P.N. Bhagwati, C.J.
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 :
(A) Sub-sections (1) (c) (iii) and (5) of section 132 are violative of articles 19(1)(f) of the Constitution since the restrictions they impose on the right of a citizen to hold and enjoy property are unreasonable in the following respects :
(i) These provisions are directed against all who are in possession of undisclosed income irrespective of whether they are responsible for evading tax on such income or are in possession of it with knowledge that it represents concealed income.
(ii) The power conferred under these provisions is not confined to concealed income which has escaped tax but also extends to income which has not been factually disclosed by reason of not being eligible to tax.
(iii) The time limited by section 132, sub-section (5), for making an order under that sub-section is too short to permit a proper and satisfactory inquiry to be made for the purpose of clauses (i) and (ii) and the estimate of undisclosed income and the calculation of tax on it which constitute the justification for retention of undisclosed income or property would, therefore, be based on perfunctory and insufficient inquiry and the citizen would be kept out of his property on the basis of such tax calculation.
(iv) There is no time limit provided in the section within which regular assessment or reassessment must be completed after the making of an order under section 132, sub-section (5), with the result that the property of a citizen may be retained with the revenue for an unduly long period which may, in cases falling with section 147, clause (a), extend to twelve years or even twenty years according as the income which has escaped tax is less than Rs. 50,000 or more and such retention would take place on a mere 'reason to believe' and an estimate of undisclosed income on a summary inquiry.
(v) There is no provision for an appeal to a quasi-judicial authority against an order under section 132, sub-section (5), the only remedy provided is an application to an administrative authority.
(vi) The section does not contain any machinery for investigation of claims which may be made by a third party to the ownership of the assets seized with the result that his assets will remain detained by the revenue until he gets his claim adjudicated by filing a civil suit in an appropriate court of law.
(vii) Even after regular assessment or reassessment is made and it is found that the assets seized were in excess of the true liability, the balance is not returned only with interest from the expiration of six months from the date of the order under section 132, sub-section (5), the citizen is thus deprived of the use of the balance of the assets which were seized in excess of the requirement, without payment of interest for a period of nine months.
(B) The power conferred under section 132, sub-sections (1) (c) (iii) and (5), is unfettered and uncanalised; there is nothing to guide or control the exercise of the power; the sub-sections, therefore, render possible arbitrary and unreasonable exercise of power and leave it open to the officers to discriminate unjustly between one possessor of undisclosed income or property and another and they are accordingly violative of articles 14 and 19(1)(g).
(C) Section 132, sub-sections (1) (c) (iii) and (5), are violative of article 14 of the Constitution also on the ground that :
(i) they make unjust discrimination between evaders of tax who are in possession of undisclosed income or property and evaders of tax who are not in such possession;
(ii) they deal with the same class of evaders of tax who are within the ambit of section 147 and impose the drastic procedure on some out of them leaving the rest to be governed by the less onerous provisions of section 147 and thus discriminate between evaders of tax falling within the same class.
The petitioners also urged in the alternative that even if the challenge to the validity of section 132, sub-sections (1) (c) (iii) and (5), was not sustainable and these sub-sections were valid, the search and seizure effected by respondents Nos. 1-A and 1-B pursuant to the authorisations issued by the Commissioner of Income-tax were illegal and invalid inasmuch as there were no grounds before the Commissioner of Income-tax on the basis of which he could have reason to believe that the petitioner was in possession of undisclosed income or property and the authorisations issued by the Commissioner of Income-tax were in colourable exercise of power under section 132(1). We shall now proceed to examine these grounds in the order in which we have set them out above.
3. Let us first analyse the provisions of sections 132 and 132A, for a proper understanding of these provisions would furnish an answer to may of the arguments advanced on behalf of the petitioners. It would also be convenient while examining these provisions to deal with some of the arguments advanced on behalf of the parties in relation to the construction of these provisions. Sub-section (1) (c) (iii) of section 132 provides, inter alia, that where the Director of Inspection or the Commissioner, in consequence of information in his possession, has reason to believe that any person is in possession of money, bullion, jewellery or other valuable article or thing representing either wholly or partly income or property which though required to be disclosed has not been disclosed for the purpose of the Income-tax Act, he may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer to enter and search any building or place and seize any money, bullion, jewellery or other valuable article or thing found as a result of such search. It is apparent that search and seizure can be effected by an officer under sub-sections (1) (c) (iii) only if he is authorised to do so by the Director of Inspection or the Commissioner, and the Director of Inspection or the Commissioner can authorise search and seizure only if he has in consequence of information in his possession reason to believe that any person is in possession of money, bullion, jewellery or other valuable article or thing which represents undisclosed income or property. The condition precedent to the exercise of the power to issue authorization for search and seizure is that the Director of Inspection or the Commissioner must have the requisite reason to believe in consequence of information in his possession. The power to authorize search and seizure is hedged in by the requirements of this conditions precedent and it is only if this condition is fulfilled that the power can be exercised. Of course, it is for the Director of Inspection or the Commissioner to be satisfied that there is reason to believe and the court cannot sit in appeal over the decision of the Director of Inspection or the Commissioner regarding the existence of the reason to believe nor can the court examine the adequacy of the grounds on which the reason to believe entertained by such officer is based. But there is a limited area within which the reason to believe entertained by the Director of Inspection or the Commissioner, can be scrutinised by the court. This area now stands clearly demarcated by several decisions of the Supreme Court and its extent and limit are no longer open to doubt or controversy. The Supreme Court, while dealing with the same expression as used in section 34 of the old Income-tax Act, pointed out in S. Narayanappa v. Commissioner of Income-tax :
'Again the expression 'reason to believe' in section 34 of the Income-tax Act does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good faith : it cannot be merely a pretence. To put it differently it is open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Income-tax Officer in starting proceeding under section 34 of the Act is open to challenge in a court of law'.
