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TMI Blog2004 (9) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... e proved to hold that they had sufficient reasons to proceed in the matter. - - - - - Dated:- 8-9-2004 - Judge(s) : SHASHANK KUMAR SINGH., R. S. GARG. JUDGMENT R.S. Garg J. - Pursuant to warrant of authorization issued by the Director of Income-tax (Investigation), Patna, dated April 30, 2003, search and survey operations under sections 132(1) and 133A(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), were carried out on May 8, 2003, at Patna, Delhi and Pune in the business and financial concerns of Sanjiv Kumar and others. While conducting the search and survey in the premises of the petitioner, M/s. Takshila Educational Society, B-549, New Friends Colony, New Delhi, other premises were searched and certain documents were seized, therefore, the petitioner, M/s. Takshila Educational Society, has filed this writ application under article 226 of the Constitution of India challenging the actions of the respondents in issuing warrants as bad and mala fide and seeking relief for quashing the search and seizure. It is to be noted that the petitioner, M/s. Takshila Education Society, claims itself to be registered with the Registrar of Societies, New Delhi, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stigation), Patna, search and seizure operations at the Patna and Pune offices of the petitioner society and other persons connected with the petitioner's society were carried out. It is also submitted that the persons searched included one Sanjay Kumar, who happened to be the secretary of the present petitioner. According to them, panchanamas of search were prepared. It is also submitted that besides the search, survey under section 133A of the Act was also undertaken at nine different places/premises. It is submitted by the petitioner that the processes of search and seizure for the purpose of the present matter were absolutely illegal and were with a sinister design to take revenge because of refusal to admit the son of respondent No. 2. It is also submitted that by no stretch of imagination, the case of the petitioner could be covered within the sweep of section 132(1)(a),(b) or (c) of the Act, inasmuch as neither was there any failure to comply with any notice nor was there any allegation of suppression of books of account and other documents to attract clause (b). It is also submitted that after gathering/receiving information, respondent No. 1 would be obliged to record his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice. They have submitted that on March 13, 2000, written permission was granted by the Additional Director of Income-tax (Investigation), Patna, to call for information under section 131 of the Act in the case of Delhi Public School, Patna. On the same day, summons along with a letter were issued to the chairman/managing director, Delhi Public School, Patna, for compliance. Certain details on eight points were also called for. The letter/summons clearly stated that furnishing of the required information would be treated as adequate compliance to the summons under section 131 of the Act. On March 31, 2000, summons under section 131 were issued to the Chairman, Delhi Public School, Patna, with a letter of even date for furnishing information, as in the opinion of the Department, the earlier compliance was partial. On the same day, summons under section 131 of the Act were issued to Sanjiv Kumar, Maurya Techno Securities Pvt. Ltd., for compliance on April 20, 2000, calling for audited accounts, etc., so that the investigation into the unsecured loans from Maurya Techno Securities Pvt. Ltd. to Takshila Education Society is made. On April 19, 2000, Sanjiv Kumar on behalf of the Delh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax (Investigation), Patna, forwarded the report of the Deputy Director of Income-tax (Investigation) to the Director of Income-tax (Exemption), New Delhi, as Takshila Education Society was assessed at New Delhi. The Assessing Officer at New Delhi initiated an action under section 147 of the Act for various assessment years in the case of the petitioner. According to them, for the accounting years 1998-99, 1999-2000, 2000-2001 and 2001-2002, the return of income was shown as nil but thereafter orders were passed and notices under section 148 of the Act were issued. According to them, the Assessing Officer observed that the assessee is found to have sources of income which were undisclosed and which had resulted in unexplained investment in school. The Assessing Officer also held that the assessee was indulging in activities which were not above board and could not be said to be charitable as per the objects of the trust. The Assessing Officer denied exemption under sections 11 and 12 of the Act and made addition on substantive basis in the hands of the trust and also observed that the additions would be made on protective basis in the hands of the main trustee, Sri Sanjiv Kumar (S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the same has been emphatically denied with a submission that any report of respondent No. 2 would not be final because the same is to be seen and approved and is to be forwarded by the Additional Director of Income-tax (Investigation) to the Director and the Director, in his turn, after going through both the records has to record his personal satisfaction and if he is personally satisfied only then the warrant of authorisation is issued. According to them, a number of companies are associated with the directors/managers of the petitioner's society. They submitted that the secretary, Mr. Sanjiv Kumar, and his mother, Smt. Kavita Singh, are the directors of Maurya Realtors