TMI Blog2012 (4) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... n Section 131 (1), if he has reason to suspect that any income has been concealed or is likely to be concealed. It is only an enabling power and does not in any way affect the search and seizure operations carried out under Section 132 of the Act. Section 132 is an independent code in itself. The exercise of powers under Section 131 (1A) is contemplated in a situation anterior to the exercise of power under Section 132. Before authorsing an officer, the officer referred to in Section 132 (1) would exercise power under Section 131 (A) of the Act. Section 131 (1A) operates in different field than Section 132. - writ petitions dismissed. - Civil Misc. Writ Petition No.1614, 1615, 1616, 1617, 1617, 1618, 1619 and 1620 of 2006 - - - Dated:- 2-3-2012 - Sunil Ambwani, Manoj Misra, JJ. JUDGEMENT 1. We have heard Shri Subham Agrawal, learned counsel for the petitioners. Shri Sambhu Chopra appears for the Income Tax Department. 2. The petitioners in these writ petitions have prayed for directions in the nature of certiorari to quash the illegal search and seizure operation dated 27th/28th October, 2005 and 14th November, 2005 by the Income Tax Department under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the preceding assessment years. 5. It is alleged that the income tax authorities also seized the CPU containing data relating to clinical research carried out by the petitioner for last several years. The search of locker no.182 in the Punjab National Bank, E.K. Road, Meerut in the name of the petitioner and his mother was carried out under warrant for search dated 28.10.2005. The income tax authorities seized the cash of Rs.3 lacs and gold jewellery weighing approximately 1394.5 grams from the lockers. The panchnama revealed that the respondent authorities had seized the bank locker on 27.10.2005 for which the search warrant was issued on 28.10.2005. Subsequently on 24.10.2005 and 12.1.2006 the Addl. Director, Income Tax Investigation, Meerut issued summons under Section 131 (1-A) of the Act requiring production of details of returns of the previous years of the petitioner by himself and his family members, which was always available with the department. 6. The search and seizure operations have been challenged on the ground that the income tax authorities did not verify the income tax returns of the company, the petitioner, his wife and other family members, and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 247 (All), in which it was held that before taking any action under Section 132 of the Act, the condition precedent, which must exist should be the information in possession of Director of Income Tax, which gives him 'reason to believe', that a person is in possession of some article, jewelery, bullion, money, which represents wholly or partly his income, which was not disclosed or would not be disclosed. If these conditions are missing, the Commission or Director of Investigation will have no jurisdiction to issue the warrant of authorisation under Section 132 (1). When a positive averment is made in the writ petition, that there was no material which could lead to formation of reason to believe in the directive for issuance of warrant of authorisation, the respondents must in their counter affidavit give specific details as to what particulars and material was taken into consideration. Such material must be taken into consideration by the Director at the time, when he issues warrant of authorisation under Section 132. If the Director considers the material after issuance of warrant of authorisation, it will be illegal, even if the material existed earlier. In this connection th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of realisation of tax, penalties etc. A presumption is an inference of facts drawn from other known or proved facts. The words in sub-section (4) are 'may be presumed'. The presumption is, therefore, a rebuttal presumption. It will not be available for the purposes of framing a regular assessment. Where during the course of search under Section 132, any money, bullion, jewelery or other valuable articles or things are tendered by the prosecution in evidence against the person, then the provision of sub-section (4A) of Section 132 shall apply. The presumption under sub-section (4A) is available only in regard to the proceedings of search and seizure and for the purposes of retaining the assets under Section 132 (5) and their application under Section 132 (B). It is not available for any other proceedings except where it is provided that the presumption under Section 132 (4A) would be available. 11. Shri Subham Agrawal appearing for the petitioner has also relied upon the judgment of the High Court of Bombay (Nagpur Bench) in Spacewood Furnishers (P) Ltd. and Ors. v. Director General of Income Tax (Investigation) and Ors., (2012) 246 CTR Reports 313 in which the note prepared ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of Instruction No.7 of 2003 by CBDT Circular. There was no reason to believe for satisfying the pre-condition of Section 132. The search was authorised without scrutinising the past returns of the petitioner. The appraisal report was not prepared even after 11 months of the search. During the course of search, the mandatory requirement of calling two witnesses was not followed. The cash, and property owned by the petitioner already forms the assets disclosed in his return was filed before the search. The CPU containing only clinical data was seized to harass the petitioner. The