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TMI Blog2015 (7) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(Inv) to the DIT(Inv.) and both these officers should independently have reason to believe on the basis of information in possession that a search and seizure activity u/s 132 of Income Tax Act, 1961 is justified.The satisfaction note is administratively approved by the Director General of Income Tax (Investigation) who independently should also have reason to believe that the provisions of Section 132 of the Income Tax Act, 1961 are complied for issue of warrant of authorization to carry out a search and seizure action. Thus no illegality has been committed by the respondents in issuing the summons under sub Section (1A) of Section 131 of the Act, 1961. See Neesa Leisure Ltd. & Anr Vs. Union of India & Ors reported in [2011 (3) TMI 706 - Gujarat High Court] - Decided against assessee. - WP (T) No. 3494/2012 - - - Dated:- 5-5-2015 - D. N. Patel And Ratnaker Bhengra,JJ. For the Appellant : Ms Radhey Shyam Pandey, Vinay Prakash Anand Kumar Sinha, Advs. For the Respondent : Mr Deepak Roshan, Adv. JUDGMENT Per D. N. Patel,J. 1. This writ petition has been preferred challenging the legality of search and seizure operations carried out by the Income Tax Au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be nexus between the information and the belief, which is lacking in the present case and hence also, the search and seizure carried out by the respondents may be declared as illegal and all consequent actions of the respondents of issuance of summons under Section 131(1A) and notice issued in exercise of power under Section 153(A) dated 20th June, 2011 also deserves to be quashed and set aside. 4. Counsel appearing for the respondents vehemently submitted that this petition has been preferred with all ulterior motive. The detailed counter affidavit has been filed by the Additional Director of Income Tax (Investigation) especially in para19 it has been stated that there was ample material with the respondents authorities that this petitioner was in possession of money, bullion, jewellery and other valuable articles represents either wholly or partly income or property which has not been disclosed for the purpose of Income Tax Act. Moreover, the Assistant Director of Income Tax has to write a satisfaction note alongwith supporting documents proposing an action under Section 132. This note tantamounts reason to believe. Similarly, Joint Director of Income Tax (Investigation)/Add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by this appellant petitioner before the Commissioner of Income Tax (Appeals) and therefore, also this writ petition may not be entertained by this Court. 7. Counsel for the respondents has relied upon the decision rendered by Hon'ble Madhya Pradesh High Court reported in (2001) 251 ITR 492 (MP) and has submitted that the Assistant Director has all power, jurisdiction and authority to issue summons under Section 131(1A) of the Act, 1961, prior to and subsequent also of the search and seizure carried out by the Income Tax Authorities under Section 132 of the Act, 1961. Moreover, the Assistant Director of Income Tax has also power, jurisdiction and authority to record the statement under Section 132 i.e. during the search and seizure. 8. It is further submitted by the counsel for the respondents that no illegality has been committed by the respondents in carrying out search and seizure on the basis of subjective satisfaction arrived at by the Income Tax Authorities that there were reasons to believe to carry out search and seizure under Section 132 of the Act. It is further submitted by the counsel for the respondents that this Court is not sitting in appeal against the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounts or other documents would not be produced or cause to be produced as required by such summon. To carry out any search and seizure activity u/s 132 of the Income Tax Act, 1961, the concerned ADIT or DDIT has to write a satisfaction note along with supporting documents proposing an action u/s 132 if he has reasons to believe that such an action is justified. The said satisfaction note is then forwarded by JDIT(Inv.)/Addl DIT(Inv) to the DIT(Inv.) and both these officers should independently have reason to believe on the basis of information in possession that a search and seizure activity u/s 132 of Income Tax Act, 1961 is justified. The satisfaction note is administratively approved by the Director General of Income Tax (Investigation) who independently should also have reason to believe that the provisions of Section 132 of the Income Tax Act, 1961 are complied for issue of warrant of authorization to carry out a search and seizure action. In the instant case also the search and seizure operation was carried out in accordance with the provisions of Section 132 of the Income Tax Act, 1961 and warrant of authorization were issued in each case by the competent autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings with respect to such person or class of persons are pending before it or any other Income-tax authority. (3) Subject to any rules made in this behalf, any authority referred to in subsection (1) or subsection( 1A) or subsection( 2) may impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act: Provided that an Assessing Officer or an Assistant Director or Deputy Director shall not- (a) impound any books of account or other documents without recording his reasons for so doing, or (b) retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Chief Commissioner or Director general or Commissioner or Director therefor, as the case may be. 132. Search and seizure (1) Where the Director General or Director or the Chief Commissioner or Commissioner or Additional Director or Additional Commissioner, or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under subsection (1) of Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; (iib) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of subsection (1) of Section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business. (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an inventory of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch Chief Commissioner or Commissioner may, notwithstanding anything contained in section 120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft. (2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in subsection (1) or subsection (1A) and it shall be the duty of every such officer to comply with such requisition. (3) The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned in the second proviso to subsection (1), serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this subsection. Explanation.