PETITIONER: <ORG> Vs. RESPONDENT: THE COMMISSIONER OF INCOME-TAX, <NAME>, <NAME> AND <NAME> DATE OF JUDGMENT: 12/05/1959 BENCH: <NAME>, NATWARLAL H. BENCH: <NAME>, <NAME>, <NAME> (CJ) HIDAYATULLAH, M. CITATION: 1959 AIR 1177 1960 SCR (1) 249 ACT: Income-tax-Reference-Power of High Court-If can direct investigation on a new question and call for "supplementary statement of case-- Indian Income-tax Act , 1922 (XI Of 1922), s. 66(4) . HEADNOTE: This appeal by special leave was directed against the order of <ORG> asking <ORG> under s. 66(4) Of the Income-tax Act to submit a supplementary' statement of case on points, which were never raised by the parties nor decided by the Income-tax Authorities or the <ORG>. The only question canvassed before them was whether certain cheques, which were received by the assessee at Bhavnagar having been cashed in British India, the monies in respect of them could be said to have been received in British India. The <ORG> held that the monies related back to the receipt of the cleques and were as such received at Bhavnagar. The question was whether the receipt of the cheques at Bhavnagar amounted to receipt of the sale proceeds at Bhavnagar.' <ORG> held that the mere receipt of the cheques by post at Bhavnagar was not conclusive in absence of a further finding as to whether the cheques were sent by post without any request, express or implied, having been made by the assessee and observed as follows- " But we cannot shut out the necessary inquiry which even from our own point of view is necessary to be made in order that we should satisfactorily answer the question raised in the Reference. It must not be forgotten that under sec. 66(4) of the Income-tax Act we have a right independently of the conduct of the parties to direct the <ORG> to state further facts so that we may properly exercise our advisory jurisdiction." Held, that <ORG> had misconceived its powers under s. 66(4) of the Act and its decision must be set aside. Section 66(4) of the Indian Income-tax Act, which must be read with ss. 66(1) and 66(2) Of the Act, did not empower <ORG> to raise a new question of law which did not arise out of the <ORG>'s order or direct the <ORG> to investigate new and further facts necessary to determine the new question which had not been referred to it under s 66(1) or s. 66(2) of the Act and direct the <ORG> to submit supplementary statement of case. Such additions and alterations in the statement of case as s. 66(4) of the Act empowered <ORG> to direct, could 250 relate only to such facts as already formed part of the record but were not included by the <ORG> in the statement of the case. <NAME> (H. M. Inspector of Taxes) v. <ORG>, (1946) 27 T.C. 267; <CITATION> ,  31 I.T.R. 455 ; <CITATION> ,  31 I.T.R. 688; <CITATION> ,  32 I.T.R. 569 and <CITATION> . [195S] 34 I.T.R. 802, referred to. <CITATION> ,  7 I.T.R. 536 and Sir <NAME> v. Commissioner of Income-tax, C. P. and U. P.  10 I.T.R. 457, considered. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 50 of 1957. Appeal by special leave from the judgment and order dated September 23, 1955, of <ORG> in Income-tax Reference No. 19 of 1955.

<NAME> and <NAME> for the appellant. <NAME>, Additional Solicitor-General of India, <NAME> and <NAME>, for the respondent. 1959. May 12. The Judgment of the Court was delivered by <NAME> appeal with special leave arises out of a judgment and order of <ORG> at Bombay dated September 23, 1955, delivered in Income Tax Reference No. 19 of 1955 made by <ORG> (hereinafter referred to as " the <ORG> ") to <ORG> under s. 66(1) of the Indian Income-tax Act (XI of 1922)-(hereinafter referred to as " the Act ") whereby <ORG> directed the <ORG> to submit a supplementary statement of case on the points mentioned therein. The appellant is a limited liability company manufacturing textile goods at Bhavnagar which was an Indian State during the assessment years 1943-44 and 1944-45. For the said assessment years the appellant was held to be a non- resident, its years of account being calendar years 1942 and 1943. For the assessment years 1943-44 and 1944-45 (account years 1942, and 1943), <ORG> computed the British' Indian Income of the appellant on a proportionate basis under s. 4(1)(a) of the Act. In the account year 1942 its total sales amounted to Rs. 66,14,852 out of which sale proceeds amounting to Rs. 35,92,157 as detailed below were held by <ORG> to have been received in British India:-

Cheques on <ORG> issued by <ORG> Rs. 2,58,987 Sale proceeds received through Tri-

kainlal Mahasukhram Rs. 20,24,190 Other cheques received at Bhavnagar but drawn on Banks in British India Rs. 13,08,980

Rs. 35,92,157 The Income-tax Officer computed the income of the appellant at Rs. 27,11,136 on a proportionate basis, i.e., proportionate to the sales in and outside British India. He held that the income amounting to Rs. 14,72,267 was received in British India under s. 4(1)(a) of the Act. There was no dispute in regard to the sale proceeds received through <ORG>.

In respect of the assessment year 1944-45 corresponding to the account year 1943 the Income-tax Officer held that the sale proceeds amounting to Rs. 16,72,693 received by the appellant by cheques from <ORG> of <ORG> on British India Banks were taxable under s. 4(1)(a) of the Act. The figure of Rs. 16,72,693 according to the appellant, was a mistake for Rs. 12,97,631. The appellant had contended that the amounts had been received at Bhavanagar, by cheques drawn on banks in British India. The <ORG> had not disputed the fact that the cheques had been actually received at Bhavnagarbut had contended that payments by cheques, though such cheques were received at Bhavnagar, were received in British India at the time and the place where the cheques were ultimately cashed and honoured by the banks on which the cheques were drawn and that until such encashment of the cheques, the monies could not be said to have been received by the appellant.

The Appellant preferred appeals to the Appellate Assistant Commissioner, Ahmedabad Range, against this order of the Income-tax Officer for the said two assessment years. The Appellate Assistant Commissioner by his two separate orders confirmed the orders of the Income-tax officer and held that the cheques were not legal tender and were not monies or monies worth as such and that the receipt of cheques at Bhavnagar was not receipt of money. The receipt of money according to the Appellate,., Assistant Commissioner, took place on actual payments by the drawee Banks and he therefore held that the said amounts were taxable under s. 4(1)(a) of the Act.

A further appeal was taken by the appellant. to the <ORG> against the said orders of the Appellate Assistant Commissioner and the <ORG> by its consolidated order for both the years, dated July 17, 1952, held that the cheques for the said amounts of Rs. 2,58,987 and Rs. 13,08,987 in respect of the assessment year 1943-44, were received at Bhavnagar and that the sale proceeds were also received in Bhavnagar. The <ORG> stated inter- alia as follows:- There is no evidence that the cheques from <ORG> were received in Bhavnagar. It is not the <ORG>'s case that the assessee company has a registered office elsewhere. The presumption is that the letters containing the cheques were addressed to the assessee company at Bhawagar We therefore hold that the cheques were received from <ORG> at Bhavnagar and that the money was also received in Bhavnagar."

In doing so, the <ORG> followed the Judgment of <ORG> in the case of <CITATION> (1). In view of the fact however that an appeal had been filed (1)  21 I.T.R. 82.

in this Court against that decision of <ORG> the Tribunal further stated:-

" We might point out that in case <ORG> does not uphold the <ORG> decision in <NAME> case an enquiry will have to be made as to whether the assessee company's banks at Ahmedabad acted as the assessee company's agents for collecting the money due on the cheques." In respect of the assessment year 1944-45, the <ORG>, after directing the Income-tax Officer to verify the correctness of the figure of the amounts received by the appellant by cheques from the Government (i. e., whether it was Rs. 12,97,631 as contended for by the appellant or Rs. 16,72,693 as held by the Income-tax Officer or any other figure), held that the cheques representing the said amount were received at Bhavnagar and the monies or sale proceeds were also received in Bhavnagar. The <ORG> also held that another amount of Rs. 5,53,447 in respect of the said latter year, being the aggregate amount of the cheques received at Bhavnagar from other merchants was also received in Bhavnagar.

It may be pointed out that neither did the Incometax Officer, when the proceedings were before him, or when the proceedings were before the Appellate Assistant Commissioner, nor did the <ORG>, when the proceedings were before the Tribunal, at any stage contend that the cheques aggregating to the said amounts in the said two years were not received at Bhavnagar because of the alleged posting of the cheques in British India and/or by reason of the allega- tion that the cheques were sent by post and/or that the post office was the agent of the appellant and that too, in spite of the decision in the case of <ORG> which decision had already been pronounced by then and where the said question had been debated and argued by the <ORG>. The only ground urged by the <ORG> at all material stages was that because the amounts which were received, from the merchants or the Government, were received by cheques drawn on Banks in British India which were ultimately encashed in British India, the monies could not be said to have been received in Bhavnagar though the cheques were in fact received at Bhavnagar.

Being aggrieved by the said decision of the <ORG>, the respondent (Commissioner of Income-tax) filed two applications under s. 66(1) of the Act requesting the <ORG> to draw up a statement of the case and refer the question of law arising out of the order of the <ORG> to <ORG>.

