TMI Blog1991 (11) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... and Acquisition Act and awards in respect thereto were given. The amount of compensation awarded by the Land Acquisition Collector was claimed by three sets of claimants, (1) the Gaon Sabha of the village in which the land was situated, (2) the proprietors/owners of the land, and (3) Bhumidars, including the petitioners. The dispute with regard to persons who were entitled to claim compensation was referred, under sections 30 and 31 of the Land Acquisition Act, to the Court of the District Judge, Delhi. Claims were also filed by the three categories of claimants before the Additional District Judge, Delhi, for enhancement of the compensation which had been offered by the Collector in his awards. It is not necessary to give details with regard to the dispute under the Land Acquisition Act except to note that the Additional District Judge decided that it was the Bhumidars who were entitled to receive the compensation. The claims of the Gaon Sabha and the owners were rejected. The Additional District Judge also enhanced the compensation and the total share of the petitioners, out of the sum awarded as compensation to the Bhumidars, was about Rs. 28.77 crores. Against the decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bank guarantees. It is alleged that photo-copies of the documents which were required by the Department were duly given to the aforesaid Inspectors who then served a notice under section 131 on petitioner No. 4 requiring her to attend the office of the Income-tax Officer on March 22, 1991, for giving information required from her. On March 22, 1991, a search took place, initially, at the residence of the petitioners. According to the averments in the writ petition, the house of the petitioners was surrounded by the police and a number of Income-tax Officers entered the house. Warrants of authorisation issued under section 132(1) by respondent No. 2 were shown to petitioner No. 1 and, thereafter, the house was searched. The petitioners have also made grievance of the manner in which the search was conducted. In particular, it is alleged that petitioner No. 1, who was sitting in his office-room at his residence when the raid started, was not even permitted to leave the room to attend to his ailing wife or to professional work. The Additional Director of Inspection (respondent No. 4) examined and recorded the statement of petitioner No. 1. It is further alleged that, even after th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluding a posh residential building at 14, Anand Lok, New Delhi. Discreet enquiries were stated to have been made and it was revealed to the Department that the house at Anand Lok was under demolition and an apartment building was proposed to be constructed on it for which some secret bookings were alleged to have been made and money received by the family members of petitioner No. 1. The further allegation of the respondents is that the explanation which had been offered with regard to the marriage expenses relating to petitioner No. 3 was of doubtful veracity. Another allegation is that the petitioners had purchased bonds from out of the compensation amount which had been received and that they had obtained commission from certain agents for the purchase of public sector bonds. The commission so received was stated to be to the extent of Rs. 38 lakhs and, according to the respondents, this income had not been disclosed, nor had the petitioners any intention of disclosing the same and it would not have been unearthed but for the search under section 132. There is also allegation of evasion of wealth-tax and particulars of the properties owned by the petitioners have been specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under section 132. This direction was issued subject to any claim of privilege which may be raised by the respondents. Initially, an affidavit was filed claiming privilege but, subsequently, the Attorney-General appeared on September 30, 1991, and stated that he was not pressing the claim of privilege and that the respondents would be willing to show to the court as well as to the petitioners the reasons which have been recorded for the issuance of the authorisation under section 132(1) of the Act in the present case. Pursuant to the aforesaid contention of the Attorney-General, petitioner No. 1 was accorded inspection of the Me by the respondents. On the court records notes of the officers of the Department at well as the satisfaction recorded by the Director (Investigation) have been filed. In the note dated March 20, 1991, the Assistant Director of Investigation (respondent No. 4) has, inter alia, noted as under : (1) the petitioners had received compensation of about Rs. 30 crores against acquisition of lands situated in and around Delhi but the same had not been disclosed to the Department towards income-tax and wealth-tax. (2) The family owns property worth crore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following satisfaction note, pursuant to which the authorisation was issued : "Discussed with <?xml:namespace prefix = st2 /> D. D. Shri Rajguru and A. D. I. Shri Anil Mehta. I am satisfied that the assessee, Shri L. R. Gupta, and members of his family have not been disclosing their true incomes and wealth and, accordingly, action under section 132(1) of the Income-tax Act is necessary to discover and to take possession of the relevant documents of incriminating nature and unaccounted cash, valuables and other assets. Accordingly, warrants of authorisation under section 132(1) of the Income-tax Act, 1961, are issued under my seal and the signature in respect of persons and premises set out in the note of the ADI at page 7. D. D. to please ensure execution." On behalf of the petitioners, Mr. Harish Salve, learned counsel, has vehemently contended that no reasonable person could have come to the conclusion that, on the facts of the present case, an authorisation under section 132(1) should have been issued. He submitted that the ingredients of section 132(1) were not satisfied in the present case and the authorisation which was issued was liable to be quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ealth of the petitioners as the said money could not be said to be belonging to them unless and until all the court