TMI Blog2013 (2) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... to order the search and seizure. Department was justified in having the reasons to believe that certain documents and other things had been secreted in the premises in question and that they would be relevant, in respect of the alleged evasion of payment of income-tax, said to be payable by the petitioners. Further, the authority concerned had also the reason to believe that such documents and things would not be produced by the persons concerned, in the normal course, to enable the respondent-Department to conduct necessary inquiries in the matter. It is also noted that the authority concerned, who had issued the search warrants, had the necessary information from the pre-search enquiries and from the available income-tax records. Further, it is not in dispute that it would be open to the petitioners to raise all the grounds available to them in defending themselves during the enquiry and in the subsequent proceedings that may be initiated against them, based on the materials seized during the search. It would also be open to them to prove, by way of sufficient evidence, that there was no evasion of payment of income-tax, as alleged by the respondents. There is no doubt that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . During the search proceedings, the respondent department had seized a number of documents. They had also found a sum of Rs.10,82,850/-, in cash, in the premises of Dr. P.G. Viswanathan. They had seized a sum of Rs. 10,00,000/- from the said premises. On 8.11.2002, the department had found a sum of Rs. 2,20,560/- in the premises of Vikram Hospital. However, they had not seized the same. The respondent had also found 4303 grams of jewelry in the premises of Dr. P.G. Viswanathan and in the lockers maintained by his family members. The search conducted by the respondent department is arbitrary, illegal and invalid in the eye of law as none. None of the conditions specified in Section 132(1) of the Income Tax Act, 1961, had existed, for the issuance of the warrants, for taking action under Section 132 of the said Act. 4. The writ petition, in W.P.No.1279 of 2005, had been filed by one K. Viswanathan @ Kumar, an employee of Vikram Hospital, situated at No.69, West Venkatasamy Road, R.S. Puram, Coimbatore. V. Muthulakshmi, the writ petitioner, in W.P.No.20074 of 2003, is the proprietrix of the said hospital. 5. The writ petitions, in W.P.Nos.1280 and 1281 of 2005, had been filed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity, without having the jurisdiction to do so. 4. In the counter affidavit filed on behalf of the respondents, in W.P.No.20073 of 2003, it has been stated that the petitioner had been filing the income tax returns, from the assessment year, 1990-91, onwards. It has been further stated that, during the course of the search, at the premises of the petitioner, a sum of Rs.10,82,850/- had been found out of which a sum of Rs.10,00,000 had been seized. 5. It had been further stated that the petitioner, being a medical practitioner, was required to maintain certain books of accounts and documents, as specified in sub-Rule 2 of 6F of the Income Tax Rules, 1962, including a cash book, a journal. If the accounts had been maintained according to the merchantile system of accounting, a ledger, carbon copies of bills, serially numbered and the original bills and receipts in respect of the expenditures, should have been maintained. The cash book should have a record of all cash receipts and payments kept and maintained, on a day-to-day basis. During the search, it was found that the prescribed registers had not been maintained, manually, and even the computerized accounts had been found to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of tax. 8. It had also been stated that the warrant issuing authority had applied its mind, fully, before issuing the warrants for the searches and seizures. It is a matter of record that the authority concerned had formed its belief, based on the materials collected in the course of its pre-search enquiry and after due application of mind, as per the requirements of Section 132 of the Act. 9. It has been further stated that, under Section 132(b)(1) of the Act the petitioner had the right to explain before the concerned assessing officer, the nature of the possession of the sources of acquisition of cash seized during the search. If the explanation submitted by the petitioner shows sufficient reasons for the availability of the cash, the assessing officer has the power to release the seized amount, with the prior approval of the Chief Commissioner. Further, the petitioner would also have the opportunity of explaining the sources of cash in the course of the block assessment proceedings, under chapter XIV B of the Act. The petitioner would also have the right of appeal to the Commissioner of Income Tax (Appeals), the Income Tax Appellate Tribunal, if it is found to be necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, under Article 226 of the Constitution of India, to prohibit the action initiated by the authority concerned. The existence of an alternative remedy is not always a sufficient reason for refusing the relief sought by the petitioner to prohibit an authority acting without jurisdiction from continuing such action. The expression reason to believe, in section 34(1)(a) of the Income Tax Act, 1922, postulates belief and the existence of reasons for such belief. The belief must be held in good faith and it cannot be merely a pretence. The expression does not mean a purely subjective satisfaction of the officer concerned. 12.2 In S. Narayanappa and others v. Commissioner of Income-tax, Bangalore, AIR 1967 SC 523, it has been held that the expression 'reason to believe', in Section 34 of the Income Tax, 1922, does not mean a purely subjective satisfaction of the officer concerned. It would be open to the court to examine the question as to whether the reasons for the belief has a rational connection or a relevant bearing to the information available and that the formation of the belief is not based on extraneous or irrelevant information. 