TMI Blog2022 (8) TMI 1233X X X X Extracts X X X X X X X X Extracts X X X X ..... the Hon'ble Apex Court. In that view of the matter, impugned notices issued under Section 153C of the Act, based on the loose sheets/diaries are contrary to law, which require to be set aside in these writ petitions, as the same are void and illegal. In this connection, it is relevant to deduce the law declared by the Hon'ble Apex Court in the case of ICICI BANK LIMITED AND ANOTHER v. MUNICIPAL CORPORATION OF GREATER BOMBAY AND OTHERS [ 2005 (8) TMI 666 - SUPREME COURT] wherein it is held that, The ratio and effect of the judgment is required to be ascertained with reference to the question of law as decided by the Court. The ratio of the judgment or the principle upon which the question before the Court is decided is alone binding as a precedent. The decision of the Supreme Court upon a question of law is considered to be a binding precedent and this must be ascertained and determined by analysing all the material facts and issues involved in the case. That apart, no opportunity was provided to the petitioner as required under Section 127 of the Act inter alia the petitioner being searched person and not Other person as required under Section 153C of the Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e novo enquiry afresh. Thus since the impugned notices are issued under Section 153C of the Act, are contrary to the judgment of the Hon'ble Apex Court, the writ petitions filed under Article 226 of the Constitution of India, in the instant case, are maintainable. Thus proceedings initiated under Section 153C of the Act culminating in issuance of Notice are quashed and further proceedings thereof are quashed by remanding the matter to the respondent-Revenue to reconsider the issue afresh in terms of the discussion made above. - WRIT PETITION NO.9937 OF 2022 (T-IT) C/W WRIT PETITION NOS.9938 OF 2022, 9939 OF 2022, 9945 OF 2022 AND 9946 OF 2022 - - - Dated:- 12-8-2022 - HON BLE MR. JUSTICE E.S. INDIRESH Petitioner Common in Writ Petitions No. 9938, 9939, 9945 of 2022 (By Sri Kiran S. JAVALI, Senior Counsel for Sri Shreehari Kutsa, Advocate) Respondents (By Sri K.V. Aravind, Advocate) (By Sri Balbir Singh, ASG For Sri K.V. Aravind Sri Dilip M., Advocates) O R D E R Since question of law involved in these writ petitions are pertaining to challenge made to impugned notices issued under Section 153C of the Income Tax Act, 1961 and further action the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alling upon petitioners to submit his return of income for the Assessment Year 2015-2016 vide Annexure-A, is without jurisdiction. The main grievance of the petitioners is that impugned notices under Section 153C of the Act is to be issued on other person and the petitioners being searched person , the impugned notice under Section 153C of the Act is not maintainable. Hence, petitioners have presented these writ petitions challenging the action of the respondent-Revenue as non-est and contrary to law. 4. The respondent-Revenue entered appearance and filed objection, and it is contended that proceedings have been initiated against the petitioners under Section 153C of the Act, based on the material found and seized by the Enforcement Directorate. It is further stated that the writ petition is not maintainable as the impugned orders in the writ petition are appealable before the Commissioner of Income Tax-Appeals, and same is an efficacious remedy for the petitioners. It is further stated that petitioners have to avail the statutory remedy before the Commissioner of Income-tax Appeals and accordingly, sought for dismissal of writ petitions as premature. It is also averred in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary to make out a case that material found in the case of searched person belongs to other person and as the search has been conducted on the residence of the petitioner at Bengaluru and material has been seized as per panchanama making him as the searched person and not other person , and as such, learned Senior Counsel appearing for the petitioner submits that the impugned notice issued under Section 153C of the Act is bad in law. 7. Sri Kiran S. Javali, learned Senior Counsel, further argued that the respondent No.1 failed to examine whether the papers or loose note sheets found during the course of search in the premises of Sri Rajendran are documents having evidentiary value to prove the fact of transaction. In this regard, he refers to Section 34 of Indian Evidence Act, 1872 and submitted that the search action did not lead to discovery of unaccounted money, bullion, jewellery or valuable article and no books of account reveals undisclosed transactions of the assessee and the entire impugned proceedings revolves around scribbling of loose sheets seized from premises of another person (Sri Rajendran) and therefore, learned Senior Counsel argued that the action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of Assessment passed by the respondent-Revenue. He invited the attention of the Court to Section 2(12A) of the Act which provides for definition of Books or Books of Account. Learned Additional Solicitor General also invited the attention of the Court