TMI Blog1966 (2) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ents and money lying in 22E, Bungalow Road, Delhi. It is apparent from annexure R. 1/1 , which is copy of a report submitted by the Inspecting Assistant Commissioner of Income-tax, Shri S.N. Sen, on the 12th August, 1965, to the Commissioner of Income-tax, that some informant met him and stated that he had received information from a very reliable source that the petitioner had a spacious basement below its office in 22E, Bungalow Road, which was being utilised for manipulating accounts with a view to showing reduced income for purposes of taxation. It was further stated that the source of this information was an employee or ex-employee of the firm, who did not want his name to be disclosed. It was added by Shri Sen: The records show that the assessee has not filed returns for the years 1963-64, 1964-65 and 1965-66. The return for the year 1961-62 was filed as early as 14th May, 1963. The assessment for 1960-61 was finalised on 29th March, 1963. The fact that the assessee has not filed returns for so many years apparently suggests that the information is correct. Shri---------------also suggested that unless action is taken early, there is every possibility of the bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated the 18th August, 1965 (copy annexure C ), giving details of damage caused and of articles missing. In this letter it was mentioned that these articles were found missing-- Cash ₹ 38,214 82 P. All cheques received from the various parties. All cheque books. 30 cloth sheets. All account books with subsidiary books and records All files and correspondence records. Many inspection notes issued by the Government Inspection Department against which payment was to be received from Government. Several railway receipts and motor truck receipts of goods. Various sale deeds of lands and properties. Various other miscellaneous papers, documents and account books pertaining to our business and our sister concerns. The Commissioner sent a reply dated the 17th September, 1965, to the letter sent by Shri G.C. Sharma, advocate of the petitioner, justifying the proceedings taken against the firm (copy annexure D. 1/3 ). In this letter it was denied that any damage had been caused except what was necessary for breaking open the five steel almirahs. As regards the amount of cash it was mentioned that only a sum of ₹ 3,214.82 P. had been removed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also arbitrary exercise of authority inasmuch as even the current books, which were required for carrying on the business of the firm, were not returned immediately, after it was found that they were neither relevant nor required for the proceedings, which were either pending or contemplated against the petitioner, under the Income-tax Act. There is a certain measure of difference between the allegations relating to the years or which the returns had been filed or not led, and, therefore, I would proceed on the assumption that the facts stated in the affidavit of Shri Balwant Singh, Income-tax Officer, with regard to them, are correct. It is not denied that the petitioner was assessed to income-tax for the first time in respect of the assessment years 1959-60 in the status of an unregistered firm. Registration for the assessment year 1960-61 was granted and the assessment was completed in the status of a registered firm. On 14th August, 1965, two returns, with regard to the assessment year 1962-63 were seized, which, according to Shri Balwant Singh, showed different incomes. No return had been filed for the assessment year 1963-64. The allegation in the petition that returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e mandatory provisions of section 132 of the Act were not followed, nor could they be invoked in the present case, and the authorisation warrant was illegal and without jurisdiction. (3) The search and the seizure were vitiated by mala fides in the sense that there was abuse of power and the books and documents were seized in utter disregard of the extent of authority conferred on the officers concerned by the warrant issued under section 132 of the Act. (4) Provisions of the Code of Criminal Procedure, 1898, relating to searches and seizure, which are made applicable by sub-section (13) of section 132 were not complied with. As regards the vires and constitutionality of section 132 and rule 112, it is unnecessary to refer to any cases decided by other courts, because, with respect, we must follow the Bench decision of this court in Writ No. 225 of 1964, Roshan Lal and Co. v. Commissioner of Income-tax, decided by Dulat and P. C. Pandit JJ. The view of the Calcutta High Court in Surajmull Nagarmull v. Commissioner of Income-tax was followed and it was held that section 132 in no way affected any provision of the Constitution. Learned counsel for the petitioner has not made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to any proceeding under the Act, or that any person was in possession of any money, bullion, etc., that represent either wholly or partly income or property, which had not been disclosed. Annexure R. 1/1 only refers to some information, which the informant, who had actually supplied the information to Shri S. N. Sen, had received from some other source, namely, an employee or ex-employee of the firm and the sole information was that accounts were being manipulated with a view to showing reduced income. Mr. Hardayal Hardy, learned counsel for the respondents, has placed before us the original statement recorded by Shri S. N. Sen of the informant, which does not show that the parson, who had made the statement, had received any information from some other source, i.e., some employee or ex-employee of the firm. It appears that this fact was gathered by Shri Sen from the talk which he had with the informant, whose statement he had recorded. In Calcutta Discount Co. v. Income-tax Officer, Shah J., delivering the judgment of the court, has observed with regard to the true import of the expression has reason to believe in section 34(1)(a) of the Income-tax Act, 1922, that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 1961-62. Verification