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TMI Blog1968 (3) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... f that warrant of authorisation, the Income-tax Officers seized large number of account books, documents and slips after observing the formalities prescribed by rule 112 of the Income-tax Rules, 1962, as amended by the Rules of 1965. This writ petition has been filed by A. Ramaswamy and K. Ramamurty in their capacity as partners of Sri Venkateswara Lodge, challenging the legality and regularity of the entire proceedings pertaining to the search and seizure and seeking a writ of prohibition with the following prayers : " (1) to issue a rule nisi calling up the records leading up to and inclusive of the notices 724(r) and 725(r) dated February 26, 1966, including the assessment orders dated March 29, 1966, for the assessment year 1961-62 and all the documents seized on the date of the seizure dated January 5, 1966, including the uninventoried two gunny bags of documents and the search warrant and the orders preceding thereon passed by the first respondent (Commissioner of Income-tax, Hyderabad) ; (2) to quash the search warrant and restrain the respondents from using the information contained in the seized material and making any use of either for re-opening the proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of the deponent, the income-tax officials raided the premises of Sri Venkateswara Lodge at 9-30 a.m. In paragraph 4 of his affidavit this is what the deponent says : " However, to my great dismay and distress, the Income-tax Officer, A-1(A) Ward, the 2nd respondent herein on January 5, 1966, at about 9-30 a.m. with nearly twenty officers, inspectors and peons without any prior notice entered my business premises, Sri Venkateswara Lodge, at Lakdi-ka-pool, and Sri Venkateswara Lunch Home near Secretariat and also the residential house at Erramanzil and searched all my belongings including the closed places wherein women live. During the course of these searches at all the three places, the officers did not find any cash, bullion, jewellery or other valuable articles except a cash of Rs. 222 and little jewellery belonging to the women. All this was done at the instance of one Mr. N. S. Mani, who was ex-manager of our business. He worked for about six years and when we questioned his behaviour regarding the business dealings and also his omission to make proper representation before the income-tax authorities in these assessment proceedings he grew inimical towards us and abstain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asa Lunch Home, now defunct, were also seized. Thus, it is clear the seizure is enormous and not in proper exercise of the powers and is clearly mala fide in the sense that there was an abuse of power conferred on the Income-tax Officer under section 132 of the Act (43 of 1961), as it stood unamended and after the Amendment Act (I of 1965)." It will thus be seen that, according to this affidavit, the villain of the piece was one N. S. Mani, ex-manager of Sri Venkateswara Lodge, who, after he had been discharged from service, bore illwill against the petitioners, colluded with the income-tax officials and at the nick of time, produced two gunny bags containing books of account, loose sheets, etc., which were somehow connected with the affairs of Sri Venkateswara Lodge, though in fact they had nothing to do with them. The further allegation is that the Income-tax Officers seized the contents of those bags without making an inventory of all of them and forced the deponent (A. Ramaswamy) to put his signature in some of those documents. Although it is stated in the paragraph extracted above that the documents relating to other business concerns, viz., Srinivasa Lodge belonging to Sri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appears from the counter-affidavit sworn to by the Income-tax Officer, Income-tax-cum-Wealth-tax Circle II, Hyderabad, the 3rd respondent in the writ petition. This is what he states : " The true facts are as follows : Consequent on information made available to the Ist respondent (Commissioner of Income-tax, Hyderabad) he had reason to believe that the petitioner would not produce or cause to be produced books of account and the other documents which will be useful for or relevant to assessment proceedings under the Income-tax Act and he is in possession of money, etc., not disclosed for the purposes of the Income-tax Act, he accordingly authorised four Income-tax Officers to search the petitioner's premises and seize any books of account and documents, etc. Pursuant to this authorisation these officers, of whom I was one, conducted a search of the petitioner's promises and seized various papers. The search and seizure were carried out with due regard for all the requirements of law. It is also true that the residence of the deponent of the affidavit was searched under another warrant. The allegation that "closed place where women live" were searched is obscure. Due decorum w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nivance in para. 6(k) is untrue..." It will be observed that, according to this counter-affidavit sworn to by the 3rd respondent, who was one of the Income-tax Officers who was authorised to conduct the search and was present throughout the proceedings, which culminated in the seizure of a large number of account books, documents, etc., the Income-tax Officers, conducting the search, genuinely believed that the materials seized were relevant and useful for the purposes of assessment proceedings relating to Sri Venkateswara Lodge, of which the two petitioners are partners. It also appears from his affidavit that the search was conducted with due regard to all the requirements of law, and there was no element of high-handedness or arbitrariness, nor was there any indiscriminate seizure of all materials good, bad or indifferent. As regards the part played by N. S. Mani in the search and seizure, according to, the 3rd respondent, the allegation that the arrival of N. S. Mani with incriminating material was pre-arranged and the whole thing was stage-managed is not true. His version is that Mani came in, while the search was in progress, with two gunny bags and the contents of those gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were required again in about September, 1965. Some of the vouchers, books, etc.,, shown to me are in my handwriting while others are in the handwriting of others. They came into my possession in the normal course of my duties and were returned to the owners on January 5, 1966." These are the material facts pertaining to the search and seizure, which were effected on that fateful day. We will now advert to the contentions advanced by Mr. Kodanda Ramayya, learned advocate for the petitioners. The first point made by him was that the power of search and seizure conferred by section 132 of the Income-tax Act is ultra vires the Constitution, because it offends articles 14 and 19. The learned advocate first advanced his arguments on article 19(1)(f) and (g) of the Constitution. Article 19(1) lays down : " All citizens shall have the right . . . (f) to acquire, hold and dispose of property ; and (g) to practise any profession, or to carry on any occupation, trade or business." Clauses (5) and (6) of article 19 make all the fundamental rights conferred by article 19 and in particular article 19(1)(f) and (g) subject to reasonable restrictions imposed by law made by the State. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e fundamental right is to be assumed. We are not unaware that in the present set up of the magistracy in this country, it is not infrequently that the exercise of this judicial function is liable to serious error, as is alleged in the present case. But the existence of scope for such occasional error is no ground to assume circumvention of the constitutional guarantee." It is difficult to see how this passage lends support to the contention of the learned advocate that only search warrants issued by Magistrates or other judicial officers would not infringe the fundamental right of the citizen under article 19(1)(f) and (g), but if search warrants are issued by an executive or administrative officer, however highly placed he may be, the fundamental right is defeated. That certainly is not the ratio of the decision of their Lordships in Sharma's case . They were merely pointing out in that particular case that the warrant had been issued by a Magistrate who was a judicial officer and, therefore, circumvention of the fundamental right could not readily be assumed. In the present case, the authorisation warrant was issued by the Commissioner of Income-tax, who is a highly placed offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... represents either wholly or partly income or property which has not been 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), he may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer (hereinafter referred to as the authorised officer) to-- (i) enter and search any building or place where he has reason to suspect that such books of account, other documents, money, bullion, jewellery, or other valuable article or thing are kept ; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available ; (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 ; (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 any such money, bullion, jewellery or other valuabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... authorised officer and signed by such witnesses ; but no person witnessing a search shall be required to attend as a witness of the search in any proceedings under the Indian Income-tax Act, 1922 ( 11 of 1922), or the Act unless specially summoned. (8) The occupant of the building or place searched or some person in his behalf shall be permitted to attend during the search and a copy of the list prepared under sub-rule (7) shall be delivered to such occupant or person. A copy shall be forwarded to the Commissioner and also to the Director of Inspection where the authorisation under sub-rule (2) has been issued by him... (11) The authorised officer may convey the books of account and other documents, if any, seized by him in the course of the search made by him and the package or packages, if any, referred to in sub-rule (10) to the office of any income-tax authority not below the rank of Income-tax Officer (hereinafter referred to as the Custodian). Any money seized in the search referred to above may also be deposited with the Custodian ... (14) The authorisation of the Director of Inspection or the Commissioner referred to in sub-rule (2) shall be in Form No. 45." (This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmitted by the petitioners with a view to evade income-tax and, on the basis of that information, he has in fact recorded reasons why he thought it necessary to issue a warrant authorising the Income-tax Officers to make a search not only of Sri Venkateswara Lodge, but the premises of two other concerns, with which the petitioners were suspected to be connected. We are fully satisfied that in issuing the warrant of authorisation, the Commissioner has acted in strict conformity with section 132 and rule 112. Once such a warrant of authorisation is issued, the officers authorised therein have the power and are under a duty to search the premises and seize all relevant material. That is what has been done in the instant case. It was then contended on behalf of the petitioners that the warrant of authorisation did not specify with any particularity what account books, what documents or what papers had to be seized, and it gave a blank authorisation to the Income-tax Officers to search and seize any papers that may be found in the premises, and, therefore, such authorisation is bad in law. A similar argument was advanced before the Supreme Court in Durga Prasad v. Superintendent (Prev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat came their way indiscriminately and without regard to its relevancy or usefulness for any of the purposes contemplated in section 132 of the Act and rule 112 of the Rules. This contention is again devoid of merit. One of the Income-tax Officers, who participated in the search, has stated on oath in the counter-affidavit filed by him that he and his colleagues examined every account book, every document and every paper that was found inside the premises of Sri Venkateswara Lodge with meticulous care and seized them only when they were satisfied about their relevancy or usefulness ; such documents were marked for identification and stamped with their departmental seal and also initialled by them ; and all this was done in the presence of two respectable witnesses and also in the presence of A. Ramaswamy, one of the proprietors who arrived at the premises some time after the search began. It is scarcely to be expected that at that stage there must be conclusive proof of the relevancy or usefulness of the material seized. In the nature of things that is not possible ; all that is necessary is that the officers must act honestly and believe as reasonable men that the material would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he contrary, it was done in strict conformity with the provisions of law. Indeed the 3rd respondent has stated in the affidavit filed by him that A. Ramaswamy, one of the partners of Sri Venkateswara Lodge, was quite co-operative during the search and the question of using force, threat or coercion never arose. We are satisfied that there is no factual basis for the somewhat reckless allegation made in the affidavit filed in support of the writ petition that the officials making the search had acted high-handedly even to the extent of invading the privacy of women folk. There is no warrant for this allegation at all. Mr. Ananta Babu, the learned counsel for the department, referred us to Annamalai Chettiar Co. v. Deputy Commercial Tax Officer, wherein it was held that even material which comes into the possession of the taxing authority as a result of an illegal search and seizure could be used in assessment proceedings, if such evidence is relevant and admissible. In that judgment Veeraswami J. referred to a decision of the Privy Council in Kuruma v. Queen in which the Judicial Committee quoted with approval the following observation of Crompton J. in Reg v. Leatham : " It m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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