to Section 132 of the Act and argued that the respondent-Revenue is empowered to make search and seizure, to unearth defaultees under the Act and such power be exercised by the respondent-Revenue, in consequence of information, having reason to believe/suspect about the transactions made by such defaultees. He particularly invited the attention of the Court to the Sections 132(4) and (4A) of the Act and argued that in view of the language employed in the aforementioned provisions, the respondent- Revenue are empowered to look into the books of account or any other articles, which is found in possession or control of any person in the course of the search and same is to be presumed in the custody of such defaultees. Nextly, learned Additional Solicitor General drew the attention of the Court to Section 278D of the Act which provides for presumption as to assets, books of account etc. in certain cases and further argued that, as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etitions. 12. Having heard the submission made by learned Counsel appearing for the parties, I have carefully examined the writ papers. In the light of the submissions advanced by both sides, the following points arise for determination in these petitions: 1) Whether the petitioners have made out the case for interference under Article 226 of the Constitution of India? 2) Whether the impugned notice under Section 153C and Order of Assessment Notice under Section 156 of the Act requires to be set aside? 3) What Order? 13. Perusal of the writ papers would indicate that the respondent-Revenue made a search at the premises of one Sri Rajendran at New Delhi and recovered certain diaries/loose sheets, which is purportedly consisting of certain entries relating to the affairs/transactions of the petitioner. Based on the statement of the said Sri Rajendran (Petitioner in Writ petition No.9946 of 2022) recorded during the investigation, respondent- Revenue initiated action against the petitioner-Sunil Kumar. In this regard, the respondent-Revenue, by exercising power under Section 127 of the Act, transferred the case to the respondent No.1. Section 127 of the Act prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of TATA CELLULAR v. UNION OF INDIA reported in (1994) 6 SCC 651. Though the matter pertaining to the action of the Administrative Authority, however, the ratio laid down by the Hon'ble Apex Court in the said judgment is aptly applicable to the facts of the case on hand. At paragraphs 74 to 81 of the judgment, it is observed thus: 74. Judicial review is concerned with reviewing not the merits of the decision in support of which the application for judicial review is made, but the decision-making process itself. 75. In Chief Constable of the North Wales Police v. Evans Lord Brightman said : Judicial review, as the words imply, is not an appeal from a decision, but a review of the manner in which the decision was made. Judicial review is concerned, not with the decision, but with the decision-making process. Unless that restriction on the power of the court is observed, the court will in my view, under the guise of preventing the abuse of power, be itself guilty of usurping power. In the same case Lord Hailsham commented on the purpose of the remedy by way of judicial review under RSC, Ord. 53 in the following terms : This remedy, vastly i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icular policy or particular decision taken in the fulfilment of that policy is fair. It is only concerned with the manner in which those decisions have been taken. The extent of the duty to act fairly will vary from case to case. Shortly put, the grounds upon which an administrative action is subject to control by judicial review can be classified as under: (i) Illegality : This means the decision- maker must understand correctly the law that regulates his decision-making power and must give effect to it. (ii) Irrationality, namely, Wednesday unreasonableness. (iii) Procedural impropriety. The above are only the broad grounds but it does not rule out addition of further grounds in course of time. As a matter of fact, in R.V. SECRETARY OF STATE for the Home Department, ex Brind, Lord Diplock refers specifically to one development, namely, the possible recognition of the principle of proportionality. In all these cases the test to be adopted is that the court should, consider whether something has gone wrong of a nature and degree which requires its intervention . 78. What is this charming principle of Wednesday unreasonableness? Is it a magical formula? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plaint by the owners of a cinema in Wednesbury that it was unreasonable of the local authority to licence performances on Sunday only subject to a condition that 'no children under the age of 15 years shall be admitted to any entertainment whether accompanied by an adult or not'. In an extempore judgment, Lord Greene, M.R. drew attention to the fact that the word 'unreasonable' had often been used in a sense which comprehended different grounds of review. (At p. 229, where it was said that the dismissal of a teacher for having red hair (cited by Warrington, L.J. in Short v. Poole Corpn., as an example of a 'frivolous and foolish reason') was, in another sense, taking into consideration extraneous matters, and might be so unreasonable that it could almost be described as being done in bad faith; see also R. v. Tower Hamlets London Borough Council, ex p Chetnik Developments Ltd. (Chapter 4, p. 73, supra). He summarised the principles as follows: The Court is entitled to investigate the action of the local authority with a view to seeing whether or not they have taken into account matters which they ought not to have taken into account, or, conversel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . v. Secretary of State for Environment, the Secretary of State referred to a number of factors which led him to the conclusion that a non-resident's bar in a hotel was operated in such a way that the bar was not an incident of the hotel use for planning purposes, but constituted a separate use. The Divisional Court analysed the factors which led the Secretary of State to that conclusion and, having done so, set it aside. Donaldson, L.J. said that he could not see on what basis the Secretary of State had reached his conclusion. (2) A decision would be regarded as unreasonable if it is impartial and unequal in its operation as between different classes. On this basis in R. v. Bernet London Borough Council, ex p Johnson the condition imposed by a local authority prohibiting participation by those affiliated with political parties at events to be held in the authority's parks was struck down. 16. In view of the aforementioned aspects, I have carefully examined the law declared by the Hon ble Apex Court with regard to acceptance of diaries/loose sheets by the respondent-Revenue. In the case of VC SHUKLA (supra), wherein at paragraphs 16 to 18 of the judgment, it is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey can be easily detached and replaced. In dealing with the work 'book' appearing in Section 34 in Mukundram vs. Dayaram [AIR 1914 Nagpur 44], a decision on which both sides have placed reliance, the Court observed:- In its ordinary sense it signifies a collection of sheets of paper bound together in a manner which cannot be disturbed or altered except by tearing apart. The binding is of a kind which is not intended to the moveable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book I think the term book in S. 34 aforesaid may properly' be taken to signify, ordinarily, a collection of sheets of paper bound together with the intention that such binding shall be permanent and the papers used collectively in one volume. It is easier however to say what is not a book for the purposes of S. 34, and I have no hesitation in holding that unbound sheets of paper in whatever quantity, though filled up with one continuous account, are not a book of account within the purview of S.34. We mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and credits. They can at the most be described as a memorandum kept by a person for his own benefit which will enable him to look into the same whenever the need arised to do for his future purpose. Admittedly the said diaries were not being maintained on day-to day basis in he course of business. There is no mention of the dates on which the alleged payment were made. In fact the entries there in are on monthly basis. Even the names of the persons whom the alleged payments were made do not find a mention in full. they have been shown in abreviated form. Only certain 'letters' have been written against their names which are within the knowledge of only the scribe of the said diaries as to what they stand for and whom they refer to. XXX XXX XXX 20. Mr. Sibal, the learned counsel for the Jains, did not dispute that the spiral note books and the small pads are 'books' within the meaning of Section 34. He, however, strongly disputed the admissibility of those books in evidence under the aforesaid section on the ground that they were neither books of account nor they were regularly kept in the course of business. he submitted that at best it could be said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that the were in accordance with facts. 282. It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court. (underlining by me) 18. It is established in law by the Hon'ble Apex Court that a sheet of paper containing typed entries and in loose form, not shown to form part of the books of accounts regularly maintained by the assessee or his business entities, do not constitute material evidence. Following the law declared by the Hon'ble Apex Court, I am of the view that the action taken by the respondent- Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l review inter alia in cases where the court or the tribunal lacks inherent jurisdiction or for enforcement of a fundamental right or if there has been a violation of a principle of natural justice or where vires of the Act is in question. In the aforementioned circumstances, the alternative remedy has been held not to operate as a bar. [ See Whirlpool Corporation v. Registrar of Trade Marks, Mumbai and Others, (1998) 1 SCC 1, Sanjana M. Wig (Ms.) v. Hindustan Petroleum Corpn. Ltd., (2005) 8 SCC 242, State of H.P. and Others v. Gujarat Ambuja Cement Ltd. and Another. 