TMI Blog1992 (3) TMI 8X X X X Extracts X X X X X X X X Extracts X X X X ..... mar. The warrants of authorisation and the proceedings initiated on the force of the said warrants have been styled by the petitioner to be wholly illegal and without jurisdiction. It is stated that there was no warrant of authorisation for searching the premises of the petitioner inasmuch as the said authorisation was against Messrs. Om Parkash Som Parkash which was a Hindu undivided family-assessee. It is further stated that the jewellery and cash which was found and seized, stand mentioned in the regular account books maintained by the assessee, supported by entries in the Gold Control Register, and also that there was complete confusion in the mind of the raiding party as to the premises which were to be searched in pursuance of the warrant of authorisation against Messrs. Om Parkash Som Parkash. The petitioner, Messrs. Jai Bhagwan Om Parkash, is stated to be a registered firm under section 185 of the Income-tax Act, and hence the warrants of authorisation which were issued against Messrs. Om Parkash Som Parkash could not be utilised for the purpose of searching the premises of the petitioner, is the clamour of the petitioner. Before, however, the matter is dealt in the light o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e regular course of business by the petitioner. The main business of the petitioner is to advance money against pawning of gold and silver jewellery, besides the manufacture and sale of gold and bullion, ornaments, either studded with stones or otherwise. Another inventory of cash found and seized was prepared in which the name of Om Parkash Som Parkash is mentioned as carrying on the business of Messrs. Bhagwan Das Om Parkash. In the manner aforesaid, there is, thus, a difference in the panchnama as also in the inventory of cash copy. Four kilograms of gold ornaments and 119 kgs. of silver ornaments were seized and out of the total cash found in the premises, i.e., Rs. 1,32,173, a sum of Rs. 1,25,000 was seized. The books of account were also seized, of which another inventory was prepared. On July 30, 1987, a notice under rule 112A of the Income-tax Rules of 1962 was issued in the name of Om Parkash Som Parkash, Jorian Kuan, Karnal, by the Income-tax Officer, A-Ward, Karnal. A reply to the aforesaid notice was sent by the petitioner on July 31, 1987, by mentioning therein that Messrs. Om Parkash Som Parkash does not carry on any business at Jorian Kuan, Karnal, nor it maintains a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made under section 132(5) of the said Act, respectively, and that even though a specific remedy is provided under the statute for the very relief that has been claimed in the present petition, the petitioner has chosen to give a go-by to the said remedy, thus disentitling him to any relief from this court under article 226/227 of the Constitution of India. On the merits, the case of the respondents is that the firm styled as Jai Bhagwan Om Parkash is a partnership concern and is comprised of two partners, namely, Om Parkash and Som Parkash, having equal shares up to the assessment year 1985-86. As per the income-tax records, Sarvshri Avinash Chander and Viney Kumar were taken as partners with effect from April 1, 1985, relevant to the assessment year 1986-87. The firm is treated as a registered firm under the Income-tax Act, vide order dated September 26, 1986, and there is nothing on the income-tax record to show that the firm is registered under the Partnership Act. It is further stated that the Income-tax Officers, i.e., the respondents Nos. 3 and 4, were issued warrants of authorisation under section 132 of the Income-tax Act. The search warrant was issued to search the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arkash in respect of the business in the name of Jai Bhagwan Om Parkash came to be mentioned in the panchnama. So far as the case of the petitioner with regard to items found and mentioned in the account books is concerned, it is stated that the same is absolutely incorrect and even as per the statement of Shri Som Parkash which was recorded by the authorised officer during the course of search, it came to be admitted by him that of the stock reflected on July 16, 1987, as per the books of account maintained, the gold ornaments were of the value of Rs. 4,88,297.87, old silver ornaments were of the value of Rs. 34,500, silver dalli was of the value of Rs. 35,300, whereas the silver ornaments were of the value of Rs, 5,345. In addition to the aforesaid ornaments, pawned jewellery of Rs. 2,10,282.89 was found at the time of the search. As against the stocks reflected in the account books, as given above, the following stocks were found on physical verification at the time of the search of the premises : Items Weight Amount (Rs.) Silver ornaments 1 Qtl. 98 Kgs. 880 Gms. 5,50,000 Gold ornaments 6 Kgs. 821 Gms. 16,00,000 Diamond jewellery 20,000 The claim of the petitioner th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year 1974-75. Further, the refund of Rs. 3,250 out of the above penalty allowed by the Gold Control Administration was again credited to the profit and loss