4. Hidayatullah J., as then was, also said much to the same effect in Barium Chemicals Ltd. v. Company Law Board.
'No doubt the formation of opinion is subjective but the existence of circumstances relevant to the inference as the sine qua non for action must be demonstrable. If the action is questioned on the ground that no circumstances leading to an inference of the kind contemplated by the section exist, the action might be exposed to interference unless the existence of the circumstances is made out..... Since the existence of 'circumstances' is a conditions fundamental to the making of an opinion, the existence of the circumstances, if questioned, has to be proved at least prima facie. It is not sufficient to assert that the circumstances exist and give no clue to what they are, because the circumstances must be such as to lead to conclusions of certain definiteness.'
5. So also Shelat J. observed in the same decision :
'Therefore, the words, 'reason to believe' or 'in the opinion of' do not always lead to the construction that the process of entertaining 'reason to believe' or 'the opinion' is an altogether subjective process not lending itself even to a limited scrutiny by the court that such 'a reason to believe' or 'opinion' was not formed on relevant facts or within the limits, or, as Lord Radcliffe and Lord Reid called, the restraints of the statute as an alternative safeguard to rules of natural justice where the function is administrative.'
6. These decisions of the Supreme Court make it clear that if the grounds on which 'reason to believe' is founded are not relevant to the subject-matter of the inquiry or are extraneous to the scope and purpose of the statute or are such as no rational human being can consider connected with the fact in respect of which the belief is to be entertained so that no reasonable person can come to such a belief, the exercise of the power would be bad. The court would say in such a case that the reason for the belief have no rational connection or relevant bearing to the formation of the belief and the belief is, therefore, not truly held but it is merely a pretence. It would, therefore, be seen that though the concept denoted by the words 'reason to believe' is a subjective one, there is a limited area of objectivity within which the court can operate.
7. Now, when an authorised officer makes search and seizure pursuant to an authorisation issued by the Director of Inspection or the Commissioner, he would have to comply with certain conditions relating to the procedure for making search and seizure. Sub-section (13) of section 132 provides that the provisions of the Code of Criminal Procedure, 1898, relating to searches and seizure shall apply, so far as may be, to searches and seizure under sub-section (1). This sub-section incorporates by reference the salutary provisions of the Code of Criminal Procedure in regard to searches and seizure. Then sub-sections (2) and (3) give certain power to the authorized officer which he may utilised for the purpose of properly effecting search and seizure. Sub-section (4) confers yet another power on the authorised officer : he may examine on oath any person who is found to be in possession or control of undisclosed income or property during the course of the search and seizure and any statement made by such person during such examination can thereafter be used in evidence. This power is given obviously to enable the authorised officer to collect facts in regard to undisclosed income or property which may be found as a result of the search.
8. Then sub-section (5) goes on to provide what is to happen to the undisclosed income or property which is seized as a result of the search. It says that the Income-tax Officer, after affording a reasonable opportunity to the person concerned for being heard and making such enquiry as may be prescribed, shall, within ninety days of the seizure, make an order, with the previous approval of the Commissioner, estimating the undisclosed income, calculating the amount of tax on the income so estimated and specifying the amount that will be required to satisfy any existing liability for tax in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the estimated tax liability on the undisclosed income as also the existing tax liability and forthwith release the remaining portion of the assets. Now, obviously, the Income-tax Officer referred to here would be the Income-tax Officer having jurisdiction to assess 'the person concerned' in respect of whom the order contemplated under sub-section (5) is to be made. But the question arises : what is the true connotation of the expression 'person concerned'? Mr. Pathak on behalf of the petitioners contended that the words 'person concerned' property was seized and they had no reference to the owner of the undisclosed income or property in cases where the person in possession was other than the owner. This contention does not appeal to us. The words used are 'person concerned' and not 'person from whose custody or possession the assets were seized'. We find that in sub-section (5) itself, the legislature has used two different expressions, namely, 'person concerned' and 'person from whose custody they were seized'. To equate one expression with the other would be to attribute looseness of language to the legislature. The ordinary canon of construction is that when the legislature has used two different expressions in the same section, the legislature must have intended to convey two different meanings. The words 'person concerned' in the context in which they occur clearly refer to the person who would be concerned or affected by the making of the order and retention of the seized assets under sub-section (5). Ordinarily, having regard to the nature of the undisclosed income or property, the person found in possession of it would be the owner and in the absence of any information to the contrary, the Income-tax Officer would presume him to be the owner and proceed against him under sub-section (5). Where such is the case, the person in possession would be the 'person concerned' for the purpose of sub-section (5). But, if, as a result of examination of the person in possession under sub-section (4) or otherwise, the Income-tax Officer comes to know that someone other than the person in possession is the owner of the undisclosed income or property, he may proceed to take action against such person under sub-section (5) and in that event such person and not the person in possession would be the 'person concerned'. The 'person concerned' would be the person in respect of whom the Income-tax Officer proposes to make an order under sub-section (5). Such person has to be given a reasonable opportunity to be heard before an order is made against him and the assets seized are retained for satisfaction of his existing and estimated tax liability. Furthermore, the order contemplated under sub-section (5) is required to be made within a period of ninety days from the seizure and it has to be made by the Income-tax Officer after obtaining the previous approval of the Commissioner. The Income-tax Officer is permitted to retain in his custody only such assets as are in his opinion sufficient to satisfy the existing and estimated tax liability of the assessee and he is enjoined by the legislature to return the remaining portion of the assets forthwith to the person from whose custody they were seized. Where it is found that the seized assets or any part thereof were held by the person in possession for and on behalf of any other person, the Income-tax Officer, says sub-section (7), may proceed against such other person under sub-section (5). This provision is obviously made ex abundanti cautela in order to meet a specific situation so that no doubt or controversy may be raised as to what is to happen where such situation exists. Sub-section (11) provides a remedy to a person who is aggrieved by the making of an order under sub-section (5). It says that such person may within thirty days of the date of the order, make an application to such authority, as may be notified in this behalf by the Central Government, stating therein the reasons for objecting to the order and requesting for appropriate relief in the matter. It was common ground between the parties that the Central Board of Direct Taxes is the authority notified by the Central Government under this sub-section. On receipt of an application objecting to the making of the order under sub-section (5), the Central Board of Direct Taxes would, a after giving the applicant an opportunity of being heard, pass suitable orders on the application under sub-section (12).
