THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 11.01.2013
+ WP (C) No. 1417/2011
MADHU GUPTA ... Petitioner
versus
DIRECTOR OF INCOME-TAX (Investigation)
AND OTHERS ... Respondents
Advocates who appeared in this case:
For the Petitioner : Mr Dr Rakesh Gupta with Mr Ashwani Taneja and
Mr Rani Kiyala
For the Respondents : Ms Suruchi Aggarwal
CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE V.K. JAIN
JUDGMENT
BADAR DURREZ AHMED, J
1. In this writ petition, the petitioner has prayed for the following
reliefs:-
"(I) To declare the authorization of income-tax search u/s 132
of the Income Tax Act, 1961 as illegal in the case of the
petitioner.
(II) To direct the concerned authority of the income tax
department to vacate prohibitory order passed u/s 132(3)
of the Income Tax Act, 1961 with respect to three bank
lockers of the petitioner.
WP (C) No.1417.11 Page 1 of 24
(III) To direct the concerned authority of income tax
department to release the papers / documents seized from
the residence of the petitioner.
(IV) To pass any other order or direction as this Hon'ble court
may deem fit and proper on the facts and circumstances
of the instant case in order to grant necessary relief to the
petitioner."
2. Essentially, what the petitioner is seeking is a declaration that the
warrant of search issued against the petitioner under Section 132 of the
Income-tax Act, 1961 (herein after referred to as `the said Act') was
without the authority of law and, therefore, all proceedings pursuant to the
search conducted at the residential premises of the petitioner at C-18,
Sector-26, Noida, U.P. and pertaining to the petitioner ought to be declared
as being illegal and the jewellery, articles and documents in lockers
belonging to the petitioner be released to her unconditionally and the
prohibitory orders in respect thereof be vacated.
3. From the affidavit filed on behalf of the respondent / revenue, it
appears that an information had been received by the Deputy Director of
the Income-tax (Investigation), Unit-IV (3), New Delhi from the Director
General Central Excise Investigation, Delhi (DGCEI) in 2009 with regard
to alleged unearthing of unaccounted sales and production as well as
WP (C) No.1417.11 Page 2 of 24
alleged clandestine removal / clearing of the products of M/s Dharampal
Satyapal Group from their units at Noida, Gauhati and Agartala. The
products comprised of various brands of paan masala, gutkha, such as
Rajni Gandha and Tulsi. It is further revealed in the said affidavit on behalf
of the revenue that a show cause notice had been issued by the DGCEI to
the said M/s Dharampal Satyapal Group (DS Group) for evasion of Central
Excise Duty. It is further indicated in the affidavit that on the basis of
"information" received, "secret discreet inquiries" were carried out by the
said Director of Income-tax and it was allegedly revealed that the DS
Group was involved in sales which were not accounted for in the books and
that such unaccounted income was being invested in agricultural and
immovable properties and other assets in the names of group concerns of
DS Group. The affidavit further reveals that during "discreet inquiries" the
said Deputy Director of Income-tax allegedly got information that the
undisclosed accounts of DS Groups were being kept at the residence of
Smt. Madhu Gupta, widow of Late Shri R.N. Goela residing at C-18, Sector
26, Noida, U.P. It is further indicated in the affidavit that the said Deputy
Director of Income-tax recorded a satisfaction note for the purposes of
WP (C) No.1417.11 Page 3 of 24
conducting a search under Section 132 (1) of the said Act on the DS Group.
The satisfaction note, inter alia, indicated as under:-
"That the above facts indicate that the assessee group is in the
possession of unaccounted income in the form of money,
bullion, jewellery and other valuables / articles or things /
papers related to the undisclosed / benami properties. These are
likely to be found at the residence and business premises of the
group members, their associates and family members. Keeping
in view of the above facts, I am of belief that even if notices u/s
142 (1) of the Act or summons u/s 131 of the Act are issued to
the above assesses, they will not produce the documents which
will be useful for determining the taxability under IT Act, 1961.
Therefore, warrant of authorization u/s 132 of the IT Act may
be issued to search the following premises."
