2013 (1) TMI 318 - HC - Income Tax

Search u/s 132 - prohibitory orders passed u/s 132(3) with respect to three bank lockers of the petitioner - direction from income tax department to release the papers / documents seized from the residence of the petitioner - whether there was any reason to suspect to enter and search the residence of the petitioner? - Held that - 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 . As decided in H. L. Sibal Versus CIT, Punjab And Others 1975 (7) TMI 67 - PUNJAB AND HARYANA HIGH COURT 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 the present case, it is found 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 of the petitioner was founded on this so-called information, the search would have to be held to be arbitrary. Also 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 - warrant of authorization u/s 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 as 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 present case, that is not what has happened as 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 - search conducted on 21.01.2011 at the premises of the petitioner would be illegal therefore prohibitory orders would also be liable to be quashed - jewellery / other articles / documents are to be unconditionally released to the petitioner - writ petition allowed.

Summary

Issues Involved:

1. Legality of the authorization of income-tax search under Section 132 of the Income Tax Act, 1961.
2. Validity of the prohibitory order under Section 132(3) of the Income Tax Act, 1961 regarding the petitioner's bank lockers.
3. Release of papers/documents seized from the petitioner's residence.
4. Examination of the pre-conditions stipulated in clauses (a), (b), and (c) of Section 132(1) of the Income Tax Act, 1961.

Detailed Analysis:

1. Legality of the Authorization of Income-Tax Search:

The petitioner sought a declaration that the warrant of search issued under Section 132 of the Income-tax Act, 1961 was without the authority of law and thus, all subsequent proceedings should be deemed illegal. The affidavit from the revenue indicated that the search was based on information received from the Director General Central Excise Investigation, Delhi, regarding unaccounted sales and production by the DS Group. The Deputy Director of Income-tax conducted "secret discreet inquiries" which allegedly revealed unaccounted income being invested in properties and assets under group concerns of DS Group. The satisfaction note indicated that the DS Group was in possession of unaccounted income and that the petitioner's residence was used to keep undisclosed accounts. However, the court found that the so-called information was undisclosed and amounted to mere surmise and conjecture rather than solid information. Therefore, the search was deemed arbitrary and without authority of law.

2. Validity of the Prohibitory Order:

The petitioner also sought to vacate the prohibitory order under Section 132(3) concerning her bank lockers. The court noted that the warrant of authorization was issued in the petitioner's name, and thus the information and reason to believe had to be formed in connection with the petitioner, not the DS Group. Since the pre-conditions of Section 132(1) were not satisfied, the warrant of authorization was without legal authority, rendering the prohibitory orders invalid. Consequently, the court ordered the unconditional release of the jewellery, articles, and documents.

3. Release of Papers/Documents Seized:

The petitioner requested the release of papers/documents seized from her residence. The court reiterated that the search warrant was issued based on insufficient and unreliable information. The affidavit suggested a likelihood of documents being found at the petitioner's residence, which was not substantiated by actual findings during the search. Therefore, the court ordered the release of all seized items to the petitioner.

4. Examination of Pre-Conditions Under Section 132(1):

The petitioner challenged the search on the grounds that the pre-conditions in clauses (a), (b), and (c) of Section 132(1) were not met. The court examined several judicial precedents, emphasizing that the belief must be based on credible information and not mere suspicion. The court found that the information leading to the search was not disclosed and amounted to conjecture. The warrant of authorization was in the petitioner's name, requiring specific information and reason to believe related to her, which was lacking. The court concluded that none of the conditions under Section 132(1) were satisfied, rendering the search and subsequent proceedings illegal.

Conclusion:

The court quashed the warrant of authorization and all proceedings pursuant to the search conducted on 21.01.2011 at the petitioner's premises. The prohibitory orders were invalidated, and the jewellery, articles, and documents were ordered to be unconditionally released to the petitioner. The writ petition was allowed, with no order as to costs.