TMI Blog2013 (1) TMI 318X X X X Extracts X X X X X X X X Extracts X X X X ..... rd "conclusion" is defined as "a judgment arrived at by reasoning, an inference, deduction, etc.”. In the present case, it is found that the so-called information is undisclosed and what exactly that information was, is also not known. At one place in the affidavit of Deputy Director of Income-tax, it has been mentioned that he got information that there was a “likelihood” of the documents belonging to the DS Group being found at the residence of the petitioner. That by itself would amount only to a surmise and conjecture and not to solid information and since the search on the premises of the petitioner was founded on this so-called information, the search would have to be held to be arbitrary. Also when the search was conducted on 21.01.2011, no documents belonging to the DS Group were, in fact, found at the premises of the petitioner - warrant of authorization u/s 132(1) had been issued in the name of the petitioner and, therefore, the information and the reason to believe were to be formed in connection with the petitioner and not the DS Group. None of the clauses (a), (b) or (c) mentioned in Section 132(1) stood satisfied in the present case and, therefore, the warrant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng illegal and the jewellery, articles and documents in lockers belonging to the petitioner be released to her unconditionally and the prohibitory orders in respect thereof be vacated. 3. From the affidavit filed on behalf of the respondent / revenue, it appears that an information had been received by the Deputy Director of the Income-tax (Investigation), Unit-IV (3), New Delhi from the Director General Central Excise Investigation, Delhi (DGCEI) in 2009 with regard to alleged unearthing of unaccounted sales and production as well as alleged clandestine removal / clearing of the products of M/s Dharampal Satyapal Group from their units at Noida, Gauhati and Agartala. The products comprised of various brands of paan masala, gutkha, such as Rajni Gandha and Tulsi. It is further revealed in the said affidavit on behalf of the revenue that a show cause notice had been issued by the DGCEI to the said M/s Dharampal Satyapal Group (DS Group) for evasion of Central Excise Duty. It is further indicated in the affidavit that on the basis of information received, secret discreet inquiries were carried out by the said Director of Income-tax and it was allegedly revealed that the DS Grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the conduct of the search on the residence of the petitioner:- She is the wife of deceased director and according to information her house is used to keep accounts which are unaccounted. 5. The said affidavit further indicates that, based on the satisfaction note prepared by the said Deputy Director of Income-tax, the Additional Director of Income-tax (Investigation), Unit-IV recommended search under Section 132(1) on the DS Group. The Director of Income-tax (Investigation)-II, New Delhi discussed the matter with the said Deputy Director of Income-tax as also the said Additional Director of Income-tax (Investigation) and accorded satisfaction that there were strong reasons to believe that DS Group of companies were engaged in unaccounted production of paan masala and other products resulting in generation of unaccounted income which was not fully being disclosed in the income-tax returns. Consequently, the Director of Income-tax (Investigation)-II, Delhi authorized the search under Section 132(1) of the said Act and after such authorization, the said Deputy Director of Income-tax carried out the search on the DS Group on 21.01.2011. The search was also carried out on the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rastogi v. Director of Investigations, Income Tax Department Others: (2003) 260 ITR 249 (All); 4) Dr Nand Lal Tahiliani v. Commissioner of Income-tax Others: (1988) 170 ITR 592 (All); 5) Narayan R. Bandekar Another: v. Income-tax Officer Others: (1989) 177 ITR 207 (Bom); 6) Smt. Kavita Agarwal Another v. Director of Income-tax (Investigation) Others: (2003) 264 ITR 472 (All); 7) L.R. Gupta Others v. Union of India Others: (1992) 194 ITR 32 (Del); 8) H.L. Sibal v. Commissioner of Income-tax Others: (1975) 101 ITR 112 (P H). 9. The contentions of the petitioner were that the opinion or the belief amounting to a reason to believe, as indicated in Section 132(1) of the said Act, must clearly show that the belief falls under clauses (a), (b), or (c) of Section 132(1) and that no search could be ordered except for any of the reasons contained in clauses (a), (b) or (c) of Section 132(1). Furthermore, it was contended that the satisfaction note ought to show the application of mind and formation of the opinion by the officer ordering the search and that if the reasons recorded do not fall under clauses (a), (b) or (c), then the authorization under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion that one of the conditions mentioned in Section 132(1) has been satisfied and, therefore, a search was warranted. It was submitted by the learned counsel for the petitioner that no such condition existed and, in fact, neither clause (a) nor clause (b) nor clause (c) of Section 132 (1) was satisfied in the present case. 10. The learned counsel for the revenue, however, contended that the reason to believe was in respect of the DS Group and clauses (a), (b) and (c) were satisfied insofar as a search was warranted on the DS group. According to the learned counsel for the revenue, the facts on the file clearly indicate that there was enough reason for the competent authority to believe that the condition stipulated in clauses (a), (b) and (c) of Section 