaranteed in the Constitution, particularly by articles 21 and 31. This section runs as follows:

"Any person authorised by the State Government in this behalf may, at any time, seize……and detain any document, article or thing which such person has reason to believe contains any advertisement which contravenes any of the provisions of this Act and the court trying such contravention may direct that such document (including all copies thereof) article or thing shall be forfeited to the Government."

It was contended in that case that there was no limitation placed on, no rules and regulations made for and no safeguards provided in regard to the powers of a person authorised in that behalf by the Government to seize and detain any document, article or anything, which, in the opinion of such person, contains any advertisement contravening any of the provisions of the Act. Dealing with that contention the learned judges of the Supreme Court formed the opinion that this portion of the section went far beyond the purpose for which the Act was enacted, and the absence of the safeguards which the legislature had thought it necessary and expedient in other statutes, e.g., the Indian Drugs Act, was an unreasonable restriction on the fundamental rights of the petitioners and, therefore, the first portion of the section was unconstitutional.

A careful consideration of these decisions leads us to the following conclusions :

(1) Search of the premises of a person and seizure of documents, books, etc., or any property belonging to that person, constitute invasions of his fundamental rights not only under article 19(1) (g) but also under article 19(1) (f) , although temporary seizure of property as the result of a search in execution of a warrant issued by a Magistrate in exercise of his judicial power vested in him under law, may be regarded in the particular circum stances of the case as amounting to a reasonable restriction on the fundamental right under article 19(1) (f) .

(2) Such search of the premises and seizure of various account books, documents, etc., necessary and useful for carrying on the trade or business of a person, undoubtedly constitute invasions of the fundamental right to practise any profession, or to carry on any occupation, trade or business, guaranteed under article 19(1) (g) of the Constitution, particularly when any such invasion is not the result of or effected during the enforcement of a judicial process or warrant issued by a Magistrate under the Criminal Procedure Code.

Hence, I experience no difficulty in coming to the conclusion that section 37(2) of the Act, which gives uncontrolled and unrestricted power to an Income-tax Officer to enter into any premises and to seize any document which he may regard as relevant for the purpose of any proceedings that may be taken or pending would, undoubtedly, amount to an invasion of and interference with the fundamental rights guaranteed under article 19(1) (g) of the Constitution.

The only question, therefore, that requires to be examined is, whether this restriction and invasion of the fundamental right guaranteed under article 19(1) (g) can be saved and justified on the ground that the restriction or invasion amounts to a reasonable restriction within the meaning of article 19(6) of the Constitution. In this connection, Dr. Paul pointed out that there are many checks placed on the officers concerned, who have to exercise the power under section 37(2) of the Act, and, therefore, the restriction must be regarded as a reasonable restriction. He stated that there was a legislative policy in the Act itself, namely, the realisation of income-tax and the prevention of evasion of the tax ; that the power under section 37(2) was made subject to rules ; that the authorisation by the Commissioner on which the Income-tax Officer has to act, which is to be in writing, operates as a safeguard, particularly as the Commissioner has to record his reasons in writing before he issues the authorisation ; that, further, the Income-tax Officer himself must have reason to believe that the books, etc., seized are relevant for or useful to any proceedings under the Act, and must have formed an opinion to that effect, and also because the Code of Criminal Procedure was advisedly held to apply to these searches. He further contended that there was a right of representation to the party aggrieved in view of sections 5(7) , 5(7) (b) , 8 and 33A(2) of the Act.

To this Mr. Roy replied that these so called checks were merely illusory; that there was no legislative policy as such indicated in the section which would operate or which would serve as a guide to the executive in exercising the power under section 37(2) of the Act; that the rules in question framed under the Act threw no light whatsoever on the matter, and afforded no assistance to the executive in the exercise of the power ; that none of the sections relied on by the opposite party gave any right of representation or appeal which would only have been created by the statute ; the Income-tax Act itself had created no such right; that section 33A(2) related to an asses-see and also applied in the case of an order which is passed by an authority subordinate to the Commissioner, whereas under section 37(2) , it is only the Commissioner who issues the authorisation, and that, therefore, there can be no question of representation before the Commissioner, and that farther, the scope of section 33A is limited to orders in respect of assessment.

It would be useful and necessary to refer to the rules framed by the Central Board of Revenue in this behalf published in the Notification S.R.O. 1953 dated 6th June, 1957, styled : "Income-tax (Search of Premises and Seizure of Documents) Rules, 1957". These Rules are as follows :

"S.R.O. 19 53.--In exercise of the powers conferred by sub-section (1) of section 59 of the Indian Income-tax Act, 1922 (XI of 1922) , the Central Board of Revenue hereby makes the following rules for the purposes of subsection (2) of section 37 of the said Act, the same having been previously published as required by sub-section (4) of section 59 of the said Act namely:--

1. These rules may be called the Income-tax (Search of Premises and Seizure of Documents) Rules, 1957.

2. The Commissioner of Income-tax may, for reasons recorded, issue a written order under his own signature and bearing his seal, specially authorising any Income-tax Officer, subordinate to him to enter any building, or place to be specified therein where he has reason to believe that books of accounts or other documents which, in his opinion, will be relevant to or useful for any proceedings under the Income-tax Act, 1922, may be found. Such order may authorise the Income-tax Officer to do all or any of the following acts, namely :--

(a) to enter the said building, or place with such assistance of police officers as may be required ;

(b) to search the same and to place identification marks on such books of account or other documents found therein as, in his opinion, will be relevant to or useful for any proceedings under the Act and to make a list of such books or documents with particulars of the identification marks thereon;

(d) to take possession of or seize any such books or documents ;

(e) to make a note or an inventory of any other article or thing found in the course of such search which, in his opinion, will be useful for or relevant to any proceedings under the Act;

(f) to convey such books or documents to the office of the Income-tax Officer or any other authority not below the rank of Income-tax Officer employed in the execution of the Act.

3. Whenever any building or place authorised to be searched is closed, any person residing in or being in charge of such building or place shall, on demand by the Income-tax Officer and on production of the authority, allow him free ingress thereto and afford all reasonable facilities for a search therein.

4. If ingress into such building or place cannot be so obtained it shall be lawful for the Income-tax Officer executing the authority, with such assistance of a police officer as may be required, to enter such building or place and search therein and in order to effect an entrance into such building or place, to break open any outer or inner door or window of any building or place, whether that of the person to be searched or of any other person, if after notification of his authority and purpose and demand of admittance duly made, he cannot otherwise obtain admittance :

Provided that, if any such building or place is an apartment in actual occupancy of a woman, who according to custom does not appear in public, the Income-tax Officer shall, before entering such apartment, give notice to such woman that she is at liberty to withdraw and shall afford her every reasonable facility for withdrawing and may then break open the apartment and enter it.

5. Where any person in or about such building or place is reasonably suspected of concealing about his person any article for which search is being made, such person may also be searched by the Income-tax Officer, with such assistance as he may consider necessary. If such person is a woman, the search shall be made by another woman with strict regard to decency.

6. Before making a search, the Income-tax 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 Income-tax 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 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 rule 7 shall be delivered to such occupant or person. A copy shall also be forwarded to the Commissioner.

9. When any person is searched under rule 5, a list of all things taken possession of shall be prepared and copy thereof shall be delivered to such person. A copy shall also be forwarded to the Commissioner.

The order of the Commissioner referred to in rule 2 shall be in the following form;

Warrant of Authorization under section 37(2) of the Indian Income-tax Act, 1922 (XI of 1922) and Rule 2 of the Income-tax (Search of Premises and Seizure of Documents) Rules, 1957.

(The Income-tax Officer)

Whereas information has been laid before me and on the consideration thereof I have been led to believe that certain books of account and/or documents which are or may be relevant to or useful for proceedings under the above Act in the case (name of the assessee with G.I.R. No. ) have been kept and are to be found at (specify particulars of the building or place) .

This is to authorise and require you

(Name of the Income-tax Officer)

(a) to enter and search with such assistance of police officers as may be required, the said premises ;

(b) to place identification marks on such books 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 ;

(d) to seize such books of account and/or documents, and take possession thereof;

(e) to convey such books or documents to the office of the Income-tax Officer or any other authority not below the rank of an Income-tax Officer employed in the execution of the Act; and

(f) to exercise all other powers and duties under the said section and the rules relating thereto.

Seal Commissioner of Income-tax."

"Explanatory Note

(This note is not a part of the above rules but is intended to be merely clarificatory) .

Section 37(2) of the Indian Income-tax Act, 1922, provides that any Income-tax Officer specially authorized by the Commissioner of Income-tax may enter and search any building or place where he has reason to believe that any books of account or other documents may be found which, in his opinion, will be useful for purposes of any proceeding under the said Act. He may also seize any such books or documents and make a note or inventory of any other article or thing found in the course of the search which, in his opinion, will be useful for or relevant to any proceedings under the Act.

As provided in the section, these rules have been framed for the purposes mentioned above."

On the question whether a right of representation was, in fact, necessary before the restriction could be accepted as reasonable, Dr. Paul contended that as the power was merely administrative, such a provision is not necessary. In support of this submission, he relied on Pannalal Binjraj's case (Supra) , Diwan Sugar and General Mills (P.) Ltd.'s case (Supra) and Kishan Chand Arora's case (Supra) . In our opinion, Pannalal's case (Supra) has no application to the instant case as the judgment in that case proceeded on the assumption that the power given in that case was a discretionary power and not necessarily discriminatory, and any action taken in that case under the Act in question, whether of the State Government or of the other executive authority, could be subject to scrutiny by courts and would be liable to be set aside if it was found to be mala fide or discriminatory qua the assessee. This decision further proceeded on the important point that there is no fundamental right in an assessee to be assessed in a particular area or locality, and that even considered in the light of section 64(1) and (2) of the Income-tax Act, this right is not an absolute right but is subject to the exigencies of tax collection. It was further pointed out in that case that the difference, if any, created in the position of an assessee qua others who continued to be assessed by the Income-tax Officer of the area in which they reside or carry on business, is not a material difference but a minor deviation from the general standard, and would, therefore, not amount to the denial of equal rights.

The learned judges further drew and maintained the distinction between discretion which has to be exercised with regard to a fundamental right guaranteed by the Constitution, and some other right which is given by the statute such as transfers of cases. On the facts of this case, it cannot be considered as authoritative of fundamental rights.

In Diwan Sugar and General Mills (P.) Ltd.'s case (Supra) , the decision proceeded apparently on the footing that so long as the Central Government exercised its powers in the manner provided by the Act and the Order in that case--and it was in fact found in that case that the powers had been so exercised--it could not be said that any further safeguard was necessary in the form of an appeal or otherwise. In Kishan Chand Arora's case (Supra) , it was the constitutionality of a licencing statute that came to be considered, and it was therein held that as the Commissioner had been given the discretion to grant a licence, certain conditions being fulfilled, and the fact that he granted the licence on being satisfied that the conditions in question were fulfilled or that he refused to grant the licence on not being satisfied that the conditions were fulfilled, could not in itself justify any interference. In that context, the majority judges in that case observed as follows :

"Reading them (that is the two parts of section 39 of the Calcutta Police Act No. IV of 1866) together, it is in our opinion fair and reasonable to come to the conclusion that the discretion of the Commissioner in this matter is guided by the two objects mentioned in the section and by the necessary implication contained in it that the person applying must be in actual and effective control and possession of the place where he is going to keep the eating house. The argument therefore that section 39 confers an arbitrary and uncanalised power without any criteria for guiding the discretion of the licensing authority must fail and the section cannot be held to be an unreasonable restriction on the right to carry on trade on this ground."

Dealing with the argument that no provision has been made under the Act for a hearing oral or written of the person applying for a licence, the majority Judges observed in that context, that it could not be laid down as a general proposition that where in the case of licensing statute no provision is made for hearing and there is no provision for giving reasons for refusal, the statute must be struck down as necessarily an unreasonable restriction on a fundamental right, and that no case had been cited before them which laid down such a general proposition; and the matter was disposed of by the majority judges holding that compulsion of hearing before passing the order implied in the maxim audi alterant partem applied only to judicial or quasi-judicial proceedings, and not to administrative matters.

By way of an answer to this aspect of the contentions of Dr. Paul, Mr. Roy pointed out that the Supreme Court had in some cases saved the impugned statute, inter alia, on the ground that there was a right of representation and had also in some cases struck down the statute on the ground that there was no right of representation, and that, therefore, each case had to be dealt with on its own merits. With reference to the statutes of the latter character, reliance was placed by him on the cases of Raghubir Singh v. Court of Wards, Ajmer [1953] SCR 1049 ; AIR [1953] SC 373, 375, Jagannath Ramanuj Das v. State of Orissa [1954] SCR 1046 ; AIR [1954] SC 400, 402 and Dwarka Prasad Laxmi Narain's case (Supra) . In Raghubir Singh's case ( Supra) , Mahajan J., as he then was, observed as follows :

"An enactment which prescribes a punishment or penalty for bad behaviour or for misconduct of a landlord cannot possibly be regarded as restriction on a fundamental right. Indeed a punishment is not a restriction. This was frankly conceded by the learned Attorney-General It is still more difficult to regard such a provision as a reasonable restriction on the fundamental right. When a law deprives a person of possession of his property for an indefinite period of time merely on the subjective determination of an executive officer, such a law can on no construction of the word 'reasonable' be described as coming within that expression, because it completely negatives the fundamental right by making its enjoyment depend on the mere pleasure and discretion of the executive, the citizen affected having no right to have recourse for establishing the contrary in a civil court."

In the second case, Jagannath Ramanuj Das case (Supra) , B.K. Mukherjea J., as he then was, dealing with the provisions of the Orissa Hindu Religious Endowments Act (4 of 1939) , observed as follows:

"The learned Attorney-General, appearing for the State of Orissa, has also conceded that these sections require redrafting. We think that the settling of a scheme in regard to a religious institution by an executive officer without the intervention of any judicial tribunal amounts to an unreasonable restriction upon the right of property of the superior of the religious institution which is blended with his office. Sections 38 and 39 of the Act must, therefore, be held to be invalid."

In the third case, Dwarka Prasad Laxmi Narain v. Slate of Uttar Pradesh [1954] SCR 803 ; AIR [1954] SC 224, 227, dealing with the U. P. Coal Control Order, 1953, the same learned judge observed as follows :

"……but the mischief arises when the power conferred on such officers is an arbitrary power unregulated by any rule or principle and it is left entirely to the discretion of particular persons to do anything they like without any check or control by any higher authority. A law or order, which confers arbitrary and uncontrolled power upon the executive in the matter of regulating trade or business in normally available commodities cannot but be held to be unreasonable. As has been held by this court in Chintaman Rao v. Stale of Madhya Pradesh [1950] SCR 759 ; AIR [1951] SC 118 (A) , the phrase 'reasonable restriction' connotes that the limitation imposed upon a person in enjoyment of a right should not be arbitrary or of an excessive nature beyond what is required in the interest of the public.

Legislation, which arbitrarily or excessively invades the right, cannot be said to contain the quality of reasonableness, and unless it strikes a proper balance between the freedom guaranteed under article 19(1) (g) and the social control permitted by clause (6) of article 19, it must be held to be wanting in reasonableness. It is in the light of these principles that we would proceed to examine the provisions of this Control Order, the validity of which has been impugned before us on behalf of the petitioners."

Replying to the decisions relied on by Dr. Paul, in regard to article 19(1) ( g) , Mr. Roy pointed out that in all these cases wherever a clear policy of the legislature and guidance to the executive in exercising the power were found out, the statute was saved, and otherwise the statute was struck down.

On a careful consideration of the various Supreme Court decisions cited on behalf of both sides, the legal and constitutional position may be summed up as follows with particular reference to section 37(2) of the Act.

1. The power conferred on the executive under section 37(2) by way of searching any premises and seizing any documents, etc., set out in the section, without the intervention of any Magistrate and without a warrant from him, will undoubtedly constitute an invasion of the fundamental right guaranteed under articles 19(1) (g) and 19(1) (f) of the Constitution. In this particular case, the petitioners placed emphasis on the fundamental right guaranteed under article 19(1) (g) .

2. Therefore, such an invasion could only be saved provided it involved a reasonable restriction coming within clause (6) of article 19 of the Constitution.

3. In determining whether a restriction is reasonable or not, the principles applicable may be formulated as under :

(i) Restrictions to be valid and supportable must be reasonable, and this would depend as much upon the procedural part of the law as on the substantive part: Gurbhachan Singh v. State of Bombay [1952] SCR 737 ; AIR [1952] SC 221.

(ii) The court must determine objectively the reasonableness of the statute applying its own intellectual yardstick which it considers applicable to the statute in question: Gopalan v. State of Madras [1950] SCR 88, State of Madras v. V.G. Row [1952] SCR 597 ; AIR [1952] SC 196, Md. Hanif Quareshi v. State of Bihar [1959] SCR 629 ; AIR [1958] SC 731.

(iii) The restriction must strike a balance between the guaranteed freedom under the article and the seizure or control sought to be exercised by the restriction. In other words, there should be a nexus between the restriction and the object and purpose of the control sought to be imposed by the restriction. That is, the restriction must have a reasonable relation to the object to be gained by the section of the statute: Chintaman Rao's case (Supra) .

(iv) In arriving at a decision as to the reasonableness of the restriction, the court would have to take into consideration the following :

(a) the nature of the right affected,

(b) the underlying purpose of the restriction,

(d) the disproportion of the imposition and the prevailing conditions in which the restriction is imposed.

4. Bearing these principles in mind, the further conclusion that would inevitably follow may be set out :

(i) Concentration of naked, arbitrary and uncontrolled power on the executive, even if it be for the highest objective and on the highest authority, without any check, control or guidance contained in the statute itself, is bad, and violative of article 19 of the Constitution : Virendra v. State of Punjab [1958] SCR 308 ; AIR [1957] SC 896, 901 & 903.

(ii) Applying the formula of subjective satisfaction of an executive authority, in order to override the guaranteed freedom is bad : V. G. Rao's case (Supra ) .

(iii) All contemporaneous legislation which form part of or similar to the scheme of the statute under examination could be looked into in order to determine the reasonableness of the restriction, besides the surrounding circumstances: Lord Krishna Sugar Mills Ltd.v. Union of India [1954] 1 SCR 39 ; AIR [1959] SC 1124, 1132, Hamdard Dawakhana case (Supra) .

