9911796707
TMI Blog2009 (5) TMI 36X X X X Extracts X X X X X X X X Extracts X X X X ..... 131 of the Income Tax Act, 1961 (the Act for the sake of brevity) on 17.9.2007 to Ms.Sandhya Sama and Shri Sanjay K. Jain, the employees of the Petitioner firm and their statements were recorded on 18.9.2007. It is further stated by the Petitioner that on the request of the DDIT these employees provided him with the electronic data relating to three companies of the EMAAR Group together with the print copies of the data. Nevertheless, the DDIT insisted on securing total and unrestricted access to the laptops obviously in order to gain information and data of all the other clients of the Petitioner. This request was refused by the employees. The seized laptops were sent by the Respondents to Central Forensic Science Laboratory (CFSL) who, however, could not ascertain the password and accordingly could not access the entire data on the laptops. The Petitioner was thereupon asked to disclose the password, which it again declined and thereafter the laptops were sealed in the presence of the said employees of the Petitioner. 2. Synopsis of arguments were filed by the parties on 21st May, 2009, and clarifications were made. 3. In its Order dated 18.11.2008, the previous Division Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature before such an inquisition can be commenced. It is important to clarify that so far as this provision is concerned it contemplates only access to and not seizure of the books or material since seizure is dealt with in Section 132(1)(iii). A Notice dated 17.9.2007 is Annexure P-2 to the Petition. It does not refer to any provision of the Act, but the Written Submissions appear to indicate that it is predicated on Section 131 of the Act. 5. The argument on behalf of the Petitioner is that the data relating to EMAAR Group of Companies has already been provided to the Respondents and the Petitioners are willing to cooperate with the Respondents in respect of every hue and aspect of the Search and to identify and provide any data stored in the laptops concerning EMAAR Group of Companies. The contention on behalf of the Petitioner is that granting absolute access to the IT Department of all the data even pertaining to the other clients of the Petitioners, having no dealings with the EMAAR Group, would tantamount to grave professional misconduct and would be contrary to the code of ethics applicable upon the Petitioner as well as the obligations contained in Chartered Accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. 7. However, we cannot, in the present case, persuade ourselves to agree with the argument of the learned Senior Counsel for the Respondent that the above stated provision would entitle and empower the DDIT to seize any or all the articles, valuables or documents found during the course of the Search regardless of whether they are relevant for the purpose of assessment of the Assessee on whom a Search and Seizure is conducted. The Section provides for "Assessment of Income of any other person" and the same is a much later stage to one which we find ourselves at the present juncture. At the cost of repetition, we would like to emphasise that the question before this Court is whether the Revenue is entitled to demand an unrestricted access to and/or right to acquire the electronic records present in the laptops that belong to the Auditor of the Assessee and not to the Assessee himself including electronic records pertaining to third parties unconnected with the EMAAR Group. It has been specifically submitted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments with ulterior motives. 10. As regards the extent of power of the Authorised Officer acting under the authority of Section 132, their Lordships in ITO vs. Seth Bros., (1969) 2 SCC 324 have enunciated the law in these words: 7. The Commissioner or the Director of Inspection may after recording reasons order a search of premises, if he has reason to believe that one or more of the conditions in Section 132(1) exist. The order is in the form of an authorisation in favour of a subordinate departmental officer authorising him to enter and search any building or place specified in the order, and to exercise the powers and perform the functions mentioned in Section 132(1). The Officer so authorised may enter any building or place and make a search where he has reason believe that any books of account or other documents which in his opinion will be useful for, or relevant to, any proceeding under the Act, may be found. The Officer making a search may seize any books of account or other documents and place marks of identification on any such books of account or other documents, make or cause to be made extracts or copies therefrom and may make an inventory of any articles or thin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es a designated officer to enter and search premises for books of account and documents relevant to or useful for any proceeding under the Act, the Court in a petition by an aggrieved person cannot be asked to substitute its own opinion whether an order authorising search should have been issued. Again, any irregularity in the course of entry, search and seizure committed by the officer acting in pursuance of the authorisation will not be sufficient to vitiate the action taken, provided the officer has in executing the authorisation acted bona fide. 9. The Act and Rules do not require that the warrant of authorization should specify the particulars of documents and books of accounts a general authorization to search for and seize documents and books of account relevant to or useful for any proceeding complies with the requirements of the Act and the Rules. It is for the officer making the search to exercise his judgment and seize or not to seize any documents or books of accounts. An error committed by the officer in seizing documents may ultimately be found not to be useful for or relevant to the proceeding under the Act will not by itself vitiate the search, nor will it entitle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. Assistant CIT, (2007) 3 SCC 794 one of the provisions which was at the fulcrum