TMI Blog2011 (12) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... which was suppressed by the petitioners from them. The authorization issued under Section 132(1) of the Income Tax Act, 1961, is found bad and unsustainable. Consequently, exercise of search undertaken in pursuance thereof from 19.06.2009 to 21.07.2009 is illegal. Notice action under Section 153A of the Act, issued on 16.02.2010 is also, therefore, bad in law. - Decided in favor of assessee. - Writ Petition No. 2150 of 2010 - - - Dated:- 9-12-2011 - B.P. Dharmadhikari, A.P. Bhangale, JJ. C.J. and S.C. Thakar with S.N. Bhattad, Advs. for the Petitioner Anand Parchure, Adv. for the Respondent JUDGMENT B.P. Dharmadhikari, J 1. By this petition filed under Article 226 of Constitution of India, petitioner No. 1 - A Company under Companies Act, 1956, and petitioner Nos. 2 and 3, who are its Directors, have prayed for quashing of the warrant of authorization for conducting search, issued under Section 132 of IncomeTax Act, 1961, (hereinafter referred to as the Act) and consequential action thereafter in issuing notices under Section 153A of the Act, thereafter for the assessment years 2004-05 to 2009-10. The search operations have been carried out from 19t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Calcutta High Court in the case of Smt. Uma Devi Jhawar vs. Income Tax Officer, reported at (1996) 218 ITR 573 (Cal.) is relied upon to show the entitlement of the petitioners to inspect said file. 4. The judgments reported in the case of Income Tax Officer and Ors. vs. Lakhmani Mewal Das, reported at (1976) 103 ITR 437 (SC), L.R. GUPTA and Ors. vs. Union of India and Ors., reported at (1992) 194 ITR 32 (Delhi), Vindhya Metal Corporation and Ors. vs. Commissioner of Income Tax and Ors., reported at (1985) 156 ITR 233 (All.), Commissioner of Income Tax vs. Vindhya Metal Corporation and Ors., reported at (1997) 224 ITR 614 (SC) and the judgment of Division Bench of this Court in Cartini India Ltd. vs. Additional Commissioner of Income Tax and Ors., reported at (2009) 314 ITR 275, are pressed into service by him to show how judicial review of that satisfaction is open. According to him, if this law is applied, the search operations and consequential steps under Section 153A of the Act are entirely without jurisdiction. 5. Shri Parchure, learned counsel appearing for the department has produced the Satisfaction Note file and pointed out how the Assistant Director of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r General or Director or the Chief Commissioner or the Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner. This provision has been considered in various judgments and hence we find it appropriate to find out how the ingredients therein have been construed. 8. In the case of Income Tax Officer and Ors. vs. Lakhmani Mewal Das, (supra), the Hon'ble Apex Court has considered reassessment under Section 147(a) of the Act. Section 147 contemplates an opinion by Assessing Officer that any income chargeable to tax has escaped assessment and it also employs the phrase "has reasons to believe". The Hon'ble Apex Court has held that the reasons to believe must have material bearing on the question of escapement of income of assessee and it does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The existence of belief can be challenged by assessee but he cannot challenge the sufficiency of reasons for said belief. In facts before the Hon'ble Apex Court, two grounds were mentioned in his report by Income Tax Officer for reopening of assessment. One was that one Mohansingh Kanayalal, one of the creditors of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the judgment of Punjab and Haryana High Court in the case of H.L. Sibal vs. Commissioner of Income Tax, reported at (1975) 101 ITR 112 (P and H). In that judgment, the Punjab and Haryana High Court has made the following observations: "The applicability of S. 165, Cr. P.C, to the searches made under S. 132(1) gives an indication that this section is intended to apply in limited circumstances to persons of a particular bent of mind, who are either not expected to cooperate with the authorities for the production of the relevant books or who are in possession of undisclosed money, bullion and jewellery, etc. Take for instance, a particular assessee who has utilized his undisclosed income in constructing a spacious building. His premises cannot be subjected to a search under this section on this score alone. A search would be authorised only if information is given to the CIT that such a person is keeping money, bullion, jewellery, etc., in this building or elsewhere. Further, if an assessee has been regularly producing his books of account before the assessing authorities who have been accepting these books as having maintained in the proper course of business, it would be some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at reopening of assessment based on material already considered and adjudicated would amount to reviewing the assessment order by reappreciating the material on record and is not contemplated under Section 147 of the Act. Shri Thakkar, learned counsel has pressed into service this judgment to urge that in the absence of any new information in possession of the respondents, such reassessment by drawing certain inferences on the strength of material already in its possession, is illegal. 