(underlining added)
4. In the said affidavit, it is further alleged that Smt. Madhu Goela, the
petitioner herein, who uses the name Madhu Gupta, is the widow of Late
Shri R.N. Goela, who was one of the major share-holders in the DS Group
of Companies till his death in the year 2006. He was also a director in the
said Group of Companies till his death. It is alleged in the affidavit that,
while inquiring into the allegations against the DS Group, the said Deputy
Director of Income-tax had received information that in view of the close
relationship of the petitioner with the promoters of DS Group, accounts
containing details of undisclosed sales and incomes, etc. were "likely to be
WP (C) No.1417.11 Page 4 of 24
kept" at the residence of the petitioner at C-18, Sector 26, Noida, U.P. It is
further indicated in the said affidavit that the following was mentioned in
the satisfaction note prior to the conduct of the search on the residence of
the petitioner:-
"She is the wife of deceased director and according to
information her house is used to keep accounts which are
unaccounted."
5. The said affidavit further indicates that, based on the satisfaction note
prepared by the said Deputy Director of Income-tax, the Additional
Director of Income-tax (Investigation), Unit-IV recommended search under
Section 132(1) on the DS Group. The Director of Income-tax
(Investigation)-II, New Delhi discussed the matter with the said Deputy
Director of Income-tax as also the said Additional Director of Income-tax
(Investigation) and accorded satisfaction that there were strong reasons to
believe that DS Group of companies were engaged in unaccounted
production of paan masala and other products resulting in generation of
unaccounted income which was not fully being disclosed in the income-tax
returns. Consequently, the Director of Income-tax (Investigation)-II, Delhi
authorized the search under Section 132(1) of the said Act and after such
authorization, the said Deputy Director of Income-tax carried out the search
WP (C) No.1417.11 Page 5 of 24
on the DS Group on 21.01.2011. The search was also carried out on the
residential premises of the petitioner.
6. From the above, it is clear that the warrant of authorization which
preceded the search at the residential premises of the petitioner was issued
in the name of the petitioner Smt. Madhu Gupta / Goela. This is also
apparent from the copy of the panchnama which is to be found at page 56
of the paper book. The second point that is to be noted is that the allegation
was that the petitioner was the wife of a deceased director and that there
was information that her house was being used to keep the accounts of DS
Group which were unaccounted.
7. The search on the premises of the petitioner has been challenged by
the petitioner on the ground that, although the warrant of authorization is in
the name of the petitioner, there could not have been any reason to believe
that the pre-conditions stipulated in clauses (a), (b) and (c) of Section
132(1) of the said Act had been satisfied. In fact, the exact nature of the
information is also not disclosed and, therefore, the search could not be
founded on mere surmises and conjectures. At this juncture, we may point
out that though the learned counsel for the petitioner submitted that a search
WP (C) No.1417.11 Page 6 of 24
under Section 132 entails serious consequences insofar as the person
searched is concerned inasmuch as the department, by virtue of Section
153A of the said Act, can re-open the assessments of six years, the learned
counsel for the revenue had conceded, on instructions, and this is recorded
in our order dated 22.02.2012, that the department shall not be proceeding
against the petitioner under Section 153A. Thus, the scope of the petition is
with regard to the lifting of the prohibitory orders and the release of the
goods / articles to the petitioner. It was first contended by the learned
counsel for the petitioner that the mere fact that the revenue had conceded
that they would not be proceeding against the petitioner under Section
153A itself meant that the initiation of the search was bad. However, the
revenue has raised certain arguments which need to be considered.
8. The learned counsel for the petitioner had placed reliance for his
submissions on the following decisions:-
1) Suresh Chand Agarwal v. Director General of Income-tax
(Investigation) & Others: (2004) 269 ITR 22 (All);
2) S.R. Batliboi & Co. v. Director of Income-tax (Investigation):
(2009) 315 ITR 137;
3) Dr Sushil Rastogi v. Director of Investigations, Income Tax
Department & Others: (2003) 260 ITR 249 (All);
WP (C) No.1417.11 Page 7 of 24
4) Dr Nand Lal Tahiliani v. Commissioner of Income-tax &
Others: (1988) 170 ITR 592 (All);
5) Narayan R. Bandekar & Another: v. Income-tax Officer &
Others: (1989) 177 ITR 207 (Bom);
6) Smt. Kavita Agarwal & Another v. Director of Income-tax
(Investigation) & Others: (2003) 264 ITR 472 (All);
7) L.R. Gupta & Others v. Union of India & Others: (1992) 194
ITR 32 (Del);
8) H.L. Sibal v. Commissioner of Income-tax & Others: (1975)
