TMI Blog2004 (11) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... January 24, 2003, issued by the Director of Income-tax (Investigation) under section 132A of Income-tax Act, 1961, (hereinafter referred to as the I.T. Act) and the action of requisitioning the cash from the custody of respondent No. 3/Police Station, Talaiya, Bhopal. Further prayer made is for quashing the notice (P-1) issued by respondent No. 2 under section 131(3) of the Income-tax Act on January 24, 2003, impounding the bank slips found on the cash of petitioner No. 2. The prayer has also been made to quash the notice (P-2) issued under section 131 (1A) on January 24, 2003. In addition, a writ is sought to quash notice (P-3) dated January 30, 2003, issued under section 131(3) of the Income-tax Act impounding the books of account of petitioner No. 1, mandamus is sought to return the cash and restrain respondent Nos. 1, 2 and 4 from taking any further action pursuant to the impugned orders (P-1), (P-2) and (P-3). It is averred in the petition that petitioner No. 1 is a resident of Sendhwa, Distt. Barwani, M. P., and petitioner No. 2 is also a resident of Sendhwa and is the uncle of petitioner No. 1. Both the petitioners are assessed to income-tax by the Income-tax Officer, Kha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner No. 1. Case under section 102 of the Code of Criminal Procedure was registered. Police informed respondent No. 1 as to the seizure of the cash without producing the seized property before the learned Magistrate. Respondent No. 3 immediately issued authorization under section 132A of the Income-tax Act on January 24, 2003, authorizing the respondent No. 2 who in turn required respondent No. 3 to hand over the possession of the seized cash Rs. 29,80,000 to respondent No. 2. The statement (P-7) of petitioner No. 1 was recorded by the Deputy Director, Income-tax (Investigation). Respondent No. 2 had no power or authority to record a statement. The cash was handed over to the Income-tax Department. The car was produced before the Magistrate, was released by the Magistrate. The Director of Income-tax (Investigation) under section 131(3) of the Income-tax Act by order (P-2) dated January 24, 2003, got the said cash deposited in the State Bank of India, Udyachal Branch, Bhopal, for issuing draft for Rs. 29,80,000 in favour of the Commissioner of Income-tax P.D. account and impounded the slips attached with the cash. Thereafter, respondent No. 2 issued notice under section 131(1A) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enforcing the attendance and production of books of account of petitioner No. 1 at her office to impound the books of account, hence the writ petition has been preferred. In the return filed by respondents Nos. 1, 2 and 4, it is contended that petitioner No. 1 was carrying cash of Rs. 29.80 lakhs kept in the dickey of the car. The Director of Income-tax (Investigation) had reason to believe that the amount in question was unexplained in the hands of petitioner No. 1 and represented income or property which had not been and would not have been disclosed for the purpose of the Income-tax Act. Petitioner No. 1 has not been able to explain the source of acquisition of cash seized from him. He only made an attempt to establish that the cash found with him was the same as withdrawn by his uncle/petitioner No. 2 from the bank which is not factually correct. It is claimed that petitioner No. 2 had withdrawn cash amounting to Rs. 13 lakhs on January 22, 2003, and Rs. 15 lakhs on January 23, 2003, from his bank account at State Bank of Indore, Sendhwa. It is also claimed that the same cash was given to petitioner No. 1 by petitioner No. 2. It was further claimed by the petitioners that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e cash had been given by petitioner No. 1 for being deposited in the State Bank of India at Indore. (iv) If the instructions were so specific (namely, cash to be deposited in the specified bank at Indore), there was no need to seek telephonic instructions consequently. (v) Petitioner No. 1 reached Indore at 11.30 pm at night. It is totally unlikely that he would have been able to either deposit the cash in his uncle's bank account or otherwise dispose of it at that late hour. (vi) Though petitioner No. 1 claims that he would have received instructions from petitioner No. 2 telephonically, surprisingly petitioner No. 2 decided to suddenly leave for Maharashtra. He thus left petitioner No. 1 totally stranded at Indore with a large amount of cash totalling to Rs. 30 lakhs in his possession and without any instructions whatsoever as to what to do with it. This is an unbelievable scenario. (vii) Petitioner No. 1 has stated that petitioner No. 2 had left Sendhwa for Maharashtra at 9.30 p.m. on January 23, 2003. However, Sharma, the accountant, stated that petitioner No. 2 had left Sendhwa only on the next day, i.e., on January 24, 2003 at 12.30 p.m. (viii) Petitioner No. 2 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to its customers. He has further clarified that in fact petitioner No. 2 had withdrawn cash of Rs. 24,60,000 on January 21, 2003, Rs. 13,00,000 on January 22, 2003, and Rs. 15,00,000 on January 23, 2003. The slips were not changed as the amount was not deposited into the RBI Chest. The statement of