TMI Blog1981 (3) TMI 53X X X X Extracts X X X X X X X X Extracts X X X X ..... er s. 132 of the Act read with r. 112 of the rules thereunder. B. C. Jain perused them and signed, with endorsement " seen and read ", sixteen of these out of a total of thirty-five in all. Search then commenced. It closed for the day at 21.00 hours. Search was resumed the next day, 13th February, 1981, at 11.15 a.m. While it was still going on, Kapoorchand Champalal, petitioner No. 2, rushed to the High Court, contacted his lawyers and presented at 5 p.m. on the same day (which was a Friday) the present writ petition on which the following interim order was passed: " In view of the extreme urgency of the matter, I find, as at present, no immediate alternative but to entertain the petition as it is presented today. The same, however, is being entertained subject to the above said undertaking. Hearing Mr. N. H. Gursahani, learned counsel for the petitioner, i/b Mr. V. Z. Kankaria and Mr. R. A. Shaikh for the petitioners, and considering the extreme urgency of the matter, I pass the following order, which in my view protects the interest of the respondents and does not jeopardise their rights in the matter of the proceedings which the respondents appeared to have taken in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction, powers and functions of the aforesaid authorities. Part C deals with powers, inter alia, regarding discovery, production of evidence, etc., search and seizure, power to requisition books of account, etc., power to call for information, etc. Part D deals with disclosure of information. Part XV of the Rules deals, inter alia, with search and seizure (r. 112), inquiry under s. 132 (r. 112A), release of articles under s. 132(5) (r. 112B) and other rules. One is here primarily concerned with s. 132 and r. 112. Under the repealed Indian I.T. Act, 1922, there was s. 37 (which itself was first enacted in 1956) conferring a limited power of search and seizure. The I.T. Act, 1961 (Act 43 of 1961), retained this power by virtue of s. 132. In 1964, the then s. 132 was substituted by a new s. 132 by virtue of s. 30 of the Finance Act, 1964. In 1965, s. 132, as it then stood, was substituted by ss. 132 and 132A by virtue of s. 2 of the I.T. (Amend.) Act, 1965. About ten years later, in 1975, further amendments were made in the said s. 132 by virtue of s. 35 of the T.L. (Amend.) Act, 1975. Suffice it to note that there has been a world of change between s. 37 of the old Act and s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a vice-president, that the pass books, cheque books, etc., relating to these accounts are likely to be found in the office of the chartered accountant or in the residence of the partners or on the person of the partners ...... .." Apart from this affidavit, the record produced before the court indicates thus : Investigations by the Intelligence Wing showed that most of the cases of bogus nature were represented by Chartered Accountants, M/s. Jain Jain, petitioner No. 1, herein; that about twenty-five concerns had given their business addresses as 208, Samuel Street-the same as that of the aforesaid chartered accountants' firm; that about eight to ten concerns had given the address 71/89, Third Bhoiwada, which belonged to Gianchand R. Jain, the brother of T. R. Jain, petitioner No. 4 herein and partner of petitioner No. 1; that about fifteen persons had given their address as Nandadeep, Cama Galli, Hansoti Lane, Ghatkopar (West), which is the residence of the said T. R. Jain ; that after laborious and careful scrutiny of the various information and materials collected by the Intelligence Wing as also after discreetly collecting a number of files from the various ITOs made a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that there was ample information before the Director of Inspection. Perusing the same, the learned counsel for the petitioners found it very difficult to pursue any further his earlier contention that there was no information before the Director of Inspection for the formation of the requisite belief. The learned counsel for the petitioners, however, did pursue his alternate submission that it was not possible from the said information to form the necessary belief constituting the foundation for the impugned warrant of authorisation. I am afraid, it is not possible to accept even this alternate contention. In the first place, we have, in this behalf, the affidavit of M. L. C. D'Souza, the Director of Inspection, as follows: " ...I had perused the information made available to me, applied my mind to the same and I had discussion on the subject with Shri V. M. Sivasubramaniam, Deputy Director of Inspection, respondent No. 3. After taking into consideration the said information and after having the benefit of discussion with respondent No. 3, I came to a positive conclusion that these were fit cases in which action under section 132 of the said Act was absolutely necessary. I sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g (p. 844) : " Where the Commissioner entertains the requisite belief and for reasons recorded by him authorises 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." In these circumstances, the alternate contention of the learned counsel, Mr. Gursahani, based on the ingredient of " reason to believe embodied in s. 132 of the Act fails and is rejected. It was next contended that the respondents wrongly failed to supply the petitioners with a copy each of the several warrants of authorisation. He submitted that the Director of Inspection was a court and consequently, the warrants of authorisation issued by him were public documents and, consequently, therefore, the petitioners were entitled to have copies thereof. In