TMI Blog2011 (5) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... nd surrounding circumstances were investigated and examined before hand and therefore, on being satisfied, satisfaction note was drawn - The material thus collected showed that officer concerned could have reason to believe that the petitioners were in possession of money, bullion etc., wholly or partly undisclosed income or asset - The exercise of power under section 131(1A) is contemplated in a situation anterior to exercise of power under section 132 - The striking feature of the provision is that the Income-tax Authorities mentioned in sub-section (1A) have been empowered to exercise the power notwithstanding the fact that no proceeding with respect to such person or class of person are pending before him or any other Income-tax Authority - To overcome it, section 131(1A) was enacted giving powers of discovery/production of evidence etc., to Director General, or Director or Joint Director etc., notwithstanding the fact that no proceeding is pending before them - Decided against the assessee - WRIT TAX NOS. 378 AND 403 OF 2004 - - - Dated:- 2-5-2011 - FERDINO INACIO REBELLO, PRAKASH KRISHNA, JJ. Dhruv Agrawal for the Petitioner. A.N. Mahajan, Ashok Kumar, Bharat Ji A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the other usual reliefs including a writ of mandamus directing the respondents to release all the documents and the material seized as mentioned in the Panchnama dated 20-3-2002. 6. In reply, counter affidavit has been filed by the Assistant Director of Income (Investigation) wherein besides disputing the claim of the petitioners on merits, certain preliminary objections have been raised. It has been stated that Dr. V.S. Chauhan is a renowned orthopaedic surgeon and he has been suppressing his income systematically. He has made substantial investment in acquiring and constructing immovable assets such as Prakash Hospital (P.) Ltd., which is super class hospital at Noida. The said hospital consists of 75 beds and leading doctors of Apollo Hospital, New Delhi also visit. During the course of search, Dr. V.S. Chauhan admitted the concealed income to the tune of Rs. 21,19,898, the details whereof have been set out in paragraph 3.2 of the counter affidavit. These assets are in the nature of deposit accounts with the banks in his name and in the name of his wife and other family members. It has been further averred that the petitioners were found maintaining the duplicate sets of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gard to the other incriminating material found at the time of search has been given with which presently we are not concerned. 10. Thereafter, a supplementary affidavit was filed by the petitioners annexing the copies of Income-tax returns for the earlier assessment years, duly audited copy of balance sheet, profit and loss account and copy of satisfaction note dated 20-2-2002 as well as the approval granted on 21-2-2002 to which a supplementary counter affidavit has been filed by the department. 11. Heard Sri Dhruv Agrawal, learned senior counsel assisted by Sri Nikhil Agrawal for the petitioners and Sri Shambhu Chopra, learned standing counsel for the department. 12. The learned counsel for the petitioners submits that there was no material before the concerned officer to reason to believe that the petitioners have unaccounted income or asset. Submission is that looking to the contents of the satisfaction note of the ADIT dated 20-2-2002 the JDIT could not have reason to believe that in order to ascertain the true and correct income of Dr. V.S. Chauhan and also to unearth his explained, undisclosed assets in the form of money, bullion, jewellery or any other valuable articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns of the counsel for the parties. The following two points fall for consideration before us : l Whether the writ petition is liable to be dismissed on the ground of laches; l Whether on the facts of the case it can be said that the concerned officer had no material or information in his possession to have reason to believe that the petitioners did not disclose the true income or property. 16. Taking the first point first, it may be noted that the search was conducted by the officials of the Income-tax Department on 20-3-2002 at the residential place of the petitioners. A Panchnama was drawn on that date. The locker of the petitioners was searched on 30-3-2002. Notice under section 131(1A) was given on 4-4-2002. Thereafter, notice under section 158BC for block assessment calling upon the petitioners to file their return was given on 9-5-2002. The block assessment file of the petitioners was transferred to Deputy Commissioner Income-tax, New Delhi under section 127(2) of the Act on 3-6-2003. The proceedings for block assessment were going on before the said authority without there being any objection or demur. 17. In para 7 of the counter affidavit it has been stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits also, but find no substance in it. 19. Now, coming to the second point, the contention of the petitioners is that the department had no material to have reason to believe that the petitioners have undisclosed income or assets. The attention of the Court was drawn towards the balance sheet for the period ending as on 31-3-2000. In the said balance sheet, the petitioner No. 1 has shown receipt of Rs. 31,36,427 as professional receipt. Similarly, for the year ending as on 31-3-2001, the said receipt has been shown at Rs. 31,64,551. Elaborating the argument, it was submitted that in the satisfaction note dated 20-2-2002 the annual receipt of Dr. Chauhan including consultation fee and from operation charges is estimated around Rs. 30 Lakhs, while he had disclosed more than that amount in the returns of his income. We have perused the satisfaction note dated 20-2-2010. In the said note, the professional income of Dr. Chauhan as "consultation fee has been estimated at Rs. 15 Lakhs and operation charges around Rs. 15 Lakhs, total income around Rs. 30 Lakhs. In the other part of the satisfaction note, it has been mentioned that : "(1) Dr. Chauhan has maintained the very high sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd he must issue an authorization in favour of a designated officer to search the premises and exercise the powers set out therein. The condition for entry into and making search of any building or place is the reason to believe that any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act may be found. 'If the Officer has reason to believe that any books of account or other documents would be useful for, or relevant to, any proceedings under the Act, he is authorised by law to seize those books of account or other documents, and to. Place marks of identification therein, to make extracts or copies therefrom and also to make a note or an inventory of any articles or other things found in the course of the search. Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the tax-payer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorizes it to be exercised. If the action of the Officer issuing the authorization, or of the designated Officer is challenged the Officer concerned must satisfy the Court about the regularity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the concerned Officer also gathered information from the petitioner No. 2, the wife of the petitioner No. 1. It is not an argument nor it could be argued that the petitioner No. 1 has no connection with Prakash Hospital. The material thus collected showed that officer concerned could have reason to believe that the petitioners were in possession of money, bullion etc., wholly or partly undisclosed income or asset. 23. The other decision relied upon by the petitioner is Ganga Prasad Maheshwari v. CIT [1981] 6 Taxman 363/[1983] 139 ITR 1043 (All.). After noticing the legislative history of search and seizure under section 132, this Court has laid down that for action under section 132 or 132A the following conditions precedent must exist : 1. Information in possession of Director of Inspection or Commissioner; 2. In consequence of which he should have reason to believe; 3. That any person is in possession of any money, bullion, jewellery or other valuable article or thing; 4. And such jewellery or bullion, etc., must represent either wholly or partly the undisclosed income. 24. It has been laid down that if any of above such conditions is missing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resenting the income believed to be undisclosed income. It is well settled, as observed by the Division Bench of this Court in Lit Light Co. v. CIT [1982] 136 ITR 513 that the issue of search warrant by the officer concerned is not a judicial or quasi judicial act and even if the officer is enjoined to issue a warrant only when, in fact, there is an information in his possession in consequence of which he may form necessary belief, the matter is not thereby subjected to scrutiny by the Court. In this regard reliance has been placed upon its earlier judgment in the case of ITO v. Firm Madan Mohan Damma Mal [l968] 70 ITR 293 (All.). 28. In Lit light Co.'s (supra) the search warrant was under challenge. The Court found that the statement of the informant who had intimate knowledge of the business dealings of the petitioners, was recorded on oath. The nature of information furnished by him could reasonably be accepted as reliable. In this background, the argument of the petitioners therein that the action was mala fide or that there was no reliable information in possession of the department to justify the action under section 132 of the Act was rejected as untenable. 29. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x etc., liability, or other ancillary power, when seizures are affected. The proceedings under section 132(5) are of a quasi judicial nature. Section 132(11) provides the forum to an aggrieved person against an order made under sub-section (5). Section 132 exists in complete isolation of other provisions of the Act and the general provisions of the Act can neither creep from under beneath under these fortifications nor can overlook with favour or disfavour over these to influence the procedure or judgment in the preceding section 132 of the Act See Joginder Singh v. CIT [1981] 128 ITR 14/6 Taxman 245 (Punj. Har.). 32. Copy of information purported to be called in exercise of power under section 131(1A) from the petitioner through the letter dated 4-4-2002 has been annexed as Annexure 4 to the writ petition. By the said letter, certain informations in connection with the inquiries relating to search and seizure operation carried out on 19-3-2002 has been called for. The desired informations which have been called for are (1) in the nature of details of family members and the dependants, their names, age, relationship etc.; (2) nature of source of income of assessee and his famil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r invalid or illegal if the authority had the power under an appropriate provision of law vide K.K. Parmar v. High Court of Gujarat JT 2006 (6) SC 509 and Amiya Bala Dutta v. Mukut Adhikari JT 2011 (3) SC 84. 34. The scope of section 133(6), second proviso was considered by the Apex Court in the case of Karnataka Bank Ltd. v. Secretary Government of India [2002] 255 ITR 508/123 Taxman 219, it has been held that with a view to collect information power is given under section 133(6) to issue notice, inter alia, requiring any person to furnish information in respect of such points or matters as may be useful or relevant. The second proviso makes it clear that such information can be sought for even when no proceeding under the Act is pending, the only safeguard being that before this power can be invoked the approval of the Director or the Commissioner, as the case may be, has to be obtained. 35. Sections 131 to 138 relating to powers of Income-tax Authorities have been grouped together under Chapter XIII, part C. Section 131 gives certain powers of a Court of law to Income-tax Authorities. The Authorities under the Income-tax Act strictly speaking do not act as Courts of law. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry on search and seizure operation, the Income-tax Authorities i.e., the Director General or Director or Joint Director or Assistant Director or Deputy Director or authorised officer referred to in sub-section (1) to section 132 could exercise the power under section 131(1A) of the Act. The Income-tax Authorities are defined under section 116 of the Act. Power has been conferred under the aforesaid section to be exercised before the search and seizure operation with a view to collect the necessary information with regard to the intended search and seizure operation. The striking feature of the provision is that the Income-tax Authorities mentioned in sub-section (1A) have been empowered to exercise the power notwithstanding the fact that no proceeding with respect to such person or class of person are pending before him or any other Income-tax Authority. The section is in the nature of enabling provision conferring the power on certain Income-tax Authorities. The section 131(1A) operates in a different field than section 132. Both these sections occupy different fields. Section 131(1A) occupies the field before issuing search and seizure warrant, while section 132 comes into pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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