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2017 (2) TMI 645 - ORISSA HIGH COURT

2017 (2) TMI 645 - ORISSA HIGH COURT - TMI - Search and seizure u/s 132 - Held that:- There is no dispute about the contention raised by the petitioner that at the time of search and seizure no bullion or jewellery has been recovered, but there is also no dispute about the fact that certain documents have been seized as would be evident from the inventory list and when the authorities have gone through the seized documents, they have found that the income having been undisclosed by the petitione .....

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income has not been disclosed and as such, for being satisfied, a notice under Section 153-A of the Act, 1961 has been issued and in terms thereof, the petitioner has given his detailed reply as would be evident from Annexure-6 annexed to the writ petition and after scrutiny of the reply, the authorities came to the conclusion that the books of account pertaining to M/s.Vasumati Builders Pvt. Ltd. has not been produced in spite of the direction having been given to him by the Income Tax authorit .....

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of the Act, 1961. Moreover, initiation of the proceeding under Section 132 has never been questioned by the petitioner immediately thereafter before any Court of law save and except challenging the same after lapse of two years by way of writ petition. - There is no dispute about the contention raised by the petitioner that if the root will go, nothing remains. But as we have discussed hereinabove, we found that the submission made by the learned counsel for the petitioner has got no substan .....

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GMENT S.N.P rasad , J. This writ petition has been filed, inter alia, for the following reliefs: (i) Issue a writ of mandamus or any other writ or writs hold that the search and seizure as held under Section 132 of the Income Tax Act as illegal same being not in consonance with the set procedures under the Income Tax Act. (ii) Issue a writ of certiorari or any other appropriate writ or writs by quashing the notices as issued U/s.153-A of the Income Tax Act, 1961 dated 06.08.2015 vide Annexure-2 .....

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12.2014 by the Income Tax Department in exercise of the powers conferred under Section 132 of the Income Tax Act, 1961, hereinafter to be referred to as the Act, 1961 , in short. The authorities of the Income Tax Department conducted search, but no incriminating material has been recovered, rather they found cash amounting to ₹ 40,050/- and gold jewellery of 906 grams belonging to two married ladies of the family, which are within the permissible limits as prescribed by the Income Tax Depa .....

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erein that the return filed under Section 139 of the Act, 1961 prior to the search operation may be treated as compliance to the notice issued under Section 153-A of the Act. 4. Opposite party no.2 has issued notice under Section 143(2) of the Act, 1961 on 11.07.2016 asking the petitioner to attend his office and explain the discrepancy in connection with the return income for the assessment year 2009-10 to 2014-15. Opposite party no.2 has also called for the records for the last six assessment .....

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conducted on 2.12.2014 as legal and valid. 5. The petitioner has taken a ground to challenge the action of the Income Tax authorities including the jurisdiction conferred to them under Section 132 of the Act, 1961 by submitting that the said power can only be exercised by the competent authority if they have definite reasons to belief, there being material information in his possession otherwise not and in case any such search is conducted without any specific information or material informatio .....

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nted for. 6. Learned counsel representing the Revenue has vehemently opposed the submission of the learned counsel representing the petitioner by submitting that it is not correct that the authorities have exercised the powers conferred upon them under Section 132 of the Act, 1961 merely on surmises and conjectures, rather in course of scrutiny of the documents in the premises of the petitioner, it was found that there was some undisclosed income, which has not been disclosed by the petitioner w .....

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ion itself is not maintainable because there is an assessment order and if the petitioner is at all aggrieved, he may challenge the same before the appropriate forum. He further submits that since the order of assessment has been passed by the authority, he ought to have approached the alternative remedy of appeal under the Statute, but instead of doing so, he has approached this Court invoking the extraordinary jurisdiction of this Court under Articles 226 and 227 of the Constitution of India, .....

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s been filed after lapse of more than one year and four months approximately from the date of issuance of notice. Hence, it cannot be said that the petitioner is at all aggrieved with the search warrant. 7. We have heard the learned counsels for the parties and gone through the materials available on record. 8. Before appreciating the argument advanced on behalf of the parties, we thought it proper to have a discussion regarding the statutory provision which has got bearing for deciding the issu .....

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section (1) of section 37 of the Indian Income-tax Act, 1922 (11 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) .....

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lly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), [then,- (A) the [Principal Director General or] Director General or [Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, as the case may be, may authorise any Additional Direct .....

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authorised officer) to-] (i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (iia) search any person who has got out of, or is about to get into, or is in, t .....

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00 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of su .....

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Commissioner, but such [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in section 120, it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the [Principal Chief Commissioner or] Chief Commissioner or [Pr .....