19. It is well settled principle in law that administrative or judicial orders must be supported by reasons. It is the duty of the respondent-Revenue being an instrumentality of state under Article 12 of the Constitution of India to give reasons for its conclusion. Recording of reason is the hallmark of a valid Order, while exercising administrative action or judicial review to disclose reasons and recording reasons, has always been insisted upon as one of the fundamentals of sound administration of justice delivery system, to make known that there have been proper and due application of mind by the authorities, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra Kishor Jha vs. Mahavir Prasad and Ors. (1999) 8 SCC 266 and in the course of consideration observed as hereunder: It is a well settled salutary principle that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner . Therefore, if the salutary principle is kept in perspective, in the instant case, though the Authorised Officer is vested with sufficient power; such power is circumscribed by a procedure laid down under the statute. As such the power is to be exercised in that manner alone, failing which it would fall foul of the requirement of complying due process under law. We have found fault with the Authorised Officer and declared the action bad only in so far as not following the legal requirement before and after freezing the account. This shall not be construed as an opinion expressed on the merit of the allegation or any other aspect relating to the matter and the action initiated against the appellant and its Directors which is a matter to be taken note in appropriate proceedings if at all any issue is raised by the aggrieved party. 21. In the case of THE COLLECTOR (DISTRICT MA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is vested the court calls it a colourable exercise and is undeceived by illusion. In a broad, blurred sense, Benjamin Disraeli was not off the mark even in Law when he stated: I repeat-that all power is a trust-that we are accountable for its exercise-that, from the people, and for the people. all springs, and all must exist. After analysing the factual matrix, it was concluded that the land was not needed for a Mandi which was the ostensible purpose for which the land was sought to be acquired but in truth and reality, the Mandi need was hijacked to reach the private destination of depriving an enemy of his land through back-seat driving of the statutory engine. The notification was declared invalid on the ground that it suffers from legal mala fides. The case before us is much stronger, far more disturbing and unparalelled in influencing official decision by sheer weight of personal clout. The District Magistrate was chagrined to swallow the bitter pill that he was forced to acquire land even though he was personally convinced there was no need but a pretence- Therefore, disagreeing with the High Court, we are of the opinion that the power to acquire land was exercised fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed, or some such other ground which could have the effect of rendering the court entirely lacking in jurisdiction in respect of the subject matter of the suit or over the parties to it. 23. I have also considered the arguments advanced by the learned Additional Solicitor General with regard to the dismissal of the Appeal by the Appellate Authority dated 03rd May, 2022 in Appeal No:CIT(A)-11/BNG/10701 of 2019-20 (Annexure-A) in Writ Petition No.9945 of 2022. On careful consideration of the grounds urged in the said writ petition and having regard to the conclusion arrived at that the impugned notices are without jurisdiction, I am of the view that the impugned notices are liable to be set aside which are arising out of wrong interpretation of Section 153C of the Act, and the entire case be remanded to the competent authority/ respondent-Revenue for fresh consideration and to pass appropriate orders in accordance with law, after affording reasonable opportunity to the petitioners in these writ petitions. It is made clear that as I have already concluded that the initiation of proceedings by the respondent-Revenue based on the diaries/loose sheets against the petitioners herei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a bar to entertain a writ petition is a rule of practice and not of jurisdiction. In appropriate cases, High Court may entertain a petition even if the aggrieved party has not exhausted the remedies available under a statute before the departmental authorities, vide State of West Bengal vs. North Adjai Cool Company [1971 (1) SCC 309]. (e) Further, alternative remedy must be effective. An appeal in all cases cannot be said to have provided in all situations, where an appeal would be ineffective and writ petition in such a case is maintainable, vide Ram and Shyam Company vs. State of Harayana [AIR 1985 SC 1147]. (f) Where an authority has acted without jurisdiction, High Court should not refuse to exercise its jurisdiction under Article 226 on the ground of existence of alternative remedy vide Dr. Smt. Kuntesh Gupta vs. Management H.K. Mahavidyaya [AIR 1987 SC 2186]. Thus, an alternative remedy is not an absolute bar to the maintainability of a writ petition. 