9. Now, when the seized assets are allowed to be retained by the Income-tax Officer, the question immediately arises ! How long are the assets to be retained and what is to happen to them? The answer to this question is provided by section 132A which lays down how the assets retained under sub-section (5) are to be dealt with. Section 132, sub-section (5), as we have already seen, provides merely for estimating the undisclosed income in a summary manner and calculation of tax on the income so estimated for the purpose of determining what part of the assets seized should be retained, so that the portion of the assets not likely to be required to satisfy the tax liability may be immediately returned to the person from whose custody they were seized. But a regular assessment or reassessment of the undisclosed income would have to be made in accordance with the provisions of the Act, if tax on it is to be recovered by the revenue. Section 132A, therefore, proceeds on the basis that subsequent to the making of an order under section 132, sub-section (5) 'regular assessment or reassessment for all the assessment years relevant to the previous years to which the income relates' would be completed and the amount of tax liability determined according to the procedure prescribed in the Act. It provides that the assets retained under section 132, sub-section (5), may be applied in discharge of the amount of the existing liability referred to in clause (iii) of that sub-section as also the amount of the liability determined on completion of the regular assessment or reassessment in regard to the undisclosed income. This is of course only one of the several modes of recovery of tax provided by the Act, and, therefore, obviously, if the recovery of any tax liability is stayed by an appellate authority it cannot be recovered out of the assets retained under section 132, sub-section (5), so long as the stay continues. Now, if the assets consist of money, there is no difficulty in applying them in discharge of the tax liability but if they are assets other than money, they would have to be sold. Such assets, says section 132A, sub-section (1) (iii), shall, for the purpose of being applied for discharge of the tax liability, be deemed to be under distraint as if such distraint was effected by the Income-tax Officer under authorization from the Commissioner under section 226(5) and the Income-tax Officer may recover the tax liability by the sale of such assets and such sale shall be effected as laid down in the Third Schedule. Since such assets would be deemed to be under distraint from the date of the order under section 132, sub-section (5), as if the distraint were effected by the Income-tax Officer under section 226(5), the Third Schedule would apply and that would bring in the applicability of the provisions of the Second Schedule relating to attachment. Rule 11 of the Second Schedule provides a detailed machinery for investigation of claims and objections which may be made by third parties and this machinery is clearly made available as soon as the assets seized are retained under section 132, sub-section (5). Any person making a claim to such assets or objecting to the distraint of such assets can prefer his claim or objection under rule 11 of the Second Schedule and such claim or objection would have to be investigated by the tax recovery officer in the manner laid down in that rule. Before the tax recovery officer, the claimant or objector would have an opportunity of adducing evidence and the making his submissions and if, ultimately, after hearing the parties, the tax recovery officer disallows the claim or objection, it would be open to the claimant or objector to institute a suit in a civil court to establish the right which he claims to the assets. The same machinery for investigation of claims and objections can also be availed of at the time of the sale of the assets since section 132A(1)(iii) in so many terms provides that the sale of the assets shall be in the manner laid down in the Third Schedule. As soon as the tax liability is discharged, section 132A(3) says that any assets or proceeds thereof which may remain unutilised shall be forthwith made over or paid to the person from whose custody they were seized. The object of this provision clearly is that once the tax liability is discharged, no part of the assets seized should continue to remain with the revenue and whatever is the surplus should immediately be returned to the person from whom it was seized. Sub-section (4) (a) of section 132A provides that the Central Government shall pay simple interest at the rate of nine per cent. per annum on the surplus amount which may be returned under sub-section (3) and such interest, according to sub-section (4) (b), shall run from the date immediately following the expiry of the period of six months from the date of the order under Section 132, sub-section (5), to the date of the regular assessment or reassessment of the undisclosed income or, as the case may be, to the date of last of such assessments or reassessments. Obviously, a period of six months from the date of the order under section 132, sub-section (5), is provided to the revenue for completing regular assessment or reassessment of the undisclosed income. If such assessment or reassessment is delayed beyond the period of six months, the Central Government is required to pay interest on the surplus amount at the rate of nine per cent. per annum. This is the scheme of the relevant provisions of the Act and having examined the scheme we shall now proceed to consider the various arguments advanced on behalf of the petitioners.
10. Re. Ground (A) : Though in view of the observations of the Supreme Court in M. P. Sharma v. Satish Chandra, it may be said that search by itself is not a restriction on the right to hold property, it is indisputable that seizure and carrying away is a serious restriction on the possession and enjoyment of the property. A power of search and seizure, therefore, prima facie imposes restrictions on the fundamental right guaranteed under article 19(1)(f) and such power cannot be justified unless it is shown by the State that the restrictions it imposes are reasonable restrictions in the interest of the general public. The question which, therefore, arises for consideration is whether the restrictions imposed by section 132, sub-sections (1) (c) (iii) and (5), are in public interest; whether they can be regarded as reasonable so as to successfully meet the challenge under article 19(1)(f). To determine this question it is necessary to notice briefly the objects and reasons which led to the enactment of this provision. There was a time in England in the early days of its history when the judges attached so much sanctity to the privacy of a man's home that they refused to recognise the power of search and seizure in the State they asserted that 'every man's house is his castle' and no one for any reason can intrude upon his privacy. This was symbolised in the famous utterance of Lord Coke when he said in Semayne's case :
'The house of everyone is to him as his castle and fortress as well as for his defence against injury and violence as for his repose.'
