TMI Blog2013 (8) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... t be disclosed for the purpose of the Act. What is required is some concrete material to enable a reasonable person to form such a belief. It is, of course, true that such belief is a matter of subjective satisfaction of the competent authority. Such subjective satisfaction, however, must be formed on the basis of the material on record and objective assessment of such material and cannot be on the basis of a mere suspicion or apprehension that the income had not been or would not be disclosed for the purpose of the Act - In the result, the petition is allowed. Search and seizure operation is declared illegal and it is hereby quashed. Consequently, seizure of the gold ornaments under panchnama dated 26th July, 2012 is also quashed – Decided in favor of Assessee. - SPECIAL CIVIL APPLICATION NO. 16855 to16857 of 2012 - - - Dated:- 11-2-2013 - AKIL KURESHI AND SONIA GOKANI , JJ. For the Appellant : P.A. Mehd. For the Respondent : Mrs. Mauna M. Bhatt. ORDER:- PER : Akil Kureshi Considering the disputes involved, we have heard learned counsel for the parties for final disposal of the petition. 2. The petitioners have challenged the validity of search and seizur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as faxed to Addl. DIT(Inv.) Chennai on 26/07/12 at about 1:00A.M. Subsequently a warrant u/s132(1) of the Act was executed and the jewellery found from the possession of Shri Laljibhai Soni was seized. The report of Director of Income- tax (Inv.), Chennai was received on 27/07/2012 at 14:39 by FAX. From the course of all the above mentioned proceedings the following discrepancies can be observed : 1. The assessee failed to explain the shortage of the physical stock of gold and cash. The assessee did not give any details as to where the extra cash of Rs. 74,19,152 and gold bullion of 5,386.156 gm was kept. 2. The assessee has not maintained the item wise details in his stock register. Hence it is difficult to verify whether the jewellery found from the possession of Shri Laljibhai Soni, was the same jewellery as reflected in the stock register of the company LKS Bullions(Import and Export) Pvt. Ltd. 3. The discovery of the original lease agreement from the possession of the lessee and not the lessor is quite intriguing because normally the original lease agreement should be with the lessor and not the lessee who has purportedly received such G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere allowed to board the flight. At Chennai, the Income Tax Authorities recorded the statements of petitioner No.2 and other co-passengers. Enquiries were made at the business premises of petitioner No.1 at Ahmedabad and with the Karta of MG-HUF at Neemuch. After collecting materials, satisfaction note was prepared by the competent authority which was duly approved by the two higher authorities before search and seizure operations were authorized. Pursuant to such authorization, the entire quantity of gold ornaments was seized under panchnama dated 26th July 2012. 12. Both sides have presented various factors for and against their cases. In particular, learned counsel for the Revenue has highlighted what, according to him, were the material contradictions and anomalies in the statements of various persons as also in the lease deed entered into between petitioner No.1 and MG-HUF on 14th June 2012 under which allegedly 25 kilos of gold was handed over by MG-HUF to petitioner No.1 Company. He also placed reliance on other factors. 13. To our mind, it is not necessary to deal with such contentions and counter contentions. We would prefer to focus our attention on the fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent authority had to have in consequence of information in his possession, reason to believe that the person in possession of jewellery represents either wholly or partly income or property which has not been or would not be disclosed for the purpose of the Act. In the satisfaction note, the Deputy Director of Income Tax, referred to the background under which the passengers who had landed at Chennai came to be interrogated and their statements were recorded leading to initiation of survey operations under section 133A of the Act at the business premise of petitioner No.1 Company, during which statements of Shri Dipen Soni, son of petitioner No.2 was recorded. Such statements reveal that the gold was received from MG-HUF of Neemuch under an agreement between MG-HUF and petitioner No.1 Company. 14. It is recorded that such lease agreement was found in possession of the lessee instead of the lessor. Further, that there was no security for leasing out 25 kilos of gold "which makes transaction suspicious". It is further recorded that there was no material evidence to prove that the jewelery in question had been actually manufactured from the bullion received from MG-HUF. He reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passengers was carrying gold ornaments along with the certificate issued by petitioner No.1 Company, that such gold ornaments were stock in trade of the Company, that such ornaments were being carried to Chennai and Kolkata for showing samples to the prospective customers. Detailed statement of petitioner No.2, one of the Directors of petitioner No.1 Company was recorded at Chennai itself. In such statement, he at the very outset, gave the version that 25 kilos of gold was received by petitioner No.1 Company from MG-HUF. Statements of various goldsmiths which were recorded