13. The pleadings of parties in present petition show assertion by the petitioners of due discharge of all statutory obligations and no violation or breach of any provisions of Income Tax Act. This has not been denied or pointed out to be incorrect by the respondents. The petitioners have contended that there is no material in possession of respondents which could have led to a "reason to believe" to take action of search under Section 132(1) of the Act. The respondents have denied it. The first affidavit in this respect filed by the respondents on 30th June 2010 is not disclosing any such information gathered later by the department. It only contains an assertion that proper procedure has been f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments and sale deed mentioned in para 7 by the respondents were pertaining to the year 2001 and hence beyond purview of search. Similarly, company opposed use of search material as the same were not relevant and the source was already fully explained. The petitioners have claimed that, therefore, there was no new material. The Additional Director of Income Tax (Investigation) has filed the additional affidavit on behalf of the respondents on 15.11.2010. Though in said affidavit reply, allegations made in para 3 and 4 of the above mentioned affidavit of the petitioners have been denied, the assertions in para 2 thereafter have not been dealt with. In this reply, the petitioners claimed that Director of Income Tax (Investigation) had taken note of discreet enquiries. Thereafter all facts were verified and assesses case records were sealed and then a satisfaction note was prepared. In affidavit it is disclosed that discreet enquiries conducted by Assistant Director of Income Tax revealed that assessee has been suppressing substantial portion of income by inflating purchases and other expenses. The assessee was catering to the high end customers and enjoying very high margins. The comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Investigation), Nagpur. Next document is satisfaction note which is submitted by the Additional Director of Income Tax (Investigation), Nagpur, on 08.06.2009 to the Director of Income Tax (Investigation). This note is also dated 08.06.2009. The said note along with note of Assistant Director then appears to have been looked into by the Director of Income Tax (Investigation) and there is a separate note running into two pages signed by said authority on 09.06.2009 at the end of second page. Next page after this note, in fact an independent page, is containing a sentence requesting the Director General of Income Tax (Investigation), Pune, to peruse satisfaction note (earlier two pages) and grant administrative approval for search and seizure action. Below it is signature of Director of Income Tax (Investigation), Nagpur and thereafter a hand written note of Director General of Income Tax, Pune, approving the same. It is, therefore, obvious that last and final note in this respect is by the Director General of Income Tax (Investigation), Pune, on 11.06.2009. Had this authority refused to grant approval, the matter could not have proceeded further. Hence, this hand written note dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant Director of Income Tax, a note running into three pages prepared by the Additional Director (Investigation), Nagpur, addressed to the Director of Income Tax (Investigation), Nagpur and then the last note mentioned above by the Director of Income Tax, Nagpur, dated 09.06.2009. The hand written portion below endorsement by the Director of Income Tax, Nagpur, put by the Director General of Income Tax (Investigation), Pune on 11.06.2009 can be stated to be fourth note by the Director General of Income Tax. The note dated 08.06.2009 by the Assistant Director of Income Tax is stated to be satisfaction note. Similarly, the document dated 08.06.2009 prepared by the Additional Director (Investigation), Nagpur, has also got heading satisfaction note. The other two documents do not show any such specific heading. All these four documents are independent and page number upon it has been put in hand. The documents, therefore, are not from a file after perusal of which one can easily gather that particular note cold not have been prepared on some other date because of chronology and number of running pages in it. Here, all four documents are independent of each other and can be easily substi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n used to draw inferences by said Assistant Director of Income Tax. This authority has also not filed any reply affidavit before this Court. 18. The next satisfaction note also dated 08.06.2009 is by the Additional Director (Investigation), Nagpur. It is not in dispute that he has necessary authority under Section 132(1) of the Act to form his belief thereunder. However, this officer instead of honouring that statutory obligation has prepared the satisfaction note and placed it before the Director of Income Tax (Investigation), Nagpur. This officer has mentioned that it is suo motu exercise without the aid of informant and by collecting marketing information, conducing discreet enquiries in the group. No market information finds mention anywhere and no discreet enquiries conducted in the group are also disclosed. On the contrary, this authority requests the Director of Income Tax (Investigation) to peruse the note of the Assistant Director (Investigation) "in the prepages". The consideration of this note of the Director of Income Tax (Investigation), Nagpur, is on independent two pages. This consideration mentions that assessee was suppressing the substantial portion of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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