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ereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii): Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stock-in-trade of the business: Provided also that no authorisation shall be issued by the Additional Director or Additiona .....

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ncipal Director General or] Director General or [Principal Director or] Director or any other [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner to take action under clauses (i) to (v) of sub- section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-section (1), such [Principal Chief Commissioner .....

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it shall be the duty of every such officer to comply with such requisition. (3) The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned in the second proviso to sub- section (1), serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with t .....

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search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any 7 proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. Explanation.-For the removal of doubts, it is hereby declared that the examination of any person under this sub- section may .....

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resumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true ; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular per .....

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(c) of section 158BC unless the reasons for retaining the same are recorded by him in writing and the approval of the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or Director General or [Principal Director or] Director for such retention is obtained : Provided that the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or] Director General or [P .....

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of account or other documents are seized under sub-section (1) or sub-section (1A) may make copies thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in this behalf, 8 at such place and time as the authorised officer may appoint in this behalf. (9A) Where the authorised officer has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c) of subsection (1), the books of account or other documents, or any .....

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ll be exercisable by such Assessing Officer. (10) If a person legally entitled to the books of account or other documents seized under sub-section (1) or sub-section (1A) objects for any reason to the approval given by the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or] Director General or [Principal Director or] Director under sub- section (8), he may make an application to the Board stating therein the reasons for .....

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eizure under this section ; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer- (i) for obtaining ingress into any building, place, vessel, vehicle or aircraft to be searched where free ingress thereto is not available ; (ii) for ensuring safe custody of any books of account or other documents or assets seized. Explanation 1.-For the purposes of sub-section (9A), "execution of an au .....

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ced after such date in respect of any year. Section 132 confers power upon the authorities for search and seizure. The provision stipulates power upon the authorities who must have information in his possession and it is he who must have reasons to believe, it is, however, not the commissioner who does the actual search and seizure. This is left to the person whom he authorizes to carry out the search. It follows, therefore, that the seizure of books of account, documents, money, bullion, jewell .....

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h documents, books of accounts, etc. The difference in between the wordings of clauses (a) and (b) of sub-section (1) of Section 132 of the Act, 1961 is that under clause (a) action may be taken if a person is searched with a summons to produce or cause to be produced, specified books of account or other documents and fails to do so. But in clause (b) the basis is somewhat different. In the latter case, the Commissioner must have reason to believe that the person to whom a summons has been issue .....

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w what the relevant books of account and documents are, and are afraid that they will be concealed or suppressed. The power of seizure under section 132 shall be exercised in accordance with sub-rules (2) to (14). Sub-rule (2) provides that the commissioner must first of all record his reason for issuing a warrant of authority. It then provides as to what should be the form of such warrant and the commissioner after going through the relevant records will reduce the reasons in writing for the fu .....

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ipal Director General or] Director General or [Principal Director or] Director or Joint Director or Assistant Director or Deputy Director, or the authorised officer referred to in sub-section (1) of section 132 before he takes action under clauses (i) to (v) of that subsection,] has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for the purposes of making any enquiry or investigation relating t .....

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jurisdiction, then, for 11 the purposes for making any inquiry or investigation relating thereto, it shall be competent to exercise powers conferred under sub-section (1) on the income tax authorities referred to in that sub-section, notwithstanding that no proceeding with respect to such person or class of persons are pending before him or any other income tax authority. We gathered from the provision of Sec.131(1A) that no precondition for issuance of notice upon the assessee is stipulated in .....

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f this section by such income-tax authority, who is assigned the area within which such place is situated or who exercises jurisdiction in respect of any person occupying such place, at which a business or profession is carried on, whether such place be the principal place or not of such business or profession, and require any proprietor, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession- (i) t .....

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usiness or profession is carried on shall also include any other place, whether any business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of his books of account or other documents or any part of his cash or stock or other valuable article or thing relating to his business or profession are or is kept. (2) An income-tax authority may enter any place of business or profession referred to in sub-section (1) only during the h .....

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and before sunset, any office, or any other place where business or profession is carried on, within the limits of the area assigned to him, or any place in respect of which he is authorised for the purposes of this section by such income-tax authority who is assigned the area within which such place is situated, where books of account or documents are kept and require the deductor or the collector or any other person who may at that time and place be attending in any manner to such work,- (i) .....

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is custody for such period as he thinks fit any books of account or other documents inspected by him: Provided that such income-tax authority shall not- (a) impound any books of account or other documents except after recording his reasons for so doing; or [(b) retain in his custody any such books of account or other documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Principal Chief Commissioner or the Chief Commissioner or the Principal D .....

