TMI Blog1981 (1) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... ajendra Road Calcutta. On the 12th January, 1977, the Director of Inspection, being respondent No. 1, issued a warrant of authorisation under s. 132(1) of the I.T. Act, 1961, to search the petitioner's residence and office and seize the books, documents, jewellery, cash, etc. I shall have occasion to refer to the authorisation for search, because arguments have been advanced on the said authorisation. On the 14th January, 1977, the Assistant Director of Inspection, being the respondent No. 2, searched the petitioner's residence No. 6, Dr. Rajendra Road, Calcutta, and seized therefrom cash amount, fixed deposit receipts, jewellery and ornaments, including the Jewellery and ornaments of the female members of his family, and Godrej lockers. Also the petitioner's office was searched and the books of account, documents and cash were seized on the same date. On the 29th January, 1977, the Assistant Director of Inspection seized two lockers, being lockers Nos. 17-N and 18-N, at Allahabad Bank, Chowringhee branch. These jewelleries, according to the petitioner, belonged to his daughter-in-law and grand-daughter. On the various dates, viz , on 10th February, 1977, 24th February, 1977, 25th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e petitioner applied to the Director of Inspection to supply him with a copy of the reasons recorded for the search and seizure. The petitioner thereupon moved an application under art. 32 of the Constitution before the Supreme Court of India, inter alia, challenging the proviso to s. 127 of the Act. It has been alleged by the petitioner in para. 32 of the present petition before me that the said petition came up on 18th April, 1978, for a preliminary hearing before the Supreme Court of India before a Bench consisting of Fazal Ali J. and Kailasam J. The petitioner further asserts that the petitioner's counsel, with the leave of the court, withdrew the petition, in the words of the petitioner, " in view of ...... (as pointed out by the hon'ble court) that your petitioner did not move this hon'ble court under article 226 and that the objections bad not been disposed of by the Commissioner of Income-tax under section 132(l 1) of the Income-tax Act, 1961 ". The petitioner, on 29 th July, 1978, applied to respondent No. 4 to dispose of the objections and release the jewellery. On the 30th July, 1978, the petitioner received the letter from the Director of Inspection that he was not enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de by the Commissioner, West Bengal-X, is totally misconceived and without jurisdiction. In view of the order annexed to the affidavit-in-opposition being the order transferring the case under sub-s. (1) of s. 127 of the I.T. Act, 1961, and the corrigendum issued on the 9th September, 1977, and the communication dated 21st June, 1979, and the corrigendum dated 27th August, 1977, and the further corrigendum dated 31st August, 1977, read with the order dated 30th May, 1977, in my opinion, this contention that when the order of transfer was made from an officer over whom the petitioner had no jurisdiction can no longer be sustained. The said orders of transfer and the corrigendum issued thereunder were all produced before me and certified copies had been filed in this proceeding and I direct that the certified copies of such bundle of corrigendum which I am marking annex. " A " be filed and kept on record of this matter. While on this aspect, however, there was another aspect urged on behalf of the petitioner, viz., that the proviso to s. 127(1) which permitted certain transfers without giving an opportunity of hearing to the parties concerned in certain circumstances was ultra vire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power of transfer should be exercised within the four corners of the statute. At p. 589 of the report, the court held that s. 5(7A) of the Indian I.T. Act, 1922, was not violative of art. 14 of the Constitution and also did not impose any unreasonable restriction on the fundamental right to carry on trade or business enshrined in art. 19(1)(g) of the Constitution. The court further stressed that if there was any abuse of power it could be remedied by appropriate action and struck down. The court also cautioned that when any question arose under s. 64 as to the place of assessment was to be determined by the Commissioner or Commissioners or by the CBR, as the case may be, the assessee should be given an opportunity under s. 64(3) of representing his views before any such question was determined. The court noted that if an opportunity was given to the assessee in such cases it was all the more surprising to find that, when an order of transfer under s. 5(7A) was made transferring the case of the assessee from one ITO to another irrespective of the area or locality where he resided or carried on business, he should not be given such an opportunity. There was no presumption against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons existed in the file although not communicated to the assessee. Recording of reasons and disclosure thereof were not a mere idle formality. When law required reasons to be recorded in a particular order affecting prejudicially the interests of any person, who could challenge the order in court, it ceased to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons was not expiated. Where, after giving an opportunity to the assessee for a proposed transfer of their case for " facility of investigation " from the ITO at Nellore to an ITO at Hyderabad, the Central Board passed an order under s. 127(1) of the I.T. Act, 1961, transferring the case, but in the order served on the assessee no reasons were recorded or communicated, it was held that the order was infirm and bad. It may be mentioned, the facts of this case fall within the main part of sub-s. (1) of s. 127. There was no scope for the application of the proviso in view of the ratio of the Supreme Court in the previously noted decisions, which I have mentioned hereinbefore, in the case of a transfer within the same city, the ratio of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmons or notice; Sarbsree/Shri/Shrimati-Dwarka Prasad Agarwalla-are/is in possession of any money, jewellery, bullion, or other valuable articles or things and such money, bullion, jewellery, or other valuable articles or things represent either wholly or partly income or property which has not been disclosed or would not be disclosed for the purpose of the Indian Income-tax Act, 1922, or the Income-tax Act, 1961; And whereas I have reason to suspect that such books of accounts other documents, bullion, jewellery, money or other valuable article or thing have been kept and are to be found