2021 (10) TMI 74 - HC - Income Tax

Validity of Search proceedings - Requirement of issuance of summons before initiation of search - Whether warrant of authorization is qua the premises and not qua the assessee ? - whether requisite satisfaction of the authorized officer who authorized the search could not have been validly arrived at since there was no information available qua each of the Petitioners to justify the search? - Material seized during the search - Undisclosed income of an Assessee - HELD THAT - Department s case does not pertain to Section 132(1) (a) or (b) but 132(1)(c). The Department s contention is that it is in possession of information which led it to form reason to believe that the Petitioners are in possession of any money, bullion, jewellery or other valuable articles or things and such money, bullion, jewellery represents either wholly or partly income or property which has not been disclosed . - Both the petitioners have admitted in their respective writ petitions that they in fact did not file ITRs for certain AYs. Even this information, if available with the Department would have been sufficient for them to form a reason to believe for the purpose of Section 132(1)(c). In other words, it is not mandatory that in the present case there should have been summons under Section 131 of the Act for the Department to proceed to initiate action under Section 132 of the Act. If here was such information available for the purposes of search, why did the Department have to undertake a survey of the factories of both Shiva and Shivom under Section 133A of the Act? - There is nothing in either in Section 132 or 133A of the Act that prohibits the Department from undertaking a survey of an entity exclusive to one location of its operations, whereas it may have credible information for search as regards the operations in another location. As rightly pointed out by the Department, search is qua a place and not necessarily qua the Assessee . Survey by its very nature could be of the entity and any place from where such entity may operate. It is perfectly possible that while conducting survey and search of the premises of an entity, for which an authorisation has been issued, the Department can come across material pertaining to some other person or entity. The provisions like Section 153C of the Act deal with such contingencies. However, that is not to say that a survey or a search cannot happen in two different premises simultaneously. Further, if search is qua the place, the Court sees no reason why if there are two entities in one premises, there cannot be a common search operation. The Court is not prepared to accept the plea of the Petitioners that in the present case the search and survey operations were entirely without jurisdiction. The Court would like to add that this conclusion is of a prima facie nature since despite the petitioners having insisted on a finding by this Court, the right of the Assessees to agitate this issue again in the further proceedings cannot be lost sight of. Consequently, the Court is not satisfied that any ground is made out by either of the Petitioners for grant of any of the reliefs as prayed for at this stage. Although the Court has expressed its prima facie view on the legal and factual issues raised, on the insistence of the Petitioners, it is clarified that after the assessment orders are received and if the Petitioners are aggrieved thereby, it would be open to them to urge all the grounds raised in the present petitions, apart from any further grounds they may have, before the Appellate Authority in accordance with law.

Summary

Issues Involved:
1. Validity of notices issued under Section 153A of the Income Tax Act.
2. Validity of search warrants issued under Section 132 of the Income Tax Act.
3. Legality of simultaneous search and survey operations.
4. Common search warrant and panchanama for separate entities.
5. Jurisdiction and satisfaction of the authorized officer under Section 132(1) of the Income Tax Act.

Detailed Analysis:

1. Validity of notices issued under Section 153A of the Income Tax Act:
The petitioners challenged the notices issued under Section 153A of the Income Tax Act, claiming they were issued without valid grounds. The Department argued that the notices were based on credible information and the non-filing of Income Tax Returns (ITRs) for certain Assessment Years (AYs) by the petitioners. The Court noted that the petitioners admitted to not filing ITRs for specific AYs, which could justify the Department's reason to believe that there was undisclosed income. The Court concluded that the notices under Section 153A were validly issued based on this information.

2. Validity of search warrants issued under Section 132 of the Income Tax Act:
The petitioners contended that the search warrants were issued without any credible information and amounted to a "roving and fishing" inquiry. The Department maintained that the search was authorized based on credible information and after thorough inquiry. The Court referred to Section 132(1)(c) of the Act, which allows search if there is reason to believe that a person possesses undisclosed income or property. The Court found that the Department had sufficient grounds to issue the search warrants, given the petitioners' admission of non-filing of ITRs and other information available with the Department.

3. Legality of simultaneous search and survey operations:
The petitioners argued that simultaneous search and survey operations under Sections 132 and 133A of the Act were not permissible. The Department countered that there was no legal prohibition against conducting both operations simultaneously. The Court agreed with the Department, stating that the Act does not prohibit simultaneous search and survey operations. The Court noted that search and survey could be conducted at different locations of an entity's operations and that search is "qua a place" rather than "qua the assessee."

4. Common search warrant and panchanama for separate entities:
The petitioners challenged the issuance of a common search warrant and panchanama for Shiva and Shivom, arguing that they were separate entities with different income tax assessments. The Department argued that both entities operated from the same premises, justifying a common search warrant. The Court referred to Section 292CC of the Act, which allows for a common search authorization and panchanama for multiple entities operating from the same premises. The Court found no illegality in issuing a common search warrant and panchanama in this case.

5. Jurisdiction and satisfaction of the authorized officer under Section 132(1) of the Income Tax Act:
The petitioners questioned the jurisdiction and satisfaction of the authorized officer in issuing the search warrants. The Department argued that the search was authorized based on credible information and after obtaining approval from higher authorities. The Court examined the provisions of Section 132(1) and concluded that the Department had sufficient grounds to form a reason to believe that the petitioners possessed undisclosed income or property. The Court emphasized that the satisfaction of the authorized officer was based on credible information, and the search was validly authorized.

Conclusion:
The Court dismissed the petitions, finding that the notices under Section 153A and the search warrants under Section 132 were validly issued based on credible information and the petitioners' admission of non-filing of ITRs for certain AYs. The Court upheld the legality of simultaneous search and survey operations and the issuance of a common search warrant and panchanama for separate entities operating from the same premises. The Court clarified that the petitioners could raise their grounds before the Appellate Authority if aggrieved by the assessment orders. The interim orders were vacated, and the petitions were dismissed with no order as to costs.