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Harbhajan Singh Chadha And Others Versus Director of Income Tax And Others

2015 (4) TMI 14 - ALLAHABAD HIGH COURT

Validity of Search and seizure operations - warrant not issued in the name of petitioners - Held that:- The jurisdiction to assess the undisclosed income, if any, of the petitioners' on the basis of the search vests in the assessing officer by virtue of the provisions of Section 158BA of the Act in case where a search under Section 132 of the Act is initiated. Such assessment is to be carried out in respect of undisclosed income of a person, who was not issued a warrant of authorisation by invok .....

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d on 1st February, 2012. The contention of the petitioners that there was no material or information with the authorising authority to believe that there was money, jewellery, etc. in the lockers and, therefore, the action of the respondents was wholly illegal is bereft of merit. It may be noted here that only a bald assertion has been made in para 59 of the writ petition which paragraph has been sworn on legal advice. Such assertion based on legal advice without making the foundational assertio .....

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tances, information received on the first date of the search by itself caused a reasonable belief for issuance of the warrant of authorisation against the petitioners' for search of their lockers. Such search conducted and the lockers seized on 2nd February, 2012, on the basis of the search conducted on 1st February, 2012 was perfectly valid. - Decided against assessee. - Civil Misc. Writ Petition (Tax) No. 451 of 2012 - Dated:- 27-3-2015 - Hon'ble Tarun Agarwala And Hon'ble Dr. Satish C .....

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ccount and other documents so seized from the petitioners premises including bank lockers should be released. The facts leading to the filing of the writ petition is, that a warrant of authorization dated 31st January, 2012 under Section 132 of the Act was issued by the Director of Income Tax, Intelligence New Delhi, respondent no.1. This warrant of authorization under Section 132 of the Act was in the name of Gurdeep Singh Chaddha (Ponty), Rajendra Singh Chaddha, Hardeep Singh Chaddha, all sons .....

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and 3. Petitioner nos.4, 5 and 6 are wives of petitioner nos.1, 2 and 3. Petitioner no.7 is the son of petitioner no.2 and petitioner no.8 is the wife of petitioner no.7. On the basis of the search conducted on 1st February, 2012 and the materials seized, the respondent issued a letter to the banks on the basis of which the bank accounts and lockers were seized/attached on 2nd February, 2012 based upon consequential warrant of authorisation under Section 132 of the Act dated 1st February, 2012 i .....

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gh, Late Gurbax Singh and Surjeet Singh, who are sons of Late Gurbachan Singh. Over a period of time a residential house was constructed and, it is alleged, that the petitioners started residing on the first floor. Other portions of the residential building was occupied by other co-owners. The petitioners contended that there is no partition by metes and bounds of the premises in question between the co-owners and, by a mutual arrangement, each co-owner is residing and living in their residentia .....

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earned Senior Counsel, Sri Pramod Agarwal and Sri Suyash Agarwal, the learned counsel for the petitioners and Sri Bharat Ji Agarwal, the learned Senior Counsel alongwith Sri Ashok Kumar, the learned counsel for the Income Tax department. Sri S.P. Gupta, the learned Senior Counsel contended that the warrant of authorization was not issued in the name of the petitioners and, therefore, the search and seizure operations carried out at their premises was wholly illegal, void and liable to be quashed .....

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n the warrant of authorization. It was urged that based on this illegal search, the petitioners' bank accounts and lockers were seized or attached illegally which action was also liable to be quashed by the Court as no search warrant was served by the respondents relating to lockers of the petitioners. It was urged that there was no material or information on the basis of which the lockers of the petitioners were seized and, therefore, the action of the respondents was wholly illegal and wit .....

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Income Tax (Investigation) and others, 264 ITR 472. On the other hand, the learned Senior Counsel for the department, Sri Bharat Ji Agarwal justified the action of the department in conducting the search at the premises mentioned in the warrant of authorization. The learned Senior Counsel contended that the search was conducted at premises No.455, Civil Lines, Moradabad which is one composite property and has not been partitioned by metes and bounds nor was there anything to show that each pers .....

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Civil Lines, Moradabad as well as the business premises at Chaddha Palace, Prince Road, Moradabad on the basis of a warrant of authorization dated 31st January, 2012 after recording the satisfaction separately. The learned Senior Counsel submitted that the jewellery seized was released subsequently on 16th February, 2012 upon taking a bank guarantee. It was further contended that the petitioners have a business link with Gurdeep Singh Chaddha (Ponty) in a company named GSR Granites (P) Ltd. in w .....

