TMI Blog2005 (7) TMI 42X X X X Extracts X X X X X X X X Extracts X X X X ..... athology of the Calicut Medical College and was running a proprietary concern by name "Santhosh Clinic". He is an assessee with P.A. No 46-007-PX-7697. The second petitioner, the wife of the first petitioner, retired as a Professor of Dermatology and is a private practitioner and is an assessee with P.A. No 46-007-PQ-9485. The Income-tax Department had received information that one Hamza, Proprietor, Hotel Sagar, Mavoor Road, Calicut, had purchased the residential house belonging to the petitioners at Mavoor Road, Calicut, for a consideration of Rs. 72 lakhs in the name of his children and the petitioners in turn purchased another residential property at Sathram Road, Calicut, belonging to Dr. N. M. Mathai and his son, George Mathai, for a sum of Rs. 59 lakhs. An enquiry conducted by the investigation wing of the Department revealed that the petitioners had sold their residential house with 11.5 cents of land at Mavoor Road for a consideration of Rs. 42 lakhs and in turn purchased the residential house of one Dr. N.M. Mathai and his son for a consideration of Rs. 29 lakhs, but the consideration shown was only Rs. 12 lakhs. Both the transactions were registered on the same day, i. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioners and since they were not present it was not possible to resume the operations. Finally on November 10, 1995, the first petitioner was requested to remain at his house and accordingly search was resumed and concluded on November 10, 1995. In the statement recorded on November 10, 1995, the first petitioner had disowned the various statements made on October 27, 1995, in respect of sale and purchase of immovable properties stating that he was in an exhausted state of mind. When the search was effected on November 10, 1995, at the residence of Dr. N. M. Mathai, he stated that the residential house at Calicut, Sathram Road, was sold to the petitioners for a total consideration of Rs. 22 lakhs for which only Rs. 9 lakhs was shown in the registration deed. It was further stated that out of the amount of Rs. 22 lakhs received he had given 50 per cent, to his son George Mathai (joint owner), Rs. 6 lakhs deposited in F.D. with the Union Bank of India, Muvattupuzha, and the balance amount of Rs. 5 lakhs was given to his relatives and the old age home at Muvattupuzha. Further he also confirmed that he and his son had received Rs. 13 lakhs towards unaccounted consideration in the deal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irector of Income-tax (Inv.) or Commissioner of Income-tax ... If action of the officer issuing the authorisation or the designated officer is challenged the officer concerned must satisfy about the regularity of his action. If the action is maliciously taken, or power under section is taken for collateral purposes, it is liable to be struck down by the court ..... On the basis of a warrant of search a search party headed by Shri T. Ravindran, Assistant Director of Income-tax (Inv.), as he then was, searched the petitioners' residential house at 5/2491 Sathram Road, Calicut on October 27,1995 and prepared a panchanama. A true copy of the panchanama dated October 27,1995, is produced herewith and marked as exhibit PI. Before leaving the search premises the said officer Sri Ravindran issued a prohibitory order in respect of an almi-rah kept in the residential premises and left the place forcefully taking a number of valuable documents without the knowledge or consent of either of the petitioners or the two panchas present which is per se against the mandatory provision of section 132(3) read with the provision of the Code of Criminal Procedure. The said officer recorded a stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners, the petitioners prepared a statement in the presence of the searching party and got it attested by the pancha witnesses present. A true copy of the said statement dated November 10,1995, is produced herewith and is marked exhibit P5. It is beyond the comprehension of the petitioners why the said officer collected unlisted document from the petitioners premises and tried to put it back at the premises. It is also not known, if he has introduced any papers or documents cooked up by him. It is a clear violation of the provisions providing for searching the raiding party before entering the search premises that a trunk load of documents were sought to be inducted into the premises of the petitioners." The petitioners also raised various other procedural violations in the conduct of search and seizure which we will deal with in the latter part of the judgment. The second respondent filed a detailed counter affidavit on October 23, 1996. Additional counter affidavit was filed by the second respondent on January 13, 1998, and also filed an affidavit in the writ appeal on February 15, 1999, to expunge the adverse remarks made in the judgment of the learned single judge. