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TMI Blog2012 (4) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... g along with his wife, who is also a medical doctor at Meerut. The petitioner derives his income from salary from Meerut Laser and Eye Care Centre Pvt. Ltd., house property and income from other sources with interest etc. It is stated that his income tax returns have been consistently accepted by the income tax authorities for last 15 years. 4. That on 27.10.2005 search and seizure operations were carried out at his residence-cum-clinic in the premises of the petitioner opposite N.A.S. college, E.K. Road, Meerut. The warrant of authorisation was prepared in the name of the petitioner and his wife Dr. Sangeeta. It is alleged that the warrant of authorisation was not given to the petitioner even though he has specifically demanded during the search operations, which was carried out for two days i.e. on 27th/28th October, 2005. A panchnama dated 28.10.2005 of search and seizure was prepared. The manner in which the search operations were carried out made it clear that the Taxing Officers had not scrutinised the past income tax records of the petitioner, before signing the warrants. The petitioner does not run his own clinic. He is working as one of the doctors of Meerut Laser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Officer v. Seth Brothers, (1969) 74 ITR 836 (SC) and P.R. Metreni v. CIT, (2007) 1 SCC 789 that search and seizure operation is a serious invasion, on the privacy and freedom of the tax payers and thus powers under Section 132 of the Act must be exercised strictly in accordance with law, and only for the purposes for which the law authorises it to be exercised. The search and seizure operations can only be authorised in view of the Instruction No.7 of the instructions issued by the Central Board of Direct Taxes on 30.7.2003, to be authorised only by the concerned Director General of Income Tax, and by no other official, read with Section 119 and Section 132 (1) and (14) of the Act makes it mandatory after 30.7.2003 the searches are to be authorised by the concerned DGIT (Investigation). In the present case the search operations were authorised on 27.10.2005 by the Director of Investigation on 18.10.2005 as is evident from the panchnama, which makes the issuance of authorisation of search void ab initio. 8. It is submitted that the revenue can resort to search only in a case, where there is expected income of more than Rs.1 crore. This limit was never considered be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er relying upon P.R. Metrani v. Commissioner of Income-Tax, Bangalore, (2006) 157 Taxman 325 (SC) submits that the Supreme Court observed in para 15 that Section 132 to 132B of the Act embody an integrated scheme laying down the procedure comprehensively for search and seizure and the power of the authorities making the search and seizure to order the confiscation of the assets seized. Section 132A gives power to the authorities to requisition books of account in consequence of the information in its possession. Section 132B provides the manner in which the assets retained under sub-section (5) of Section 132 can be dealt with. Section 132 is a Code in itself. It provides for the conditions upon which and the circumstances in which the warrants of authorization can be issued. After discussing the scheme of Section 132 including sub-section (2), sub-section (4), sub-section (4A) and (5); sub-section (6) and sub-section (7) the Supreme Court held that search and seizure under Section 132 is a serious invasion into the privacy of a citizen and therefore it has to be construed strictly. Sub-section (4A) was inserted by the Taxing Laws (Amendment) Act, 1975 w.e.f. 1.10.1975, to permit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfaction note and no details of the discreet enquiry were disclosed. It was held that satisfaction note must be based upon contemporaneous material, information becoming available to the competent authority. Loose satisfaction notes placed by authorities before each other cannot meet the requirement of the provisions and thus the authorisation in that case was found to be bad and unsustainable. 12. Shri Subham Agrawal has also cited a judgment of this Court in City Montessory School (Regd) v. Union of India and Ors., Writ Petition No.2818 (MB) of 2000 decided in May, 2007, judgment of Lucknow Bench in Raghuraj Pratap Singh v. Asstt. Commissioner of Income Tax, Writ Petition No.5731 (MB) of 2004 decided on 14th December, 2006 and judgment of Delhi High Court in Ajit Jain v. Union of India, 84 (2000) DLT page 1 in support of the submissions that the information within the meaning of Section 132 (1) should be as accurate as possible having reference to the precise assets of a person and not of a general nature and that should in all probability lead the authorities to have the unmistaken belief that money, bullion, jewelery or other valuable articles or things pointed out by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts were not provided. None of the assets seized were considered undisclosed. There was no mention of any seized document in the order and computer data and there was no mention that the petitioner was running his own clinic. The petitioner did not have any undisclosed income nor any such undisclosed income was found during search and seizure operation. 