petitioner No. 2 carries no weight. Petitioner No. 1 is aged 24 years and a person under distress may make little variation. It is not very unlikely that petitioner No. 1 could have carried the cash amount of Rs. 30,00,000 for petitioner No. 2 to be deposited in Indore. He carried it to Bhopal instead of depositing it in Indore. A citizen is entitled to carry any amount of cash legally in his possession anywhere in the country and there is no bar as such. Simply because a person is carrying a huge amount of cash that does not itself give any person reason to believe that such cash has not been disclosed or would not be disclosed for the purposes of the Act. Recording the statement is without the authority. An additional return has been filed by the respondents. It is, inter alia, contended that the order of the magistrate is not required for proceedings under the Income-tax Act. Peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is found to be explained, it is for the Department to consider the explanation. Shri Pankaj Bagadia with Shri Piyush Mandovara, learned counsel appearing for the petitioners, have submitted that possession of the cash was explained properly, money was accounted for. It was withdrawn from the bank by petitioner No. 2. There was no reason to believe, to issue warrant of authorization under section 132A of Income-tax Act. Action taken is impermissible. A citizen is entitled to carry the cash. Considering the huge amount which was withdrawn on January 22, 2003, and January 23, 2003, by petitioner No. 2, it is not unnatural that he had handed over the cash to petitioner No. 1, Amar Agrawal to deposit it in the bank at Indore. He has also referred to the statement of the bank manager and other statements to submit that possession stood explained, as such notices (P-1), (P-2) and (P-3) deserve to be quashed along with the entire proceedings. Shri Rohit Arya, learned senior counsel with Shri Ajit Ade, appearing for respondents Nos. 1, 2 and 4 has submitted that action has been taken in accordance with law. There was reason to believe available to respondent No. 1 to authorize respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s observed that most of the bundles did not contain bank slips and in some bundles, the bank slips were dated January 17, 2003, January 18, 2003, January 20, 2003, January 21, 2003, and January 22, 2003, issued from various banks based in Indore such as Vijaya Bank, Indore, Central Bank of India, Indore, Union Bank of India, Indore, etc. Some bundles also carried slips of private parties. It is highly improbable that such bundles of cash which are dated January 17, 2003 to January 22, 2003, would reach from Indore to some bank of another town Sendhwa and thereafter, could be withdrawn further from the bank at Sendhwa. Shri Amar Agrawal could not satisfactorily explain the source of acquisition of the cash found in his possession by the police authorities. Thus, it appears that there is reason to believe that the assets represent either wholly or partly income or property which has not been, or would not have been disclosed for the purposes of the Income-tax Act, 1961, by Shri Amar Agrawal from whose possession or control such assets have been taken into custody by the police authorities. It was, therefore, proposed by the Deputy Director of Income-tax (Investigation) to initiate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be an income-tax payee but in the instant case money was found in the possession of petitioner No. 1. The statement of Amar Agrawal which has been recorded on January 24, 2003, reflects that money was handed over by his uncle/petitioner No. 2. It was to be given to someone else, whose name was not disclosed. It was to be informed on the telephone. It was not stated that the amount was to be deposited in bank at Indore. Such a statement was given to the police. On being questioned about the contradictions by respondent No. 2, Shri Amar Agrawal has stated that "he was not able to inform the police properly as to the purpose of carrying the currency notes". It was stated by Shri Amar Agrawal that the amount was withdrawn from the State Bank of India, the fax letter (P-4) mentions that amount was withdrawn from a different bank, State Bank of Indore at Sendhwa. He has stated that he has made the statement due to mistake. When he was questioned that on certain bundles of currency notes, there was a seal of "Shubh Laxmi Mahila Cooperative Bank Ltd., Indore, dated January 22, 2003" and as per fax, the amount has been withdrawn on January 22, 2003," and January 23, 2003, from the Sendh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctory. In my opinion, there was material to form an opinion/reason to believe as required for issuance of authorization. Possession has not been satisfactorily explained, the facts and circumstances were such, it cannot be said that there was no material to form an opinion. In Jai Bhagwan Om Parkash v. Director of Inspection [1994] 208 ITR 424 (P H), it has been observed that in case there is information with the authorities and the Department had satisfied itself with regard to the authenticity of the information available and bona fide belief was found, it is not for the court to make interference. In the instant case, the file which has been produced indicates