support, he relied upon a Division Bench ruling of this court in Mulji Manilal v. State [1962] 64 Bom LR 348, the ratio whereof has been correctly and succinctly set down in its headnote: " An Income-tax Officer, while holdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search and/or the seizure. That it was so done here is not in dispute. Indeed, a number of original warrants of authorisation produced before petitioner No. 3, B. C. Jain, were even signed by him with the endorsement " seen and read ". There is thus no merit in the aforesaid contention. The same is rejected. Mr. Gursahani, the learned counsel for the petitioners, further submitted that the authorisations were illegal and invalid because the same did not relate to any specific item, document, book or paper, but were of general nature. There is no merit in this contention. No provision in the Act or the Rules requires the mention of a specific item, document, book, etc. Indeed, in the very nature of things, that would hardly be possible. It would be well nigh impossible for the Director of Inspection to know the exact documents, papers, accounts, etc., from which the discovery or discoveries are intended to be made. It would be for the authorised officer conducting the search to apply his mind and to decide, in the course of the search, as to which articles, documents, papers, accounts, etc., etc., he will seize or will not seize. There cannot, in this behalf, be any hard and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of C. As. was operating with their own undisclosed income, number of bank accounts in benami names. I, as authorised officer, entertained a prima facie belief that these accounts represented or evidenced transactions of the C. As. themselves with their undisclosed income and that the monies lying in credit in these accounts represented undisclosed income. A list of such accounts operated through banking channel of Vaibhav Co-operative Bank Limited was, therefore, drawn up and the Manager of the above Co-operative Bank was restrained from allowing the operation of the said bank accounts and fixed deposit accounts by these persons by issuing of prohibitory order u/s. 132(3) of the I.T. Act, 1961, on the Bank Manager." If such were the circumstances and if in the light thereof the Assistant Director of Inspection issued prohibitive order under s. 132(3) of the Act, I do not see how such an order can be characterised as illegal or unsustainable. On the contrary, if such be the facts and circumstances coming to light, absence of an order under s. 132(3) may, in a given case, be characterised as dereliction of duty on the part of the officer concerned. The concerned officer here has w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing. Averments of mala fides made in the petition have been emphatically denied in the affidavits-in-reply. It is not the case of the petitioners that the respondents have any malice against any of the petitioners. Nor is it the case of the petitioners that any particular officer of the search party had any animus against any of the petitioners. On this aspect (mala fides) the department's record produced before the court is also above board. There is no good reason for even any doubt or suspicion against the department on the question of mala fides. It was, however, contended that mala fides can be seen from the fact that though the petitioners were originally assessed from year to year, there was no complaint against the returns filed and the particulars disclosed. But even so, search and seizure was ordered. I, however, find no substance in this contention. The fact that returns were filed and assessments made and completed cannot, by itself, preclude the department from ordering such a seizure if reliable information reaches the concerned authorities regarding large undisclosed income of the assessee, vide Pooran Mal's case [1974] 93 ITR 505 at p. 520 before the Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r where the department could have exercised its power under s. 131 of the Act, viz., the power regarding discovery, production of evidence, etc. It is not possible to agree. In the first place, we have the affidavit of Mr. L. C. D'Souza, Director of Inspection, wherein he states as follows: " I say that in consequence of the said information in my possession had reason to believe that if summons (under section 131) were issued to the petitioners herein, the petitioners would not produce or cause to be produced any books of account or other documents which would be useful for or relevant to any proceedings under the Income-tax Act, 1961, hereinafter referred to as the said Act, and that the petitioners were in possession of any money or valuable articles or things and such money, articles or things represented income or property which had not been disclosed or would not be disclosed for the purpose of assessment under the said Act. 1, therefore, issue a warrant of authorisation under section 132 of the said Act read with rule 112 of the Rules framed under the said Act. The records of the petitioners produced before this court shows that P. R. Jain, the brother of petitioner No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titution. In this context, reference may be made to the pertinent observations of the Supreme Court at pp. 515 and 516 of the aforesaid ruling : " Dealing first with the challenge under article 19(1)(f) and (g) of the Constitution it is to be noted that the impugned provisions are evidently directed against persons who are believed on good grounds to have illegally evaded the payment of tax on their income and property. Therefore, drastic measures to get at such income and property with a view to recover the Government