TMI Blog2007 (1) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... oner-company has not been disclosed in the petition. C.W.P. No. 15824/2006 was filed on October 5, 2006, by Shri S.K. Jain (brother of Shri G.L. Jain and resident at the same address) as an individual, having also been served with the impugned notice under section 153A of the Act dated July 10, 2006, praying, in substance, for the same reliefs. It has been asseverated that S.K. Industries (P) Ltd. was incorporated on January 5, 1991, and is carrying on the business of manufacture of confectionery; that it has regularly filed its return of income and has been assessed to tax each year. It has been pleaded that the company has paid its tax dues. This is also the stand of Shri S.K. Jain. In the counter affidavit the Revenue has disclosed that the petitioners are part of the group companies owned and managed by S/Shri Suresh Jain, Sajal Jain, son of Shri S.K. Jain, Ganeshi Jain and Yogesh Jain. This group comprises S.K. Industries (P) Ltd., Harsh International (P) Ltd. at 11/2A, Pusa Road, New Delhi-110005, Mansarover Promoters (P) Ltd. at 1/1B, Pusa Road, New Delhi, H.B. Industries (P) Ltd. and Mahak Food (P) Ltd. These facts have not been traversed in the rejoinder and hence stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ners' submission that facts pertaining to the manufacture of Chaini Khaini are irrelevant so far as S.K. Industries or S.K. Jain are concerned, the petitioners ought to have clearly spelt out the share holding in Harsh. A reading of the rejoinder leads only to the confusion being worse confounded; it does not set down any foundation for the ipse dixit that neither of the petitioners have any direct or indirect connection with the affairs of Harsh. It is, therefore, not possible even for us to cull out any meaningful distinction between the business interest and activities of the petitioner on the one hand and the shareholders of Harsh. Since the petitioners were in the best position to remove and dispel doubts and unravel the skein of common and obscure dealings, an adverse inference would have to be drawn against them. On behalf of the Revenue it has been emphasised that there is no valid explanation as to why the challenge to the warrant of authorisation and the search conducted thereon in February, 2005, should have been raised after sixteen long months. We are not impressed with the argument that these writ petitions became necessary only upon the issuance of the impugned not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. R.D. Shah, Director of Inspection, I.T. [1969] 71 ITR 550 is more directly relevant in this regard. Mr. Bajpai, learned counsel for the petitioners, has relied very heavily on the ratio of L.R. Gupta v. Union of India [1992] 194 ITR 32 (Delhi). The Division Bench of this court was confronted with the question of what would constitute tangible material to justify the authorisation of a search or seizure. It was observed that information must be more than a mere gossip, or rumour or a hunch. Mere failure to file returns of net wealth and income would not justify such an action as it may not invariably disclose the rational connection for concluding that the assessee did not want the Department to gain knowledge of the existence of his assets or income. It was also observed that a search conducted under section 132 of the Act is a serious invasion into the privacy of a citizen and, therefore, must strictly be construed in a manner conducive for the protection of the citizen. The opinion must be apparent from the note recorded by the officer and it must clearly manifest that the belief falls under clause (a), or (b) or (c) of section 132(1). In that case the petitioner, who is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he court extracted the following passage from the landmark judgment of the Supreme Court in Pooran Mal v. Director of Inspection (Investigation) [1974] 93 ITR 505 in which the constitutionality of section 132 of the Act was unsuccessfully called into question: "We are, therefore, to see what are the inbuilt safeguards in section 132 of the Income-tax Act. In the first place, it must be noted that the power to order search and seizure is vested in the highest officers of the Department. Secondly, the exercise of this power can only follow a reasonable belief entertained by such officer that any of the three conditions mentioned in section 132(1)(a), (b) and (c) exists. In this connection it may be further pointed out that under sub-rule (2) of rule 112, the Director of Inspection or the Commissioner, as the case may be, has to record his reasons before the authorisation is issued to the officers mentioned in sub-section (1). Thirdly, the authorisation for the search cannot be in favour of any officer below the rank of an Income-tax Officer. Fourthly, the authorisation is for specific purposes enumerated in (i) to (v) in sub-section (1), all of which are strictly limited to the obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lief that the money represented income which would not have been disclosed had details been asked for. These facts palpably have no relevance to the case before us. The Gauhati High Court in M.S. Associates v. Union of India [2005] 275 ITR 502 has gone to the extent of holding that if information is received from proceedings of the Legislature that a Member of the House is involved in evasion of money, if the authorities concerned have reason to believe the information so received is true, it is their bounden duty to act thereupon. It has been further held that if the authorities are not in a position to know whether the information/accusation is true or not, they are not barred from making investigations to find out the truth or veracity of the information received by them. Therefore, the expression "reason to believe" under section 132 is subjective and objective. The dicta in Seth Brothers [1969] 74 ITR 836 (SC), that the power exercised by the Commissioner under section 132 is not a judicial or quasi-judicial power and the court cannot substitute its own opinion for that of the Commissioner, was applied. It was also noted that no mala fides or malicious intent attributable to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e expected concealment is more than one crore. So far as the Department was concerned it had stated that the search and seizure had been authorised by the Director General of Income-tax (Investigations) after careful examination of information, evidence and material. It is in the backdrop of this exposition of the law that we have to decide the rule whether the search that has been conducted was legal. As has already been indicated above, the maze of commercial dealings between various companies owned by the Jain group, of which the petitioners presently appear to be an integral and inseparable part, was sufficient justification for a simultaneous search being conducted on all the businesses. In our considered opinion it is not possible to conclude that the Department had initiated a roving enquiry to allay or satiate their suspicions. It has been sufficiently pleaded that as a consequence of the surveillance carefully carried out over a period of time it had been noted that the returns filed in the Chaini Khaini business did not match either the output capacity of the packaging machinery or the numerous assets built up and acquired by the Jain family. In these circumstances it w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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