TMI Blog2018 (12) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... . In fact, there is contradiction in the plea raised by the respondents for nothing was found in locker Nos.7712-D and 7637-A. An irregularity in exercise of search and seizure would not affect the authorization or search. It could in a given case vitiate the action taken when the officer executing the search and seizure has acted malafidely. Clearly, therefore, legal validity of issue of warrant of authorization is distinguished from the manner and method in which it has been executed. The respondents have also placed reliance on Section 292CC of the Act. The said section is of no relevance to the present case. It was inserted by Finance Act, 2012 with retrospective effect from 1st April, 1996 in view of some judgments holding that authorization for search must be separately issued in the name of each person and when warrant of authorization is issued in the name of more than one person, the assessment is to be made against all of them as Association of Persons and not as separate individuals. We fail to understand relevance of the said provision in the factual matrix of the present case. Supplementary or secondary contentions raised by the respondents have to be rejected. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... November, 2016 and 8th November, 2016, respectively. They have also challenged warrant of authorization dated 27th June, 2014 under Section 132 of the Act for search of locker No.7325-A in the joint names of Nagina Judge and Shah-E-Naaz Judge, locker No.7637-A in the joint names of Shah-E-Naaz Judge and Sahyr Kohli and locker No. 7712-D in the joint names of Sandeep Kohli and Shah-E-Naaz Judge in Delhi Safe Deposit Company Ltd. as illegal, bad in law and without jurisdiction. Other prayers made in the writ petition include quashing of proceedings initiated pursuant to notice under Section 153A of the Act. The notices under Section 153A and the proceedings initiated under Section 153A of the Act relate to Assessment Years 2009-10 to 2014-2015. 2. Nagina Judge is sister of Shah-E-Naaz Judge and is a Non-Resident Indian. Nagina Judge has not filed any writ petition. Nagina Judge, it was stated, has filed a statutory appeal challenging the assessment order dated 10th March, 2017 under Section 153A of the Act. 3. Precursor to the search warrants noted in paragraph 1 above, were search and seizure operations under Section 132 of the Act at the residential and business premises of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... J. Kohli and why there keys are kept here? Ans. Ms. Nagina J. Water is my first cusion (sic) Ms. Sheh-e-naaz J. Kohli is Nagina J. Water s sister. she (sic) was staying here till April 15, 2014. she (sic) is the resident of London and British Passport holder. No other question or suggestion was put to Karamjit Singh Jaiswal. 7. On 27th June, 2014, search warrant was issued in the names of Nagina Judge, Shah-E-Naaz Judge, her husband Sandeep Kohli and her daughter Sahyr Kohli in respect of three lockers. For the sake of convenience, we would reproduce the relevant portions of the search warrant in the names of Nagina Judge and Shah-E-Naaz Judge Kohli, which reads as under:- Whereas information has been laid before me and on the consideration thereof I have reason to believe that:- x x x x xx .It a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 131 of the Income-tax Act, 1961, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of the Income-tax Act, 1961, is issued to Ms. Nagina Judge and Ms. Shah Naaz J. Kohl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o convey such books of account, documents, money bullion, jewellery or other valuable article or thing to the office of the Deputy Commissioner of Income-tax or any other authority not below the rank of Income-tax Officer employed in the execution of the Income-tax Act, 1961: and (h) to exercise all other powers and perform all other functions under section 132 of the Income-tax Act, 1961, and the rules relating thereto. You may requisition the services of any police officer or any officer of the Central Government, or of both, to assist you for all or any of the purposes specified in subsection (1) of section 132 of the Income-tax Act, 1961. [We have omitted the portion which has been scored off in the warrant of authorization dated 27th June, 2014 issued by the Additional Director of Income-tax (Inv.)]. 8. On opening, locker Nos. 7712-D and 7637-A were found to be empty. Accordingly, nothing was seized and recovered. In locker No.7325-A in the name of Nagina Judge and Shah-E-Naaz Judge, jewellery worth ₹ 49,73,295/- was found. Nagina Judge was questioned and her statement on oath under Section 132 (4) of the Act was recorded on 27th June, 2014. Nagina J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found belonged to her and not her sister. 