With reference to this aspect of the matter, namely, reference to contemporaneous legislation, learned counsel for the petitioners invited our attention to the various provisions, somewhat similar to the one contained in section 37(2) of the Act, in the sales tax laws of various States. Reference was made to section 28(3) of the Andhra Pradesh Sales Tax Act, which is as follows :

"If any such officer has reason to suspect that any dealer is attempting to evade payment of any tax or other fee due from him under this Act, he may, for reasons to be recorded in writing, seize such accounts, registers or other documents of the dealer as he may consider necessary, and shall give the dealer a receipt for the same. The accounts, registers and documents so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceedings under this Act :

Provided that such accounts, registers and documents shall not be retained for more than thirty days at a time except with the permission of the next higher authority."

Mr. Roy pointed out that the power given by this section is reasonable and properly canalised, firstly by indicating the particular situation in which it should be exercised, namely, the officer having reason to suspect that any dealer was attempting to evade payment of tax or fee, and that where such seizure takes place, the section also provided for the retention of the documents for not more than the period fixed, namely thirty days, subject to the further condition that the documents should be retained only so long as may be necessary for their examination or for any inquiry or proceedings under the Act. Mr. Roy pointed out that all these safeguards are totally absent from section 37(2) of the Act.

Next, reference was made to section 44(3) of the Assam Sales Tax Act, provisions of which are similar to those of the Andhra Pradesh Sales Tax Act. Section 37(3) of the Bihar Sales Tax Act was also referred to for a similar purpose. Section 49(3) of the Bombay Sales Tax Act contains also similar conditions and restrictions. According to section I7(2A) of the Kerala Sales Tax Act, documents, accounts, etc., shall be returned within ten days of the seizure, except when they are required for prosecution. Section 29(3) of the Madhya Pradesh Sales Tax Act is similar to the provisions of section 49(3) of the Bombay Sales Tax Act. Section 41(3) of the Madras Sales Tax Act prescribed the maximum limit of 30 days for the retention of the documents. Section 28(3) of the Mysore Sales Tax Act and section 16(3) of the Orissa Sales Tax Act are similar. Section 13(3) of the Uttar Pradesh Sales Tax Act is more meticulous in the restrictions placed for exercising the power to seize account books, documents, etc., inasmuch as it lays down that the officer seizing the documents should be of a particular rank, namely, above that of the Assistant Sales Tax Officer, and that he should have had reasonable grounds for believing that any dealer is trying to evade liability for tax or other dues under the Act, and that when anything necessary for the purpose of an investigation into his liability may be found in his accounts, he may seize such accounts, etc. It would be useful to extract this section, which runs as follows :

"Section 13 :

(3) If any officer authorised under sub-section (2) , not being an Assistant Sales Tax Officer or officer below that rank, has reasonable grounds for believing that any dealer is trying to evade liability for tax or other dues under this Act, and that anything necessary for the: purposes of an investigation into his liability may be found in any account, register or documents, he may enter any office, shop, godown, vessel or vehicle in the possession of the dealer and seize such account, register or document as may be necessary. The officer seizing the account, register or document shall forthwith grant a receipt for the same and shall be bound to return them to the dealer or the person from whose custody they were seized, within a period of ninety days from the date of such seizure, after having such copies or extracts taken therefrom as may be considered necessary, provided the dealer or the aforesaid person gives a receipt, in writing, for the account, register or document, returned to him. The officer may, before returning the account, register or document, affix his signature and his official seal at one or more places thereon, and in such case the dealer or the aforesaid person will be required to mention in the receipt given by him the number of places where the signature and seal of such officer have been affixed on each account, register or document."

It may be seen from the above provisions of the sales tax laws of various States that (1) only seizure of books is provided for and not any search of the premises for the purpose of seizure; (2) the power could only be exercised when the officer concerned had reason to suspect that any dealer is attempting to evade payment of any tax or dues under the Act in question ; (3) such officer should record his reasons in writing; (4) he should grant a receipt forthwith for the documents seized ; and (5) he shall retain the same documents, etc., only for so long as may be necessary for the purpose of this Act, and in many cases the maximum period for which the documents can be retained is also specified.

Mr. Roy drew our attention to certain provisions of the Central Acts, such as section 9 of the Central Sales Tax Act, 1956, section 96 of the Code of Criminal Procedure, section 172 of the Sea Customs Act, 1878, and sections 19(2) and 19A of the Foreign Exchange Regulation Act, 1947.

Section 9 of the Central Sales Tax Act is as follows :

"9.(1) The tax payable by any dealer under this Act shall be levied and collected in the appropriate State by the Government of India in the manner provided in sub-section (2) .

(2) The authorities for the time being empowered to assess, collect and enforce payment of any tax under the general sales tax law of the appropriate State shall, on behalf of the Government of India and subject to any rules made under this Act, assess, collect and enforce payment of any tax payable by a dealer under this Act in the same manner as the tax on the sale or purchase of goods under the general sales tax law of the State is assessed, paid and collected; and for this purpose they may exercise all or any of the powers they have under the general sales tax law of the State ; and the provisions of such law, including provisions relating to returns, appeals, reviews, revisions, references, penalties and compounding of offences, shall apply accordingly.

(3) The proceeds (reduced by the cost of collection) in any financial year of any tax levied and collected under this Act in any State on behalf of the Government of India shall, except in so far as those proceeds represent proceeds attributable to Union territories, be assigned to that State and shall be retained by it; and the proceeds attributable to Union territories shall form part of the Consolidated Fund of India."

This section applies to the levy and collection of the tax under that Act, the same provisions which are applicable to the corresponding recovery of the sales tax in the particular State concerned.

Section 96 of the Code of Criminal Procedure is as follows ;

"96.(1) Where any court has reason to believe that a person to whom a summons or order under section 94 or a requisition under section 95, subsection (1) , has been or might be addressed, will not or would not produce the document or thing as required by such summons or requisition, or where such document or thing is not known to the court to be in the possession of any person, or

where the court considers that the purposes of any inquiry, trial or other proceeding under this Code will be served by a general search or inspection,

it may issue a search warrant; and the person to whom such warrant is directed, may search or inspect in accordance therewith and the provisions hereinafter contained.

(2) Nothing herein contained shall authorise any Magistrate other than a District Magistrate or Chief Presidency Magistrate to grant a warrant to search for a document, parcel or other thing in the custody of the Postal or Telegraph authorities."

It may be seen from this section that various conditions are imposed by it in controlling the exercise of the power of search and seizure, and section 97 provides for specifying in the warrant issued by the Magistrate, the particular place or part thereof which is to be searched or inspected.

Observing that the power exercisable under sections 96 and 97, Criminal Procedure Code, is exercisable under a warrant issued by a court, the power is obviously a judicial power and in spite of the fact that what is exercisable is a judicial power, Parliament found it necessary to prescribe conditions controlling and restricting even the exercise of the judicial power. It is contended, and in our opinion quite rightly, that a similar power exercisable by a non-judicial authority under section 37(2) of the Act, is not in any manner similarly controlled, inasmuch as the section does not lay down as a condition to the exercise of the power--to give an example --that there should be reason to believe that the person against whom the power is exercised is intending or attempting to evade the payment of income-tax or would not produce the document or thing by the issue of notice or summons under section 37(1) of the Act or by the making of an order under section 94 or a requisition under section 95(1) , Criminal Procedure Code.

Again looking into the Sea Customs Act, 1878, we find section 172 thereof runs as follows :

"Any Magistrate may, on application by a Customs-collector, stating his belief that dutiable or prohibited goods are secreted in any place within the local limits of the jurisdiction of such Magistrate, issue a warrant to search for such goods.

Such warrant shall be executed in the same way, and shall have the same effect, as a search warrant issued under the law relating to Criminal Procedure."

It may be seen from the above that the power to issue search warrants is first of all vested only in a Magistrate, thereby making the power a judicial one, and even this power is conditioned on the Magistrate being satisfied on the application by a Customs-collector that dutiable or prohibited goods are secreted in a place, the search for which had been applied for by the Collector. Reading this vis-a-vis section 37(2) of the Act, we again find that apart from the fact that the power is not vested in a Magistrate, and therefore, not judicial, there is no such condition attached to the exercise of the power as is contained in section 172, which ostensibly and clearly justifies the need for exercising this special power conferred on the Magistrate by the section.

Section 19(2) and (3) of the Foreign Exchange Regulation Act is as follows :

"(2) Where for the purposes of this Act the Central Government or the Reserve Bank considers it necessary or expedient to obtain and examine any information, book or other document in the possession of any person or which in the opinion of the Central Government or the Reserve Bank it is possible for such person to obtain and furnish, the Central Government or, as the case may be, the Reserve Bank may, by order in writing, require-any such person (whose name shall be specified in the order) to furnish, or to obtain and furnish, to the Central Government or the Reserve Bank or any person specified in the order with such information, book or other document.

(3) If on a representation in writing, made by a person authorised in this behalf by the Central Government or the Reserve Bank, a District Magistrate, Sub-Divisional Magistrate, Presidency Magistrate or Magistrate of the First Class, has reason to believe that a contravention of any of the provisions of this Act has been, or is being or is about to be committed in any place,

or that a person to whom an order under sub-section (2) of this section has been or might be addressed, will not or would not produce the information, book or other document,

or where such information, book or other document is not known to the Magistrate to be in the possession of any person,

or where the Magistrate considers that the purposes of any investigation or proceeding under this Act will be served by a general search or inspection,

he may issue a search warrant and the person to whom such warrant is directed may search or inspect in accordance therewith and seize any book or other document, and the provisions of the Code of Criminal Procedure, 1898 (Act V of 1898) , relating to searches under that Code shall, so far as the same are applicable, apply to searches under this sub-section :

Provided that such warrant shall not be issued to any police officer below the rank of sub-inspector.

Explanation.--In this sub-section, 'place' includes a house, building, tent, vehicle, vessel or aircraft."

Section 19A provides for the custody of documents seized in pursuance of order made under section 19(2) or section 19(3) , and is as follows:

"Where, in pursuance of an order made under sub-section (2) of section 19 or of a search warrant issued under sub-section (3) of the said section, any book or other document is furnished or seized, and the Director of Enforcement has reasons to believe that the said document would be evidence of the contravention of any of the provisions of this Act or of any rule, direction or order made thereunder, and that it would be necessary to retain the document in his custody, he may so retain the said document for a period not exceeding four months or if, before the expiry of the said period of four months, any proceedings under section 23--

(a) have been commenced before him, until the disposal of those proceedings, including the proceedings before the Appellate Board, if any, or

(b) have been commenced before a court, until the document has been filed in that court."

It may be seen from these provisions, all adequate safeguards are included in the section itself for the exercise of the power of search or seizure for the rights of the individuals affected.

A consideration of section 37(2) of the Act makes it abundantly clear that none of the above safeguards contained in similar provisions in the statutes in pari materia, of both the State and the Central Legislatures, are provided for in this sub-section.

In this context it would be useful to refer to some of the provisions of the Indian Income-tax Act itself. Section 28 of the Act deals with penalty for concealment of income or improper distribution of profits. The section contemplates action being taken only on the failure of the assessee to furnish the return or failing to comply with appropriate notice or when he had concealed particulars of his income or deliberately furnished inaccurate particulars. Section 33 provides for appeals from orders made under section 28, and section 33B provides for a revision of the orders of the Income-tax Officer by the Commissioner. Section 34 of the Act deals with cases where income escaped assessment and reasonable safeguards are contained in the section by way of notice and opportunity to be heard before action is taken. In section 34(1A) , a similar provision for notice and opportunity to be heard is included. It may thus be seen that wherever evasion of income-tax is made the basis of action, it is specifically indicated in the particular section, and adequate safeguards incorporated by way of notice, opportunity to be heard, right of appeal and right of revision, whereas such safeguards are absent in section 37(2) . Coming closer, we find from section 37(1) itself that action could be taken under that section only after notice, as contemplated by the Code of Civil Procedure. Again, the power under section 37(1) is properly restrained by adequate safeguards. In this connection section 37(3) may be noticed, which runs as follows :

"Subject to any rules made in this behalf, any authority referred to in sub-section (1) may impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act :

Provided that an Income-tax Officer shall not--

(a) impound any books of account or other documents without recording his reasons for so doing; or

(b) retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Commissioner therefor."

Strangely enough, even this safeguard is only made applicable to action taken under section 37(1) and not to action taken under section 37(2) .

Hence, on examination of section 37(2) vis-a-vis the other provisions and enactments in pari materia, as well as the other provisions in the Indian Income-tax Act itself, I experience no difficulty in coming to the conclusion that so far as section 37(2) is concerned--

(1) there is nothing to indicate the purpose and object for exercising the power under the sub-section ; in other words, no nexus is disclosed between the purpose and object of the section and the exercise of the drastic power thereunder;

(2) there is no indication as to when and in what circumstances the power in question is to be exercised;

(3) there is no indication in the sub-section in respect of which persons and whose premises, the power in question is to be exercised ;

(4) the sub-section discloses or contains no policy of the legislature; nor any principles, which, according to the legislature, afford a guidance for exercising the power under that sub-section by the executive;

(5) no opportunity is afforded to the persons affected or who are likely to be affected, to contest the exercise of the power ;

(6) no provision is made to enable the aggrieved party to make a representation ;

(7) no provision is there for any notice before the power is exercised; and,

(8) no provision is made for the return of books ; nor any time-limit set for any such return, and the above features of the impugned provision have got to be borne in mind, in determining whether the interference with the fundamental right under article 19(1) (g) is reasonable and could be justified under article 19(6) of the Constitution.

Bearing in mind and applying the principles set out in detail earlier in this judgment, I shall examine the constitutional validity of section 37(2) of the Act vis-a-vis article 19(1) (g) of the Constitution.

(1) At the outset it has to be noticed that section 37(2) , which had been introduced by way of an amendment by the Finance Act of 1956, as already pointed out, contains no specific indication of the legislative policy underlying the imposition of the restriction on the fundamental right in the section itself ; nor do I find any indication of the same elsewhere either in the Finance Act or the Income-tax Act. The preamble of the Income- tax Act is of no help, as the preamble has remained the same from the beginning of the Act, namely, 1922, and obviously, it could not throw any light on the scope of a new provision introduced into the Act, like sec tion 37(2) ; nor can the scheme of the Act be of any assistance as the scheme itself had not changed in any way by reason of introducing section 37(2) , and, therefore, cannot throw any light on the policy of the legislature in the matter of the exercise of the power and authority given to the executive under section 37(2) . Hence, I find no indication of the policy of the legislature in regard to section 37(2) in the statute itself, and this is necessary having regard to the Supreme Court decisions which lay down that the policy governing the exercise of power should be enacted by the statute itself and must be found in the statute which introduced the impugned provision.

(2) There are also no principles or standards laid down in the section to serve as a guidance, help or direction to the executive when exercising the power conferred on it by section 37(2) . The section merely gives power to the Income-tax Officer when authorised by the Commissioner to exercise the powers under the section. Hence, the conclusion appears to be inevitable that neither do we find any guiding policy nor do we find any principle laid down requiring to be complied with by the executive when exercising the power under the section, and, consequently, the section must be deemed to have conferred naked, arbitrary and uncontrolled power on the executive without any form of check, control or guidance to canalise the exercise of the power within just and understandable limitations. Hence, for these reasons alone, I feel, I would be justified in striking down section 37(2) of the Act as ultra vires of article 19(1) (g) of the Constitution, the invasion of the right not satisfying the test of reasonableness as laid down in clause (6) of article 19 of the Constitution.

In this connection it would be necessary to deal with Dr. Paul's contention that in considering the reasonableness of a statute, besides the preamble and the scheme and the purpose and object of the Act in question, the court should also examine the background in which the particular provision or the statute, as the case may be, came to be passed, and the past history, etc., could be looked into in order to ascertain the policy; and based on this argument Dr. Paul sought to refer to the budget speech of the Finance Minister as relevant to throw light on the policy of the legislation. As already pointed out, where a particular provision of the statute or the statute itself does not lay down the policy of the legislature and the principles which are to serve as a guidance for the exercise of the power conferred on the executive, reference to the background and the past history would be of no assistance. No doubt, in cases where the statute itself makes a classification as regards the categories of persons to whom the particular provision is made applicable, and a doubt arises as to the basis of such a classification, or the justification thereof, it may be open to clear the doubt by considering the background and the past history of the legislation in so far as they may throw light on the matter in question. But neither the background, and much less the budget speech of a Finance Minister, introducing the Finance Bill, could by any stretch of language be regarded as relevant where the statute itself is silent both as regards the classification as well as in regard to the legislative policy or the principles which are intended to guide the executive in either making the classification or in exercising the absolute power given under the statutory provision.

On a careful consideration of the respective contentions of the parties in the light of the materials placed before us, I have no difficulty in coming to the following conclusions :

(1) There is nothing in the section (section 37(2) ) to indicate any special legislative policy or any principles which could serve as a guide in the application of the said sub-section ; nor are any principles laid down in the Act which could serve as a guide to the executive in the exercise of the power under the said sub-section ;

(2) the rules framed, as seen above, afford no guidance in the matter except that they lay down that the Commissioner before he issues the authorisation should record his reasons;

(3) no guidance is to be found in the section as to the circumstances in which the Commissioner would be justified in authorising the search and seizure ;

(4) the power of the Commissioner is not judicial;

(5) there is no guidance in the sub-section as to when and in what circumstances the Income-tax Officer could form the opinion or entertain the belief referred to therein;

(6) there is no right of representation before the search and seizure;

(7) section 37(2) does not provide for any right of representation or appeal either against the Commissioner issuing the authorisation or against the Income-tax Officer exercising the power of search and seizure under that authorisation. The absence of any such provision in the particular facts of the case makes the restriction on the fundamental right unreasonable;

(8) the person or persons proceeded against, that is in respect of whom the power under section 37(2) is sought to be exercised, have no opportunity of knowing the ground or information on which the authorisation by the Commissioner is based, or the reasons for the belief or opinion formed by the Income-tax Officer, or the source or nature of the information on which such belief or opinion is based ;

(9) the section contains no provision enabling the person affected by the exercise of the power to challenge the same after it is exercised ;

(10) again, no time-limit has been fixed or laid down for the return of the books, documents, etc., seized, under the section; nor does the section contain any provision whatsoever for the return of the books, documents, etc., at all; and

(11) the power under the section could be exercised not merely against the assessees or intended assessees but against any person including total strangers not connected with any pending proceeding, without their having been afforded any opportunity to object to the action proposed to be taken or taken, regarding the search and seizure.