In the said applications the facts which were admitted and/or found by the Tribunal and which were necessary for drawing up a statement of the case were stated as under:- " Regarding items of Rs. 2,58,987 and Rs. 12,97,631 received from <ORG> in the accounting years relevant to the assessment for 1943-44 and 1944-45 respectively the amounts were received by cheques drawn on <ORG>. No evidence was produced by the assessee at any stage even before <ORG>, that the cheques were received at Bhavnagar, nor was any evidence produced to show that these cheques were received as unconditional discharge of debtor's liability. These cheques were collected by the Company's bankers in 'British India. The Income-tax Officer, therefore, held that the amount was received in British India. The Appellate Assistant Commissioner confirmed the Income-tax Officer's action. The Tribunal, however, relied upon the <ORG> decision in <ORG> case and held that the amount was received in Bhavnagar. "

" As regards items of Rs. 13,08,980 and Rs. 5,53,447 received in the accounting years relevant to the assessments for 1943-44 and 1944-45 respectively, the relevant facts are that the company received these cheques and sent them to their bankers in Ahmedabad for collection......... The <ORG>, held that the sale proceeds were received at Bhav- nagar on the basis of <ORG> decision in the Kirloskar Brothers' case without enquiring as to whether the cheques were received by the company in unconditional discharge of the drawer's liability.

On these facts the respondent submitted that the following questions of law arose out of the order of the <ORG>:- " (1) Was there any evidence on the record to justify the <ORG>'s finding that the mere receipt by the assessee of cheques of Rs. 2,58,987 and Rs. 13,08,980 in Bhavnagar amounted to receipt of the above amounts in Bhavnagar even though the said cheques had actually been cashed in British India and the proceeds thereof were credited to the assessee's accounts with certain Banks in British India ?

(ii) Whether in the circumstances of this case, the income, profits and gains in respect of the sales amounting,to Rs. 15,67,967 made to <ORG> and other customers were received in British India within the meaning of section 4(1)(a) of the Indian Income-tax Act. " A similar statement of facts which were admitted and/or found by the <ORG> was also made in regard to the assessment year 1944-45 and similar questions of law were asked to be referred as in the case of the assessment year 1943-44 except in regard to the change in the figures necessitated by the differences in the amounts received. These reference applications being Reference Applications Nos. 615 and 616 of 1952-53 were kept pending until the decision of this <ORG> in the case of <CITATION> . (1). This <ORG> decided that appeal and the companion appeal <CITATION> . <ORG> (2) on April 17, 1954. and the said Reference Applications were thereafter heard and decided by the <ORG> on November 3, 1954.

It is worthy of note that the decision of this Court in the said two cases proceeded on the basis that on the particular facts of those appeals <ORG> had acted as the agent of the assessee and that though the cheques were in fact received by post by the assessees outside British India, nevertheless, by reason (1) [1954]25 I.T.R. 547.

(2) [1955] 1 S.C.R. 185.

of the fact that the assessees in the said two appeals had expressly requested the <ORG> to remit the amounts by cheques, the assessees had constituted <ORG> their agent to receive, on their respective behaves, the said cheques which were posted by the <ORG> at Delhi having addressed them to the assessees outside British India. In spite of the said decisions, the <ORG> did not urge before the <ORG> that the said aspect of the matter should in the present case also be referred to <ORG> for its decision and the Reference applications were heard on the materials which were on the record before the <ORG> when it made its orders dated July 17, 1952. The said order of the <ORG> was based on the facts admitted and/or found by the <ORG> as stated in the Reference Applications made by the <ORG> as aforesaid and this aspect of the case, viz., whether any portion of these cheques were received by post and if so whether there was any request by the appellant express or implied that the amounts of those cheques should be remitted to Bhavnagar by post, had certainly not been canvassed before any of the income-tax authorities or before the <ORG> and did not find its place in the order of the <ORG> and any question of law appertaining thereto could not be said to arise out of the said order of the <ORG>.

On the materials as they stood on the record then, the <ORG> drew up on November 5, 1952, a statement of case in which all the facts and events above referred to were set out. Besides the same the <ORG> also referred in para. 8 thereof to two letters on the record which showed that the cheques from <ORG> were received by post. It also annexed a sample agreement form on record between the appellant and its customers other than the <ORG> and annexed thereto the copies of the Appellate Assistant Commissioner's orders for the assessment years 1943-44 and 1944-45. The two letters showing that the cheques from <ORG> were received by post were evidently put in with a view to show that the order of the <ORG> dated July 17, 1952, was correct in making the presumption that the letters containing the cheques were addressed to the, appellant at Bhavnagar and in holding that the cheques were received from the <ORG> at Bhavnagar. There was no other reason, so% far as the record then stood, to make any reference to the said two letters. Out of the facts stated above the <ORG> raised the following question of law:- Whether the receipt of the cheques in Bhavnagar amounted to receipt of sale proceeds in Bhavnagar? "

The said Reference was heard by <ORG> on September 23, 1955, and judgment was delivered the same day whereby <ORG> held that it was not possible to answer the question in the absence of materials as to whether the cheques which were received in Bhavnagar were posted by the Government at the request of the appellant and <ORG> observed :-

" The question that has been submitted to us by the <ORG> is whether the receipt of the cheques in Bhavnagar amounted to receipt of sale proceeds in Bhavnagar. This question over-looks the important aspect which was dealt with both by us in <NAME>'s case and also by <ORG>. Assuming that the cheques were received in Bhavnagar, the question still, remains as to whether if the cheques were received by post, the post office was constituted the agent of the asseessee or not. The mere receipt of cheques by post in Bhavnagar is not conclusive of the question raised by the <ORG>. Unless we are in a position to say whether the cheques were sent to Bhavnagar by post without there being a request express or implied by the assessee the mere receipt of the cheques in Bhavnagar would not constitute receipt of sale proceeds in Bhavnagar. When we look at the statement of the case there is no reference at all to this aspect of the case."

<ORG> further observed that the burden would be upon the <ORG> to establish that the cheques which were received by post were so received at the request express or implied of the appellant and that therefore <ORG> was the agent of the appellant. But it observed in this context:- " But we cannot shut out the necessary inquiry which even from our own point of view is necessary to be made in order that we should satisfactorily answer the question raised in the Reference. It must not be forgotten that under sec. 66(4) of the Income-tax Act we have a right independently of the conduct of the parties to direct the <ORG> to state further facts so that we may properly exercise our advisory jurisdiction."

In the result, <ORG> directed that a supplementary statement of case should be submitted by the <ORG> on the following points:-

" On the finding of the <ORG> that all the cheques were received in Bhavnagar, the <ORG> to find what portion of these cheques were received by post, whether there was any request by the assessee, express or implied, that the amounts which are the subject matter of these cheques should be remitted to Bhavnagar by post. Mr. <NAME> concedes that to the extent that the cheques were not received by post but by hand, the receipt will be for the purpose of tax in Bhavnagar."

The appellant filed a petition in <ORG> on November 22, 1955, for the grant of a certificate under S. 66A(2) of the Act to appeal to this Court from the said judgment and order of <ORG>. This application was dismissed by <ORG> by its order dated December 8, 1955, with the result that the appellant presented on December 22, 1955, a petition in this Court for special leave to appeal from the said judgment of <ORG> dated September 23, 1955. This Court by its order dated March 12, 1956, granted special leave to appeal, such leave being limited to the question whether <ORG> had jurisdiction under section 66(4) of the Act to call for a supplemental statement of case. This is how the appeal has come up for hearing and final disposal before us.

We have narrated the facts and events leading up to this appeal in such detail in order that we may have the proper perspective and the background against which <ORG> directed the <ORG> to submit a supplementary statement of case on the points mentioned therein. The appeal raises an important question as to the nature, scope and extent of the jurisdiction vested in <ORG> under section 66(4) of the Act and we shall now address ourselves to that question.

The relevant provision of sec. 66 of the Act may now be referred to :-

" 66. (1) Within sixty days of the date upon which he is served with notice of an order under sub-section (4) of section 33 the assessee or the Commissioner may, by application in the prescribed form, accompanied where application is made by the assessee by a fee of one hundred rupees, require <ORG> to refer to <ORG> any question of law arising out of such order, and <ORG> shall within ninety days of the receipt of such application draw up a statement of the case and refer it to <ORG>:

Provided that, if, in the exercise of its powers under sub- section (2), <ORG> refuses to state a case which it has been required by the assessee to state, the assessee may, within thirty days from the date on which he receives notice of the refusal to state the case, withdraw his application and, if he does so, the fee paid shall be refunded.

(2) If on any application being made under sub-s. (1) <ORG> refuses to state the case on the ground that no question of law arises, the assessee or the Commissioner, as the case may be may, within six months from the date on which he is served with notice of the refusal, apply to <ORG>, and <ORG> may, if it is not satisfied of the correctness of the decision of <ORG>, require <ORG> to state the case and to refer it, and on receipt of any such requisition <ORG> shall state the case and refer it accordingly........................................

(4) If <ORG> is not satisfied that the statements in a case referred under this section are sufficient to enable it to determine the question raised thereby, the <ORG> may refer the case back to <ORG> to make such additions thereto or alterations therein as the <ORG> may direct in that behalf."