by the Income Tax Authorities also supported the version of the petitioners. The records and the books of account maintained by petitioner No.1 Company also matched this version. Vouchers were maintained in detail evidencing the outgoing gold to different goldsmiths and the incoming of the duly prepared gold ornaments from such gold so distributed. Each time, 24 carat gold was shown to have been given, the ornaments were of 22 carat gold by adding necessary quantity of alloys. We have perused such documents. We find that the entries of gold distributed to various goldsmiths matched perfectly with the entries of g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For preparation of the ornaments, the same had to be mixed with alloys and converted into 22 carat purity. In addition to expecting an unreasonable requirement of establishing the identity of the very same gold being used for preparation of ornaments, we also otherwise see no relevance for the purpose of authorization of search. When it was pointed out that the petitioners had maintained voluminous records right from the beginning and when such record was found from the premises of petitioner No.1 Company, immediately upon the survey operation being conducted, we do not see how the competent authority could form a reasonable belief that such gold jewellery had not been or would not be disclosed for the purpose of the Act. 20. We may notice that section 131 of the Act which pertains to the power regarding discovery, production of evidence, etc. gives wide powers to the Department. Under sub section (1) of section 131, various officers of the Income Tax have been, for the purpose of the Act, clothed with the powers as vested in a Court under the Code of Civil Procedure for discovery and inspection and enforcing attendance of any person including any officer of a banking compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta v. Union of India, 194 ITR 32, a Division Bench of the Delhi High Court in connection with section 132(1) of the Act observed as under : The basis of the exercise of the jurisdiction under section 132(1) has to be the formation of a belief and the belief is to be formed on the basis of receipt of information by the authorising officer. 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 on the basis of which the authorising officer can have reason to believe that action under section 132 is called for for any of the reasons mentioned in clauses (a), (b) or (c). When the action of issuance of an authorization under section 132 is challenged in a Court, it will be open to the petitioner to contend that, on the facts and information disclosed, no reasonable person could have come to the conclusion that action under section 132 was called for. The opinion which has to be formed is subjective and, therefore, the jurisdiction of the Court to interfere is very limited. A Court will not act as an appellate authority and examine meticulou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then he would not be liable to show receipt of that money in his income-tax return. Nondisclosure of the same would not attract the provisions of section 132(1)(c). It may be that the opinion of the assessee that the receipt of such amount is not taxable may be incorrect and, in law, the same may be taxable but where the Department is aware of the existence of such an asset or the receipt of such an income by the assessee, then the Department may be fully justified in issuing a notice under section 148 of the Act, but no action can be taken under section 132(1)(c). An authorisation under section 132(1) can be issued if there is a reasonable belief that the assessee does not want the Income-tax Department to know about the existence of such income or asset in an effort to escape assessment. Section 132(1)(c) has been incorporated in order to enable the Department to take physical possession of those movable properties or articles which are or represent undisclosed income or property. The words "undisclosed income" must mean income which is liable to be taxed under the provisions of the Income-tax Act but which has not been disclosed by an assessee in an effort to escape assessment. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is of the above decisions, it emerges that mere possession of money, bullion, jewellery or such valuable article or thing per-se would not be sufficient to enable the competent officer to form a belief that the same had not been or would not be disclosed for the purpose of the Act. What is required is some concrete material to enable a reasonable person to form such a belief. It is, of course, true that such belief is a matter of subjective satisfaction of the competent authority. Such subjective satisfaction, however, must be formed on the basis of the material on record and objective assessment of such material and cannot be on the basis of a mere suspicion or apprehension that the income had not been or would not be disclosed for the purpose of the Act. 28. The decisions referred to by the counsel for the Revenue were rendered in different fact situations. In the case of Neesa Leisure Ltd (supra) a Division Bench of this Court upheld the search operations when it was found that there was sufficient material enabling the competent authority to form such a belief. So also were the facts in case of Dipin G. Patel (supra) wherein, the Division Bench having perused the satisfa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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