RAMJIBHAI KALIDAS Vs. DESAI I G ITO

JUDGEMENT

(1.) THESE petitions raise a question as to the constitutional validity of sub -sections (1) (c) (iii) and (5) of section 132 of the Income -tax Act, 1961. To determine this question it is not necessary to refer to any facts and, therefore, we would have ordinarily refrained from reciting the facts giving rise to these petitions but there is also a subsidiary point raised by the petitioners and that calls for a statement of the facts. The facts of both the petitions are identical and we may, therefore, conveniently narrate the facts with reference to the first petition, namely, Special Civil Application No. 163 of 1970. One Amirbhai Alibhai was the owner of a shop situate in an important business locality in Ahmedabad. The petitioner, according to his case as set out in the petition, was carrying on business in gold and silver coated cotton threads as a licensee in this shop. On 22nd August, 1968, the officers of the Central Excise Department raided this shop and, as a result of the search made by them, seized primary gold weighing 40 grammes, one gold bar bearing foreign marks and weighting 10 tolas which was lying beneath a brick under the floor, two British guineas contained in an envelope kept under charcoal. 76 grammes of gold ornaments, Rs. 15,280 in currency notes from the counter of the shop and currency notes of Rs. 3,480 lying in a handkerchief near the table. One Krishnala Meghraj who is the petitioner in the other petition was present in the shop at the time and on making search of his person, currency notes of Rs. 15,597 were found from him and they were also seized by the Central Excise Officers. Amirbhai Alibhai, the owner of the shop, was not available at the time of the search but on his return his statement was recorded by the Superintendent, Central Excise. His disowned ownership as well as possession of the gold, jewellery and currency notes seized by the Central Excise, Officers but admitted that some profit was being given to him in gold and silver business by the petitioner and Krishnalal Meghraj. The petitioner also gave a statement and in this statement he admitted that gold ornaments which were seized were received by him in the course of his money -lending business but denied that the primary gold and the gold bar belonged to him. So far as the sum of Rs. 16,280 seized from the shop was concerned the petitioner claimed to be the owner of the same and stated that currency notes of Rs. 12,000 forming part of this sum had been given to him by his sister Ram Laxmi, for purchase of silver. Krishnalal Meghraj in his statement claimed that out of the money seized for him, currency notes of Rs. 15,000 had been given to him by Navnitlal, the brother of one Ambalal Namdar, for being kept with him. The petitioner by his subsequent letters dated 5th September, 1968, and 17th October, 1968, declared that out of the sum of Rs. 15,280 seized from the counter of the shop, currency notes of Rs. 12,000 had been given to him by his sister, Ram Laxmi, while the remaining currency notes of Rs. 3,280 were his personal moneys. So far as the currency notes of Rs. 3,480 lying in the handkerchief near the table were concerned, the petitioner explained that they belonged to one Babulal Gandhi who had given the them to Krishnalal Meghraj for being handed over to the petitioner for redeeming his ornaments which were lying mortgaged with Bhailal Dahyalal and Company. The statements of Ram Laxmi and Babulal Gandhi were then recorded by the Central Excise Officers. After the preliminary inquiry was over, a show cause notice dated 20th February, 1969, was issued by the Deputy Collector of Central Excise calling upon the petitioner, Krishnalal Meghraj and Amirbhai Alibhai to show cause why the gold bar and two British Guineas and currency notes aggregating to Rs. 34,358 should not be confiscated and penalty should not be imposed for contravention of the relevant provisions of the Customs Act, 1962, and the Foreign Exchange Regulation Act, 1947. All three of them filed written statements and contested the show cause notice and after hearing them the Deputy Collector passed an order dated 20th December, 1969, holding that the gold bar bearing foreign marks was found from the premises of Amirbhai Alibhai and must, therefore, be held to be in his possession and directed that the same be confiscated and a penalty of Rs. 1,000 imposed on Amirbhai Alibhai. So far as the currency notes were concerned, the Deputy Collector held that there was no conclusive evidence on record to show that the amount of the currency notes represented sales proceeds of smuggled gold or smuggled gold or that the petitioner and Krishnalal Meghraj were in league with Amirbhai Alibhai in dealing in smuggled gold and he accordingly gave the benefit of doubt to the petitioner and Krishnalal Meghraj and ordered release of the currency notes to the owners. Pursuant to this order, the Assistant Collector of Central Excise addressed a letter asking the petitioner, Krishnalal Meghraj and Amirbhai Alibhai to attend his office on 5th January, 1970, for taking delivery of the currency notes which were ordered to be released. This instruction was, however, countermanded by the Assistant Collector by a subsequent letter dated 2nd January, 1970. This countermanding presumably took place because in the meantime information about the seized currency notes was given by the Central Excise authorities to the Commissioner of Income -tax and at the request of the Commissioner of Income -tax, the record of the inquiry held by the Central Excise authorities was made available to him and he was examining the question whether any action was called for in the matter from his end. Ultimately, the commissioner of Income -tax, after perusing the record of the inquiry papers, came to the conclusion that, in the circumstances, there was reason to believe that the seized currency notes lying with the Central Excise authorities represented undisclosed income of one or more of the three persons, namely, the petitioner, Krishnalal Meghraj and Amirbhai Alibhai. He, therefore, proceeded to take action under section 132(1)(c)(iii) and after recording his reasons as required by rule 112A, he issued three authorisations on 3rd January, 1970, authorizing respondents Nos. 1 -B and 1 -C to search the office of the Assistant Collector of Central Excise and seize therefrom any books of account, documents, money, bullion, jewellery or other valuable article or thing belonging to the petitioner, Krishnalal Meghraj and Amirbhai Alibhai which may be found as a result of the search and take possession of the same. Pursuant to these authorisations, respondents Nos. 1 -B and 1 -C search the officer of the Assistant Collector of Central Excise and seized, inter alia, three packets containing currency notes of Rs. 15,597, Rs. 15,281 and Rs. 3,480 aggregating to Rs. 34,358 on 9th January, 1970. The first respondent who is the Income -tax Officer having jurisdiction to assess the petitioner thereafter issued a notice dated 5th January, 1970, to the petitioner under section 132(5) read with rule 112A stating that, in the course of search under section 132(1), currency notes of Rs. 34,358 were seized from the possession of the petitioner on 5th January, 1970, and calling upon the petitioner to attend his office on 2nd February, 1970, to explain or to produce or cause to be produced evidence on which the petitioner might rely for explaining the nature of the possession and the source of acquisition of these assets. The petitioner thereupon filed Special Civil Application No. 163 of 1970 challenging the legality of the seizure and the validity of the show cause notice on various grounds to which we shall presently refer. Since this notice proceeded on the basis that the entire amount of Rs. 34,358 was seized from the possession of the petitioner and belonged to him, Krishnalal Meghraj who claimed to be the owner of a part of his amount, namely, Rs. 15,598, also in his turn filed Special Civil Application No. 164 of 1970, challenging the validity of the seizure and of the show cause notice on the same grounds on which the petition in Special Civil Application No. 163 of 1970 was founded.

(2.) THE main ground on which the legality of the seizure and the validity of the show cause notice was challenged on behalf of the petitioners was that sub -sections (1) (c) (iii) and (5) of section 132 are violative of articles 14 and 19(1)(f) of the Constitution and are accordingly null and void and no action can be taken under those provisions. This ground was divided under several heads and each head was pressed as a separate and independent argument :

(3.) HIDAYATULLAH J., as then was, also said much to the same effect in Barium Chemicals Ltd. v. Company Law Board.