P. Vishwanatha Shetty, J.
1. The petitioners in Writ Petitions Nos. 32450-53 of 1997, are companies (hereinafter referred to as 'the companies') carrying on the business of manufacture and sale of pharmaceuticals. The petitioner in Writ Petition No. 32454 of 1997, is an individual who is a director in some of the petitioner-companies.
2. A few facts that may be relevant for disposal of these petitions may be stated as follows :
The business premises of the companies and also of the fifth petitioner were raided by the officials of the Income-tax Department on September 10, 1997, in exercise of the power conferred on them under section 132 of the Income-tax Act, 1961, and in the course of search, some records belonging to the petitioners also have been seized.
3. Chapter IV of the Finance Act, 1997, provides for the Voluntary Disclosure of Income Scheme (hereinafter referred to as 'the Scheme'). Sub-section (1) of section 64 of the Finance Act (Chapter IV) provides that subject to the provisions of the scheme, where any person makes, on or after the date of commencement of the Scheme, but on or before December 31, 1997, a declaration in accordance with the provisions of section 65 in respect of any income chargeable to tax under the Act for any assessment year-(a) for which he has failed to furnish a return under section 139 of the Act; (b) which he has failed to disclose in a return of income furnished by him under the Act before the date of commencement of the Scheme; (c) which has escaped assessment by reason of the omission or failure on the part of such person to make a return under the Act or to disclose fully and truly all material facts necessary for his assessment or otherwise, then, notwithstanding anything contained in the Act or in any Finance Act, income-tax shall be charged in respect of the income so declared at the rates specified in the said provision. However, sub-section (2) of section 64 makes sub-section (1) of section 64 of the Act inapplicable under the two conditions as set out in clauses (i) and (ii) of sub-section (2). In these petitions, we are concerned with clause (ii) of sub-section (2) of section 64 of the Act, which reads as hereunder :
'(2) Nothing contained in sub-section (1) shall apply in relation to - ....
(ii) the income in respect of the previous year in which a search under section 132 of the Income-tax Act was initiated or requisitioned under section 132A of the Income-tax Act was made, or survey under section 133A of the Income-tax Act was carried out or in respect of any earlier previous year.'
4. In these petitions, the petitioners have made two prayers. Firstly, they have prayed for a declaration that clause (ii) of sub-section (2) of section 64 of the Finance Act, 1997, is unconstitutional; and, secondly, for a writ in the nature of certiorari declaring the circulars bearing No. 754 (see [1997] 226 ITR 8), dated June 10, 1997, and No. 755 (see [1997] 226 ITR (St.) 33), dated July 25, 1997, issued by the Central Board of Direct Taxes to the extent they preclude the petitioners from availing of the benefit under sub-section (1) of section 64 of the Finance Act in the year of search or any earlier years as discriminatory, arbitrary and unreasonable and opposed to article 14 of the Constitution of India and consequently to direct respondents Nos. 1 and 2 to accept the declaration that may be filed by the petitioners under section 64 of the Act.
5. Sri Sarangan, learned senior counsel appearing along with Sri Thirumalesh, in support of the prayer of the petitioners, submitted as follows :
Firstly, he submitted that from a plain reading of clause (ii) of subsection (2) of section 64 of the Act, the only interpretation that could be placed is that in respect of cases where searches have been conducted or initiated under section 132 of the Act or a requisition under section 132A of the Act is made, such of those persons, who come under sections 132 and 132A of the Act, are denied the relief provided under sub-section (1) of section 64 of the Act, only in respect of the income of the previous year of search or requisition made under section 132 or 132A of the Act, but, in cases where survey is made as provided under section 133A of the Act, such persons are not entitled for the benefit of sub-section (1) of section 64 of the Act not only for the income of the previous year of the search, but also in respect of any period earlier to the previous year. Therefore, he submits that the interpretation that could be placed on clause (ii) of sub-section (2) of section 64 being as stated above, the circulars dated June 10, 1997, and July 25, 1997, issued by the Central Board of Direct Taxes, wherein it is clarified that in respect of a case where search has taken place in any financial year, persons cannot make a declaration in respect of income of any year prior to the previous year in which search has taken place; and in respect of the survey that has taken place, such persons are not eligible for the benefit of the scheme only in respect of the income of the previous year of survey, runs counter to the plain reading of clause (ii) of sub-section (2) of section 64 of the Act and, therefore, it must be held that even in cases where search has taken place as provided under section 132 of the Act, such persons are entitled for the benefit of the Act in respect of the income of all the previous years except for the year prior to the year of search.
