2015 (7) TMI 194 - HC - Income Tax

Search and seizure operation undertaken u/s 132(1) - Held that - The present case, in September 2007 the search was carried out in the premises of Dr. Yogi Raj Sharma. The document Annexure RJ-1 was seized by the respondents. At the relevant time petitioner no. 1 was the Chief Health Secretary and this fact was within the knowledge of the respondents, but why the search was conducted on 30.5.2008 after a period of near about 9 months, there is no explanation in this regard. The document Annexure RJ-1 was seized from the premises of Dr. Yogi Raj Sharma but until and unless there is corroborating evidence the respondents could not have formed the basis of issuing warrant of authorization. It appears that because of the allotment of house to respondent no.4, there was some annoyance of the authorities and as soon as on 20.5.2008 the house was got allotted by Chief Minister, on 28.5.2008 warrant of authorization was issued and on 30.5.2008 search was conducted. If there was some material with the Department that the petitioners had purchased some house or land property, then there could have been definite evidence in this regard, but for a period of 8 months no information was collected and all of a sudden the warrant of authorization was issued. From the perusal of panchnama prepared during seizure it appears that no objectionable document or undisclosed property was found except those which were declared in the earlier return. There is no other evidence available on record that the document Annexure RJ-1 relates to the petitioner and the word ch of which correctness is disputed by the petitioner indicates to the petitioner. In absence of any cogent reasons in the present matter warrant of authorization could not have been issued. Issuance of warrant of authorization is a serious action and for this authorization officer should have recorded his satisfaction. Though normally this Court is not looking to the reasons of satisfaction, but in the present case it appears that the warrant of authorization was issued merely on hypothecated grounds, which is not sustainable under the law. In the present case, we have examined the entire proceedings, satisfaction note, the document Annexure RJ-1, which is the basis for issuance of warrant of authorization and ultimately the seizure memo and find that the entire action which was initiated and taken was based on without any sufficient ground or material and it appears that because of dispute in respect of allotment of house, the respondents could get an opportunity to issue warrant of authorization, resultantly search in the premises of petitioners as conducted. - Decided in favour of assessee.

Issues Involved:
1. Legality of the search and seizure operation under Section 132(1) of the Income Tax Act, 1961.
2. Validity of the satisfaction recorded for issuing the search warrant.
3. Allegation of mala fide action by the respondents.

Detailed Analysis:

1. Legality of the Search and Seizure Operation:
The petitioners, both government servants, challenged the search and seizure operation conducted on 30.05.2008 under Section 132(1) of the Income Tax Act, 1961. They contended that they had been regularly filing their Income Tax Returns, supported by necessary documents, and their accounts were duly verified by the Assessing Officer each year. The search was conducted as a consequence of a search at the premises of Dr. Yogi Raj Sharma, the then Director of the Department of Public Health and Family Welfare, Government of Madhya Pradesh. During the search, documents, books, and vouchers were seized without verification, and it was alleged that the search was conducted with a predetermined belief that the assets found were unaccounted and undisclosed.

2. Validity of the Satisfaction Recorded:
The petitioners argued that there was no satisfaction recorded by the respondents for issuing the search order. The power to conduct a search could only be exercised if there was information leading to a belief that the person would not produce the necessary documents or that the property was undisclosed. They relied on several judgments, including ITO v. Seth Bros. and CIT v. Vindhya Metal Corpn., to support their claim that the search and seizure should be quashed. The respondents, however, submitted that the search was based on documents found during the search at Dr. Yogi Raj Sharma's premises, which formed the basis for the search at the petitioners' premises.

3. Allegation of Mala Fide Action:
The petitioners alleged that the search and seizure were mala fide, as petitioner no.1, who was the Home Secretary, was responsible for the allotment of houses and had delayed the allotment of a house to the officer who issued the search warrant. This delay allegedly led to the officer's annoyance, resulting in the issuance of the search warrant. The petitioners argued that no illegal property was found during the search, and the notice under Section 153A of the Act and subsequent suspension of petitioner no.1 were baseless.

Court's Findings:
The court examined the satisfaction note and found that it was centered on the search conducted at Dr. Yogi Raj Sharma's premises. The document (Annexure RJ-1) used as the basis for the search did not bear the petitioners' names, and there was no evidence to indicate that the word 'ch' in the document referred to the petitioners. The court noted that the search was conducted nine months after the document was seized, with no explanation for the delay. The court found that the search warrant was issued on hypothecated grounds and not based on sufficient material, indicating a possible mala fide action due to the dispute over the house allotment.

Conclusion:
The court concluded that the issuance of the warrant of authorization and the consequent search and seizure proceedings were not sustainable under the law. The petition was allowed, and the search and seizure proceedings were quashed. The court emphasized that the power to order a search under Section 132 of the Act must be exercised strictly in accordance with the law and for the purposes authorized by the law. The court also highlighted that the satisfaction note must contain sufficient grounds to justify the search, which was lacking in this case.

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