account of M/s. Jai Bhagwan Om Parkash. Shri Om Parkash as partner of M/s. Jai Bhagwan Om Parkash, vide his letter dated June 6, 1977, addressed to the Income-tax Officer, had himself requested that refund of Rs. 3,250, credited to the profit and loss account, should not be treated as income because the fine of Rs. 3,500 was already disallowed. From the aforesaid facts, as also the conduct of Som Parkash, it is stated by the respondents that it was clearly established that the searched premises were being run by Messrs. Om Parkash Som Parkash in respect of the business in the name and style Jai Bhagwan Om Parkash. From the facts that have been narrated above, Mr. B. S. Gupta, learned counsel for the petitioner, vehemently contends that there was no warrant of authorisation for searching the premises of the petitioner, i.e., Messrs. Jai Bhagwan Om Parkash, and inasmuch as the warrants of authorisation were against Messrs. Om Parkash Som Parkash, which was a Hindu undivided family-assessee, the proceedings fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th regard to the information available with the Department and the material on which the authorities had come to a bona fide belief is concerned, the contention of Mr. Sawhney is that in the entire petition, not a word was mentioned with regard to there being no formation of opinion on the material available and, therefore, it was not possible to disclose the same in the written statement. However, he contends that, on the asking of the court, the entire file culminating in the order of issuance of warrants of authorisation can be produced and, in fact, during the course of arguments, the same was produced for the perusal of the court. After hearing learned counsel for the parties, we are of the opinion that unless the relevant file pertaining to the case of the petitioner while issuing the warrant of authorisation is perused, it shall be difficult to answer the questions that have been posed in the present case. However, before that is done, it shall be useful also at this stage to extract the provisions of section 132 of the Act of 1961, in so far as they have a bearing upon the facts of the present case. The relevant extract of section 132 runs thus : " 132. (1) Where the Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. Bhagat Ram alias Bhagtu Saraf, son of Shri Om Parkash. Shri Om Parkash, it is stated, is also alleged to have an accountant named Om Parkash in whose house documents and goods are lying. It is further stated that these persons have amassed huge wealth and have earned income in crores. As per the officer who made the note, the facts as made out by the complainant reveal that cash in crores, over and above jewellery items of gold and silver, are lying with them. They have got their rice shellers and substantial extent of land near Karnal. They also have three shops at Kunjpura Road, Karnal, which have been rented out. The other allegation made by the complainant against these persons was that they were in the habit of purchasing stolen items and were also dealing in money-lending. Many bank lockers, apart from having accounts in the names of various persons, were also there. It is also stated that these persons have at least two crores rupees in cash, apart from diamonds and gold/silver jewellery. In view of the officer making the note, it was a case which required orders to be passed under section 132 of the Income-tax Act. The complainant had given full particulars of persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lakhs of rupees, apart from incriminating books of account and documents. The list of persons as mentioned in the note aforesaid is as follows : 1. Sh. Om Parkash C/o. Messrs. Om Parkash Som Parkash. 2. Sh. Som Parkash C/o. --as above- 3. Sh. Prem Chand Saraf. 4. Sh. Bhagat Ram alias Bhagtu, son of Om Parkash. 5. M/s. Om Parkash Som Parkash, Sarafa Bazar, Karnal. 6. M/s. Om Parkash Saraf and Sons, Sarafa Bazar, Karnal. 7. Business concern of Sh. Prem Chand and Sh. Bhagat Ram. 8. Books of account and valuables are kept by these persons in the shop named Gupta Photographer, Sarafa Bazar, Karnal, and residence of Sh. Madan Lal, accountant. 9. Messrs. Haryana Cold Stores, Hansi Road, Karnal. In the ultimate analysis, it is mentioned that this case was mature for action under section 132 of the Act of 1961, and that on approval authorization should be prepared and a case be put up for search. There is yet another note of April 23, 1987, wherein it is mentioned that the case was discussed with the Commissioner of Income-tax, Rohtak, and the Deputy Director of Inspection, Rohtak, and as directed by the Commissioner of Income-tax, the officer concerned, who made the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts for gold business and other business, and investment in cold storage business (Haryana Cold Storage, Hansi Road, Karnal) by way of advance payment to persons who keep their goods in cold storages, not disclosed fully in account books. The result of verification has been separately noted and it has been mentioned that secret inquiries have been made by the Additional Director of Inspection, independently from various quarters