TMI Blog2004 (12) TMI 74X X X X Extracts X X X X X X X X Extracts X X X X ..... A.P. Shah J.- The first petitioner is a company incorporated under the Companies Act and is engaged in the business of manufacture, purchase and sale of gold, diamonds, ornaments and jewellery and the second and the third petitioners are, respectively, director and sales manager of the first petitioner. The petitioners have approached this court for quashing the warrant of authorisation issued under section 132 of the Income-tax Act and follow up action including search and seizure of gold, diamonds, ornaments and jewellery and consequent notices issued under section 158BC of the Income-tax Act. According to the petitioners the first petitioner with a view to explore local and foreign markets, regularly participates in various jewellery exhibitions held in India and abroad. One such jewellery exhibition called "Swarna Sambandh" was organised by M/s. Sercon India Pvt. Ltd., New Delhi to be held at Taj Hotel, Lucknow, for three days from January 13, 2001 to January 15, 2001, for which the first petitioner sent its three employees, i.e., Mr. Parimal Patel, Mr. Manish Jhaveri and petitioner No. 3 to Lucknow. Mr. Patel and Mr. Jhaveri went to Lucknow by train and they reached there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioners addressed several letters to the respondents contending, inter alia, that the search and seizure was illegal and requesting immediate release of gold, diamonds, ornaments and jewellery but the letters failed to evoke any response from the respondents. In the meanwhile the respondents proceeded to issue notices to the petitioners under section 158BC of the Income-tax Act. The action of respondent No. 1 in issuing authorisation under section 132 of the Income-tax Act and follow up action of search and seizure is challenged mainly on the ground that there was no information on record, on the basis whereof respondent No. 1 could form belief that the said gold, diamonds, jewellery, etc., recovered from petitioner No. 3 represented wholly or partly the income which had not been or would not have been disclosed for the purpose of the Act, a condition precedent for exercise of powers under section 132(1) of the Act. The contention is that since the authorisation itself was illegal and void ab initio, all proceedings taken consequent thereto are also rendered illegal and void. In the affidavit in reply filed on behalf of respondents Nos. 1 and 2, a preliminary objection ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or General or Director or the Chief Commissioner or Commissioner or any such Joint Director or Joint Commissioner as may be empowered in this behalf by the Board in consequence of information in his possession, has reason to believe that-... (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purpose of the Indian Income-tax Act, 1922 (11 of 1922), or this Act, then,- (A) the Director General or Director or the Chief Commissioner or Commissioner as the case may be, may authorize 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 authorize any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, (the officer so authorized in all cases being hereinafter referred to as the authorized officer) to- (i) enter and search any buildin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in consequence of which it is formed must be valid and linked with the ingredients mentioned in the section. That is, there must be rational connection between the information or material and the belief about undisclosed income... Satisfaction of the authorities may be subjective, but it must be arrived at objectively on materials. Not one could be found on record. The expression is 'reason to believe that the income has not been disclosed and not probably it may not have been disclosed'. It is not left to guessing. It carries with it the impress of certainty... Reasonable belief exists if the information is not only trustworthy but reasonable and sufficient in itself to warrant the conclusion that the provisions of section 132 were being violated. Because if the exercise of power is bad or unlawful in inception, then it is not validated or nor does it change character from its success. It would not, therefore, be asking too much from the authorities to comply with the basic requirements of the section before they are permitted to invade the secrecy of one's home." The special leave petition filed against this judgment was dismissed by the Supreme Court. In L.R. Gupta v. Uni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Delhi High Court has held as follows: "Thus, for authorizing action under section 132, the conditions precedent are: (i) the information in the possession of the named authority; and (ii) in consequence of which he may have reason to believe that the person concerned is in possession of money, bullion, etc., which represents, either wholly or partly, income which has not been or would not be disclosed for the purpose of the Act. If either of these conditions are missing or have not been adhered to, then power under section 132 cannot be invoked. Thus, the basis of exercise of power under section 132(1) has to be formation of belief and the belief has to be formed on the basis of receipt of information by the authorizing officer that the person is in possession of money, etc., which represents undisclosed income". In CIT v. Vindhya Metal Corporation [1997] 224 ITR 614 (SC), a resident of Mirzapur was detained while travelling to Calcutta by train, and cash of Rs. 4.63 lakhs was seized from him by the police on the suspicion that the money was stolen property or had been obtained through some other offence. The Commissioner issued a warrant of authorization under section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s travelling to Lucknow by Sahara Airlines flight No. S27907 whose scheduled departure time from Mumbai is 4.05 p.m. today, i.e., January 12, 2001. He has stated that he is carrying jewellery items worth Rs. 69 lakhs. This is for your information and necessary action please. Yours faithfully (Sd.) A. A. Shankar 12-1-2001 Addl. Director of Income-tax (Inv.) Unit IX, Mumbai Copy for information to Shri A.K. Gautam Addl. DIT (Inv.) (HQ) Aayakar Bhavan, Mumbai, with reference to directions of learned DGIT Inv. Mumbai, vide meeting dated 10-1-2001. (Sd.) A. A. Shankar 12-1-2001 Addl. Director of Income-tax (Inv.) Unit IX, Mumbai". We have no hesitation in holding that on the basis of this fax message, without anything more, respondent No. 1 as a reasonable person, could not entertain a belief that the said gold, diamonds and jewellery, etc., in the possession of the sales manager of petitioner No. 1 represented income which had not been or would not be disclosed by the company for the purpose of the Act. The fax sent by the Addl. Director of Income-tax, Mumbai, was general in nature. The mere fact that petitioner No. 3 was in possession of gold, diamonds and jewe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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