Taking all the above factors into consideration, I feel no hesitation in coming to the conclusion that (1) there has been a concentration of naked, arbitrary and unrestricted power in the executive authorities without any form of check, control, guidance or limitation ; (2) that such concentration of power in the executive not only amounts to gross violation of the fundamental right guaranteed under article 19(1) (g) , but it cannot, in the circumstances, be justified on the ground of any reasonableness, validating this encroachment on the fundamental right in question. In conclusion, I am, therefore, clearly of opinion that section 37(2) of the Act is unconstitutional and invalid by reason of its being violative of article 19(1) (g) of the Constitution as well, and that it cannot be saved on the ground that it could be regarded as amounting to a reasonable restriction falling under article 19(6) of the Constitution.

I do not wish to conclude the consideration of this case without making reference, however briefly, to the decision of a Special Bench of the Calcutta High Court in Surajmull Nagarmull v. Commissioner of Income-tax AIR [1961] Cal. 578. We have been taken closely and carefully through that judgment, and with the greatest respect to the learned judges constituting the Special Bench, I regret, for the reasons already recorded earlier in my judgment, I am unable to agree with either the reasoning adopted by the learned judges in that case, or with the conclusions reached by them on the issues arising therein. As the learned judges in that case were dealing with the same provision, namely, section 37(2) of the Act, with which I have had the occasion to deal in this judgment, I gave anxious thought to the deliberations of that Bench recorded in that judgment, but I feel I am unable to agree with the same. As that decision is, however, not binding on us in any way, I do not consider it necessary to further elaborate and examine the conclusions reached therein.

The next question to consider is the method and manner in which this power under section 37(2) of the Act has, in fact, been exercised in the instant cases. In this connection, it would be necessary to make reference to the allegations contained in the petitions, but as they are more or less similar, I consider it enough to refer to the allegations made in Civil Rule No. 195 of 1962, and the material portions thereof may be extracted as follows :

"Paragraph 47.--( i) All of a sudden on the 11th March, 1962, in the morning the respondents Nos. 4, 7, 8, 9 and 10 under the leadership of the respondent No. 3 along with various officials and employees of the income- tax department and respondent No. 10 with a posse of armed police with rifles and guns requisitioned from Dibrugarh arrived at Tinsukia by motor cars, lorries, jeeps and trucks and proceeded to the police station at Tinsukia. At the said police station the said respondents under the leadership of the respondents Nos. 3 and 10 requisition d further police force from the Tinsukia police station and thereafter accompanied by about 100 armed policemen (both from Dibrugarh and Tinsukia) started raiding simultaneously various premises and/or offices in Tinsukia belonging either to your petitioner or to one or other of its directors or to the companies mentioned in paragraph 8 hereof or to one or other of their directors or even to companies having nothing to do with any of your petitioner. The entire operation was conducted and guided by the respondent No. 3 who positioned him self at the income-tax office at Tinsukia and from there directed the manner in which the said income-tax officers, their men and the said policemen should function. The said respondent No. 4 was constantly taking instructions from the respondent No. 3 by telephone. The entire police force was being directed by respondent No. 10……

(iii) The said search of the premises and/or office of your petitioner as also of the said companies was commenced simultaneously at about 10 a.m. on the said 11th March, 1962, and continued till 11 p.m. on the said date. In the course of the said purported search, the premises and/or offices of the said companies including the residence of the directors as well as the premises and/or offices of one Himalayan Plywood Industries Private Ltd. and one Tinsukia Timber Trading Co. and the residence of the said Maheswari, and the office of one Jagadamba Stores, all in Tinsukia, were ran sacked and diverse documents, papers and books, original contracts, hundis and title deeds were seized therefrom. A copy of the seizure list as pre pared by the income-tax department is annexed hereto and marked "F"…… Your petitioner states that the income-tax officials seized and removed original contracts, hundis, railway receipts, receipts vouchers, title deeds, which were in a loose form without making any list and without taking any signature of your petitioner's employees thereon.

(iv) In the course of the said search and seizure the employees and the officers of the income-tax department and police under the direction of the respondent No. 10 acted in an extremely high-handed manner, tore up various documents, voucher receipts including requisition slips of certain cheque books, went and searched apartments occupied by the ladies of the household with the sole object of bringing your petitioner and/or its directors down in the estimation of the people of the locality and generally subjecting your petitioner and/or its directors to hatred, contempt and ridicule and also to ruin your petitioner's business……

(x) In the course of their said operations the said respondents Nos. 4, 7, 8, and 9 proceeded under 4 warrants of authorisation purported to be issued under section 37(2) of the said Act and rule 2 of the said rules which in spite of demand were not shown to your petitioner and/or its directors...

(xviii) The mala fide nature of the search will appear from the fact that the bodies of the employees of your petitioner did not escape the hands of the income-tax department. Several employees of your petitioner in the Siding Bazaar were made naked in the presence of large number of the public which had gathered outside and their persons were thoroughly searched."

Besides these allegations, the petitioners contend that these high-handed acts of the Income-tax Officers were possible because of the naked, uncontrolled and arbitrary power conferred on them by section 37(2) ; that the fact that the very provision itself was contrary to article 19(1) (g) and that the restriction is not reasonable as, according to the petitioners, it gave room for such unscrupulous and high-handed action on the part of the executive, which action clearly amounted to a patent and drastic invasion on their fundamental rights.

Mr. Roy pointed out that the seriousness of all these illegal and high-handed actions must be judged in the light of the other undisputed facts and circumstances of the case, namely, that his client, the petitioner in Civil Rule No. 195 of 1962, had been all along assessed in accordance with the provisions of the Income-tax Act; that he had duly paid all taxes from time to time and produced all books, documents, papers, etc., whatsoever required, and assisted the income-tax authorities in every possible way ; that even on January 8, 1962, respondent No. 4, had completed the hearing of the income-tax case of the petitioner for the assessment year 1960-61; that the petitioner had produced all the books, documents, papers, etc., for the inspection and scrutiny of respondent No. 4, who had duly inspected and scrutinised them and returned the same to the petitioner ; that at no time had any occasion arisen for service of a notice under section 34 of the Act; and that there had never been one single instance or occasion in respect of any assessment year, including the assessment year 1960-61, when the petitioner failed or neglected or refused to produce any books, documents or papers before the income-tax authorities for their fullest inspection and scrutiny. He further pointed out that the search and seizure in this case are illegal, as there is nothing to show that the Income-tax Officers concerned formed any opinion or had reasons to believe that any books or documents to be seized would be relevant or useful for any assessment proceedings pending against the petitioner, and that, unless and until such an opinion or belief, as the case may be, is formed, the exercise of jurisdiction under section 37(2) would be contrary to the language and tenor of the section, and would be illegal.

On the factual submissions made by Mr. Roy, Dr. Paul made no effective reply, except stating that the conduct of the officers was entirely bona fide and tree from any bias or mala fides.

On a careful consideration of the contentions of the parties, I am satisfied that the search of various premises and the indiscriminate seizure of the documents, books, valuable securities, papers, correspondence, etc., that was done in this case, are in the nature of things extremely highhanded, and cannot be justified under section 37(2) of the Act. Conducting a search from 10 a. m. to 11 p. m. is itself a most unreasonable act and the search of a large number of premises and of the various rooms contained therein, and the seizure of as many as 683 items in all, leaves the matter in no doubt that the power under section 37(2) has been grossly abused in these cases and had been carried on to an excess resulting in inevitable harm and loss to the trade and business of the petitioners, thus flagrantly interfering with the fundamental rights to hold and enjoy property and to carry on trade, business or occupation. I see further that the seizure of as many as 683 items of documents, books, etc., without any indication that the Income-tax Officer or Officers who had seized the same, were of the opinion or had reasons to believe that the documents so seized would be relevant or useful for any assessment proceedings pending against the petitioner, itself, is sufficient to condemn the action of the Income-tax Officers in question, as high-handed and illegal.

On these facts and in these circumstances, I am satisfied that even on an assumption that section 37(2) could be saved as not being unconstitutional, I have no hesitation whatsoever in holding that, in the instant case, the power conferred by section 37(2) had been grossly abused, contrary to both the language and the spirit of the section, and that the exercise of the power obviously amounted to an infringement of the fundamental rights of the petitioners in these cases. I have, therefore, no hesitation in striking down the executive action as grossly excessive of the powers given under section 37(2) of the Act and it is ultra vires of these powers, and, therefore, clearly illegal requiring interference by this court.

It was contended by Mr. Roy that the authorisation in these cases, purporting to have been issued by the Commissioner, is itself vague and illegal, not being in conformity with section 37(2) . These letters of authorisation issued to the four Income-tax Officers in these cases have been set out in exhibit H. It is sufficient, for the purpose of consideration, to examine the first of these. This letter of authorisation is as follows :

"Court Fee--Re. 1

Warrant of Authorization under section 37(2) of the Indian Income-tax Act, 1922 (XI of 1922) and Rule 2 of the Income-tax (Search of Premises and Seizure of Documents) Rules, 1957."

"To

The Additional Income-tax Officer,

Dibrugarh.

Whereas information has been laid before me and on the consideration thereof I have been led to believe that certain books of accounts and/or documents which are or may be relevant to or useful for proceedings under the above Act in the case (name of the assessee with G.I.R. Senairam Doongarmal Agency (P.) Ltd., G.I.R. No. 2-S) have been kept and are to be found at (The Sales Depot and Office of Senairam Doongarmal Agency (P.) Ltd., situated in Siding Market, Tinsukia Town, Dist. of Lakhimpur) .

This is to authorise and require you

Shri R.N. Bagchi

(Name of the Income-tax Officer)

(a) to enter and search with such assistance of police officers as may be required, the said premises;

(d) to seize such books of account and/or documents, take possession thereof;

(e) to convey such books or documents to the office of the Income-tax Officer or any other authority not below the rank of an Income-tax Officer, employed in the execution of the Act; and

(f) to exercise all other powers and duties under the said section and the rules relating thereto.

(Sd.) K. E. Johnson

7-3-62.

Commissioner of Income-tax, Assam,

Tripura, Manipur and Shillong."

It may be seen from the above that no particulars of the books, etc., to be seized are contained in the authorisation, which is very vague and general in character. I am satisfied that the letters of authorisation that have been issued by the Commissioner in these cases are much wider than the scope of the authorisation contemplated under section 37(2) of the Act and that no materials are placed before the court; nor has the nature of information furnished to the Commissioner been disclosed by the contesting respondents to justify the issue of the letters of authorisation in question, and no special grounds other than the letters of authorisation themselves, have been disclosed, although the recording of such grounds is required by the rules. Accordingly, I am not satisfied that the letters of authorisation issued by the Commissioner in these cases satisfied the requirements of law.

Taking all the above facts and circumstances of the cases into consideration, I am fully satisfied that the administrative and executive action taken by the respondents Nos. 1 to 4 and 7 to 9 was not in conformity with and far in excess of the power conferred by section 37(2) of the Act, and, therefore, ultra vires and illegal, and must be struck down as amounting to a gross invasion of the fundamental rights of the petitioners guaranteed under articles 19(1) (f) and 19(1) (g) of the Constitution.

To sum up :

(1) Section 37(2) of the Act is unconstitutional as it is violative of article 14 of the Constitution ;

(2) Section 37(2) of the Act is illegal, unconstitutional and ultra vires of the powers of the legislature, in that it violates the fundamental rights guaranteed by article 19(1) (f) and article 19(1) (g) of the Constitution;

(3) this invasion of the fundamental rights in question is not by any means reasonable and does not fall within clause (5) or clause (6) of article 19 of the Constitution; and

(4) the executive action taken by the income-tax authorities, namely, the Commissioner and the Income-tax Officers concerned, in pursuance of the power given under section 37(2) of the Act is ultra vires and illegal, and unconstitutional, inasmuch as the executive action contravened articles 19(1) (f) and (g) of the Constitution.

I would accordingly make the rules absolute in all these petitions, which we allow with costs, and declare (1) that section 37(2) of the Act is ultra vires of the Constitution and (2) set aside the executive action taken by the contesting respondents, and(3) by the issue of a mandamus directing them to return at once, all the documents, books, etc., seized during these abortive searches to the respective petitioners.

Dutta, J.

Civil Rules Nos. 195 to 198 of 1962 are analogous and they are heard together. The facts giving rise to Civil Rule No. 195 are as follows :

Messrs. Senairam Doongarmall of Tinsukia was a firm in the Dibrugarh sub-division carrying on business in food-grains, mustard oil and other commodities and also as indigenous bankers. It had been in existence for over 100 years and established enormous credit which extended throughout the whole of Northern India. Later on, the various businesses carried on by this firm were taken over by different limited companies and the petitioner was one of these companies incorporated in 1951, and it took over the business of food-grains, oil and other commodities from the parent firm. The petitioner-company has their sales depot and their own railway siding at the Siding Bazaar, Tinsukia. This company has earned considerable reputation in the market. Most of the other companies which took over businesses of the parent firm have their registered offices in Calcutta. The petitioner-company was regularly assessed to income-tax and had never, in course of any proceedings for assessment, in any way defaulted or neglected to produce all or any of its books, documents and papers which were found necessary. On no occasion the income-tax authorities complained of any omission on the part of the petitioner. The petitioner cleared all his income-tax dues up to the assessment year 1959-60 and an income-tax clearance certificate dated the 7th August, 1961, was granted to him. As regards the assessment year 1960-61, the petitioner duly filed his return and the assessment case was heard by the Income-tax Officer (respondent No. 4) when the petitioner produced all books and documents which were inspected by the Income-tax Officer and returned by him. Only the assessment order remains to be passed and there is no proceeding for any escaped assessment. There was not a single instance in which the petitioner neglected or refused to produce any book, paper or document before the income-tax authorities for their fullest inspection and/or scrutiny. Nor has the petitioner at any time failed to pay the tax dues. But all of a sudden on the 11th March, 1962, in the morning the Additional Income-tax Officer, Dibrugarh (respondent No. 4) , the Income-tax Officer, Dibrugarh (respondent No. 7) , the Income-tax Officer, Digboi (respondent No. 8) , the Income-tax Officer, Tinsukia (respondent No. 9) and the Additional Superintendent of Police, Dibrugarh (respondent No. 10) , under the leadership of the Inspecting Assistant Commissioner of Income-tax, Assam (respondent No. 3) , arrived at the town of Tinsukia with a posse of armed police from Dibrugarh in various cars, lorries, jeeps and trucks and first proceeded to the Tinsukia police station. Therefrom, another police force was requisitioned and the party with about 100 armed policemen proceeded to the premises of the petitioner-company and started raiding them simultaneously. The various premises belonging either to the petitioner-company or to one or other of the directors, or to the other companies, which took over the businesses of the parent firm, were all raided and searched. The search continued from 10 A.M. till 11 P.M. and various documents, papers, books, original contracts, hundis, and title deeds were seized. A copy of the seizure-list was prepared by the income-tax department, but the petitioner does not accept the same as correct. The search was carried out in a very high-handed manner and even the apartments occupied by the ladies of the household were not spared and the directors of the petitioner-company were greatly humiliated and lowered in public estimation. The presence of an armed police force of about 100 strong and of so many Income-tax Officers at the search created a great sensation throughout the Tinsukia town which is an important commercial centre and by the evening anonymous leaflets were distributed proclaiming that another "Mundhra Episode" had been unearthed. Exaggerated reports were published in several newspapers including some Calcutta papers. During the search the Income-tax Officer (respondent No. 4) was taking instructions all along over the phone from the Inspecting Assistant Income-tax Commissioner (respondent No. 3) who posted himself at a room in the income-tax office at Tinsukia and directed the whole operation.

The petitioner alleges that there is a story behind this search and seizure. It is contended that one Beharilal Lohia (respondent No. 6) was appointed as a sales manager in 1955 for the sales depot of the petitioner-company at Tinsukia. There were various allegations against Beharilal Lohia and on an enquiry it was found that he was guilty of dishonesty, falsification of accounts and misappropriate n as a result of which huge loss was incurred at the sales depot. Beharilal was put under suspension and by a letter dated December 26, 1961, he was asked to hand over charge to one Bhandaria. The said handing over of charge continued until the 2nd January, 1962, and during all this time one Motichand Tandon (respondent No. 5) was present and appeared to have been acting in close concert with Beharilal Lohia. Motichand (respondent No. 5) was at one time an employee of the petitioner but as his service was dispensed with he bore a grudge against the petitioner. Thereafter on the 9th January, 1962, one Durgadutt Lohia, a shareholder of the petitioner-company, lodged an ejahar at the Tinsukia police station against Beharilal and his two brothers and also against another ex-employee named Malpani alleging criminal breach of trust. Beharilal and his two brothers were arrested by the police and Malpani also surrendered in court and a criminal case was started against them and they were released on bail. Upon a complaint being made at the instance of the petitioner-company, a large number of books, papers and documents belonging to the petitioner were seized by the police from the sales depot and the same were ordered to be kept with the accountant of the petitioner who was appointed as zamindar. According to the petitioner, these books and documents are essentially required for the prosecution of Beharilal and others in the criminal case. After the filing of the criminal case, Beharilal became very inimical towards the petitioner and sought the assistance of Motichand (respondent No. 5) to bring the petitioner and his directors to disrepute. Motichand is closely connected with the Inspecting Assistant Commissioner of Income-tax, Assam (respondent No. 3) and as far as the petitioner has been able to ascertain, they are relatives. The petitioner alleges that the Inspecting Assistant Commissioner (respondent No. 3) , at the instance of Beharilal and Motichand, submitted false reports to the Commissioner of Income-tax (respondent No. 1) and thereby brought the whole income-tax machinery into action with a design to remove the books and documents which were seized by the police in connection with the criminal case and also to discredit the petitioner. These books and documents were, however, not seized in course of the search on the 11th March, 1962; but on the 12th March a petition was filed before the Magistrate at Dibrugarh for permission to seize these books and documents. The Magistrate passed an ex-parte order on that day asking the officer-in-charge of Tinsukia police station to make over all the books and documents, which had been seized by them, to the Income-tax Officer, Dibrugarh, for scrutiny and return after necessary action. On coming to know this, Durgadutt, on behalf of the petitioner-company, submitted an application before the Magistrate and obtained an order from him to the effect that before the said books and documents were handed over to the Income-tax Officer every page thereof should be signed by the said Income-tax Officer or any other officer on his behalf, as well as by the officer-in-charge of the Tinsukia police station. Thereafter on the 15th March, 1962, some officers of the income-tax department arrived at Tinsukia again being accompanied by the sub-divisional officer and numerous policemen and entering the premises of Lohia Properties (Private) Ltd. affixed seals on all the pages of the books of account lying in those premises and left. This sealing and initialling were going on till 2 A.M. of the 16th March, 1962, and all this time armed guards were posted outside. The persons of several employees of the petitioner were searched at the Siding Bazaar when a crowd that gathered was watching. The petitioner submits that the whole search and seizure was mala fide and that as a result of the same the petitioner is unable to carry on the business so much so that it cannot even hold any meeting of the directors. The petitioner has also suffered irreparable loss and damage. It is submitted that the entire operation including the search and seizure was illegal, ultra vires, and unlawful, unconstitutional and bad in law, without authority, mala fide and conducted not for the purpose of any genuine tax collection. The Commissioner, the Assistant Commissioner and the various Income-tax Officers have filed affidavits denying the allegations.

