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TMI Blog2012 (9) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome and is assessed to tax regularly. The petitioner started trading in gold and silver jewellery in a retail counter since the year 2000. On 9th September, 2011 basing upon the information provided to the Income Tax department as a routine procedure by the local police a search and seizure operation was conducted at the residential-cum-business premises of the petitioner. Subsequently, panchanamas were prepared and statements were recorded under Section 132(4) of the Act. Inventories were made and jewelleries item bearing serial No.1 to 10 and 13 to 22 i.e. totalling 22 items valued at Rs.62,10,585 (Rupees Sixty two lakhs ten thousand five hundred eighty five) have been seized even though the same represented stock-in-trade of the business and stock hypothecated. Hence, the present writ petition. 3. Learned counsel appearing on behalf of the petitioner submitted that statements were recorded under Section 132(4) of the Act with regard to books of Account, other documents or assets found as a result of search and also in respect of all matters relevant for the purpose of investigation. The petitioner who happens to be the Karta of HUF files the returns in his dual capacity, i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be quashed on the ground that mere information received from local police and recovery of two items of alleged stolen jewellery from the petitioner who purchased both the items on good faith from the seller, without any further investigation or cogent material or reason, does not constitute information within the meaning of Section 132(1) particularly when search was conducted on the very same day the local police intimated the matter to the Department. Such opinion can at best provide a "reason to suspect" and does not give rise to "reason to believe" and thus does not fulfil any of the conditions precedent for invocation of Section 132 of the Act. 5. Mr. A. Mohpatra, learned Senior Standing Counsel appearing for the opp. parties submitted that there is valid reason to initiate the search and seizure proceedings as contemplated under Section 132 of the Act and the warrant of authorization issued to conduct search and seizure operation in the residential-cum-business premises of the petitioner is valid in law. In support of his contention, he produced the relevant record for perusal of this Court. 6. Mr. Mohapatra further submitted that in course of search and seizure operatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or things and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property [which has not been, or would not be disclosed] for the purposes of the Indian Income Tax Act, 1922 (11 of 1922) or this Act (hereinafter in this section referred to as the undisclosed income or property), [then,- (A) the [Director General or Director] or the [Chief Commissioner or Commissioner], as the case may be, may authorize any [Joint] Director, [Joint] Commissioner, [Assistant Director] [or Deputy Director] [Assistant Commissioner [or Deputy Commissioner] or Income-tax Officer], or (B) such [Joint] Director] or [Joint] Commissioner, as the case may be, may authorize any [Assistant Director] [or Deputy Director], [Assistant Commissioner [or Deputy Commissioner] or Income-tax Officer], (the officer so authorized in all cases being hereinafter referred to as the authorized officer) to- (i) enter and search any [building, place, vessel, vehicle, or aircraft] where he has reason to suspect that such books of account, other documents, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he business. (underlined for emphasis) 9. Section 132 prescribes that the competent authorities are empowered to permit the authorized officers to enter, search, break open, seize, place marks of identification and take other steps as contemplated under sub-clauses (i) to (v). However, such powers can be exercised against a person upon fulfilment of certain conditions. Firstly, the competent authority must have the information in its possession and, secondly, on the basis of such information it must have the reason to believe that the condition as stipulated in subclause (a) or (b) or (c) of Section 132(1) of the Act exists. Search and seizure cannot be sustained unless it is clearly shown that it was done by the authority duly authorized and any of the conditions precedent in relation thereto existed. 10. The opinion or the belief so recorded must clearly show whether the belief falls under clause (a) or (b) or (c) of Section 132(1) of the Act. The satisfaction note should itself show the application of mind and the formation of opinion by the officer ordering the search. If the reasons recorded do not fall within in any one of the clauses (a), (b) or (c) then the authorization ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or section 132A (1)(c) the belief of the authorizing authority as to mere possession of the assets mentioned in that section by a person is not sufficient. The information in possession of the authorizing authority must be such that he may have reason to believe that the assets represent undisclosed income of the person in whose possession the asset is possessed. Thus, where the authorizing authority issues warrant of authorization without there being any reason to believe that the asset which was in possession of a person represented wholly or partly his undisclosed income, his action is to be held to be without jurisdiction. 16. So far the first question is concerned, Mr. Mohapatra, learned Senior Advocate for the Department produced the connected records for our perusal and we find that there are materials available on record for which the specified authority had reason to believe that the condition precedent to issue the warrant of authorization to conduct search and seizure operation in terms of Section 132 of the Income Tax Act at the residential-cum-business premises of the petitioner existed. Therefore, we are not inclined to quash the warrant of authorization. 17. Questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll apply in case of any valuable article or thing, being stock-in-trade of the business. 20. At this juncture, it is necessary to refer to Circular No.8 of 2003 dated 18th September, 2003 issued by the Central Board of Direct Taxes (CBDT), which read as follows:- "60. Amendment in Section 132 to provide that stock-in-trade not to be seized during search: 60.1 The existing provisions of clause (iii) in sub-section (1) of section 132 provide for seizure of any books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of search. 60.2 The Finance Act, 2003, has amended Section 132 to provide that any bullion, jewellery or other valuable article or thing being stock-in-trade of the business, found as a result of search shall not be seized but the authorized officer shall make a note or inventory of such stock-intrade. Thus, stock-in-trade of business cannot be seized during search and seizure operations conducted on or after June 1, 2003. 60.3 The existing provisions of the second proviso to sub-section (1) of section 132 provide that where it is not possible or practicable to take physical possession of any valuable article o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not permissible under fiscal provision. 25. A Constitution Bench of the Hon'ble Supreme Court in G. Narayana Swami v. G. Panneerselvam & Ors., AIR 1972 SC 2284 held that the statute requires to be interpreted giving plain meaning of literal construction, and modification of words used in statutory provisions is not permissible. 26. In Union of India and another V. Hansoli Devi and others, (2002) 7 SCC 273, the Hon'ble Supreme Court held that if the words of the statute are in themselves precise and unambiguous, then no more can be necessary than to expound those words in their natural and ordinary sense. The words themselves alone do, in such case, best declare the intention of the lawgivers. 27. In view of the above, we are of the view that the seizure of jewellery being stock-in-trade by the authorized officer is wholly without authority of law and contrary to the statutory provision contained in proviso to Section 132 (1) (iii) and third proviso to Section 132(1) (v). Therefore, the opposite parties-Income Tax Department are directed to return the jewellery (gold and silver ornaments) seized by the Authorized Officer in course of search on 9.9.2011 forthwith to the petit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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