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ection (2A).] (4) An income-tax authority acting under this section shall, on no account, remove or cause to be removed from the place wherein he has entered, any cash, stock or other valuable article or thing. (5) Where, having regard to the nature and scale of expenditure incurred by an assessee, in connection with any function, ceremony or event, the income-tax authority is of the opinion that it is necessary or expedient so 13 to do, he may, at any time after such function, ceremony or event .....

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Act. (6) If a person under this section is required to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income-tax authority shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement made. Provided that no action under sub-section .....

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fficer, or a Tax Recovery Officer, and for the purposes of clause (i) of sub-section (1), clause (i) of sub-section (3) and sub- section (5), includes an Inspector of Income-tax; (b) "proceeding" means any proceeding under this Act in respect of any year which may be pending on the date on which the powers under this section are exercised or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in re .....

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occupying such place. 11. Section 153-A reads as follows:- 153A. Assessment in case of search or requisition (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to .....

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ix assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of .....

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iately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to subsection (1), shall stand revived .....

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ect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. Section 153-A confers power upon the authorities for making an assessment in case of search or requisition which provides that notwithstanding anything contained in Sec.139, 147, 148, 149, 151 and 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned U/s.132-A after the 31st .....

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vant to the previous year in which such search is conducted or requisition is made. This provision confers power for making assessment after the search and seizure as contemplated under the provision of sec.132 and sec.133-A in order to reassess the income due to suppression or concealment of the documents of the undisclosed income. These statutory provisions have been taken note by the Hon‟ble Supreme Court as well as by various High Courts dealing with the power of search and seizure. Th .....

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rson against whom the warrant of authorization has been issued. The same view has been reiterated in the case of Dr. Pratap Singh Vrs. Director of Enforcement, reported in 1985(155) ITR 166 (SC). We, after going through the statutory provisions as well as the authoritative pronouncements as referred herein above, have found that before taking decision for search and seizure as contemplated under the provision of Sec.132 or 133-A of the I.T. Act, 1961 it is the bounden duty of the competent autho .....

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sment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income Tax Officer to form the above belief, that would be sufficient to clothe him to invoke the jurisdiction of section 132 of the Act. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of the grounds which induce the Income Tax Officer to act is therefore not a justifiable issue, though he cannot make a search .....

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ontained in Sec.132 of the I.T. Act that before invoking the jurisdiction conferred under the said provision the reason to believe‟ must be there for making search and seizure of the premises of the assessee in order to know the real fact as to whether the income disclosed by way of income tax return for a particular year is in consonance with the income being possessed by the said assessee. If authorities have found from any sources that the income disclosed by the income tax return, year .....

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t issued on 1.12.2014 and after its conclusion inventory of cash was found but not seized to the tune of ₹ 40,050/-, inventory of account book found and seized, inventory of jewellery making a valuation of the same to the tune of ₹ 22,00,714/- and thereafter a notice under Section 153-A of the Act, 1961 was issued on 6.8.2015 asking the petitioner-assessee to prepare true and correct return of both the income including undisclosed income in support of individual/ AOP/ Firm/Company as .....

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ce dated 6.8.2015 or not. The authorities of the Income Tax Department has issued a letter on 11.7.2016 asking him to clarify certain information in connection with the return of income submitted by him on 30.9.2009 for the assessment year 2009-10. Hence, he was directed to attend the office on 19.7.2016 at 11.30 A.M. either in person or by representative duly authorized in writing to produce the relevant documents on which he may want to rely in support of the return filed. It is not so stated .....

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horities, hence, by this letter, he has once again been requested to give reply without any further delay. However, the petitioner has submitted his response in compliance to the notice under Section 142(1) of the Act, 1961 and the letter dated 24.8.2016 stating in detail that he is not at all fault and whatever return he has submitted that is without any undisclosed income. The authorities in response to his compliance has answered the same vide letter communicated to the petitioner on 1st Nove .....

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conducted in exercise of the powers under Section 132 of the Act, 1961 on the ground that the search cannot be conducted merely on surmises and conjectures and there must be reason to believe and further on the ground that no incriminating things have come out after conclusion of search and as such, it cannot be said that there was reason to believe for conducting search in the premises of the petitioner. 13. In the light of these factual aspects we have appreciated the argument advanced on beh .....

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n 37 of the Act, 1922, or under sub-section (1) of sub-section 131 of the Act, 1961, or a notice under sub-section (4) of Section 22 of the Indian Income Tax Act, 1922, or under subsection (1) of Section 142 of the Act, 1961 was issued to produce or cause to be produced, any books of accounts 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 any person to whom a summon or notice as afor .....