-For the removal of doubts, it is hereby declared that serving of an ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Chief Commissioner, Commissioner, Director General or Director for such retention is obtained: Provided that the Chief Commissioner, Commissioner, Director General or Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed. (8A) An order under subsection (3) shall not be in force for a period exceeding sixty days from the date of the order: (9) The person from whose custody any books of account or other documents are seized under subsection (1) or subsection (1A) may make copies thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in this behalf, at such place and time as the authorised officer may appoint in this behalf. (9A) Where the authorised officer has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c) of subsection (1), the books of account or other documents, or any money, bullion, jewellery or other valuabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the petitioner has submitted that the satisfaction of the Income Tax Authorities before carrying out search and seizure must be reduced in writing and it must be based upon sufficient materials and in the facts of the present case, there was no sufficient materials with the Income Tax Authorities and therefore, they had no reason to believe, to carry out search and seizure at the premises of the petitioner. This contention is devoid of any merit mainly for the following reasons: (a) In paragraph 19 of the counter affidavit, as stated hereinabove, this satisfaction has been arrived at with supporting documents by Assistant Director of Income Tax thereafter, by Joint Director of Income Tax and individually by Director General of Income Tax (Investigation). (b) More than one authorities of the Income Tax have reason to believe on the basis of the supporting documents to carry out search and seizure under Section 132 of the Act, 1961 at the premises of this petitioner. (c) This Court is not sitting in appeal against the subjective satisfaction arrived at by the Income Tax Authorities for arriving at a conclusion that there are sufficient reasons to believe to carry ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aled and before he takes action under clauses (i) to (v) of Section 132 (1) of I.T. Act is legally flawed. (b) There are two distinct sub sections, each with its precondition, under which the Income-tax Authorities have been given the power to issue summons. Section 131 of the Income-tax Act has been in operation since the introduction of the Income-tax Act. Under section 131(1) the power to issue summons has been given to the officers engaged in assessment and appellate and revisionary related functions during the pendency of Income-tax Proceedings. The limitations of issuing summons during the pendency of Income-tax proceedings were recognized and sub section (1A) to section 131 was introduced by the Taxations Laws (Amendment) Act, 1975 w.e.f. 01101975. Originally inserted the powers of the civil court were given to Assistant Directors of Inspection only. Circular179 dated 30.09.1975 explains the purpose of introduction of the sub section, which is as follows: At present Income-tax Officers, Appellate Assistant Commissioners, Inspecting Assistant Commissioners, and Commissioners exercise powers of discovery and inspection, enforcing attendance of persons, compelling produc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assistant Director of Inspection, who generally deals with searches and seizures, and enabled him to exercise the powers even when no proceedings were pending. However, these powers were not available to the Directors and Deputy Directors, who are generally associated with investigation of cases and intelligence work in connection with searches and seizures under section 132. Another difficulty felt was that an authorised officer could record a statement on oath only during the course of search under the provisions of section 132(4). Sometimes it becomes necessary to record a preliminary statement before the commencement of the search for proper investigation. This was not possible, as the Courts had held that such a preliminary statement before the search could not be recorded under the provisions of section 132(4)................ (Emphasis Supplied) (e) When the Chief Commissioner of Income Tax/Director General of Income Tax/Commissioner of Income Tax/Director of Income Tax (CCIT/DGIT/CIT/DIT) issues the warrant, the Authorised Officers could be the JCIT/JDIT/DCIT/DDIT/ADIT/ACIT/ITO. Similarly when the Adddl. DIT/JDIT issues the warrant the authorised officers could be th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore no argument can be taken that summons cannot be issued under Section 131(1A) after the completion of the search proceedings. The noncompliance of summons issued during the course of assessment proceedings is only one of the preconditions that are required to be fulfilled before the issue of a search warrant. Any one of the three preconditions mentioned u/s 132 is required to be fulfilled. The cumulative fulfillment of all the three preconditions is not mandated under Section 132 of the Act. In section 132 the issue of summons under Section 131(1) and the issue of notice under Section 142(1) have been mentioned together. Since contextually both are together so also is their fate. If one fails, so would the other. If summons [sub section has not been mentioned] cannot be issued after the conduct of the search then notice under Section 142(1) cannot also be issued after the conduct of search. If this argument is extended then, assessment under Section 153A of the Act also gets affected. Assessing Officers then would be precluded from asking any question during the course of assessment. Such an interpretation will render section 132 toothless. (i) It has further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents could be directed only with regard to particular documents which are specified in the order, and not with regard to all the documents in the possession of a party. The learned Advocate General submitted that matters dealt with in sections 131 and 132 of the Act were entirely different and that section 131 was not an adjunct of section 132. Section 131 of the Act, it was argued, related to the power regarding discovery production of evidence, etc., while section 132 of the Act dealt with search and seizure. It was submitted that it could not, therefore, be argued that the condition in which a civil court could direct production and inspection of documents should be treated to be condition precedent which must be fulfilled before a warrant of authorisation was issued by the Commissioner of Income-tax. Sections 131 and 132 of the Act, it was argued, were not supplementary to each other in view of the matters and circumstances contemplated by the two sections, which were entirely different in nature and scope. In my opinion, there is a good deal of force in this contention of the learned Advocate General.Section 132 of the Act is a comprehensive code in itself and the conditions u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, thereafter Assessing Officer has already passed an order dated 28th March, 2014 and assessment is arrived at ₹ 4.65 crores approximately of the income which is to be paid by this petitioner against which an appeal is preferred by this petitioner which is pending before the Commissioner of Income Tax (Appeal). These facts reveals that there is sufficient materials with the Income Tax Authorities which has provided reason to believe to these authorities to carry out search and seizure because this petitioner has preferred an application before the Settlement Commission under Section 245C. Normally this type of applications are being preferred by those assessee who have not disclosed their huge income. This applicant has also preferred such type of repent application which was ultimately not accepted by the Settlement Commission as there was no full and true disclosure of income nor the application under 245C had been given, the manner in which such income has been derived. This repentance application which is known in the eye of law an application under Section 245C of the Income Tax Act, 1961 justifies the search and seizure carried out by the respondents at the premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated hereinabove, such particulars can be helpful not only to the Department but to the assessee also. We, therefore, do not agree with the submissions made by the learned advocate, Shri Puj, that such a notice can be issued only before initiation of proceedings under Section 132 of the Act. Moreover, even under the provisions of Section 133 of the Act, the Assessing Officer or the officers referred to in the said section are having power to call for information. So issuance of such a notice during or after the search cannot be said to be bad in law (Emphasis Supplied) (ix) It has been held by Hon'ble Gujarat High Court in Neesa Leisure Ltd. Anr Vs. Union of India Ors reported in [2011] 338 ITR 460 (Guj) paragraph no. 11 as under: 11. In this regard, it may be pertinent to note that in the concluding subpara of para 3 of the petition, it has been averred that after search, the Asstt. Director of IT, incharge of search operations has issued several notices under s. 131(1A) to the persons searched for production of books of accounts and other information, which are already with him in the seized books of accounts and document. In paragraph 7 of the petition it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be issued only before initiation of proceedings under s. 132 of the Act. Moreover, even under the provisions of s. 133 of the Act, the AOs or the officers referred to in the said section are having power to call for information. So issuance of such a notice during or after the search cannot be said to be bad in law . The main plank of the submissions advanced by the learned counsel for the petitioners was that issuance of notices under s. 131(1A) of the Act subsequent to the search proceedings was fatal and would render the search proceedings invalid even if the requisite satisfaction had been recorded prior to issuance of authorization under s. 132(1) of the Act. This Court does not find any merit in the said contention, inasmuch as if there is sufficient and tangible material available on record, prior to the search, based on which the concerned officer has formed the requisite belief under s. 132(1) of the Act, merely because certain other information has been sought for by the authorised officer or any of the officers mentioned in s. 131(1A) of the Act, the same would not render the search proceedings invalid. Even if the contention raised on behalf of the petitioners were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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