11. But gradually it came to be recognised that the power of search and seizure was a necessary power in the interest of the community and without it the process of law enforcement might suffer to the detriment of public interest and, therefore, subsequent legislation in England started conferring such power on the police and various other officers from time to time. In India too, the power of search and seizure for prevention and investigation of offences was for the first time conferred under the Code of Criminal Procedure and since search and seizure is a process exceedingly arbitrary in character, stringent statutory conditions were imposed on the exercise of the power. The Supreme Court, while examining the validity of section 96 (1) of the Code of Criminal Procedure empowering search and seizure, pointed out that :
'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.'
12. Now so far as the income-tax is concerned, the authorities under the Income-tax Act had originally no power of search or seizure : they had only such powers as are ordinarily possessed by civil courts under the Code of Civil Procedure such as powers of discovery and inspection, enforcing attendance of witness, examining them on oath, compelling the production of books and documents, issuing commissions, etc. During the second world war, however, it was found that large profits were made by business men which were secreted and kept outside the books and even invested in shares and real property acquired in the names of benamidars or in cash purchase of gold, silver and jewellery. There was tax evasion on a large scale and it was, therefore, necessary in the public interest in investigate into cases of tax evasion and bring to tax huge profits that had escaped assessment. Parliament, therefore, enacted the taxation on Income (Investigation Commission) Act with vast powers to deal with cases of substantial evaders of tax. The Income-tax authorities were, for the first time, invested with certain powers of search and seizure with a view to assisting the investigation commission in this task of catching substantial evaders. The Act was declared ultra vires by the Supreme Court in Suraj Mall Mohta and Co. v. A. V. Visvanatha Sastri and M. Ct. Muthiah v. Commissioner of Income-tax with the result that the Act was deprived of all its efficacy and became a dead-letter. The evasion also continued during these years on an appreciated scale and therefore in 1956 a commission called the Taxation Inquiry Commission appointed by the Central Government recommended that, with a view to preventing evasion of tax, it was necessary to confer power of search and seizure on the income tax authorities. This recommendation was implemented and section 37 of the Income-tax Act, 1922, was re-cast so as to confer on Income-tax Officers specially authorised by the Commissioner in that behalf, power to search and seize books of account or other documents which is his opinion would be useful for or relevant to any proceeding under the Act. This power was continued under section 132 when the income-tax law was revised and the new Act was enacted in 1961. But this was a limited power confined only to books of account and documents and soon it was found that this limited power was not enough to unearth concealed income and bring it to tax. The undisclosed profits were usually secreted in the form of cash, bullion, jewellery or other valuable articles or thing and it was difficult to unearth them by the ordinary processes of law. Experience showed that in many cases, in the absence of evidence, it was almost impossible to discover that an assessee had made undisclosed profits and to tax him on those profits. But it was apparent that if by some device the revenue could get at the undisclosed profits in specie, it would considerably faciliate the task of bringing such undisclosed profits to tax. The cash, bullion, jewellery or other valuable articles or things representing undisclosed profits would themselves furnish evidence of the making of undisclosed profits and it would be possible to bring them to tax. It was, therefore, found necessary to confer power of search and seizure in regard to undisclosed income or property on the appropriate officers of the income-tax department and Parliament with that end in view, amended the Act and introduced, inter alia, sub-sections (1) (c) (iii) and (5) in section 132 and added section 132A by enacting the Income-tax (Amendment) Act, 1965.
13. With this background let us examine whether the provisions contained in section 132, sub-sections (1) (c) (iii) and (5), can be said to impose reasonable restrictions in the interest of the general public. Now, there can be no doubt that these provisions are enacted in public interest for their object clearly is to catch evaders of tax and get at undisclosed income with a view to bringing it to tax as also to facilitate recovery of tax from defaulters. The community at large is interested in proper enforcement of the income-tax law and effective recovery of tax legitimately due from those liable to pay it and provisions such as these intended to achieve this object would certainly be in the interest of the general public. This indeed was not disputed by the learned advocates appearing on behalf of the petitioners. But their only contention was that, though the object was commendable and intended to serve public interest, the restrictions imposed by the provisions for carrying out that object were excessive and unreasonable. Now the question whether restrictions imposed by a statutory enactment are reasonable or not cannot be judged with reference to any abstract standard or rigid formula. There is no fixed yardstick and no universal test for judging the reasonableness of the restrictions. It was pointed out as far back as 1952 by Patanjali Sastri C. J. in a passage which has now become classical; vide State of Madras v. V. G. Row :
'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. In evaluating such elusive factors and forming their own conception of what is reasonable, in all the circumstances of a given case, it is inevitable that the social philosophy and the scale of values of the judges participating in the decision should play an important part, and the limit to their interference with legislative judgment in such cases can only be dictated by their sense of responsibility and self-restraint and the sobering reflection that the Constitution is meant not only for people of their way of thinking but for all, and that the majority of the elected representatives of the people have, in authorising the imposition of the restrictions, considered them to be reasonable.'
14. It is in the light of these observations that we must examine whether the restrictions imposed by section 132, sub-sections (1) (c) (iii) and (5), are reasonable. We must ask ourselves the questions whether the restrictions strike a just balance between the fundamental right of the individual and the social interest of the community in law enforcement and tax collection or whether they excessively invade the fundamental right of the individual beyond what is required by the social interest of the community.