15. During the pendency of the writ petitions the Court passed orders on 10.3.2011, 4.5.2011, 17.5.2011 and 12.8.2011 in which keeping the question of validity of search and seizure open, in view of the fact that the assessments for the block periods were completed and that ITAT had upheld the orders of CIT (A) for dealing Rs.8 lacs as gifts and had set aside the orders of CIT (A) regarding the sum of Rs.50 lacs, directed the income tax authorities to release the entire seized articles after accepting security for an amount of Rs.15 lacs only, which remained in dispute. The order dated 12.8.2011 is quoted as below:- "We have heard Shri Subham Agarwal for the petitioner. Shri Dhananjai Awasthi appears for the department. On 04.5.2011 we had passed the following order:- "In pursuance to our direction on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... centralization of the powers to the officers. It is admitted by Shri Awasthi that assessments have become final and refunds were allowed to the petitioners. He relies upon statement given in the counter affidavit that the data in the hard disc and all the material seized were actually returned to the petitioner. Dr. Roop appearing in person has strongly denied these avermetns and states that nothing, which was seized has been returned so far and that infact the FDRs of his father from out of the retirement dues were also seized and that when his father requested for their return he was not even given acknowledgment of his presence in the office and was not treated with respect due to senior citizen. Dr. Roop appearing in person also submits that CPU was seized along with hard disc. CPU has been returned but hard disc was retained. The copy of the hard disc given back to the petitioner was examined by experts. The entire clinical data was found missing. He states that there was no financial data in the hard disc. In this writ petition we are prima facie concerned with the validity of the search and seizure operation. Since a complaint has been made that seized articles have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment of the block periods, which co-relate to the search and seizure, was concluded at the stage of CIT (Appeals) and that the CIT had opined that AO had passed assessment order without examining seized material; old records were not available with AO; and further it was admitted by Shri Agarwal that the assessments had become final and refunds were allowed to the petitioners, there was no justification to retain the seized articles including hard disc, title deeds, fixed deposits, jewelery etc. We had directed the assessments and the appellate orders to be brought on record by supplementary affidavit within a week. The department was directed to immediately return all the seized articles and any other articles, which may have been seized and are still retained within one week after receipt of the petitioner. Shri Dhananjay Awasthi has filed two applications. By the first application, the department is seeking privilege under Section 123 of Evidence Act, 1872 on the grounds given in paragraphs 5, 6 and 7 as follows:- "5. That the process of finalizing a search action is a detailed process were by the satisfaction note is put up by the Assistant Director of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is accordingly rejected. In the second application, it is stated that in so far as the return of seized material is concerned, it will affect the finality of the assessment proceeding. In para-8 of the application it is stated that the appeals have been filed by the department against the order of CIT (A) in ITAT and that the finality of the assessment proceedings and interest of revenue will suffer, in case directions in the order dated 4.5.2011 are to be followed. The department has prayed for modifying the order or to recall it keeping in view of the interest of the revenue. It is further stated that if the High Court finds it necessary to release the seized article, the completion of administrative formality in coordination of various wings of the department may be taken into consideration and one month's time be granted to the department to comply with the order of the High Court dated 4.5.2011. Prima facie we find from the punchnama of the articles prepared that none of the articles or material may be required physically to be produced before the ITAT for the purposes of deciding the appeal. The copies of the documents and hard disk could be easily obtained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Jaiswal, Income Tax Inspector as follows:- "3. That the ITAT vide the order dated 1.7.2011 has decided the pending appeal of the petitioner by detailed order. The ITAT has upheld the order of the CIT (A) for deletion of Rs.8 Lacs as received as gift but has set aside the order of the CIT (A) regarding a sum of Rs.15 lacs. A copy of the ITAT order dated 1.7.2011, is being annexed as Annexure-1 to this affidavit. 4. That now the position is that since major portion of the quantum has been decided by the ITAT against the petitioner the department cannot return the seized assets because the department does not have the power to divide the assets in proportion of the ITAT order also the department is filing appeal against the ITAT order regarding the gift of Rs.8 Lacs received from Sri Sanjeev Juneja, hence it is prayed that for substantial justice and to balance the equity the assets of the petitioner are being retained. 5. That the present affidavit is being filed in order to demonstrate the bonafide of the respondent and to seek further directions in the present circumstances. 6. That the department has taken into cognizance the order dated 17.5.