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TMI Blog1967 (2) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in the first writ petition. In the Writ Petition No. 3607, the sole petitioner is the Bijli Cotton Mills (P.) Ltd., Hathras (hereinafter called the company). The respondents are the same as in the first petition. In the Writ Petition No. 1691, the petitioner is Messrs. Vishwanath Seth. The respondents are : (1) the Income-tax Officer, A-Ward, Varanasi, (2) the Inspecting Assistant Commissioner of Income-tax, Varanasi, and (3) the Commissioner of Income-tax, U. P. The petitioners in the Writ Petitions Nos. 3605, 3606 and 3607 are interconnected. Mrs. Uma Lal is the wife of Sri Ram Babu Lal. He is the brother of Messrs. Tara Chand Agrawala and Jawahar Lal. He is the managing director of the company. Mrs. Uma Lal and Messrs. Tara Chand Agrawala and Jawahar Lal are the partners of the firm. The firm has its head office in Hathras. It has also its branches in Calcutta and Jullunder. It carries on the business of manufacturing and selling non-ferrous metals and their alloys and castings. It is assessed to income-tax by the Income-tax Officer, A-Ward, Aligarh. At the point of time with which we are concerned in the first three cases, the third respondent was the Income-tax Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of accounts, bullion and ornaments were seized. The cash and old silver coins were also seized. The search and the seizure were arbitrary and indiscriminate. On April 14, 1965, the petitioner received a notice dated April 12, 1965, regarding determination of the estimated tax liability under section 132(1B) of the Income-tax Act, 1961 (hereinafter called the Act). April 17 was the date fixed for hearing. The notice was issued after the expiry of the statutory period prescribed by rule 112A of the Income-tax Rules. Accordingly, the proceedings are illegal. In all these petitions the main prayers are that the search and seizure should be declared illegal and unconstitutional and that the seized articles should be returned to them. In the Writ Petition No. 1691, there is also a prayer that the respondents should be prohibited from proceeding further with the hearing of the case under section 132(1B). The common constitutional question is that section 132 of the Act is violative of articles 14 and 19(1)(f) of the Constitution and is accordingly void and inoperative. The search and seizure made under section 132 is accordingly illegal. Counsel for the petitioner in the Writ Petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Act, 1922, has been repealed by the Act and section 132 of the Act is similar to section 37(2). Section 132, as it stood originally, consisted of ten sub-sections. It provided that any Income-tax Officer specially authorised by the Commissioner of Income-tax may search any building or place where he has reason to believe that any books of account or other documents which, in his opinion, will be useful for or relevent to any proceeding under the Act may be found and may seize any such book of account or other document. The power of search and seizure was to be exercised in accordance with the Rules made in that behalf. Rule 112 framed by the Central Board of Revenue provided that the Commissioner of Income-tax may, for reasons to be recorded, issue a written order specially authorising any Income-tax Officer subordinate to him to enter any building or place, specified in the order, where he had reason to believe that books of account or other documents which, in his opinion, will be relevant to or useful for any proceeding under the Act may be found. Such order may authorise the Income-tax Officer to search the said building or place with such assistance of police officers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arches and seizures as were challenged in courts and were held to be illegal or unconstitutional. This argument proceeds on a misapprehension of the true scope of section 6. The words of section 6 are very wide. It says that "any search" made before the commencement of the Income-tax (Amendment) Act, 1965, shall be deemed to have been made under the amended section as if the amended section was in force on the day the search was made. In the result, even searches, which were held by courts to be illegal or unconstitutional will now be deemed to have been made under the amended section 132 and not under the original section 132. This court held in the case of Seth Brothers that no search could be made under the original section 132 in connection with an assessment proceeding under the Indian Income-tax Act, 1922. Section 6 now says that such a search would be deemed to have been made under the amended section 132 as if the amended section 132 was in force on the day the search was made. Similarly, a search made under the original section 132 shall be deemed to have been made under the amended section 132. If the amended section 132 is constitutional, it will give protection to the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Delhi and Lucknow, making wild allegations against them. In proof of malice in fact it is further alleged that searches were made deliberately at a time when Ram Babu Lal and others were out of Hathras. We are not prepared to believe these allegations. Firstly, paragraphs 28 and 29, which are most crucial paragraphs, have been verified by G. K. Gupta, general manager of the first petitioners on "information received." The source of information has not been disclosed. Secondly, the allegations in paragraphs 28 and 29 are vague and lacking in particulars. Thirdly, the third respondent has filed a counter affidavit denying the allegation in support of the plea of malice in fact. The other Income-tax Officers have filed affidavits adopting the affidavit of the third respondent. There appears to be no reason why the affidavits of the respondents should be disbelieved. Fourthly, there is no independent and impartial testimony in proof of the allegations. It is interesting to note that, although G. K. Gupta filed an affidavit in support of the petition, he did not file a rejoinder affidavit controverting the affidavit of the third respondent. Another person has filed a rejoinder