TMI Blog2005 (5) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... ts factory situated at village Chhapar Post Jhiwana Tapukara Tehsil Tijara, District Alwar (Rajasthan). The petitioner-company is manufacturing the bread in the name and style "Harvest Gold" and which is sold inside and outside the State of Rajasthan including capital city of Delhi. Earlier the name of the petitioner-company was Florida Foods (India) Private Limited and subsequently changed to its present name with effect from September 13, 1975. The petitioner-company became a deemed public company with effect from July 1, 1998, and thereafter became private limited company pursuant to section 43A(2A) of the Companies Act, 1956. The controversy arose when the respondents conducted search and seizure on January 8, 2004, at the residence of the petitioners and their commercial establishments at New Delhi and Rajasthan and also made survey under section 133A at Delhi depots and subsequently issued notices under section 131(1A) to the petitioners and their business constituents. Against the notices dated January 8, 2004 and January 9, 2004, the petitioners preferred this present petition asking for writ order or direction to quash and set aside the search operations and the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regularity of his action." By referring the aforesaid judgment of the hon'ble Supreme Court, learned counsel for the petitioner submitted that the search can be ordered by the authorised officer, only if information is given to the Commissioner of Income-tax that such person is keeping money, bullion, jewellery, etc., in his building or elsewhere. He also placed reliance on the judgments in the cases of Dr. Nand Lal Tahiliani v. CIT [1988] 170 ITR 592 (All), Ajit Jain v. Union of India [2000] 242 ITR 302 (Delhi) and Ganga Prasad Maheshwari v. CIT [1983] 139 ITR 1043 (All). In the case of Ganga Prasad [1983] 139 ITR 1043, the Allahabad High Court has observed as under: "The conditions precedent for action under section 132 or section 132A are: (i) information in the possession of the Director of Inspection or Commissioner; (ii) in consequence of which he should have reason to believe; (iii) that any person is in possession of any money, bullion, jewellery or other valuable article or thing; (iv) and such jewellery, bullion, etc., must represent either wholly or partly undisclosed income. If any of these conditions is not fulfilled the officer concerned can have no jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. (Cash balance) (in lakhs) ------------------------------------- 1999 64.28 2000 33.60 2001 39.99 2002 51.05 2003 34.64 2004 56.05 ------------------------------------- After referring the audited balance-sheet learned counsel for the petitioners submitted that, under the Act, section 132(1), the authorised officer when during the search wishes to seize some particular jewellery, ornament, money, etc. he has to form an opinion before seizing the particular ornament, money or jewellery that articles are a part of undisclosed income. Since the respondents have not filed satisfaction note before this hon'ble court it gives inference that they had no reason to believe and warrant of search was authorised without any authentic information, application of mind and reason to believe. There was no reason to believe because after initiating action under section 132(1) the respondents in exercise of power under section 131(1A) issued summons to the petitioners and also to their business constituents and a bare perusal of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it the application. The High Court vide order dated December 7, 2004, vacated the interim order dated March 12, 2004, and the respondents were permitted to proceed in accordance with law. Still there is no co-operation from the petitioners and the petitioners are only interested in avoiding appearance and submitted the record before the Assessing Officer. The warrant of authorisation as well as satisfaction note giving details of the materials are submitted for the perusal of this court in a sealed cover as the same is confidential. It is further submitted that the information and material available were verified in the pre-search inquiries. It is also submitted that the material available with the Department was sufficient for issue of warrant of authorisation for search and seizure operations. A perusal of reply will clearly reveal that the seizure were done after being satisfied that the cash/jewellery are unaccounted. The cash/jewellery which were accounted were not seized. It is also submitted that from the inquiry it has been borne out that the assessee-petitioner has inflated the expenditure so as to reduce the net profit, resulting in huge reduction in payment of tax. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary to examine the relevant provisions of law. Section 131 deals with power regarding discovery, production of evidence, etc., which runs as under: "131. (1) The Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner, Commissioner (Appeals) and Chief Commissioner or Commissioner shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely:- (a) discovery and inspection; (b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath; (c) compelling the production of books of account and other documents; and (d) issuing commissions. (1A) If the Director General 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 sub-section, 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 inquiry or investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... represents either wholly 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 Director General or Director or the Chief Commissioner or Commissioner, as the case may be, may authorise any Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or (B) such Joint Director or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, (the officer so authorised in all cases being hereinafter referred to as the 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 k ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incriminating documents, books of account, etc. The main allegation regarding generation of unaccounted income on the part of the assessee stands proved. The concerned authority also prepared inventory of the seized articles like cash, jewellery and other valuables. After carefully reading of the aforesaid provisions it is to be examined whether the search warrant issued without information in possession/application of mind and also without any reason to believe or not. As appeared in the appraisal report prepared by the respondent pursuant to the search conducted on January 8, 2004, there is ample reason to believe that the petitioner has not produced material relating to assessment of income unless search is carried out and after application of mind and having reason to believe the search was carried out. I have carefully perused the judgment referred by learned counsel for the petitioners in respect of his submission in the case of Kusum Lata v. CIT [1989] 180 ITR 365, wherein the Rajasthan High Court expressed opinion with regard to "has reason to believe" in sub-section (1) of section 132 of the Income-tax Act means the bona fide belief based on some reasonable or credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the economic life of the community. It is a well-known fact of our economic life that huge sums of unaccounted money are in circulation endangering its very fabric. In a country which has adopted high rates of taxation a major portion of the unaccounted money should normally fill the Government coffers. Instead of doing so it distorts the economy. Therefore, in the interest of the community it is only right that the fiscal authorities should have sufficient powers to prevent tax evasion. (ii) Search and seizure are not a new weapon in the armoury of those whose duty it is to maintain social security in its broadest sense. The process is widely recognised in all civilized countries. (iii) It is now too late in the day to challenge the measure of search and seizure when it is entrusted to income-tax authorities with a view to prevent large scale tax evasion. Indeed, the measure would be objectionable if its implementation is not accompanied by safeguards against its undue and improper exercise. As a broad proposition it is now possible to state that if the safeguards are generally on the lines adopted by the Criminal Procedure Code they would be regarded as adequate and render th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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