41. On the issue of maintainability of the writ petition, learned counsel for the appellants relied upon the following decisions: (a) In Whirlpool Corporation vs. Registrar of Trade Marks, Mumbai and O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the authority against whom the writ is filed is shown to have had no jurisdiction or had purported to usurp jurisdiction without any legal foundation. In the said case (Whirlpool Corporation), it was also observed that the High Court was not justified in dismissing the writ petition at the initial stage without examining the contention that the show cause notice issued to the appellant was wholly without jurisdiction. In the said case, the Registrar of Trade Marks issued to the appellant therein a notice under Section 56(4) of the Trade and Merchandise Marks Act, 1958 to show cause against the proposed cancellation of appellants' Certificate of renewal. It was held that the issuance of such a notice by the Registrar was without authority and it was quashed by the High Court. (b) In State of H.P. and others vs. Gujarat Ambuja Cement Limited and Another, [(2005) 6SCC 499], (Gujarat Ambuja Cement Limited), a detailed discussion on the plea regarding alternative remedy was made. It was held that the principle of alternative remedy is essentially a rule of policy, convenience and discretion and never a rule of law. Despite the existence of an alternative remed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion despite availability of an alternative remedy, it would not be justifiable for the High Court to dismiss the same on the ground of non-exhaustion of statutory remedies, unless the High Court finds that factual disputes are involved and it would not be desirable to deal with them in a writ petition. In the said case, the question was liability to pay purchase tax on the royalty paid by the respondents, i.e., the holder of mining lease, where there was a price for removal of minerals and thus, attracted liability to pay purchase tax. The Hon'ble Supreme Court in the said decision rejected the plea that the High Court should not have entertained the writ petition. Thereafter, the question relating to liability to pay purchase tax on royalty paid was taken up for consideration by discussing on the meaning of the words royalty , dead rent , mining lease . It was observed that royalty paid by the holder of a mining lease under Section 9 of the Mines and Minerals (Regulation and Development) Act, 1957 was not the price for removal of minerals and hence, did not attract liability to pay purchase tax. (c) In Embassy Property Developments Private Limited vs. State of K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinction between the lack of jurisdiction and the wrongful exercise of the available jurisdiction should certainly be taken into account by High Courts, when Article 226 of the Constitution is sought to be invoked bypassing a statutory, alternative remedy provided by a special statute. In the said case, the question was, as to, whether, the NCLT lacked the jurisdiction to issue a direction in relation to a matter covered by Mines and Minerals (Development and Regulation) Act, 1957 (MMDR Act) and the Statutory Rules issued thereunder; or, there was mere wrongful exercise of a recognised jurisdiction, for instance, asking a wrong question or applying a wrong test or granting a wrong relief. On a detailed discussion, it was held that the NCLT did not have jurisdiction to entertain an application against the Government of Karnataka for a direction to execute Supplemental Lease Deeds for the extension of the mining lease. Since, NCLT chose to exercise jurisdiction not vested in it in law, the High Court of Karnataka was justified in entertaining the writ petition, on the basis that NCLT was coram non judice. In the instant case, the State of Karnataka had invoked the jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which are illustrative and non-exhaustive: (i) where remedy available under statute is not effective but only mere formality with no substantial relief; (ii) where statutory authority not acted in accordance with provisions of enactment in question, or; (iii) where statutory authority acted in defiance of fundamental principles of judicial procedure, or; (iv) where statutory authority resorted to invoke provisions which are repealed, or; (v) where statutory authority passed an order in total violation of principles of natural justice. (e) In United Bank of India vs. Satyawati Tondon and others, [(2010) 8 SCC 110], (Satyawati Tondon) it was observed that it is true that the rule of exhaustion of alternative remedy is a rule of discretion and not one of compulsion, but it is difficult to fathom any reason why the High Court should entertain a petition filed under Article 226 of the Constitution and pass interim order ignoring the fact that the petitioner can avail effective, alternative remedy by filing an application, appeal, revision, etc. and the particular legislation contains a detailed mechanism for redressal of his grievance. (f) Of course ..... X X X X Extracts X X X X X X X X Extracts X X X X
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