12.3 In The Income-tax Officer, Calcutta a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e introduced, it was confined only to stolen goods, but its usefulness soon forced its recognition and was, from time to time, extended to such like searches and seizures. It is true that sometimes the over-zealousness of the authorities led to its abuse and it appears that for this reason the Fourth Amendment was introduced in the American Constitution in recognition of the fact that a man's house is his castle not to be invaded by any general authority to search and seize his goods and papers. The only legal means that can be applied to search a person's abode is a search warrant and, in the absence thereof, neither any private person nor any officer can invade the privacy of a home and subject its occupants to indignity. It is, therefore, imperative that seizure should not be allowed to exceed the limits of absolute necessity and the over-zealousness of the searching officers is not permitted to cross the permissible limits. Such provisions must, therefore, be necessarily construed in the light of this background and when two alternatives, namely, to seize the books or place marks of identification and leave them with the persons concerned are available, the seizure will be stru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il where the action is wholly without jurisdiction and results in infringement of any fundamental right of the petitioners." 12.7 In Dr. Nand Lal Tahiliani v. Commissioner of Income-Tax [1988] 39 Taxman 127 (ALL), it had been held as follows: "In the instant case, the information given by the complainant was of a very general nature. What could have resulted in action against the petitioner under section 132 was a reasonable belief that he was in possession of any money, bullion or jewellery or any other valuable article representing wholly or partly income or property which had not been disclosed or would not be disclosed, and not the prima facie satisfaction that the petitioner was having a roaring practice and charging a high rate of operation fees. Further, this prima facie satisfaction had been arrived at on no material apart from the general complaint received as far back as 1985. Living in posh house or having a high standard of living alone cannot constitute a base for 'reasonable belief. Reasonable belief exists if the information is not only trustworthy but reasonable and sufficient in itself to warrant the conclusion that provisions of section 132 are being violated. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding counsel left us not only dazed but shocked....... Prakash, J Privacy is a very valuable right of a civilised society and violation thereof is not permissible except by authority of law and, therefore, the department should not only be slow but slowest in acting upon the information being given by an informer. Before acting upon the information, source of knowledge of an informer should be fully tested and unless the departmental authority make themselves doubly sure of the correctness of the information and the creditworthiness of informer, they should be loath to act upon information. A word of informer should not be taken for granted. How, in what manner and from whom information has been gathered, all this should be made clear beyond an iota of doubt by thorough examination of the informer. No action should be taken on information based on surmises or guess. 3.......... Estimate being made by an informer cannot tantamount to 'information' within the meaning of section 132(1). If estimate alone can constitute information, then why to act upon the estimate of an informer, because that sort of estimate can be made by the departmental authorities themselves, looking to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote recorded by him. The opinion or the belief so recorded must clearly show whether the belief falls under sub-clause (a), (b) or (c) of section 132(1). No search can be ordered except for any of the reasons contained in sub-clause(a), (b) or (c) . The satisfaction note should itself show the application of mind and the formation of the opinion by the officer ordering the search. If the reasons which are recorded do not fall under clause (a),(b) or ) then an authorization under section 132(1) will have to be quashed. As observed by the Supreme Court in ITO v. Seth Bros. [1969] 74 ITR 836: "Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorises it to be exercised. If the action of the officer issuing the authorisation or of the designated officer is challenged, the officer concerned must satisfy the Court about the regularity of his action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the Court. If the conditions f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious opportunities. Similarly, in the warrant of authorisation, it was claimed by the Director of Inspection (Investigation) that 'information had been laid before' him and that on the consideration thereof, he had reason to believe that 'if a summons under sub-section(1) of section 131 or notice under sub-section (4), was issued to the assessee to produce or cause to be produced, books of account or other documents.... he would not produce or cause to be produced, such books of account or other documents'. It was also observed that the 'assessee was in possession of money, bullion, jewellery or other valuable articles....' Clearly there was no information with the department and the conclusions were wholly unfounded. Factually, the Director of Inspection (Investigation) had no information available to him on 'record'. There was no material on the basis of which he could have reasons to believe that the conditions precedent for proceeding under section 132(1) were satisfied. The department, in fact, conceded, that there was no information, document or evidence beyond the satisfaction note. Admittedly, the 'note' did not constitute 'information' as contemplated under the law. It o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 226 though on account of availability of statutory remedies the Courts normally do not entertain writ petitions but where an action is wholly without jurisdiction and results in the infringement of any fundamental right, the plea of alternative remedy is of no avail. The instant case did fall in that category. Hence, the impugned authorisation issued under Section 132 and all further actions/proceedings in consequence thereof, including the block assessment, were quashed." 