documents seized were not relevant for the income tax as they were already disclosed. The Addl. Director of Income Tax has no jurisdiction to authorise the search. There was no reason to believe that the locker contained any undisclosed assets. The locker was sealed on 27.10.2005 without any valid reason one day prior to the issuance of search warrant. Only Rs.69,000/- belong to the petitioner, which was duly reflected in his income tax return. The seizure of gold was illegal as it was disclosed in the returns of the petitioner's mother Mrs. Krishna. The summons under Section 131 (1A) and the informati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition No.2818 (MB) of 2000 along with two other connected petitions in 2007. The consistent view taken is that the material on the basis of which warrant of authorisation under Section 132 was issued and the search and seizure operations were carried out should be disclosed to the assessee unless privilege is claimed. Shri Dhananjay Awasthi has pleaded but has not filed application and affidavit claiming privilege of the documents. He prays for and is allowed two weeks time to have consult with the department and if advised claim privilege. We are informed that after the search and seizure was carried out, the assessment orders were passed by ACIT under Section 153 on 28th December, 2007, making some additions. None of the assets seized were considered undisclosed and there was no mention of any seized documents in the order. There is no mention of computer data also in the order. By order dated 29th June, 2009 CIT (Appeals), Meerut passed an order deleting all the additions made by the Assessing Officer and accepting returned income. It is stated by Shri Subham Agrawal that CIT (Appeals) opined that AO has passed assessment order without examining seized material; old ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ist on 17th May, 2011. A copy of the order be given to Shri Dhananjay Awasthi appearing for the Income Tax Department." The department claimed privilege to disclose the satisfaction note, put up by the Assistant Director of Income Tax (Investigation) before the Joint/Additional Director of Income Tax (Investigation). The application claiming privilege filed under Section 123 of the Evidence Act, 1872 was rejected by us on 17.5.2011. It was thereafter brought to our notice that against the assessments on the basis of seized material in the searches carried out on 27th and 28th October, 2005, and against the orders of CIT (A), the department has filed appeals in the Income Tax Appellate Tribunal (ITAT) and that the finality of the assessment proceedings and interest of revenue will suffer in case the directions dated 4.5.2011 are to be followed. The department prayed for modifying the order, or to recall it keeping in view of interest of the revenue. We accepted the request of the revenue, and passed an order on 17.5.2011 as follows:- "The supplementary affidavit filed by the petitioner is taken on record. On 04.5.2011 we passed the orders giving two weeks' time t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The satisfaction note prepared before the signing of the authorization is highly confidential and its revelation to the assessee or to general public may prove detrimental to the potential information given as well as the department. 7. That in view of the above stated facts I, Director of Income Tax (Investigation) under Section 123 and 124 of the Evidence Act, 1972 hereby claim privilege in the instant case for not showing this satisfaction note to the petitioner." We find that none of the grounds, taken in the affidavit of Shri Umesh Takyar, Deputy Director of Income Tax (Investigation)-I, Meerut in support of the application under Section 123 of the Evidence Act, is relevant for claiming privilege. The confidentiality of the information by itself cannot be a ground to claim privilege. The claim of the department, that the authorisation is highly confidential and its revelation to the assessee or to general public may prove detrimental to the potential information given as well as the department, by itself cannot be a ground to claim privilege of the documents. The satisfaction has to depend upon the material on which it is based, the disclosure of which will bring it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the month of the amount which was seized. In order to alley any apprehension and to conclude the issues, we find it appropriate to direct that pending appeals be decided by ITAT within a period of one month from the date a certified copy of the order is produced and that within a week from the decision of the appeal, unless the orders of the ITAT otherwise provide, the entire article seized may be returned to the petitioner within a week of the decision of the appeal. Our order dated 4.5.2011 is modified to that extent. List this matter for final hearing on 19.7.2011. The sealed envelop shall be retained by the Registrar General to be produced on 19.7.2011." Shri Dhananjai Awasthi appearing for the department has filed an affidavit of Smt. Beena Jaiswal, Income Tax Inspector, in the office of Income Tax (Investigation)-I, Meerut, annexing therewith the order of the ITAT dated 01.7.2011 running into 76 pages deciding ITA No. 3794 and 3795/Del/2009 and Cross Objection Nos. 365 and 366/Del/09 relevant to the assessment years 2003-04 and 2004-05. The ITAT has allowed the appeals of the revenue for the assessment year 2003-04 and partly allowed the appeal for the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) for deletion