TMI Blog1979 (3) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... in all of these petitions common questions of law and facts are involved, I propose a common order for the same, and wherever found necessary the reference to facts would be made from Civil Writ Petition No. 4395 of 1975. The submissions advanced on behalf of the petitioners by Mr. Kuldip Singh, their learned counsel, are: (1) that the searches carried out by the I.T. authorities were illegal for the reason that the order under s. 132(1) of the Act had been passed by the Commissioner (respondent No. 1) mechanically, without application of his mind, as would be clear from the order itself, for he had not given any reason for his satisfaction envisaged in the said provision; (2) that such of the petitioners, to whom notice under r. 112A of the Rules had been issued, could not have been required by respondent No. 4, the ITO, to disclose the source of the acquisition of such items of the undisclosed income as had been merely listed by the searching authorities at the time of carrying out of the searches of their respective premises. According to the learned counsel, provisions of r. 112A of the Rules limit the query in this regard to such items of the undisclosed income only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. The informer, Arjan Singh, also mentioned in his statement before the Assistant Director of Intelligence Cell that besides the duplicate account books furnished by him the petitioners had a large number of such duplicate account books dealing with the black money and undisclosed transactions with them. According to him, the petitioners had generated crores of black money. The Assistant Director of the Intelligence Cell, in pursuance of the directions of the Commissioner, verified the information so received from the informer and prepared a detailed note for him which runs as follows : " P.U.C. is information received from an informer of Ferozepore regarding possession of unaccounted assets in the form of cash, jewellery, etc., and documents relating to the acquisition of these assets by persons connected with M/s. Samundri Transport Company (Private) Limited, Ferozepore. The members of this group are living at Ferozepore and Hoshiarpur. Apart from the transport company, these people are carrying on several other businesses also, i.e., a cold storage and a cinema at Hoshiarpur, petrol pumps at Hoshiarpur, Ferozepure, Kotkapura and Muktsar, etc. The unaccounted assets and do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... informer. Also, as per worthy CIT's instructions, I discussed the matter with the two Inspecting Assistant Commissioners concerned, i.e., Inspecting Assistant Commissioner, Range-II. Jullundur, and Inspecting Assistant Commissioner, Bhatinda. Both of them were of the view that action under section 132(1) is immediately called for against this group of persons. The Inspecting Assistant Commissioner, Range-II, Jullundur, told me that he also had heard of the reputation of these people, i.e., that they are in possession of substantial unaccounted wealth. In view of these facts, action under section 132(1) is recommended against the above said group of persons. If approved, necessary authorisations may kindly be issued in respect of the following premises: (1) M/s. Swaran Talkie, Phagwara Road, Hoshiarpur. (2) M/s. Swaran Cold Storage, Hoshiarpur. (3) M/s. Jupiter Service Station, Opposite Bus Stand, Hoshiarpur. (4) M/s. Hoshiarpur Oil Store, Opposite Bus Stand, Hoshiarpur. (5) M/s. Hoshiarpur Oil Store, Hoshiarpur to Garhshankar Road. (6) Residence of Shri Avtar Singh, Model Town, Hoshiarpur. (7) Residence of Shri Balwant Singh, Hoshiarpur to Garhshankar Ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P. Chaliha [1971] 79 ITR 603 (SC). From the case of Seth Brothers [1969] 74 ITR 836 (SC) my pointed attention is drawn to the following observations (p. 843): " The section does not confer any arbitrary authority upon the revenue officers. The Commissioner or the Director of Inspection must have, in consequence of information, reason to believe that the statutory conditions for the exercise of the power to order search exist. He must record reasons for the belief and he must issue an authorization in favour of a designated officer to search the premises and exercise the powers set out therein." Mr. Awasthy, learned counsel appearing for the revenue, on the contrary, asserted that the order authorising search suffered from no legal infirmity. He maintains that the condition precedent is the existence of material and the application of mind of the authority, which has to take a decision, on that material. Once that is found to be there, the order would not be considered (invalid) on the mere ground that the authority concerned did not couch its satisfaction, on the paper in a more expressive and explicit language. The learned counsel argues that the giving of reasons is primaril ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tatement, also furnished the pedigree table. (Counsel for the revenue had given out the pedigree table to the court as being furnished by the informer, in the presence of the counsel for the petitioners land on seeing the record, I ascertained that the pedigree table, as given by the counsel, was identical with the one which existed at page 1 of the confidential file of the revenue). This information was given to the Assistant Director of Intelligence Cell. He was functioning directly under the supervision, control and direction of the Commissioner, respondent, No. 1, as the noting extracted above would show. From the above, it is clear that there was sufficiently reliable and relevant material in the possession of the secret cell functioning under the direct control and supervision of the Commissioner and the noting would further show that at every stage the Commissioner had occasion to know the investigation carried out by the secret cell in the matter. It is thus clear that two out of the three requirements stand satisfied in the present case, that is, availability of relevant material and application of mind by the Commissioner to the same. What is merely lacking is the reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sub-section (5) of section 132 is to be made requiring him on the date to be specified therein (not being earlier than fifteen days from the date of service of such notice) either to attend at the office of the Income-tax Officer to explain or to produce or cause to be there produced evidence on which such person may rely for explaining the nature of the possession and the source of the acquisition of the assets." Mr. Kuldip Singh stressed that in r. 112A of the Rules "money, bullion, jewellery or other valuable article or thing" are referred to as "assets" and the expression occurring at the fag end of sub-r. (1) of r. 112A of the Rules "the acquisition of the assets" refers to the said assets, that is, the petitioners could be required to explain the source of acquisition of the seized assets only. In my opinion, the submission is based on the misconception of the scope of r. 112A of the Rules and of the provisions of s. 132 of the Act, the relevant portions whereof are in the following terms: " 132. (1) Where the Director of Inspection or the Commissioner or any such Deputy Director of Inspection or Inspecting Assistant Commissioner as may be empowered in this behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment; (iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the acts specified in clause (a) of sub-section (1) of section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized : Provided that if, after taking into account the materials available with him, the Income-tax Officer is of the view that it is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized and may also determine the interest or penalty, if any, payable or imposable accordingly : Provided further that where a person has paid or made satisfactory arrangements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... searching officer. Had the intention been to limit the expression "the assets" at the fag end of r. 112A of the Rules to those items, which, in the first portion of the said rule, were referred to as "assets", then instead of the use of the expression "the assets", there would have been used the expression " such assets ", in the said rule. Further, in case the expression "the assets" occurring in r. 112A of the Rules is held to refer to the items of undisclosed income which had been seized and referred to as "assets", then that would amount to the limiting of the scope of the provisions of sub-s. (5) of s. 132 of the Act to the estimating of the value of the seized items known as "assets", while, in my opinion, the true scope of sub-s. (5) of s. 132 of the Act is not to be limited, as the duty cast on the ITO, inter alia, is to estimate the undisclosed income and not merely to estimate the value of the "assets" which had been seized in the search. Hence, the expression "the assets" occurring in r. 112A of the Rules refers to all the items of undisclosed income as referred to in cl. (c) of sub-s. (1) of s. 132 of the Act. For the reasons aforesaid, the contention advanced on beh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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