TaxTMI 
TaxTMI 
2019 (9) TMI 6
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....dh Police Station, Songadh, District Tapi by passing writ of mandamus, certiorari or any other writ or direction." 3.00. The case of the writ applicant in his own words as pleaded in the writ application is as follows :- "(2). The petitioners by way of this petition beg to challenge, the illegal and the arbitrary action of the respondent no.1 Income Tax Department to claim the amount of the petitioner, which is seized by the respondent no.2 in casual checking and also challenging the warrant of authorization dated 30/10/2018 issued by the respondent Income Tax Department, Surat under Section 132A (1) of the Income Tax Act, 1961, whereby respondent no.1 requisitioned the amount of Rs. 2,45,50,000/- seized from two persons of the Angadiya Courier Services by Police Inspector Shri M.V.Kikani, Songadh Police Station, Songadh, District Tapi. (3). The brief fact of the present petition is such that the present petitioner is doing business in the name and style of S.K.Traders. The petitioner is dealing mainly with the selling of vegetable fruits and agricultural products, milk and post harvesting crop activity. It is submitted that the petitioner's business is considered as a Micr....
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.... the statement was made by department that proceedings under Section 132A of the Act has been initiated. The application of the petitioner is rejected by order dated 05/01/2019 and the application of the IT Department is allowed by the same order. (6). It is submitted that against the said order, the petitioner has tiled Revision Application being Criminal Revision Application before the learned Sessions Court, Tapi and same is pending. However, stay is granted. (7). It is submitted that the Income tax department has issued a summons to the petitioner on 11/09/2018 calling the petitioner on 14/09/2018 at 11:00 am. It is submitted that the petitioner appeared before the Income Tax Department and recorded his statement. (8). It is submitted that again the petitioner was called upon by the respondent No.1 department on 11/10/2018. It is stated in the summons that the petitioner has to remain present on 18/10/2018 and has to give explanation regarding cash amount as specified in the notice. It is submitted that the appeared before the department and explain each and every thing with documents regarding the accounts. The petitioner has satisfied the department regarding the cas....
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....Srinath Travels. Upon physical search of the Bus, two bags containing seven packets of cash aggregating Rs. 2,45,50,000/- were recovered by the Songadh Police, Tapi. The police took the possession of the entire cash. Upon interrogation of Surajbhai and Rajendrasinh, it was revealed that they were employees of the Angadiya Company running in the name of M/s.V.P. Angadiya and Courier Service. In their statements, which came to be recorded, they disclosed that as employees of the courier company, they were asked to deliver the cash at Ahmedabad. The police also the recorded the statement of one Hitendrabhai Babubhai Patel, an employee of the Angadiya Company at Surat Branch. 4.03. Summons under section 131(1) of the Act were issued to Mr.Surajbhai Mehta and Mr.Rajendrasinh Vaghela asking them to attend the office of the DDIT (Investigation-III), Surat along with the necessary details as regards the cash recovered from their possession. The statements of Mr.Suraj and Mr.Rajendrasinh were recorded on oath under section 131 of the Act on dated 7/9/2018. Both made themselves clear that they were not the owners of the cash but they were only employees of the courier service company. 4.....
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....stay of the operation of the order passed by the Magistrate to handover the cash to the Income Tax department. The application Ex.5 came to be allowed by the Principal District and Sessions Judge, Tapi at Vyara vide order dated 10/1/2019. The operation of the order passed by the Judicial Magistrate came to be stayed till the final disposal of the Revision Application. 4.07. We are informed that the Criminal Revision Application, referred to above, is yet to be heard finally. 4.08. Ultimately, the impugned Warrant of Authorization under sub-section (1) of section 132A of the Act came to be issued by the Principal director of Income Tax (Investigation), Surat in Form No.45C in accordance with the Rule 112D(1) of the Rules. The same reads as under :- "FORM NO. 45C V (SEE RULE 112D(1)) Warrant of authorization under subsection (1) of section 132A of the Income Tax Act, 1961 No.000451 To, The Deputy Director, Abhishak Gramin The Deputy Commissioner, The Assistant Director, Aditya Bikram The Assistant Commissioner, The Income-Tax Officer, The assets taken into custody by Shri M.V.Kikani, Police Inspector, Songadh Police Station, (Name and designation of t....
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.... return is yet to be filed and as the cash has been withdrawn from the bank accounts and cash book, the writ applicant would have definitely disclosed the same in his Return of Income. In such circumstances, according to Mr.Shah, the Warrant of Authorization is not justified and the cash should be ordered to be handed over to the writ applicant. 5.04. Mr.Shah, took us through few documents more particularly, bank accounts etc. This exercise was undertaken by Mr.Shah to demonstrate that the writ applicant is in the business of fruits, vegetables and flowers and that too on large scale. According to Mr.Shah, the amount which has been seized in cash, is to be paid to the farmers from whom the writ applicant purchased the goods to be sold to the retailers. Mr.Shah laid much emphasize on the fact that in the bank accounts, huge amount has been shown which would indicate that the cash was, in fact, withdrawn from the bank accounts as well as from the cash book. 5.05. Mr.Shah also brought to our notice that the writ applicant submitted few documents vide letter dated 18/10/2018. The documents are in the form of (1) Indemnity Bond; (2) Cash Book duly certified by the Chartered Accounta....