101 ITR 112 (P&H).
9. The contentions of the petitioner were that the opinion or the belief
amounting to a reason to believe, as indicated in Section 132(1) of the said
Act, must clearly show that the belief falls under clauses (a), (b), or (c) of
Section 132(1) and that no search could be ordered except for any of the
reasons contained in clauses (a), (b) or (c) of Section 132(1). Furthermore,
it was contended that the satisfaction note ought to show the application of
mind and formation of the opinion by the officer ordering the search and
that if the reasons recorded do not fall under clauses (a), (b) or (c), then the
authorization under Section 132(1) would be bad and would be liable to be
quashed. It was further contended that where the authorizing authority is
challenged in a judicial review, he would have to prove the basis for his
belief. Furthermore, the information on the basis of which a belief is
WP (C) No.1417.11 Page 8 of 24
formed must be something more than a mere rumour or a gossip or a hunch.
There must be some material which can be regarded as information which
must exist on the file on the basis of which the authorizing officer could be
said to have a reason to believe that an action under Section 132(1) is called
for on the basis of any of the conditions mentioned in clauses (a), (b) or (c)
of Section 132(1). Furthermore, it was contended that the information has
not only to be authentic, but must be capable of giving rise to the inference
that the person was in possession of the undisclosed accounts which would
not normally be disclosed. It was submitted that before any action is taken
under Section 132(1) of the said Act, the competent authority must do so
only after a serious application of mind on the material before him. It was
also contended that the facts, which constitute an information, should be
such on the basis of which a reasonable and prudent man could come to the
requisite belief or conclusion as required under Section 132(1) of the said
Act. The belief must not be based on mere suspicion. He further
contended that it would be open in the course of judicial review for the
court to examine whether there was, in fact, information in the possession
of the authorizing authority and whether there was a rational connection
between information and the belief entertained by him. It was further
WP (C) No.1417.11 Page 9 of 24
contended that the information has to be of a fairly reliable character
because unless the information is of such a character, it could not furnish a
reliable basis for entertaining the belief that any of the circumstances
mentioned in Section 132(1) existed. The information must have a relevant
bearing on the formation of the belief and must not be extraneous or
irrelevant. It was contended that in the present case, there is no information
revealed by the revenue at all. Merely stating that some information had
been received is not sufficient. There must be tangible evidence on the file.
Secondly, the information must be such that it is reliable and on the basis of
which a reasonable and prudent man would come to the conclusion that one
of the conditions mentioned in Section 132(1) has been satisfied and,
therefore, a search was warranted. It was submitted by the learned counsel
for the petitioner that no such condition existed and, in fact, neither clause
(a) nor clause (b) nor clause (c) of Section 132 (1) was satisfied in the
present case.
10. The learned counsel for the revenue, however, contended that the
reason to believe was in respect of the DS Group and clauses (a), (b) and
(c) were satisfied insofar as a search was warranted on the DS group.
According to the learned counsel for the revenue, the facts on the file
WP (C) No.1417.11 Page 10 of 24
clearly indicate that there was enough reason for the competent authority to
believe that the condition stipulated in clauses (a), (b) and (c) of Section
132(1) existed insofar as the DS Group was concerned. Once that was
satisfied, the provisions of Section 132(1) (i) clearly permitted the search to
be carried out in any building, place, etc. where the officer authorized had
"reason to suspect" that the books of accounts, other documents, etc. were
kept. It was contended by the learned counsel for the revenue that as there
was `reason to believe' insofar as the DS Group was concerned, the
authorized officer could conduct a search at any place which included the
residential premises of the petitioner at C-18, Sector 26, Noida, U.P. as also
the three bank lockers belonging to her. For conducting a search under
Section 132(1)(i), the authorized officer had only to have a `reason to
suspect' as distinct and different from a `reason to believe' as appearing in
Section 132(1). It was contended that the reason to suspect for entering any
premises could not be equated with the reason to believe, which was
necessary for directing any search of any tax payer. It was submitted that
the search of the DS Group was based on several allegations, which
according to the revenue, were found to be, prima facie, correct and once
that satisfaction was reached, the authorized officer only needed to have a
WP (C) No.1417.11 Page 11 of 24
reason to suspect that some books, assets or other documents or evidence
would be found at the residence of the petitioner. It is accepted that the
search in the case of DS Group was legal and had been validly authorized.