of Rs.8 lacs received as gift, but has set aside the order of CIT (A) regarding a sum of Rs.15 lacs. In the circumstances the objections raised by Shri Dhananjai Awasthi for the revenue, that since the CIT (A) has to decide the appeal denovo, there is no justification to return the seized gifts at this stage, is liable to be rejected. The ITAT has observed in paragraph-3 of the order that the AO initiated assessment proceedings under section 153A by issuing a notice on 10.9.2007 for six assessment years from assessment year 2000-01 to 2005-06, and also for the assessment year 2006-07. The Tribunal concerned itself only with the appeals relating to assessment made by AO for the assessment years 2003-04 and 2004-05. No other appeal was filed by the assessee or by revenue for any previous years or was pending. After the remand by ITAT, the only issue, which survives for consideration before the CIT (A), is regarding a sum of Rs.15 lacs. We are thus satisfied that the release of assets seized during the search operations will not in any way prejudice the interest of the revenue, if the petitioner gives security for an amount of Rs.15 lacs, which will not only cover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a dated 7.11.2005 (Sl.No.108 comprising 8 Kara Thos 24 Ct. weighing 933.700 gms); jewelery as per Annexure 'J' of panchnama dated 14.11.2005 (Sl.No.1-6, comprising of 10 bars, necklace and bunde (studded)- gross 1418.100 gms); cash (Rs.6 lacs) as per panchnama dated 28.10.2005; cash Rs.3 lacs as per panchnama dated 14.11.2005 and FDRs as per Panchnama dated 28.10.2005 were not returned. The department was required to give the reasons as to why items have not been returned inspite of completion of the assessment proceedings and the directions issued by the Court. 17. On 21.10.2011 we passed an order as follows:- "Sri Shubham Agrawal appears for the petitioner. Sri A.N. Mahajan appears for the Income Tax Department. Sri Laljee Prasad Assistant Commissioner, Income Tax, CIR-II, Meerut is present in person. He has also filed a supplementary affidavit. It is stated by Sri A.N. Mahajan that apart from documents and items noted in the previous orders, he is returning the cash of Rs.6 lacs and Rs.3 lacs as per panchnamas dated 28.10.2005 and 14.11.2005, to Sri Shubham Agrawal by cheques today in Court. So far as articles mentioned at Sl. Nos. 1 to 8 of Annexure 'J' of p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged the search and seizure action of the department belatedly and on this ground alone the present writ petition should be dismissed. The search and seizure operation has been done following due procedure as per Income Tax Rules and now assessment is being carried out under Section 153B (1) of the Income Tax Act, 1961 for which the time period is 2 years. 4. That the petitioner has based the writ petition on the case of Dr. (Mrs.) Anita Sahai vs. Director of Income Tax (Investigation), which is absolutely misleading. Both the cases are radically different, as premise on which the Dr. Anita Sahai Case proceeds is that the department did not have any Reasons to Believe or satisfaction note of the Director of Income Tax (investigation). Here in this case, there was credible evidence before the competent authority to indicate huge tax evasion and possession of substantial unaccounted assets, which was put before the Director of Income Tax (Investigation), Kanpur who after being satisfied from the evidence on record that huge tax evasion is being carried on by the petitioner, recorded his satisfaction note. Subsequently the Director General of Income Tax (Investigation) also recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the petitioner and the CPU was seized as it was found to contain the books of accounts. After taking out copy of Hard Disc to Hard Disc of CPU, original Hard Disc has been sealed and retained and both the CPUs have been released to the petitioner with Hard Disc copied. The photocopy of Panchanama dated 13.1.2006 is being filed and marked herewith as Annexure No.CA-2 to this counter affidavit. 17. That the contents of paragraph no.13 of the writ petition are denied as stated. It is submitted that the Locker No.182 was sealed in pursuance of proper warrant of authorization dated 28.10.2006, which was later on executed on 14.11.2006. 18. That the contents of paragraph no.14 of the writ petition are denied as stated. It is submitted that initial warrant of authorization for search under Section 132 of the Act was issued by the Director of Income Tax (Investigation) and the locker was searched in consequence to such authorization. Moreover according to the provisions of Income Tax Act, 1961, the Additional/Joint Director of Income Tax (investigation) are also authorized to issued warrant of authorzation under Section 132 of the Act for authorizing search as also for operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erut. 22. The satisfaction note of DIT (Inv.), Kanpur dated 17.10.2005 received approval of the Director General of Income Tax (Inv.), Lucknow on the same date on 17.10.2005. It is based on the material collected by the department for which the preparations were made for search in the year 2002. The relevant files were handed over to Addl. DIT (Inv.), Meerut. The then ADIT and JD-II had opined that the persons in question were not disclosing their true and correct income and were indulging in large scale understatement of their receipts of profession. The Addl. Director, Income Tax, visited the clinic-cum-residence of Dr. Roop and Dr. Sangeeta, at Roop Netralaya