and allegations levelled in respect of the nature of business and availability of cash with the aforesaid persons was found to be satisfactorily correct. It is also mentioned in the aforesaid note that all the allegations with regard to purchase of land and under-estimation of consideration regarding one piece of land was found to be substantially correct and as regards the other two pieces of land the allegations could not be specifically verified from secret inquiries and detailed inquiries were not made to avoid suspicion, but people had the impression that the aforesaid persons had a lot of unaccounted money which they invest in purchase of land. It has also been mentioned in the aforesaid note that the parties aforesaid were living in decent and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , (7) and (9), which may have some bearing on the controversy that is required to be adjudicated in the present case, are reproduced as under: " (2) (a) The authorisation under sub-section (1) of section 132 (other than an authorisation under the proviso thereto) by the Director-General or Director or the Chief Commissioner or Commissioner or any such Deputy Director or Deputy Commissioner as is empowered by the Board in this behalf shall be in Form No. 45 ; (b) the authorisation under the proviso to sub-section (1) of section 132 by a Chief Commissioner or Commissioner shall be in Form No. 45A ; (c) the authorisation under sub-section (1A) of section 132 by a Chief Commissioner or Commissioner shall be in Form No. 45B. (2A) Every authorisation referred to in sub-rule (2) shall be in writing under the signature of the officer issuing the authorisation and shall bear his seal. (3) Any person in charge of or in any building, place, vessel, vehicle or aircraft authorised to be searched shall, on demand by the officer authorised to exercise the powers of search and seizure under section 132 (hereinafter referred to as the authorised officer) and on production of the authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the contentions that have been raised by learned counsel appearing for the petitioner. Based on the conditions precedent envisaged under the provisions of section 132 of the Act of 1961, as also rule 112 of the Rules of 1962, it is sought to be made out that there was absolutely no information available with the authorities, nor on the information that might be available, the authorities had applied their mind. The contention aforesaid is endeavoured to be buttressed on judicial precedents rendered in ITO v. Seth Brothers [1969] 74 ITR 836 (SC) ; H. L. Sibal v. CIT [1975] 101 ITR 112 (D. B. of this court) ; Jagmohan Mahajan v. CIT [1976] 103 ITR 579 (D. B. of this court) ; Manmohan Krishan Mahajan v. CIT [1977] 107 ITR 420 (P H) ; Balwant Singh v. R. D. Shah [1969] 71 ITR 550 (Delhi) ; Pooran Mal v. Director of Inspection (Investigation) [1974] 93 ITR 505 (SC) and Equitable Investment Co. (P.) Ltd. v. ITO [1988] 174 ITR 714 (Cal). It is required to be mentioned here that, out of the judgments referred to above, the respondents have also placed reliance upon Om Parkash Jindal v. Union of India [1976] 104 ITR 589 (P H) and upon Equitable Investment Co.'s case [1988] 174 ITR 714 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be regarded as adequate and render the temporary restrictions imposed by the measure reasonable. " It was, however, observed that, though in a very rare case, a tax evader may comply with a requisition, the Director of Inspection who has reliable information that the assessee has consistently concealed his income derived from certain financial deals may be justified in entertaining a reasonable belief that the assessee, if called upon to produce necessary documents, will not produce the same. It is, thus, clearly spelt out that there must be reliable information before the competent authorities and the measure of search and seizure would be objectionable if its implementation is not accompanied by safeguards against its undue and improper exercise. It is also clear from a reading of the other judgments cited, and a reference to which has been made above, that the Commissioner, while acting under section 132 of the Act of 1961, must come into possession of some material before he can resort to the drastic measures of issuing such warrants. The aforesaid judgments, however, cannot possibly come to the rescue of the petitioner on the question of availability of material befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a kind of general impression gathered by the Department. As is rightly observed by the Division Bench of this court in the aforesaid case, the note recorded by the Commissioner of Income-tax was in the nature of a declaration of a policy intended to rope in people residing in Chandigarh, Ludhiana, Ambala and Rohtak ranges. There was absolutely no information, nor any evidence, and the action was rightly struck down. The case of Jagmohan Mahajan v. CIT [1976] 103 ITR 579 (P H) was also decided on the basis of the judgment rendered in H. L. Sibal's case [1975] 101 ITR 112 (P H). It is significant to mention that the raid against Jagmohan Mahajan and others, as also Mr. H. L. Sibal, were