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....(b) and (c) exists. 6.04. Mr.Bhatt thereafter invited our attention to the following averments made in the Affidavit-in-reply filed on "I. With reference to paragraphs 1 to 7, the contents of the extents it does not form part of the record are denied. I submit that the information was received on 30/08/2018 from Shri V. R. Bhawad, Police Inspector, Songadh Police Station, Tapi regarding interception of cash of Rs. 2,45,50,000/- from Surajbhai Pravinchandra Mehta and Rajendrasinh Viramji Vaghela. Cash was intercepted from a Shreenath Travels bus on 30.08.2018, in which above persons were travelling from Nagpur to Ahmedabad via Surat. Upon physical search of bus, two bags containing 7 packets of cash totalling Rs. 2,45,50,000/- was found by Songadh Police, Tapi. When enquiries were made from these two persons, no legitimate documentary evidence was produced by them before the police. Therefore, information in this regard was passed on to Additional Director of Income-tax (Investigation), Surat on 30.08.2018 requesting to take over investigation in this matter. The enquires in this case were assigned to the undersigned i.e. Deputy Director of Income-tax (Investigation), Unit-3, S....
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....more opportunity to be given to him to appear before the investigating Officer (respondent no. 1) on 14.09.2018 along with all relevant documents to explain the sources of cash worth Rs. 2,45,50,000/- seized by Songadh police. The Petitioner appeared before the investigation officer on 14.09.2018 when his statement on oath was recorded u/s 131 of the Act. The above facts that he did not appear on 11.09.2018 despite being informed about it were again confirmed by him in Statement recorded u/s 131 of the Act. I submit that when asked about the source of Rs. 2,45,50,000/- cash seized by Songadh Police, the Petitioner stated that he had withdrawn amount from his bank accounts as well as from his wife's bank accounts. The Petitioner further stated that some amount was also taken from his cash book. However, when asked to submit bank account-wise and date-wise cash withdrawals along with details about cash withdrawal from his wife's bank accounts to support his claim, the Petitioner expressed his inability to submit the details and asked for some time to produce required documents. The Petitioner was asked that despite the fact that he was informed on 07.09.2018 itself and again on 11....
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....me Tax (Investigation), Surat on 30.10.2018. Thus, it becomes clear that that information about cash seizure was passed on to Income tax authority by Songadh Police on 30.08.2018. Further, about two months time was consumed in procuring warrant u/s 132A of the Act because enquiries had to be conducted about the source of cash seized. I submit that in due compliance of principles of natural justice, sufficient opportunities were provided to the Petitioner to submit evidence in support of his claim and thereafter in the absence of any satisfactory explanation, reason to believe had to be formed that prima facie the cash seized was unexplained and unaccounted for. I submit that the warrant of authorization was issued after following the laid down procedures. II. With reference to paragraph 8, the contentions therein are denied. I submit that the following submissions were made by the Petitioner on 18.10.2018: (1) a covering letter dated 18.10.2018. (2) cash book from 1.4.2018 to 21.08.2018 (3) Indemnity bond dated 18.10.2018 and (4) Breakup of cash receipts on 10.4.2018, 10.5.2018, 10.06.2018 and 10.7.2018. I humbly submit that the details submitted do not satisfactorily explain....
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....offer a satisfactory explanation about the source of cash seized even after providing multiple opportunities. Thus, the report of DDIT(Inv.), Ajmer dated 05.02.2019 has no relevance to this proceedings. V. With reference to paragraph 11, the contentions therein are denied. I submit that there are laid down rules and procedure to be followed while enquiring about cash seizure information which was passed on to investigation officer by Songadh police. The information was received by the investigating officer on 30.08.2018 and the enquiry into the case began thereafter. Two months time was consumed in procuring warrant u/s 132A of the Act because enquiries had to be conducted about the source of cash seized and as per principles of natural justice, sufficient opportunities had to be provided to the Petitioner to submit evidence in support of his claim and thereafter in the absence of a satisfactory explanation, reason to believe had to be formed that prima facie the cash seized was unexplained and unaccounted for. This legal procedure had to be followed as per law and rules laid down in this regard. Therefore, the contention that the warrant of authorization is issued with malafide....
