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TMI Blog2015 (5) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... We have heard Shri Guru Krishna Kumar, learned senior counsel for the appellants and Shri Krishnan Venugopal, learned senior counsel appearing for the respondents. 4. The issues that arise in the present appeal lie within a short circumference. As the warrant of authorization under Section 132, which is required to be founded on a reasonable belief of the authorized official regarding the existence of the conditions precedent to the exercise of the power to issue the same, has been interdicted under Article 226 of the Constitution, the ambit of the power of the High Court to do so may be noticed at the outset. 5. The "classical" notion of the extent of power that the High Court would have in the exercise of its writ jurisdiction to cause such interference is formulated in ITO vs. Seth Brothers 1969 (74) ITR 836 (SC) and Pooran Mal vs. Director of Inspection (Investigation), Income Tax (1974) 93 ITR 505 (SC). The parameters of permissible interference as laid down in the aforesaid two decisions have stood the test of time and continue to hold the field even today. We may, therefore, advert to ITO vs. Seth Brothers (supra) in the first instance. 6. Considering the scope of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er authorising search should have been issued. Again, any irregularity in the course of entry, search and seizure committed by the officer acting in pursuance of the authorisation will not be sufficient to vitiate the action taken, provided the officer has in executing the authorisation acted bona fide.The Act and the Rules do not require that the warrant of authorisation should specify the particulars of documents and books of accounts a general authorisation to search for and seize documents and books of account relevant to or useful for any proceeding complies with the requirements of the Act and the Rules. It is for the officer making the search to exercise his judgment and seize or not to seize any documents or books of account. An error committed by the Officer in seizing documents which may ultimately be found not to be useful for or relevant to the proceeding under the Act will not by itself vitiate the search, nor will it entitle the aggrieved person to an omnibus order releasing all documents seized." 7. In Pooran Mal vs. Director of Inspection (supra) the constitutional validity of Section 132 was under challenge. While negating the said challenge, this Court at page 51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , but the Supreme Court did not accept this submission. The Supreme Court also referred to an earlier decision in S. Narayanappa v. CIT [1967] 63 ITR 219 (SC), to hold that whether grounds for ordering search were sufficient or not is not a matter for the court to investigate. However, the court may examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant for the purpose of the section." 9. The principles that can be deduced from the aforesaid decisions of this Court which continue to hold the field without any departure may be summarized as follows : (i) The authority must have information in its possession on the basis of which a reasonable belief can be founded that- (a) the concerned person has omitted or failed to produce books of account or other documents for production of which summons or notice had been issued OR such person will not produce such books of account or other documents even if summons or notice is issued to him. OR (b) such person is in possession of any money, bullion, jewellery or other valuable article which represents either wholly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation)/DDIT (Investigation). It should be put up to the DIT (Investigation) through the Joint/Additional DIT (Investigation), along with the detailed comments of the latter. The note must be recorded in the secret file, already prepared for this purpose, containing material like, the secret information collected from various sources, statement(s), if any of the informant(s), reference to tax evasion petition(s), if any, surveillance reports and information relating to assessment(s), returns of income, wealth, etc, where available." 12. It will also be required to be noticed that by Notification dated 7.3.2001 administrative approval of the Director General of Income Tax (investigation) was made mandatory before an authorization for search is issued. The said requirement appears to have been brought in order to obviate a malafide search and to avoid undue harassment of the taxpayers. 13. In the present case the satisfaction note(s) leading to the issuing of the warrant of authorization against the respondent-assessee were placed before the High Court. As it would appear from the impugned order the contents thereof were exhaustively reproduced by the High Court. The said satisfac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. and Spacewood Nest P Ltd are also in possession of undisclosed income / assets and books, documents containing details of such unaccounted incomes. It appears that a substantial portion of such unaccounted money is being held in cash also. The Directors are maintaining luxurious life styles out of such unaccounted income. I am also satisfied that these companies and the directors are not likely to furnish the details of such unaccounted incomes and assets if notices were to be issued to them u/s.131 or 142(1) of the I.T. Act. I am therefore satisfied that this is a fit case for exercise of powers vested u/s.132 of the Act to search the persons (M/S. Spacewood Furnishers P Ltd, its associated concerns and Directors mentioned above) and the premises mentioned in the note of the ADIT to seize unaccounted assets and documents and evidences relating undisclosed income." The Director of Income Tax (Investigation), Nagpur thereafter put his signature dated 9.6.2009 on the said note. 16. There is an endorsement to the following effect at the bottom of the said note again under the signature of the Director (Investigation) - "DGIT (Inv) Pune may kindly peruse the above satisfaction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n note(s) placed before the Court. Even if the satisfaction notes alone are to be gone by, the essential details with regard to source of information; the persons who were interrogated and with whom discreet enquiries were made are not disclosed. The necessary information revealed by such interrogation and discreet enquiries with regard to over invoicing, market information etc. are not indicated. Materials like high growth, high profit margins, doubts about international brand and details thereof etc. as mentioned in the satisfaction note(s) are admitted and known facts and therefore could not have induced the requisite belief. The above constitutes the broad basis on which the High Court thought it proper to cause inference with the measures undertaken by the Revenue against the assessee. 21. Before we advert to the specific reasoning of the High Court, one specific aspect of the opinion expressed by the High Court needs to be taken note of inasmuch as the precise position in law in this regard needs to be clarified. The above aspect is highlighted by the following observations of the High Court expressed in paragraph 6 of the impugned order:- "We, however, express that when t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal Director and the Director; the absence of any satisfaction of the Director General who, according to the High Court took the decision to issue the authorization are all seriously flawed. The different steps in the decision making process is lucidly laid down in the instructions contained in the search and seizure manual published by the department, relevant part of which has been extracted above. The steps delineated have been scrupulously followed. Besides we may take note of the fact that the Additional Director was not one of the competent authorities under Section 132 on 8.6.2009 (date of his note) inasmuch as it is by the Finance Act, 2009 effective from 19th August, 2009 that the Additional Director came to be included amongst the authorized officials though with retrospective effect from 1.10.1998. The reading of the relevant part of the satisfaction note of the Director goes to show that on the basis of materials produced satisfaction was duly recorded by him that authorization for search should be issued. The file was put up before the Director General (Investigation) for accord of administrative approval as required by Notification dated 7.3.2001. In fact, the require ..... X X X X Extracts X X X X X X X X Extracts X X X X
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