It is clear on a plain reading of the terms of s. 66(1) that the only question of law which the assesssee or the Commissioner can require the <ORG> to refer to <ORG> is " any question of law arising out of the order of the <ORG> " so that if the question of law which the assessee or the Commissioner requires the <ORG> to so refer to <ORG> does not arise out of its order the <ORG> is not bound to refer the same. What has therefore to be looked at in the first instance is whether the question of law thus required to be referred arises out of the order of the <ORG>. The <ORG> no doubt has got before it #he facts which are admitted and/or found by the <ORG> and which are necessary for drawing up a statement of the case and it is the facts admitted and/or found by it that would form the basis on which the statement of case would be drawn and references of the question of law made by the <ORG> to <ORG>. If such facts were not there whether in the order of the <ORG> or in the record before it there would certainly not be any foundation for the raising of any question of law either in the abstract or otherwise and it is only a question of law which would arise out of such facts which are admitted and/or found by the <ORG> that would be the substratum of the reference to <ORG>. The facts admitted aD.d/or found by the <ORG> would really be the foundation or the basis on which such questions of law could be raised and neither party would be entitled to require the <ORG> to refer to <ORG> any question of law which could not thus arise out of the order of the <ORG>. Section 66(2) which gives the power to <ORG> to require the <ORG> to state the case and refer the question of law to it also proceeds on the same basis and even where <ORG> exercises the power under s. 66(2) it can only require the <ORG> to state the case on any question of law arising out of such order.' The scope and subject-matter of the reference under s. 66(2) therefore is co-extensive with that of the reference under s. 66(1) of the Act and <ORG> has no power or jurisdiction under s. 66(2) to travel beyond the ambit of s. 66(1) . Section 66(2) comes into play only when the <ORG> refuses to state the case on the ground that no question of law arises and if <ORG> is not satisfied of the correctness of the decision of the <ORG>, it has got the power and jurisdiction to require the <ORG> to state the case and refer the same to it.

On the conditions of s. 66(1) and s. 66(2) being thus complied with the statement of case has to be drawn up by the <ORG> and the question of law arising out of its order referred to <ORG> for its opinion. This statement of case which is based, as stated above, on the facts which are admitted and/or found by the <ORG> may not contain sufficient material to enable <ORG> to determine the question raised thereby and in that case <ORG> under s. 66(4) is vested with the jurisdiction to refer the case back to the <ORG> to make such additions thereto or alterations therein as the <ORG> may direct in that behalf only for the purpose of determining the question referred to it. If the question actually referred does not bring out clearly the real issue between the parties, <ORG> may reframe the question so that the matter actually agitated before the <ORG> may be raised before <ORG>. But s. 66(4) does not enable <ORG> to raise a new question of law which does not arise out. of the <ORG>'s order and direct the <ORG> to investigate new or further facts necessary to determine this new question which had not been referred to it under s. 66(1) or s. 66(2) and direct the <ORG> to submit a supplementary statement of case. This power and jurisdiction which is vested in <ORG> is to be exercised within the four corners of s. 66 . If under s. 66(1) and s. 66(2) the statement of case has to be drawn up on the basis of the facts which are admitted and/or found by the <ORG> and this is the requirement also of para. 3 of the prescribed form-the scope of such statement of case cannot, in our opinion, be in any manner enlarged by the power which is given to <ORG> under s. 66(4) to make such additions thereto or alterations therein in the statement of case as the <ORG> may direct in that behalf. The jurisdiction of <ORG> under s. 66 is a consultative or advisory jurisdiction. In order to satisfactorily discharge that advisory jurisdiction <ORG> must have before it all the facts which are admitted and/or found by the <ORG> properly set out in the Statements in the case. It is only in those cases where the statement of case referred to <ORG> under s. 66(1) and s. 66(2) are not sufficient to enable the High, <ORG> to determine the question raised thereby that <ORG> is empowered to refer the case back to the <ORG>, so that the <ORG> within the four corners of s. 66(1) and s. 66(2) may make such additions to those statements or alterations therein as may be directed by the <ORG>. Even though the terms of s. 66(4) are wide enough to comprise " such additions thereto or alterations therein as the <ORG> may direct in that behalf " the scope of such directions has got to be read in the context of and in conjunction with the provisions of s. 66(1) and s. 66(2) and under the guise of that direction <ORG> cannot refer the case back to the <ORG> to find new facts or embark upon a new line of enquiry which would enable either the assessee or the Commissioner to make out a case which had never been made during the course of the proceedings before the Income-tax authorities or the <ORG> so far. Such additions thereto or alterations therein as the <ORG> may direct in that behalf are additions of facts to the statement of case or alterations therein which though they were part of the record before the Income-tax authorities or the <ORG> were not incorporated in the statement of case drawn up by the <ORG> either because such facts or statements though contained in the record were not found by the <ORG> or were omitted to be incorporated in the statement of case drawn up by it.

That this is the scope, nature and extent of the jurisdiction of <ORG> under s. 66(4) of the Act is amply borne out by the authorities. In <NAME> (H. M. Inspector of Taxes) v. <ORG>('). Lord <NAME>, M. R. observed at p. 277:-

" The <ORG>, therefore, failed before the Commissioners to establish the only measure of value for which it was contending. It was, however, suggested that this difficulty could be avoided by sending the matter back to the Commissioners, so as to give the <ORG> an opportunity of setting up a different measure of value supported by different evidence. Even assuming that this was the only difficulty in the way of the <ORG>'s argument, it would not, in my opinion, have been proper to take this course. The <ORG> failed in its contention on a matter of fact and it must abide by. the result: it would be contrary to all principle to give it another chance to establish by fresh and different evidence a quite different contention which, if it was desired to rely upon it, ought to have been advanced in the first instance. Our task is to deal with the case on the basis of the facts as found by the Commissioners upon the submissions made to them, and on this basis the value of the investments has not been established." <CITATION> (2), <NAME>, C.J., who delivered the judgment of <ORG> at Calcutta said at p. 551 :-

" We intimated to Mr. <NAME> as soon as he formulated his points that he could not be allowed to take the first of them, since it did not appear to have been taken on behalf of the <ORG> at any stage of the proceedings and certainly not before the <ORG>. It could not, therefore, be said to arise out of the <ORG>'s order. The practice followed in this Court in references under section 66(1) of the Act has always been to limit the party, at whose instance a reference has been made, to the points raised and canvassed before the <ORG>. Questions (1) (1946) 27 T.C. 267, 277.

(2) [1957] 31 I.T.R. 545, 551, are often framed in a general form, such as whether the assessment for a particular year made in a certain manner was valid in view of the provisions of a certain section of the Act. A question framed in that form might be said to comprise all possible contentions to which the terms of the relevant section might give rise, but this <ORG> has always refused to treat matters arising out of questions so framed as entirely at large. It has adopted and acted on that view for the reason that this <ORG> is only an advisory body and the advice which it can be properly asked to give is only advice on matters which had been in contention before the <ORG> and which had been decided in one way or another such advice being sought in order that the parties interested might know whether the decision on those conten- tions had been in accordance with law. In hearing a reference under section 66(1) , this <ORG> does not sit in appeal from the assessment and it is not called upon to give its advice on matters which the <ORG> was not asked to decide and which the <ORG> neither decided, nor included in the statement of case for the opinion of this <ORG>." The Bombay High <ORG> also expressed the same opinion in the case of <CITATION> (1), <NAME>, C.J., who delivered the judgment of the <ORG> pointed out to the <ORG> what the correct procedure was with regard to the submission of a statement of the case and observed:- " It is true that very often the <ORG> may not refer to all the evidence and all the facts in its appellate order. We quite appreciate the difficulty of the <ORG> as it has to deal with a large number of cases, and it may be that in many cases the decision may seem obvious to the <ORG> and it might dispose of an appeal by a very short order. If a statement of the case is, subsequently called for, naturally the <ORG> would want to elaborate it,-, decision by pointing out various materials and pieces of evidence to which it had not referred in  31 I.T. R. 688, 695.

the appellate order. But all that can be referred to in the Statement of the case are materials and evidence which were before the <ORG> when it heard the appeal. A statement of the case is not intended for the purpose of buttressing up the order of the Appellate <ORG> or further fortifying it by requisitioning to its aid materials and evidence which were not before the <ORG> but which it discovers by investigation after the order was passed in appeal. " Much more so would be the case where no such material and evidence were at all in existence when <ORG> in exercise of its jurisdiction under s. 66(4) of the Act referred the case back to the <ORG> and asked it to make such additions thereto or alterations therein as the <ORG> may direct in order to enable it to determine the question raised thereby. Adopting such a procedure would involve, in effect, raising fresh issues and taking fresh evidence in order that fresh facts may be found which facts certainly were not there at the time when the matter was heard before the Income-tax authorities or before the <ORG> in the first instance.