The only issue that requires to be seen is that whether there was any reason
to suspect to enter and search the residence of the petitioner. According to
the learned counsel, there was sufficient reason to suspect and this was
enough for the issuance of a warrant to enter and search the residence of the
petitioner. She submitted that no independent search of the petitioner was
directed to be conducted and, therefore, the first requirement of Section
132(1) of the existence of a reason to believe consequent upon information
in possession was not required to be satisfied. Therefore, it was submitted
that the case law presented by the learned counsel for the petitioner as also
the propositions advanced by him relating to proper authorization of the
search based on information in possession were not at all applicable to the
facts of the present case.
11. The provisions of Section 132(1), to the extent relevant, are set out
hereinbelow:-
"132. Search and seizure. (1) Where the Director General
or Director or the Chief Commissioner or Commissioner or
WP (C) No.1417.11 Page 12 of 24
Additional Director or Additional Commissioner or Joint
Director or Joint Commissioner in consequence of information
in his possession, has reason to believe that--
(a ) any person to whom a summons under sub-section (1) of
section 37 of the Indian Income-tax Act, 1922 (11 of
1922), or under sub-section (1) of section 131 of this Act,
or a notice under sub-section (4) of section 22 of the
Indian Income-tax Act, 1922, or under sub-section (1) of
section 142 of this Act was issued to produce, or cause to
be produced, any books of account or other documents
has omitted or failed to produce, or cause to be produced,
such books of account or other documents as required by
such summons or notice, or
(b ) any person to whom a summons or notice as aforesaid
has been or might be issued will not, or would not,
produce or cause to be produced, any books of account or
other documents which will be useful for, or relevant to,
any proceeding under the Indian Income-tax Act, 1922
(11 of 1922), or under this Act, or
(c ) any person is in possession of any money, bullion,
jewellery or other valuable article or thing and such
money, bullion, jewellery or other valuable article or
thing represents either wholly or partly income or
property which has not been, or would not be, disclosed
for the purposes of the Indian Income-tax Act, 1922 (11
of 1922), or this Act (hereinafter in this section referred
to as the undisclosed income or property),
then,--
(A) the Director General or Director or the Chief
Commissioner or Commissioner, as the case may
be, may authorise any Additional Director or
Additional Commissioner or Joint Director, Joint
Commissioner, Assistant Director or Deputy
WP (C) No.1417.11 Page 13 of 24
Director, Assistant Commissioner or Deputy
Commissioner or Income-tax Officer, or
(B) such Additional Director or Additional
Commissioner or Joint Director, or Joint
Commissioner, as the case may be, may authorise
any Assistant Director or Deputy Director,
Assistant Commissioner or Deputy Commissioner
or Income-tax Officer,
(the officer so authorised in all cases being hereinafter
referred to as the authorised officer) to
(i) enter and search any [building, place, vessel,
vehicle or aircraft where he has reason to suspect
that such books of account, other documents,
money, bullion, jewellery or other valuable article
or thing are kept;
(ii) break open the lock of any door, box, locker, safe,
almirah or other receptacle for exercising the
powers conferred by clause (i) where the keys
thereof are not available;
(iia) search any person who has got out of, or is about
to get into, or is in, the building, place, vessel,
vehicle or aircraft, if the authorised officer has
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;
(iib) require any person who is found to be in
possession or control of any books of account or
other documents maintained in the form of
electronic record as defined in clause (t) of sub-
section (1) of section 2 of the Information
WP (C) No.1417.11 Page 14 of 24
Technology Act, 2000 (21 of 2000), to afford the
authorised officer the necessary facility to inspect
such books of account or other documents;
(iii) seize any such books of account, other documents,
money, bullion, jewellery or other valuable article
or thing found as a result of such search:
Provided that bullion, jewellery or other valuable article
or thing, being stock-in-trade of the business, found as a
result of such search shall not be seized but the
authorised officer shall make a note or inventory of such
stock-in-trade of the business;
(iv) place marks of identification on any books of
account or other documents or make or cause to be
made extracts or copies therefrom;
(v ) make a note or an inventory of any such money,
bullion, jewellery or other valuable article or
thing:"
12. It is apparent that there are several parts to the said provision of
search and seizure. In the first part, certain persons have been named, who
would be competent to authorize other officers of the Income-tax
Department to carry out searches. The first authority or warrant of
authorization can only be issued by the named persons, namely, the
Director General or Director or the Chief Commissioner or Commissioner
or an Additional Director or Additional Commissioner or Joint Director or
Joint Commissioner. Such warrant of authorization can only be issued by
such a person in consonance of information in his possession and after he
WP (C) No.1417.11 Page 15 of 24
has formed a reason to believe that the conditions stipulated in clauses (a),
(b) and (c) existed.