12.12. In Dr. Sushil Rastogi v. Director of Investigation, IT Dept. [2003] 128 Taxman 217, it had been held as follows: "The reasons recorded under section 132 were only generalities based on rumours. The decision of the same High Court in Dr. Nand Lal Tahiliani v. CIT [1988] 170 ITR 592, and those of the Supreme Court in other cases, relied upon by the petitioner, squarely applied to the facts of the instant case. In view of that decision, the action under section 132 was clearly illegal and it could not be said that the Commissioner had reason to believe that the petitioner was concealing his income." 12.13. In Union of India v. Azadi Bachao Andolan, [2003] 132 Taxman 373, it had been held as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Director Generals of Income-tax (Investigation), had been instructed that tax payers, who are professionals of excellence, should not be searched without there being compelling evidence and confirmation of substantial tax evasion. 12.17. In Pradip J.Mehta v. Commissioner of Income-Tax, AIR 2008 SC (Supp) 1788, it had been held as follows: "28. This Court in a catena of decisions, has held that the circulars issued by the Department are binding on the Department. See: K.P. Varghese v. ITO [(1981) 4 SCC 173], UCO Bank v. CIT, W.B. [(1999) 4 SCC 599], Collector of Central Excise Vadodra v. Dhiren Chemical Industries [(2002) 2 SCC 127], etc. In all these cases it has been held that the circulars issued under the Income Tax Act or Central Excise Act are binding on the Department." 13. The learned counsel appearing for the petitioner had further submitted that, for initiating search proceedings, there must be sufficient information and it must not only be authentic but should also be capable of giving rise to the inference that the person was in possession of undisclosed income, as held by the Division Bench of the Allahabad High Court, in DR. NAND LAL TAHILIANI v. COMMISSIONE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oney etc., which has not been or would not be disclosed for the purpose of the Act. Even though it is well settled that, while the sufficiency or the otherwise of the information cannot be examined by the Court under its writ jurisdiction, the existence of the information and its relevance to the formation of the belief is open to judicial scrutiny, because it is the foundation of the condition precedent for the exercise of the serious power of search available in the authorities concerned for searching a private property or person, in order to prevent violation of the privacy of a citizen. 17. It has been further stated that the expression 'reason to believe' has been explained in the various decisions of the Apex Court and the High Courts, while dealing with Sections 132 and 148 of the Income Tax Act, 1961. It has been held that the words 'reason to believe' means that a reasonable man, under the given circumstances, would form a belief, which will impel him to take action under the law. The formation of the opinion has to be in good faith and not on a mere pretence. For the purpose of Section 132 of the Act, there has to be a rational connection between the information or mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authorities concerned, for arriving at the belief necessary for the issuance of the warrant of search and seizure. 21. In SPACEWOOD FURNISHERS (P) LTD., v. DIRECTOR GENERAL OF INCOME TAX (INVESTIGATION) PUNE, [2012] 17 TAXMANN. COM 114 (BOM.), the Bombay High Court had observed that the satisfaction of the authorities concerned must be based upon contemporaneous materials available on record. 22. In L.R.GUPTA v. UNION OF INDIA [1991] 59 TAXMAN 305 (DELHI), the Delhi High Court had observed that the expression 'information' must be something more than a mere rumour or a gossip or a hunch. There must be some material which can be regarded as information, which must exist on the file of the department, on the basis of which the authorising officer can have reason to believe that the action under section 132 is called for, for any of the reasons mentioned therein. However, the opinion, which had been formed by the authority concerned is a subjective matter, the jurisdiction of the court to interfere in such matters is very limited. The Court would not act as an appellate authority and examine the materials and the information available on record meticulously, in order to decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation), Chennai, the first respondent herein, is a simultaneous process. The satisfaction note of the department is not a public document, as per the provisions of Section 24, read with item 16 of the Right to Information Act, 2005. It has also been stated that the provisions of Section 147 of the Income Tax Act, 1961, cannot be viewed in tandem, for the purpose of Section 132 of the said Act. For the purpose of reopening of the assessment, as per the provisions of Section 147 of the Income Tax Act, 1961,the formation of the reason to believe that certain income had escaped the assessment should be recorded by the assessing officer, prior to the issuance of the notice, under Section 148 of the Act. Whereas, the recording of reasons is not explicitly mentioned in the provisions of Section 132 of the Act. The said position is made clear by the Taxation Law (Amendment) Act, 1975. It is a well settled position in law that the non mentioning of the reasons shall not make the proceedings invalid or void, ab initio. 26. It has been further stated, by the learned counsels appearing for the respondents that, for the purpose of search and seizure, the information collected or obtained by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions relating to search and seizure, in Section 132 of the Income Tax Act and Rule 112 of the Income Tax Rules, cannot be regarded as violative of Articles 19(1)(f) and (g) of the Constitution of India. 