conducted simultaneously, and the same information was available as in the case of Mr. H. L. Sibal. In fact, blanket warrants of authorisation were issued in which the name of the petitioners in those cases were filled at the time when the search was being conducted in the house of Mr. Mulkh Raj Mahajan, an advocate practising in this court. The petitioners in the aforesaid case were living with Shri Mulk Raj Mahajan. The facts of Manmohan Krishan Mahajan's case [1977] 107 ITR 420 (P H) w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such on which no reasonable person can come to that belief, the exercise of the power would be bad ; but, short of that, the court cannot interfere with the belief bona fide arrived at by the Director of Inspection, and it is open to the court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief. There cannot be any dispute to this proposition of law nor has any such dispute been raised by learned counsel for the respondents, but as mentioned above, there were sufficient grounds on which the belief, as required under section 132 of the Act of 1961, was founded. The case of Pooran Mal [1974] 93 ITR 505 (SC) has already been discussed above, and we are of the considered view that the aforesaid judgment, far from going in favour of the petitioner, rather turns against it. In Seth Brothers' case [1969] 74 ITR 836 (SC), it was held that, since by the exercise of the powers under section 132 of the Act of 1961, a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with law and only for the purposes for which the law authorises it to be exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be illegal. Admittedly, Om Parkash is one of the partners of the firm Messrs. Jai Bhagwan Om Parkash. The warrant of authorisation was to search the premises of all the persons as have been detailed above. While noting down as to how the file with regard to such proceedings started, it is clearly mentioned in the letter of authorisation that all such persons as have been mentioned and their premises could be searched. The names of Om Parkash, Som Parkash, Bhagat Ram alias Bhagtu, Parveen Kumar, Gian Chand and Madan Lal are individually mentioned along with their places of residence. Then comes the mention of Messrs. Om Parkash Som Parkash, Sarafa Bazar, Karnal ; Messrs. Om Parkash and Sons, Sarafa Bazar, Karnal ; business premises of Shri Bhagat Ram alias Bhagtu, Sarafa Bazar, Karnal, and the business premises of Parveen Kumar, Sarafa Bazar, Karnal. The board displayed at the premises where Messrs. Jai Bhagwan Om Parkash is carrying on the business of sarafa in the Sarafa Bazar mentions Messrs. Om Parkash Som Parkash and it is amply made out from the records of this case that the business run by Messrs. Om Parkash Som Parkash is styled as Jai Bhagwan Om Parkash. Not only that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad nothing to say. Further, if Som Parkash was not a partner of Messrs. Jai Bhagwan Om Parkash, it was expected that he would have raised some objections on that account when the search operation was going on and, admittedly, he was present at the shop. Further there was no question for him to have offered an amount of Rs. 4 lakhs, which offer was revised to Rs. 6 lakhs later, if he was not a partner of the firm, Messrs. Jai Bhagwan Om Parkash. With regard to other questions put to him regarding the period when he had acquired the assets, he answered that he had earned such assets after March, 1987. Further, the statement of Mahadev Bombaywala also shows that the said persons were melting silver on behalf of Messrs. Om Parkash Som Parkash. The matter does not rest there and it is further made out from the statement of Shri Kailash Chand, son of Om Parkash before Shri G. D. Thapar, Superintendent (Prevention), on March 2, 1977, where he stated that the name of their firm is Messrs. Om Parkash Som Parkash, which business is being run for the last 30 to 35 years. On the aforesaid material, the surviving contention of learned counsel for the petitioner is only that there was no materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... name of Jai Bhagwan Om Parkash has been created, in the peculiar facts and circumstances of this case, would not make any difference. The unaccounted or black money, as it may be called, is fast eating into the economy of this country. Unscrupulous persons cannot be permitted to endanger the economic life, and as has been curtly said by the Supreme Court in Pooran Mal's case [1974] 93 ITR 505, it is a well-known fact of our economic life that huge sums of unaccounted money are in circulation endangering its very fabric and in a country which has adopted high rates of taxation, a major portion of the unaccounted money should normally fill the Government coffers. Instead of doing so, it distorts the economy. Therefore, in the interests of the community, it is only right that the fiscal authorities should have sufficient powers to prevent tax evasion. The contention of Mr. Gupta that the information that was available with the Department as also the material and the reasons on the basis of which the action against the petitioner was taken ought to have