13. The information must be credible information and there must be a
nexus between the information and the belief. Furthermore, in our view,
the information must not be in the nature of some surmise or conjecture, but
it must have some tangible backing. Until and unless information is of this
quality, it would be difficult to formulate a belief because the belief itself is
not just an ipse dixit, but is based on reason and that is why the expression
used is "reason to believe" and not simply `believes".
14. We shall now examine the decisions cited by the learned counsel for
the petitioner. In H. L. Sibal (supra), the Punjab & Haryana High Court
observed as under:-
"30. ... The word "information" has been defined in the
Shorter Oxford Dictionary as "that of which one is apprised or
told". The word "reason" has been defined as "a statement of
fact employed as an argument to justify or condemn some act".
On the other hand, the word "conclusion" is defined as "a
judgment arrived at by reasoning; an inference, deduction,
etc.". In other words, when the information received or the
basic facts are harnessed in support of an argument, the
resultant effect assumes the shape of a reason and when a
number of reasons are considered in relation to each other, the
final result of this consideration assumes the shape of a
conclusion. A necessary concomitant of this approach is that
WP (C) No.1417.11 Page 16 of 24
the facts constituting the information must be relevant to the
enquiry. They must be such from which a reasonable and
prudent man can come to the requisite belief or conclusion. If
either of the afore-mentioned elements is missing, the action of
the authority shall be regarded as lying outside the ambit and
scope of the Act. Such an action would be liable to be struck
down on the basis of what is commonly known as "legal
malice"."
15. In Dr Nand Lal Tahiliani (supra), the Allahabad High Court
observed as under:-
"5. ... The expression is "reason to believe that the income
has not been disclosed and not probably it may not have been
disclosed". It is not left to guessing. It carries with it the
impress of certainty. The dwelling house of a person is his
fortress. "Every householder, the good or the bad, the guilty or
the innocent, is entitled to the protection designed to secure the
common interest against unlawful invasion of the house ".
Ransacking of the house and the act of taking away the
property is an inroad on the citizens' right of privacy": one of
the values of civilization. Any unwarranted intrusion on it
cannot be countenanced. Reasonable belief exists if the
information is not only trustworthy but reasonable and
sufficient in itself to warrant the conclusion that the provisions
of Section 132 were being violated. Because, if the exercise of
power is bad or unlawful in inception, then it is not validated
or nor does it change character from its success. It would not,
therefore, be asking too much from the authorities to comply
with the basic requirements of the section before they are
permitted to invade the secrecy of one's home."
16. In Narayan R. Bandekar (supra), the High Court of Bombay
observed as under:-
WP (C) No.1417.11 Page 17 of 24
"3. ... A plain reading of sub-section (1) of
section 132 makes it clear that the powers can be exercised in
consequence of information in the possession of the Director
of Inspection or the Commissioner of Income Tax and from
such information of the Commissioner has reason to believe
that (a) any person, in spite of issue of summons, has failed to
produce the books of account or other documents, (b) any
person is likely to fail to produce the books if so called upon,
and (c) any person is in possession of any money, bullion,
jewellery or other valuable articles and which are not
accounted for and which represent undisclosed income. It
hardly requires to be stated that the power conferred upon the
Commissioner under section 132 is of a drastic nature and the
exercise of power can only be after serious application of mind
to the information in the possession of the Commissioner and
from which a reasonable person would come to the conclusion
that the conditions prerequisite for the exercise of power
existed."
