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TMI Blog1985 (4) TMI 219X X X X Extracts X X X X X X X X Extracts X X X X ..... .S. Ahuluwalia, Assistant Commissioner of Income-tax at Jullundur) bore personal malice towards the appellants, amongst others, attributable to an incident concerning the servant of the appellants and an application for transfer of appeals pending before him made to the Chairman, Central Board of Direct Taxes, by the first appellant. Actuated by this personal malice, respondent No. 6 first instigated respondent No. 2 to issue a search warrant under the authority of which a raid was carried out at the residence of the appellants on August 24, 1979, which led to the seizure of certain documents including some foreign currency. Thereafter, when the appellants made various representations for return of documents, again instigated by respondent No. 6, respondent No. 5 issued a warrant of authorisation under section 132A of the I.T. Act on April 9, 1984, by which respondent No. 2 was directed to deliver such books of account and other documents and goods seized during the search to the requisitioning officer. As the documents and material seized during the search had not been returned, the writ petition as aforementioned was filed for the reliefs hereinabove set out. When the writ peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y documents which in his opinion would be useful for or relevant to any investigation or proceeding under the Act were secreted in the house of the appellants. It was urged that respondent No. 6 who was actuated by personal malice towards the appellants and who being a friend of respondent No. 2 instigated and provoked him to exercise his power of search and seizure and not to effectuate any purpose for which power is conferred but with a view to humiliating and harassing the appellants. A little while later, we will examine the allegation of personal malice. Suffice it to say that there is no substance in the allegation. Respondent No. 2 is a responsible officer being the Assistant Director, Enforcement, Foreign Exchange Regulation Act, stationed at Jullundur. He issued the impugned search warrant which led to the seizure. In the affidavit-in-reply on behalf of the respondents No. 1 to 4, it was clearly stated that the search was authorised by the second respondent after he was fully satisfied on the basis of the information available in the official record and also on the basis of the information collected by the officers of the Enforcement Directorate after making enquiries. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the appellants so that they can controvert any false or wholly unsustainable material set out in the file. When an officer of the Enforcement Department proposes to act under section 37, undoubtedly he must have reason to believe that the documents useful for investigation or proceeding under the Act are secreted. The material on which the belief is grounded may be secret, may be obtained through intelligence or occasionally may be conveyed orally by informants. It is not obligatory upon the officer to disclose his material on the mere allegation that there was no material before him on which his reason to believe can be grounded. The expression " reason to believe " is to be found in various statutes. We may take note of one such. Section 34 of the Indian I.T. Act, 1922, inter alia , provides that if the ITO must have " reason to believe " that the income, profits or gains chargeable to income-tax have been under-assessed, then alone he can take action under section 34. In Narayanappa v. CIT [1967] 63 ITR 219 (SC), the assessee challenged the action taken under section 34 and amongst others it was contended on his behalf that the reasons which induced the ITO to initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorisation for search of the premises and seizure of incriminating articles was to search for goods liable to be confiscated or documents secreted in any place, which are relevant to any proceeding under the Act. The legislative policy reflected in the section is that the search must be in regard to the two categories mentioned in the section. The court further observed that though under the section, the officer concerned need not give reasons if the existence of belief is questioned in any collateral proceedings, he has to produce relevant evidence to sustain his belief. A shield against the abuse of power was found in the provision that the officer authorised to search has to send forthwith to the Collector of Customs a copy of any record made by him. Sub-section (2) of section 37 of the Act takes care of this position inasmuch as that, where an officer below the rank of the Director of Enforcement carried out the search, he must send a report to the Director of Enforcement. The last part of the submission does not commend to us because the file was produced before us and as stated earlier, the officer issuing the search warrant had material which he rightly claimed to be adequa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961. The court after referring to the decision of this court in Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver [1967] 66 ITR 664 (SC), held that " the obligation to record in writing, the grounds of the belief as enjoined by section 165(1), if not complied with would vitiate the issuance of a search warrant and the seizure of the articles ". It was then submitted that if the search is illegal, anything seized during such an illegal search has to be returned as held by a learned single Judge of the Calcutta High Court in New Central Jute Mills Co. Ltd. v. Kaul AIR 1976 Cal. 178. Section 37(2) provides that " the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under section 37(1)". Reading the two sub-sections together, it merely means that the methodology prescribed for carrying out a search provided in section 165 has to be generally followed. The expression "so far as may be" has always been construed to mean that those provisions may be generally followed to the extent possible. The submission that section 165(1) has been incorporated by pen and ink in section 37(2) has to be negatived in view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the grounds which induced the reasonable belief were either imaginary or fictitious or mala fide conjured up. Assuming that it is obligatory upon the officer proceeding to make a search or directing a search to record in writing the grounds of his belief and also to specify in such writing, so far as possible, the thing for which the search is to be made, is mandatory and that non-recording of his reasons would result in the search being condemned as illegal, what consequence it would have on the seizure of the documents during such illegal search. The view taken by a learned single Judge of the Calcutta High Court in New Central Jute Mills Co. Ltd.'s case, AIR 1976 Cal 178, that once the authorisation for carrying out the search is found to be illegal on account of the absence of recording of reasons in the formation of a reasonable belief, the officer who has seized documents during such search must return the documents seized as a result of the illegal search is against the weight of judicial opinion on the subject and does not commend to us. In fact this decision should not detain us at all because virtually for all practical purposes, it can be said to have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial. Such an approach would be a sad commentary on human ingenuity. There can be cases in which a search may fail or a reasonable explanation in respect of the documents may be forthcoming. In ITO v. Seth Brothers [1969] 74 ITR 836 (SC), it was in terms held that " from amongst the documents seized during the search, if some are found not to be useful for or relevant to the proceeding, that by itself will not vitiate the search. Nor can an inference be made that the power was initially exercised mala fide ." The court in Puran Mai's case [1974] 93 ITR 505 (SC), held that if the books of account and other documents collected during the search were afterwards found to be not relevant, that by itself does not make the search and seizure illegal. In this case, however, as the documents and other materials have been sealed under the warrant of authorisation issued under section 132A of the I.T. Act, the Enforcement Directorate may legitimately close the proceedings. We cannot move backward and conclude that if no further proceedings are taken, at the inception the search was mala fide or for reasons irrelevant or extraneous to the exercise of power. The contention therefore, m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated by the police. When the petitioners learnt about it at Bombay, they requested a common friend to get Gyan Chand released and in fact Gyan Chand was released. It was then stated that the friend contacted the Police Officer who had detained Gyan Chand and before him, the Police Officer admitted that Gyan Chand was detained at the instance of the sixth respondent ". Could there be more vague and completely misleading averments to support serious allegation of personal mala fides against the officer discharging his duties ? We are not inclined to dilate any more on this aspect save and except saying that the affidavit of Gyan Chand is not forthcoming, that the name of the friend is not mentioned and the Police Officer cannot be identified from the material disclosed in the petition. One can only say that a nefarious attempt has been made to cook up a wholly imaginary allegation for attributing personal mala fides to the sixth respondent. The contention must be negatived without further examination. It was lastly urged that there has been tampering with the documents by the officers of the Enforcement Directorate while the ITO sealed and took possession of the documents un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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