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nd others, 155 ITR 166 and Takshila Educational Society Vs. Director Of Income-Tax (Investigation) and others, 272 ITR 274. Having heard the learned counsel for the parties, we find that a search is necessary to secure evidence, which is not likely to be made available by issue of summons. Tax authorities have to resort to search and seizure when there is evidence of undisclosed documents or assets which have not been and would not be disclosed in ordinary course. Section 132 of the Act read wit .....

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income or property and bring it to assessment. However, a search which is conducted under Section 132 of the Act is a serious invasion into the privacy of a citizen. Section 132(1) of the Act has to be strictly construed and the formation of the opinion or reason to believe by the Authorising Officer must be apparent from the note recorded by him. The opinion so recorded must clearly show whether the belief falls under clause (a), (b) or (c) of Section 132(1) of the Act. No search can be ordere .....

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Section 132(1) of the Act, there must be "information" with the authorising authority relating to two matters, namely, that any person is in possession of money, etc. and secondly, that such money, etc. represents either wholly or partly income or property, which has not been or would not be disclosed for the purposes of the Act. The search would be valid if the authorising authority had reasonable ground for believing that a search was necessary and that he further believes that the r .....

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ion under Section 132, it is incumbent upon the authority to collect relevant material on the basis of which, the authority can form an opinion that he has reasons to believe that an action under Section 132 of the Act would be justifiable. The expression "information" must be something more than a mere rumour, gossip or 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 h .....

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ch warrant should be called upon to disclose information on the basis of a mere denial by the petitioner of a valid information in the possession of the department would frustrate the whole scheme of Section 132 of the Act. Only where the petitioner furnishes adequate and cogent material in support of his denial of a valid information that the court can justifiably call upon the department to disclose the information. We may make it clear that the disclosure of the material or information to the .....

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that stage, relevant material would be disclosed. The words "has reasons to believe" as provided in Section 132(1) of the Act postulates a belief and existence of reasons for that belief. The belief must be held in good faith: it cannot be a mere pretence. Such belief should not be based on mere suspicion but must be based on information which is in the possession of the authorising authority. The formation of the belief within the meaning of Section 132(1) is a condition precedent to .....

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r and search any building, place, vessel, vehicle, etc. where he has reasons to believe that such books of accounts, documents, money, bullion, jewellery or other valuable articles or things are kept. The authorising authority is under law expected to sign a warrant of authorisation, which is complete in all aspect. The warrant of authorisation should be in the name of the persons whose premises, etc. are sought to be searched. When it is not clear whether one or more persons are in occupation o .....

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names and, therefore, the search conducted at their premises was wholly illegal and without jurisdiction. In the first blush, the proposition appears to be attractive but on a closer scrutiny, we find that the contention cannot stand the test of scrutiny. Admittedly, the warrant of authorisation under Section 132 of the Act was issued in the name of Gurdeep Singh Chaddha (Ponty), Rajendra Singh Chaddha, Hardeep Singh Chaddha, all sons of Late Sri Kulwant Singh and brother of petitioner no.1 as w .....

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petitioners' cannot question the validity or legality of the issuance of the warrant of authorisation in the name of Gurdeep Singh Chaddha (Ponty) and others, on the basis of which, search and seizure operations was conducted at the premises no.455, Civil Lines, Moradabad. We are also of the opinion that the petitioners' cannot allege that there was no "information" or "reasons to believe" warranting the issuance of the warrant of authorisation under Section 132 of th .....

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rial or existence of information with the authorising authority, which led the authorising officer to have a reason to believe that an action under Section 132 of the Act was called for any of the reasons mentioned in clause (a), (b) or (c) of Section 132 of the Act. We are of the opinion that persons mentioned in the warrant of authorisation alone can contend that on the facts or information disclosed, action under Section 132 of the Act was wholly illegal. The petitioners' contend that the .....

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gh, Late Gurbax Singh and Surjeet Singh, who are all sons of Late Gurbachan Singh. We find that the property is still joint and no partition by metes and bounds has taken place. The petitioners' themselves admit that there is a common entrance, common car parking and a common guard room. We find that the statements of the petitioners were recorded under Section 132(4) of the Act which does not disclose that the premises no.455, Civil Lines, Moradabad was partitioned by metes and bounds. Once .....

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in respect of the petitioners' premises, the search and seizure operations would not be held to be illegal and we are of the opinion that the provisions of Section 158BD of the Act would be attracted. For facility, the provision of Section 158BD is extracted hereunder:- " Undisclosed income of any other person. 158BD. Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under Section 132 o .....

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titioners' on the basis of the search vests in the assessing officer by virtue of the provisions of Section 158BA of the Act in case where a search under Section 132 of the Act is initiated. Such assessment is to be carried out in respect of undisclosed income of a person, who was not issued a warrant of authorisation by invoking the provisions of Section 158BD. We are of the opinion that even though no warrant of authorisation was issued against the petitioners' under Section 132 of the .....

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