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Indian Income Tax Act, 1922, or the Act, 1961, the authorities can initiate proceeding U/s.132 of the Act, 1961. 15. In the instant case, the search was conducted on 2.12.2014 pursuant to the search order dated 1.12.2014, the petitioner kept mum against the search conducted in his premises. The authorities have issued notice under Section 153-A of the Act, 1961 on 6.8.2015, the petitioner has not assailed the notice even before any forum, rather the petitioner has submitted to the jurisdiction o .....

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spite of specific direction given to the petitioner to produce his documents, the documents have not been produced. For ready reference, the finding of the authorities in response to the application filed by the petitioner is being quoted hereinbelow to show as to whether there was reason to believe for conducting search and seizure or not. 2. Please refer to page 12 of ASPI-10 regarding receipt of ₹ 5.00 Lakhs by M/s. Vasumati Builders Pvt. Ltd. from Shri Dhoi Sahu of Patia. You are the .....

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Nuagaon as advance for land and payment of ₹ 2.00 lakhs to Shri Ravi Bisoi, Sisupalgarh for purchase of land. This is stated by you as a transaction of your company i.e. M/s.Vasumati Builders Pvt. Ltd. The books of M/s. Vasumati Builders Pvt. Ltd. should show such transactions failing which it shall be added to the income of yours because you are the Director. 4. Please refer to page 30 of ASPI regarding payment of advance of ₹ 2.75 Lakhs to Bhasia Bhai. It was stated by you that it .....

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advance to Sanatan Bhoi for sale of land. You have replied that these transactions relate to the company. The books of M/s. Vasumati Builders Pvt. Ltd. should show such transaction failing which it shall be added to the income of yours because you are the Director. 6. Please refer to page-26 of ASPI-03 regarding various expenses. The total expenses come to ₹ 22,96,926/- which includes Vasumati land agreement- ₹ 16.00 Lakhs, Ravi Gudia- ₹ 1.00 Lakh and Bhasia Bhoi-Rs.2.75 Lakhs .....

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ease refer to page-26 of ASPI-03 regarding various expenses relating to making of gift (Rs.1200, ₹ 1550/- etc). Such expenses being personal in nature have to be explained through the relevant source. 8. Please refer to page-23 of ASPI-03 regarding various expenses of ₹ 60,88,690/-. It is replied by you that all the expenses relate to M/s. Vasumati Builders Pvt. Ltd. You are requested to explain all such expenses through the cash book and ledger of the Company failing which it shall .....

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you are the Director & the information is available from the documents seized from your premises. 10. Please refer to page-36 of ASPI-03 regarding various expenses of ₹ 3,34,500/-. It is stated by you that these expenses relate to M/s. Vasumati Builders Pvt. Ltd.. You are requested to explain all such expenses through the cash book and ledger of the Company failing which it shall be added to the total income of yours because you are the Director & the information is available from .....

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it was in permissible limit, documents have been seized and in course of their examination, the authorities have come to a definite conclusion that certain income has not been disclosed and as such, for being satisfied, a notice under Section 153-A of the Act, 1961 has been issued and in terms thereof, the petitioner has given his detailed reply as would be evident from Annexure-6 annexed to the writ petition and after scrutiny of the reply, the authorities came to the conclusion that the books .....

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tent authority can resort to the provisions of the Act, 1961, if it is opinion that the assessee is flouting the provisions of the Act and if in that situation, it comes to the conclusion that it is necessary to resort to the provisions under Section 132, then it cannot be said that there was no reason behind resorting to the provisions of the Act, 132 of the Act, 1961. Moreover, initiation of the proceeding under Section 132 has never been questioned by the petitioner immediately thereafter bef .....

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hat since the petitioner has challenged the warrant and search and if warrant and search will be said to be illegal, its conclusion will be said to be a nullity in the eye of law. 22. There is no dispute about the contention raised by the petitioner that if the root will go, nothing remains. But as we have discussed hereinabove, we found that the submission made by the learned counsel for the petitioner has got no substance. We are of the further considered view that since the assessment order h .....

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the judgment rendered by the Hon‟ble Apex Court in the case of Pooran Mal (supra), which we have already discussed hereinabove. So far as the judgment relied upon by the learned counsel for the petitioner in the case of Commissioner of Income-tax, Gujarat v. Vijaybhai N.Chandrani, AIR 2013 SC 3518, is concerned, the fact of the said case is that the assessee has invoked the jurisdiction of the Gujarat High Court against the notice issued under Section 153C of the Act, 1961 and the said wr .....

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