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ewelery, cash and fixed deposits seized during the search and seizure conducted on 27.10.2005, 7.11.2005 and 14.11.2005. The AO and CIT(A) had adjudicated on the material seized during the search operations and that after the order of ITAT only a question of the validity of the gift of Rs.15 lacs survives. There is as such no justification whatsoever to allow the department to continue to retain the articles including hard discs, the documents, jewelery, cash, FDRs seized five years ago. Keeping the question of the validity of the search and seizure operations open; the proceedings pending before CIT (A) as well as the right of the petitioner to file appeal against the order of the ITAT, we direct that in case the petitioner furnishes security of Rs.15 lacs, which will be other than cash and bank guarantee, the entire articles including hard disc, documents, jewelery, cash and FDRs seized and lying in the custody of the Income Tax Department shall be released within 15 days from the date the security is furnished, to the satisfaction of the A.O. So far as question of validity of search and seizure is concerned, since we have rejected the application for claiming the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Director of Income Tax (Investigation), who is on official trip to Kolkatta, and these articles will be returned latest by 25.10.2011. We express our displeasure with the process, adopted in returning the articles seized by panchanams dated 28.10.2005, 7.11.2205, and 14.11.2005 to the petitioner. Inspite of clear orders passed by us on 12.8.2011, to return all the articles within 15 days after accepting 15 lacs as security, the Income Tax Department is taking its own time, in returning the articles one by one. We expect that the officer present in Court will carry out the undertaking given in the affidavit filed today, in returning the articles to the petitioner by 25.10.2011. The personal presence of Sri Laljee Prasad, Assistant Commissioner, Income Tax, CIR-II, Meerut from the proceedings is exempted, until directed by the Court. Put up on 14.11.2011 for further hearing." 18. The satisfaction note and other related documents were received on 17.5.2011. The envelope was kept in the custody of the Registrar General. On the request of learned counsel for the petitioner we allowed the documents to be inspected by the counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onducted by the authorized officers on 27.10.2005 in present of independent witnesses and following due proper procedure where the search warrant was also shown to the assesee/petitioner an the independent witnesses before commencement of search and their satisfaction note were also obtained as proof of having seen the warrant and subsequently search was closed by drawing a panchnama in which the assessee/petitioner as well as the 2 witnesses certified that the search action was conducted in a proper and orderly manner. Both these notes will be placed if this Hon'ble Court so desired at any time during course of hearing, as these documents are sensitive in nature, hence will be placed only on requirement. 5. It is categorically denied that "even irrelevant documents and unrelated items been seized". The C.P.U. seized contained information relating to business of petitioner, which was opened before the assessee/petitioner and two witnesses on 13.1.2006 and after making copies from the Hard Disc, original was retained and sealed and copies of hard Disc was returned along with the C.P.U., hence contention of the petitioner raised are misleading and are only aimed to obtain som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraph no.15 of the writ petition are denied as stated. It is submitted that the search and seizure operation was conducted on 27.10.2005 in presence of assessee/petitioner after obtaining due satisfaction certificate from both the authorities namely Director of Income Tax (Investigation) and Director general of Income Tax (Investigation), who had Reasons to Believe that huge unaccounted assets were there in possession of the petitioner. 27. That the contents of paragraph no.24 of the writ petition are denied as stated. It is submitted that the CPUs that were seized during the search and seizure operation contained information relating to the business of the assessee/petitioner as also the books of account apart from any clinical research work maintained by the petitioner. Both the CPUs have been opened in the presence of the petitioner, ADIT (Systems) and two witnesses on 13.1.2006. After taking out copy of Hard Disc to Hard Disc of CPU original Hard Disc has been sealed and retained and both the CPUs have been released to the petitioner with Hard Disc copied. 30. That the contents of paragraph no.27 of the writ petition are denied as stated. It is denied that copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . She advised him to get YAG Laser cleaning for which she asked for Rs.1200/-. The amount was paid and the patient was subjected to YAG Laser treatment in about four minutes. The Addl. Director found that there were 80 patients registered for consultation on 21.8.2005; 82 on 25.8.2005 and 87 on 28.8.2005. Taking into account the receipts of consultation at Rs.100/- per patient for 300 working days and the charges of procedures carried out by laser surgery, stitch less cataract (cold phaco) surgery, YAG Laser retinal, laser photo coagulation, vetreo-ratinal surgery, fluorescein-angiography computerised perimetry applanetion-tonomartry, computerised refraction contact lenses, at an average rate of Rs.5000/- for 300 days. The annual income from consultation and procedures was estimated at Rs.2,04,90,000/-. He did not make any further enquiries regarding staff and expenses, as there was possibility of leakage. He observed that some of the officers and inspectors of the Income Tax Department were very close to doctors and were visiting them and giving consultations. 