TMI Blog1969 (7) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... ner. The partners were engaged in carrying on other businesses in the names of Seth Brothers (Private) Ltd., Nath Brothers (Private) Ltd. and Meerut Cold Storage and General Mills. The owners of the business were, year after year, assessed to income-tax in respect of the income arising in the course of the business. On March 14, 1963, the Income-tax Officer, Meerut, issued a notice under section 148 of the Income-tax Act, 1961, intimating M/s. Seth Brothers that there was reason to believe that their income chargeable to tax had escaped assessment and it was proposed to reassess this income for the assessment year 1954-55. In response to the notice, Baikunth Nath and Vishwa Nath filed a return under protest. In the meantime information was received by the Income-tax Commissioner, U.P., that M/s. Seth Brothers were maintaining " duplicate records " and were evading assessment of their true income and that it was necessary to seize the records which may be found at " Shanti Niketan ", Meerut, in which M/s. Seth Brothers carried on the business of Imperial Flour Mill and other businesses, The Commissioner of Income-tax, U.P., on May 29, 1963, drew up a memorandum that on a report o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Income-tax Officer were copies of the books of account and that action had been taken by the Commissioner of Income-tax, not on his own initiative but at the behest of the Directorate of Inspection. In reply to the contentions raised by the assessees several affidavits sworn by officers of the income-tax department were filed. The Commissioner of Income-tax stated in his affidavit that before issuing letters of authorisation and the warrant of search he was satisfied that it was necessary to take action under section 132 of the (Indian) Income-tax Act, 1961, and that the letters of authorisation were not issued at the direction of the Directorate of Inspection. The Income-tax Officers stated that in consequence of the search a large number of " duplicate account books and records " maintained by M/s. Seth Brothers were recovered, that the search was carried out according to law and in the presence of two of the partners of the firm and their advocates, that all the documents seized were relevant for the purpose of reassessment, that there was close connection between the different business activities of the partners of M/s. Seth Brothers and that all the documents which we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch was made. The relevant part of section 132 as substituted by the Income-tax (Amendment) Act, 1965, may, therefore, be set out : " 132. Search and seizure.---(1) Where the Director of Inspection or the Commissioner, in consequence of information in his possession, has reason to believe that--- (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (XI of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (XI of 1922), or under this Act, or (c) any person is in possession of any mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in writing and the approval of the Commissioner for such retention is obtained : ... (13) The provisions of the Code of Criminal Procedure, 1898 (V of 1898), relating to searches and seizure shall apply, so far as may be, to searches and seizure under sub-section (1). " The Central Board of Direct Taxes has, in exercise of the power conferred by section 295(1) of the Act, framed rule 112 prescribing the procedure to be followed by the Commissioner and the authorised officers. The Commissioner or the Director of Inspection may, after recording reasons, order a search of premises, if he has reason to believe that one or more of the conditions in section 132(1) exist. The order is in the form of an authorization in favour of a subordinate departmental officer authorising him to enter and search any building or place specified in the order, and to exercise the powers and perform the functions mentioned in section 132(1). The officer so authorised may enter any building or place and make a search where he has reason to believe that any books of account or other documents which in his opinion will be useful for, or relevant to, any proceeding under the Act, may be found. The of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide, 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 account : 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere fact that it may ultimately be found that some document seized was not directly relevant to any proceeding under the Act or that another officer with more information at his disposal may have come to a different conclusion will not be a ground for setting aside the order and the proceeding for search and seizure. The authorisation issued by the Commissioner was, in the view of the High Court, open to challenge on the ground that the Commissioner did not apply his mind to the existence of circumstances which justified the exercise of the power to issue authorisation. The action of the Income-tax Officers who searched the premises was quashed on the ground that they seized some documents which were irrelevant to the process of reassessment. In our judgment, in reaching their conclusion that the Commissioner acted at the behest of the Director of Inspection, the High Court ignored important evidence on the record. It was averred in the petition of M/s. Seth Brothers that : " (56) It appears that the Deputy Director of Inspection at the instigation of Shri K. L. Nanda and Sri Satya Prakash, without making any enquiries or having any material, ordered a raid for search and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... affidavit denied that the raid or search of the premises of M/s. Seth Brothers was ordered by him. The affidavit of R. Kapur, Income-tax Officer, Special Investigation Circle, who was authorised by the Commissioner of Income-tax to make the search is also relevant. Mr. Kapur averred that some information was received by Mr. R. R. Agarwal from which it appeared that the firm of M/s. Seth Brothers and its partners were " evading tax by maintaining duplicate sets of accounts " and by suppressing relevant documents and papers from the department ; that Mr. R. R. Agarwal made a written request to the Commissioner of Income-tax for letters of authorisation in order to carry out the search of the assessee's premises and in pursuance thereof on May 29, 1963, the Commissioner of Income-tax issued three authorisation letters, two in favour of Mr. R. R. Agarwal and one in favour of the deponent authorising them to carry out the search in accordance with the terms of the authorisation letters. In this state of the record we are unable to agree with the High Court that the letters of authorisation were issued by the Commissioner of Income-tax at the direction of the Director of Inspectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken for a collateral purpose. It is not disputed that assistance of the police may be obtained in the course of a search. The High Court has, however, found that the police force employed was excessive. But we are unable to hold that on the evidence, in keeping police officers present at the time of the search in the house of influential businessmen to ensure the protection of the officers and the record, "excessive force was used". We accordingly see no good grounds to accept the finding recorded by the High Court that the manner in which the search and seizure were conducted " left no room for doubt that the Income-tax Officer did not apply his mind and formed no opinion regarding the relevancy or usefulness of the account books and documents for any proceedings under the Income-tax Act ". The High Court accepted that the correctness of the opinion actually formed by the Income-tax Officer was not open to scrutiny, in a writ petition, but in their view no opinion was in fact formed by the officer and the search and seizure of documents and books of account must on that account be held as made in excess of the powers conferred upon the Income-tax Officer and mala fide. For t ..... 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