The first point raised is whether section 37(2) of the Income-tax Act offends article 14 of the Constitution. Section 37 of the Income-tax Act runs as follows :

"37. Power of income-tax authorities.--(1) The Income-tax Officer, Appellate Assistant Commissioner, Commissioner and Appellate Tribunal shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (V of 1908) , when trying a suit in respect of the following matters, namely :

(a) discovery and inspection ;

(b) enforcing the attendance of any person, including any officer of a banking company, and examining him on oath ;

(d) issuing commissions.

(2) Subject to any rules made in this behalf, any Income-tax Officer specially authorised by the Commissioner in this behalf may,--

(ii) seize any such books of account or other documents or place marks of identification thereon or make extracts or copies therefrom ;

and the provisions of the Code of Criminal Procedure, 1898 (5 of 1898) , relating to searches shall apply so far as may be to searches under this section.

Provided that an Income-tax Officer shall not--

(a) impound books of account or other documents without recording his reasons for so doing ; or

(b) retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Commissioner therefor.

Rules have been framed for the purposes of the aforesaid sub-section (2) of section 37. Rule 1 describes the Rules as the Income-tax (Search of Premises and Seizure of Documents) Rules, 1957 (hereinafter called the Rules) . Rule 2 is as follows :

"2. The Commissioner of Income-tax may, for reasons recorded, issue a written order under his own signature and bearing his seal, specially authorising any Income-tax Officer, subordinate to him to enter any building, or place to be specified therein where he has reason to believe that books of accounts or other documents which, in his opinion, will be relevant to or useful for any proceedings under the Income-tax Act, 1922, may be found. Such order may authorise the Income-tax Officer to do all or any of the following acts, namely :

(a) to enter the said building, or place with such assistance of police officers as may be required ;

(d) to take possession of or seize any such books or documents ;

(e) to make a note or an inventory of any other article or thing found in the course of such search which, in his opinion, will be useful for or relevant to any proceedings under the Act;

(f) to convey such books or documents to the office of the Income-tax Officer or any other authority not below the rank of Income-tax Officer employed in the execution of the Act."

Rule 3 lays down that the Income-tax Officer must be given free access and all reasonable facilities for search. Rule 4 provides for requisitioning of police help and for making forcible entry and search. Rule 6 requires that search should be carried out in the presence of two or more respectable inhabitants of the locality. Rule 7 provides for preparation of a list of the things seized. Rule 8 provides for giving copy of the list to the occupant and for sending a copy to the Commissioner. Rule 9 provides that when a person is searched a list of things seized from him shall be prepared and a copy of it shall be given to that person. Rule 9 also prescribes the warrant of authorisation which is as follows :

"To

(The Income-tax Officer) .

Whereas information has been laid before me and on the consideration thereof I have been led to believe that certain books of account and/or documents which are or may be relevant to or useful for proceedings under the above Act in the case (name of the assessee with G.I.R. No. . . .) have been kept and are to be found at (specify particulars of the building or place) .

This is to authorise and require you--(Name of the Income-tax Officer)

(a) to enter and search with such assistance of police officers as may be required, the said premises ;

(d) to seize such books of account and/or documents, and take possession thereof;

(e) to convey such books or documents to the office of the Income-tax Officer or any other authority not below the rank of an Income-tax Officer employed in the execution of the Act; and

(f) to exercise all other powers and duties under the said section and the seal.

Commissioner of Income-tax."

It is submitted by Mr. Roy, the learned counsel for the petitioners, that sub-section (1) and sub-section (2) of section 37 of the Indian Income-tax Act operate on the same field and sub-section (2) being more drastic and onerous must be struck down as void. It is contended that both subsection (1) and sub-section (2) deal with any person who may have in his possession any book of account or document which in the opinion of the income-tax authorities may be required in connection with any proceeding. There is no separate class of persons for selective application of subsection (2) . Therefore, when the income-tax authorities want in connection with any proceeding some book or document in the possession of somebody, they may have recourse to sub-section (1) of section 37 and adopt the procedure of a civil court to get the same but in the case of somebody else they may adopt the procedure of search and seizure under sub-section (2) . The latter person may legitimately ask why he is dealt with by the drastic procedure when another person similarly situated has been dealt with under the more lenient provision of law. Article 14 of the Constitution of India guarantees to all persons the right of equality before the law and equal protection of the laws in respect of both substantive and procedural laws. Two substantially different laws of procedure, one being more onerous, cannot be allowed to operate on the same field and the onerous one must be struck down. Reliance is placed in this connection on the decisions of the Supreme Court in Suraj Mall Mohta & Co. v. A.V. Visvanatha Sastri [1954] 26 ITR 1 ; [1955] 1 SCR 448, Shree Meenakshi Mills Ltd. v. Sri A.V. Visvanatha Sastri [1954] 26 ITR 713 ; [1955] 1 SCR 787 and in M, Ct. Muthiah v. Commissioner of Income-tax [1956] 298 ITR 390 ; [1955] 2 SCR 1247.

In Suraj Mall's case (Supra) the validity of section 5(4) of the Taxation on Income (Investigation Commission) Act, 1947, i.e., Act 30 of 1947, was considered and it was held that it was a discriminating piece of legislation and as such was hit by article 14 of the Constitution. Under the said section 5(4) if the Investigation Commission had reason to believe that any person other than the person whose case was being investigated had evaded payment of income-tax, it could make a report to the Central Government and on receipt of this report the. Central Government had to refer the case to the Commission for investigation. Under section 34 of the Income-tax Act also the case of an income-tax evader could be dealt with. Thus section 5(4) of Act 30 of 1947 and section 34 of the Income-tax Act applied to the same class of persons and as the procedure laid down for investigation in section 5(4) was more onerous, this section was declared void by the Supreme Court.

Section 5(1) of the Act of 1947 was challenged in the other case, viz ., Meenakshi Mills case ( Supra) . Under this section the Central Government could refer to the Commission for investigation the case in which it has prima facie reasons to believe that a person had to a substantial extent evaded payment of taxation. In 1954 section 34 of the Indian Income-tax Act was amended by insertion of sub-section (1A) and as a result persons who evaded payment of income-tax to a substantial extent could be dealt with under this section. Thus the same class of persons could be dealt with under the normal law, viz., section 34 of the Income-tax Act, and under section 5(1) of the Act 30 of 1947 which laid down a summary and drastic procedure. Hence the Supreme Court struck down section 5(1) by declaring it void. The same principle was laid down in Muthia's case (Supra) by the Supreme Court. The same point also arose before a Special Bench of the Calcutta High Court in S. M. Nawab Ariff v. Corporation of Calcutta [1959-60] 64 CWN 1 ; AIR [1960] Cal. 159. Under section 251 of the Calcutta Municipal Act a defaulter could be proceeded against by way of a suit. Under section 237 of the same Act a defaulter could be proceeded against by issue of a distress warrant. Thus both the sections operated on the same field and section 237 was struck down as the more onerous.

The first submission of Dr. Pal, the learned counsel for the income-tax department, is that sub-section (1) and sub-section (2) of section 37 of the Income-tax Act do not lay down two alternative procedures but sub-section (2) only gives some additional powers to the income-tax authorities. In this connection he relies on the decisions in the following cases, viz., Pur-shottam Govindji Halai v. B.M. Desai, Additional Collector of Bombay [1955] 28 ITR 891 ; [1955] 2 SCR 887, Kashiram Agarwalla v. Collector of 24-Parganas [1958] 33 ITR 800 and Murlidhar Jalan v. Income-tax Officer, Dibrugarh [1961] 41 ITR 80 . In Halai's case (Supra) section 46(2) of the Income-tax Act was challenged. The first part of this sub-section provides that on receipt of a certificate from the Income-tax Officer the Collector shall proceed to recover from the defaulting assessee the amount specified therein as if it were an arrear of land revenue. The proviso to the sub-section invests the Collector with all the powers a civil court has under the Code of Civil Procedure for the purpose of the recovery of an amount due under a decree.

It was argued that section 46(2) provided for two different and alternative methods of recovery of dues, that is to say, that the Collector might proceed under the provision of the relevant law of the State for recovery of arrears of land revenue which in this case was section 13 of the Bombay City Land Revenue Act, 1876, under which the Collector could issue a warrant against a defaulter and keep him in detention for a period much longer than six months ; or, the Collector could proceed under the Code of Civil Procedure and arrest and detain a defaulter for the maximum period of six months. It was further argued that the Collector had unguided and unfettered power to adopt one procedure or the other and thus discriminate between two defaulters and hence section 46(2) was violative of article 14 of the Constitution. This argument was repelled by the Supreme Court which pointed out that there were not two modes of recovery of dues but only one mode, viz., through a certificate. But the Collector was given some additional powers for effective application of the only mode. It was observed as follows Pur-shottam Govindji Halai v. B.M. Desai, Additional Collector of Bombay [1955] 28 ITR 891 , 896 (SC) :

"All that the sub-section directs the Collector to do is to proceed to recover the certified amount as if it were an arrear of land revenue, that is to say, he is to adopt the procedure prescribed by the appropriate law of his State for the recovery of land revenue and that in thus proceeding he is, under the proviso, to have all the powers a civil court has under the Code."

It will suffice for me to point out that the above decision of the Supreme Court makes it clear that under section 46(2) the Collector is not competent to take any independent proceedings under the Code of Civil Procedure. He can only proceed under the appropriate State law for recovery of arrears of land revenue but in such a proceeding he is competent to exercise all the powers a civil court has under the Code.

Section 46(2) of the Income-tax Act was considered also by the Calcutta High Court in Kashiram Agarwalla's case (Supra) . It was held there that the procedure under the Civil Procedure Code was independent of any proceedings under the Public Demands Recovery Act and that as every assessee was liable to be proceeded against in one of these modes, there was no discrimination. It was observed that if the contention that the discretion to follow these alternative modes amounted to discrimination was accepted, the various provisions of law which provided alternative remedies leaving the court to give any one of those remedies to a litigant at its discretion would be void.

In view of the Supreme Court judgment in Halai's case (Supra) the view that section 46(2) of the Income-tax Act lays down two procedures does not appear to be correct. With due respect, I may say that the analogy with laws providing alternative remedies also does not appear to be correct. A law which leaves to a court of law the discretion to apply one remedy or another cannot be arbitrary. It is only when a legislation leaves anything to the discretion of an executive authority, the question can arise if the discretion is unguided and hence arbitrary.

In Murlidhar Jalan's case (Supra) , the question arose if section 46(5A) was discriminatory. Under section 46(2) the dues from an assessee could be recovered as an arrear of land revenue. Under section 46(5A) the Income-tax Officer could call upon a debtor of the assessee to pay the amount of debt to the income-tax department instead of to the assessee. It was argued that there were two modes of recovery of income-tax and the mode laid down in section 46(5A) was more arduous. A (1)

A Division Bench of this court held that there was no "substantial" discrimination and that no fundamental right was impinged upon. The Supreme Court has laid down that for violation of article 14 of the Constitution the discrimination must be substantial and a fundamental right must be impinged upon (vide Pannalal Binjraj v. Union of India [1957] SCR 233 ; AIR [1957] SC 397 discussed below) .

The above decisions are thus of no assistance to Dr. Pal in his contention that sub-section (2) of section 37 of the Income-tax Act only gives some additional powers to the income-tax authorities. The mode laid down in sub-section (1) of this section is the mode of a civil court and there is always a judicial approach in its adoption. Proceedings under this subsection are judicial proceedings whereas a search and seizure under subsection (2) is carried out at the discretion of the administrative authority and it depends on his subjective satisfaction whether a particular search and seizure is necessary. The two modes are therefore substantially different. This difference is also confirmed by the fact that while acting under sub-section (2) the Income-tax Officer has to be specially authorised by the Commissioner whereas no such authorisation is necessary for him to act under sub-section (1).

The meaning and scope of article 14 have been elaborately dealt with by the Supreme Court in a series of cases. Stated very briefly, the principle laid down is that all persons placed in similar circumstances, i.e., all persons belonging to a well-defined class, must be treated alike both in respect of the privileges conferred and in the liabilities imposed by law. The classification must not be arbitrary, but must be rational and there must be a nexus between the differentia which is the basis of the classification and the object of the statute.

In Ram Krishna Dalmia v. Justice Tendolkar [1959] SCR 297 ; AIR [1958] SC 538, the Supreme Court laid down that a statute which came up for consideration on a question of its validity under article 14 of the Constitution should be considered on the following principle, viz., a statute may itself indicate the persons or things to whom its provisions are intended to apply and the basis of the classification of such persons or things may appear on the face of the statute or may be gathered from the surrounding circumstances known to or brought to the notice of the court. A statute may not make any such classification but may leave it to the discretion of the Government to select or classify persons or things to whom its provisions are to apply. The court will not then strike down the statute simply because such a discretion has been given, but will go on to examine and ascertain if the statute has laid down any policy or principle for the guidance of the exercise of the discretion by the Government. If such a policy or principle is laid down by the statute itself for the guidance of the Government in the matter of selection or classification, the court will not strike down the statute. If the Government in making the selection or classification does not follow the policy or principle laid down, in such a case it is the executive action and not the statute which will be condemned as unconstitutional. But if the court finds on scrutiny that no policy or principle is laid down in the statute for guidance of the Government in the exercise of the discretion in the matter of selection or classification, the court will strike down the statute itself as delegating arbitrary and uncontrolled power to the Government so as to enable it to discriminate between persons or things similarly situated. The discrimination in such a case is inherent in the statute itself.

There is also no doubt that the procedure laid down in sub-section (2) of section 37 of the Income-tax Act for the income-tax department to get books and documents considered relevant for an assessment proceeding is much more drastic than the procedure laid down in sub-section (1) of the same section. How drastic is the procedure laid down in the said subsection (2) can be realised from the fact that the person whose house is searched need not be an assessee at all. Thus if the assessment of X, a shop-keeper, is pending and the Income-tax Officer has reason to believe that X gave a cash memo. of Rs 100 to Y, although in his book he entered Rs 50, the Income-tax Officer, if duly authorised, may proceed to search the house of Y instead of asking him to produce the cash memo.

Mr. Roy contends that the legislature has not indicated the persons to whom sub-section (2) of section 37 should be applied. Nor has it laid down in the statute any policy or principle to guide the income-tax authorities in the selective application of this sub-section. It is left to their naked discretion as to what class of persons this provision is to be applied and hence it is discriminatory.

On the other hand, it is submitted by Dr. Pal that sub-section (2) of section 37 applies to a class of persons different from those to whom subsection (1) of the said section applies and thus the two sub-sections operate on different fields. His contention is that the selective application of this provision is not left to the naked discretion of the income-tax authorities but the policy or principle can be found in the statute and this guides the discretion of the income-tax authorities in making a classification of persons to whom to apply the provision. In this connection he relies on the decision of a Special Bench of the Calcutta High Court in Surajmull Nagarmull v. Commissioner of Income-tax AIR [1961] Cal. 578. It was held in this case that sub-section (2) of section 37 was to be applied only where there was concealment of books and documents required in connection with some assessment proceeding and action under sub-section (1) of the said section was not expected to produce the desired result. This judgment has been severely criticised by Mr. Roy who submits that there is not an iota of material in the statute to enable the income-tax authorities to make any such classification.

It may be noted that section 37(2) was inserted in the Income-tax Act by the Finance Act of 1956. It is not disputed that the legislature has not made in either of these Acts any classification or selection of persons to whom sub-section (2) of section 37 should apply. The only question is, therefore, whether in either of these statutes any policy or principle is laid down for the guidance of the exercise of discretion by the income-tax authorities in making a classification or selection.

Dr. Pal draws our attention to the preambles of the Indian Income-tax Act and of the Finance Act of 1956 which introduced section 37(2) of the former Act. The preamble to the Indian Income-tax Act says as follows :

"Whereas it is expedient to consolidate and amend the law relating to income-tax and super-tax ; it is hereby enacted as follows."

The preamble to the Finance Act of 1956 is as follows :.

"An Act to give effect to the financial proposals of the Central Government for the financial year 1956-57."

Dr. Pal argues that these preambles lay down the policy inherent in the Income-tax Act. This policy, according to Dr. Pal, is to collect income-tax and to prevent the evasion of the same. The preamble to the Finance . Act of 1956 speaks of giving effect to the financial proposals of the Government and Dr. Pal contends that if we interpret the term "financial proposals" in light of the budget speech of the Finance Minister, it will be found that the power of search and seizure was introduced in order to prevent tax evasion and hence the income-tax authorities are to select the field of application of sub-section (2) of section 37 according to this principle.

At this stage I may discuss the principles laid down by the Supreme Court in certain cases cited at the Bar Which will help us to consider how far the discretion vested in the income-tax authorities for the application of section 37(2) is naked and unguided.

In Thangal Kunju Musaliar v. M. Venkaitchalam Potti [1956] 29 ITR 349 ; [1955] 2 SCR 1196 the question arose whether there was any guidance for selective application of section 5(1) of the Travancore Taxation on Income (Investigation Commission) Act, 1124. This section enacted that the Government might at any time before the last day of Makaram 1125 (February 15, 1950) , refer to the Commission for investigation and report any case or points in a case in which the Government had, prima facie, reasons for belief that a person had to a substantial extent evaded payment of tax on income together with such material as might be available in support of such belief. The Supreme Court observed that in order to ascertain the scope and purpose of the impugned section reference must first be made to the Act itself. The preamble of a statute has been said to be a good means of finding out its meaning, and as it were a key to the understanding of it. The preamble to the aforesaid Travancore Act was as follows :

"Whereas it is expedient for the purpose of ascertaining whether the actual incidence of taxation on income is and has been in recent years in accordance with the provisions of law and the extent of taxation is adequate to prevent the evasion thereof, to make provisions for an investigation to be made into such matters: it is hereby enacted as follows."

The Supreme Court, however, considered that this preamble gave no assistance to the solution of the problem and went to observe that section 5(1) itself gave some indication as to the real object of it. The condition on which the action of the Government under this section was made dependent was that the Government must have, prima facie, reasons for believing that a person had to a substantial extent evaded payment of tax on his income. The Supreme Court therefore observed Thangal Kunju Musaliar v. M. Venkaitchalam Potti [1956] 29 ITR 349, 385 :

"The selection is guided by the very objective which is set out in the terms of section 5(1) itself and the attainment of that object controls the discretion which is vested in the Government and guides the Government in making the necessary selection………."