Two more decisions may be referred to in this context. One is a decision of <ORG> in <CITATION> (1) where <NAME>, J., dealt with an argument advanced by Counsel that the Court should send the matter back to the <ORG> for determining the quantum of penalty, and observed:-

Then Mr. <NAME> says that we should, therefore, send this matter back to the <ORG> for determining that question. We do not find any power in this <ORG> under the provisions of section 66 of the Income-tax Act to remand a matter back to the <ORG> for determining what might have been left undetermined by them, because they took a particular view of the law. We have merely the jurisdiction to answer the question of law referred to us, and we are not concerned with any questions which are pure questions of fact or its determination by the <ORG>." 34 (1)  32 I.T.R. 569, 573.

The other is the decision of this Court in <CITATION> . (1), where <NAME>, J., dealt with a similar argument which was addressed before this Court at p. 805 :-

" The matter then came before <ORG> on a reference under section 66(1) of the Income-tax Act, at the instance of the appellant. There the contention was raised that the differentiation between movable and immovables on which the judgment of the <ORG> rested had not been made at any time in the prior stages of the proceedings and that was a matter on which further evidence would have to be taken to ascertain the intention of the parties and that, therefore, the matter should be remanded for further enquiry to the Appellate <ORG>. The learned Judges refused to accede to this contention for the reason that no such appli- cation was made before the <ORG> and that it was a point which ought not to be allowed to be taken for the first time in <ORG>. On behalf of the appellant, it is stated that the question as to what are immovables and what are movables, arises only on the judgment of the <ORG> and that, therefore' an opportunity ought to be given for an investigation of this aspect of the question. We are not impressed by this argument. Surely, before the <ORG> there must have been a discussion as to the position with reference to the movables as distinct from the immovables, under the transaction and if the appellant considered that in view of that distinction, further enquiry was called for, it was incumbent upon it to apply to the <ORG> itself to order it and not having done so, it had no right to call upon <ORG> to remand the matter for that purpose. In our opinion <ORG> was justified in declining to entertain this point."

If there is no power in <ORG> to remand the case to the <ORG> for fresh findings of facts on further enquiry in the manner stated above, much less would <ORG> have the power while exercising its jurisdiction under s. 66(4) of the Act to (1)  34 I.T.R. 802, 805, refer the case back to the <ORG> to make such additions thereto or alterations therein as the Court may direct as would require the <ORG> to embark upon a fresh line of enquiry which had never been canvassed at any time before the Income-tax authorities or the <ORG> in the first instance and record fresh findings on evidence adduced by the parties in that behalf.

Our attention was drawn on behalf of the <ORG> to the observations of <NAME>, J. (as he then was) in the <CITATION> (') where the learned Judge dealt with the procedure adopted by the Commissioner of Income-tax in sending up the reference in question. <ORG> sent the matter back to the Commissioner in order that he may re-state the statement of case. When the matter went back to the Commis- sioner he sent up a restatement of the case, but unfortunately without hearing the assessee. <ORG> sent the re-stated case back to the Commissioner once again in order that the case might be re-stated with such further finding of fact as the Commissioner may consider necessary after hearing the assessee. The matter then went back to another Commissioner who instead of re-stating the case, as he was ordered by <ORG> to do, sent up a letter to <ORG> stating that he had not heard the party in regard to the opinion of the Commissioner, and that in any event he should not consider that he had power within s. 66(4) to vary an opinion given under s. 66(2) if no new facts were admitted. The learned Judge pointed out that the Commissioner was in duty bound to carry out the order of <ORG> and he should have re-heard the parties, admitted such further evidence as he considered relevant on the point at issue and re-stated the case with his opinion thereon. It is not clear, however, from the record as to whether the re-hearing of the parties and the recording of such further finding as was considered relevant on the point at issue embraced a fresh line of enquiry which had not been entertained at any earlier stage of the proceedings or was merely (1)  7 I.T.R. 536,554.

by way of elucidation of the very same points at issue which had been canvassed earlier but had not been thrashed out completely and properly reflected in the finding of the <ORG>. These observations, in our opinion, do not make any difference to the position that we have adopted herein, viz., it is not open to <ORG> in the exercise of its jurisdiction under s. 66(4) of the Act to raise a new question and to require the <ORG> to entertain a fresh line of enquiry, hear the parties in regard to the same and record fresh finding of fact which would enable either the assessee or the Commissioner to advance a case which had never been made by it before the Income tax authorities or the <ORG> and which therefore could not be said to arise out of the order of the <ORG>.

The decision of <ORG> in Sir <NAME> v. Commissioner of Income-tax, C. P. and U. P. (1) was also referred to by the <ORG> in this context. In that case the question of law which was formulated was in the following terms:-

,, In all the circumstances of the case, having regard to the personal law governing the assessee and the requirements of the Transfer of Property Act (IV of 1882) and the Stamp Act (II of 1899) has the deed of partnership dated February 12, 1933, brought into existence a genuine firm entitled to registration under the provisions of section 26-A of the Act."

<ORG> while answering this question did not advert to the relevant aspect of the question and this result was brought about because the Commissioner had taken pains to state some matters very fully,. but he had not found the material facts as he should have done. The various essential facts were not found and stated by the Commissioner and <ORG> observed that the referred question could not be answered until <ORG> had exercised its powers under sub-s. 4 of s. 66 of the Act and left it to the discretion of <ORG> to specify the particular additions and alterations which the Commissioner should be directed to make. Here also (1)  10 I.T.R. 457,461.

the nature, scope and extent of the jurisdiction of <ORG> under s. 66(4) of the Act was not specific-, ally discussed and the only order which was passed was that the case be remanded to <ORG> for disposal after taking such action under sub-section (4) of s. 66 of the Act as <ORG> might think fit in the light of the judgment. The same observations which we have made earlier while discussing the case of Commissioner of <ORG> v. <NAME> (1) would apply to this case also and the observations of <ORG> really do not militate against the position as we have laid down above.

On the facts of the present case before us it is abundantly clear that the only question which was canvassed before the Income-tax authorities and the <ORG> before it made its order dated July 17, 1952, was whether the cheques which were received at Bhavnagar having been cashed in British India, the monies in respect of the same should be said to have been received in British India and the <ORG> had held following the case of <NAME> Brothers' Case that the cheques were received from the Government at Bhavnagar and the receipt of money in respect of these cheques from Banks in British India related back to the receipt of the cheque at Bhavnagar and therefore was also received in Bhavnagar. At no time was the question as regards the posting of the cheques in British India (Delhi) at the request, express or implied, of the appellant and the consequent receipt of the sale proceeds in British India ever mooted before the Income-tax authorities or the <ORG> before the <ORG> made its order on July 17, 1952, or even in the reference applications filed on September 15, 1952, nor was the said question mooted before the <ORG> when it heard the reference and drew up the statement of case on November 5, 1954, even though this <ORG> had pronounced its decision in <NAME> Brothers' Case (1) and the <CITATION> . <ORG> (2) on April 19, 1954. The facts admitted and/or (1)  7 I.T.R. 536, 554. (2)  25 I.T.R. 547. (3)  1 S. C. R. 185.

found by the <ORG> as stated in the said applications for reference took count of the position as it had been adopted by the <ORG> in all these proceedings and it could not by any stretch of imagination be urged that the question now sought to be mooted was ever in the minds of the <ORG>. The question of law which was referred by the <ORG> to <ORG> for its decision was:-

Whether the receipt of the cheques at Bhavnagar amounted to receipts of sale proceeds in Bhavnagar." and it was only based on the facts admitted and/or found by the <ORG> which had relevance only to that question and not to the question which was sought to be mooted by <ORG> in its judgment under appeal. If the latter question was allowed to be entertained the question would have to be recast as under:-

" Whether the posting of the cheques in British India at the request, express or implied of the appellant, amounted to receipt of sale proceeds in British India."

- a question quite distinct and separate from the question of law which was actually referred by the <ORG> to <ORG> in the statement of the case drawn on November 5, 1954.

We are, therefore, of opinion that <ORG> was in error in not deciding the reference before it and answering the question on the facts disclosed in the statement of case. We are also of opinion that in the circumstances of this case <ORG> had no jurisdiction under s. 66(4) to direct the <ORG> to submit a supplementary statement of case on the points mentioned in its judgment. The result, therefore, is that the appeal will be allowed and the matter remanded to <ORG> to arrive at its decision on the question of law referred to it in the statement of case already submitted to it by the <ORG>. The respondent will pay the appellant's costs throughout. Appeal allowed.


JUDGMENT

1. The appellant became surety on behalf of the defendant in O.S. No. 596 of 1897 during the pendency of that suit in the Court of first instance. Though the security was taken after the attachment of property before judgment, yet by the security bond the appellant consented to become liable for any sum that might be decreed.

2. A decree having been eventually passed against the defendant in that suit, application for the execution of the decree was made and granted against the appellant. Before the actual execution of the decree the present suit was brought for a declaration that the appellant was not liable for a portion of the decree sought to be executed against him on certain grounds unnecessary here to be stated. The order for execution against the appellant was not appealed against. The objection taken on behalf of the respondent that this suit does not lie, the matter being one to be litigated only in execution proceedings must, in our opinion, be upheld on the authority of Exparte Bhikaji v. <NAME> 4 B.H.C.R. 119 Ghoree Lalgha v. <NAME> and Anr. 8 W.R. p. 24 <CITATION> . 15 W.R. p. 538 <CITATION> . 12 B. 7 and Tirumalai v. Ramayya I.L.R. 13 M. p. 1 <CITATION> 13 M.L.J.R. 484.

