TMI Blog1980 (10) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... authorities after the expiry of the period, of appeal, if no appeal was filed. The criminal adventure of Chaturbhuj Das, having miserably failed, he knocked at the door of income-tax department and is alleged to have sent a written complaint to the Govt. of India and the CIT, Allahabad, under the fake name of Dinesh Chandra Sahu that the petitioner was possessed of three hundred tolas of gold, which he claimed, in the criminal proceedings, to have received in a family partition, but failed to disclose it or file any return under the W.T. Act. This set the ball rolling for proceedings under s. 132A of the I.T. Act, and it is the validity of these proceedings which is under challenge in this petition. It appears, while the complaint of Sahu was still in the process of examination in the office of the Commissioner, a letter was received from the Under Secretary to the Govt. of India to make necessary inquiries regarding the evasion of wealth-tax by the petitioner. This letter along with the complaint, which was already pending in the office of the Commissioner, was forwarded by the IAC to the Assistant Director of Inspection (Intelligence), in charge of a cell maintained in the I. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of this court under art. 226 of the Constitution of India. Before adverting to the main question, whether there was material on which the Commissioner could have reason to believe that the jewellery, which was in the custody of the Chief Judicial Magistrate, represented wholly or partly the undisclosed income of the petitioner so as to confer jurisdiction on him to issue an authorisation warrant for requisitioning the same under s. 132A, it would be better to have a glimpse of the legislative background in which this provision was enacted. In the Act of 1922, the only circumstance in which the Commissioner could authorise a search of any building or place under s. 37(2) was when he had reason to believe that books of account or other documents which may be found there, shall be useful in proceedings pending under the Act. In 1,954, it was held by the Supreme Court in M. P. Sharma v. Satish Chandra, AIR 1954 SC 300, 306. " A power of search and seizure is, in any system of jurisprudence, an overriding power of the State for the protection of social security and that power is necessarily regulated by law." This power is thus given to assessing authorities for social security ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 disclosed for the purposes of the Indian I.T. Act, 1922. (Act 11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), he may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer (hereinafter referred to as the authorised officer) to (i) enter and search any building or place where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; ...... (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search; ...... (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing. " In the course of time, it was felt that at times the jewellery or bullion or money may be in the custody of any officer or court.. Therefore, in 1975, s. 132 was amended further, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion but that it represented wholly or partly an undisclosed income. For action under s. 132 or s. 132A the conditions precedent, which must exist, appear to be: (i) information in possession of Director of Inspection or Commissioner ; (ii) in consequence of which he should have reason to believe; (iii) that any person is in possession of any money, bullion, jewellery, or other valuable article or thing; (iv) and such jewellery, bullion, etc., must represent either wholly or partly undisclosed income. If any of these conditions is missing, the officer concerned can have no jurisdiction to proceed. It may now be seen what is the import of each of these. Information as such presents no difficulty. But it is the foundation on which the entire structure is constructed. What its nature is has been made clear by the use of the words in consequence of which the Commissioner may have "reason to believe". It follows, therefore, that information must relate to conditions Nos. 3 and 4, so as to empower the authority concerned to reach the conclusion contemplated in condition No. 2. For instance, suppose the information is that a person is in possession of any article, jewell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Any person is in possession of any property which has not been or could not be disclosed for the purposes of this Act." He urged that the word " property " was wide enough to include jewellery. Therefore, the clause relating to assets do not apply to it. We have carefully considered the argument and we are of opinion that it is misconceived. It is not based on any principle of interpretation or construction of a provision in an enactment. It is a figment of imagination unsupported by any authority or law. Section 132A is a provision empowering the authorities concerned to requisition jewellery or bullion in the custody of a court or an officer in respect of which the Commissioner or the Director of Inspection could proceed under s. 132. Neither s. 132 nor s. 132A deal with property. They are concerned with books of account or other document, bullion, jewellery or other valuable article or thing including money. The use of property in both the sections is in relation to these things. It is clear from the use of word " such " in s. 132 that it connects the things in possession with " undisclosed income ". The first part describes the items in respect of which action could be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount maintained by him. This is a power conferred on the ITO, whereas the power to issue a requisition is conferred on the Commissioner or the Director of Inspection under s. 132 or s. 132A. Apart from it, this section could be availed of at the time of assessment only. The two stages of issuing authorisation and assessment are different. Section 69A is available in the latter proceedings only. If the section, as such or its principle, could be invoked at the stage of issuing notice it would result in a negation of the safeguard provided by " reason to believe We, therefore, do not find any warrant for the submission that the notice could be held to be valid by virtue of s. 69A. Coming to the facts of the case we may point out that in order to satisfy ourselves we sent for the record and examined the same with the assistance of Sri Gulati. We found that, apart from the statement of the petitioner and the complaint sent by Sahu, there was no other evidence or material on record. None of these, however, mentioned anything about the undisclosed income of the petitioner. We are of the opinion that from this, it was not possible to draw an inference that the jewellery, which was in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pears to have been afforded to him to substantiate these allegations. In the absence of it, how the statement could be disbelieved cannot be understood. The Commissioner had jurisdiction to believe or not to believe, but, before he could exercise that power there should have been material on record to justify it. The statement of the petitioner was not controverted. What was stated by him was not inherently improbable. The Act does not contemplate an arbitrary exercise of power. It has to withstand the test of reason. The action of the Commissioner could be upheld only if it was reasonable. We are, therefore, of the opinion that the material on which reliance has been placed by the learned counsel did not individually or collectively furnish material on which the Commissioner could have reason to believe that the jewellery represented wholly or partly the undisclosed income of the petitioner. It was a case where there was no material which could form the foundation for taking action. We may also point out that although we had examined the record which clearly established that action of the Commissioner was contrary to s. 132A but we have based our decision on material which has bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cient, then the entire purpose of ss. 132 and 132A and the provision of formation of opinion in consequence of information become redundant. Form No. 45 is follow up action as a result of formation of opinion in the circumstances enumerated. It is the formation of opinion and not the issuing of Form No. 45 which is fundamental. Moreover in Sudarshan's case [1983] 139 ITR 1032 (All) the search was made of the premises by the police authorities, on suspicion that they (sic) were in possession of stolen ornaments. As a result of the search a huge amount of gold, silver and cash was seized. While the proceedings were pending before the Chief judicial Magistrate, the Superintendent of Police informed the I.T. authorities about the seizure of articles. The ITO appeared before the Chief judicial Magistrate and sent information to the Commissioner that in the assessment years 1970-71, 1971-72 and 1972-73, the assessee was assessed only on Rs. 6,000. Taking into account the financial status of the assessee and the huge amount of gold, silver and cash seized from his premises, the Commissioner issued the authorisation warrant under s. 132A. The action of the Commissioner was upheld not becau ..... X X X X Extracts X X X X X X X X Extracts X X X X
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