Secondly, he submitted that if the provisions contained in clause (ii) of sub-section (2) of section 64 of the Act are to be understood as denying the benefit of the scheme to such of those persons who fall under sections 132 and 132A of the Act in toto, i.e., in respect of the income of the previous year of the search and also in respect of the income of any period earlier to the previous year of search, the same is the position even in respect of the cases which fall under section 133A of the Act; and under these circumstances, by means of the circulars referred to above, issued by the Central Board of Direct Taxes, the persons who fall under section 133A of the Act cannot be picked up for preferential treatment while picking up the cases falling under sections 132 and 132A of the Act for hostile discrimination. In other words, it is his submission that if the circulars in question confine the disability for the benefit of the scheme in respect of cases falling under section 133A of the Act, only in respect of the income of the previous year of survey held under section 133A of the Act, there is absolutely no justification to deny the said benefit to the cases who fall under sections 132 and 132A of the Act, and to deprive them of the benefit of the scheme in respect of the income for any year earlier to the previous year of search or requisition as provided under section 132 or section 133A of the Act. Thus, he points out that the object of sections 132 and 132A of the Act is to fasten the liability by various methods provided under sections 132, 132A and 133A of the Act, on tax evaders and proceed to assess them for evasion of tax and levy penalty on them as provided under the Act; and there being not much of difference between the object and the consequences provided under sections 132, 132A and 133A of the Act, while such of those persons who fall under section 133A of the Act, are made eligible for the benefit of the disclosure of income for any period earlier to the previous year of search, the persons who fall under sections 132 and 132A of the Act are deprived of the benefit of the scheme not only for the year of search, but also for the period earlier to the previous year of search. In view of this, he submits that if clause (ii) of sub-section (2) of section 64 of the Act is so understood in the light of the interpretation or clarification by the Central Board of Direct Taxes, the said provision is liable to be declared as unconstitutional as being violative of the rights guaranteed to the petitioners under article 14 of the Constitution of India.
Finally, he submitted that the classification of persons, who were searched under section 132 of the Act and forbidding them from availing of the benefit of filing declarations under the scheme is not based on any intelligible differentia, which distinguishes such persons from the rest and the differentia brought about has no rational nexus with the objectives sought to be achieved and, therefore, the impugned provision is liable to be declared as unconstitutional.
6. Shri M. V. Seshachala, learned counsel for the respondents, while strongly refuting the submissions of Sri Sarangan submitted that clause (ii) of sub-section (2) of section 64 of the Act is not discriminatory in nature or violative of the rights guaranteed to the petitioners under article 14 of the Constitution of India. He points out that sections 132, 132A and 133A are provided for three different things, and objects and purposes of the said three provisions are quite distinct and different. He points out that the plain reading of section 132 shows that the power of search and seizure is conferred on the officers in certain circumstances and section 132A provides for issue of a requisition under the Act calling upon any officer or authority to deliver such books of account, other documents or assets to the requisitioning officer, and section 133A relates to power of survey to be carried out by the officers of the Income-tax Department. Therefore, he would submit that the survey carried out is not as stringent, nor the consequences as serious as a search made under section 132 or the requisition made under section 132A of the Act. Therefore, he points out that in this background, if the circulars dated June 10, 1997 and July 25, 1997, have been issued, on that ground the petitioners cannot have any grievance and on that basis, clause (ii) of sub-section (2) of section 64 of the Act cannot be declared as unconstitutional as being violative of the rights guaranteed to the petitioners under article 14 of the Constitution of India. Learned counsel further points out that the validity of clause (ii) of sub-section (2) of section 64 of the Act, cannot be decided on the basis of the circular issued by the Central Board of Direct Taxes in exercise of the power under section 119 of the Act and the constitutional validity of the said provision has to be independently understood and appreciated keeping in mind the parameters provided for declaring a statute as unconstitutional. He also points out that the petitioners have neither placed any material before this court nor have shown on the basis of the well settled legal principles that the provision under challenge is unconstitutional, except asserting that the provision is discriminatory.
7. In the light of the rival contentions, the two questions that would arise for consideration are (1) whether clause (ii) of sub-section (2) of section 64 of the Act requires to be declared as unconstitutional; and (2) if clause (ii) of sub-section (2) of section 64 of the Act cannot be declared as unconstitutional, whether the benefit of circulars dated June 10, 1997 and July 25 1997, also should be extended to the petitioners as claimed.