23. The Addl. Director again visited the clinic-cumresidence with a patient on 19.9.2005 and found that the consul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax (Inv.), Lucknow in his note dated 17.10.2005 recorded that he has discussed with Addl. DI (Inv.), Meerut and ADI, Meerut, who had visited the clinic. He recorded that couple are doctors, and agreed with DI (Inv.) that it is a fit case for issue of warrant under Section 132 (i) and directed issuance of warrants accordingly. The warrants were directed to be issued by DIT (Inv.), Kanpur on 18.10.2005. On 27.10.2005, after the search, permission was taken for warrant of authorisation for search proceedings of Locker No.1085 with Punjab National Bank, B.K. Road in the name of Dr. Roop and Dr. Sangeeta and thereafter again on 28.10.2005 permission was obtained for warrant of authorisation for search of another Locker No.182 with PNB, E.K. Road, Meerut in the name of Smt. Krishna and Dr. Roop, which were traced out. 28. Shri Sambhu Chopra appearing for the Income Tax Department submits that there was credible evidence before the competent authority that the petitioner have indulged into huge tax evasion and are in possession of substantial unaccounted assets, which was put before the Director of Income Tax (Investigation), Kanpur, and who had after satisfying himself from the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s had not been correctly recorded in different documents, when the raid was conducted and that notices served was not valid, the issue must be raised in appeal. When alternative remedy is available or being availed of, as in the present case in the assessment proceedings, then the High Court under Art.226/227 of the Constitution of India would ordinarily restrain itself from exercising the writ jurisdiction. 30. In Deputy Director of Income Tax (Investigation) and Ors. v. Mahesh Kumar Agarwal (Supra) the Calcutta High Court held that when an officer of the rank of Deputy Director had made discreet enquiries, and has given details of the reasons, which were considered by the Director and Director General, who authorises search and seizure, the Court would not judge the efficiency or adequacy of the materials. The Court would only examine the material and see whether on such material, a reasonable man could form an opinion that there was reasons to believe for the purposes of issuing notice under Section 132 (1). In Amar Agrawal and Anr. v. Director of Income Tax (Investigation) and Ors. (Supra) the High Court examined the case file and found that the department has satisfied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disclosed nursing and operation charges were patently low, the receipts against only part payment were made and major amount was charged in the name of operation charges, fees for visiting doctors were taken outside the books of accounts and were unaccounted. The Court found that satisfaction note in the other part had recorded the constructions of the Prakash Hospital as investment made, which was not possible from the disclosed income. In respect of notice under Section 131 (1A) this Court observed that it confers powers on the authorities 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 proceedings with respect to such person, class of persons pending before him. It is only a enabling Section and does not in any manner affect the search and seizure operations carried out under Section 132 of the Act. Section 132 is an independent code in itself. The Court held in paras 37 and 38 that the exercise of power under Section 131 (1A) is contemplated in a situation anterior to exercise of power under Section 132. In other words before authorsing an officer to carry on search and seizu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the writ petition. The petitioners have been subjected to block assessment on the basis of the recoveries made during search, in which they are pursuing the remedies. The appeal filed by the department has been allowed by ITA, and the matter in remand is pending consideration in assessment. We do not find substance in the submission of Shri Subham Agrawal, learned counsel appearing for the petitioners that the notice under Section 131 (1A) shows that the department did not have sufficient material with regard to reason to believe that the income had escapement from assessment. This Court has in Dr. V.S. Chauhan and Anr. v. Director of Income Tax (Inv.) and Anr. (Supra) held that notice under Section 131 (1A) confers power on the authorities as mentioned in Section 131 (1), if he has reason to suspect that any income has been concealed or is likely to be concealed. It is only an enabling power and does not in any way affect the search and seizure operations carried out under Section 132 of the Act. Section 132 is an independent code in itself. The exercise of powers under Section 131 (1A) is contemplated in a situation anterior to the exercise of power under Section 132. Befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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