TMI Blog2012 (9) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2003, has amended Section 132 to provide that any bullion, jewellery or other valuable article or thing being stock-in-trade of the business, found as a result of search shall not be seized but the authorized officer shall make a note or inventory of such stock-intrade. Thus, stock-in-trade of business cannot be seized during search and seizure operations conducted on or after June 1, 2003 - thus the seizure of jewellery being stock-in-trade by the authorized officer is wholly without authority of law and contrary to the statutory provision contained in proviso to Section 132 (1) (iii) and third proviso to Section 132(1) (v) - in favour of assessee. - W.P.(C) No.31361 of 2011 - - - Dated:- 3-7-2012 - V Gopala Gowda, CJ And B N Mahapatra, JJ. For Appellant : U C Behura, S K Ray For Respondent : Mr. A.K. Mohapatra, Senior Standing Counsel (for I.T. Deptt.) JUDGEMENT Per : B N Mahapatra, J : This writ petition has been filed with a prayer to quash the warrant of authorization and follow up action including search and seizure of stock-in-trade and stock hypothecated and to declare the seizure of stock-in-trade and stock hypothecated as unconstitutional being wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislatures to frame rules under Section 132(14) disapproves this kind of search seizure of the present nature vide instruction No.7 of 2003 dated 30.07.2003, the guidelines of which should have been strictly adhered to. The petitioner is running a jewellery business and its part of business is to purchase old gold items, remaking them for trading purpose. Gold is a precious metal, accumulated by people for its monetary value and easy liquidation and anybody in possession of a gold ornament can dispose of the same in the market without any proof of its ownership as a general practice and being a trader in jewellery, the petitioner purchases old ornaments from people in need. Assuming and not admitting for the moment that the search conducted was valid, the seizure of the items in trade cannot be said to be valid. The seizure of stock-in-trade violates the 3rd proviso of Section 132(1) of the Act. Such action of the authority violates the constitutional right guaranteed to the petitioner under the Constitution. The petitioner who traded with silver jewellery and filigree works in his individual capacity also deals with gold jewellery in his HUF business and to finance his HUF busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, no power/authority is vested with the Authorized Officer to seize any bullion, jewellery or valuable article of thing being stock-in-trade? (iii) Whether the authorized officer in course of search and seizure operation cannot seize stock-in-trade even if he comes to a conclusion that the said stock-in-trade represents wholly or partly undisclosed income or property of the Assessee ? 8. In order to decide above questions, it is necessary to examine the scope and ambit of Section 132 of the Act. The relevant provisions of Section 132 are quoted below:- 132. Search and seizure (1) Where the [Director General or Director] or the [Chief Commissioner or Commissioner] [or any such] [Joint] Director or [Joint] Commissioner as may be empowered in this behalf by the Board], in consequence of information in his possession, has reason to believe that (a) any person to whom a summons under sub-section (1) of Section 37 of the Indian Income Tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income Tax Act, 1922 (11 of 1922), or under sub-section (1) of section 142 of this Act was is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny books of account or other documents maintained in the form of electronic record as defined in clause (t) or sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorized officer the necessary facility to inspect such books of account or other documents;] (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: [ Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorized officer shall make a note or inventory of such stock-intrade of the business; ] (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies there from; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing: xxxx xxxx xxxx Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession of undisclosed assets and intends to evade tax. Therefore, search and seizure carried out on the basis of reason to suspect is not valid because reason to believe is mandatory requirement of law for search and seizure {See Mahesh Kumar Agarwal Vs. Dy. Director of Income Tax, (2003) 260 ITR 67 (Cal.) } 12. The words reason to believe postulate application of mind and assigning of reasons. There is a rationale nexus between reason and believe {See Ganga Saran Sons Pvt. Ltd. Vs. I.T.O., (1981) 130 ITR SC 212 . 13. In absence of any relevant material, authority would be acting in excess of his power and in violation of the mandatory power of Section 132 of the Act and the action of the authority cannot be sustained. Before taking action under Section 132 the competent authority must assure and reassure about the truthfulness and correctness of the information. A search which is conducted under Section 132 is a serious invasion into the privacy of the citizen. Therefore, Section 132(1) has to be strictly construed and the information of the person or reason to believe by the authorizing officer must be apparent from the note recorded by him. 14. Clause (c) of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de of the business, found as a result of such search shall not be seized but the authorized officer shall make a note or inventory of such stock-in-trade of the business. Therefore, even if the Authorized officer is of the view that any bullion, jewellery or other valuable article or thing which is in form of stock-in-trade either wholly or partly represents the undisclosed income or property of the person/ assessee searched, he cannot seize the same. But he shall make a note or an inventory of such stock-in-trade of business. 18. Prior to insertion of proviso to Section 132 (1)(iii) with effect from 01.06.2003 stock in trade can be seized at the time of seizure if it represents either wholly or partly the undisclosed income or property of the person/assessee searched. However, after insertion of the proviso with effect from 01.06.2003 it shall not be seized but a note or inventory of such stock in trade shall be prepared. The obvious purpose is to use it at the time of assessment and for other follow up actions. 19. The second proviso to Section 132 (1) (v) provides that where it is not possible or practicable to take physical possession of any valuable article or thing and re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business. 60.5 These amendments will take effect from June 1, 2003 [Section 59(a)] 21. In view of the specific provision contained in proviso to Section 132 (1) (iii) and third proviso to Section 132 (1) (v) of the Income Tax Act that bullion, jewellery or other valuable article or things being stock-in-trade of business found as a result of search shall not be seized, contention of Mr. Mohapatra that the authorized officer is fully empowered to seize stock-in-trade if he comes to the conclusion in course of seizure that said stock-in-trade represents wholly or partly undisclosed income or property of the assessee is not tenable in law. 22. Law is well-settled that interpreting a statute, effort should be made to give effect to each and every word used by the Legislature. The Courts always presume that the Legislature inserted every part thereof for a purpose and legislative intention is that every part of the statute should have effect. (See Nathi Devi v. Radha Devi Gupta , AIR 2005 SC 648) . 23. Courts being custodian of law have a solemn duty to uphold the rule of law under all circumstances by directing the authorities concerned to act in accordance with law. If t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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