8. At the outset, I may point out that though the argument of learned counsel for the petitioner appears to be very attractive, I am unable to accept his submissions for reasons more than one. In my view, the interpretation placed by Sri Sarangan that the benefit of the scheme is not available to cases falling under sections 132 and 132A of the Act, only in respect of the income of the previous year of the search, and not to any period earlier to the previous year of search, is not correct. The words 'in respect of any earlier previous year' occurring immediately after the words 'survey under section 133A of the Income-tax Act was carried out' are applicable in respect of the cases falling under sections 132, 132A and 133A of the Act. The words 'in respect of any earlier previous year' cannot be read as limiting it to the survey conducted under section 133A of the Act. In my view, there is absolutely no scope to read or understand the section as indicated by Sri Sarnagan holding that in cases falling under sections 132 and 132A of the Act, the persons are not denied the benefit of the scheme in respect of the income for the period prior to the previous year in which the search is held under section 132 of the Act or requisition is done under section 132A of the Act, and it is limited only to the year of search. The plain reading of clause (ii) of sub-section (2) of section 64 of the Act, in my view, disentitles the benefits of the scheme to all the cases falling under sections 132, 132A and 133A of the Act not only for the previous year of the search, requisition or the survey held as provided under section 132, 132A or 133A of the Act, respectively, but also in respect of any earlier previous years prior to the year in which the search, requisition or survey is held. Therefore, I do not find any merit in the first submission of Sri Sarangan.
9. In the light of the above discussion, merely on the ground that the circular issued by the Central Board of Direct Taxes clarifies that the persons falling under section 133A of the Act are denied the relief of the scheme only for the previous year of the survey held under section 133A and not for the previous years prior to the year of survey, and in respect of cases falling under sections 132 and 132A of the Act, the benefit of the scheme is deprived for all the years, it is not possible to hold that the impugned provision is unconstitutional on the ground that it is either arbitrary or discriminatory or violative of the right guaranteed to the petitioners under article 14 of the Constitution of India. The constitutional validity of the impugned provision cannot be decided on the basis of the contents of the circulars, referred to above. The constitutional validity of the impugned provision has to be independently decided with reference to the parameters laid down to decide the constitutional validity of the said provision. If so understood and examined, in my view, clause (ii) of sub-section (2) of section 64 of the Act does not make any difference or distinction between the cases falling either under section 132, 132A or 133A of the Act to avail of or deprive the benefit of the scheme. All the persons who come under the provisions of sections 132, 132A and 133A are deprived of the benefit of the scheme. Further, even otherwise, merely because the persons, who fall under section 133A of the Act, are not deprived of the benefit of the scheme with regard to their income for the period earlier to the previous year of survey done under section 133A of the Act; and all others, who fall under sections 132 and 132A, are deprived of the benefit, as rightly pointed out by Sri Seshachala, the provision providing for search, requisition and survey under sections 132, 132A and 133A of the Act are different and distinguishable. They are incorporated in the Act to fasten the liability on tax evaders depending upon the facts and circumstances of each case. The consequences flowing from resorting to each of the provisions contained in sections 132, 132A and 133A are different and distinct. Under these circumstances, the classification made also could be treated as a reasonable classification. A greater latitude or discretion should be given in a matter like this to the law makers while dealing with the rights of persons who, on admitted facts, are evaders of tax. The provisions contained in sections 132, 132A and 133A are the mechanisms provided to fasten the tax liability on persons who make an attempt to evade payment of tax. Further, if, for any reason, the persons falling under section 133A of the Act are given preferential treatment, it may be a ground to declare the circular in question as unconstitutional either on the ground that it is discriminatory in nature or on the ground indicated by me earlier, that the circular runs counter to the plain reading of clause (ii) of sub-section (2) of section 64 of the Act, but it cannot be a ground to extend the benefit given to such of those persons falling under section 133A of the Act to such of those persons who also fall under sections 132 and 132A of the Act. It is not permissible for the courts to direct the authorities, who are administering the Act, to do contrary to the mandate of the provisions contained in the Act. In that view of the matter, I have no hesitation to reject the second submission of Sri Sarangan that clause (ii) of sub-section (2) of section 64 of the Act is liable to be declared as unconstitutional as the effect of the circular is to make the impugned provision discriminatory.