29. The learned counsel had also relied on the decision of the High Court of Bombay, in HEMENDRA RANCHHODDAS MERCHANT, MUMBAI v. THE DIRECTOR OF INCOME TAX AND OTHERS, wherein, it had been held that the formation of the reason to believe is the foundation of the authorisation, which is issued under section 132 of the Income Tax Act, 1961. The ambit and jurisdiction of the court is limited to a determination of whether the authorities concerned had a reason to belief, within the meaning of Section 132(1). The sufficiency of the reasons cannot be questioned by the court, in the exercise of its writ jurisdiction, under Article 226 of the Constitution of India. 30. The learned counsel had also relied on the decision of the Gujarat High Court, in DIPIN G.PATEL v. DIRECTOR GENERAL OF INCOME TAX (INVESTIGATION) AND OTHERS [2011] 339 ITR 636 (GUJ), in stating that sufficient materials were available for the authorities concerned, for the issuance of authorisation of search. If nece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interfere is very limited and that the Court will not act as an appellate authority and examine meticulously the information in order to decide for itself as to whether action under Section 132 was called for. 53. The only other aspect which the Court can examine would be whether the reason to believe was tangible in law and if the information or the reason had no nexus with the belief or there was no material or tangible information for the formation of the belief, only then an action under Section 132 would be regarded as bad in law. 54. Applying the above well laid down principles, when we examine the case on hand, there was an information and the first respondent who after collecting the information by recording it in the form of statement, approached the competent authority for necessary authorisation to effect a search and thereafter made a search on the respondent and finding that the respondent was categoric in his information revealed earlier and having found the gold jewellery weighing 10 kgs held by him proceeded to seize the same under Section 132. 55. We are therefore convinced that there was absolutely no flaw in the action taken by the first appellant in effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said section. Thus, it is clear that extraneous reasons cannot be the basis for the issuing of an order of search and seizure by the authority concerned. 38. It had been further contended that the information, based on which an order for search and seizure is issued, must be something more than a mere rumor, a gossip or a hunch. There should be materials available on record, based on which a search and seizure could be ordered. The reason to believe that a search is necessary must be tangible in law and it should have a rational nexus with the belief formed in the mind of the authority concerned. If such reasons are available, the order for search and seizure cannot be said to be arbitrary and illegal. It is also noted that the respondent department had reasons to believe, based on the available information, that there was a necessity to issue an order for search and seizure, in respect of the premises in question. The said contention raised on behalf of the petitioners that there were no materials available on record, for the respondent department to form such an opinion, cannot be countenanced. 39. It is clear, from the decisions relied on by the learned counsel appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n based on the materials available before the authority concerned. As such, it would not be appropriate for this Court to analyse, in detail, whether the decision of the respondent department to issue the warrants of search and seizure is perfect or logical in nature. It would be sufficient if there were certain materials, which could have prompted a prudent man to arrive at such a conclusion. When serious allegations of tax evasion by the petitioners, to the tune of several lakhs of rupees, have been made, it would not be appropriate for this Court to scuttle the process by placing undue emphasis on the hyper technical pleas put forth on behalf of the petitioners, with regard to the procedural formalities in the issuance of the search warrants. 43. From the decisions relied on by the learned counsel appearing on behalf of the petitioners there is no doubt that the authority concerned, who issues the warrant for searches and seizure, ought to have the necessary materials before him to have a reason to believe that an order for search and seizure is warranted. However, it is clear that if certain materials are available before the authority concerned to arrive at his conclusion, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on formed by the respondent department that there was a necessity to issue the warrants of search, to search the premises concerned, cannot be held to be arbitrary or void, as prayed for by the petitioners, in the present writ petitions. 46. There is no doubt that the personal liberty and the privacy of a citizen stands on a high pedestal in the scheme of things contemplated under the provisions of the Constitution of India. However, when certain private interests of an individual clashes with the common interests of the society at large, this Court would have to carefully weigh the same and arrive at its conclusions, with utmost care, keeping in mind the larger interests of the society, especially, when it is likely to have ramifications of a serious nature, relating to its economic health and welfare. However, it does not mean that the privacy of an individual could be infringed with impugnity. Therefore, it is of paramount importance that the authority concerned, who exercises the power vested in him by a statute, should take utmost care and exercise sufficient caution while making the decision to issue the warrant to search the premises of the persons concerned and to seize t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