It will suffice for me to point out that the preamble to the Travancore Act was in much more definite terms than the preamble to the Indian Income-tax Act or to the Indian Finance Act of 1956. Yet the Supreme Court found the preamble to the Travancore Act as of no assistance to the administrative authority for guiding it to make the necessary selection for application of section 5(1) of the Travancore Act.

In Union of India v. Bhana Mal Gulzari Mal Ltd. [1960] 2 SCR 627 ; AIR [1960] SC 475, the question arose as to whether clause 11B of the Iron and Steel (Control of Production and Distribution) Order, 1941, was valid or not. It was argued that this clause gave uncanalised and unguided power to the Controller to fix maximum prices of iron and steel. The clause was held by the Supreme Court to be valid on the ground that a procedure for fixing the maximum prices was prescribed in a scheme found in the Order itself and some of the factors which had to be considered by the Controller for fixing the maximum prices were clearly laid down. The Supreme Court observed :

"As we have already indicated the object which was intended to be achieved and the means which were required to be adopted in the achievement of the said object have been clearly enumerated by the legislature as a matter of legislative decision." (vide paragraph 8 in the report) .

When a preamble to an Act enunciates a definite policy or objective on the basis of which a proper classification can be made, it has been held that there is a guiding principle to enable the executive or administrative authority to make selective application of the law. But when a preamble is too general, it does not enunciate any policy which can be a guidance for classification. Thus section 11 of the Saurashtra Ordinance was worded in exactly the same manner as section 5(1) of the West Bengal Special Courts Act. Under these provisions a special judge was to try such offences or such cases or class of cases as the State Government might by general or special order in writing direct. The Saurashtra Ordinance amended another. Ordinance and thus the preamble to the original Ordinance became the preamble of the amending Ordinance also. This preamble said that the object of the Ordinance was to provide for public safety, maintenance of public order and preservation of peace and tranquillity of the State. On the other hand, the preamble to the West Bengal Special Courts Act simply declared that "it was expedient to provide for speedy trial of certain offences".

Section 5(1) of the West Bengal Special Courts Act was challenged in State of West Bengal v. Anwar Ali Sarkar [1952] SCR 284 ; AIR [1952] SC 75 on the ground that it gave naked discretion to the Government to pick and choose any case for trial by a special judge. It was held by the Supreme Court that the necessity of speedy trial mentioned in the preamble is too vague and uncertain a criterion to form the basis of a valid and reasonable classification. Hence section 5(1) was declared ultra vires article 14 of the Constitution.

Section 11 of the Saurashtra Ordinance was similarly challenged in Kathi Raning Rawat v. State of Saurashtra [1952] SCR 435 ; AIR [1952] SC 123. But the Supreme Court held that the preamble to the Saurashtra Ordinance gave a definite guidance to the State Government to choose for reference to a special judge only such offences or cases as affected public safety, maintenance of public order and preservation of peace and tranquillity. Thus, there was a guiding principle within the four corners of the Act and hence, section 11 did not offend article 14 of the Constitution.

In Kedar Nath Bajoria v. State of West Bengal [1954] SCR 30 ; AIR [1953] SC 404, the contention that section 4 of the West Bengal Criminal Law Amendment (Special Court) Act, 1949, violated article 14 of the Constitution was rejected by the Supreme Court. The preamble to this Act said :

"An Act to provide for more speedy trial and more effective punishment of certain offences which are set out in a Schedule annexed to the Act."

It was argued that under section 4 the Government had an unfettered discretion to choose any particular case of a person alleged to have committed an offence falling under any of the specified categories for allotment to the special judge and hence this section offended article 14 of the Constitution. The Supreme Court, however, held that there was no such unfettered power. The legislative purpose was clearly stated not only in the preamble but also in section 9 of the aforesaid Act which provided for special compensatory fines equal in value to the amount procured by the offender by means of the offence. When this section was interpreted with the help of the history of the legislation, it was evident that the purpose was to deprive some persons in public services who enriched themselves through corrupt practices during the post-war period of their ill-gotten gains. Thus there was a complete guidance in the Act itself for the Government as to whose case should be picked and chosen for refernce to the special judge.

In Niemala Textile Finishing Mills Ltd. v. Second Punjab Tribunal [1957] SCR 335 ; AIR [1957] SC 329, section 10 of the Industrial Disputes Act, 1947, was challenged. It was contended that section 10 of the said Act was discriminatory in its ambit as under it the appropriate Government could pick and choose one or other of the authorities constituted under the Act for reference of an industrial dispute to it. This contention was not accepted by the Supreme Court which observed thus :

"It follows from this survey of the relevant provisions of the Act that the different authorities which are constituted under the Act are set up with different ends in view and are invested with powers and duties necessary for the achievement of the purposes for which they are set up."

Thus there was a clear guidance in the Act itself for the Government to decide which case was to be referred to which authority.

In Vasantlal Maganbhai v. State of Bombay [1961] 1 SCR 341 ; AIR [1961] SC 4, the Supreme Court pointed out that the legislature could not delegate its essential legislative function in any case. It may delegate subsidiary powers but while doing so it must lay down the legislative policy and principle and must afford guidance for carrying out the said policy before delegating such powers. It was observed as follows :

"In dealing with the challenge to the vires of any statute on the ground of excessive delegation it is, therefore, necessary to enquire whether the impugned delegation involves the delegation of an essential legislative function or power and whether the legislature has enunciated its policy and principle and given guidance to the delegate or not. As the decision in Bagla's case (Supra ) shows, in applying this test this court has taken into account the statements in the preamble to the Act, and if the said statements afford a satisfactory basis for holding that the legislative policy and principle has been enunciated with sufficient accuracy and clarity the preamble itself has been held to satisfy the requirements of the relevant tests. In every case it would be necessary to consider the relevant provisions of the Act in relation to the delegation made and the question as to whether the delegation is intra vires or not will have to be decided by the application of the relevant tests."

In Biswambhar Singh v. State of Orissa [1954] SCR 842 ; AIR [1954] SC 139, the question was raised whether section 3(1) of the Orissa Estates Abolition Act was discriminatory. Under this section the State Government by notification issued from time to time could declare the estate specified in the notification as vested in the State free from all encumbrances. It was argued that this section gave unfettered discretion to the Government to issue or not to issue a notification in respect of an estate and hence it enabled the Government to issue a notification only in respect of zamindars who opposed the ruling party. This contention was rejected by the Supreme Court. It was pointed out that the long title of the Act and the two preambles to the Act clearly indicated that the object and purpose of the Act was to abolish all rights, title and interest in land of intermediaries by whatever name known. This was a clear enunciation of the policy which was sought to be implemented by the operative provisions of the Act. Whatever discretion was vested in the . Government under section 3, must be exercised in the light of this policy and, therefore, it could not be said to be an absolute or unfettered discretion, for sooner or later all estates must perforce be abolished.

In Pannalal Binjraj v. Union of India [1957] SCR 233 ; [1957] 31 ITR 565, 588 ; AIR [1957] SC 397, it was held by the Supreme Court that section 5(7A) of the Income-tax Act is not violative of article 14 of the Constitution. Under this section the Commissioner of Income-tax may transfer any case from one Income-tax Officer subordinate to him to another and the Central Board of Revenue may transfer any case from any one Income-tax Officer to another. It was contended that section 5(7A) was discriminatory as it gave naked and arbitrary power to the Commissioner and the Central Board of Revenue to pick and choose a case for transferring it from one Income-tax Officer to another. But this contention was rejected by the Supreme Court.

Dr. Pal, on behalf of the income-tax department, puts particular stress on the observations in this judgment at paragraph 33 of the same. In paragraph 27, the scheme of the Income-tax Act was discussed. In paragraph 33 the following observation was made :

"It is, therefore, clear that the power which is vested in the Commissioner of Income-tax or the Central Board of Revenue, as the case may be, under section 5(7A) of the Act is not a naked and arbitrary power, unfettered, unguided or uncontrolled so as to enable the authority to pick and choose one assessee out of those similarly circumstanced thus subjecting him to discriminatory treatment as compared with others who fall within the same category. The power is guided and controlled by the purpose which is to be achieved by the Act itself, viz., the charge of income-tax, the assessment and collection thereof, and is to be exercised for the more convenient and efficient collection of the tax. A wide discretion is given to the authorities concerned, for the achievement of that purpose, in the matter of the transfer of the cases of the assessees from one Income-tax Officer to another and it cannot be urged that such power which is vested in the authorities is discriminatory in its nature."

It may however be noted that the Supreme Court held the aforesaid section 5(7A) to be valid not because this section was not discriminatory but because there could be no real and substantial discrimination in its application. It observed as follows [1957] 31 ITR 565 , 589 :

"In other words, the discretion vested has to be looked at from two points of view, viz., (1) does it admit of the possibility of any real and substantial discrimination, and (2) does it impinge on a fundamental right guaranteed by the Constitution ? Article 14 can be invoked only when both these conditions are satisfied. Applying this test, it is clear that the discretion which is vested in the Commissioner of Income-tax or the Central Board of Revenue, as the case may be, under section 5(7A) is not at all discriminatory."

From the above discussion of the various decisions of the Supreme Court we may draw certain conclusions. If for the selective application of any provision of law, no classification is made by the legislature, the guidance to the executive or administrative authority for making the classification must be found in the statute itself. The preamble is certainly a part of the statute and often a key to the understanding of it. If the preamble lays down the object of the enactment in a precise and clear-cut way, this may be a sufficient guidance for the executive or administrative authority to make selective application of an operative provision of the law. Even the title of a statute is an important part of the Act and may throw light on its scope and construction. But when a preamble is in very general terms, the object becomes no guidance for the selective application of a particular provision. Again where the guidance is not in the statute itself, we cannot go about fishing for it in the historical background and surrounding circumstances. We may look into historical background or surrounding circumstances, if any difficulties arise in the interpretation of the meaning and purpose of the language used in a statute. But we cannot import something new into a statute from such external circumstances. The following passage from Maxwell's Interpretation of Statutes (11th edition, page 19) makes the position clear in this respect :

"As regards the history, or external circumstances which led to the enactment, the general rule which is applicable to the construction of all other documents is equally applicable to statutes, viz., that the interpreter should so far put himself in the position of those whose words he is interpreting, as to be able to see to what those words relate.

Extrinsic evidence of the circumstances or surrounding facts in which a will or contract has been made, so far as they throw light on the matter to which the document relates, and on the condition and position and course of dealing of the persons who made it or are mentioned in it, is always admitted as indispensable for the purpose not only of identifying such persons and things, but also of explaining the language, whenever it is latently ambiguous or susceptible of various meanings or shades of meaning, and of applying it sensibly to the circumstances to which it relates."

Another conclusion is that a provision offends article 14 of the Constitution only if it is discriminatory in a real and substantial way and a fundamental right is impinged upon by it.

Considering sub-section (2) of section 37 of the Indian Income-tax Act in the light of the above principles, I find that the income-tax authorities have been given naked and unguided power to pick and choose persons to be dealt with under it. The preamble to the Indian Income-tax Act only states the general object of the legislature in passing the Act, viz., to consolidate and amend the income-tax law. The preamble to the Finance Act of 1956 speaks only of giving effect to the financial proposals for 1956-57. The ''financial proposals" mean taxation proposals and the Finance Act lays down the rates of income-tax. I fail to see how from these preambles any policy or principle for selecting the field of operation of sub-section (2) of section 37 can be found. The said preambles only disclose that the object of the Indian Income-tax Act is the assessment and collection of income-tax. But every Act dealing with taxation is based on such an object which cannot be of any assistance to the executive or administrative authorities to make a classification for the selective application of a law providing for search and seizure.

I have already pointed out that section 37(2) was inserted in the Income-tax Act only by the Finance Act of 1956. If the object of the Income-tax Act was to prevent evasion of income-tax, section 37(1) which was there before insertion of sub-section (2) of that section also applies to tax evaders. Then also both the sub-sections operate on the same field and the income-tax authorities have unguided discretion to apply sub-section (1) to some tax evaders, and sub-section (2) to some other tax evaders.

Dr. Pal tries to obviate this difficulty by submitting that sub-section (2) of section 37 is to be applied only when sub-section (1) of the said section will yield no result. But I do not understand where he gets such a condition. Even in section 96 of the Criminal Procedure Code the condition is laid down that a search warrant can be issued only when a court has reason to believe that a person to whom a summons or requisition is issued to produce a document will not do so. Yet in sub-section (2) of section 37 of the Income-tax Act, where the discretion to search and seize is left not to any judicial authority but to administrative authorities, even this bit of guidance has not been given. I do not think that such a condition can be imported into the section as was done by the Calcutta High Court in Surajmull Nagarmull v. Commissioner of Income-tax AIR [1961] Cal. 578 when any such condition is glaringly absent in the statute itself.

I have already explained that sub-section (2) of section 37 of the Income-tax Act is much more drastic and onerous than sub-section (1) and there is a substantial difference in the procedures laid down by the two sub-sections respectively. Moreover, as will be explained later, the procedure of search and seizure laid down in sub-section (2) impinges upon the fundamental rights guaranteed by article 19(1) (f) and (g) of the Constitution respectively to hold property and to carry on trade or business. In the result, therefore, I hold that sub-section (2) of section 37 of the Income-tax Act offends article 14 of the Constitution. The next question is whether it offends also article 19(1) (f) and (g) of the Constitution.

Article 19(1) (f) guarantees to every citizen the right to acquire, hold and dispose of property and article 19(1) (g) guarantees the right to practise any profession or to carry on any occupation, trade or business. If the account books of a business are seized a person is deprived of his property and it is also a restriction on his right to carry on trade or business. The disadvantage created by seizure of books of accounts is the direct consequence of such a seizure and the result of the disadvantage may be such that the business and trade of the person from whom the books or documents are seized may come to a standstill. Although search and seizure is a restriction on the enjoyment of property and also on the right to carry on trade or business, under clauses (5) and (6) of article 19 respectively, such restrictions are permissible if they are reasonable and imposed in the interests of the general public.

As observed by the Supreme Court in M. P. Sharma v. Satish Chandra [1954] SCR 1077 ; AIR [1954] SC 300 a seizure and carrying away is a restriction on the possession and enjoyment of the property seized. But in that case it was held that when the seizure was only for a temporary period for the purpose of investigation, it was a reasonable restriction and thus it was saved from unconstitutionality by clause (5) of article 19 of the Constitution.

So, the next question is how far the restriction imposed by sub-section (2) of section 37 of the Indian Income-tax Act on the right to hold property and to carry on business and trade, is reasonable. The test of reasonableness, wherever prescribed, should be applied to each individual statute impugned and no abstract standard or general pattern of reasonableness can be laid down as applicable to all cases (vide State of Madras v. V. G. Row [1952] SCR 597) .

It is true that there is always a presumption in favour of constitutionality of a statute and that it has to be borne in mind in considering the reasonableness of a provision, that the legislature understands and appreciates the need of the people, that its laws are directed to problems made manifest by experience and that it enacts laws which it considers to be reasonable. But at the same time it has to be remembered that our Constitution contains express provisions for judicial review of legislation as to its conformity with the Constitution. The court therefore cannot shirk its responsibility in this respect. The following observation made by the Supreme Court in the above-quoted case of State of Madras v. V. G. Row [1952] SCR 597, 605 is apposite, viz. :

"If, then, the courts in this country face up to such important and none too easy task, it is not out of any desire to tilt at legislative authority in a crusader's spirit, but in discharge of a duty plainly laid upon them by the Constitution. This is especially true as regards the 'fundamental rights', as to which this court has been assigned the role of a sentinel on the qui vive. While the court naturally attaches great weight to the legislative judgment, it cannot desert its own duty to determine finally the constitutionality of an impugned statute. We have ventured on these obvious remarks because it appears to have been suggested in some quarters that the courts in the new set up are out to seek clashes with the legislatures in the country."

Bearing the above principles in mind we may proceed to examine first if section 37(2) of the Income-tax Act is violative of article 19(1) (f) of the Constitution which guarantees the right to hold property. I have already referred to the view of the Supreme Court that seizure of property for a temporary period for the purpose of investigation cannot be unreasonable.

Mr. Roy points out that there is no time-limit mentioned in subsection (2) of section 37 for return of the seized books and documents. Whereas sub-section (3) of the said section provides that a taxing authority will retain the books and documents produced before it for "such period as it thinks fit" and that an Income-tax Officer shall not retain such books and documents for more than fifteen days, without approval of the Commissioner, nothing is mentioned in the Income-tax Act, as to when seized books and documents are to be returned. In this connection our attention is drawn to the provisions for search and seizure in the Sales Tax Acts of the various States. In all these provisions a time-limit is fixed for the seized books and documents. Dr. Pal, however, submits that books and documents which are relevant to a pending proceeding can alone be seized and it follows that they must be returned when the proceeding is over. I am inclined to accept this argument and it appears to me that section 37(2) cannot be violative of clause (f) of article 19 of the Constitution as the deprivation of the books and documents is only temporary and as such the restriction on the right to hold property imposed by a seizure cannot be called unreasonable.

But, as already pointed out above, seizure and search is also a restriction on the right to carry on trade or business. Even temporary seizure of books and documents of a concern may cause great dislocation of its trade or business. Moreover, there is the question of goodwill. A search and seizure may completely destroy the goodwill of a concern and may bring about its ruin. It is said that credit is like fire. If it is once extinguished it is difficult to rekindle it. A reputation once broken may perhaps be repaired but the public eyes will always be on the spot where the crack was. In such circumstances, a search and seizure is a restriction on the fundamental right guaranteed by article 19(1) (g) of the Constitution to every citizen of India to carry on business or trade. In Bengal Immunity Co. Ltd. v. State of Bihar [1955] 2 SCR 603 ; 6 STC 446 the Supreme Court held that a provision laying down condition of search and seizure to which a dealer must submit and other like provisions of the Bihar Sales Tax Act to be restriction on the said fundamental right.