Pvt. Ltd. These two persons again are directors of Maurya Techno Securities Pvt. Ltd. Sanjiv Kumar and his brother, Rajeev Kumar, are directors in Maurya Enterprises Pvt. Ltd. Sanjiv Kumar happens to be the proprietor of Centre for Professional Studies which is under the franchiseship of Aakash Institute. Shri Fanish Singh, the father of Sanjiv Kumar, was the President of Scientific Educational Promotion and Medical Aid Foundation. They submitted that the respondents were absolutely justified in issuing authoris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken under section 132 of the Act. They submitted that the reasons to believe ought to be recorded on the administrative side and unless it is shown that the same are not bona fide, any allegation would not stand. It is also submitted that the procedure under section 132 of the Act are not judicial proceedings, therefore, the action taken on the administrative side cannot be compared with the action taken on the judicial side. They have submitted that as the secretary of the society and Md. Alim were applying delaying tactics, the Department had to proceed with their own investigation for collecting the information. It is submitted that the requirement of section 132(1) of the Act is absolutely fulfilled. For respondent No. 2, it is contended that the allegation would not cut any ice because the said principal after a long time has tried to oblige the society, but the facts would remain that immediately after the incident, the said principal did not make any complaint either to the police or to the management or to the Department or to any other authority. It is also submitted that any material collected during the course of search and seizure may not prove sufficient for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing 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 authorise 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 authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, (the officer so authorised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Commissioner having jurisdiction over such person may be prejudicial to the interests of the revenue: Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may 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 authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii); Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stock-in-trade of the business." To appreciate the argument of the parties and their rival contentions, we must see whether the actions of the respondents were justifiable or not. In the matter of ITO v. Seth Brothers [1969] 74 ITR 836 (SC), the action taken under section 132 of the Income-tax Act, 1961, was taken up for consideration. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court observed that when a warrant is issued in relation to a firm, the officer authorised thereunder is not restricted to searching for and taking possession of only those books of account and other documents which directly relate to the business carried on by the partners in the name of the firm. It was also observed by the Supreme Court that in appropriate cases a writ petition may lie challenging the validity of action taken under section 132, even before the investigation pursuant to the action taken by the Income-tax Officer is made, on the ground of absence of power or on a plea that the proceedings were taken maliciously or for a collateral purpose. But normally the High Court in such a case should not proceed to determine merely on affidavits important issues of facts especially where serious allegations of improper conduct are made against public servants and the officers assert that they acted in good faith in the discharge of their duties. If the High Court is of the view that the question is one in respect of which an investigation should be made it should direct oral evidence to be taken. From the said judgment of the Supreme Court, it would be clear that an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsider the reasonableness of the restrictions or curbs placed on the freedoms mentioned in article 19(1)(f) and (g), one cannot possibly ignore how such evasions eat into the vitals of the economic life of the community. It is a well known fact of our economic life that huge sums of unaccounted money are in circulation endangering its very fabric. In a country which has adopted high rates of taxation a major portion of the unaccounted money should normally fill the Government coffers. Instead of doing so, it distorts the economy. Therefore, in the interest of the community it is only right that the fiscal authorities should have sufficient powers to prevent tax evasion. (ii) Search and seizure are not a new weapon in the armoury of those whose duty it is to maintain social security in its broadest sense. The process is widely recognised in all civilised countries. (iii) It is now too late in the day to challenge the measure of search and seizure when it is entrusted to income-tax authorities with a view to prevent large scale tax evasion. Indeed, the measure would be objectionable if its implementation is not accompanied by safeguards against its undue and improper exercise. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of search was issued and the search was conducted. The Allahabad High Court observed that the information collected was not sufficient to confirm the information to issue warrant of authorisation. The High Court observed that the fact that the assessee was known for his "roaring practice" and for high rate of fee for operations could not be construed for constituting information in consequence of which the director could have reason to believe that the petitioner had not disclosed his income or would not disclose it. It is to be seen that the said judgment of the Allahabad High Court was challenged before the Supreme Court but the Supreme Court refused to interfere in the matter only on the ground that the articles seized in the course of the search had already been released, therefore, the Department would be free to resort to other proceedings which were permissible in law. The judgment of the Supreme Court is reported in CIT v. Dr. Nandlal Tahiliani [1988] 172 ITR 627. The said judgment in the matter of Dr. Nandlal Tehiliani proceeds on its own facts. On the facts, the High Court found that that was not a case where on the information which in fact was in the form of rumour or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigation) submitted his report in his own handwriting keeping the same to be very confidential to the Additional Director (Investigation). The said Additional Director after going through the said report of the Deputy Director, recorded his own satisfaction, approved the report and forwarded the matter to the Director (Investigation). The allegation of the petitioner that respondent No. 2 was the kingpin behind the action certainly would have assumed importance if a warrant of authorisation was issued by respondent No. 2 or on his fanciful report. Unfortunately, while making the allegation against respondent No. 2 and other respondents, the petitioner did not look into the instructions issued by the higher authorities of the Department. In accordance with the direction and policy, the report of the Deputy Director is to be placed before the Additional Director and the Additional Director after scrutinising the report of the Deputy Director has to submit his own report to the Director (Investigation). The Director (Investigation) in his own turn has to look into the material collected during the course of investigation, has also to go through the two reports prepared by the Deputy D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finds that the approach is absolutely bad and the findings are perverse. It is settled law that the High Court does not examine the report, etc., with administrative approach. The High Court examines the records with a judicial approach. If the High Court is prima facie satisfied that the administrative approach can be justified to a good extent then the High Court would not be required to substitute its opinion for the opinion recorded at the administrative side. The same logic would also apply to turn down the argument that the Assessing Officer in the reassessment proceedings did not find any material nor used the material relating to Aayaton. In our considered opinion, the material collected by the Department in issuing the authorisation warrant must be taken into consideration to form an opinion or record reasons to believe whether warrant of authorisation could be issued or not. The result of the search in fact would not be so material to justify the issuance of the warrant. If the argument of the petitioner is allowed to stand, it would lead to a chaotic situation. In a given case, if there are strong reasons to believe that on search incriminating articles would be recover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar Jain [2003] 260 ITR 1 (SC), it has been observed that though the principles of natural justice provide that no one shall be a judge in his own case but the paid provision may be excluded by statute and a person can be a judge in his own cause. The Supreme Court has observed that if the Assessing Officer is authorized to gather information and assess the value of the information himself and the provisions of the Act did not impose restriction then such an action of the officer would not be bad. The Supreme Court further observed that existence of judicial bias has to be established as a matter of fact. In the said matter, the Supreme Court observed that the mode of gathering information may vary from the mere issuance of notice under section 142 to the more intrusive method of entry and search envisaged under sections 133A and 133B and seizure under section 132. The Supreme Court observed that sections of the Act impose no limitation on the Assessing Officer and the authorised officer for a search being the same person and it cannot be said that action taken pursuant to such statutory empowerment was coloured, only by reason thereof, by any bias. The Supreme Court observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondition precedent for search and seizure is "reason to believe" under section 132 of the Act which cannot be equated with "reason to suspect". The expression "reason to believe" postulates belief and the existence of the reasons for that belief. The belief must be held in good faith. It cannot be merely a pretence. The reason to suspect under sub-sections (1A) and (4A) of section 132 are subject to satisfaction of the primary test of "reason to believe" under section 132(1). The "reason to believe" is the mandatory requirement of law for search and seizure. Each case has to be independently established within the norm of "reason to believe" under section 132(1)(c). In the opinion of this court, the said observation made by the Calcutta High Court would be of no assistance to the petitioner. The present is not a case of "reason to suspect". The present is a case where the respondents have recorded the reasons to believe and after going through the records specially the reports, we must also observe that they had valid reasons to believe. So far as the question of applicability of section 132(1)(a),(b) and (c) of the Act is concerned, we must observe that the present case falls ..... X X X X Extracts X X X X X X X X Extracts X X X X
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