9. Pertinently, Shah-E-Naaz Judge was not examined on oath under Section 132 (4) of the Act, though she was present when the three lockers were forced open on 27th June, 2014. 10. We, however, would notice the contention of the Revenue that Nagina Judge had subsequently oscillated as in her subsequent letter dated 27th February, 2017, she had stated:- As per the last Wealth Tax Return the jewellery of Mrs. Surinder Ajeet Judge (mother) was 740 gms. Thus the balance jewellery owned by both sisters is 1128.90 gms. as computed below:- Jewellery accounted by M/s Swastic Jewellers, 1668, Dariba Kalan, Delhi-110006 1868.90 gms Less Jewellery declared by Mrs. Surinder Ajeet Judge 740.00 gms Balance jewellery jointly owned by Mrs.Nagina Judge and Mrs. Shah Naaj. J. Kohli 1129.90 gms The Jewellery in the hands of Mrs. Nagina Judge is 1 of the aforesaid quantity i.e. 564.45 gms We shall subsequently deal with the said contention and the argument of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... like to reproduce the stand taken by the respondents in response to ground V and paragraph 29 of the counter affidavit, which reads:- V. During the search and seizure operation under section 132(1) of the Act on 10.06.2014 in the case of Mr. Karamjit Singh Jaiswal (the searched person ) at 6, The Green Rajokari, New Delhi which was duly authorized by the Director of Income-tax (Investigation)-II, Delhi after recording the 'reason to believe' with respect to conditions of section 132(1)(b) and 132(1)(c) of the Act qua person, key of the subject locker no. 7325-A maintained with The Delhi Safe Deposit Co. Limited, New Delhi was unearthed. The petitioner was the joint holder of the said locker No. 7325-A with her sister Ms. Nagina Judge. Following discovery of the key of the Locker No. 7325-A, a restraint order under section 132(3) of the Act was issued in respect of the locker on 10.06.2014. Subsequently, the locker was searched by the warrant issued under section 132(1) of the Act. xxx 29. That before issuing the warrant of authorization under section 132(1) of the Act, reason to believe with respect to conditions mentioned under section 132(1)(a) or 132( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (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 purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), then,- (A) the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner or Chief Commissioner or Principal Commissioner or Commissioner, but such Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in section 120, it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner having jurisdiction over such person may be prejudicial to the interests of the revenue : Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may 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 authorised officer and such action o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seizure can follow only on a reasonable belief being entertained by an officer that any of the three conditions mentioned in clauses (a), (b) and (c) to Section 132(1) are satisfied. These reasons have to be recorded in writing before authorization is issued to the officer to conduct search and seizure. The Supreme Court observed that the provisions were evidently directed against persons who are believed on good grounds to have illegally evaded the payment of tax on their income and property. Drastic measure to get at such income and property for recovery of government dues were justified and required. The search and seizure provisions were reasonable restrictions and curbs on the freedoms mentioned under Article 19 (1)(f) and (g) of the Constitution. 14. The aforesaid legal position, viz., on the statutory mandate to record reasons to believe and their nexus with the three pre-conditions in clauses (a), (b) and (c) to Section 132 was thereafter emphasized and elucidated by the Supreme Court in Director General of Income Tax (Investigation), Pune and Ors. Vs. Spacewood Furnishers Private Limited and Ors. (2015) 12 SCC 179 , which also refers to an earlier decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sons would not adjudge or test adequacy and sufficiency of the grounds, but could go into the question and examine rational connection between the information or material recorded and formation of the belief as to satisfaction of conditions specified in clauses (a), (b) and (c) to Section 132 (1) of the Act. The reasons to believe as recorded should have relevant bearing on formation of the belief, for the search warrants cannot be issued for making a fishing and roving inquiry. The test and parameters of reasonable man is applied. We would to avoid prolixity not quote from the aforesaid decisions, except the decision in the case of Madhu Gupta (supra) as in the said case, an identical plea relying upon the language of clause (i) to Section 132(1) of the Act was raised to submit that reasons to suspect and not reasons to believe were suffice in cases of consequential search. In the said case widow of the ex-Director, who