TMI Blog2003 (1) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... s seized could not be such which could not be due to his income from his profession, and which would not have been disclosed. For the reasons given above, the writ petition is allowed. - - - - - Dated:- 16-1-2003 - Judge(s) : M. KATJU., PRAKASH Krishna. JUDGMENT The judgment of the court was delivered by M. KATJU J.--This writ petition has been filed for a writ of certiorari for an appropriate direction declaring as illegal the search and seizure operation conducted on November 23, 2001, by the Income-tax Department and for a mandamus restraining the respondents from proceeding in any manner in pursuance of the said search and seizure and to release the cash of Rs. 6,33,300 and other documents, money and jewellery seized by the Department. Heard learned counsel for the parties. The petitioner is a dental surgeon and a regular income-tax assessee and has been filing income-tax returns for the last twenty years regularly. The details of the previous six years of his gross receipts from profession, taxable income and tax paid are given in paragraph 2 to the writ petition. A perusal of the same shows that for the financial year 2000-2001 the gross receipts were of Rs. 45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her in the only safe vault mounted in his father's bed room which belonged to the Prayag Dant Vigyan Anusandhan Sansthan, a charitable society. It was explained to the officers conducting the search that the month was nearing the end and regular payments had to be made to the staff towards their salary as well as the suppliers for the materials supplied by them and also for payment of the second instalment of the advance tax which was due shortly thereafter. All the relevant papers, documents and books of the account were made available to the raiding party for verification. However, respondent No. 2 did not bother to verify the same from the books of account and seized the money, which was duly explained. In paragraph 14 of the writ petition it is stated that as regards the sum of Rs. 6,33,300 which was kept in the vault in the father's bed room, it belonged to a charitable society and did not belong to the petitioner. The books of account and other relevant papers with regard to the Sansthan were also shown to respondent No. 2 and his team during the search but respondent No. 2 did not bother to look at the same and seized the money. The society has been demanding the said money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r affidavit it is stated that the petitioner did not produce any books of account in support of his claim that the cash of Rs. 6,33,300 belonged to Prayag Dant Vigyan Anusandhan Sansthan. In the rejoinder affidavit in paragraph 5 of the same the petitioner has given explanation regarding the cash, which has been seized. It is stated therein that a sum of Rs. 5,04,730 was found which consisted of Rs. 2 lakhs received towards advance against the agreement to sell property No. E-2, Civil Station, Allahabad, and the balance amount was from regular professional receipts. The jewellery and articles found were duly explained as they were received on marriage and other occasions. Some articles were also seized which were received by way of gift from various companies, which is a normal feature in the medical profession. The total quantity of gold ornaments, silver articles, etc., are within reasonable limits, which can be possessed by a person, of status like the petitioner. In paragraph 7 of the affidavit it is stated that the petitioner has been maintaining complete prescribed books of account and other prescribed registers on a regular basis up to the assessment year 2001-2002 which h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 92, the Allahabad High Court held that the averments of information under section 132 must be in good faith and there must be rational relation between the information and the material and reasonable belief. Mere rumour of roaring practice and charging of high rate of fee and living in a posh house, in the absence of any other material, could not be construed as constituting information in consequence of which the director could have reason to believe that the petitioner had not disclosed his income or would not disclose it. The search and consequent actions of the Department were therefore held to be illegal. The Supreme Court dismissed the S.L.P. against this judgment. In L.R. Gupta v. Union of India [1992] 194 ITR 32, it was held by the Delhi High Court that the expression "information" must be something more than a mere rumour or a gossip or a hunch. There must be some material, which can be regarded as information, which must exist on the file on the basis of which the authorising officer can have reason to believe that action under section 132 is called for. It was also observed:"... an assessee is under no obligation to disclose in his return of income all the moneys whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sent case. It seems to us that the Department has only acted on rumours. The petitioner is admittedly a leading dentist of Allahabad who has a huge practice. We have seen the reasons recorded under section 132 (which were produced before us by learned departmental counsel) and we find that they are only generalities based on rumours. The decision of this court in Dr. Nand Lal Tahiliani v. CIT [1988] 170 ITR 592, squarely applies to the facts of the present case. In Dr. Nand Lal Tahiliani's case [1988] 170 ITR 592 (All), the report on the basis of which the Commissioner of Income-tax formed his opinion under section 132 reads as follows: "'Enquiries with regard to the abovementioned allegations were made by the Investigation Wing at Allahabad. Mr. N.L. Tahiliani has been the most leading surgeon in the town. He is known for his roaring practice in this field of medical profession and also for his high rate of fee for operations. He stays in a posh house owned by him, which is situated in a posh locality of Allahabad. The allegations made above appear to be prima facie correct on the basis of the local enquiries made. On the basis of the allegations and consequent enquiries mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rusion on it cannot be countenanced. 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 court further went on to say: "The statement that the Director of Inspection has sufficient material in his possession to believe that the person to whom summons or notice was issued was in possession of money, bullion or jewellery or other valuable articles or things, is a mere reproduction of the section. That is hardly sufficient. If the authorities can be permitted to claim that on 'consequent inquiries', they are empowered to take action without keeping on record anything to support it, then it shall be empowering them with naked powers. Inquiries should have been reduced to writing in black and white to enable the Director to di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authorities are satisfied not only about its veracity and authenticity but it must be an information in consequence of which the authority must have reason to believe that income had not been disclosed as action under section 132 transgresses liberty of a citizen. To say the least, such an adventure should be avoided as it not only frustrates the objectives sought to be achieved by such salutary provisions but spoils the reputation of the Department and causes incalculable harm to the person concerned. Therefore, the writ petition deserves to be allowed." Thus, we are of the opinion that in view of the above decisions the action under section 132 was clearly illegal and it could not be said that the Commissioner of Income-tax had reason to believe that the petitioner was concealing his income. As regards the jewellery seized, according to the Central Board of Direct Taxes guidelines the three units residing in the premises could retain 2,500 gms. of net gold jewellery but the total jewellery found was less than 1,000 gms. The petitioner admittedly has a huge practice in his dental profession and huge income as disclosed in paragraph 2 of the writ petition. In our opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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