The next question is whether the search and seizure provided in sub section (2) of section 37 of the Income-tax Act which is a restriction on the right to carry on business or trade is reasonable. I have already held that under this provision the income-tax authorities have a naked and unguided discretion to subject any person to search and seizure. There is no criteria in the Act itself to guide their discretion in the selection of the persons to whom the said sub-section is to be applied. A legislation which thus excessively invades a right does not have the quality of reasonableness. For example, the Supreme Court has laid down that a law which gives unfetter ed discretion to an executive authority to regulate trade and business in a normally available commodity is void as imposing an unreasonable restriction (vide Dwaraka Prasad v. State of Uttar Pradesh [1954] SCR 803 ; AIR [1954] SC 224) . The next question is whether there are adequate safeguards in the application of the aforesaid sub-section. Under clause (1) of this sub-section the Income-tax Officer may enter and search that 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 the said Act may be found. Under rule 2 of the Rules the Income-tax Officer must be specially authorised to do so by the Commissioner of Income-tax who also must have reason for a similar belief. In issuing the written order of authorisation, the Commissioner has to record reasons for such an authorisation. These provisions can hardly be called adequate safeguards. The decision to search and seize depends entirely on the belief and opinion of the Income-tax Officer and the Commissioner and the reasons on which their belief and opinion are based cannot be tested in a judicial inquiry. This imposes a subjective test and the Supreme Court in Stale of Madras v. V. G. Row [1952] SCR 597, 608 laid down a rule of caution in this respect in the following words :

"The formula of subjective satisfaction of the Government or of its officers, with an advisory board thrown in to review the materials on which the Government seeks to override a basic freedom guaranteed to the citizen, may be viewed as reasonable only in very exceptional circumstances and within the narrowest limits………"

I may only add that there is no provision in the Income-tax Act for any authority to review the materials on which the income-tax authorities decide to search a house or place.

But the worst feature of section 37(2) of the Income-tax Act is that there is no provision in the Act for any representation against the decision to search one's house or place. The decision to search is based on a belief of executive and not judicial officers. The person whose house is searched may or may not be an assessee. He does not know for what reasons the income-tax authorities are satisfied that books and documents relevant to a proceeding may be found in his house or place. He does not know on whose report they are acting. He has no opportunity to raise any objection before the search. Once the search is made, his reputation is gone. As I have said above the crack can be repaired but the spot where the crack was remains under public eyes. In fact, he is condemned without being given an opportunity to make any representation against the proposed action which is against all principles of natural justice.

It is not necessary to refer to a series of decisions of the Supreme Court in support of the above view. It will suffice if I refer to two decisions. In Raghubir Singh v. Court of Wards, Ajmer [1953] SCR 1049 ; AIR [1953] SC 373, it was held by the Supreme Court that when a person was deprived of his property for an indefinite period merely on the subjective determination of an executive officer and there was no provision for the citizen to have recourse to a civil court to prove the contrary, the provision must be held to be bad as an unreasonable restriction on the right to hold property. On the other hand, in Tika Ram v. State of U.P. [1956] SCR 393 ; AIR [1956] SC 676, the validity of section 15 of the U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, was considered by the Supreme Court. In upholding this section the Supreme Court took into account the fact that the orders of the Cane Commissioner were subject to an appeal to the State Government.

I shall not, however, go so far as to say that absence of an opportunity to move a court of law against the decision to carry out a search makes it unreasonable in all cases. Every determination affecting liberty or right to property or right to carry on trade or business need not always be made by a judicial authority. This much is, however, well established that the right of judicial review makes reasonable a restriction which will be otherwise unreasonable. But when a search is made under section 37(2) of the Income-tax Act, not to speak of any judicial review, the person whose house is searched does not get any opportunity whatsoever to make any representation against the decision to search which is taken on the subjective belief of an executive officer. Of course, it may be argued that the very object of a search may be frustrated if the person whose house or place is searched gets prior information about the decision to search, and hence, the question of giving him an opportunity to make a representation against the said decision cannot arise. But absence of an opportunity to make such a representation makes some other safeguards more indispensable. Even under the Criminal Procedure Code a search warrant can be issued only after a judicial inquiry and on proper materials. As I have said above a search warrant can be issued under section 96 of the Criminal Procedure Code only when the magistrate is satisfied that the person, against whom the search warrant is issued, will not produce the document or thing on a summons or requisition.

It is pointed out to us that the Income-tax Commissioner has "to record his reasons" while issuing the order authorising the Income-tax Officer to search any building or place. But this can hardly be regarded as a safeguard. In Dwarka Prasad's case (Supra) , the validity of clause 4(3) of the U.P. Coal Control Order, 1953, was considered. Under that clause the licensing authority could grant or refuse to grant, renew or refuse to renew a licence and could suspend, cancel, revoke or modify a licence or any terms thereof granted by him under the Order for reasons to be recorded. No rules were framed or directions given to guide the discretion of the licensing officer. It was argued that there was sufficient safeguard as the licensing authority had to record his reasons for what he did. The Supreme Court held that this safeguard was hardly effective inasmuch as there was no higher authority prescribed in the Order who could examine the propriety of those reasons and revise or review the decision of the subordinate officer.

I am, therefore, of the view that sub-section (2) of section 37 of the Income-tax Act gives a naked, unguided and uncanalised discretion to the income-tax authorities to carry out a search and seizure and there is no safeguard worth the name in the exercise of this discretion. The above provision therefore offends article 19(1) (g) of the Constitution as well.

Lastly, it is well-settled that even if a provision is not unconstitutional, there may be abuse of power and the action taken under the provision may be mala fide. In that case, the action taken under that provision must be struck down. In the cases before us, the petitioner clearly alleges that the whole operation was mala fide. A definite allegation is made that an ex-employee of the petitioner in collusion with the Inspecting Income-tax Assistant Commissioner (respondent No. 3) put the whole income-tax machinery into action against the petitioner with an ulterior motive. Moreover, sub-section (2) of section 37 of the Income-tax Act read with rule 2 of the Rules shows that first the Income-tax Officer before whom a proceeding is pending has to form an opinion that certain books and documents are relevant for the purpose of any proceeding pending before him and he must have reasons to believe that these books and documents will be found in a particular house or place. He has then to send a report to the Commissioner who can authorise the Income-tax Officer to search that house or place and seize the books and documents provided the Commissioner is also of the opinion that the said books and documents are relevant for any proceeding and he has also reasons to believe that they will be found in that house or place. If the Commissioner gets a report from a third party, he has obviously to call for a report from the Income-tax Officer before whom the proceeding is pending and then to decide about authorising the search and seizure.

But in spite of the allegations of the petitioner, the Commissioner (respondent No. 1) does not disclose in his counter-affidavit the materials on which he believed that books and documents relevant to a proceeding would be found in the premises that were searched. This court is thus not assisted to judge if there were materials on which a reasonable man could form such a belief. We may therefore infer that either the Commissioner did not honestly form his belief or that in forming it, he could not have applied his mind to the relevant facts. The Commissioner does not tell us what was the source of his information. The petitioner categorically charges that the Inspecting Income-tax Assistant Commissioner (respondent No. 3) made a false report to the Commissioner as a result of which the search and seizure followed. The Commissioner and the said Assistant Commissioner only deny that the said Assistant Commissioner made any "false report", meaning thereby that he did make a report. On the other hand, the Income-tax Officer before whom the proceedings of 1960-61 (these were the only pending proceedings in respect of the petitioner-company) were pending does not say that he believed that certain books and documents, which he considered relevant for the proceedings, would be found in the premises of the petitioner, and that, therefore, he moved the Commissioner for authority to search. His whole contention is that he carried out the search because he was authorised to do so. Thus it appears that the Income-tax Officer (respondent No. 4) who was dealing with the assessment of the petitioner never asked for any authority to search and seize any books or documents. In fact it appears that he was in the dark till he received the authorisation to search the premises of the petitioners. It may be noted that the authorisation was in a prescribed form which did not specify the books or documents to be searched and seized. Consequently, the search could be conducted only for fishing out purpose. Section 165 of the Criminal Procedure Code authorises the police to make a search without warrant in cases where delay will frustrate the object of the search. In that section various safeguards are laid down and one of these safeguards is that the articles of search must be specified, as far as possible, in the record. In the prescribed form of warrant to search issued under section 96 of the Criminal Procedure Code also, the things to be searched are to be clearly specified. But in the warrant of authorisation issued under section 37(2) of the Income-tax Act, the Commissioner does not even have to specify the things to be searched. The Commissioner apparently acted on the report of the Assistant Commissioner without referring the matter to the Income-tax Officer who as a result could not possibly know for what particular book or document he had to carry out the search. In such circumstances, the allegation that the Income-tax Officer indiscriminately seized all kinds of books and documents seems to be well-founded.

I have carefully gone through all the counter-affidavits filed by the various income-tax authorities. In none of them there is even an inkling of a suggestion that at any time the petitioner was even suspected of any tax evasion or of concealing any book or document. The Commissioner and the Income-tax Officer (respondent No. 4) , within whose jurisdiction the assessment of the petitioner falls, do not clearly tell us in their affidavits for which proceeding the seized books and documents were considered necessary. The Income-tax Officer simply asserts that the petitioner's assessment for 1960-61 and 1961-62 were pending and leave us to infer that the said books and documents were considered relevant for these proceedings. On the other hand, the Commissioner in his affidavit makes no mention of the proceedings of 1961-62. In the prescribed authorisation the Commissioner has to mention the general index register number of the case in connection with which the books and documents are considered necessary. Yet, these officers do not want to tell the court frankly for which case the seized books and documents were relevant. It is surprising that the petitioners who never concealed any book or document in all the proceedings prior to 1960-61 and paid all their tax dues up to that year and against whom there was no proceeding for any escaped assessment under section 34 of the Income-tax Act, should turn overnight into such a tax evader as to deserve drastic action under section 37(2) of the Income-tax Act.

It is true that the income-tax authorities have a duty to collect tax for the public exchequer but at the same time they have an equally important duty to the public to see that no one is subjected to avoidable hardship and inconvenience. They should not take the invasion of the privacy of a man's premises as lightly as they did in this case. The petitioner alleges that the use of an armed force of about 100 policemen and the presence of so many Income-tax Officers from different parts of the district gave an impression to the public that some serious tax evasion was discovered. It is not denied by the income-tax authorities that such a police force was used and that so many Income-tax Officers participated in the search. At the same time it is nowhere stated by them that the use of such a force was an imperative necessity. It can therefore be presumed that this show was with a view to humiliate the petitioner. In such circumstances I am constrained to hold that the search and seizure carried out in this case was a gross abuse of power by the income-tax authorities and their action must be characterised as mala fide and hence struck down.

In the result the petitions must succeed.

Mehrotra, CJ.

I have had the benefit of reading the judgment prepared by my learned brothers, Nayudu J. and Dutta J. I agree with their conclusion, but I prefer to give my own reasons. I cannot persuade myself to agree that section 37(2) of the Indian Income-tax Act is unconstitutional. I, however, agree that the warrants of authorisation are not in accordance with the provisions of section 37(2) and the action of the income-tax authorities is mala fide.

Nayudu J. has held that section 37(2) of the Indian Income-tax Act, 1922 (hereinafter called the Act) , is ultra-vires, both of articles 14 and 19(1) (f) and 19(1) (g) of the Constitution. Dutta J. has held that the section infringes the fundamental rights guaranteed under articles 14 and 19(1) (g) , but does not infringe article 19(1) (f) .

These four petitions were heard together and a common question had been raised. Civil Rule No. 195 of 1962 arises out of a petition filed by Senairam Doongarmall Agency (Private) Ltd., a company incorporated under the Companies Act and having its registered office at Tinsukia. The petitioner carries on banking business and also business in foodgrains, mustard oil and other commodities. The petitioner took over the business in foodgrains, oil and other commodities from the parent firm of Senairam Doongarmal since about the year 1954. The petitioner firm was assessed by the Income-tax Officer, Dibrugarh. In this petition, K.E. Johnson has been impleaded as opposite party No. 1, as the Commissioner of Income-tax, Assam, Tripura and Manipur, in his personal capacity. The Commissioner of Income-tax, Assam, Tripura and Manipur, has also been impleaded as opposite party No, 2, S.C. Varma (opposite party No. 3) was the Inspecting Assistant Commissioner of Income-tax, Assam, having his office at Shillong. Opposite Party No. 4, R.N. Bagchi, was the Additional Income-tax Officer, Dibrugarh, and has been impleaded as such. Opposite Party No. 5, Moti-chand Tandon, was an ex-employee of the petitioner and worked as the chief accountant of the petitioner from the 28th January, 1956, to 28th February, 10,58. Opposite party No. 6, Beharilal Lohia, is alleged to be an ex-employee of the petitioner, having worked as the sales manager from the 14th August, 1955, to 8th January, 1962, when he is alleged to have been dismissed from service by the petitioner. Opposite party No. 7, R.K. Choudhury, opposite party No. 8, P.L. Das, and opposite party No. 9, A. A. Barabhuyan, were the Income-tax Officers of Dibrugarh, Digboi and Tinsukia, respectively. Opposite party No. 10, N. Natarajan, was the Additional Superintendent of Police at Dibrugarh at the relevant time. The Union of India has been impleaded as opposite party No. 11 in this petition.

The petitioner contends that it had been paying regularly the taxes due in accordance with the orders of assessment passed by the assessing authorities. It was never in default or failed to produce its account books or any other documents and papers, which were found necessary for the assessment proceedings. The income-tax authorities had no occasion to complain about the conduct of the petitioner and had no complaint against the petitioner that it ever failed to produce the books of accounts and papers necessary for the assessment. The last assessment order was passed for the assessment year 1959-60 and from a copy of the income-tax clearance certificate dated the 7th August, 1961, issued to the petitioner by the opposite party No. 4, it is shown that the entire tax amount had been paid up by it. For the assessment year 1960-61, the petitioner filed its income-tax return and on or about the 8th January, 1962, the opposite party No. 4 took up and completed the hearing of the petitioner's case. In respect of this assessment year, the account books were duly produced and they were inspected and scrutinised by the Income-tax Officer and were returned to the petitioner's representative, G. D. Maheswari. The petitioner had submitted all necessary papers required for assessment up to 31st December, 1961, but no orders of assessment for the assessment year 1960-61 were passed till the petition was filed in this court.

From about the assessment year 1900-61, some of the directors of the petitioner-company got some complaints about the inefficiency and mismanagement of opposite party No. 6 and further about his dishonesty, fraudulent misappropriation and embezzlement of certain funds belonging to the petitioner. The directors considered the matter on the 25th November, 1961, and passed an order of immediate suspension of opposite party No. 6 and for further enquiry into his conduct. On enquiry it was found that opposite party No. 6 had committed misappropriation of a large sum of money. The opposite party No. 6 was thus suspended and asked to hand over charge to K. G. Dhandharia. From the 28th of December, 1961, he commenced handing over charge of the petitioner's business at its said sales depot to the said K. G. Dhandharia. On the 2nd January, 1962, the handing over of charge was completed and at that time it is alleged by the petitioner that opposite party No. 5 was also present acting on behalf of opposite party No. 6. Thereafter, on the report of the directors on the 8th January, 1962, the opposite party No. 6 was dismissed. On the 9th January, 1962, at the instance of the petitioner, a first information report was lodged before the officer-in-charge, Tinsukia Police Station, against the opposite party No. 6, and two of his brothers, namely, one Girdharilal Lohia and one Murlidhar Lohia, and also against one Satyanarayan Malpani, another ex-employee of the petitioner, for taking action for the offence of criminal breach of trust, misappropriation of funds and falsification of accounts. The accused were arrested and a criminal case was started against them. They were all released on bail. In this criminal case, a large number of books, papers and documents belonging to the petitioner were seized from the sales depot. After these books were seized, they were ordered to be kept in the custody of one G. D. Maheswari, the accountant of the petitioner. These account books and other documents, which were seized from the sales depot of the petitioner, were necessary for the conduct of the petitioner's business and thus, they were kept in the custody of the petitioner's accountant in the sales depot of the petitioner. Opposite parties Nos. 5 and 6, it is alleged, prevailed upon opposite party No. 3 to utilise the machinery of the income-tax department, so as to manage the removal of these documents and books from the custody of the petitioner's accountant. With that object in view and acting in a conspiracy, on the morning of the 11th March, 1962, suddenly, opposite parties Nos. 4, 7, 8, 9 and 10, under the leadership of opposite party No. 3, along with various officials and employees of the income-tax department, and opposite party No. 10 with a posse of armed police with rifles and guns requisitioned from Dibrugarh arrived in Tinsukia by motor-cars, lorries, jeeps and trucks and proceeded to the police station at Tinsukia. At the Tinsukia Police Station, the said opposite parties requisitioned further police force, and thereafter, they raided simultaneously various premises and offices at Tinsukia belonging either to the petitioner or to one or other of its directors or the companies mentioned in paragraph 8 of the petition. The search commenced at about 10 a.m. and continued till 11 p.m. on the said date. In the course of these searches, various places were searched, various documents were seized and a copy of the seizure list was prepared. During the course of this search, the employees and officers of the income-tax department and the police acted in an extremely highhanded manner, tore up various documents, voucher receipts including requisition slips of certain cheque books, went and searched apartments occupied by the ladies of the household with the sole object of bringing the petitioner and its directors down in the estimation of the people of the locality and generally subjecting the petitioner and its directors to hatred, contempt and ridicule and also to ruin the petitioner's business. Opposite parties Nos. 4, 7, 8 and 9 purported to act under four warrants of authorization purported to have been issued under section 37(2) of the Indian Income-tax Act, hereinafter called the Act, and rule 2 of the Rules framed under the Act. The seizure continued till the 16th March, 1962. It is this action of the authorities that is challenged by means of the present petition.

Civil Rule No. 196 of 1962 arises out of a petition filed on behalf of one Gordhandas Maheswari, carrying on business under the name and style of "Jagadamba Stores". The petitioner in this case also has set out the facts and circumstances under which his premises were searched and the documents were seized. The circumstances are similar to the one alleged in the petition numbered as Civil Rule No. 195 of 1962.

In Civil Rule No. 197 of 1962, the petition is filed on behalf of Lohia Brothers (Private) Ltd. The contention of the petitioner is that the petitioner-company is an assessee in Calcutta, that the entire tax has been paid up by it and that it had nothing to do with the assessment proceedings relating to the petitioner in Civil Rule No. 195 of 1962, or with its business. The circumstances under which the premises belonging to the petitioner-company were searched and the documents were seized in a high-handed manner, are set out in the petition. The circumstances are similar to those set out in Civil Rule No. 195.

The petition in Civil Rule No. 198 of 1962 is filed by Jashbhai Patel and the pleas raised by him are similar to the petition in Civil Rule No. 197. His case is that he was a tenant in respect of one room and one kitchen, and one bath room in the ground floor of the premises belonging to Himalayan Plywood Industries Private Ltd. at Tinsukia. The petitioner had been regularly assessed to income-tax and had been paying the same. The assessment proceedings for the assessment year 1960-61 had been completed and the income of the petitioner was found to be below the taxable limit. He had nothing to do with the business of the petitioner in Civil Rule No. 195 of 1962. His business premises were searched and documents and books of accounts were seized in a high-handed manner in similar circumstances as are set out in the petition giving rise to Civil Rule No. 195 of 1962.