17. In L.R. Gupta & Others (supra), the Delhi High Court held as under:
"17. A search which is conducted under Section 132 is a
serious invasion into the privacy of a citizen. Section 132(1)
has to be strictly construed and the formation of the opinion or
reason to believe by the authorising officer must be apparent
from the note recorded by him. The opinion or the belief so
recorded must clearly show whether the belief falls under sub-
Clause (a), (b) or (e) of Section 13:(l). No search can be
ordered except for any of the reasons contained in sub-Clauses
(a) (b), or (e). The satisfaction note should itself show the
application of mind and the formation of the opinion by the
officer ordering the search. If the reasons which are recorded
do not fall under Clauses (a), (b) or (e) then an authorisation
under Section 132(1) will have to be quashed. As observed by
the Supreme Court in Income Tax Officer v. Seth Brothers:
(1969) 74 ITR 836 (SC):
WP (C) No.1417.11 Page 18 of 24
`Since by the exercise of the power a serious
invasion is made upon the rights, privacy and
freedom of the tax payer, the power must be
exercised strictly in accordance with the law and
only for the purposes for which the law authorises
it to be exercised. If the action of the officer
issuing the authorisation or of the designated
officer is challenged, the officer concerned must
satisfy the Court about the regularity of his action.
If the action is maliciously taken or poer under
the Section is exercised for a collateral purpose, it
is liable to be struck down by the Court. If the
conditions for exercise of the power are not
satisfied the proceeding is liable to be quashed'."
18. In Dr Sushil Rastogi (supra), the decisions in Dr Nand Lal (supra)
as also in L.R. Gupta (supra), were followed. The same is the position
with Smt. Kavita Agarwal (supra) wherein, while considering the said
decisions in Dr Nand Lal (supra) and L.R. Gupta (supra), a Division
Bench of the High Court of Allahabad observed as under:-
"5. On the facts of the case we are of the opinion that this
writ petition deserves to be allowed. The law is well settled
that a warrant of search and seizure under Section 132(1) can
only be issued on the basis of some material or information on
which the Commissioner/Director has reason to believe that
any person is in possession of money, jewellery or other
valuable articles representing wholly or partly income or
property which has not been or would not be disclosed, under
the IT Act. In the present case the respondents have not
disclosed what was the material or information on the basis of
which the Director/Commissioner entertained the belief that
the lockers contained valuable jewellery or other articles
WP (C) No.1417.11 Page 19 of 24
representing undisclosed income. It is well settled that the
satisfaction of the authorities under Section 132 must be on the
basis of relevant material or information. The word used in
Section 132(1) are "reason to believe" and not "reason to
suspect". In the counter-affidavit it has been specifically stated
in para. 18 that the authorized officer had reason to suspect
and not reason to believe."
19. In Suresh Chand Agarwal (supra), the High Court of Allahabad held
as under:-
"12. As regards the allegations in paragraphs 11, 12, 13, 14 and 15
of the counter affidavit to the effect that the assessee could not give
a satisfactory explanation regarding certain assets or documents
found during the search, this court held in the case of Smt. Kavita
Agarwal v. Director of Income Tax (Investigation): [2003] 264 ITR
472 that the material on the basis of which the reason to believe of
the Commissioner/Director is said to exist must be such material
which was brought to the knowledge of the said authority prior to
the search. In other words, the authorities cannot rely on material
found during the search for taking the plea that this was the basis of
the reason to believe, unless such material was brought to the
knowledge of the authority who signs the warrant of authorisation
before or at the time when he signs it. To take a contrary view
would mean that the Commissioner/Director can issue a warrant of
authorisation under Section 132(1) without considering any
material, and thereafter the Income Tax authorities can indulge in a
fishing enquiry to uncover some undisclosed asset. No such view
can be countenanced by this court as it would give unbridled and
arbitrary powers to the Income Tax authorities to harass the
citizens.
13. For the reasons given above, the writ petition is allowed and
the impugned warrant of authorisation is quashed and the entire
search and seizure is declared illegal. The respondents are directed
to release the cash, articles and documents seized from the
WP (C) No.1417.11 Page 20 of 24
petitioner or his wife from their residence as well as the bank locker
forthwith."
20. Finally, in S.R. Batliboi and Company (supra), the Delhi High Court
held as under:-
"9. It would be perilous and fatal to lose sight of the reality
that the powers of the Search and Seizure are very wide and
thus the legislature has provided a safeguard that the Assessing
Officer should have reasons to believe that a person against
whom proceedings under Section 132 are to be initiated is in
possession of assets which have not been or would not be
disclosed. Secondly, the authorized officer is also required to
apply his mind as to whether the assets found in the Search
have been disclosed or not, and if no undisclosed asset is
found no action can be taken under Section 132(1)(iii) or (3).