132(1) existed insofar as the DS Group was concerned. Once that was satisfied, the provisions of Section 132(1) (i) clearly permitted the search to be carried out in any building, place, etc. where the officer authorized had reason to suspect that the books of accounts, other documents, etc. were kept. It was contended by the learned counsel for the revenue that as there was reason to believe insofar as the DS Gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons 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 Indian Income-tax Act, 1922 (11 of 1922), or under this 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 Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), then, (A) the Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... article or thing: 12. It is apparent that there are several parts to the said provision of search and seizure. In the first part, certain persons have been named, who would be competent to authorize other officers of the Income-tax Department to carry out searches. The first authority or warrant of authorization can only be issued by the named persons, namely, the Director General or Director or the Chief Commissioner or Commissioner or an Additional Director or Additional Commissioner or Joint Director or Joint Commissioner. Such warrant of authorization can only be issued by such a person in consonance of information in his possession and after he has formed a reason to believe that the conditions stipulated in clauses (a), (b) and (c) existed. 13. The information must be credible information and there must be a nexus between the information and the belief. Furthermore, in our view, the information must not be in the nature of some surmise or conjecture, but it must have some tangible backing. Until and unless information is of this quality, it would be difficult to formulate a belief because the belief itself is not just an ipse dixit, but is based on reason and that is wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor does it change character from its success. It would not, therefore, be asking too much from the authorities to comply with the basic requirements of the section before they are permitted to invade the secrecy of one s home. 16. In Narayan R. Bandekar (supra), the High Court of Bombay observed as under:- 3. A plain reading of sub-section (1) of section 132 makes it clear that the powers can be exercised in consequence of information in the possession of the Director of Inspection or the Commissioner of Income Tax and from such information of the Commissioner has reason to believe that (a) any person, in spite of issue of summons, has failed to produce the books of account or other documents, (b) any person is likely to fail to produce the books if so called upon, and (c) any person is in possession of any money, bullion, jewellery or other valuable articles and which are not accounted for and which represent undisclosed income. It hardly requires to be stated that the power conferred upon the Commissioner under section 132 is of a drastic nature and the exercise of power can only be after serious application of mind to the information in the possession of the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rector has reason to believe that any person is in possession of money, jewellery or other valuable articles representing wholly or partly income or property which has not been or would not be disclosed, under the IT Act. In the present case the respondents have not disclosed what was the material or information on the basis of which the Director/Commissioner entertained the belief that the lockers contained valuable jewellery or other articles representing undisclosed income. It is well settled that the satisfaction of the authorities under Section 132 must be on the basis of relevant material or information. The word used in Section 132(1) are "reason to believe" and not "reason to suspect". In the counter-affidavit it has been specifically stated in para. 18 that the authorized officer had reason to suspect and not reason to believe. 19. In Suresh Chand Agarwal (supra), the High Court of Allahabad held as under:- 12. As regards the allegations in paragraphs 11, 12, 13, 14 and 15 of the counter affidavit to the effect that the assessee could not give a satisfactory explanation regarding certain assets or documents found during the search, this court held in the case of Smt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly such books as were considered relevant to or useful for the proceedings in question. It was not open to them to indiscriminately, arbitrarily and without any regard for relevancy or usefulness, seize all the books and documents which were lying in the premises, and, if they did so, the seizure would be beyond the scope of the authorization. Our learned Brothers have designedly used the words proceeding in question, in order to clarify that material that may possibly be of relevance to the affairs of a third party, unconnected with the raided assessee and beyond the contemplation of the search and seizure exercise, should not be retained. All remaining doubts will be dispelled on a perusal of H.L. Sibal v. CIT: 1975 CTR (P H) 302 in which the Division Bench has, inter alia, analysed Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver: [1967] 66 ITR 664 (SC) into four concomitants (1) The authorized officer must have reasonable grounds for believing that anything necessary for the purpose of recovery of tax may be found in any place within his jurisdiction; (2) he must be of the opinion that such thing cannot be otherwise got at without undue delay; (3)he must record i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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