Section 37 of the Act reads as follows :

"(1) The Income-tax Officer, Appellate Assistant Commissioner, Commissioner and Appellate Tribunal shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (V of 1908) , when trying a suit in respect of the following matters, namely :

(a) discovery and inspection;

(b) enforcing the attendance of any person, including any officer of a banking company, and examining him on oath ;

(d) issuing commissions.

(2) Subject to any rules made in this behalf, any Income-tax Officer specially authorised by the Commissioner in this behalf may--

(ii) seize any such books of account or other documents or place marks of identification thereon or make extracts or copies therefrom ;

and the provisions of the Code of Criminal Procedure, 1898 (V of 1898) , relating to searches shall apply so far as may be to searches under this section.

Provided that an Income-tax Officer shall not--

(a) impound any books of account or other documents without recording his reasons for so doing ; or

(b) retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Commissioner therefor.

The present section was substituted by the Finance Act, 1956, with effect from the 1st April, 1956, for the following section.

"37. Power to take evidence on oath, etc.--(1) The Income-tax Officer, Appellate Assistant Commissioner, Commissioner and Appellate Tribunal shall, for the purposes of this Chapter, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (V of 1908) , when trying a suit in respect of the following matters, namely:

(a) enforcing the attendance of any person and examining him on oath or affirmation;

(b) compelling the production of documents ; and

and any proceeding before an Income-tax Officer, Appellate Assistant Commissioner, Commissioner or Appellate Tribunal under this Chapter shall be deemed to be a 'judicial proceeding' within the meaning of sections 193 and 228 and for the purposes of section 196 of the Indian Penal Code (XLV of 1860) .

(2) Subject to any rules made in this behalf, any authority referred to in sub-section (1) may impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act:

Provided that an Income-tax Officer shall not--

(a) impound any books of account or other documents without recording his reasons for so doing ; or

(b) retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Commissioner therefor."

Section 59 of the Act has given power to the Central Board of Revenue to make rules for carrying out the purposes of the Act and to provide for any matter which by this Act is to be prescribed. Under section 37(2) , the provisions of the said sub-section are subject to any rules made in this behalf. In the exercise of the powers conferred by section 59, the Central Board of Revenue has made rules known as the Income-tax (Search of Premises and Seizure of Documents) Rules, 1957. These rules were issued under a notification dated the 6th June, 1957. Rule 2 of these Rules reads as follows :

"2.The Commissioner of Income-tax may, for reasons recorded, issue a written order under his own signature and bearing his seal, specially authorizing any Income-tax Officer, subordinate to him to enter any building, or place to be specified therein where he has reason to believe that books of account or other documents which, in his opinion, will be relevant to or useful for any proceedings under the Income-tax Act, 1922, may be found. Such order may authorize the Income-tax Officer to do all or any of the following acts, namely :

(a) to enter the said building, or place with such assistance of police officers as may be required ;

(d) to take possession of or seize any such books or documents;

(e) to make a note or an inventory of any other article or thing found in the course of such search which, in his opinion, will be useful for or relevant to any proceedings under the Act;

(f) to convey such books or documents to the office of the Income-tax Officer or any other authority not below the rank of Income-tax Officer employed in the execution of the Act."

Under rule 9, the form of the order of the Commissioner referred to in rule 2 has been prescribed and is as follows :

"Warrant of authorization under section 37(2) of the Indian Income-tax Act, 1922 (XI of 1922) , and rule 2 of the Income-tax (Search of Premises and Seizure of Documents) Rules, 1957.

(The Income-tax Officer)

Whereas information has been laid before me and on the consideration thereof I have been led to believe that certain books of account and/or documents which are or may be relevant to or useful for proceedings under the above Act in the case (name of the assessee with G.I.R. No……...) have been kept and are to be found at (specify particulars of the building or place) .

This is to authorise and require you (Name of the Income-tax Officer)

(a) to enter and search with such assistance of police officers as may be required, the said premises;

(d) to seize such books of account and/or documents, and take possession thereof;

(e) to convey such books or documents to the office of the Income-tax Officer or any other authority not below the rank of an Income-tax Officer employed in the execution of the Act; and

(f) to exercise all other powers and duties under the said section and the rules relating thereto.

Seal.Commissioner of Income-tax."

The search and seizure of the account books in all these cases were done under the warrants of authorization issued by the Commissioner of Income-tax and these have been made annexures to the petitions. Section 37(2) of the Act requires that before action is taken by an Income-tax Officer, he has to obtain a special authorization from the Commissioner of Income-tax and further that the provisions of the sub-section are subject to any rules made in this behalf. Another condition necessary before the Income-tax Officer acts is that he should have 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. The rules prescribe the manner in which the Commissioner of Income-tax has to issue his warrant of authorization, and the form of authorization. Even after obtaining the necessary warrant of authorization from the Commissioner of Income-tax, the Income-tax Officer must have reason to believe that the books which are relevant in his opinion to the enquiry are to be found in the place which he has been authorized to enter and thereupon seize such books. The issue of the warrants of authorization and the consequent search and seizure of the books of account and documents is challenged upon the ground, firstly, that the Income-tax Officer did not form any opinion and/or he had no reason to believe that any such books or documents which would be useful for, or relevant to, any particular assessment proceedings pending against the petitioner, might be found in the premises. The condition precedent for the exercise of the powers under section 37(2) of the Act was thus not fulfilled. Secondly, it is urged that there is no pending proceeding in which the Income-tax Officer could possibly have any reason to believe that any books of account or other documents would be either relevant or useful. Thirdly, it is urged that the warrants of authorization show that it was only the respondent No. 1, namely, the Commissioner of Income-tax, who had reason to believe that certain books of account and other documents, which were or might be relevant or useful for some alleged proceeding against the petitioner, might be found in the premises, and this was in contravention of the provisions of section 37(2) . Fourthly, it is contended that in the warrants of authorization, there is no mention of any pending proceeding against the petitioner in which the books of account and documents are alleged to be relevant or useful. No books or documents are specified, which are likely to be relevant or useful and thus the issue of the warrants is arbitrary and capricious and is unwarranted under the Act. Fifthly, it is urged that no action can be taken under section 37(2) of the Act, unless action has been taken under section 37(1) and that has failed to produce any results. Lastly, it is urged that in view of the facts set out in the affidavit, the search and seizure of the books and the entire operation were mala fide and colourable exercise of powers under the Act.

The warrant of authorization issued by the Commissioner of Income-tax to the Additional Income-tax Officer, Dibrugarh, is as follows :

"Whereas information has been laid before me and on the consideration thereof I have been led to believe that certain books of account and/or documents which are or may be relevant to or useful for proceedings under the above Act in the case (name of the assessee with G.I.R., Senairam Doongarmal Agency (P.) Ltd., G.I.R. No. 2-S) have been kept and are to be found at the sales depot and office of Senairam Doongarmal Agency (P.) Ltd., situated in Siding Market, Tinsukia Town, Dist. of Lakhimpur.

This is to authorise and require you, Shri R N. Bagchi.

(Name of the Income-tax Officer)

(a) to enter and search with such assistance of police officers as may be required, the said premises ;

(d) to seize such books of account and/or documents, take possession thereof;

(e) to convey such books or documents to the office of the Income-tax Officer or any other authority not below the rank of an Income-tax Officer employed in the execution of the Act; and

(f) to exercise all other powers and duties under the said section and the rules relating thereto.

(Sd.) . K. E. Johnson

7-3-62.

Commissioner of Income-tax, Assam,

Tripura and Manipur, Shillong."

In similar terms is the warrant of authorization issued to Sri R. K. Choudhury, Income-tax Officer, Dibrugarh, to search the offices including the accounts office and other offices of Lohia Brothers (P.) Ltd., Senairam Doongarmal Agency (P.) Ltd., Chunilal Murlidhar and Senairam Doongarmal and residence of their directors and members situated in Tinsukia town in the district of Lakhimpur. By another warrant of authorization issued in similar terms, Shri A. A. Borbhuiyan, Income-tax Officer, Tinsukia, was authorised to search the residence of Gobardhandas Maheshwari, Khemani Quarters, opposite Khemani Rice Mills, Tinsukia. Similar in terms is the warrant of authorization issued to Shri P. L. Das, Income-tax Officer, Digboi, to search the premises of Himalaya Plywood Factory, its offices and residence of Dayabhai Patel at Rangagora Road, Tinsukia, in the district Lakhimpur.

The Commissioner of Income-tax in his reply has stated as follows :

"That in this connection I further say that on information placed before me and on being satisfied of the reasonableness and reliability thereof I issued a warrant of authorization in favour of respondent No. 4, Sri R. N. Bagchi, to enter into and search the place referred to in the warrant of authorization, where I had reason to believe that books, documents and other papers might be found which would be useful for or relevant to the proceedings under the Income-tax Act, 1922, pending against M/s. Senairam Doongarmal Agency (Private) Limited. Whatever was done by respondents Nos. 4, 7, 8 and 9 and the officers acting under their instructions was done by them bona fide on the authority of the warrants of authorization issued by me in their favour under section 37(2) of the Indian Income-tax Act, 1922, and rule 2 of the Income-tax (Search of Premises and Seizure of Documents) Rules, 1957, and that they all along acted bona fide in the discharge of their duties. There was no mala fide action on their part…….."

This averment in the counter-affidavit and in the warrant of authorization shows that the Commissioner of Income-tax considered the information placed before him and on that information he was satisfied that certain books of account relating to the assessment proceedings pending against the petitioner could be found in different premises and being so satisfied, he issued the warrant of authorization. Section 37(2) of the Act requires that where any Income-tax Officer, who is specially authorized in this behalf, 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 may be found, he may proceed to enter, search any building and seize the books of account. On a plain reading of section 37(2) , it is the opinion of the Income-tax Officer, which is relevant and further, the Income-tax Officer should have reason to believe that the books of account relevant to the proceedings will be found at the place and not that of the Commissioner of Income-tax, and in none of the affidavits filed by the Income-tax Officers, it is stated that at any stage they formed an opinion that the books of account and documents were relevant for the proceedings pending against the petitioner, or that they had reason to believe that the books of account would be found at the place. It is not stated in the affidavits filed by the Income-tax Officers that at any stage they submitted any report to the Commissioner of Income-tax to this effect. Shri R.N. Bagchi, Additional Income-tax Officer, Dibrugarh, in paragraph 24 of his counter-affidavit has stated that he searched the premises specified in the warrant of authorization issued in his favour and denied that any other premises was searched by him or that any books, documents and papers were seized other than from the premises mentioned in the said warrant of authorization. In paragraph 33, he further stated that the books, documents and papers specified in the seizure list were legally seized in execution of valid warrants of authorization issued by the Commissioner of Income-tax from the places mentioned therein. He further denied each and every allegation, which was contrary to or inconsistent with what was stated. In paragraph 34, he had also stated as follows :

"With reference to the allegations contained in paragraph 48 of the petition, I say that whatever action was taken was done bona fide in execution of a legal and valid warrant of authorization issued by respondent No.1……."

In paragraph 35, he deals with the allegations contained in paragraph 49( b) of the petition, but he does not say anything about the allegations contained in paragraph 40(a) of the petition, in which it is specifically mentioned that the Income-tax Officer never applied his mind nor had reason to believe that the books of account were relevant or useful for the proceedings before him. It is also not stated in the affidavit of the Commissioner of Income-tax that he acted on the reports submitted by the Income-tax Officers in which it was indicated that the Income-tax Officers were of the opinion that the books would be relevant for the proceedings before them and that they had reason to believe that the books would be found in the premises which they were asked to search. In the case of Surajmull Nagarmull's case (Supra) , the constitutionality of section 37(2) of the Act was challenged. One of the points, however, raised there was that the Commissioner of Income-tax only approved the report sent by the Income-tax Officer and did not apply his own mind to the fact whether the books were relevant to the enquiry and whether there were reasons to believe whether those books could be found in the premises. In fact, the contention was that section 37(2) required the satisfaction of the Commissioner of Income-tax and not of the Income-tax Officer and as the Commissioner of Income-tax had relied on the satisfaction of the Income-tax Officer, his action was invalid. This argument was repelled and I am in agreement with the construction of section 37(2) of the Act. In my opinion also section 37(2) requires that the Income-tax Officer should have reason to believe that any books of account are to be found in particular premises, which books of account will be useful to the enquiry, and not the Commissioner of Income-tax. Rule 2 of the Income-tax (Search of Premises and Seizure of Documents) Rules, 1957, requires that the Commissioner of Income-tax may, for reasons recorded, issue a written order under his own signature and bearing his seal, specially authorizing any Income-tax Officer to enter any building where he has reason to believe that books of account or other documents which, in his opinion, will be relevant to or useful for any proceedings under the Income-tax Act, 1922, may be found. The words, "where he has reason to believe", in rule 2, in my opinion, also refer to the Income-tax Officer and not to the Commissioner of Income-tax. The Commissioner of Income-tax has to give reasons in writing and issue a written order under his own signature. The form of the order is prescribed. This also shows that the Commissioner of Income-tax has to consider the information, which is laid before him and on consideration of that information, if he is led to believe that certain books of account, which are or may be relevant and useful for any proceedings may be found, he may then order the Income-tax Officer to enter the building and seize the books. The form does not show that the Commissioner of Income-tax should have reason to believe that the books relevant will be found at the premises or that they are, in his opinion, useful for the proceedings. He has only to consider the information laid before him and has to record his reasons. Even if it be accepted that the Commissioner of Income-tax has to consider the information. laid before him and on the basis of that information has to make up his mind and form an opinion that certain books of account relevant or useful for the proceedings will be found at any premises, this requirement does not relieve the Income-tax Officer of his responsibility under section 37(2) of the Act. The Rules cannot substitute the requirement of the section itself. They may add to the requirement and when the section and the Rules are read together, it will be clear that first of all the information has to be given to the Commissioner of Income-tax, may be by the Income-tax Officers themselves, that certain books of account relevant and useful to the proceedings under the Act are kept in certain premises and on that information, the Commissioner of Income-tax, if he is satisfied, issues a warrant of authorization. But, before actually entering the premises, the Income-tax Officer also must have reasonable grounds for believing that the documents will be found at certain premises and that the said documents or books of account are relevant or useful for any proceedings before him. He may form that opinion before laying the information before the Commissioner of Income-tax or before entering the premises and after the warrant of authorization has been issued. The Commissioner of Income-tax also may have received information not only from the Income-tax Officer, but from other sources also, and simply because the Commissioner of Income-tax has issued a warrant of authorization, it does not make it obligatory on the Income-tax Officer to act in accordance with that warrant of authorization without applying his own independent mind to the requirements of section 37(2) of the Act. From the affidavits filed, as I have already indicated, it appears that the Income-tax Officers thought that under section 37(2) , once the warrant of authorization has been issued, they are bound to carry into effect the said warrants and need not apply their own independent mind. In cases where the Income-tax Officers have already applied their mind to the requirements of section 37(2) and thereafter submitted the report to the Commissioner of Income-tax, acting on which the Commissioner of Income-tax has issued the warrants of authorization, it may be argued that the Income-tax Officers have applied their independent mind and the requirements of section 37(2) have been fulfilled. But in the present case, the Commissioner of Income-tax has not disclosed the source of information and has not stated that he acted on any report received from the Income-tax Officers. Under rule 2, the Commissioner of Income-tax can issue a written order, as prescribed in rule 9, for the reasons recorded. The reasons have to be recorded separately. The issue of the order as prescribed in rule 9 does not, to my mind, satisfy the requirements of rule 2 that before issuing a written order, reasons have to be recorded.

Rule 2 further requires that the building or place, where the Income-tax Officer is authorised to enter, is to be specified in the order itself. The form of the order also suggests that particulars of the building or place have got to be specified. In the order of authorization issued in favour of Shri R.K. Choudhury, the specification of the building or place is mentioned as follows :

"At offices including accounts office and other offices of Lohia Brothers (P.) Ltd., Senairam Doongarmal Agency (P.) Ltd., Chunilal Murlidhar and Senairam Doongarmal and residence of their directors and members situated in Tinsukia Town in the district of Lakhimpur."

The specification of the building or place is very vague. In the authorisation letter issued in favour of Shri R. N. Bagchi, the specification of the place is stated to be at the sales depot and office of Senairam Doongarmal Agency (P.) Ltd., situated in Siding Market, Tinsukia Town. In this warrant of authorization, the building and the place have been clearly specified. In the other one, the specification is too vague and it had been left to the discretion of the Income-tax Officer to decide which of the buildings situated in the town of Tinsukia, or the accounts office and other offices of Lohia Brothers (P.) Ltd., or Senairam Doongarmal Agency (P.) Ltd. For the reasons which I have set out above, in my opinion, the Income-tax Officer has not applied his mind to the conditions precedent for the exercise of powers under section 37(2) , nor has the Commissioner of Income-tax given any indication either in his order or in the affidavit, of the sources of his information, nor has he recorded any reasons. The search and seizure thus are not in accordance with the provisions of section 37 and the Rules framed in that behalf.

The next point urged is that the whole action is mala fide. The manner in which the search was conducted and the account books were seized are set out in paragraph 47 of the affidavit. The motive suggested by the petitioner in his affidavit is that opposite parties Nos. 5 and 6, who were the petitioner's dismissed employees, conspired with opposite party No. 3 and managed to take the assistance of the income-tax department so as to humiliate the petitioners and thus in a high-handed manner searched the premises and seized the account books. It is alleged that opposite party No. 3 is related to opposite party No. 5. It is further alleged that with a view to help opposite parties Nos. 5 and 6, the opposite party No. 3 influenced the income-tax department to act in a high-handed manner and to the prejudice of the petitioner. The facts setting out the manner how the police party reached the place and carried out the search have not been denied, except the fact that the opposite party No. 3 was present at the time of the search and the fact that the search was conducted under his guidance. If an act is done arbitrarily and capriciously without due care and caution, and if any act has been done not with a view to give effect to the purposes of the Act, but due to considerations which are extraneous to the purposes of the Act, or if an act is done in a manner which no reasonable body of persons under these circumstances could have done, the act is a mala fide exercise of the powers, and it can be set aside by this court under article 226 of the Constitution. It is not necessary that the act should be actuated by malice in the popular sense. In view of the denial of the opposite party No. 3, it must be accepted that there is no relationship between the opposite party No. 5 and opposite party No. 3 and he was not actuated by any malice in the popular sense. But the fact remains that in the past, there was no charge of evasion of income-tax by the petitioner, and there was no charge that he suppressed any account books. Further, no materials were placed before us which could have given a reasonable belief in the mind of the Income-tax Officer that the documents will be found at those places, which were relevant to the enquiry. The proceedings so far as the assessment for the years concerned have already come to a close. All these facts lead to the inference that the exercise of the powers was not bona fide. That a large number of documents were seized irrespective of the fact whether the books had any relevance to the enquiry, and the manner in which the search was conducted, all these go to show that the exercise of the powers was not bona fide. As observed by Lord Halsbury in Susannah Sharp v. Wakefield [1891] AC 173, 179 :

"An extensive power is confided to the justices in their capacity as justices to be exercised judicially ; and 'discretion' means when it is said that something is to be done within the discretion of the authorities that that something is to be done according to the rules of reason and justice, not according to private opinion:…….according to law, and not humour-It is to be, not arbitrary, vague, and fanciful, but legal and regular ..."

