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2020 (12) TMI 481 - HC - Income TaxValidity of Search and seizure action - No acceptable explanation in respect of the valuables kept in the locker - search operations of the Primary Persons - whether Competent Authority did not apply its mind while issuing the impugned WoA against the Petitioners or in conducting the search? - Whether petition is barred by delay and laches? - HELD THAT - The undisputed fact is that the present petitions are predicated on the search action which served as a cause of action for the Petitioners to file the present petition. There is no convincing explanation for the delay, nevertheless, since we have extensively heard the arguments on the merits of the case, we are not inclined accept the preliminary objection raised by the Revenue Warrant of Authorization - whether impugned warrant is issued u/s 132(1) OR 132(1A) - Revenue thus suspected that the Petitioner s Premises was a location where undisclosed income/assets/documents/other incriminating evidence relating to the Kochar Group was likely to be found - HELD THAT - In the case of the Petitioner, as explained above, the WoA u/s 132(1) in the case of Kochar Group pertained to the Petitioner s Premises wherein the Issuing Authority had reasons to suspect that the undisclosed income, books of account and documents of the Kochar Group were kept or to be found. Accordingly, the search and seizure under Section 132(1) in respect of the Kochar Group was carried out at the premises of Vikas Chowdhary on 06.02.2019.Also perused the WoAs issued by Respondent No. 2 under which the searches were initiated. As shown to us, both have been issued in Form No. 45, under Section 132 r/w Rule 112(1) of the Income Tax Rules 1962. WoA No. 7257 dated 05.02.2019 was issued to the Primary Persons i.e. the Kochar Group, and was in respect of the Petitioner s Premises. WoA No. 7275 dated 12.02.2019 was issued to the Petitioners Shilpa and Vikas Chowdhary, and was in respect of their Locker No. 150F. Thus, the distinction sought to be drawn by Mr. Shrivastava is wholly irrelevant. Further the assumption and contention that, since Vikas Chowdhary was not the searched person under the WoA dated 05.02.2019, his premises could only be searched under Section 132(1A) of the Act, is entirely misconceived and is rejected. Validity of search carried out at the Petitioner s Premises - declaration that the search and seizure, conducted on them is illegal, void and without authority of law, and the exercise is without jurisdiction - HELD THAT - The search action between 06.02.2019 to 09.02.2019, was therefore, not against the Petitioners but against the Primary Persons. The Petitioner s Premises was searched not for Vikas or Shilpa Chowdhary s income/books of account/etc., but for the books of accounts/documents/money/bullion/jewellery/etc. belonging to the Primary Persons who were the subject of the search. The Respondents, on physical surveillance, observed movement of cash from the Petitioner s Premises by motorcycle borne couriers. Therefore, the premises was identified to likely have incriminating evidence. The connection and link between the persons subjected to search (i.e. the Primary Persons) and the Petitioner s Premises was thus established. We cannot ignore the fact that documents/articles/valuables etc. belonging to Primary Persons can be kept with third parties and concealed anywhere in different places and locations - authorised officer can subject any such premises to search if there are reasons to suspect that such location could be accommodating such document/articles/valuables, etc . Therefore, the jurisdictional precondition or the threshold for justifying such action qua the premises, was satisfied. As argued that such an action is unlawful, however the entire premise of the Petitioner s case is essentially founded on the plea that such action qua the Petitioners was under Section 132(1A) and not under Section 132(1) - This factual affirmation is incorrect and has been clarified for the reasons stated hereinafter. Thus, there is no credible foundation laid out by the Petitioners to challenge such an action. Even otherwise, this action of search and the consequences thereof are qua the Primary Persons i.e. the Kochar Group. Petitioners have no locus to challenge the same and we are not concerned with this search and consequent proceedings against the Kochar Group. Validity of search action under WOA - The satisfaction arrived at by the authority meets the conditions stipulated in Clauses (b) / (c) of Section 132(1) of the Act. The factual background noted above demonstrates that the impugned WoA against the Petitioners has been issued not merely on the ground of recovery of locker key, as Mr. Srivastava has sought to project. The formation of belief by the authorities is also based on the statements of the Petitioners. The officers made an attempt to ascertain and verify the facts, post the discovery of the locker key. The satisfaction note also records that Petitioners were asked to furnish details of the contents of the locker, but did not provide satisfactory explanation. In these circumstances, we believe that the Revenue was well within its right to proceed to search the Petitioner s locker under section 132(1). Court to not evaluate the adequacy of reason to believe - foundation for having reasons to believe in terms of the