of discussion was Section 158-BD of the Act in the context of the legitimacy of ordering a Block-Assessment. This provision has also been relied upon before us in order to vindicate the stance of the Revenue that information that can be gleaned from the seized computers belonging or relating to other clients of the Petitioner, even those who have had no dealings whatsoever with the assesses against whom the search and seizure operations are directed, can legitimately be demanded and acted upon. The argument is that the Act contemplates that all such information should be forwarded by the Authority carrying out the search and seizure to the Assessing Officer of those third parties. We are unable to accept such an extreme stand. The words "other person" employed in the Section must only be construed as referring to the 'other person' having dealings or transactions with the party who is being searched or whose material is being seized. Otherwise, the provisions may well be seen as violative of the fundamental rights enshrined in Articles 14 and 19. 12. Over two score years ago the Division Bench of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SCC 225 in these words: 6. It must, however, be stated that the findings that the action of the Commissioner of Income Tax and the Income Tax Officer amounted to "indiscriminate search" and was beyond the "legitimate scope of Section 132" depends upon the evidence in each case and no general rule can be laid down in that behalf. 14. Coming back to the contention of the Petitioner, it has argued that the laptops that have been seized by the Respondent have confidential information relating to the accounts of 46 other clients, having no relation or business dealings with the Assessee, and seizure of these accounts will amount to serious breach of confidentiality which they are bound to protect by the principles of professional ethics. It is also our view that the Income Tax Department cannot make fishing or roving inquiry to initiate proceedings against all these companies which are the clients of the Petitioner. It has been argued orally as well as in the synopsis that the Petitioner cannot assist any party in breaking the law; this submission is illogical since it cannot be presumed that the accounts relating to 46 other clients of the Petitioner contained in the two laptops a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f income appears to have escaped taxation and Sections 147 to 149 are pressed into service, Section 153(2) mandates broadly that the assessment must be completed within one year. Sections 153A, 153B and 153C were introduced by the Finance Act, 2003 with effect from 1.6.2003. In essence, Section 153A has in focus the 'case of a person where a Search is initiated or any assets are requisitioned' and envisages the furnishing of a Return of income for six years. The succeeding Section 153B sets a limit of two years for the making of an order of assessment or reassessment of such a person, that is, one in respect of whom a search or requisition has been initiated. Section 153C, on the other hand, brings within its sweep "a person other than the person referred to in Section 153A" to whom the money, bullion, jewellery or other valuable article belongs or books of account or document seized or requisitioned belong and directs that they shall be forwarded to the Assessing Officer of that person. The Assessing Officer will then proceed in the manner prescribed by Section 153A, which principally extends the period within which the assessment has to be completed. The vires of these sections w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e person, property or correspondence; and the Fourth Amendment of the US Constitution. Their Lordships emphasized upon Govind vs. State of MP, AIR 1975 SC 1378, [1975] 2 SCC 148 in which the need to guard against the pernicious possibility of a "police-raj" was forcefully articulated. The triple tests distilled by the 7 Judge Bench in Maneka Gandhi vs. Union of India, (1978) 1 SCC 248: AIR 1978 SC 597 were reiterated viz. that a law interfering with personal liberty must (a) be consonant with a prescribed procedure which should, (b) be compliant with one or more rights mentioned in Article 19 and (c) with Article 14 additionally. Their Lordships thought it to be essential that documents deposited or stored in a Bank must remain confidential. It is our considered opinion that the same privilege of confidentiality must extend to auditors as well. The decision of the High Court striking down unbridled power sought to be given in Section 73 of the Stamp Act was affirmed by the Supreme Court. This ratio can logically be extrapolated upon the facts of the present case to conclude that the Revenue is not empowered to make use of material stumbled upon by its officers in a Search conducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If apparently reliable material cannot be directly used against an assessee solely because it was not collected during a Search of that assessee, a fortiori, material palpably concerning a third party with no connection with the raided party must be ignored. It is also illogical that the rigours which apply to the Search of a particular notified person can be flagrantly ignored so far as an unconnected person is concerned. It is argued that under Section 153C the Department acts as a post-office, viz. it sends the seized material to the concerned Assessing Officer. This proposition advanced by the Revenue is legally acceptable so long as it is restricted to any person having dealings or transactions with the person who is the subject of the Search and Seizure operation. 19. Finally, so far as the prayers in the Petition are concerned, we are of the opinion that in a situation such as the one which we are seized with, in view of the fact that the Respondents have rejected the offer made by the Petitioner as recorded in our Order dated 18.11.2008 : the impugned summons, as referred to in Prayer (ii) of the Writ Petition are set aside, and the Respondents are directed to forthwith ..... X X X X Extracts X X X X X X X X Extracts X X X X
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