clause in the affidavit is in the following terms : I, deponent, above-named, do hereby declare that whatever has been stated above is true and correct to my knowledge derived from the official record and no portion is false nor has anything been concealed therefrom. This, it is stated, does not and cannot establish the correctness of the statement in the affidavit with regard to the belief of the Commissioner which had nothing to do with the official records, but the correctness of which he could affirm only from his own knowledge. It has also been pointed out that the Commissioner never applied his mind to the matter and merely acted on the suggestions of Shri S. N. Sen, which showed that he did not bring to bear his own independent mind on the question of forming the belief that the assessee would not produce the books of account, etc., when required to do so. In the State of Bombay v. Purushottam Jog Naik, verification of the affidavit was regarded as defective. The body of the affidavit there disclosed, that certain matters were known to the secretary, who made the affidavit, personally. The verification, however, stated that everything ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue authorisation under section 132 or not. In such matters it would have been highly desirable if the Inspecting Assistant Commissioner of Income-tax had only stated the facts and not expressed his own opinion which might have influenced the Commissioner, but it is difficult to apply the ratio of the decisions given under police rule 16.38 to the present case, as there was no question of giving any reasons in this case. On the third point, the learned counsel for the petitioner has referred to the relevant facts in the affidavit of Shri Balwant Singh, to which reference has already been made, and has further called attention to the numerous lists (annexures D-1 to D-33 ) of books and documents prepared by Shri H. R. Chhabra, Income-tax Officer, which were seized. Roughly, the number of documents and books thus seized, comes to 518. Annexure D-1 shows that 15 cheques, which had been issued by third parties in favour of the petitioner as also 3 cheque books of Messrs. Devkaran Nanjee Banking Company Limited, Delhi, as well as the letter dated the 5th November, 1964, from Dr. Med Otto Martin Luzern to Mr. T. C. Agarwal, were taken into possession. The cheques were of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs under the Act. The warrant of authorisation was issued in prescribed form No. 45, by means of which the officers authorised to effect search and seizure were authorised and required-- (a) to enter and search the said premises ; (b) to place identification marks on such books of account and documents as may be found in the course of the search and as you may consider relevant to or useful for the proceedings aforesaid and to make a list thereof together with particulars of the identification marks... It was, consequently, necessary and essential for these officers to take into custody only such books as were considered relevant to or useful for the proceedings in question. It was not open to them to indiscriminately, arbitrarily and without any regard for relevancy or usefulness, seize all the books and documents which were lying in the premises, and, if they did so, the seizure would be beyond the scope of the authorisation. The relevant provisions of the Act and the authority which was conferred by means of the warrant of search leave no room for doubt that the officers, who had been so authorised, were not empowered to seize and take into possession each and ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve a certain amount of similarity with the facts in the present case. There 500 documents had been seized. After saying that section 132 did not contemplate a fishing enquiry, and that a number of police officers had accompanied the Income-tax Officer during the raid, for which there was no justification, and several documents had been taken into possession that were current books of account, detention of which for over two months must have seriously prejudiced the petitioners in their business activities, and that marks of identification had not been put on a number of documents, their Lordships struck down the seizure on the ground that the search did not appear to be bona fide. It was observed that although no illwill had been established between the petitioners and the respondent, the extent of the seizure was far beyond the limits of section 132 of the Act, and the action was mala fide in the sense that there was abuse of power. Mr. Hardy has relied on paragraph 31 of the affidavit of Shri Balwant Singh, in which it is stated that books of account of seven concerns were seized, and their examination revealed, for instance, that in the books of Messrs. Agarwal and Company, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsequent letter of Shri T. C. Agarwal dated the 18th August, 1965, in which he had alleged that all the books, etc., had been removed, to offer to return those documents, which were not required, or at least the current books of account without which no commercial concern can possibly carry on its business. As has been stated before, by the letter dated the 1st October, 1965, documents and books contained in seven lists were offered to be returned, the total of which comes to 293. It would seem that at least these books were not found useful or relevant and that is the reason why the Income-tax Officer offered to return them. At any rate, even in the letter dated the 1st October, 1965, a copy of which has been produced before us, and is not disputed, it was not stated that the remaining books and documents were considered relevant and useful and were, therefore, being detained for examination, and not returned. All this supports and substantiates the case of the petitioner that the books and documents had been seized in their entirety from the premises and whatever was found lying there was taken into possession irrespective of any consideration of the question, which it was man ..... X X X X Extracts X X X X X X X X Extracts X X X X
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