in the premises at 5 6, Karbala Mohammad St., Calcutta, (Specific particulars of the building/place/vessel/vehicle/aircraft.) This is to authorise and require you (as on reverse) (a) to enter and search the said building/place/vessel/vehicle/aircraft; (b) to search any person who has got out of, or is about to get into, or is in the building/place/vessel/vehicle/aircraft, if you have reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery, or other valuable article or thing; (c) to place identific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows: (i) There must be a proceeding pending or completed concerning the assessee under the Act, (ii) there must be information in the possession of the Director of Inspection and in consequence of such information he had reason to believe that the assessee was in possession of money, jewellery, valuable thing, etc. which represented either wholly or partly his income and such income was not disclosed by him or would not be disclosed by him and such thing is necessary for the purpose of assessment, and (iii) the Director of Inspection must record the reasons for his belief and specify the things noted. Unless these conditions were fulfilled, there could not be a valid exercise of the power under s. 132(1) of the I.T. Act, 1961, and if the conditions precedent for the said exercise of power were not fulfilled, the exercise of the power was not valid. In this connection, it appears that the reasons recorded were not supplied to the petitioner. When the matter came before the court, I had directed that the copy of the reasons should be supplied to the petitioner. Such reasons have been annexed to the affidavit of Narayan Prasad Agarwalla which has been affirmed on 12th June, 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to believe and that reason to believe must be in consequence of information in his possession. In the reasons which were placed before the Commissioner which were supposed to be the grounds there is a mention in the first paragraph that there was " specific information " that the petitioner and his two sons had accumulated huge unaccounted money by manipulation of their books of account and were keeping the same in cash, jewellery, concealed stock of raw materials and finished products at their godowns or factory. There is no mention as to what was the specific information, neither the source nor the credibility nor the content of the information. Thereafter, the reasons proceed to point out that the offices of these concerns are located at the addresses given. Thereafter, the officer proceeds to note: " I have made discreet enquiries in the case, and I am of the opinion that a substantial amount of unaccounted cash and jewellery can be recovered from the residence and office of the above persons if action under s. 132 was taken in this case ". The nature of the enquiry, discreet or otherwise, the source from which such enquiries were made were not in the reasons recorded. The A. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation for the authorisation of a search if, in fact, there were no grounds for entertaining reasonable belief as required by sub-cls. (a), (b) and (c) of s. 132(1) of the I.T. Act, 1961. In this connection, the Supreme Court at p. 533 noted that the grounds for the belief recorded by the Director of Inspection before the authorisation were shown to the Supreme Court. There, the Supreme Court found from the grounds that a big godown had been newly constructed by the petitioner in that case, but his books of account did not reflect the expenditure on account of this construction. In this background, that is to say, in the background of one objective factor that the information that a godown had in fact been constructed which was not reflected in the expenses incurred, the Supreme Court noted that the department had placed before the court that on search certain documents in the nature of maps, etc., were seized which showed that the petitioner had constructed the building in the month preceding the date of search and the money with which the said building was constructed was unaccounted money. If there was some ground for entertaining the reasonable belief, then the subsequent recov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in my opinion, in detail because the examination of information involves the person whose house is searched under s. 132 who is not an accused as contemplated under art. 20(3) of the Constitution and, secondly, whether the papers, books and documents or jewellery and cash are things which can be said to be evidence collected or received from the person concerned is doubtful. Now, in the first aspect, if he is not an accused, then this question does not apply. In view of the decision of the Supreme Court in the case of Ramesh Chandra Mehta v. State of West Bengal, AIR 1970 SC 940, and the observations of the court at p. 946, it is clear that a person whose house is being searched for gathering the materials as contemplated under sub-s. (1) of s. 132 is not an accused and, therefore, no question of testamentary compulsion arises. The result, therefore, that follows is that, here, there has been no striking out of the material portion whether the books of account as required under the Act of 1922 would not have been complied with or whether the summons or notices under the Act of 1961 would not have been complied with, had any notice or requisition been issued to the petitioner, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... along with Sri B. P. Agarwalla and Sri N. P. Agarwalla, sons of the assessee, and stated that the assessee had nothing more to add to what was stated in the letter dated 4-4-77. In the letter dated 4-4-77, filed before me the assessee again raised only technical objections to the notice issued by me. So far, the assessee did not make any positive approach in explaining the source of acquisition of the valuables seized. In the above circumstances, in the absence of any acceptable explanations furnished by the assessee, I have come to the conclusion that the value of the whole of the assets seized should be treated as concealed income of the assessee earned during financial year 1976-77 from undisclosed sources. The objections raised by the assessee are not tenable and are rejected. Total income of the assessee is computed below : Rs. " Estimated income for the financial year 1976-77 45,000 On the basis of past records, concealed income as discussed above 4,27,144 Estimated income from secret money-lending business as appears from books of accounts seized 50,000 ------------------ Total income 5,22,144 Tax payable on concealed income 2,35,486 Penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X
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