K. G. Balakrishnan, J. -
(1.)In both these appeals, the constitutional validity of Ss. 269-SS and 271-D of the Income-tax Act, 1961 (for short, "the Act"), is challenged. In Criminal Appeal No. 601 of 1992, the learned single Judge of the Madras High Court quashed the prosecution initiated against the respondent by holding that S. 269-SS is violative of Art. 14 of the Constitution and, therefore, the prosecution initiated against the respondent was not legal. The learned single Judge granted certificate under Art. 134-A of the Constitution and the present appeal has been filed by the Department.
(2.)In Civil Appeal No. 4478 of 2000, the appellant had challenged the constitutional validity of Ss. 269-SS and 271-D of the Act before the High Court. The learned single Judge dismissed the writ petition. Thereupon the appellant filed an appeal before the Division Bench. The Division Bench in Writ Appeal No. 5447 of 1999 affirmed the order of the learned single Judge. The judgment of the Division Bench is now challenged before us in this appeal.
(3.)Section 269-SS was inserted in the Income-tax Act by Finance Act, 1984 with effect from 1-4-1984, but the same was made operative from 1-7-1984. The Income-tax Department, in course of searches carried out by them from time to time recovered large amounts of unaccounted cash from certain tax payers and often the tax payers gave explanation for their unaccounted cash to the effect that they had borrowed loans or received deposits made by other persons. Sometimes, it was noticed, that the unaccounted income was also brought into the books of accounts in the form of loans and deposits and later they would obtain confirmatory letters from other persons in support of their explanation. The Department was not able to unearth the source of such unaccounted cash. Therefore, in order to plug the loopholes and to put an end to the practice of giving false and spurious explanation by tax payers, a new provision was inserted in the Income-tax Act debarring persons from taking or accepting from any other person any loan or deposit otherwise than by account payee cheque or account payee bank draft, if the amount of such loan or deposit or the aggregate amount of such loan or deposit is Rs. 10,000/- or more. The amount of Rs. 10,000/- was later revised as Rs. 20,000/- with effect from 1-4-1989.