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned single judge. He has denied the various allegations raised against him and stated that he was only acting on the basis of the direction given by the superior officers including the Assistant Director of Income-tax (Investigation I), Deputy Director of Income-tax, etc. He was one among the twenty-one persons who had conducted search and seizure operations and had no malice towards the petitioners and there is no reason for the same as well. Reply affidavit was filed by the first respondent on November 18, 1996, refuting the various averments contained in the counter-affidavit filed by the second respondent on October 23, 1996. The learned single judge after hearing counsel on either side and after perusing the various averments contained in the counter affidavits and reply affidavit, took the view that the action of the second respondent and the members of the investigation team in keeping the seized documents in an almirah in the house of the assessee violated the mandatory requirements and there is no explanation whatsoever as to why books of account, documents, etc., found out during the search on October 27, 1995 could not be seized. The learned single judge took the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndents from invoking the provisions of Chapter XIV-B of the Act. The judgment is reported in Dr. C. Balakrishnan Nair v. CIT [1999] 237 ITR 70 (Ker). Aggrieved by the judgment the Commissioner of Income-tax and the officer have come up with this appeal. Senior standing counsel appearing for the Revenue, Sri P.K. Ravindranatha Menon, submitted that there is no violation of the statutory provisions in the conduct of search and seizure made on October 27,1995, and on November 10, 1995. Counsel submitted that the search was conducted in accordance with the search and seizure guidelines issued by the Central Board of Direct Taxes. Counsel also submitted that the learned single judge has committed an error in not properly understanding the difference between the wordings in the proviso to section 132(1) relating to the practicability of seizure and also the wordings in section 132(3) relating to the procedure where it is not practicable to seize the materials. Counsel also submitted that there are sufficient reasons for resuming the search on November 10, 1995, since it was not complete on October 27, 1995. The finding that the search party had taken away various documents on October ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... November 27, 1995, is true, even then there is no tax liability in view of section 54 of the Income-tax Act. In support of the various contentions reference was made to the decisions of the apex court in CCT v. Ramkishan Shrikishan Jhaver [1967] 66 ITR 664, ITO v. Seth Brothers [1969] 74 ITR 836, H.L. Sibal v. CIT [1975] 101 ITR 112 (P H) and K.V. Krishnaswamy Naidu Co. v. CIT [1987] 166 ITR 244 (Mad) and CWT v. N.C. J. John [1998] 233 ITR 475 (Ker); [1998] KLJ (TC) 360. Counsel for the petitioner submitted an argument note dated February 24, 2005. The Income-tax Department had information that one Hamza had purchased a residential building belonging to the respondents at Mavoor Road and the petitioners in turn had purchased the property from Dr. N.M. Mathai. Enquiry conducted by the investigation wing of the Department revealed that the petitioners had sold their residential house with 11.5 cents of land for a consideration of Rs. 42 lakhs. Though the amount admitted in the document was only Rs. 12 lakhs they purchased the residential house from Dr. N. M. Mathai for a consideration of Rs. 29 lakhs as against the recorded price of Rs. 9 lakhs. Both the transactions were regis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the knowledge or consent of the petitioners or the panchas. Complaint is that on November 10,1995, the second respondent entered the premises with a box containing several documents but refused to open the same in the presence of panchas who were the same panchas present on October 27, 1995. In respect of this, exhibit P5 statement's stated to have been prepared in the presence of the search party and got attested by the panchas. We may test whether exhibit P5 is a valid document on the basis of the averments contained in the writ petition as well as the inference to be drawn in the facts and circumstances of the case. We may refer to exhibit P1 panchanama dated October 27, 1995, admitted to have been signed by the writ petitioners and the two panchas. Paragraph 11 of the panchanamas is extracted below for easy reference. "Before leaving the abovementioned place of search the entire search party again offered themselves for personal search which was taken/declined. The above panchanama has been read by us/explained to us in local language." Sri T. Ravindran has put his signature which has been correctly recorded. If there was any