statute - The principle, as reiterated time and again by the Courts, necessary to be borne in mind is that the words reason to believe mean that the reason should exist. The existence of such a belief can be challenged by the assessee, but not its sufficiency. The Court can examine whether the reasons to believe have a rational connection or are relevant bearing to the formation of such belief, and are not extraneous or irrelevant to the purpose of the Section. But, as at the Court cannot sit in appeal or test the adequacy of the opinion formed by the Assessing Officer under Section 132 - having regard to the settled legal position on the subject, we are of the view that the action initiated by the Respondents under Section 132(1) of the Act qua the Petitioners does not call for any interference by this Court. Shah-E-Naaz Judge judgment reliance 2019 (7) TMI 1502 - DELHI HIGH COURT - Revenue contended that the consequential WoA dated 27.06.2014 issued to inspect the Petitioner s lockers, was issued by under Section 132(1A) or under Section 132(1)(i) - Petitioners, under their statements on oath failed to provide acceptable explanation in respect of the valuables kept in the said locker. And as the proceeding is under a new and separate WoA in the case of the Petitioners where they are the party being searched, and not a consequential warrant issued during the search operations of the Primary Persons, therefore any business connection, link and association between the petitioners and the primary search party is prima facie not required to be established. Thus, the said case is distinguishable on facts and does not assist the case of the Petitioner.
Issues Involved:
1. Validity of the search and seizure action. 2. Legality of the Warrant of Authorization (WoA) issued under Section 132(1) and 132(1A) of the Income Tax Act. 3. Release of seized materials and valuables. 4. Quashing of notices issued under Sections 153A/143(3) of the Income Tax Act. 5. Delay and laches in filing the petition. Detailed Analysis: 1. Validity of the Search and Seizure Action: The petitioners challenged the search and seizure action as arbitrary and mala fide, asserting that the Competent Authority did not apply its mind while issuing the WoA and conducting the search. They argued that the search was a general search without any evidence of possession of undisclosed income by the petitioners. The court found that the search action at the petitioner’s premises was based on WoA dated 05.02.2019 issued against the Kochar Group under Section 132(1) of the Income Tax Act. The search was conducted on suspicion that the premises housed incriminating evidence related to the Kochar Group. The court held that the search was valid and within the jurisdiction of the authorized officers. 2. Legality of the Warrant of Authorization (WoA) Issued Under Section 132(1) and 132(1A): The petitioners contended that the WoA was illegal and issued without fulfilling the conditions stipulated in Clauses (a), (b), or (c) of Section 132(1). They argued that the search should have been conducted under Section 132(1A) based on suspicion. The court clarified that the initial search was under Section 132(1) against the Kochar Group, and the subsequent search of the petitioners’ locker was based on WoA dated 12.02.2019 issued under Section 132(1). The court examined the satisfaction note and found that the reasons to believe were based on material evidence, including statements of the petitioners and the discovery of a locker key. The court held that the WoA was valid and issued in accordance with the law. 3. Release of Seized Materials and Valuables: The petitioners sought the release of materials and valuables seized during the search. The court did not find any merit in this request, as the search and seizure were conducted legally under the WoA issued against the Kochar Group and the petitioners. The court upheld the validity of the search and seizure action and did not order the release of the seized items. 4. Quashing of Notices Issued Under Sections 153A/143(3) of the Income Tax Act: The petitioners challenged the notices issued under Sections 153A/143(3) of the Income Tax Act. The court found that the notices were issued following the search and seizure action, which was conducted legally. The court held that the assessment proceedings initiated under these sections were valid and did not quash the notices. 5. Delay and Laches in Filing the Petition: The Revenue argued that the petition was barred by delay and laches, as it was filed after more than eighteen months from the date of the search action. The court acknowledged the delay but decided to hear the case on its merits, considering the extensive arguments presented by both parties. The court ultimately dismissed the petition on substantive grounds, finding no merit in the challenges raised by the petitioners. Conclusion: The court dismissed the petitions, upholding the validity of the search and seizure action, the legality of the WoA issued under Section 132(1), and the notices issued under Sections 153A/143(3) of the Income Tax Act. The court found that the search was conducted based on material evidence and within the jurisdiction of the authorized officers. The court did not order the release of the seized items and addressed the issue of delay and laches by deciding the case on its merits.
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