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....nk account-wise withdrawals in support of his claim. However, no such required details have been submitted by the petitioner before the respondent till date. Thus, the contention of the petitioner that no opportunity to be heard was given to him is totally false, incorrect and misleading. X. With reference to para 12(G) and 12(H), the Petitioner has reiterated that the cash seized is accounted amount and warrant of authorization is illegal. XI. The said contention is denied. I reiterate that no satisfactory explanation has been provided by the petitioner to explain the source of cash seized. Reasons to believe has been recorded in writing based on the information in possession of the Pr. DIT(Inv.), Surat in this case. Warrant of authorisation under section 132A has been issued as per law and after following due procedures and rules. XII. With reference to 12(I) and 12(K), the Petitioner has relied on the no objection certificate issued by the department as well as the order passed by the Hon'ble Rajasthan High Court. I submit that the said no objection as well as the order passed by the Hon'ble Rajasthan High Court has no relevance to the present proceedings as the Petitio....
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....clause (a) or clause (b) or clause (c), as the case may be, of that sub-section shall deliver the books of account, other documents or assets to the requisitioning officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody. [2] Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of subsections (4A) to (14) (both inclusive) of section 132 and section 132B shall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of subsection (1) of this section and as if for the words "the authorized officer" occurring in any of the aforesaid subsections (4A) to (14), the words "the requisitioning officer" were substituted." 7.01. The constitutional validity of section 132A of the Act has already been upheld by the Supreme Court long back in the case of Pooram Mal Versus Director of Inspection (Investigation), reported in IT ....
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....t. Suffice it to say that in exercise of the extraordinary jurisdictions this Court can examine whether the act or issuance of an authorization under section 132A is arbitrary or malafide or whether the subjective satisfaction which is recorded is such that it indicates lack of application of mind of the appropriate authority. According to us, the reason to believe must be based on definable material or materials and if the information or the reason to believe has no nexus with the belief or there is no definable material or tangible information for formation of such belief, then, in such a case, action taken under section 132A of the Act would be treated as illegal. 7.05. In the case of Shalini Verma (supra) this Court (wherein one of us, Justice J.B. Pardiwala is a party), had an occasion to consider sections 132, 132A, as well as Rule 112A in detail. In Shalini Verma (supra), the petitioner had prayed for a writ of mandamus and had also prayed for quashing and setting aside the impugned Warrant of authorization. In the said decision, this Court in paras 9, 10, 11, 12, and 13 has held as under :- "9. After hearing the learned counsel for the parties and after going through t....
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....decide whether from the circumstances of the case, the appropriate authority might have reason to believe that any of those conditions existed. However, the jurisdiction of the Court extends no further. Whether on the information in his possession, the said authority should exercise his power under Section 132A, must be decided by the said authority and not by the High Court. The concerned authority under Section 132A alone is entrusted with the power to administer the same. If from the materials disclosed it may be prima facie said that he had reason to believe that any of those conditions existed, it is not open to the High Court, exercising powers under Article 226 of the Constitution, to set aside the warrant of authorization on a re-appraisal of the evidence. On the other hand, if the writ petitioner can establish mala fides on the part of the authorities concerned or that in the circumstances, no reasonable person would come to the conclusion that the conditions mentioned therein existed, the High Court can interfere at that stage." 7.06. Thus, the scope of interference with the Warrant of Authorization in a writ application under Article 226 of the Constitution is very lim....
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....ering the statements of various persons and other materials on record, the authorities came to the conclusion that it was concealed income and assessed the assessee to tax. It was argued before the Assessee that the proceedings initiated under section 132 of the Act itself were invalid for the reason that it could not have been based on a search conducted on a train by the police authority and therefore, the proceedings initiated for the Block Assessment for the relevant period were without jurisdiction. Such contention raised before the Supreme Court came to be negatived by the Supreme Court by observing as under :- "This plea was not raised by the appellant before any of the authorities. Further, we find that in view of the amendment made in section 132A of the Income-tax Act, 1961 by the Finance Act of 2017, the "reason to believe" or "reason to suspect", as the case may be, shall not be disclosed to any person or any authority or the Appellate Tribunal as recorded by the income-tax authority under section 132 or section 132A. We, therefore, cannot go into that question at all. Even otherwise, we find that the explanation given by the appellant regarding the amount of cash of....
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....ion of mind on the part of the appropriate authority. The reason to believe must be tangible in law and if the information or reason has no nexus with the belief or there is no material or tangible information for the formation of the belief, action taken under section 132 would be bad in law. If reasons have been recorded and the concerned officer is satisfied that there is reason to believe, the court cannot sit in appeal over the decision of the said officer regarding the existence of the reason to believe nor can the court examine the adequacy of the grounds on which the reason to believe entertained by such officer is based. But there is a limited area within which such reason to believe entertained by the officer can be scrutinized by the Court. If the grounds on which "reason to believe" is founded are not relevant to the subject matter of inquiry or are extraneous to the scope and purpose of the statute or are such as no rational human being can consider connected with the fact in respect of which the belief is to be entertained so that no reasonable man can come to such a belief, the exercise of the power would be bad. In appropriate cases a writ petition may lie challengi....