that the Department had satisfied itself in proper manner to initiate the proceedings under section 132A of the Income-tax Act. In Rugmini Ram Raghav Spinners (P.) Ltd. v. Union of India [1992] 196 ITR 674 (Mad), it has been held that it is not for the court to find out that belief is rational and has nexus with information, in case circumstances exist to form an opinion. In the instant case, I find that the opinion was formed on relevant facts. In Sudarshan and Co. v. CIT [1983] 139 ITR 1032 (All), it has been observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . ITO [1967] 66 ITR 212 (Mys), it has been laid down on the facts that the searching officers had not proceeded in a high-handed manner and seized documents without regard to their usefulness or relevancy, nor had they failed to comply with any of the provisions of section 132 in the matter of issue of authorizations for search and seizure. The court has not to substitute its view for that of the authority under section 132 of the Income-tax Act. The apex court in Pooran Mal v. Director of Inspection (Investigation) [1974] 93 ITR 505; AIR 1974 SC 348, 366, has laid down that information gathered from the documents seized, cannot be excluded from the evidence. It has been further held that reason to believe cannot be said to be ousted because the assessment was earlier done still it is open to the Director of Inspection to entertain necessary belief. The apex court has observed thus: "In this petition also it was alleged that the Director of Inspection could possibly have no reason to believe the existence of circumstances required by sub-clauses (b) and (c) of sub-section (1) of section 132 because the petitioner's assessment for the year 1970-71 had been already completed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments which will be useful for, or relevant to, any proceeding under the Act may be found. If the officer has reason to believe that any books of account or other documents would be useful for, or relevant to any proceeding under the Act, he is authorized by law to seize those books of account or other documents, and to place marks of identification therein, to make extracts or copies therefrom and also to make a note or an inventory of any articles or other things found in the course of the search. Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorizes it to be exercised. If the action of the officer issuing the authorization, or of the designated officer is challenged, the officer concerned must satisfy the court about the regularity of his action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the court. If the conditions for exercise of the power are not satisfied the proceeding is liable to be quashed. But where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could it have been assumed that he would not have disclosed it for purposes of any proceedings under the Act. There was nothing before the Commissioner to suggest that it was, in fact, wholly or in part, income of any person connected with Vinod Kumar Jaiswal so as to induce a belief that, if called upon, Vinod Kumar Jaiswal would not have disclosed it for the purpose of the Act. The mere fact that Vinod Kumar Jaiswal was in possession of this amount and did not have any documents with him regarding its ownership or possession could not be treated as appears to have been done by the Commissioner as information relatable to a conclusion that it represented income which would not have been disclosed by Vinod Kumar Jaiswal for purposes of the Act. Mere unexplained possession of the amount, without anything more, could hardly be said to constitute information which could be treated as sufficient by a reasonable person, leading to an inference that it was income which would not have been disclosed by the person in possession for purposes of the Act'." It has been held that merely on unexplained possession of amount without anything more it cannot be said that information which could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners were deprived of the gold ornaments without authority of law, hence the writ petition was entertained and recourse to the Income-tax Act was held not to be necessary. He has further relied upon the decision of the High Court of Calcutta in Mahesh Kumar Agarwal v. Deputy Director of Income-tax [2003] 260 ITR 67, wherein it has been laid down that "reason to suspect" is subject to satisfaction of the primary test of "reason to believe" under section 132(1) of the Act. Unless one successfully crosses the hurdle of "reason to believe" under section 132(1) of the Act, there is no scope to get attracted by sub-sections (1A) and (4A) of section 132A of the Act. Reason to believe is the mandatory requirement of law for search and seizure. Reason to believe is a common feature of taxing statute. It has been considered to be the most salutary safeguard on the exercise of the power by the authorities. On the other hand, adequacy or sufficiency of the materials cannot be the subject-matter of scrutiny of the court. The belief must be held in good faith. There should have to be a balance. On the basis of the record it was found that there was no reason to believe on the facts of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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