Having held that the act of the opposite parties was not in accordance with the provisions of section 37(2) and the Rules made under the Income-tax Act and further that the act was mala fide, it is not necessary to elaborately deal with the question of the constitutionality of section 37. I have already indicated that I do not agree with the opinion of my brother judges that the provisions are unconstitutional. Beyond expressing my dissent from the view taken by my brother judges, I do not propose to deal exhaustively with that point. Mainly, the constitutionality has been challenged on the ground that the provisions infringe the fundamental rights guaranteed under articles 14,19(1) (f) and 19(1) (g) and the section is not saved by articles 19(5) and 19(6) . Article 14 has been canvassed mainly on two grounds : firstly, that the power given both under section 37(1) and (2) operates on the same field and as the power under section 37(2) is more onerous, it should be struck down as being discriminatory. Even if it is held that section 37(2) leaves it to the discretion of the authorities to classify the persons to whom section 37(2) will be attracted, there is no guidance left in the statute for the executive authorities to classify the persons and the circumstances under which this sub-section will be attracted. It is secondly urged that the discretion vested on the income-tax authorities under section 37(2) is unguided, arbitrary and uncanalised and thus it contains the germs of discrimination. To some extent, the argument of unreasonableness is overlapping. It is argued that as the discretion conferred under section 37(2) affects the right to possess property and to carry on business and is uncanalised, it is ultra vires of article 19(1) (f) and (g) of the Constitution. In my opinion, having regard to the scheme of the Act and the internal evidence in the section itself, it cannot be said that the power conferred on the income-tax authorities is uncanalised and there is no guidance and thus arbitrary. If the exercise of the powers is arbitrary, it can always be struck down by this court under article 226 of the Constitution.

For the first proposition that both sub-sections (1) and (2) of section 37 operate on the same field and the provisions of section 37(2) being more onerous, should be struck down, reliance has been placed on two decisions of the Supreme Court in Suraj Mall Mohta's case (Supra) and Shree Meenakshi Mills Ltd's. case (Supra) and a decision of the Calcutta High Court in S.M. Nawab Ariff v. Corporation of Calcutta AIR [1960] Cal. 159 ; 64 CWN 1. In the first case before the Supreme Court, the validity of section 5(4) of the Taxation on Income (Investigation Commission) Act was called into question. During the proceedings before the Income-tax Investigation Commission, it was found that the petitioner also evaded payment of tax. His case was sought to be referred under section 5(4) of Act XXX of 1947. It was urged that on a plain reading, section 5(4) is not limited only to persons who made extraordinary profits and to a substantial extent evaded payment of taxation on income, but applies to all persons who may have evaded payment of taxation on income, irrespective of whether the evaded profits are substantial or insubstantial. That being the true scope of section 5(4) , it deals with the same class of persons who fall within the ambit of section 34 of the Indian Income-tax Act and are dealt with in sub-section (1) of section 34. The income of such persons could also be taxed under proceedings under that section. Inasmuch as proceedings under the Act XXX of 1947 were more onerous, and persons belonging to the same class could on the sweet will of the Investigation Commission be treated under section 5(4) , although they could also be proceeded against under the provisions of section 34 of the Income-tax Act, this was a clear case of discrimination. The validity of section 5(1) of the Act XXX of 1947 was not decided in this case.

In the next case, the validity of section 5(1) of the Taxation on Income (Investigation Commission) Act of 1947 came up for decision. It was held that by amending the Income-tax Act and adding a new sub-section (1A) to section 34 by Act 33 of 1954, the class of persons which was dealt with by section 5(1) of the Act 30 of 1947 was also brought within the purview of the amended section 34(1A) . The amendment was intended to deal with the class of persons who were classified for special treatment by section 5(1) of Act 30 of 1947. The Supreme Court held that as, after the amendment, the persons who were classified for special treatment under section 5(1) of the Act 30 of 1947 could also be dealt with under the amended section 34(1A) , thus the more onerous procedure under the Act 30 of 1947 was discriminatory and should be struck down. The matter again came up before the Supreme Court in M. Ct. Muthiah v. Commissioner of Income-tax [1955] 2 SCR 1247 ; [1956] 29 ITR 390 . Briefly the facts of this case were that the Central Government under section 5(1) of the Act 30 of 1947 referred to the Income-tax Investigation Commission the cases of M. Ct. M. Chidambaram Chettiar, M. Ct. M. Muthiah Chettiar and Devanai Achi. The Commission after holding an enquiry into all these three cases recorded their findings and held that a certain sum represented the undisclosed income during the investigation period. This report was submitted by the Commission to the Central Government on the 26th August, 1952. The Government considered the report and purporting to act under section 8(2) of the Act 30 of 1947 directed that appropriate action under the Income-tax Act should be taken against the assessees with a view to assess or reassess the income, which had escaped assessment for the years 1940-41 to 1948-49. Thereupon, notices were issued under section 34 of the Income-tax Act and reassessments were made for the above period based on the findings of the Investigation Commission, which were treated as final and conclusive. These assessment orders for the years 1940-41, 1941-42 and 1948-49 were served on the assessees on the 20th February, 1954, and the assessment orders for the years 1943-44 to 1947-48 were served on 12th May, 1954. The reassessment proceedings for the year 1942-43, however, remained pending. Applications were then made for reference to the High Court against the orders of reassessment. Later in 1954, the petitioners filed petitions under article 32 of the Constitution before the Supreme Court. Two points were urged by the petitioners before the Supreme Court. Firstly, it was contended that after the amendment of section 34 of the Income-tax Act by Act XXXIII of 1954 by which the sub-sections (1A) to (1D) were added to section 34, the provisions of section 5(1) of the Act 30 of 1947 became discriminatory, as on a reading of both the enactments, Act 30 of 1947 and the Income-tax Act as amended in 1954, showed that they applied to the same category of persons and there was nothing in section 5(1) or any other provision of the Act 30 of 1947 disclosing any valid or reasonable classification. For this they relied upon Shree Meenakshi Mills' case (Supra) . Another argument was made that the Act 30 of 1947 enabled the Central Government to discriminate between one person and another, inasmuch as they were authorised to pick and choose cases of persons, who fell within the group of those who had substantially evaded taxation on income, that the act of the Government in referring some evaders to the Commission was wholly arbitrary and there was nothing to eliminate the possibility of a favouritism or a discrimination against an individual by sending or not sending cases to the Commission as between two persons both of whom might be within the group of those who might have evaded the payment of tax to a substantial extent. The argument that section 5(1) gave arbitrary power to pick and choose the cases of particular individuals falling under the category leaving the cases of others, falling within the same category, to be dealt with by section 34(1) of the Act prior to 1948, was repelled on the reasons given in the decision of the Supreme Court in Thangal Kunju Musaliar v. Venkatachalam Potti [1955] 2 SCR 1196 ; [1956] 29 ITR 349. Relying upon the reasons given in Shree Meenakshi Mills' case (Supra) it was held that barring the cases of persons which were already concluded by reports made by the Commission and the directions given by the Central Government under section 8(2) of the Act 30 of 1947, culminating in the assessment or reassessment of the escaped income, those cases which were pending on the 26th January, 1950, for investigation before the Commission as also the assessment or reassessment proceedings, which were pending on January 26, 1950, before the Income-tax Officers concerned in pursuance of the directions given by the Central Government under section 8(2) of the Act 30 of 1947 would be hit by article 14 of the Constitution and would be invalidated.

In my opinion, the two sub-sections of section 37 of the Act confer two distinct and separate powers on the Income-tax Officer for the better and more effective way of achieving the objectives of the Act. There is thus no question of any discrimination by exercising one power or the other. The two sub-sections do not provide two separate procedures for dealing with persons, who belong to the same class. Both these sub-sections apply to persons who belong to the same class. In enacting this law, the legislature has not discriminated at all. The object of the Act, as disclosed from the preamble and the entire scheme of the Act, is to provide for an effective machinery to determine the amount of tax and for the collection and realisation of the tax and further to prevent evasion of the tax. In order to achieve this object, certain powers have been conferred on the Income-tax Officer and other income-tax authorities and the power will have to be exercised with a view to achieve that object. The income-tax authorities have been left with discretion to exercise any of the two powers having regard to the necessity and the circumstances of the case and having regard to the object of the Act. Which of the powers will be required to achieve the object of the Act in a particular set of circumstances has been left to the discretion of the authorities. The policy thus is clear under the Act and if the power has been exercised not in conformity with the policy of the Act, that act can be struck down, but it cannot be said that the section itself is discriminatory.

In the case of Pannalal Binjraj's case (Supra) the constitutionality of section 5(7A) of the Act had come up for decision and it was held that the said section is not violative of article 14 of the Constitution and also does not impose any unreasonable restriction on the fundamental right to carry on trade or business enshrined in article 19(1) (g) of the Constitution. In discussing the object of the Income-tax Act, it was observed at page 407 :

"It has to be remembered that the purpose of the Act is to levy income-tax, assess and collect the same. The preamble of the Act does not say so in terms, it being an Act to consolidate and amend the law relating to income-tax and super-tax but that is the purpose of the Act as disclosed in the preamble of the first Indian Income-tax Act of 1886 (Act II of 1886) . It follows, therefore, that all the provisions contained in the Act have been designed with the object of achieving that purpose ..."

Dealing with the power conferred under the said section, it was observed at page 408 as follows [1957] 31 ITR 565 ; AIR [1957] SC 397 :

"This power is discretionary and not necessarily discriminatory and abuse of power cannot be easily assumed where the discretion is vested in such high officials . . . There is moreover a presumption that public officials will discharge their duties honestly and in accordance with the rules of law ... It has also been observed by this court in Thangal Kunju Musaliar v. Venkatachalam Potti [1955] 2 SCR 1196 ; [1956] 29 ITR 349 with reference to the possibility of discrimination between assessees in the matter of the reference of their cases to the Income-tax Investigation Commission that :

'It is to be presumed, unless the contrary were shown, that the administration of a particular law would be done "not with an evil eye and unequal hand" and the selection made by the Government of the cases of persons to be referred for investigation by the Commission would not be discriminatory.'

This presumption, however, cannot be stretched too far and cannot be carried to the extent of always holding that there must be some undisclosed and unknow n reason for subjecting certain individuals or corporations to hostile and discriminatory treatment. .. There may be cases where improper execution of power will result in injustice to the parties. As has been observed, however, the possibility of such discriminatory treatment cannot necessarily invalidate the legislation and where there is an abuse of such power, the parties aggrieved are not without ample remedies under the law….What will be struck down in such cases will not be the provision which invests the authorities with such power but the abuse of the power itself."

As I have said, the argument really resolves itself into this that the Income-tax Officer can pick up any person and exercise his powers under section 37(2) of the Act as against him, while in similar circumstances, other persons may not be dealt with under that section, and thus the section is discriminatory. If there are restrictions in the section itself to the exercise of the power and the power necessarily is to be exercised with a view to achieve the object of the Act, it cannot be said that the section has germs of discrimination.

The Income-tax Officer has to be specially authorized by the Commissioner of Income-tax. Further, the exercise of the power is subject to the rules and further the provisions of the Code of Criminal Procedure relating to searches shall apply to the searches made under the section. The power thus cannot be said to be unguided and unregulated. In the case of Saghir Ahmad v. State of U.P. [1955] 1 SCR 707 ; AIR [1954] SC 728, the provisions of the U. P. State Road Transport Act, 1951, were challenged as unconstitutional. Section 3 of the said Act authorises the State Government to declare that the road transport service in general or on particular routes should be run and operated by the State Government exclusively or by the State Government in conjunction with railway or partly by the State Government and partly by others in accordance with the provisions of the Act. One of the arguments advanced was that as the State could choose any and every person it liked for the purpose of being associated with the transport service and there were no rules to guide its discretion in the matter of selection, the section offended against article 14 of the Constitution. In reply, it was contended by the Advocate-General that the State could only choose the routes or portions of routes on which the private citizens would be allowed to operate and the number of persons to whom permits should be given. After that had been done, the granting of permits would necessarily be regulated by the provisions of the Motor Vehicles Act. In this view of the matter, it was held by the Supreme Court that the discretion to be exercised by the State would be a regulated discretion guided by statutory rules.

In the case of Jyoti Pershad v. Union Territory of Delhi [1962] 2 SCR 125 ; AIR [1961] SC 1602 the validity of certain provisions of the Slum Areas (Improvement and Clearance) Act, 1956, were challenged. Though the provisions were upheld to be constitutional, the scope and import of article 14 of the Constitution was considered. It was observed in this case that the decisions of the Supreme Court laying down the proper construction of article 14 rendered up to 1959, had been summarised in the form of five propositions by Das C.J. in Ram-krishna Dalmia v. S.R. Tendolkar [1959] SCR 297 ; AIR [1958] SC 548-549. In this case, however, the propositions were summarised as follows :

"(1) If the statute itself or the rule made under it applies unequally to persons or things similarly situated, it would be an instance of a direct violation of the constitutional guarantee and the provisions of the statute or the rule in question would have to be struck down.

(2) The enactment or the rule might not in terms enact a discriminatory rule of law but might enable an unequal or discriminatory treatment to be accorded to persons or things similarly situated. This would happen when the legislature vests a discretion in an authority, be it the Government or an administrative official acting either as an executive officer or even in a quasi-judicial capacity by a legislation which does not lay down any policy or disclose any tangible or intelligible purpose, thus clothing the authority with unguided and arbitrary powers enabling it to discriminate."

In summarising this law as pointed out above, their Lordships have referred to the cases of Harishankar Bagla v. State of Madhya Pradesh [1955] 1 SCR 380 ; AIR [1954] SC 465, Dwarka Prasad Laxmi Narain v. State of Uttar Pradesh [1954] SCR 803 ; AIR [1954] SC 224, State of West Bengal v. Anwar Ali Sarkar [1952] SCR 284 ; AIR [1952] SC 75, Kathi Railing Rawat v. State of Saurashtra [1952] SCR 435 ; AIR [1952] SC 123 and lastly, Kedar Nath v. State of Bengal [1954] SCR 30 ; AIR [1953] SC 404. It was further observed in this case that :

"Such guidance may thus be obtained from or afforded by (a ) the preamble read in the light of the surrounding circumstances which necessitated the legislation, taken in conjunction with well-known facts of which the court might take judicial notice or of which it is appraised by evidence before it in the form of affidavits (Kathi Raning Rawat's case (Supra) ) being an instance where the guidance was gathered in the manner above indicated, (b) or even from the policy and purpose of the enactment which may be gathered from other operative provisions applicable to analogous or comparable situations or generally from the object sought to be achieved by the enactment."

The concept of reasonableness has been laid down by Patanjali Sastri C.J. in the case of State of Madras v. V. G. Row [1952] SCR 597 ; AIR [1952] SC 196 in the following terms :

"It is important in this context to bear in mind that the test of reasonableness, wherever prescribed, should be applied to each individual statute impugned, and no abstract standard, or general pattern, of reasonableness can be laid down as applicable to all cases. The nature of the right alleged to have been infringed, the underlying purpose of the restrictions imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition, the prevailing conditions at the time, should all enter into the judicial verdict ..."

Reliance was placed on the following observations of the Supreme Court in the case of Raghubir Singh v. Court of Wards, Ajmer [1953] SCR 1049 ; AIR [1953] SC 373, at page 375 :

"When a law deprives a person of possession of his property for an indefinite period of time merely on the subjective determination of an executive officer, such a law can on no construction of the word 'reasonable' be described as coming within that expression, because it completely negatives the fundamental right by making its enjoyment depend on the mere pleasure and discretion of the executive, the citizen affected having no right to have recourse for establishing the contrary in a civil court ..."

The argument that an arbitrary and unguided discretion given to the executive authorities to act in a manner so as to restrict the fundamental rights of citizens is an unreasonable restriction, is the same and has been examined in connection with the violation of article 14 of the Constitution. The first question which arises in all cases where the constitutionality of an Act is challenged on the ground that it violates article 19(1) (f) and (g) is whether the petitioner has got any fundamental right and whether any such right has been restricted. If there is any restriction, then the question arises whether that restriction is reasonable and is saved under article 19(5) and (6) . Assuming that the petitioner has a fundamental right under article 19(1) (f) and ( g) , inasmuch as the account books, which are seized, are his property and further, the seizure affects his right to carry on business and the power granted to the Income-tax Officer to seize such account books, is a restriction on the said fundamental right, in my opinion, the restriction cannot be regarded as unreasonable. Applying the test laid down in the two cases mentioned above, section 37(2) of the Act cannot be struck down as being an unreasonable restriction. The power conferred on the Income-tax Officer is not arbitrary and uncanalised.

I have already pointed out in dealing with article 14 as to why the power under section 37(2) of the Act cannot be regarded as arbitrary and uncanalised. The deprivation of the petitioners of their account books, if at all, is only temporary. Section 37(2) was enacted in view of large-scale evasion of income-tax and if, under those circumstances, restriction is placed on the right of the petitioner, it cannot be said that the restriction is in its very nature unreasonable, and not in the public interest. In conclusion, however, I agree that the search and seizure of the account books made by the income-tax authorities were illegal and the petitioners are entitled to the relief claimed.

These petitions are allowed with costs. The warrants of authorisation dated March 7, 1962, are quashed, and the opposite parties are directed not to in any way give effect to the seizure of the said books and documents effected on March 11, 1962, or take any steps thereunder. The opposite parties are further directed to return forthwith the books and documents seized on March 11, 1962. We assess the hearing fee at Rs 200 in each case, but the costs will not be drawn up against the opposite parties Nos. 5 and 6 in Civil Rules Nos. 195 and 197 of 1962.

Petitions allowed.