TMI Blog2015 (5) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... een repeatedly stressed upon by this Court so as to ensure accountability and responsibility in the decision making process. The necessity of recording of reasons also acts as a cushion in the event of a legal challenge being made to the satisfaction reached. Reasons enable a proper judicial assessment of the decision taken by the Revenue. However, the above, by itself, would not confer in the assessee a right of inspection of the documents or to a communication of the reasons for the belief at the stage of issuing of the authorization. Any such view would be counter productive of the entire exercise contemplated by Section 132 of the Act. It is only at the stage of commencement of the assessment proceedings after completion of the search and seizure, if any, that the requisite material may have to be disclosed to the assessee. At this stage we would like to say that the High Court had committed a serious error in reproducing in great details the contents of the satisfaction note (s) containing the reasons for the satisfaction arrived at by the authorities under the Act. The view expressed by the High Court with regard to the satisfaction note(s); the alleged absence of a fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent years 2004-05 to 2009-10 was sought to be initiated by notices issued under Section 153A of the Income Tax Act, 1961 (hereinafter referred to as the Act ) following a search made under the provisions of the Act. The same has been interdicted by the High Court of Delhi by interfering with the warrant of authorization for the search issued under Section 132 of the Act and the consequential search made between 19th June, 2009 to 21st July, 2009. Aggrieved, the Revenue has filed this appeal by special leave under Article 136 of the Constitution. 3. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liable to be quashed. But where power is exercised bona fide, and in furtherance of the statutory duties of the tax officers any error of judgment on the part of the Officers will not vitiate the exercise of the power. Where the Commissioner entertains the requisite belief and for reasons recorded by him authorises a designated officer to enter and search premises for books of account and documents relevant to or useful for any proceeding under the Act, the Court in a petition by an aggrieved person cannot be asked to substitute its own opinion whether an order 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 off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial on which the officer has reasons to believe that any documents will be useful for or relevant to any investigation need not be disclosed in the search warrant; such material may be secret, may have been obtained through intelligence, or even conveyed orally by informants. In the said case, the petitioner contended that, if the court is going to look into the file produced on behalf of the officer who authorized the search, it must be disclosed to the petitioner so that the petitioner can controvert any false or wholly unreasonable material set out in the file , 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 witho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power under Section 132 of the Act in respect of the territorial areas falling within the jurisdiction of the CCIT Nagpur and CCIT Nasik in the State of Maharashtra. 11. Notice must also be had of certain provisions contained in the Search and Seizure Manual published by the Directorate of Income Tax with regard to the preparation of satisfaction note and issuing of warrant of authorization under Section 132 of the Act. Para 2.38 of the aforesaid Manual being relevant may be usefully extracted : 2.38 The satisfaction note should ordinarily be initiated by the ADIT (Investigation)/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 dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts of the case I am satisfied that M/s. Spacewood Furnishers P Ltd is suppressing its income substantially. I am also satisfied that the company is not likely to produce the details of such unaccounted income and the books of accounts and documents containing details of such unaccounted incomes and assets if notices were to be issued to it u/131 or u/s.142(1) of the I T Act. It is also reliably learnt that the Directors S/Shri. Kirit Joshi and Vivek Deshpande and associated concerns M/S. i3Space Systems (India) P Ltd., Spacewood Exports P ltd., Spacewood Hongkong P Ltd., i3space Hongkong Ltd. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h warrant, thereby vitiating the authorization issued. 19. The High Court further held that each of the satisfaction notes was in loose sheets of paper and not a part of a single file maintained in proper sequence and order with due pagination. Therefore, according to the High Court, it is possible that the file containing the satisfaction note(s) was manipulated and thus is of doubtful credibility. 20. The High Court also held that the materials indicated by the department in the counter affidavit and the additional affidavit filed before it were at variance with what was revealed by the satisfaction 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 there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the aforesaid part of the exercise undertaken by the High Court which we will understand to be highly premature; having the potential of conferring an undue advantage to the assessee thereby frustrating the endeavor of the revenue, even if the High Court is eventually not to intervene in favour of the assessee. 24. Having clarified the above issue in the manner indicated, we may turn to the reasons assigned by the High Court for its decision. The view expressed by the High Court with regard to the satisfaction note(s); the alleged absence of a final decision to issue the authorization at the level of the Additional 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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