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TMI Blog2013 (8) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... ding the flight, however, when the flight landed at Chennai, all passengers were detained. Their statements were recorded. Simultaneously inquiries were also conducted at the business premises of the company. Statements of various persons were recorded. Authorities also carried out inquiries with Karta of HUF at Neemuch, who according to the petitioners was the owner of gold which was leased to the petitioners under certain conditions. On the basis of satisfaction note recorded on 26-7-2012, search and seizure operations were carried out against the company and the persons who were travelling on the said date from Ahmedabad to Chennai. 3. Such search and seizure operations were challenged before this Court by the affected persons in Special Civil Application No.11593/2012 and connected petitions. Such petitions were allowed by judgment dated 30-10-2012. Search and seizure operations were quashed. 4. In the present round of litigation similar search and seizure operations have been authorised against the son of the Director of the company and two passengers who had accompanied the Director from Ahmedabad to Chennai on 25-7-2012. In the present group of petitions such fresh operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further it was claimed that whole of the jewellery was carried as a sample to show to prospective customers. This is highly unlikely that such a huge quantity of 24 kg. of jewellery is brought as samples only. 6. In addition, the persons could not tell whom (customers) were they planning to meet in Chennai. No evidence was available for that. 7. In view of the above it is clear that the books of account maintained by the company M/s. LKS Bullions (Import and Export) Pvt. Ltd. are not reliable. The lease agreement discovered from the business premises of the company also appears to be a fabricated paper and the leases transaction is also bogus one. The said document has been maintained only to give a cover of genuineness to the suspicious entry through which 25Kg. of Gold has been shown to be received on 14/06/2012. In view of above I am satisfied that the persons mentioned above are in possession of bullion and jewellery and other valuable articles or things and the said bullion and jewellery represents either wholly or partially income of the persons which may be unaccounted. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arch and seizure cannot be pressed in service for supporting authorization to search. Further, the different factors and discrepancies sought to be highlighted by the Department, through affidavits filed before us and through oral submissions made by the counsel also independently would be of no consequence unless and until the genesis of such discrepancies are found in the satisfaction note. It may be to explain or expand particular factors already noted by the competent officer in his satisfaction note that such factors can be highlighted before us. In short, we have focused our attention to the different aspects noted by the Deputy Director of Income Tax in his satisfaction note dated 26th July 2012 to ascertain whether it can be stated that the requirements of section 132(1)(c) of the Act are satisfied. We may recall that sub-section (1) of section 132 of the Act empowers the officers mentioned therein to authorize an appropriate officer to carry out search and seizure operations if in consequence of information in his possession he has reason to believe that any of the requirements contained in clauses (a) to (c) of sub-section (1) of section 132 are satisfied. Since we are co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustomers they were like to meet in Chennai. He further highlighted that it is not possible to establish co-relation between the gold allegedly received from MG-HUF and the gold used for preparation of the ornaments which was found at Chennai Airport. On the basis of above observations, he recorded that "it is clear that the persons do not have an intention to disclose the jewellery of 23915 grams found in the Airport to the Department". On the basis of such conclusion, he suggested that the Director of Income Tax, if satisfied to issue a warrant of authorization for seizing the same by conducting a search and seizure operation under section 132 of the Act. 15. Such satisfaction note was placed before the Additional Director of Income Tax who approved the suggestion noting that in view of the report received from the Additional DIT Unit II, Ahmedabad and the contents of the note of the Deputy Director, Chennai, it is clear that the jewellery found with Shri L.K. Soni at Chennai represents unaccounted assets. 16. Such notes were placed before the Director of Income Tax, Chennai who recorded his reasons for issuance of warrant of aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24 carat to 22 carat. The so called discrepancies pointed out by the Revenue in such documents really do not exist. Respondents fail to notice that the gold ornaments would weight marginally more than the weight of gold from which they are made due to addition of alloys. They also failed to see that such increase in weight was uniform in all cases. Accounts were also maintained regarding labour charges to be paid to different agencies. It can therefore not be stated that there was sufficient information in possession of the Director of Income Tax to have reason to believe that such jewellery had not been or would not be disclosed for the purpose of the Act. 18. There were some discrepancies highlighted by the Department particularly with respect to the agreement dated 14th June 2012. It was argued that such agreement was found in possession of the petitioners and not in possession of the lessee. It was further argued that the co-relation between the gold actually used in preparation of the ornaments and the one which was available with MG-HUF could not be established. 