An arbitrary seizure cannot be maintainable even where the
authority has seized documents with ulterior motives.
xxxx xxxx xxxx xxxx xxxx
12. Over two score years ago the Division Bench of this
Court had opined in N.K. Textiles Mills v. CIT [1966] 61 ITR
58 propounded that it was necessary and essential for these
officers to take into custody only such books as were
considered relevant to or useful for the proceedings in
question. It was not open to them to indiscriminately,
arbitrarily and without any regard for relevancy or usefulness,
seize all the books and documents which were lying in the
premises, and, if they did so, the seizure would be beyond the
scope of the authorization. Our learned Brothers have
designedly used the words proceeding in question, in order to
clarify that material that may possibly be of relevance to the
affairs of a third party, unconnected with the raided assessee
and beyond the contemplation of the search and seizure
WP (C) No.1417.11 Page 21 of 24
exercise, should not be retained. All remaining doubts will be
dispelled on a perusal of H.L. Sibal v. CIT: 1975 CTR (P&H)
302 in which the Division Bench has, inter alia, analysed
Commissioner of Commercial Taxes v. Ramkishan Shrikishan
Jhaver: [1967] 66 ITR 664 (SC) into four concomitants (1)
The authorized officer must have reasonable grounds for
believing that anything necessary for the purpose of recovery
of tax may be found in any place within his jurisdiction; (2) he
must be of the opinion that such thing cannot be otherwise got
at without undue delay; (3)he must record in writing the
grounds of his belief; and (4) he must specify in such writing,
so far as possible, the thing for which search is to be made.
Where material or document or assets belong to a third party,
totally unconcerned with the person who is raided, none of
these conditions are fulfilled. In Sibal the belongings of a
house-guest of Shri Sibal were searched and some money
found therein was seized. The Court had concluded that the
authorization for the search of the house-guest was prepared
after the planned search of Shri Sibal. The warrants were
quashed partly for this reason."
21. These are the principles of law which have been set down by several
judicial pronouncements. In the present case, we find that the so-called
information is undisclosed and what exactly that information was, is also
not known. At one place in the affidavit of Deputy Director of Income-tax,
it has been mentioned that he got information that there was a "likelihood"
of the documents belonging to the DS Group being found at the residence
of the petitioner. That by itself would amount only to a surmise and
conjecture and not to solid information and since the search on the premises
WP (C) No.1417.11 Page 22 of 24
of the petitioner was founded on this so-called information, the search
would have to be held to be arbitrary. It may also be pointed out that when
the search was conducted on 21.01.2011, no documents belonging to the
DS Group were, in fact, found at the premises of the petitioner.
22. With regard to the argument raised by the learned counsel for the
respondent that there was no need for the competent authority to have any
reason to believe and a mere reason to suspect would be sufficient, we may
point out that the answer is provided by the fact that the warrant of
authorization was not in the name of the DS Group but was in the name of
the petitioner. In other words, the warrant of authorization under Section
132(1) had been issued in the name of the petitioner and, therefore, the
information and the reason to believe were to be formed in connection with
the petitioner and not the DS Group. None of the clauses (a), (b) or (c)
mentioned in Section 132(1) stood satisfied in the present case and,
therefore, the warrant of authorization was without any authority of law
insofar as the petitioner was concerned. Had the warrant of authorization
been issued in the name of the DS Group and in the course of the searches
conducted by the authorized officer, the premises of the petitioner had also
been searched, then the position might have been different. But, in the
WP (C) No.1417.11 Page 23 of 24
present case, that is not what has happened. The warrant of authorization
was in the name of the petitioner and, therefore, it was absolutely necessary
that the pre-conditions set out in Section 132(1) ought to have been
fulfilled. Since those pre-conditions had not been satisfied, the warrant of
authorisation would have to be quashed. Once that is the position, the
consequence would be that all proceedings pursuant to the search
conducted on 21.01.2011 at the premises of the petitioner would be illegal
and, therefore, the prohibitory orders would also be liable to be quashed. It
is ordered accordingly. The jewellery / other articles / documents are to be
unconditionally released to the petitioner. The writ petition is allowed as
above. There shall be no order as to costs.
BADAR DURREZ AHMED, J
V.K. JAIN, J
JANUARY 11, 2013
dutt
WP (C) No.1417.11 Page 24 of 24
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