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Rich Udyog Network Ltd. Versus Chief Commissioner of Income Tax And Others

Conversion of survey under Section 133A into a search under Section 132 - Held that:- The contention that the mere fact that cash was found could have been utilized in assessment proceedings and that the same cannot be a ground to convert the survey into a search operation under Section 132 of the Act cannot be accepted. We find that the petitioner's had not brought on record the statement of the Director, who was examined during the course of search but upon perusal of the original record, we f .....

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summons under Section 131 or notice under Section 142 of the Act was issued. - In this regard, we find that the Central Board of Direct Taxes has issued Instructions dated 30th September, 2014 indicating that where cash amounting to more than ₹ 10 lacs is found at the premises during the survey under Section 133A of the Act, the Director of Income Tax (Investigation) having territorial jurisdiction over the survey should be intimated to examine the facts for taking recourse to Section .....

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orward during the course of survey, a satisfactory note was placed before the competent authority, who after considering the material recorded his satisfaction. Such satisfaction recorded was in accordance with the provision of Section 132 of the Act.- Decided against assessee. - Civil Misc. Writ Petition (Tax) No. 458 of 2015 - Dated:- 7-7-2015 - Hon'ble Tarun Agarwala And Hon'ble Surya Prakash Kesarwani,JJ. ORDER (Per: Tarun Agarwala, J.) The petitioner is a company incorporated under .....

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under the search. The petitioner contends that the respondents arrived at their registered office at around 12.00 noon on 28th April, 2015 for the purpose of conducting a survey under Section 133A of the Income Tax Act and during the course of survey seized cash amounting to ₹ 64,56,970/- and also impounded the books of account in the absence of any Panchas. The petitioner's contended that the respondents deposited the cash in the petitioner's bank account on 28th April, 2015 at 5 .....

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the aforesaid factual position, we have heard Sri Shubham Agarwal, the learned counsel for the petitioner and Sri Ashok Kumar, the learned counsel for the income tax department at length. By an earlier order of the Court, the income tax department was directed to produce the original records relating to the recording of the satisfaction for the purpose of conducting a search under Section 132. The said record was produced, which the Court has perused. The contention of the petitioner is, that t .....

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other articles, which represented undisclosed income. The learned counsel contended that the conditions mentioned in Section 132 of the Act must exist and is a mandatory requirement for a valid search. The learned counsel further submitted that merely because some cash was found would not entitle the authorities to convert the survey into a search operation. The learned counsel submitted that the cash so found, at best, could be utilized in the assessment proceedings but could not become a grou .....

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i Vs. Commissioner of Income Tax and others, 170 ITR 592 and Director General of Income Tax (Investigation), Pune and others Vs. Spacewood Furnishers Pvt. Ltd. and others, 2015 ISI B-716 (SC). Sri Ashok Kumar, the learned counsel for the department submitted and admitted that initially a survey was conducted under Section 133A of the Act, which was subsequently converted into a search under Section 132 after recording the satisfaction of the competent authority and after obtaining administrative .....

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re the evidence, which was not likely to be made available by issue of summons and, therefore, the tax authorities had to resort to search and seizure in order to secure the evidence of undisclosed income, which would not have been disclosed in ordinary course. The learned counsel consequently, justified the action of the department in conducting the survey at the premises in question. In the light of the aforesaid, the Court directed the department to produce the original records in order to fi .....

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tion 133A of the Act at the business premises. The survey action under Section 133A was approved by the Competent Authority. Accordingly, the survey team consisting of Income Tax Officers and other authorised officers reached the premises and commenced the survey action under Section 133A of the Act at around 12.00 noon on 28th April, 2015 after showing the authorisation under Section 133A of the Act, which was duly acknowledged by the petitioner's Director. During the course of the survey, .....

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he premises in question, which he failed to produce. Sri Gupta was also asked to explain various entries in the documents where the assessee was taking cash from various parties and returning the money by cheque to the same parties. There were also entries, which showed that assessee was taking payment in cheque and returning the money after taking his commission in cash. These facts were confronted to Sri Gupta and he failed to provide any explanation and only stated that Sri Shaswat Agarwal, M .....

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as taking cognizance of and, accordingly, a satisfaction note was prepared to convert the survey into a search. This satisfaction note was put up before the Director of Income Tax (Investigation), who after obtaining administrative approval from the Director General of Income Tax (Investigation), Lucknow issued a warrant of authorisation under Section 132(1) of the Act to seize the unaccounted cash and documents from the premises of the petitioner and other companies. We find from the record tha .....

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nexed to the writ petition, before commencing the search, two independent witnesses were called to become witnesses. Having heard the learned counsel for the parties, we find that a search is required under the Act in order to secure evidence, which is not likely to be made available by issuance of a summon. The 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 .....

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132(1) of the Act. No search can be ordered except for any of the reasons contained in 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 (c), in that event, the authorisation issued under Section 132(1) will become illegal and will have to be quashed as held in L.R. Gupta and others Vs. Union of India and others, 194 .....

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ry and that he further believes that the required object cannot otherwise be obtained without undue delay. In our opinion, clause (a), (b) and (c) of Section 132(1) of the Act spells out the circumstances under which authorising authority may issue a warrant of authorisation. Such authorisation is possible only if the authorising authority in consequence of information in his possession has reason to believe the existence of the circumstances enumerated in clause (a), (b) and (c) of Section 132( .....

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sis of which the authorising officer can have "reason to believe" that an action under Section 132 of the Act is called for any of the reasons mentioned in clause (a), (b) and (c). 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 .....

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, we find that the warrant of authorisation was issued after according approval from the competent authority. The contention of the petitioner that the search was conducted without recording satisfaction since it was only a survey conducted under Section 133A of the Act appeared to be attractive in the first blush but upon perusal of the record, we find that the department had definite information about the clandestine activity of the petitioner and upon recording a satisfactory note permission .....

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y via cheque to the same parties. This unexplained cash and dubious entries in the documents fortified the belief and gave reasons to believe that there was undisclosed income, which would not have been disclosed in ordinary course and accordingly, a satisfactory note was prepared upon an application of mind and requesting a search to be conducted. We also find that the competent authority, after considering the matter, recorded its satisfaction and issued authorization for conducting a search u .....

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was indulging in huge cash transaction, which were being transferred to subsidiary companies and, therefore, the petitioner and its companies were doing money laundering in the form of unaccounted cash, which fact was proved to be true when the search was conducted. Further, reliance by the learned counsel for the petitioner in the case of Ganga Prasad Maheshwari (supra) that possession of cash does not form an opinion that it represented an undisclosed income is erroneous. We find that the con .....

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the basis of material is patently erroneous. We have perused the record and we find that the information was based on certain valid information and that the satisfaction recorded was based upon consideration of the material placed before it. We also find from the original record that administrative approval was taken from the Director General of Income Tax (Investigation), Lucknow and, therefore, the contention that no such approval was taken is patently erroneous. The contention that the mere .....

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