proceedings relating to the land acquired were concluded in their favour. Merely because wealth-tax returns had not been filed or alleged, capital gain not disclosed in the income-tax return could not be a ground for the Department to conclude that, if any information in respect of the said compensation or purchase of property or any other document was sought for, the same would not have been produced before the income-tax authorities by the petitioners. In short, the submission was that no material existed on the basis of which the respondents could have been satisfied under the provisions of section 132 ( 1 ) (b). On behalf of the respondents, Shri Rajendra drew our attention to the decision of the Mysore High Court in the case of C. Venkata Reddy v. ITO [1967] 66 ITR 212. At page 234, it was observed that section 132 was intended to achieve two limited objectives, (1) to get hold of evidence bearing on the tax liability of a person which the said person is seeking to withhold from the assessing authority, and (2) to get hold of assets representing income believed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33) : "From the file, we find that there was some material on the record suggesting that there was concealed income. It also appears that after the information had been documented the Commissioner wanted certain further information and it was only then that the Commissioner made noting that this was a fit case for issuing a search and seizure warrant for unearthing secret valuables and documents. " Therefore, the existence of tangible material, for formation of opinion, is a prerequisite. Reference was also made to Balwant Singh v. R. D. Shah, Director of Inspection [1969] 71 ITR 550. A Division Bench of this court held that the High Court could not test the adequacy of the grounds leading to the satisfaction which was recorded under section 132 of the Act. It was, however, observed that the Director of Inspection or the Commissioner ought not to lightly or arbitrarily invade the privacy of a subject. If the grounds on which the belief is founded are non-existent or are irrelevant or are such on which no reasonable person can come to that belief, the exercise of the powers would be bad ; but short of that, the court cannot interfere with the belief bona fide arrived at by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich must exist on the file on the basis of which the authorising officer can have reason to believe that action under section 132 is called for for any of the reasons mentioned in clauses (a), (b) or (c). When the action of issuance of an authorisation under section 132 is challenged in a court, it will be open to the petitioner to contend that, on the facts or information disclosed, no reasonable person could have come to the conclusion that action under section 132 was called for. The opinion which has to be formed is subjective and, therefore, the jurisdiction of the court to interfere is very limited. A court will not act as an appellate authority and examine meticulously the information in order to decide for itself as to whether action under section 132 is called for. But the court would be acting within its jurisdiction in seeing whether the act of issuance of an authorisation under section 132 is arbitrary or mala fide or whether the satisfaction which is recorded is such which shows lack of application of mind of the appropriate authority. The reason to believe must be tangible in law and if the information or the reason has no nexus with the belief or there is no material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities either voluntarily or on a requisition being sent. It may also happen that the documents may exist and be in the custody of a person which would show the existence of immovable property which he may have acquired from money or income which has been hidden from the Income-tax Department. The past record of the assessee and his status or position in life are also relevant circumstances in this regard. Where, however, documents exist which are not secretly maintained by an assessee, for example pass books, sale deeds which are registered and about the existence of which the Department is aware, then in such a case, it will be difficult to believe that an assessee will not produce those documents. Sub-clause (c) refers to money, bullion or jewellery or other valuable articles which, either wholly or partly, should have been the income of an assessee which has not been disclosed for the purpose of the Act. The said sub-clause pertains only to movable and not immovable assets. Secondly, it pertains to those assets which, wholly or partly, represent what should have been his income. The expression income "which has not been, or would not be, disclosed for the purposes of the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an effort to escape assessment. "Not disclosed" must mean the intention of the assessee to hide the existence of the income or the asset from the Income-tax Department while being aware that the same is rightly taxable. While interpreting the provisions of section 132, a Division Bench of the Allahabad High Court in the case of Motilal v. Preventive Intelligence Officer [1971] 80 ITR 418 observed in the language of R. S. Pathak J. (as he then was) as follows (pp. 422, 423) : "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, 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 .... 