3. In some of these cases, it is expressly pointed out that the surety should be treated as a party to the suit and as the question sought to be raised by the appellant is one relating to the execution of the decree, the bar to a separate suit laid down by Section 244, C P.C. applies. On this ground, the suit ought to have been dismissed. We accordingly dismiss this second appeal with costs.


PETITIONER: THE COMMISSIONER OF COMMERCIAL TAXES AND A OTHERS ETC. Vs. RESPONDENT: <NAME> AND OTHERS ETC. DATE OF JUDGMENT: 09/08/1967 BENCH: <NAME>, K.N. (CJ) BENCH: <NAME>, K.N. (CJ) BACHAWAT, <NAME>, V. MITTER, G.K. HEGDE, K.S. CITATION: 1968 AIR 59 1968 SCR (1) 148 CITATOR INFO : D 1971 SC 792 (5) F 1971 SC1170 (25) RF 1972 SC 787 (7) R 1974 SC 348 (10) E&R 1978 SC 851 (89) R 1985 SC 582 (39) D 1985 SC 989 (11) ACT: Madras General Sales Tax Act, 1 of 1959, s. 41--scope of--subsec. (2) granting power to inspect--Whether includes power of search--sub-section (4) giving power to officer confiscating to give dealer an option to pay tax Plus an additional amount before stage of first sale when tax ordinarily becomes due--Whether repugnant to scheme of Act and invalid--Sub-sec. (3) authorising seizure and sub- section (4) authorising confiscation--Whether unreasonable restrictions and violative of Art. 19 (1) (f) and (g) of the Constitution. HEADNOTE: On August 19, 1964, officers belonging to <ORG> appellant raided and searched the premises of a company and foreibly removed certain accounts and goods. The respondents challenged the department's action by writ petitions filed in <ORG> under Art. 226 of the Constitution praying that the articles seized should be returned. It was contended by the petitioners that on a proper construction of section 41 of the Madras General Sales Tax Act, No. 1 of 1959, the officers of the <ORG> had no authority to search the premises and seize any account books or goods found there; that if section 41(4) authorised seizure and confiscation of goods, it was beyond the legislative competence of <ORG>, for it was not covered by item 54 of List II of the Seventh Schedule to the Constitution relating to "taxes on the sale or purchase of goods"; and that if various provisions in S. 41 were capable of being construed as authorising search and seizure, they were violative of Art. 19(1)(f) and (g) of the Constitution. <ORG> allowed the Petitions holding, inter alia, that s. 41 (2) did not permit a search being made and only provided for inspection; the power of seizure or confiscation in s. 41(4) was beyond the legislative competence of <ORG>; and that subsections (2), (3) and (4) of s. 41 contained unreasonable res- trictions and were violative of Art. 19(1) (f) and (g). <ORG> also found with respect to one of the petitions that the search warrant had been issued without the application of Mind by the magistrate and was bad. On appeal to this Court; Held: dismissing the appeal, (i)Anything recovered during the search must be returned to the petitioners for the safeguards provided by s. 165 of the Code of Criminal Procedure were not followed and in one case the finding of <ORG> that the search warrant issued by the magistrate was bad on various grounds was not challenged; furthermore anything confiscated must also be returned as sub-section (4) of s. 41 must fall.[163 B-D]. Clause (a) of the second proviso to sub-section (4) gives power to the officer ordering confiscation to give the person affected an option to pay in lieu of confiscation, in cases where the goods are taxable under the Act, the tax recoverable and an additional amount and thus provides for recovery of tax even before the first sale in 149 the State which is the point of time in a large majority of cases for recovery of tax. As such it was repugnant to the entire scheme of the Act and sub-section (4) must therefore be struck down. As Clause (a) compels the officer to give the option and thus compels recovery of tax before the first point of sale, which cannot have occurred in cases of goods seized from the dealer himself, it is clearly intended by the legislature to go together with the main part of the Section and is not therefore severable. [159F-16OD]. (ii) Although generally speaking the power to inspect does not give power to search, where, as in the case of s. 41 (2) the power has been given to inspect not merely accounts registers, records, goods, etc., but also to inspect the offices, shops etc., these two powers together amount to giving the concerned officer the power to enter and search the offices etc. and if he finds any accounts or goods in the offices, shops, etc., to respect them. <ORG> was therefore wrong in holding that there was no power of search whatsoever under sub-section (2). [154H-155E]. The proviso to sub-section (2) in providing that all searches under "this sub-section" shall be made in accordance with the provisions of the Code of Criminal Procedure, bears out the construction that the main part of sub-section (2) contemplates searches. Similarly it is clear from sub-section (3) which gives power to seize accounts etc., in certain circumstances, that sub-section (2) must include the power of search for a seizure under sub-section (3) is not possible unless there is a search. [156D-E. 158B-C]. The contention that as the main part of sub-section (2) does not provide for search of a purely residential accommodation and therefore the proviso is otiose must be rejected. Although generally a provision is an exception to the main part of the section, it Is recognised that in exceptional cases, as in the present case, the provision may be a substantive provision itself. [156D-F]. <ORG> v. <ORG>, L. R.  A.C. 253: <CITATION> (1963) 47 I.T.R. 803, and <CITATION> .  1 S.C.R. 276, referred to. (ii)Sub-sections (2) and (3) of S. 41 are not violative of Art. 19 as they are protected by clauses (5) and (6) of Art. 19 of the Constitution. [162F-G]. <ORG> had wrongly assumed that the provisions of the Criminal Procedure Code did not apply to a search under s. 41(2). In view of the safeguards provided in s. 165 Cr. P.C. and in Chapter VII of that Code, it cannot be said that the power to search provided in sub-section (2) is not a reasonable restriction keeping in View the object of the search, namely, prevention of evasion of tax. [161EG]. The mere fact that the Act gives power to Government to em- power any officer to conduct the search is no reason to strike down the provision for it cannot be assumed that Government will not empower officers of proper status to make searches. [160-H], To, exercise the power of seizure under sub-section (3) the officer concerned has to record his reasons in writing, has to give a receipt for the accounts seized, and can only retain the items seized beyond a period of 30 days with the permission of the next higher officer. These are sufficient safeguards and the restriction, if any, on 150 the right to hold property and the right to carry on trade by sub-section (3) must therefore be held to be a reasonable restriction. [162-D-G]. While the court held that the <ORG> has power to provide for search and seizure in connection with taxation law in order that evasion may be checked, it did not decide the general question whether a power to confiscate goods which are found on search and which are not entered in account books of the dealer is an ancillary power necessary for the purpose of stopping evasion of tax. [159C- D]. <CITATION> , (1967) XIX S.T.C. 506; referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 150--154 of 1967.

Appeals from the judgment and order dated February 26, 1965 of <ORG> in Writ Petitions Nos. 1321, 1495, 1496 and 1553 of 1964.

<NAME>, Silicitor--General, <NAME> and <NAME>, for the appellant (in C.As. Nos. 150, 153 of 1967). <NAME>, Advocate-General, Madras, <NAME> and <NAME>, for the appellant (in C.A. No. 154 of 1967).

<NAME> and <NAME>, for the respondents (in C.As. Nos. 150, 151 and 154 of 1967). <NAME>, for the intervener.

The Judgment of the Court was delivered by <NAME>, C. J.--These five appeals on certificates granted by <ORG> raise common questions of law and will be dealt with to-ether. We shall give brief facts in one of the appeals (No. 150 of 1967) arising out of writ petition No. 1321 of 1964 in order to understand the questions that fall to be decided in the present appeals. On August 19, 1964, at about 5.00 p.m, the officers of <ORG> (hereinafter referred to as the <ORG>) raided the premises of <ORG>, (hereinafter referred to as the Company). It is said that the premises were searched and a Suit-case was seized and forcibly removed by the officers who made the raid, in spite of the fact that they were informed that the box did not contain any papers or documents belonging to the Company and its contents consisted merely of personal effects of one of the Managing Directors, namely, <NAME> <NAME>. The raid and search were made by the authorities concerned on information that <NAME>, one of the Directors of the Company, had removed a box containing secret accounts relating to it. The main contention of the petitioner in support of his prayer that the articles seized should be returned to him was under three heads. It was first contended that on a proper construction of section 41 of the Madras General Sales Tax Act, No. 1. of 1959 (hereinafter referred to as the Act), the officers of the <ORG> had no authority to search the premises and seize either the account books or the goods found therein. Secondly, it was contended that if section 41(4) authorised seizure and confiscation of goods, it was beyond the legislative competence of <ORG>, for it could not be covered by item 54 of list II of the Seventh Schedule to the Constitution relating to "taxes on the sale or purchase of goods." Lastly, it was contended that if various provisions in s.41 were capable of being construed as authorising search and seizure. the provisions contained therein were unconstitutional in view of Art. 19(1) (f) and (g) of the Constitution.