15. Now, under section 132, sub-section (1) (c) (iii), the power to carry out search and seizure is conferred on a Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection of Income-tax Officer but the exercise of this power is made dependent on a condition. It cannot be exercised unless there is an authorization issued by the Director of Inspection or the Commissioner. The power to issue authorization conferred on the Director of Inspection and the Commissioner is also not an absolute unfettered power without any policy or principle to guide or control its exercise. The section does not leave it to the absolute and unguided discretion of the Director of Inspection or the Commissioner whether or not to issue authorization. The power to issue authorization is hedged in by several conditions. One condition is that the Director of Inspection or the Commissioner must have some information in his possession and the other is that in consequence of such information he must have reason to believe that a particular person is in possession of money, bullion, jewellery or other valuable article or thing which represents undisclosed income or property. If either of these two conditions is not satisfied, the exercise of the power would be bad and the authorisation issued would be invalid. Where a person aggrieved by the search and seizure comes to the court and challenges its validity on the ground that these two conditions are not fulfilled, the Director of Inspection or the Commissioner who issued the authorization would have to satisfy the court that he had the requisite reason to believe in consequence of information in his possession. It is true that the power to issue authorization is made dependent on the existence of mere 'reason to believe' but that it is in the nature of things inevitable for at that stage there cannot be any definite finding based on proof that the person concerned is in possession of undisclosed income or property. The state of mind immediately next below the stage of conviction would be 'reason to believe' and the legislature has insisted on that state of mind as a condition precedent for exercise of the power to issue authorization. It is significant to note that the legislature has prescribed the existence of 'reason to believe' and not 'reason to suspect'. 'Reason to suspect' would indicate a lower state of mind than that connoted by the words 'reason to believe'. We have already discussed the true connotation of the words 'reason to believe'; it is apparent from that discussion that though 'reason to believe' is a matter of subjective satisfaction, there is a limited area of objectivity within which it is open to judicial scrutiny. Moreover, rule 112, which is a statutory rule made in exercise of the power under section 295, enjoins that before the Director of Inspection or the Commissioner issues authorization, he must record his reasons for doing so. The requirements of giving reasons is a healthy check against arbitrary or unreasonable exercise of power, for the court can always, in a case where the validity of the authorization is challenged, call upon the Director of Inspection or the Commissioner to produce the reasons recorded by him and scrutinise the reasons for the purpose of satisfying itself that the 'reason to believe' entertained by him was based on relevant grounds having rational connection or bearing to the formation of the belief. It may also be noted that the Director of Inspection and the Commissioner on whom the power to issue authorization is conferred are high and senior officers of the income-tax department and abuse of power cannot easily be assumed where the discretion is vested in such high officials. It can reasonably be expected that such high officials will act fairly and honestly and in conformity with the policy and principle laid down in the Act. The search and seizure are carried out by an officer not below the rank of an Income-tax Officer and they are to be conducted in accordance with the provisions of the Code of Criminal Procedure which include section 103. These provisions are salutary provisions which constitute healthy safeguards ensuring that the search and seizure are conducted fairly and honestly and not in an oppressive manner. It is no doubt true, as argued by the petitioners, that the power of search and seizure is directed against all who are in possession of undisclosed income irrespective of the fact whether they are responsible for evading tax on such income or are in possession of it with knowledge that it represents concealed income but that does not make the power unreasonable. The object of the legislature being to get at undisclosed income or property which has escaped assessment, it would be entirely irrelevant at the stage of search and seizure to inquire whether the person in possession is the owner or he knows it to be concealed income. Who is the owner of the undisclosed income or property is a matter which would be considered by the Income-tax Officer before the proceeds to take action under section 132, sub-section (5), but at the stage of search and seizure all that the revenue is concerned to inquire is where and in whose possession the undisclosed income or property is so that it can be seized. Section 132, sub-section (1) (c) (iii), in so far as it authorises search and seizure cannot, therefore, be regarded as imposing unreasonable restrictions on the right of the citizen to hold and enjoy property under article 19(1)(f).
16. When we return to section 132, sub-section (5) we find that this sub-section far from enacting an unreasonable provision, discloses an anxiety on the part of the legislature to see that the assets which are seized on mere 'reason to believe' entertained by the Director of Inspection or the Commissioner are not permitted to be retained for an unreasonable length of time without any further inquiry. The legislature has provided in sub-section (5) that within ninety days from the date of seizure the Income-tax Officer must hold an inquiry where the 'person concerned' will have a reasonable opportunity of being heard and make an order, (1) estimating the undisclosed income including the income from undisclosed property in a summary manner to the best of his judgment on the basis of such materials as are available with him, (2) calculating the amount of tax on the income so estimated, and (3) specifying the amount that will be required to satisfy any existing liability to tax in respect of which the assessee is in default or is deemed to be in default and retain in his custody only so much of the assets as are sufficient to satisfy the amount of tax on the estimated undisclosed income and the amount of existing liability to tax and forthwith release the remaining portion of the assets to the person from whose custody they are taken. The search and seizure being in their nature ex parte, the 'person concerned' would have no opportunity at that sage to repel the belief of the officers of the income-tax department. But, subsequently, under sub-section (5), within a short period of ninety days an opportunity is given to the 'person concerned' to contest the view of the revenue that the assets seized represent undisclosed income or property. Of course this inquiry is not an elaborate inquiry for it is not intended to take the place of regular assessment or reassessment. It is an inquiry only for the purpose of enabling the Income-tax Officer to determine prima facie whether the assets or any part thereof represent undisclosed income or property and what portion of the assets would be retained for satisfying the existing and anticipated tax liability of the assessee pending the making of the regular assessment or reassessment. That is why the provision in sub-section (5) for estimating the undisclosed income and calculating the amount of tax on the income so estimated. The completion of the regular assessment or reassessment would ordinarily take some time and legislature did not intend that until such time, the assets seized should be allowed to remain with the income-tax department to the prejudice of the owner. The legislature, therefore, enacted sub-section (5) providing that undisclosed income should be estimated and the amount of tax calculated on it is a summary manner within a period of ninety days from the date of seizure. The object of the legislature clearly was that within as short a time as possible an inquiry must be held giving to the person concerned a reasonable opportunity of being heard and a prima facie determination must be made by the Income-tax Officer as to how much assets are likely to be required for meeting the existing and anticipated tax liability so that the balance of the assets may be immediately returned to the person from whose custody they were seized. This provision is really intended for the benefit of the assessee and is enacted