attempt to take away any document from the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judge also took the view that in the absence of any satisfactory explanation as to why books of account, documents, etc., were not practicable to be seized on October 27, 1995, it is a case of contravention of sub-section (3) of section 132 of the Act. The learned single judge also took the view that the action of the second respondent in keeping the documents seized in the almirah cannot be supported. Reference was made to rule 112(4C) of the Income-tax Rules. We may point out, so far as this case is concerned search was not over on October 27, 1995. Several documents and records were found out and some of them are relevant documents and the same may be irrelevant but they kept all those documents and records in an almirah and sealed the same for further scrutiny. If it was not practicable to seize all the books of account and records as per the second proviso to sub-section (1) of section 132 the Authorised Officer has to 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 the previous permission of such Officer and such Officer may take such steps as may be neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments in a day or two, because they are in an unfamiliar territory, while the assessee would be familiar with each and every items and materials kept in the place of search. Attitude of some of the assessees may be helpful, of others may not. In this connection reference may be made to the decisions of the apex court in Pooran Mal v. Director of Inspection (Investigation) [1974] 93 ITR 505 and ITO v. Seth Brothers [1969] 74 ITR 836. The petitioners have raised a contention that search was prolonged unreasonably and the reasons stated are not convincing. Search commenced on October 27, 1995, and continued on November 10, 1995, and there is a delay of fourteen days for which the Department have given acceptable explanation. In the absence of any time limit prescribed in the Code of Criminal Procedure or the Income-tax Act, we are not prepared to say that the delay in conducting the search has vitiated the search and seizure. We are not prepared to say that the procedure adopted by the second respondent and the inspection team is in any way violative of article 21 of the Constitution of India or discriminatory. The apex court in Pooran Mal v. Director of Inspection (Investigation) [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o vitiate the action taken provided the officer has, in executing the authorisation, acted bona fide. The principle laid down in the above decision would fully support the case of the Department. We are of the considered view that the various allegations raised against the second respondent have no legs to stand. On facts also we are convinced that the second respondent has not committed any irregularity in the conduct of search and seizure conducted under section 132 of the Income-tax Act. Further, the first writ petitioner had made retraction statement before the Commissioner of Income-tax on October 30, 1995, and at that time also he had no case that the second respondent had taken away any records or documents from his residence on October 27, 1995. The Department has got reliable information to hold that the retraction statement by the writ petitioner is not correct. In the statement of N. M. Mathai, residential house at Calicut was sold to the first writ petitioner for a total consideration of Rs. 22 lakhs but only Rs. 9 lakhs was shown in the registration deed. Detailed information was furnished by Mathai which would disprove the subsequent retraction statement made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id. The learned single judge while disposing of O.P. No. 5935 of 1999 has taken the view that once the Division Bench sets aside exhibit P1 judgment there would not be any inhibition in proceeding under section 158BC of the Act. In cases where section 158BC proceedings are taken there is no scope for invoking section 147 of the Act in respect of the same matter. The learned single judge while disposing of O. P. No. 5935 of 1999 had also deferred all proceedings under exhibits P6(a) and P6(b) till a decision is taken by the Division Bench in the writ appeal. We have now held that the search and seizure are valid and there is no illegality in the notices issued under section 158BC of the Act. Consequently as rightly held by the learned single judge there is no scope for invoking section 147 of the Act. In view of the above conclusions, we are inclined to allow W.A. No. 409 of 1999 and the judgment of the learned single judge in O.P. No 10564 of 1996 (see [1999] 237 ITR 70) would stand set aside, consequently W.A. No. 1374 of 1994 would stand dismissed. Both the writ petitions would, therefore, stand dismissed with costs of Rs. 10,000 to be paid to the second respondent in O.P. No 1 ..... 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