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 seiz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atisfaction note of respondent No. 2 does not, in our opinion, comply with any of the said two provisions. An authorisation under section 132(1)(b) can be issued if the satisfaction is that the person to whom summons or notice has been issued or will be issued will not produce or cause to be produced any books of account, documents, etc. No such satisfaction is indicated in the aforesaid note of respondent No. 2. With regard to the documents, the note states that action under section 132(1) is being taken to discover and take possession of the relevant documents of incriminating nature. The power of discovery is contained in section 131 and not under section 132. That apart, there must be material on which the mind has to be applied and opinion formed that the person concerned will not produce the documents if asked to do so. The satisfaction note of respondent No. 2 is completely silent on this aspect. The note also does not satisfy the provisions of section 132(1)(c). The note does not show that there is any information in his possession which has led respondent No. 2 to form an opinion that the petitioners had money, valuables, etc., which represented income and which they had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isfaction note of respondent No. 2, in our opinion, no reasonable person could have come to the conclusion that action under section 132(1) against the petitioners was called for. In the notes of respondents Nos. 2 and 3, it has been stated that there has been a failure on the part of the petitioners to disclose the compensation which has been received from the Land Acquisition Department in their income-tax returns. According to the petitioners, the money received, whether in the nature of compensation or interest thereon, was not taxable. What is not denied, however, is that the receipt of the money by the petitioners was known to the respondents. Failure to return an income on the contention that the same is not taxable cannot be a ground for issuing an authorisation under section 132(1). Non-filing of the return may give right or jurisdiction to the respondents to invoke the provisions of sections 147 and 148 of the Income-tax Act in an effort to tax the same. This is not a case where money was received surreptitiously or the Department did not have knowledge of the receipt of the money by the petitioners. The respondents have taken recourse to proceedings under sections 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in progress. This statement of fact was obviously false. Action under section 132 results in serious inroads into the privacy of an individual. When any information is received on the basis of which the appropriate authority may form a reasonable belief that action under section 132(1) is called for, then the correctness or veracity of that information should be carefully and thoroughly examined. This does not appear to have happened in the present case. It was easy to determine and find out whether any demolition work was being carried out at 14, Anand Lok, New Delhi. The affidavits and the notes of respondents Nos. 3 and 4 falsely stated that the demolition work was in progress. It is on this premise that it has been noted that unaccounted cash was allegedly being generated from out of the proposed sale proceeds of flats which were to be constructed at 14, Anand Lok, which, according to the respondents, was under demolition. When the basic premise, viz., alleged demolition of the house, is false, the entire super-structure must collapse. With a reasonable amount of diligence, it could have been found out whether the house at 14, Anand Lok, was under demolition or not. It is e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has not been alleged anywhere that there has been any lack of co-operation from the petitioners prior to the issuance of authorisation. Whatever information about the receipt of the compensation or acquisition of movable or immovable properties was required was received by the Department. Information was gathered by them from the Government Department. It has been alleged in the writ petition that the Income-tax Inspectors started visiting the office of the petitioner at 10, Hailey Road, New Delhi, for making enquiries. In this connection, it is averred that "petitioners Nos. 1, 2 and 3 gave the entire information about the same and showed all the relevant documents including the award and receipt of compensation under the bank guarantee as per the orders of the Hon'ble High Court and the disputes regarding title and also regarding the amount of enhanced compensation pending in this Hon'ble Court being the subject-matter of appeals." It is further alleged that, on March 21, 1991, two Inspectors of the Department visited the petitioners and asked the petitioners to supply them with copies of documents regarding the award of compensation and orders of this court under which compen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities who have been accepting these books as having been maintained in the proper course of business, it would be somewhat unjustified use of power on the part of the Commissioner of Incometax to issue a search warrant for the production of these 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 or individuals jointly interested in a transaction or a venture. 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 might be found is wholly outside the scope of section 165, Criminal Procedure Code. This power has to be exercised in an honest manner and search warrants cannot be indiscriminately issued purely as a matter of policy." In Dr. Nand Lal Tahiliani v. CIT [1988] 170 ITR 592 (All), search was conducted, pursuant to an authorisation under section 132 of the Act, in the premises of the petitioner who was an eminent surgeon and a Professor of Surgery in the Allahabad Medical College. In this case, the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to be present for the purpose of recording his statement. Once his statement was recorded, there was no reason or justification for the Officers of the Department exercising jurisdiction which they did not possess, viz., preventing petitioner No. 1 from attending to his work. An authorisation which is issued under section 132(1) only enables the officers of the Department to conduct search and seizure. Under section 131, they have, inter alia, the authority and the power to enforce the presence of a person for the purpose of examining him on oath. There is no power contained in the Act or the Rules whereby the movement of a person against whom search is ordered can be restricted. By refusing to give permission to the petitioner to attend to his work in effect, it amounted to his confinement which is not permissible in law. While an element of surprise may be vital or essential for a successful operation of search and seizure, nevertheless unnecessary hardship or harassment should not be caused by the raiding party. Serious allegations in this regard have been made in the present case but, as we are allowing the writ petition, we do not propose to go into the correctness o ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