with a view to relieving the hardship which would be caused to the assessee if his assets are allowed to be retained by the revenue until the regular assessment or reassessment is completed. It was contended on behalf of the petitioners that the period of ninety days provided by sub-section (5) for making an order under that sub-section would be too short to permit a proper and satisfactory inquiry to be made for the purpose of estimating the undisclosed income and calculating the amount of tax on it and it is, therefore, quite likely that the citizen might be kept out of his property on the basis of perfunctory and insufficient inquiry. But we do not think this contention is justified. It is obvious that in prescribing the time limit of ninety days the legislature was called upon to reconcile two opposing considerations. The legislature was anxious to prescribe a reasonably short time limit within which an order under section 132, sub-section (5), should be made so that the assets seized, to the extent to which they were not required for meeting the tax liability, may not be unnecessarily retained by the revenue. At the same time the legislature was concerned to see that the time limit prescribed was not too short to allow a proper and satisfactory inquiry to be made for the purpose of estimating the undisclosed income and calculating the amount of tax on it. The legislature had, therefore, to strike a balance and prescribe a time limit which would neither be too short nor too long and in the exercise of its legislative discretion the legislature fixed the time limit at ninety days. We do not think it would be right for us to interfere with the legislative judgment in this regard unless we find that the time limit fixed by the legislature is so unduly short that no fair and proper inquiry can possibly be made within such period. But that obviously cannot be said to be the position in the present case. It may be noted and this shows how reasonable is the provision made by the legislature that even the order made under section 132, sub-section (5) which is in the nature of an intermediate order, is not made final by the legislature. The legislature has provided a remedy by way of an objection application to the Central Board of Direct Taxes under section 132, sub-section (11). Moreover, there is also machinery provided in rule 11 of the Second Schedule for investigation of any claim or objection which may be made by a third party in respect of assets retained under section 132, sub-section (5). If the Income-tax Officer holds, as a result of the inquiry under section 132, sub-section (5), that the assets seized belong to the person in respect of whom the inquiry is held and makes an order under section 132, sub-section (5), on that basis, the third party making a claim or objection in respect of such assets can have his claim or objection adjudicated by the tax recovery officer and if he does not succeed there, he can further agitate his claim or objection by filing a civil suit in a court of law. The true claimant of the assets seized is, therefore, not prejudiced by the making of an order under section 132, sub-section (5). It may also be noted that the order under section 132, sub-section (5), is to be made after affording a reasonable opportunity to the person concerned of being heard and making such inquiry as may be prescribed by the rules and, before making the order, the Income-tax Officer is required to obtain the previous approval of the Commissioner who would scrutinise the material gathered in the course of the inquiry and satisfy himself that the order proposed to be made by the Income-tax Officer is a proper order before giving his approval. It will thus be seen that there are sufficient safeguards provided by the legislature in regard to the making of an order under section 132, sub-section (5), and it is not possible to say that the retention of the seized assets under that sub-section unreasonably restricts the citizen's right to hold and enjoy property.
17. It is no doubt true - and the petitioners are right in this grievance - that there is no time limit provided in the section within which the regular assessment or reassessment must be completed after the making of an order under section 132, sub-section (5). But we do not think the absence of such time limit renders the section unreasonable. There is sufficient safeguard provided in the section to ensure that the completion of the regular assessment or reassessment would be unduly or unreasonably delayed. If the assets retained under section 132, sub-section (5), after discharge of the amount of the existing liability are not sufficient to meet the amount of the liability determined on completion of the regular assessment or reassessment of the undisclosed income then obviously the assessee can have no grievance even if the regular assessment or reassessment is completed after a number of years, for in that event the revenue would be retaining only that amount which was legitimately due to it by way of tax and which should have been paid long ago. If, on the other hand, it is ultimately found as a result of completion of the regular assessment or reassessment that there is surplus out of the assets retained under section 132, sub-section (5), such surplus has to be returned with simple interest at the rate of nine per cent. per annum from the expiration of a period of six months from the date of the order under section 132, sub-section (5). This provision obviously proceeds on the hypothesis that ordinarily a period of six months would be a reasonable period required by the income-tax authorities to complete the regular assessment or reassessment and there should be no payment of interest for this period. But if the Income-tax Officer for any reason fails to complete the regular assessment or reassessment within the period of six months which the legislature has regarded as reasonable, simple interest at the rate of nine per cent. per annum should be payable by the Central Government on the amount of surplus. A clear indication is thus given by the legislature to the income tax authorities that they must ordinarily complete the regular assessment or reassessment within a period of six months from the date of the order under section 132, sub-section (5). The Income-tax authorities would also naturally be anxious to complete the regular assessment or reassessment within such period of six months since failure on their part to do so would involve the Central Government in liability to pay interest at the rate of nine per cent. per annum for which they might be held administratively responsible. It may also be noted that until the regular assessment or reassessment is made and the assets are applied in discharge of the amount of liability determined, the assets would not form part of the revenue and would not be available for being used for the purposes of the Union or the State and that would be another reason why the income tax authorities would be prompted to complete the assessment or reassessment without unreasonable delay. It is true that the assessee would not get any interest from the date of seizure up to the expiration of a period of six months from the date of the order under section 132, sub-section (5), but that is an inevitable consequence of the action taken by the revenue in the process initiated under section 132, sub-section (5). It is because the Director of Inspection or the Commissioner of Income-tax has reason to believe that a person is in possession of undisclosed income or property is seized. Thereafter, a period of ninety days is provided for the inquiry under section 132, sub-section (5), and then a period of six months is provided for completion of the regular assessment or reassessment. It is only when the regular assessment or reassessment is made that it would be possible to say definitely what portion of the assets seized and retained was beyond the requirements for meeting the tax liability of the assessee. The period of ninety days provided for the enquiry under section 132, sub-section (5), and the period of six months provided for completion of the regular assessment or reassessment are not at all unduly long and the legislature could not be said to have acted unreasonably in refusing interest on the amount of surplus to the assessee from the date of seizure up to the expiration of the period of six months from the date of the order under section 132, sub-section (5).
18. We are, therefore, of the view that the restrictions imposed by the impugned provisions on the right of the citizen to hold and enjoy property under article 19(1)(f) are reasonable restrictions in the interests of the general public and they are saved by article 19(5). The challenge to the validity of the impugned provisions on the ground of infraction of article 19(1)(f) must, therefore, fail.