19. To our mind, these factors would not be sufficient to cloth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pelling production of books of account and other documents and issuing commissions. Under sub-section (1A) of section 131, the Director General or Director or Joint Director or Assistant Director or Deputy Director or the authorized officer referred to under sub-section (1) of section 132, if has reason to suspect that any income has been concealed or is likely to be concealed by any person or class of persons within his jurisdiction, then for the purpose of making any inquiry or investigation relating thereto, it would be competent for him to exercise powers conferred under sub-section (1) notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other Income Tax Authority. 21. It can be immediately noticed that under sub-section (1A) of section 131, the officers mentioned therein have very wide powers of discovery and inspection and enforcing attendance or compelling production of documents and issuing commissions for the purpose of making any inquiry or investigation even when no proceedings are pending before him, if he has reason to suspect that any income has been concealed or is likely to be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an appellate authority and examine meticulously the information in order to decide for itself as to whether action under section 132 is called for. But the Court would be acting within its jurisdiction in seeing whether the Act of issuance of an authorisation under section 132 is arbitrary or mala fide or whether the satisfaction which is recorded is such which shows lack of application of mind of the appropriate authority. The reason to believe must be tangible in law and if the information or the reason has no nexus with the belief or there is no material or tangible information for the formation of the belief, then in such a case, action taken under section 132 would be regarded as bad in law.' .... .... "Sub-clause (c) refers to money, bullion or jewellery or other valuable articles which, either wholly or partly, should have been income of an assessee which has not been disclosed for the purpose of the Act. The said sub-clause pertains only to movable and not immovable assets. Secondly, it pertains to those assets which, wholly or partly, represent what should have been his income. The expression inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Act but which has not been disclosed by an assessee in an effort to escape assessment. "Not disclosed" must mean the intention of the assessee to hide the existence of the income or the asset from the Income-tax Department while being aware that the same is rightly taxable.' 23. In the case Vindhya Metal Corpn. v. CIT 156 ITR 233 (All.), a Division Bench of the Allahabad High Court examined the case where the person was found in possession of cash of Rs.4,63,000/- while he was travelling by train. Such amount was seized by the Railway Police and the Commissioner of Income Tax was informed about it. Search and seizure operation was carried out. The High Court held that mere fact that the person who was in possession of large amount of cash and he did not have document regarding his ownership or that his name was not found in the list of income-tax assessee could not be treated as sufficient information leading to a reasonable mind to infer that the amount would not be disclosed for the purpose of the Act. It was observed that there was nothing before the Commissioner to suggest that the said amount, in fact, was wholly or in part, income of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was found that there was sufficient material enabling the competent authority to form such a belief. So also were the facts in case of Dipin G. Patel (supra) wherein, the Division Bench having perused the satisfaction note and further notes recorded by the higher Income Tax Authorities was of the opinion that the authorization was not based on isolated material that cash was found from the petitioner's premises. But such authorization was based on additional information which was adequately sufficient for the purpose of satisfying the statutory requirements. 29. In the result, the petition is allowed. Search and seizure operation is declared illegal and it is hereby quashed. Consequently, seizure of the gold ornaments under panchnama dated 26th July, 2012 is also quashed. In view of the above findings, we do not go into the question whether the jewellery was stock in trade of petitioner No.1 Company and therefore even in face of valid search and seizure, the same could not have been seized in terms of proviso to section 132 of the Act. Rule is made absolute accordingly. 30. Before closing, we may record that the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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