run by Meerut Laser and Eye Care Centre Pvt. Ltd., Opposite NAS College, B.K. Road, Meerut. He visited the clinic-cum-residence on 21.8.2005 at 1.30 p.m. to find out the services provided at the clinic. He sought appointment for a patient on 25.8.2005 and got the patient examined in the waiting list at Sl.No.25 at 12.30 p.m. The patient was advised to come again on 28.8.2005. The patient was charged Rs.100/- as consultation fees and was asked to come again on 28.8.2005 for 'parda janch'. On that date there were 87 patie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s opinion that the tax payments of the couple are no where near the estimation of AD's in 2002 and 2005, and this suggests massive understatement of income by them. Considering all aspects he recorded reason to believe that Dr. Roop and Dr. Sangeeta are not disclosing their correct incomes and are in possession of undisclosed income, which may be in the shape of cash, bullion, jwellery, FDRs, immovable assets and other valuables. He thus requested DIT (Inv.), Kanpur to issue Warrant of Authorisation to conduct search in the name of Dr. Roop, Dr. Sangeeta, M/s Meerut Laser and Eye Care Center (P) Ltd. under Section 132 (1) of the Act. 26. The DIT (Inv.), Kanpur in his note dated 17.10.2005 recorded that he has gone through the noting of ADIT and Addl. DIT, and discussed the case with them. He recorded that it appears that Dr. Roop and Dr. Sangeeta are not recording their receipts correctly. They are paying tax only on fraction of their actual income. They must have amassed huge undisclosed assets by not paying proper tax. In view of the fact he recorded his satisfaction that it was a fit case to conduct search and seizure under Section 132 (i) of the Act and requested the Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two witnesses on 13.1.2006, and after making copies from the hard disc the original was retained and sealed and the copies of hard disc was returned along with the CPU. A period of 2 years is provided under the Act for finalisation of the assessment. The assessments were carried out within the same period. The search and seizure operations have not violated the petitioner's right of privacy as these operations were carried out strictly in accordance with the provisions of the Act. 29. Shri Sambhu Chopra relied upon Shri Vipin Kumar Jain and Ors. v. Union of India and Ors., 2001 ITR (249) 728 (Punjab and Haryana); Deputy director of Income Tax (Investigation) and Ors. v. Mahesh Kumar Agarwal, 2003 (262) ITR 338; Amar Agrawal and Anr. v. Director of Income Tax (Investigation) and Ors., 2005 (276) ITR 182 (MP); Commissioner of Income Tax v. Smt. Jayalakshmi Deverajan, (2006) 286 ITR 412 (Ker); Arti Gases v. Director of Income Tax (Investigation), 2001 (248) ITR 55 and Dr. V.S. Chauhan and Anr. v. Director of Income Tax Investigations and Ors., 2011 UPTC 651 in support of his submissions that where Director of Investigation has reasonable information and no malafides were attr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o only Rs.8150/- and Rs.13,151/- was found at the residence and hospital, which was not seized, jewelery amounting to Rs.1,84,104/- was also found and was not seized as it was within permissible limits. After looking into the warrant of authorisation the Court found, the information in possession of the Director of Inspection and Commissioner to be sufficient on which he had recorded the reasons to believe that the petitioners were in possession of money, bullion, jewelery and other valuable articles and such wealth represents wholly or partly the undisclosed income. It was found that Dr. Chauhan maintains very high standard of living and has made substantial investment in his clinic by constructing a super-class three storey clinic-cum-residence, with a total investment estimated at Rs.50 lacs. A 75 bedded hospital developed on a plot of 2000 sq. mtrs., in four storied hospital including basement, pathology, x-ray machine, was first class construction valued at about Rs.2 crores. Substantial investments were made from which it was found that the disclosed income of Dr. Chauhan in the balance sheet dated 31st March, 2000 showing Rs.31,36,427/- as provisional receipts for the year e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which the administrative approval was given by DGIT (Inv.), Lucknow. The Addl. Director had visited the clinic on four occasions. On the last three occasions he visited along with decoy patient, and obtained receipt of consultation and laser treatment. He perused the registers and took details of the number of patients, payments received by the doctors from their patients, who were not issuing receipts to all the patients. The Income Tax Department based on the records of the year 2002 and the report of the Addl. Director after visiting the clinic in 2005 on four occasions along with decoy patients, and having examined the income tax returns and balance sheets in which negligible income was returned, authorised the search. There was no illegality in recording the satisfaction note by the competent authorities based on relevant and credible evidence collected by the department. The satisfaction that the doctor couple was disclosing only the part of their income and that they had amassed huge wealth by receipts of crores of rupees every year, does not suffer from any error of law. 32. We also find substance in the contention of learned counsel for the department that in the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X
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