19. Re. Ground (B) : This ground stands completely answered by what we have stated in reference to ground (A). It is clear from the aforesaid discussion that the power conferred under section 132, sub-sections (1) (c) (iii) and (5), is not unfettered or uncanalised. It is a power which is hedged in by several conditions and safeguards and it is exercisable only in certain specified circumstances and subject to certain defined conditions and the section clearly indicates the policy or principle which is to guide the exercise of the power. The challenge to the constitutionality of the impugned provisions on the ground of violation of articles 14 and 19(1)(f) is, therefore, unfounded and cannot be sustained.
20. Re. Ground (C) (i) : There is undoubtedly a classification made by the section between evaders of tax who are not in possession of undisclosed income or property and evaders of tax who are not is such possession, but this classification is reasonable for the object of the section is to get hold of undisclosed income or property and that can only be done by effecting search and seizure from those who are in possession of it. It is difficult to see how the provision of search and seizure enacted in the section can be directed against evaders of tax who are not in possession of undisclosed income or property. Having regard to the object of the section and the nature of the power conferred under it, the classification made by the section must be held to pass the test of permissible classification under article 14.
21. Re. Ground (D) (ii) : This ground of attack is also not well founded. It is not correct to say that section 132 deals with the same class of evaders of tax who are within the ambit of section 147 and it is left to the absolute discretion of the income-tax authorities to adopt the drastic procedure set out in section 132 against some evaders of tax leaving the rest to be governed by the less onerous provisions of section 147. Section 132 does not lay down any different procedure for assessment or reassessment of undisclosed income from what is set out in section 147. It merely provides for search and seizure of undisclosed income or property and retention of it for meeting the existing and anticipated tax liability of the assessee pending completion of the regular assessment or reassessment. It does not dispense with the normal procedure for assessment or reassessment of the undisclosed income under section 147. Section 132 applies to a limited class of evaders of tax who are in possession of undisclosed income or property and even they are ultimately left to be assessed or reassessed under section 147. There is therefore no overlapping between the two provisions and it is not possible to say that it is open to the income-tax authorities to adopt one procedure or the other according to their absolute discretion. Section 132, cannot, in the circumstances, be said to be violative of the equal protection clause contained in article 14.
22. That takes us to the last ground urged on behalf of the petitioners namely, that the authorisations issued by the Commissioners were illegal and invalid inasmuch as there were no grounds before the Commissioner on the basis of which he could have reason to believe that the petitioners were in possession of undisclosed income or property. Now we have already indicated above the limited area of objectivity within which the existence of the reason to believe can be scrutinised by the court. If it can be show by the petitioner that the grounds on which the belief of the Commissioner was founded were not relevant to the subject-matter of the inquiry or were extraneous to the scope and purpose of the statute or had no rational connection or relevant bearing to the formation of the belief, the authorization issued by the Commissioner on the basis of such belief would be in colourable exercise of power and would be bad. But when we examine the material which was before the Commissioner and which led him to issue the authorisations, it is not possible to say that the reason to believe entertained by him suffers from any of these infirmities. The material before the Commissioner consisted of the evidence regarding the search and seizure of gold, foreign gold bar, jewellery and currency notes by the Central Excise officers. There were also statements of various persons including the petitioners. There were also the unusual circumstances in which gold, foreign gold bar, jewellery and currency notes were found. This material was clearly relevant to the formation of the belief in the Commissioner that the currency notes represented undisclosed income or property. It is not open to us to examine the sufficiency of the material for the purpose of considering whether the belief entertained by the Commissioner was justified but even if it were competent to us to do so, we think the material before the Commissioner was such that he could have reason to believe that the currency notes represented undisclosed income or property. It is, therefore, not possible to accept the contention of the petitioners that the authorisations issued by the Commissioner were in colourable exercise of power under section 132, sub-section (1).
23. These grounds which we have discussed above were common to both the petitions but there was one additional ground urged on behalf of the petitioner which was peculiar only to Special Civil Application No. 164 of 1970. That ground rested on the admitted fact that the show cause notice under rule 112A was issued to the petitioner in that petition on 9th February, 1970, after the expiration of fifteen days from the date of seizure. The argument of the petitioner was that the provision in rule 112A which requires that the show cause notice for an enquiry under section 132, sub-section (5), must be issued within fifteen days from the date of seizure was a mandatory provision with implied nullification for disobedience and the show cause notice issued to the petitioner in breach of this mandatory provision was, therefore, without jurisdiction and void. This argument requires careful consideration. We may reproduce rule 112A in so far as it is material for the present argument :
'112A. (1) Where any money, bullion, jewellery or other valuable article or thing (hereinafter referred to as assets) are seized, the Income-tax Officer shall within fifteen days of the seizure issue to the person in respect of whom enquiry under sub-section (5) of section 132 is to be made requiring him on the date to be specified therein (not being earlier than fifteen days from the date of service of such notice) either to attend at the office of the Income-tax Officer to explain, or to produce or cause to be there produced evidence on which such person may rely for explaining the nature of the possession and the source of the acquisition of the assets...'
24. This rule provides that the show cause notice shall be issued by the Income-tax Officer to the person in respect of whom inquiry under section 132, sub-section (5), is to be made within days of the date of seizure. The question is whether this provision is mandatory or directory in character. If it is mandatory, it must be obeyed or fulfilled strictly and in that event the show cause notice issued to the petitioner being admittedly beyond the period of fifteen days from the date of seizure, would be invalid. But if it is directory, it would be sufficient, if it is obeyed or fulfiled substantially which event it might be possible to say that the show cause notice is valid as being in substantial compliance with the rule.
25. Now the question whether a particular provision of a statute which on the face of it appears mandatory inasmuch as it uses the word 'shall', is really mandatory or directory cannot be resolved by laying down any general test. This was plainly stated by Lord Campbell in Liverpool Borough Bank v. Turner. He said :
'No universal rule can be laid down for the construction of statues, as to whether mandatory enactments shall be considered directory only or obligatory, with an implied nullification for disobedience. It is the duty of courts of justice to try to get at the real intention of the legislative, by carefully attending to the whole scope of the statute to be constructed.'