dues would stand justified in themselves. When one has to consider the reasonableness of the restrictions or curbs placed on the freedoms mentioned in article 19(1)(f) and (g), one cannot possibly ignore how such evasions eat into the vitals of the economic life of the community.It is a well-known fact of our economic life that huge sums of unaccounted money are in circulation endangering its very fabric. In country which has adopted high rates of taxation a major portion of the unaccounted money should normally fill the Government coffers. Instead of doing so it distorts the economy. Therefore, in the interest of the community, it is only right that the fiscal aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... my view, of no relevance. The said case also turned on its own facts which showed that there was no justification for the Commissioner there to authorise the impugned search of the premises of the petitioner, Anand Swaroop. The reasons recorded by the Commissioner for authorising search under s. 132 in the said case were as follows: " Submits returns on estimate, does not co-relate fees with briefs. One of the top lawyers. Strange he is not a wealth-tax assessee. There is no jewellery. This needs looking into along with the fees earned by him. " It was rightly observed that action under s. 132 of the Act could not be sanctioned on such considerations and that the above reasons showed that the object of the search was to make a probe into the cause why the petitioner was not wealthy enough to possess jewellery or to become wealth-tax assessee and that such inquisitorial searches cannot be justified under any system of civilized laws. Mr. Gursahani also relied upon a ruling of the Supreme Court in State of Kerala v. Mathew [1978] 42 STC 348, with particular reference to the following observations therein (headnote): " Strong suspicion, strange coincidences and grave doubts ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alings of Kallupalam Auto Stores which stands registered in the name Marykutty and which is also housed in the same building in which Kallupalam Lad's jewellery Mart is housed. It is true that there are certain entries in the secret books of account which tally in certain respects with the entries in the books of account intended for official purposes which were produced by the respondents in response to the demand made by the Inspecting Assistant Commissioner which raises a strong suspicion against the respondents, but that circumstance alone is not sufficient to warrant their conviction for the aforesaid offences. " And it is thereafter that the observations supra on which reliance is placed follow. I do not see how this case can be relied upon by the petitioners in support of their contentions in their present petition. Observations torn out of context and de hors the facts and circumstances in which they are made cannot avail the petitioners herein. It was also contended that the provisions of the Code of Criminal Procedure, made applicable to the impugned search and seizure by virtue of sub-s. (13) of s. 132 of the Act, have not been complied with in this case. There is, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onest citizens. Those who defraud the revenue in this way are parasites who suck out the life blood of our society. In this context, it is well to note that in s. 132 of our Act and r. II 2 of the Rules thereunder there are several in-built checks and safeguards. These in turn have been succinctly set forth by our Supreme Court in Pooran Mal's case (p. 518 of 93 ITR): " In the first place, it must be noted that the power to order search and seizure is vested in the highest officers of the department. Secondly, the exercise of this power can only follow a reasonable belief entertained by such officer that any of the three conditions mentioned in section 132(1)(a), (b) and (c) exists. In this connection it may be further pointed out that under sub-rule (2) of rule 112, the Director of Inspection or the Commissioner, as the case may be, has to record his reasons before the authorisation is issued to the officers mentioned in sub-section (1). Thirdly, the authorisation for the search cannot be in favour of any officer below the rank of an Income-tax Officer. Fourthly, the authorisation is for specific purposes enumerated in (i) to (v) in sub-section (1), all of which are strictly l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns with responsible avocations in different walks and fields of life. Misuse of intellectual ingenuity and financial wizardry can well frustrate efforts at revival of economy and can only encourage not the decline and fall but the rise and growth of underground economy thriving with underhand dealings and eating into the very vitals of the economic life of the country fracturing the very foundations of a sound economic structure. Parallel economy stands before us all like a colossus. Serious efforts are on to weaken the same and to ultimately (if possible) obliterate it. Though measures in that behalf in the past have been, more or less, lessons in futility, that is no reason at all to give up. On the contrary, that itself is a warrant for injecting more blood, more vigour and more dynamism to control and cure the cancerous growth. The reasons and the compulsions behind the search and seizure provisions are too obvious to all. Though not a talisman, these powers do serve in their own way to reach and get at the secreted profits, concealed wealth and tax-evaded amounts-in the process of bridging up, at least to an extent, the gap between evasion and compliance and, albeit indirectly ..... X X X X Extracts X X X X X X X X Extracts X X X X
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