10. Now, the only other contention of Sri Sarangan that requires to be considered, is as to whether the impugned provision is liable to be declared as unconstitutional on the ground that the classification of persons who were searched under section 132 of the Act and forbidding them from availing of the benefit of filing declarations under the scheme, is not based on any intelligible differentia which distinguishes such persons from the rest and the differentia brought about has no rational relation or nexus with the objectives sought to be achieved.
11. It cannot be disputed that the scheme introduced is an enabling provision where an opportunity is given to the persons, who have not disclosed their income earlier and who are made liable for levy of penalty and prosecution under the Act for violating the provisions of the Act, to declare their income by paying tax as provided under sub-section (1) of section 64 of the Act. The object, it cannot be disputed, is to give an opportunity to the persons, who have not accounted for their income, to declare their income by paying the tax and in the process, to generate all the black money into white. The resulting position, undoubtedly would be, that if the scheme is successful, the State would be able to secure huge money. When a scheme is introduced and certain relief is given, the persons, who intend to get the benefit, must generally strictly comply with the requirements of the scheme. In that background, if clause (ii) of sub-section (2) of section 64 of the Act denies the benefit of the scheme to such of those persons who have been searched under section 132 or requisitioned under section 132A or surveyed as provided under section 133A of the Act, can they make a grievance that such of those persons, who do not suffer the disability provided under sections 132, 132A and 133A of the Act, are given the benefit of the scheme even though they are tax evaders, when they are deprived of the benefit of the scheme It is no doubt true that the benefit of the scheme is extended to a class of people who undisputedly have evaded payment of tax. But, the persons, who do not suffer any disability as provided under sections 132, 132A and 133A of the Act, fall under a different category than those who suffer disability provided thereunder. Human experience shows that it is only in cases where there is huge evasion of tax liability, that extreme steps of search and seizure, requisition or survey as provided under sections 132, 132A and 133A of the Act are resorted to. Further, in respect of those persons, who are falling under those categories, proceedings are already initiated and pending adjudication; and in that background, if a policy decision is taken and incorporated in clause (ii) of sub-section (2) of section 64 of the Act, in my view, the said policy decision, which has been made as a law, cannot be struck down on the ground that it is violative of the rights guaranteed under article 14 of the Constitution of India to the petitioners. The persons, who have violated the law with impunity, cannot be permitted to say that the impugned provision is violative of the rights guaranteed to them under article 14 of the Constitution of India merely on the ground that there is another set of tax evaders, who are given the benefit of the scheme. In what manner and which type of tax evaders in public interest and in the interest of the State revenue, they should be given relief, is essentially for the State to decide. It is a matter of legislative policy. This court cannot sit in judgment over such legislative policy. Further, it is also necessary to notice that the scheme will be in operation till December 31, 1997. In that situation, if the object of the scheme is to compel a large number of tax evaders to take the benefit of the scheme, thereby to minimise the quantity of unaccounted money in the country and to secure huge money to the Revenue, and in that situation, if a tax evader is exposed to the threat of search and seizure, requisition or survey as provided under sections 132, 132A and 133A of the Act and also the denial of the benefit of the scheme, in my view, the provision contained in clause (ii) of sub-section (2) of section 64 of the Act is more in furtherance of achieving the object of the scheme. In other words, such a provision would compel more and more persons to avail of the benefit of the scheme at the earliest point of time than being exposed to the denial of the relief provided under the scheme on account of search and seizure or requisition or survey as may be resorted to under sections 132, 132A and 133A of the Act. Therefore, in my considered view, the persons, who do not suffer the disability of search and seizure or requisition or survey under sections 132, 132A and 133A of the Act, fall under a different category than others and, therefore, the classification made is a reasonable classification. In the circumstances and in the background of the classification made, it must be held that it is a reasonable classification and there is nexus and rationale with the object sought to be achieved. In a matter of taxing statutes and more particularly, when it relates to undisputedly conferring benefit on tax evaders, this court must be very slow to interfere with the policy decision taken by the law makers, who have better information and better knowledge in the matter of collection of tax and the impunity with which the tax evaders are trying to violate the taxing statute. Therefore, looked at from any point of view, I do not find any justification to hold clause (ii) of sub-section (2) of section 64 of the Act as unconstitutional in law.
12. In the light of the discussion made above, I do not find any merit in these petitions and these petitions are liable to be rejected at the stage of preliminary hearing itself without issuing rule.
13. Accordingly, these petitions are dismissed. However, no order is made as to costs.