It is not necessary to refer to the facts in the other petitions which have resulted in the other appeals before this Court because in those cases also there was search and seizure by the officers of the <ORG> and their action is being attacked on the same grounds. All the petitions were opposed on behalf of <ORG> and its case was--firstly. that s.41 authorised search and seizure; secondly, that <ORG> was competent to enact s.41(4) under item 54 of list 11 of the Seventh Schedule to the Constitution; and thirdly, that the provisions in question did not offend Art. 19(1) (f) and (g) of the Constitution and were in any case protected by Art. 19(5) and (6).

<ORG> held that s. 41(2) did not allow search being made thereunder, as it only provided for inspection, and that search was a different thing altogether from inspection. <ORG> further held that if s.41 (2) provided for search it would be within the legislative competence of the State Legslature. <ORG> took the view that the power of seizure and confiscation of goods contained in sub-section (4) could not be said to be ancillary and incidental to the power to tax sale or purchase of goods and therefore this provision was beyond the legislative competence of <ORG>. Finally, <ORG> held that sub-sections (2), (3) and (4) of' section 41 were unconstitutional as they were unreasonable restrictions on the fundamental rights guaranteed under Art. 19(1) (f) and (g) of the Constitution. Besides the above. <ORG> also found with respect to one of the petitions that the search warrant issued for the search of the residential house by the magistrate disclosed that the magistrate had not applied his mind at all to the necessity of the search of he residential house, for columns in the printed search warrant which should have been struck out were not so struck out. Further the gaps in the printed form which should have been filled in before the warrant was issued had not been filled in. From these two circumstances <ORG> concluded that the search warrant for the residential house had been issued without the application of mind by the magistrate to the necessity of the search of the residential house. <ORG> further found that s.41(4) was not complied with strictly before confiscation was ordered and no pro-

per opportunity was given to the dealer to show that the goods seized and confiscated were not accounted for in his accounts. In the result therefore <ORG> allowed all the petitions and directed that the documents, things and goods covered by the petitions should be returned to the petitioners along with photographs, negatives, translations and notes made by the <ORG> from the accounts etc. The State of Madras then applied for and obtained certificates from <ORG> to appeal to this Court and that is how the matter has come before us.

The same three questions which were raised, before <ORG> have been raised before us on behalf of the appellant. Before, however, we deal with them we would briefly refer to the provisions of the Act which are material for our purposes.- Section 3 is the main charging section which provides that "every dealer whose total turnover for a year is not less than Rs. 10,000......... shall pay a tax for each year at the rate of 2 per cent of his taxable turnover." The point at which tax has to be paid on single point taxable goods is indicated in the First Schedule to the Act and that will show that in a large majority of cases the tax has to be paid at the point of first sale in the <ORG>, though in some cases it has to be paid at the point of first purchase or of last purchase in the <ORG>. Section 4 is another charging section in respect of declared goods and the Second Schedule to the Act deals with the point at which tax has to be paid in respect of such goods. That Schedule also shows that in a majority of cases the tax had to be paid at the point of first sale in the <ORG>, though in some cases it has to be paid at the point of first purchase in the <ORG> or the last purchase in the <ORG>. Certain goods are exempt from the tax under the Act as provided in the Third Schedule and do not thus form part of the taxable turnover, though they will be a part of the turnover for purposes of calculating the total turnover per year. The Act provides for registration of firms and of dealers, for appointment of officers, for collection of tax, for the levy of penalty, and for appeals and revisions. It also casts a duty on dealers to maintain a true and correct account. Then comes section 41 with which we are particularly concerned. It is in these terms:

"(1) Any officer empowered by the Government in this behalf may, for the purpose of this Act. require any dealer to produce before him the accounts, registers, records and other documents and tot furnish any other in- formation relating to his business. (2)All accounts, registers, records and other documents maintained by a dealer in the course of his business. the goods in his possession and his offices, shops, godowns, vessels or vehicles shall be open to inspection at all reasonable times by such officer:

Provided that no residential accommodation (not being a place of business-cum-residence) shall be entered into and searched by such officer except on the authority of a search warrant issued by a Magistrate having jurisdiction over the area, and all searches under this sub-section shall, so far as may be, be made in accordance with the provisions of the Code of Criminal Procedure. 1898 (Central Act V of 1898). (3)If any such officer has reason to suspect that any dealer is attempting to evade the payment of any tax, fee or other amount due from him under this Act he may, for reasons to be recorded in writing, seize such accounts.. registers, records or other documents of the dealer as he may consider necessary, and shall give the dealer a receipt for the same. The accounts, registers, records and documents. so seized shall be retained by such officer only for so long as may be necessary for their examination and for any inquiry or proceeding under this Act. Provided that such accounts, registers and documents shall not be retained for more than thirty days at a time except with the permission of the next higher authority. (4)Any such officer shall have power to seize and confiscate any goods which are found in any office. shop, godown, vessel, vehicle, or any other place of business or any building or place of the dealer, but not accounted for by tile dealer in his accounts registers records and other documents maintained in the course of his business.

Provided that before ordering the confiscation of goods under this Sub-section the officer shall give the person affected an opportunity of being heard and make an inquiry in the prescribed manner:

Provided further that the officer ordering the confiscation shall give the person affected option to pay in lieu of confiscation-

(a)in cases where the goods are taxable under this Act, in addition to the tax recoverable a sum of money not exceeding one thousand rupees or double the amount of tax recoverable, whichever is greater; and

(b)in other cases. a sum of money not exceeding one thousand rupees.

Explanation-It shall be open to the Government to empower different classes of officers for the purpose of asking action under sub- sections (1). (2) and (3)".

It will be seen from the above brief review of the provisions of the Act that it mainly deals with sales tax to be levied at the point of first sale in the State. though there is also provision for purchase tax in certain cases. It is in this background that we have to consider the construction of s.41 of the Act. So far as sub-s(1) is concerned, there is no difficulty. It empowers any officer, empowered by the <ORG> in this behalf, to require any dealer to produce before him the accounts registers, records and other documents and to furnish any other information relating to his business. It may be mentioned here that the <ORG> has empowered all officers of the <ORG> not lower in rank than the Assistant Commercial Tax Officer, all officers of the Revenue <ORG> not lower in rank than an Inspector and all officers of the Police <ORG> not lower in rank than a Sub-Inspector. to act under s.41. sub- ss. (2) to (4). Presumably. so far as sub-s. (1) is concerned. only officers of the <ORG> can act under the provision. However, there is no dispute with respect to that sub-section as the power has to he exercised for the purpose of the Act i.e., with reference to assessment proceedings at all stages including recovery of tax and prosecution for offences. It is not disputed that the power under sub-s. (1) can only be exercised to require a dealer to produce accounts etc. relating to his business and not that of any body else.

The main dispute centres round the interpretation of sub- s.(2) of s.41. The contention on behalf of the respondents is that that provision did not authorise search of premises but merely provided for inspection thereof it all reasonable times by the empowered officer. We shall first deal with, the main part of sub-s. (2) to see what it provides without reference to the proviso. Clearly Sub-s(2) provides for three things, namely--(1) all accounts. registers, records and other documents maintained by a dealer in the course of his business ',,hall be open to inspection at all reasonable times, (ii) the goods in the possession of the dealer shall also be open to inspection, and (iii) the dealer's offices, shops, godowns, vessels or vehicles shall also be open to inspection. There is no doubt that there are no specific words in sub-s. (2) giving power of search. But if we read the three powers conferred by sub-s.(2) it should not be difficult to hold that search is included therein. In sub- s.(1) the dealer is required to produce his accounts etc. and to furnish other information relating to his business and it is left to the dealer to produce what accounts he may say he has. The legislature was however cognizant of the fact that a dealer may not produce all accounts or furnish ill information even though required to do so, under sub-s.(1). Therefore. sub-s.(2) provides that ,ill accounts etc. of the dealer shall be open to inspection. It also provides that the dealer's offices. shops, godowns, vessels or vehicles shall be open to inspection. It is true that generally speaking a power to inspect does not necessarily give power to search. But where, as in this case, the power has been given to inspect not merely accounts, registers, records and other documents maintained by a dealer but also to inspect his offices, shops, godowns, vessels or vehicles, it follows that the empowered officer would have the right to enter the offices etc. for purposes of inspection. Naturally his inspection will be for purposes of the Act i.e., for the purpose of seeing that there is no evasion of tax. If therefore during his inspection of offices etc. the empowered officer finds any accounts, registers, records or other documents in the shop, those accounts etc. will also be open to inspection. Reading therefore these two provisions together, it is clear that the empowered officer has the right to; enter the offices etc. and to inspect them, and if on such inspection he finds accounts etc. he has also the power to inspect them. Lind to see if they relate to the business. These two powers taken together in our opinion mean that the em- powered officer has the power to search the office etc. and inspect accounts etc found therein. Though therefore the word "search" has not been used in sub-s.(2) these two powers of entering the offices etc. for inspection and of inspecting every kind of account maintained by a dealer with respect to his business together amount to giving the officer concerned the power to enter and search the offices etc. and if he finds any account in the offices, shops etc. to inspect them. Otherwise we can see no sense in the legislature giving power to the empowered officer to enter the offices etc. for the purpose of inspection as the officer concerned would only do so for the purpose of finding out all accounts etc. maintained by the dealer and if necessary to inspect them for the purposes of the Act. We cannot therefore agree with <ORG> that there is no power of search whatsoever in sub-s(2) because the subsection in terms does not provide for search. goods in the possession of the dealer. He has also the power to enter the dealer's offices etc. for the purpose of such inspection, Combining these two powers together it follows on the same reasoning that the officer has the power to search for the goods also and to inspect them if found in the offices etc. of the dealer. We have therefore no hesitation in coming to the conclusion that the power of search is implicit in sub-s.(2) with reference accounts etc. maintained by the dealer and the goods in the ')possession of the dealer. It also seems to us that this power in Sub- s. (2) is confined to offices, shops,godowns. vessels and vehicles of the dealer and does not go beyond them. It is urged on behalf of the appellant that as the officer is entitled to inspect all accounts etc. maintained by the dealer he can search for them even in the dealer's residential premises. But we do not agree with this conten- tion. for we have found the power of search by reading the power of inspection of offices etc. with the power of inspection of accounts etc. and the power of inspection of goods. Sub-s. (2) does not give any power of inspecting the residential, accommodation of the dealer and therefore it cannot be read as giving the power of search of the residential house for purposes of the Act. But whether it is a case of business-cum-residence, the power of search will be there, for under sub-s.(2) all offices, shops, godowns, vessels or vehicles of the dealer are open to inspection.