had died, had been subjected to search on the ground that there was evidence and material that the assessee as a group was in possession of unaccounted income in the form of money, bullion, jewellery and other valuable articles or things or papers relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Locker holder Name of bank and Branch Locker No. 1 Ms. Nagina Judge Ms. Shah e Naaj J. Kohli The Delhi Safe Deposit Co. Ltd, 86, Janpath, New Delhi Locker No.7325A 2 Sandeep Kohli Ms. Shah e Naaz J. Kohli The Delhi Safe Deposit Co. Ltd, 86, Janpath, New Delhi Locker No.7712 D 3 Ms. Shah e Naaz J. Kohli Sahyr Kohli The Delhi Safe Deposit Co. Ltd, 86, Janpath, New Delhi Locker No.7637-A In my opinion, the lockers may contain valuables such as cash, jewellery, FDRs and other important documents, etc, which represent either wholly or partly income or property not disclosed or would not be disclosed for the purpose of Income Tax Act, 1961, even if, summons u/s 131 of the I.T. Act, are issued to them. Accordingly, it is requested that three (3 warrants) consequential warrants of authorization in the name of persons and lockers as mentioned above may be issued to search/seal the above lock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zure operations. Lockers were not subjected to search to unearth undisclosed and concealed assets of Jaiswal Group or Karamjit Singh Jaiswal. Accordingly, we have no hesitation in holding that the three consequential warrants of authorization issued in the name of persons and lockers for search/seizure, therefore, do not meet the mandate and requirement of clauses (a), (b) and (c) of Section 132 of the Act. We would now refer to some judgments relating to search and seizure operations in case of lockers. 18. In Lajpat Rai v. Commissioner of Income Tax (1995) 215 ITR 608 (All), locker key was found in residence of petitioner no. 1 therein during search and seizure operation. Request for issue of consequential warrant of authorization for search of locker was made 25 days after the earlier search. The Court observed that the authorities had sufficient opportunity to peruse the material already seized from the residential premises and inspite of time and opportunity, the report did not contain any material or reason to justify search of the locker. Consequently, the authorization was based on irrelevant consideration and was quashed. This verdict highlights need to protect ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, jewellery or valuables representing her income which had not been disclosed. The decision upholds that the courts in a limited way can examine whether the belief formed was devoid of any basis and irrational in the extreme sense to fall foul of the Clapham Omnibus test. It was observed as under:- 20. Turning to the case on hand, in the first place there is nothing in the Satisfaction Note to indicate that there was any credible information available with the Department that the Petitioner belonged to the Nanda Group who were being searched. It must be recalled that the Petitioner is a regular Assessee. The information needed to trigger the search action against the Petitioner had to be such that would show that she is linked in some manner to the business or other activities of the Nanda Group . Secondly such information had to have a nexus to the belief that could be reasonably formed that she is in possession of any money, jewellery or valuable representing her income which has not been or would not be disclosed by her. The mere fact that the key to the locker which she was operating was found during the search of her uncle Mr Suresh Nanda would not constitute 'inf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first step was to seal the locker. In fact they did so by issuing an order under Section 132 (3) of the Act. However, instead of immediately jumping to conclusions against the Petitioner, and before actually searching the locker by lifting the restraint order, the Respondents ought to have investigated further and gathered some credible information that could lead them to form a reasonable belief that (i) she was linked to the activities of the Nanda Group and (ii) her locker might contain money, jewellery etc that constituted undisclosed income. Only then was a search warrant qua her justified. Alternatively, they may have opted to proceed against her under Section 153 C of the Act. That too would have required two Satisfaction Notes: one by the AO of the searched person followed by one by her own AO. However, in the present case, the Respondents did not opt for the alternative. 20. This judgment refers to an earlier decision of Allahabad High Court in the case of Smt.Kavita Agarwal Anr. v. Director of Income Tax (Investigation) Ors. (2003) 264 ITR 472 (All). This again was a case in which during the course of search, keys of three lockers were found and seized. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the same quality or material and information was not required to justify when consequential search of a building, place, vessel, vehicle or aircraft under clause (i) of the Section 132 (1) of the Act is undertaken, for search would be in continuation of the authorized search recording the reasons to believe . Consequential warrants would be justified in cases where the exact location of the offending articles, books of accounts etc. for which search had been initiated by recording reasons to believe is unknown or had been shifted and relocated to avoid detection and seizure. In such circumstances, the reasons to believe must meet the requirements of clauses (a), (b) or (c) of Section 132(1) of the Act, albeit the authorized officer directing consequential search must record and state the reason why another place, building, vehicle etc. was being subjected to search. Some latitude and stringent requirements in comparison may not be required when the satisfaction note records the reason for issue of warrants of authorization under clause (i) of Section 132(1) of the Act. However, the satisfaction note in such cases must evince and bespeak this reason. Confluence and connectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lear from Clause (iii), is contemplated in the case of those articles or things found as a result of such search. In my opinion, the power conferred under Section 132(1) is contemplated in relation to those cases where the precise location of the article or thing is not known to the income-tax department and, therefore, a search must be made for it, and where it will not be ordinarily yielded over by the person having possession of it and, therefore, it is necessary to seize it. If it is only such article or thing which is contemplated by Section 132(1), then it is such article or thing alone which can be the subject of an order under Section 132(3), I am unable to accept the contention on behalf of the income-tax department that Section 132(3) will include a case where the location of the article or thing is known and where ordinarily the person holding custody of it will readily deliver it up to the income-tax department. Such article or thing, I think, requires neither search nor seizure. 23. In Motilal and Ors. (supra), it was held that where an article, money or bullion is already seized, search under clause (i) to Section 132(1) of the Act cannot be authorized. Ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the counter affidavit. Shah-E-Naaz Judge in the original writ petition had not specifically challenged the search in her locker No.7325-A. Her stand and stance was that she was a second account holder and had not operated the locker in question from 2007. Therefore, Section 153A was not attracted and she should not be subjected to the procedure prescribed under the said section. The respondents do not deny and have not controverted the fact that she had not operated the locker since 2007. The respondents had pleaded and asserted that in the absence of challenge to the warrant of authorization to the search of lockers amounts to admission accepting validity of search in respect of locker No.7325-A. Shah-E-Naaz Judge had in light of the objection amended the writ petition to challenge validity of search of locker No.7325-A. The aforesaid defect or lapse was noticed during the course of hearing as recorded in the order dated 15th January, 2018. We would observe that this was a legal flaw and defect in the writ petition, consequences whereof were not understood by the counsel for Shah-E-Naaz Judge till arguments by the Revenue were made. Amendment application, C.M. No. 3504/2018 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the premises, for the Court does not substitute its opinion with that of the order authorizing search and decide whether they should have been issued. Similarly, an irregularity in exercise of search and seizure would not affect the authorization or search. It could in a given case vitiate the action taken when the officer executing the search and seizure has acted malafidely. Clearly, therefore, legal validity of issue of warrant of authorization is distinguished from the manner and method in which it has been executed. 29. The respondents have also placed reliance on Section 292CC of the Act. The said section is of no relevance to the present case. It was inserted by Finance Act, 2012 with retrospective effect from 1st April, 1996 in view of some judgments holding that authorization for search must be separately issued in the name of each person and when warrant of authorization is issued in the name of more than one person, the assessment is to be made against all of them as Association of Persons and not as separate individuals. We fail to understand relevance of the said provision in the factual matrix of the present case. 30. In view of the aforesaid discussion, the su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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