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....essee group was in possession of documents which would not be produced by issuance of summons or other notice in terms of provisions of section 132(1)(b) of the Act as also assets as contemplated under clause (c) of section 132(1). It has been categorically averred that the pre-search inquiries formed reason for believing the aspect enumerated in clauses (b) and (c) of section 132(1) and that the satisfaction recorded has been vindicated even from the findings in the search. The record indicates that exhaustive inquiries have been made and it is on the basis of the material collected during the course of such inquiries, that the satisfaction has been recorded. On a perusal of the material, based on which satisfaction has been recorded by the respondent No.2 before issuance of authorization under section 132 of the Act, it cannot be said that based on such material no reasonable person could have formed the opinion that reasons for exercise of powers under section 132 exist. In the opinion, of this court, the record of the case clearly indicates that there was sufficient and relevant material before the respondent No.2 to form the requisite opinion as contemplated under section 132(....
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.... amount as his income in any assessment proceedings under the Act. Without anything more than what was actually there before the Commissioner, how could it have been assumed that he would not have disclosed it for purposes of any proceedings under the Act. There was nothing before the Commissioner to suggest that it was, in fact, wholly or in part, income of any person connected with Vinod Kumar Jaiswal so as to induce a belief that, if called upon, Vinod Kumar Jaiswal would not have disclosed it for the purpose of the Act. The mere fact this amount and did not have any documents with him regarding its ownership or possession could not be treated as appears to have been done by the Commissioner as information relatable to a conclusion that it represented income which would not have been disclosed by Vinod Kumar Jaiswal of purpose of the Act. Mere unexplained possession of the amount, without anything more, could hardly be said to constitute information which could be treated as sufficient by the reasonable person, leading to an inference that it was income which would not have been disclosed by the person in possession for purposes of the Act." The Supreme Court after reproducing....
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....rd to the facts of that case and evidence on record, this Court, by relying on the decision in the case of Vindhya Metal Corporation (supra) took the view that no reasonable person could have come to the conclusion that the amount of Rs. 11 Lac belonged to the petitioner or that the petitioner would not have disclosed the same to the Income Tax Authority under the provisions of the Act. This decision also, in our opinion, does not help the writ application in any manner. 7.11. At this stage, our attention has been invited by Mr.Bhatt, the learned counsel appearing for the revenue to the decision of the Supreme Court in the Case of Director General of Income Tax (Investigation) Pune & Ors. Versus M/s. Spacewood Furnishers Pvt. Ltd. & Ors., [2015] 374 ITR 595 (S.C.). We are referring to this decision only with a view to highlight the scope of interference in such type of matters, more particularly in cases where the Warrant of Authorization is issued under section 132A of the Act. We may quote the relevant observations made by the Supreme Court, in the case of M/s. Spacewood Furnishers Pvt. Ltd. & Ors. in paragraph Nos.5 to 9 :- "5. The "classical" notion of the extent of power ....
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....ance of the statutory duties of the tax officers any error of judgment on the part of the Officers will not vitiate the exercise of the power. Where the Commissioner entertains the requisite belief and for reasons recorded by him authorizes a designated officer to enter and search premises for books of account and documents relevant to or useful for any proceeding under the Act, the Court in a petition by an aggrieved person cannot be asked to substitute its own opinion whether an order authorising search should have been issued. Again, any irregularity in the course of entry, search and seizure committed by the officer acting in pursuance of the authorization will not be sufficient to vitiate the action taken, provided the officer has in executing the authorization acted bona fide. The Act and the Rules do not require that the warrant of authorization should specify the particulars of documents and books of accounts a general authorization to search for and seize documents and books of account relevant to or useful for any proceeding complies with the requirements of the Act and the Rules. It is for the officer making the search to exercise his judgment and seize or not to seiz....
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....t to any investigation need not be disclosed in the search warrant; such material may be secret, may have been obtained through intelligence, or even conveyed orally by informants. In the said case, the petitioner contended that, if the court is going to look into the file produced on behalf of the officer who authorized the search, it must be disclosed to the petitioner so that the petitioner "can controvert any false or wholly unreasonable material set out in the file", but the Supreme Court did not accept this submission. The Supreme Court also referred to an earlier decision in S. Narayanappa v. CIT [1967] 63 ITR 219 (SC), to hold that whether grounds for ordering search were sufficient or not is not a matter for the court to investigate. However, the court may examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the 3 (1985 (155) ITR 166 (SC) belief and are not extraneous or irrelevant for the purpose of the section." 9. The principles that can be deduced from the aforesaid decisions of this Court which continue to hold the field without any departure may be summarized as follows : "(i) The authority....