TMI Blog1999 (1) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... The search was provisionally concluded on October 27, 1995, and a panchnama, exhibit P-1, dated October 27, 1995, was prepared on that day with an assurance that the search operation would continue next day. A statement, exhibit P-2, also was obtained from the first petitioner. Before leaving the premises, a prohibitory order in respect of an almirah kept in one of the bed rooms in the first floor of the premises was issued. The second search took place on November 10, 1995, after a gap of nearly two weeks. No incriminating document or unaccounted cash or jewellery were recovered from the premises during the search. Subsequently, the petitioners were served with notice under section 158BC of the Act, exhibit P-6, dated April 16, 1996, calling upon them to file returns for the block period of 10 years. They have filed the returns in time. According to the petitioners, since nothing was unearthed as a result of search they cannot be dealt with under Chapter XIV-B of the Act. Contending that the whole exercise of search and seizure are illegal and arbitrary and initiation of further proceedings on the basis of the illegal search and seizure are also illegal, the original petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst petitioner had stated that he had sold his house at Mavoor Road, Calicut, for Rs. 24 lakhs though the recorded price was only Rs. 12 lakhs and that the entire sale proceeds of Rs. 24 lakhs were paid to Dr. Mathai. However, he could not give proper explanations for the source of investments in UTI and fixed deposits amounting to Rs. 2,62,500. In the second statement recorded on November 10, 1995, the first petitioner had retracted the earlier statement. According to the second respondent, all the books, pass books, fixed deposit receipts, etc., found at the premises were put in the almirah which was sealed. It is averred that he was not aware of any statements having been prepared by the first petitioner marked as exhibit P-5 in the petition as none of the members of the search party had any knowledge about the same as it was not prepared during the operation. The allegation of mala fides is denied. According to him, the action taken by him during the course of search operations was in his capacity as authorised officer in good faith and bona fide execution of his work. In the additional affidavit filed by the second respondent he had refuted the allegations made against him in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the second respondent has committed perjury and committed an offence of contempt of this court giving false information. In the light of the fact that no concealed income was detected there is no scope for block assessment under Chapter XIV-B of the Act. Section 54 of the Act deals with residential property and in lieu of the allegation of receipt of Rs. 24 lakhs and payment of Rs. 22 lakhs, no tax for capital gain is involved and, therefore, there is no authority to continue the proceedings. Learned senior standing counsel for the Income-tax Department in reply to the arguments submitted that the warrant of authorisation dated October 12, 1995, was issued by the Director of Income-tax (Investigation), Bangalore, on the basis of a satisfaction note prepared by the then Assistant Director of Income-tax (Investigation)-1, Calicut. It was in turn based on the enquiries conducted by him and information received regarding the undervaluation of the property deals of the petitioners with Shri K. T. Hamza and Dr. N. M. Mathai. The search was conducted as per law. According to him, the search could not be completed on October 27, 1995, and due to paucity of time the search was temporaril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 14,931. (3) Statement as to the sale consideration. From exhibit P-3 second panchnama dated November 10, 1995, seven items, books of account and other valuable articles were seized. These articles which were available on October 27, 1995, were put in an almirah, according to the second respondent, and sealed since scrutiny could not be completed during the search and investigation and prohibitory order under section 132 of the Act was served on the petitioners. Sub-section (3) of section 132 empowers the authorised officer to pass an order on the owner that he shall not remove, part with or otherwise deal with it except with the previous permission of the officer. But this can be served only if it is not practicable to seize any such books of account, other documents, etc. It is not stated as to why the books of account, documents, etc., was not practicable to be seized on October 27, 1995. The second respondent has collected the listed documents from the premises and has put them in the almirah and sealed it. In the absence of any satisfactory explanation as to why the books of account, passbook and the documents were not practicable to be seized on October 27, 1995, itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to secure the presence of the petitioners and continue the operations. Therefore, unless there is convincing reason for not resuming search immediately the proceedings undertaken by the second respondent for a second search cannot be held to be legal. It is invading the right and freedom of the petitioners for a period more than required or necessary. The averment that the petitioners were not available for two days. is denied by them. Instead it is stated that they could not keep the house in order as the search was incomplete and that they had telephoned and required the officers to complete the search. Therefore, search has prolonged unreasonably without justification. Thirdly, the seized documents and records cannot be retained by the authorised officer for more than 15 days. It shall be handed over to the Income-tax Officer within 15 days of the seizure. Sub-section (9A) of section 132 of the Act is very clear in this aspect. In the additional counter affidavit filed by the second respondent it is submitted that the seized documents and records were handed over by P. N. Devadasan, Assistant Director of Income-tax (Inv.)-1, Calicut, within 15 days. In the counter affidavit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the documents were taken without the petitioners' permission or receipt on October 27, 1995. The petitioners asked the officials for the total list of items taken out on October 27, 1995, and brought on November 10, 1995. However, the officials refused to give the list or to give a statement to the effect that there were taken on October 27, 1995, and returned on November 10, 1995. The officials admitted their mistakes, expressed regret and even tendered apology and also requested not to demand any written statement or receipt of list of documents as that would affect them adversely. Since no statement was given by the said Income-tax Officers, exhibit P-5 was recorded by the petitioners in the presence of the witnesses." These allegations contained in exhibit P-5 are denied by the respondents specifically in the additional counter affidavit. It is stated that no such statement was ever made before the authorised officer on that day nor that he was informed of anything of this statement either by the assessees or by the witnesses on that day. Thereafter, the second respondent proceeded to discredit the statement on the basis that the petitioners did not have any complaint whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documents should have been retained for more than 15 days by the authorised officers without handing them over to the Income-tax Officer. Coupled with these materials and the clear statement made in exhibit P-5 in the presence of pancha witnesses I have no hesitation to accept that it reflects the true state of events that occurred on November 10, 1995. Therefore, it is clear that the second respondent has seized the documents and the records and took them back privately without consent or knowledge of the petitioners and brought back on November 10, 1995, for reasons best known to him only. Though no personal motive is established against the second respondent for this action it is clearly an arbitrary exercise of power and amounts to malice in law. The conduct of the second respondent is unbecoming, improper and erodes the confidence and the image of the Department. The petitioners are regular assessees and are persons of standing in the society. They could have been treated in a much more responsible manner. Counsel for the petitioners referred to the decision of the Constitution Bench of the Supreme Court in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191, wherein it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is commonly known as legal malice. In that case the Division Bench held that if an assessee has been regularly producing his books of account before the assessing authorities who have been accepting those books of account as having been maintained in proper course of business, it would be somewhat unjustified use of power on the part of the Commissioner to issue a search warrant for the production of those books of account unless, of course, there is information to the effect that he has been keeping some secret account books also. He has to arrive at a decision in the background of the mental make up of an individual. A blanket condemnation of persons of diverse activities unconnected with each other on the odd chance that if their premises are searched, some incriminating material may be found is wholly outside the scope of section 165 of the Code of Criminal Procedure, 1973. The power has to be exercised in an honest manner and search warrants cannot be indiscriminately issued as a matter of policy. Whether the premises of the petitioner were searched on the basis of valid reasons or the action was taken against him on the basis of some policy decision could be determined by c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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