“Every government has a right to levy taxes. But no government has the right, in the process of extracting tax, to cause misery and harassment to the taxpayer and the gnawing feeling that he is made a victim of palpable injustice.”-Nanabhoy Palkhivala

In any jurisprudential system, taxing statutes are enacted for a social purpose. To the mind of the author, taxation is an exercise in pursuance of deriving collective solutions to individual problems. Revenue generated from taxation, helps the state to perform multifarious functions and provide security and stability to the economy.

Mobilisation of financial resources through taxation has a substantive impact on the functioning of the economy. Though the statutory provisions governing taxation establish the basic principles, there exists uncertainty in several aspects. The author intends to discuss one such thought-provoking issue under the Income Tax Act, 1961, namely, can the principles of preventive detention by invoked and applied by the income tax authorities to detain a tax-payer.

Article 19(1)(d) of the Constitution ensures the right to move freely throughout the territory of India and Article 19(1)(g) recognises the right of trade and business. The right to travel is incidental and ancillary to such a right and thus a co-joint reading of these provisions permits a person to inter-alia, carry documents, cash and such other relevant articles for the purpose of trade and there is no prohibition under the law for doing so.

Moreover, Article 21 states that no person shall be deprived of his life or personal liberty, except according to the procedure established by law. ‘Personal liberty’ is interfered upon, even when temporary physical restraint is imposed on a person and unless the ‘procedure established by law’ is prescribed for; the mandate of Article 21 must be followed.

In search and seizure provisions, no procedure has been provided for, which allows physical detention, temporary or permanent, as the case may be. Negating the aforesaid principles, two interdependent issues that arise are whether the income tax authorities, can detain a taxpayer, and whether such power can be exercised, even when the taxpayer has corroborated evidence to prove the disclosure of such assets .

Diverging opinions of the Apex Court thwack upon the very depth of the issue. In a judgment delivered in 1997, the Apex Court took a pragmatic approach and held that “mere unexplained possession of an amount without anything more could hardly be treated as information to justify search and seizure .”

The author opines that simply because the person cannot immediately produce documents to claim ownership, it should not ipso facto induce a belief that such person is carrying undisclosed income. Such an assumption by the income tax authorities is unjustified and in such circumstances, detaining and causing humiliation to the taxpayer and depriving him of his fundamental rights without a reasonable cause, is unwarranted.

However, there exists a contradiction between the aforesaid judgment and a latest judgment of the Apex Court, wherein the Court has held that income tax authorities, on bona-fide grounds, can initiate such actions.

Extending the fiscal laws to the domain of security and protection of the nation, the Court held that legitimate assets might still be used for illegal purposes, such as funding of a terrorist activity. The tax authorities are to be satisfied that such assets are not just legal, but are being transported and moved from one part of the country to another for legal purposes only. Even if the carrier of such assets is not guilty of any offence, verification may be necessitated to ensure non-commission of any illegal action .

The author respectfully states that this is not an egalitarian principle of law. The provision of section 132 cannot be construed to extend its applicability to prevent terrorist activity and such other claims, as stated by the Apex Court. The author contends that the authorities are not the correct forum, as their powers are limited to the four corners of the Act, wherein they perform their duties with an object to secure maximum revenue, and not check/ prevent commission of crime.

A statute is an edict of the Legislature and it is the duty of the judicature to act upon the true intent of the legislature. The Income Tax Act, 1961, is an enactment to tax persons, who are liable to pay and to provide for consequences and legal action thereof. It is not an enactment to secure the prevention of terrorism and such other hazardous crimes.

Moreover, fiscal statutes are subject to strict construction. When the Act in question is a taxing statute it must be interpreted as it reads with no addition or no subtraction, on the ground of legislative intendment or otherwise. In the humble opinion of the author, extraneous considerations, as mentioned in the Apex Court judgment, with due respect, could not have formed the basis of a detention by the income tax authorities. The author states that cognizance of this issue must be taken by the a larger bench of the Apex Court to settle the current discord that will ensure that the income tax authorities do not abuse their power and perform such unauthorised acts.