26. To this celebrated dictum, Lord Penzance added his of quoted observation in Howard v. Bodington :
'I believe, as far as any rule is concerned, you cannot safely go further than that in each case; you must look to the subject-matter, consider the importance of the provisions that has been disregarded, and the relation of that provision to the general object intended to be secured by the Act, and upon a review of the case in that aspect decide whether the enactments is what is called imperative or only directory...'
27. It is clear from these observations that no general rule can be laid down for deciding as to when a particular provision of a statute in mandatory or directory. The question must ultimately depend upon the facts of each case and for that purpose the object of the statute in making the provision would be the determining factor. The purpose for which the provision has been made and its nature, the intention of the legislature in making the provision, the serious general inconvenience or injustice to persons resulting from whether the provision is read one way or the other, the relation of the particular provision to the other provisions dealing with the same subject and other considerations which may rise on the facts of a particular case including the language of the provisions would also have to be taken into account in arriving at the conclusion whether a particular provision is mandatory or directory : vide Raza Buland Sugar Co. Ltd. v. Municipal Board, Rampur.
28. Let us examine the provision in rule 112A in the light of the criteria which we have disclosed above. Rule 112A prescribes the inquiry which is to be held by the Income-tax Officer for the purpose of making an order under section 132, sub-section (5). It says that the Income-tax Officer shall, within fifteen days of the seizure, issue to the person concerned notice requiring him on the date to be specified therein which shall not be earlier than fifteen days from the date of service of such notice to explain the nature of the possession and the source of acquisition of the assets. There are two provisions in regard to time contained in this rule. The first is that the Income-tax Officer shall issue a show cause notice within fifteen days of the seizure and the second is that the show cause notice must specify a date of rendering an explanation which is not earlier than fifteen days from the date of service of the notice. We are concerned with the first provision. What is the purpose for which it is made? To understand the purpose we must go back to section 132, sub-section (5). That sub-section prescribes a period of ninety days from the date of seizure within which an inquiry must be held by the Income-tax Officer and an order made as contemplated in that sub-section. Now it is indisputable, and indeed it must be said in fairness to the learned Advocate-General on behalf of the revenue that he did not dispute it, that this period of ninety days is a mandatory period and it must be strictly complied with by the Income-tax Officer, for, otherwise, the object of fixing the time limit of ninety days would be frustrated. Now within this period of ninety days, which must be strictly observed, the Income-tax Officer has to make an inquiry in which the person concerned would have to be given a reasonable opportunity of being heard and he has then to move the Commissioner for approval of the order proposed to be made by him and after obtaining the approval he has to make his order. This process has, therefore, to be properly regulated in such a manner that not only adequate notice is given to the person concerned and reasonable opportunity is afforded to him for being heard but sufficient time is also left of the Income-tax Officer to come to a decision in regard to the matters to be dealt with by him in him order, and the Commissioner also has sufficient time left with him to scrutinise the material gathered by the Income-tax Officer at the inquiry and to decide whether on such material the order proposed to be made by the Income-tax Officer is a fair and proper order so that he should give his approval to it. The rule making authority therefore, provided in rule 112A that the show cause notice must be issued by the Income-tax Officer to the person concerned within fifteen days from the date of seizure. The object of the rule making authority clearly was that the process of inquiry which must precede the making of an order under section 132, sub-section (5), must be initiated by the Income-tax Officer within a period of fifteen days from the date of seizure so that there might be no possibility of reasonable opportunity being denied to the person concerned for want of time nor there might be any risk of the inquiry being casual or perfunctory or the decision of the Income-tax Officer being hasty or unconsidered on account of shortage of time. This being the object and purpose of the provision, it must be held to be mandatory in character and the Income-tax Officer must issue the show cause notice within fifteen days from the date of seizure. If he fails to do so, no inquiry can be made under rule 112A, and, in that event, no order under section 132, sub-section (5), can be passed. We may point out in this connection that there are several time limits provided in the Income-tax Officer and all these time limits have always been regarded as mandatory in character. The reason is that the Income-tax Act is a taxing statute and unless a person falls strictly within the four concerns of the statute, no action can be taken against him. If rule 112A provides that the show cause notice shall be issued by the Income-tax Officer within fifteen days from the date of seizure, it must be issued with the time limit. It is no doubt true that the effect of our taking this view would be that a case where the Income-tax Officer fails to issue within the time limit. It is no doubt true that the effect of our taking this view would be that a case where the Income-tax Officer fails to issue the show cause notice within fifteen days from the date of seizure the further proceedings consequent upon the search and seizure would be frustrated but that is no argument for reading the provision as directory. If the show cause notice is not issued within fifteen days from the date of seizure in any given case, it would be entirely due to the inaction of the Income-tax Officer and there is no reason why the assessee should be subjected to the inquiry by issue of a show cause notice after the expiration of such period. Moreover, we do not see any prejudice to the revenue in taking this view. The revenue can always return the assets to the person from whose custody they were seized and proceed once again under section 132, sub-section (1). We are, therefore, of the view that the show cause notice issued to the petitioner is Special Civil Application No. 164 of 1970 is without jurisdiction and void and the Income-tax Officer is not entitled to proceed further under such notice.
29. We, therefore, dismiss Special Civil Application No. 163 of 1970 and discharge the rule issued in that petition with costs. So far as Special Civil Application No. 164 of 1970 is concerned, we allow the petition and make the rule absolute to the limited extent that a writ of mandamus shall issue quashing and setting aside the show cause notice dated 9th February, 1970, issued against the petitioner. We do not give any direction for return of the amount of Rs. 15,597 claimed by the petitioner since it is a matter of dispute whether that amount was seized from him or from the shop of Amirbhai Alibhai. We have no doubt that the income-tax authorities will pass appropriate orders in this connection. There will be no order as to costs of Special Civil Application No. 164 of 1970.