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TMI Blog2011 (5) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... ents in the said Hospital. Both the petitioners claim that they are regular Income-tax assessee and have been filing regular Income-tax return under the Act. 3. The officials of the Income-tax Department on 19-3-2002 made a search under the search warrant issued under section 132(1) of the Income-tax Act (hereinafter referred to as the Act) at the residence of the petitioners. Questioning the legality and validity of warrant of authorisation authorising the respondents to conduct a search in the premises of the petitioners, the present writ petition has been filed. The main thrust of challenge in the present petition is that there was no material in possession of the officials (as described under section 132(1) of the Act) to have reason to believe that the petitioners are in possession of any money, bullion, jewellery or other valuable articles or things as undisclosed income or property. 4. A Panchnama dated 20-3-2002 enlisting the documents found and seized during the search operation was prepared. The petitioner's locker in the Bank of India was searched on 30-3-2002 when it was found empty. During the search operation, cash amounting to Rs. 8,150 was found at the residence a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the present petition. 8. On merits it has been stated that the warrant of authorisation was issued strictly in accordance with law and the contrary allegations that it was in the nature of fishing and roving enquiry has been denied. The further case is that the petitioners have been showing only part of their professional income and concealing its major part. 9. In the rejoinder affidavit the allegations made in the writ petition have been reiterated. The petitioners have come out with the case that the entire search and seizure operation was a nullity and there was no material before the respondent No. 1 to form reason to believe that the petitioners have concealed the income or asset. With regard to the surrender of certain income during search operation as stated in the counter affidavit mentioned above, the explanation given is that the statement of the petitioner No. 1 was recorded in the early morning hours at about 4:30 A.M. and by that time he was completely exhausted and made the statement under duress, pressure, influence and terror. The allegation of maintaining duplicate books of account has been denied and it has been stated that the petitioners has been organisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any surrender, without admitting the surrender of income as valid, is of no consequence to justify the search operation. Reference to certain paragraphs of rejoinder affidavit was made to support his argument that the surrender of income is not valid as it was done under coercion, threat, pressure etc. The petitioner was not in a fit mental state to depose at the end of long drawn search operation. He was completely exhausted by that time. 14. In reply, the learned counsel for the department submits that the writ petition is liable to be dismissed on the ground of laches. By means of the present writ petition, the validity of search warrant of the search operation done on 20-3-2002 has been questioned with considerable delay of about more than two years. The block assessment proceedings were on and were likely to be concluded soon and when barely a month was left to complete the proceedings within the prescribed period, the petitioners without any rhyme and reason, rushed to this Court. Had there been any grievance against the search operation, they should have approached the Court immediately or shortly, after the search. On merits, it was submitted that sufficiency of reasons t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s they presumably accepted the search operation as valid during all this period over a span of two years. Had they ever felt aggrieved, they should have challenged the search warrant shortly or immediately after the close of the search which according to the department concluded on 5-4-2002. It is true that no period of limitation for filing a writ petition is prescribed but it is also equally true that an aggrieved person should approach the Court for redressal of his grievances with promptitude. The facts of the case do disclose that the petitioner was not serious in challenging the search operation and on smelling out that the block assessment proceedings may go against him sought to stall the proceedings by filing the present writ petition and obtained the stay order. The writ petition was presented before the stamp reporter on 15-3-2004 and the stay order providing that the block assessment proceedings may go on but no formal order shall be passed was granted on 17-3-2004, without formally admitting the writ petition. This being so, we are of the considered view that the argument of the department that the writ petition is liable to be dismissed on the ground of laches has got ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made. The disclosed income of Dr. Chauhan is highly insufficient to enable him to make such huge investment; and (4) The disclosed nursing and operation charges of Prakash Hospital are plenty low. It has been gathered that receipts against only part of payments are issued by the Hospital and major amount of payment in the name of operation charges and fee for visits of the doctors is taken outside the books of account and remain unaccounted." 20. The aforesaid satisfaction note was drawn by ADIT which was approved by the competent authority. 21. In the above factual scenario the question of formation of belief within the meaning of section 132 authorising the search, arises. The Court is not concerned at this stage to examine the sufficiency of the material. The formation of believe within the meaning of section 132(1) is an important step and the condition precedent to the authorisation of search and seizure, it is one essentially making up one's mind as to whether on the information presented he had or had not formed the reason to believe. At this stage, the learned counsel has placed reliance upon the well known judgment of the Apex Court in the case of ITO v. Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er an order authorising search should have been issued. Again, any irregularity in the course of entry, search and seizure committed by the Officer acting in pursuance of the authorisation will not be sufficient to vitiate the action taken, provided the Officer has in executing the authorisation acted bona fide." [Emphasis Supplied] 22. In the light of above pronouncement of the Apex Court, we have to see whether the conditions for exercise of power are satisfied or not in the case on hand. The gist of the satisfaction note has been referred to above, it, in no uncertain terms shows that the petitioner No. 1 has made investments in constructions of clinic and in establishing Prakash Hospital as well. The tax authority opined that the nature of constructions prima facie do show that these constructions could not have been raised by the petitioner No. 1 from his disclosed income. This by itself is sufficient to exercise the power as conferred under section 132 of the Act. To put it differently, it cannot be said that the power was not exercised in accordance with law. On the facts of the case, it can be said that the power was exercised for the purpose for which the law authorises. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation received. But, the reason due to which the decision is reached can always be examined. When it is said that reason to believe is not open to scrutiny what is meant is that the satisfaction arrived at by the officer concerned is immune from challenge but where the satisfaction is not based on any material or it cannot withstand the test of reason, which is an integral part of it, then it falls through and the court is empowered to strike it down. Belief may be subjective but reason is objective. In ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC), the Supreme Court, while interpreting a similar expression used in section 147 of the Act, held (at p. 446) : 'The expression 'reason to believe' does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence.'" 26. Coming to the facts of the present case, we are of the opinion that on the facts of the present case, it can be said that there was material with the concerned official to have reason to believe that the petitioners have got undisclosed income or asset. On the basis of the satisfaction note prepared by the ADIT, it is but ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer mentioned in the said section has reason to suspect that an income has been concealed or likely to be concealed. In contrast to the phrase "reason to suspect" as mentioned in section 131(1A), section 132 of the Act uses the phrase "reason to believe". Reliance has been placed upon a Division Bench decision of this Court in the case of Dr. (Mrs) Anita Sahai v. Director of Income-tax (Investigation) [2004] 266 ITR 597/136 Taxman 247 wherein it has been held that after taking any action under section 132 of the Act, the issuance of notice under section 131(1A) goes to show that there was neither reason to believe nor material before the authorising officer on the basis of which he could issue a warrant under section 132 of the Act. 31. On a careful consideration of the matter, we are of the opinion that section 131(1A) confers powers on the authorities mentioned therein to exercise the powers as mentioned in section 131(1) if he has reason to suspect that any income has been concealed or is likely to be concealed, notwithstanding that no proceeding with respect to such person or a class of persons are pending before him. This is only an enabling section and it does not in any ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) of the Act but it appears that the aforesaid section has been wrongly mentioned as there is no such section. In the corresponding paragraph relating to said document, the petitioner in paragraph 6 of the writ petition has mentioned that the correct section is 131(1A) of the Act. On that basis, the learned senior counsel for the petitioners has sought to build up a legal argument which we will deal with a little later in this judgment. 33. It may noted that the mentioning of a wrong section in an order will not vitiate it if the authority of the order can be traced to a statutory provision. After going through the contents of the said document dated 4-4-2002 we are of the opinion that the information sought for through the said letter can be justified with reference to section 133(6) read with section 135 of the Act. It provides that the Director General or Director or the Chief Commissioner etc., shall be competent to make any inquiry under this Act, and for this purposes shall have all the powers that Assessing Officer has under the Act in relation to making of inquiries. Definition of Director General or Director is inclusive definition which includes Assistant Director as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd retain the custody of any books of account or other documents produced before it vide section 131(5); 6. Search and seizure under section 132; 7. Power to requisition the books of account under section 132A; 8. Power to retain the assets for payment of tax vide section 132B; 9. Power to call for information under section 133; 10. Survey under section 133A; 11. Power to enter any building or place under section 133B; and 12. To inspect registers of the company under section 134." 36. Presently, we are concerned with the scope and ambit of section 131(1A) vis-a-vis section 132 of the Act. A close reading of sub-section (1A) of section 131 would show that if the Director General or the other authorities mentioned therein, "(i) has reason to suspect that any income has been concealed or is likely to be concealed by any person or class of person; (ii) before he takes an action under sub-section (1) of section 132; then, (a) for the purposes of making any inquiry or investigation relating thereto, (b) it shall be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f evidence etc., only in relation to a pending matter. To overcome it, section 131(1A) was enacted giving powers of discovery/production of evidence etc., to Director General, or Director or Joint Director etc., notwithstanding the fact that no proceeding is pending before them. The use of words "it shall be competent for him to exercise the powers confirmed under sub-section (1) are indicative of confirmation of power on such officers even for the purposes of making any enquiry or investigation under sub-section (1) of section 132. Section 131(1A) and section 132 should be interpreted harmoniously. 39. The above aspect of the case, it appears, was not brought to the notice of the Division Bench of this Court in the case of Dr. (Mrs.) Anita Sahai (supra). 40. In any case, a futile exercise made by the department by issuing a notice under section 131(1A) of the Act will not in any manner affect the search operation validly carried on within the four corners of section 132 of the Act. 41. Even otherwise also, the decision in the case of Dr. (Mrs.) Anita Sahai (supra) is not applicable for the reasons more than one. Firstly, in the case on hand, the notice dated 4-4-2002 is not un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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