been made available to the petitioner and lack of pleadings to that effect in the written statements would vitiate the action does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respondent had failed to disclose fully and truly all material facts necessary for the assessment and that, by reason of such failure, a portion of its income had escaped assessment. On the aforesaid facts, it was held by the Supreme Court that the stand taken by the Income-tax Officer in his first affidavit was obviously untenable because the existence of reason to believe on the part of the Income-tax Officer was a justiciable issue and it was for the court to be satisfied whether, in fact, the Income-tax Officer had reason to believe that income had escaped assessment by reason of failure of the respondent to make a full and true disclosure. (emphasis supplied). It was further held that, as the Income-tax Officer had, in the second affidavit, merely stated his belief but not set out any material on the basis of which he had arrived at such a belief, there was nothing on the basis of which the court could be satisfied on the affidavit that he had reason to believe that a part of the income of the respondent had escaped assessment by reason of his failure to make a true and full disclosure of the material facts. It shall be seen from the narration of facts given from the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave disclosed the material and the reasons on which the action was taken, if pleadings in that direction were made in the writ petition itself. On a parity of the same reasoning, we do not find any solace for the petitioner from the judgment in L. R. Gupta v. Union of India [1992] 194 ITR 32 (Delhi). Mr. Gupta has also relied upon N. K. Textile Mills v. CIT [1966] 62 ITR 58 (Punj), as also Dr. Nand Lal Tahiliani v. CIT [1988] 170 ITR 592 (All) and Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1 (SC) and on the basis of these authorities, it is sought to be made out that the words " has reason to believe " in section 132 of the Income-tax Act postulate belief and existence of reasons for that belief and that the belief must be held in good faith. On the detailed facts that have been enumerated in the earlier part of this judgment, we find that there was sufficient material on which the belief and existence of reasons for that belief could be formed as also that it was a bona fide belief. The aforesaid three judgments also, thus, provide no assistance to the petitioner. The relevant provisions of rule 112 of the Rules, 1962, have been quoted in the earlier part of the judgm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.6 lakhs were recovered. The Income-tax Officer issued show-cause notice under rule 112A of the Income-tax Rules, 1962, to " B " and his wife and, after hearing them, passed an order under section 132(5) of the Income-tax Act, holding that the tax and penalty for the assessment years 1977-78 to 1986-87 was more than the value of the assets seized and, therefore, the assets seized were required to be retained. In the writ petition filed by the assessees, it was, inter alia, contended that the warrant of authorisation issued by the Commissioner of Income-tax was invalid as there was no material or information in the possession of the Commissioner from which he could have reasons to believe that the conditions prerequisite for directing a search existed, as also that the provisions of section 132(9A) of the Act were violated on the ground that the authorised officer did not hand over the assets seized to the Income-tax Officer and, therefore, the order passed under section 132(5) of the Act could not be sustained. On a perusal of the file, it was held that the exercise of power by the Commissioner was proper. The Commissioner had considered the note submitted by the Assistant Direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice aforesaid, it was brought to the notice of the income-tax authorities that the firm, Messrs. Om Parkash Som Parkash, was not carrying on any business at Jorian Kuan, Karnal, nor it maintained any shop and that no operation under section 132 of the Act was conducted on any of the premises of Messrs. Om Parkash Som Parkash, immediately a new notice was issued by the Income-tax Officer under rule 112A of the Rules, wherein the correct name, i.e., Messrs. Om Parkash Som Parkash, with regard to the business of Jai Bhagwan Om Parkash, Karnal, etc., was mentioned. The warrant of authorisation admittedly being in the name of Om Parkash Som Parkash, Sarafa Bazar, Karnal, panchnama and inventories prepared at the spot in the name of Om Parkash Som Parkash, Sarafa Bazar, Karnal, with regard to the business of Messrs. Jai Bhagwan Om Parkash would leave no one in doubt that, in the first notice, mention of the name of Om Parkash Som Parkash at Jorian Kuan was a clerical or typographical mistake. On the detailed facts and circumstances that have been reproduced above, we are inclined to accept the aforesaid explanation furnished by learned counsel for the respondent. Nothing else has be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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