Let us now see what light is thrown on the interpretation of sub-s.(2) by the proviso and whether the interpretation we have put on the main part of sub-s.(2) is supported by the proviso. The proviso lays down that (i) no purely residential accommodation shall be entered into and searched by such officer except on the authority of a search warrant issued by a Magistrate having jurisdiction over the area and

(ii) that all searches under this sub-section shall, so far as may be, be made in accordance with the provisions of the Code of Criminal Procedure, 1898. The latter part of the proviso clearly shows that the main part of sub-s.(2) con- templates searches, for it refers to all searches made under this sub-section. If the reference in the second part of the proviso was confined only to searches made under the first part of the proviso, the words would have been "all searches under this proviso shall be made in accordance with the provisions of the Code of Criminal Procedure." The proviso therefore bears out the construction that we have put on the main part of sub-s.(2). But it is urged that a proviso carves out something which is already contained in the main provision and the main provision at any rate does not provide for search of a purely residential accommodation. Therefore the proviso is otiose. That is what <ORG> also seems to have held. Generally speaking, it is true that the proviso is an exception to the main part of the section; but it is recognised that in exceptional cases a proviso may be a substantive provision itself. We may in this connection refer to <ORG> v. <ORG>), where s.51 of the Act there under consideration was framed as a proviso to preceding sections. The Lord Chancellor however pointed out that "though s.51 was framed as a proviso upon preceding sections, but it is true that the latter half of it, though in form a proviso, is in substance a fresh enactment, adding to and not merely qualifying that which goes before.". Again in <CITATION> (2) it was observed that 'though ordinarily a proviso restricts rather than enlarges the meaning of the provisional to which it is appended, at times the legislature embodies a substantive provision in a proviso. The question whether a proviso is by way of an exception or a condition to the substantive provision, or whether it is in itself a substantive provision, must be determined on the substance of the proviso and not its form.". (1) L. R.  A.C. 253.

(2) [1963]47 1. T. R. 803.

Finally in <CITATION> (1) the question arose whether the proviso in the Act under consideration there was a limiting provision to the main provision or was a substantive provision in itself. This Court observed that "so far as general principle of construction of a proviso is concerned, it has been broadly stated that the function of a proviso is to limit the main part of the section and carve out something which but for the proviso would have been within the operative part." But it was further observed that the proviso in that particular case was really not a proviso in the accepted sense but an independent legislative provision by which to a remedy which was prohibited by the main part of the section, an alternative was provided. These three cases show that in exceptional circumstances a proviso may not be really a proviso in the accepted sense but may be a substantive provision itself. It seems to us that the proviso under consideration now is of this exceptional nature. As we have already held, there is no provision in the main part of the sub-section for searching purely residential premises. Therefore when the proviso provides for such search it is providing for something in- dependent of the main part of the sub-section. Further the second part of the proviso which talks of searches made under this sub-section shows that the power of inspection provided in the main part of the sub-section is tantamount to a power of search. We have already come to that conclusion independent of the proviso. All that we need say here is that the proviso also shows that that interpretation is correct. We may add that we are not precluded from looking at the proviso in interpreting the main part of the sub-section. We may in this connection refer to the following passage in Maxwell on Interpretation of Statutes, Eleventh Edition, at p.155 where it is observed-

"There is no rule that the first or enacting part is to, be construed without reference to the proviso. 'The proper course is to apply the broad general rule of construction, which is that a section or enactment must be 'construed as a whole, each portion throwing light, if need be, on the rest'.

"The true principle undoubtedly is that the sound interpretation and meaning of the statute, on a view of the enacting clause, saving clause and proviso, taken and construed together is to prevail."

But as we have said already even without looking at the proviso, our conclusion is that the main part of sub-s.(2) provides for searches and the proviso merely enforces that conclusion. We therefore cannot agree with <ORG> that subsection(2) does not provide for search of the business premises of a dealer, in the shape of offices etc. (1) [1965] 1 B.C. R. 276 Then we come to sub-section(3). That provides for the seizure of accounts etc., if the empowered officer has reason to suspect that any dealer is attempting to evade the payment of any tax. fee or other amount due from him under the Act. If he has such reason he may for reasons to be recorded in writing seize such accounts etc. Now if sub- s.(2) gives power of search, sub-s.(3) merely provides further power to seize the accounts etc. found on such search. We have already held that sub-s.(2) gives the power of search and in that case sub-s.(3) is merely complementary to sub-s.(2) and gives the ,empowered officer the power to seize the accounts found in certain circumstances. If anything, sub-s.(3) also bears out that sub-s.(2) must include the power of search for a seizure under sub-s.(3) is not possible unless there is a search. Reading therefore sub-s (2), its proviso and sub-s.(3) together we are of opinion that they provide for search and seizure without warrant except that if the place searched is a purely residential accomodation it cannot be searched without a search warrant from a Magistrate. It naturally follows that if it cannot be searched without a search warrant it is not open to the empowered officer to seize anything from a residential accommodation for he cannot enter and search it unless he has a warrant from a Magistrate to do so. The next question relates to the legislative competence of the <ORG>, legislature to enact sub-s.(4). This subsection provides for seizure and confiscation of any goods found in any office etc.. including purely residential accommodation after search if they are not accounted for in the accounts maintained in the course of the dealer's business. The sub- section thus completes the process which starts with sub- section (1) and gives authority to the empowered officer to seize and confiscate goods of the nature indicated therein. The contention on behalf of the respondents is that the power of confiscation provided by sub-s.(4) was not within the competence of the <ORG> Legislature under item 54, List II. of the Seventh Schedule relating to tax on sales and purchase of goods. On the other hand. the appellant justifies the power to seize and confiscate goods on the round that it is ancillary and incidental to the power to tax, for it is necessary to have such power in order to check evasion of tax and make it unprofitable. <ORG> held that the Act was not a law on goods and that a provision for confiscation of goods found on search was neither incidental nor ancillary to the power to tax contained in item 54. List II of the Seventh Schedule. Now it has not been and cannot be disputed that the entries in the various Lists of the Seventh Schedule must be given the widest possible interpretation. It is also not in doubt that while making a law under any entry in the Schedule it is competent to the legislature to make all such incidental and ancillary provisions as may be necessary to effectuate the law; particularly it cannot be disputed that in the case of a taxing statute it is open to the legislature to enact provisions which would check evasion of tax. It is under this power to check- evasion that provision for search and seizure is made in many taxing statutes. It must therefore be held that the legislature has power to provide for search and seizure in connection with taxation laws in order that evasion may be checked. It is further urged on behalf of the appellant that confiscation of goods which are not entered in accounts is merely a provision of ancillary nature to check evasion of tax by making it unprofitable for dealers to secrete goods in which they are dealing. Reliance in this connec- tion is placed on <CITATION> ,(1) where <ORG> upheld an analogous provision in the Andhra Pradesh General Sales Tax Act, (No. 6 of 1957). in s.28 (6).