affidav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accounts of the firm and had applied the proviso to section 13 of the Income-tax Act in assessing tax. Their judgments were, however, reversed by the Appellate Tribunal. Penalties had also been imposed on some of the petitioners. It would appear from the affidavit of the third respondent that he suspected the account books of the petitioners. He has given three reasons for his suspicion. Firstly, the petitioners had a branch at Jullundur. Its income was not shown in the petitioners' account books ; secondly, the petitioners had shown in their account books a loan account of rupees two lakhs against hundis from certain parties at Bombay. There was suspicion that it was not a genuine loan account. Thirdly, the petitioners' account books showed the value of their stock-in-trade at eight and a half lakhs while they had taken an over-draft of rupees ten lakhs against the stock-in-trade from the Punjab National bank Ltd., Hathras. Higher value of the stock was shown to the bank. In other words, the third respondent suspected that the petitioners' account books were not accurate. We think that the question of malice in law should be examined in the background of these facts. It is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orised to make a search, were associated with the respondents in making the search. The affidavit of the third respondent states that the respondents were accompanied by three inspectors, one sub-inspector of police and about 12 policemen. The three inspectors were taken for doing clerical and ministerial work during the search. The sub-inspector and the 12 policemen were taken for ensuring the maintenance of peace and order and for preventing obstruction and illicit removal of documents. The affidavit, in our opinion, offers adequate explanation for taking the help of outsiders. That apart, we are not satisfied that the association of outsiders at the time of search would make the search mala fide. For the same reason, the argument that identification marks were not placed on the seized documents loses importance. It may be mentioned that the documents which were seized in the course of search were later kept in a sealed cover by a Commissioner appointed by this court. It is then alleged that the safeguards provided for in the Code of Criminal Procedure were not observed in the course of search. It is stated that no independent or respectable person of the locality was present a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... writ petitions and obtained an interim order from this court appointing a Commissioner to put the documents in a sealed cover during pendency of the petition. The Commissioner put all the seized documents in a sealed cover some time after filing of the petitions. They are still kept in the sealed cover. Accordingly, the income-tax authorities could not examine and make use of the seized documents. In the circumstances of the case, it is difficult to say that the documents had been retained for an unduly long time. Counsel for the petitioners have tried to support their argument of malice in law by the cases of Seth Brothers and Sanai Ram Doongermal Agency Ltd. Those cases are clearly distinguishable from the present petitioner's. Firstly, the background of those cases is different from the background of these cases. In those cases the previous record of the petitioners was found to be clean and unsuspect, in the present petitions the previous record of the petitioners is not immaculate and above board. Secondly, in the case of Seth Brothers, there was an allegation that the Deputy Director of Inspection had ordered the searches and seizure of all documents and the Commissioner of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary to read (5) for sub-section (1B) after enactment of the Act No. 1 of 1965. The income-tax authorities issued notice under sub-rule (1) of the rule 112A to the petitioner on April 12, 1965 ; it was served on the petitioner on April 14, 1965. The argument is that the notice, having been issued after the expiry of the period prescribed in sub-rule (1), is illegal. Sub-rule (1) provides that in respect of the seized articles the Income-tax Officer "shall within 15 days of the seizure issue (a notice) to the person in respect of whom enquiry under sub-section (1B) of section 132 is to be made." In the present case the notice was evidently issued after the expiry of 15 days from the dates of the seizure of the articles. We are, however, of opinion that the notice is not illegal. Although sub-rule (1), quoted earlier, is in the imperative form, it appears to us that sub-rule (1) is not imperative ; it is directory. Sub-section (1B) of section 132, as enacted by the Ordinance No. 1 of 1965, materially reads : "Where any money, bullion, jewellery or other valuable article or thing ... is seized under sub-section (1), the Income-tax Officer, after making an enquiry in such manner as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y so that the assessment may be completed within the time fixed by sub-section (1B). Having regard to the context and object of sub-rule (1) of rule 112A we think that a notice issued after the expiry of 15 days from the date of seizure would not be illegal. The last argument is that the search and seizure were mala fide. Shri B. L. Gupta has marshalled the following points in support of this argument : (1) The Commissioner of Income-tax has no reason to believe that the account books and other documents were useful for or relevant to any proceeding and that any articles which were income not disclosed would be found in the premises. (2) The letter of authorisation did not specify any particular documents to be searched. (3) The income-tax authorities did not form any opinion regarding the relevancy of documents. (4) The searching party was unduly large. The Commissioner of Income-tax and the income-tax authorities have filed separate affidavits. In paragraph 3 of his affidavit the Commissioner of Income-tax, Shri M. S. Nadkarni, has stated that he had definite information that the petitioner had in his possession certain books of account and documents which were of s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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