TMI Blog2012 (4) TMI 250X X X X Extracts X X X X X X X X Extracts X X X X ..... Income Tax) Section 189 states that notwithstanding the discontinuance of firm or its business, assessment has to be made of the total income of the firm as if no such discontinuance or dissolution has taken place and every person who was at the time of such discontinuance or dissolution a partner of the firm, shall be jointly and severally liable. Also, warrants of authorization were not merely issued in the names of the firms, but also separately issued in the name of the petitioner and his spouse. Further, documents have been retained having regard to the pendency of the appeal proceedings. Thus no illegality is found. For the aforesaid reasons, no meit is found in the petition – Petition dismissed. - WRIT PETITION NO. 47 OF 2011 - - - Dated:- 2-4-2012 - DR. D.Y. CHANDRACHUD M.S. SANKLECHA, JJ. Mr. O.J. Menejes with Mr. P.P. Prabhu for the petitioner. Mr. Suresh Kumar for respondents. ORAL JUDGMENT (Per Dr. D.Y. Chandrachud,J.): 1. In these proceedings under Article 226 of the Constitution of India, petitioner has sought to question the legality of a warrant of authorization issued by the first respondent under Section 132 of the Income Tax Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 132(1) are unlawful and must be set aside by this Court for the following reasons : (i) The Director of Income Tax (Investigation) who issued the warrants of authorization had no reason to believe, within the meaning of Clause (b) of sub section (1) of section 132 that any person to whom summons or notices might be issued under sub section (3) of section 142 would not produce or cause to be produced any books of account or other documents which will be useful for or relevant to any proceedings under the Act; (ii) The warrants of authorization were issued in the name of a dissolved firm which is not in existence in law and are therefore a nullity; (iii) In pursuance of the warrants of authorization issued in the name of a dissolved firm, the residential premises of the erstwhile partners cannot be searched. (iv) All the assessment proceedings which were commenced pursuant to illegal warrants of authorization and the orders of assessment would have to be quashed and set aside. (v) The documents which were seized during the course of the search and seizure operation must be ordered to be returned, having regard to the provisions of Section 132(8). Though the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be disclosed for the purposes of the Act. The formation of a reason to believe is the foundation of an authorization which is issued under section 132(1). 6. The power which is conferred by Section 132(1) constitutes, as the Supreme Court noted an invasion upon the rights, privacy and freedom of the tax payer and has to be therefore, exercised strictly in accordance with law. The Commissioner or as the case may be the Director, must record reasons for the belief which he entertains. In the leading judgment of the Supreme Court in Income Tax Officer, Special Investigation Circle B Meerut Versus Seth Brothers and Others (1969) 74 ITR 836 (SC), the nature of jurisdiction and parameters of judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deals, reliable information about which finds its way to the Director of Inspection. In such a case no oracle is needed to tell the Director of Inspection that if a requisition is made on the assessee to produce his documents in connection with these financial deals and investments, the assessee will most certainly omit to produce or cause to be produced such documents. On the other hand, there is danger that all these documents may be destroyed because the very fact that a requisition is made with a view to investigate concealed deals would put the assessee on his guard and the relevant documents may either disappear or be destroyed. Indeed, it is possible that an assessee may, after knowing that the game is up, produce the requisite documents. But in the nature of things such an assessee would be rare. The question for us to consider is whether the authority under Section 132(1) may entertain the reasonable belief that in such circumstances the assessee will not or would not produce the documents. In our opinion though in a very rare case a tax evader may comply with a requisition, the Director of Inspection who has reliable information that the assessee has consistently conceale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on has to be imminent and proximate in time. 8. Now it is in this background that the facts of the present case will have to be assessed. The satisfaction note on the basis of which the warrants of authorization were issued has been produced for the perusal of the Court. The Assistant DIT (Inv) Unit II, Mumbai recorded that Sriram Group of Companies was in the business of providing security for Properties/sick units attached by the Debt Recovery Tribunal. The group members comprise of several entities including the following : i) Sri. Ram Securities Consultancy Services ii) Sri Ram Warehousing Corporation iii) Sri Ram Security Agency iv) Srikrishan Security Services v) Sriramkrishna Security Services vi) Sriram Maintenance Services vii) Manubhai Sons viii) Hemendra R. Merchant ix) Smt. Hemaben H. Merchant The group is being run by the petitioner whose residential and business addresses are set out in the note. The group specializes in providing security for companies/units, which have been declared sick and where the Court Receiver has been appointed to take possession of the company/unit. The Group is stated to be on the panel of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness or profession carried on by a firm has been discontinued or where a firm is dissolved, the Income-tax Officer shall make an assessment of the total income of the firm as if no such discontinuance or dissolution had taken place, and all the provisions of this Act, including the provisions relating to the levy of a penalty or any other sum chargeable under any provision of this Act, shall apply, so far as may be, to such assessment. By sub section (3) of section 189, every person who was at the time of such discontinuance or dissolution a partner of the firm, and the legal representative of any such person who is deceased, shall be jointly and severally liable for the amount of tax, penalty or other sum payable, and all the provisions of this Act, so far as may be, shall apply to any such assessment or imposition of penalty or other sum. Sub section (1) of section 189 creates a legal fiction. The effect of the fiction created by law is that notwithstanding the discontinuance of the business of a firm or the dissolution of a firm, assessment has to be made by the Assessing Officer of the total income of the firm as if no such discontinuance or dissolution has taken place. Couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are relevant are completed. However, by sub section (3) the person from whose custody any books of account and other documents are seized under sub section (1) is permitted to make copies thereof or take extracts therefrom. Counsel for the Petitioner states on instructions that the Fixed Deposit Receipts have been returned to the Petitioner. Counsel appearing on behalf of the Revenue has placed on the record the last order dated 16 March 2012 passed by the Commissioner of Income Tax Unit III Mumbai authorizing retention of the documents, having regard to the pendency of the appeal proceedings, until 31 March 2013 or until the proceedings are disposed of, whichever is earlier. Having regard to the provisions of Section 132 that direction is lawful and cannot be faulted. The Petitioner is entitled, however, to take copies of extracts as may be required. 9. Counsel appearing on behalf of the petitioner has relied upon a judgment of the Punjab and Haryana High Court in Commissioner of Income Tax Vs. Rakesh Kumar (2009) 313 ITR 305 (P H) where the Division Bench held that since the person in whose name the search authorization was issued, had died prior to the issuance of the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X
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