We do not propose in the present case to decide the general question whether a power to confiscate goods which are found on search and which are not entered in account books of the dealer is an ancillary power necessary for the purpose of stopping evasion of tax. Assuming that is so, we have still to see whether sub-s.(4) of the Act can be upheld read along with the second proviso thereof. It may be added that there is no such provision as the second proviso in s.28 of the Andhra Pradesh General Sales Tax Act. We do not therefore propose to express any opinion as to the correctness of the above decision of <ORG>. Sub-s(4) of s.41, before it was amended by the Madras General Sales Tax (Second Amendment) Act. from April 1, 1961, had only the first proviso with respect to giving an opportunity of being heard and making an enquiry in the matter before ordering confiscation. By the amendment of 1961, the second proviso was added. That provides that the officer ordering the confiscation shall give the person affected option to pay in lieu of confiscation. in cases where the goods are taxable under the Act. in addition to the tax recoverable, a sum of money not exceeding one thousand rupees or double the amount of tax recoverable. whichever is greater. This provision clearly requires the officer ordering confiscation to do two things(i) to order the person concerned to pay the tax recoverable. and (ii) to pay a sum of money not exceeding one thousand rupees or double the amount of tax recoverable. whichever is greater. We have already indicated that in a large majority of cases covered by the Act the tax is payable at the point of first sale in the State. But under cl.(a) of the second proviso the tax is ordered to be recovered even before the sale, in addition to the penalty not exceeding Rs. 1,000 or double the amount of tax recoverable whichever is greater. Therefore cl.(a) of the second proviso is clearly repugnant to the general scheme of the Act which in the majority of the cases provides for recovery of tax at the point of first sale in the State. In view of this repugnancy one or other of these two provisions must fall. Clearly it (1967) XIX S.T.C. 506.

is cl. (a) in the proviso which under the circumstances must fall, for we cannot hold that the entire Act must fall because of this inconsistency with respect to recovery of tax under cl.(a) of the ,second proviso even before the taxable event occurs in the large majority of cases which would be covered by the Act. We are ,therefore of opinion that cl.(a) of the second proviso being repugnant to the entire scheme of the Act, in so far as it provides for recovery of tax even before the first sale in the <ORG> which is the point of time in a large majority of cases for recovery of tax, must ,fall, on the ground of repugnancy. It is next urged that in any case the second provisio is severable and therefore only this proviso would fall and not the main part of sub-s.(4). We are however of opinion that cl. (a) of second proviso is not severable. We have already indicated that originally the second proviso was not there in the Act. It was brought in by the amendment of 1961 and it compels the officer to give the 'Option, and thus compels recovery of tax even in those cases where the tax is recoverable only at the first point of sale in the <ORG> which naturally has not occurred in cases of goods seized 'from the dealer himself. Considering the fact that the legislature added this compulsory proviso later, it is clear that the legislature intended that the main part of the section and the second proviso should go together. It is difficult to hold therefore that after the introduction of the second proviso in 1961, the legislature could have intended that the main part of sub-s.(4) should stand by itself. We are therefore of opinion that sub-s.(4) with the two provisos must fall on this narrow ground. We therefore agree with <ORG> and strike down sub-s.(4) but for reasons different from those which commended themselves to <ORG>.

Then we come to the question whether sub-ss.(2) and (3) of s.41 of the Act which have been struck down by <ORG> on the ground that they are unreasonable restrictions on the right to hold property and to carry on trade have been correctly struck down. The main reason which impelled <ORG> to strike ,down sub-s.(2) was that there was no safeguard provided for search made thereunder. <ORG> held that s. 165 of the Code of Criminal Procedure did not apply to searches made under sub-s(2). It also held that <ORG> was given the power to empower any officer to make a search under sub-s.(2) and this meant that even an officer of low status could be empowered. Consequently <ORG> struck down sub-s.(2) on the ground that it gave arbitrary power of search which could be made even by an officer of low status. It is true that search under this sub-section can be made by any officer empowered by Government in this behalf, but we have no reason to think that Government will not empower officers of proper status to make searches. In this very case, we find that the Government empowered an Assistant Commercial Tax Officer, a Revenue Inspector and a Sub Inspector of Police to make searches. Considering the large number of dealers who are covered by the Act, it cannot be said that these officers are of such low status that they cannot be depended upon to make a search with due care and caution. We cannot also forget that in a case of this kind the Government cannot find sufficient number of officers of what may be called high status to make searches, for dealers who may be covered by the Act may be legion throughout the State, and if such searches could only be made by high officers there would not be enough officers available to do so. The fact that the Act gives power to Government to, empower any officer is therefore no reason to strike. it down for, as we have said, the Government will see that officers of proper status are empowered. Nor do we think that an Assistant Commercial Tax Officer or an Inspector of Revenue Department or a Sub-Inspector of <ORG> is not an officer of proper status to make searches under this provision.

We are also of opinion that though sub-s.(2) itself provides no safeguards and might have been open to objection on that ground, there is a provision in the proviso to, sub-s.(2) which lays down that all searches under this subsection shall, so far as may be. be made in accordance with the provisions of the Code of Criminal Procedure. Therefore, the provisions of the Code of Criminal Procedure, so far as may be, apply to all searches made under sub-s. (2). It appears that in <ORG>, the parties as well as the <ORG> assumed that s.165 of the Code of Criminal Procedure would not apply to searches under sub-s.(2) We cannot see any warrant for this assumption. The proviso clearly lays down that all searches made under this sub-section, so far as may be, shall be made in accordance with the provisions of the Code of Criminal Procedure. Thus all provisions contained in the Code of Criminal Procedure relating to searches would be applicable to searches under sub-s.(2), so far as may be. Some of these provisions are contained in Chapter VII but one such provision is contained in s.165. It is true that that section specifically refers to an officer in-charge of a police-station or a police officer making an investigation. But when the proviso applies the provisions of the Code of Criminal Procedure to all searches made under this sub-section, as far as may be possible, we see no reason why s.165 should not apply, mutatis mutandis, to searches made under sub-s.(2). We are therefore of opinion that safeguards provided in S. 165 also apply to searches made under sub-s. (2). These safeguards are-(i) the em- powered officer must have reasonable grounds for believing that anything necessary for the purpose of recovery of tax may be found in any place within his jurisdiction, (ii) he must be of the opinion that such thing cannot be otherwise got without undue delay, (iii) be must record in writing the grounds of his belief, and (iv) he must specify in such writing so far as possible the thing for which search is to be made. After he has done these things, he can make the search. These safeguards, which in our opinion apply searches under sub-s.(2) also clearly show that the power to search under sub-s. (2) is not arbitrary. In view of these safeguards and other safeguards provided in Chapter VII of the Code apply so far as may be to searsee no reason to hold that the restriction, if any, on the right to hold property and to carry on trade by the search provided in sub-s.(2) is not a reasonable restriction keeping in view the object of the search, namely, prevention of evasion of tax.

Next we come to sub-s.(3), which as we have already stated, is complementary to sub-s.(2). It provides in addition to the safeguards- which have to be complied with when a search is made under sub-s.(2), that the officer may seize accounts etc. if he has reason to suspect that any dealer is attempting to evade the payment of any tax etc. due from him under the Act. It also provides that he has to record his reasons in writing and we are of opinion that these reasons have to be recorded before the accounts are seize. It further provides that the dealer shall be given a receipt, and this means that the receipt must be given as and when the accounts etc. are seized. Finally it provides that these accounts etc. Shall be retained by such officer so long as may be necessary for their examination and for any enquiry or proceeding under the Act. These in our opinion are sufficient safeguards and the restrictions iS any, on the right to hold property and the right to carry on trade by sub-s.(3) must therefore be held to, be a reasonable restriction. We may add that the proviso to sub-s.(3) has fixed the period for which the officer seizing accounts can keep them, namely,' @o days at a time, and if he wants to keep them for has to 'take the permission of the next additional safeguard entitling the dealer accounts after every 30 days,'unless'a higher officer has permitted the retention of accounts for a period longer than 30 days. We cannot therefore agree with the high <ORG> that sub-ss. (2) and (3) of s. 41 of the Act are unreasonable restrictions on the right to hold property or carry on trade for reasons indicated. We are of opinion that they are reasonable restrictions which are protected by cls. (5) and (6) of Art. 19 of the Constitution.

We now proceed to consider what order should be passed in the appeals in the view we have taken about the interpretation and validity of sub-ss. (2) and (3) of s. 41 of the Act. We have already indicated that <ORG> held that the warrant issued by the Magistrate for search of the residental accommodation was bad because it showed that the Magistrate had not applied his mind to the question of issuing it, inasmuch as there were portions which should have been struck out from the printed form and gaps which should have been filled in. But this was not done.

That conclusion of <ORG> has xi(4 @re ,@n challenged before us. <ORG> has further held'that a r pr6kr and reasonable opportunity was not given to the persons concerned to show that the goods seized Were not prpperly accounted for in their account-books, though this findili' is not material now for 9 we have held that sub- s.(4) falls in its entirety. It follows therefore that anything recovered from the search of the residential accom- modation on the basis of this defective warrant must be returned. It also follows that anything confiscated must also be returned, as we have held that sub-s.(4) must fall. As to the accounts etc. said tot have been seized, it appears to us that the safeguards provided under s. 165 of the Code of Criminal procedure do not appear to have been followed when the search was made for the simple reason that everybody thought that provision was not applicable to a search under sub-s.(2). Therefore, as the safeguards provided in s. 165 of the Code of Criminal Procedure were not followed, anything recovered on a defective search of this kind must be returned. It follows therefor that the final order of <ORG> allowing the writ petitions must stand, though we do not agree with the interpretation of <ORG> that sub-ss.(2) and (3) are unconstitutional on the ground of their being unreasonable restrictons on the right to hold property and to carry on trade. The appeals therefore fails and are hereby dismissed. In view of our decision on the main question of law, we order parties to bear their own costs in all the appeals.

Appeals dismisyed,, R.K.P.S.