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TMI Blog2005 (3) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... izure. - - - - - Dated:- 22-3-2005 - Judge(s) : P. G. AGARWAL., I. A. ANSARI. JUDGMENT The judgment of the court was delivered by I.A. Ansari J.- The five appeals enlisted above are being disposed of by this common judgment and order, for all these appeals have arisen out of the common judgment and order, dated May 31, 2004, whereby as many as nine writ petitions were disposed of; all these appeals have posed the common questions of law based on identical facts and have been heard together. We have heard Mr. K.N. Choudhury, learned senior counsel, assisted by Mr. S. Shyam, learned counsel appearing on behalf of the writ petitioner-appellants in Writ Appeals Nos. 240 of 2004, 239 of 2004, 350 of 2004 and 354 of 2004, which have arisen out of W.P.(C) Nos. 1552 of 2000, 7008 of 2000, 6965 of 2000 and 137 of 2000, respectively, and Mr. K.P. Pathak, learned Additional Solicitor General, assisted by Mr. U. Bhuyan, learned counsel, appearing on behalf of the respondents in the four appeals aforementioned. We have also heard Mr. K.P. Pathak, learned Additional Solicitor General, assisted by Mr. U. Bhuyan, learned counsel, appearing on behalf of the appellant in Writ Appeal No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "). The report of the CAG, which had been acted upon, was in a draft form and had not acquired any legal status and, hence, this report of the CAG could not have been treated as "information" within the meaning of sub-section (1) of section 132. This apart, the Nagaland State Assembly, later on, referred the report to the Public Accounts Committee, but the said Committee did not recommend any action against the petitioner firm. The petitioner firm is assessed to tax at New Delhi and respondent No. 5, who is based at Guwahati, issued, without any authority of law, the warrants of authorisation. The satisfaction for search and seizure in respect of the petitioner firm was that of the Director, Income-tax (Investigation), New Delhi. In fact, the CAG had carried out an audit pursuant to a complaint filed by one Mr. Munkala Krishna Rao, business rival of the petitioner firm. The report of the CAG contains sweeping adverse remarks against the petitioner firm indicating that the firm was involved in some sort of scam with the Directorate of Lotteries, Nagaland. The search and seizure were carried out during the period, when the CAG's report was pending with the State Legislature of Naglan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kata and Guwahati, issued the warrants within their respective territorial jurisdiction after an honest evaluation of the information, which came into their possession. The report of the CAG is one of the sources of the information on the basis of which the satisfaction required under section 132 was founded. A draft report of the CAG may also provide legal or factual material for forming the requisite belief to the effect that the petitioner firm has acquired assets not disclosed to tax. The warrants of authorisation were issued in the name of the persons named in the warrants and in respect of identifiable premises. A prima facie case of tax evasion was found to have been made out on the information received by the authorities concerned and the report of the CAG only substantiated the above information. (c) In their rejoinder affidavit, the petitioner asserted that it has a branch office at Silpukhuri, Guwahati, and M/s. Guwahati Agencies function as agent of the petitioner firm and sells lottery tickets, on behalf of the petitioner firm, in the State of Assam and income derived from such sales has been duly reflected in the books of account. (ii) W.P.(C) No. 137 of 2000: ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s challenged the legality and validity of the warrants of authorisation for search and seizure issued by the income-tax authorities at the office premises of M/s. M. S. Associates situated at Guwahati and New Delhi in June, 1999. The petitioner also challenged the legality and validity of the impugned notice, dated November 13, 2000, issued by respondent No. 4 in purported exercise of its powers under section 158BC of the Act. Cash, jewellery, investment certificates, fixed deposit certificates and other documents were seized by the income-tax authorities during the said search. The authorities had also conducted a search at the office premises of M/s. M. S. Associates situated at Guwahati and Tinsukia and various documents of account relating to M/s. M. S. Associates were seized. The warrants of authorisation were issued in the name of Mr. M. K. Subba, Mr. A. K. Subba, Mr. S.R. Subba, and the petitioner, but the search and seizures were, as a matter of fact, effected against the said firm and not the individuals named hereinbefore. The searches were conducted in violation of the provisions of section 132 of the Act inasmuch as no information had been in the possession of the autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrants of authorisation were issued in the name of Mr. A. K. Subba, Smt. Limbu and the petitioners, but the search was, in fact, effected against the firm and not the individuals named hereinabove. The warrant of authorisation for search and seizure was issued by respondent No. 6 in violation of the provisions of section 132 of the Act, for, there was no information in his possession as was required under the law. The petitioners sought for declaration that the search and seizure was null and void, for quashing of the notices, dated November 13, 2000 and October 19, 2000, aforementioned and for a direction to the respondents to return the seized documents/valuables to the writ petitioners. (b) The respondents resisted the writ petition on the same grounds as in the aforementioned writ petitions. According to the respondents, no illegality was committed by the authorities concerned in issuing the warrants of authorization and that the wife of writ petitioner No. 2 has been, with effect from April 1, 1994, a partner having 51 per cent. share in M/s. M. S. Associates, which functions as sole distributor of lottery tickets on being so appointed by the State of Nagaland. The firm M/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, W.P.(C) No. 7008 of 2000 aforementioned, and also having concluded that the report aforementioned of the CAG could not have formed the basis for the purpose of issuance of warrant of authorisation for search and seizure, the learned single judge took the view that the action of the Revenue did not, in the present cases, depend entirely on the said report of the CAG, but on a set of information including the report of the CAG, and even after keeping the report of CAG excluded from the purview of consideration, the remaining information in the possession of the authorities concerned was sufficient to lead them to form the "belief" as was required under section 132(1) and the authorities concerned could have, therefore, legally acted upon the same. Having reached this conclusion, the learned single judge held to the effect that the issuance of warrants of authorisation suffered from no illegality. With the opinion so expressed, the learned single judge dismissed the writ petitions. Aggrieved by the conclusion so reached, that the said report of the CAG could not have been acted upon for the purpose of taking action under section 132(1), the Revenue has, in Writ Appeal No. 306 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his favour. For determining, therefore, the question if the court has territorial jurisdiction, the court must take into account all the facts pleaded in support of the cause of action without, however, embarking upon an enquiry, as to the correctness or otherwise of the facts pleaded. Thus, the question as to whether a High Court has territorial jurisdiction to entertain a writ petition must be answered on the basis of the averments made in the writ petition, the truth or otherwise whereof being immaterial. In Election Commission, India v. Saka Venkata Subba Rao, AIR 1953 SC 210, while interpreting article 226, as it then stood, the Supreme Court observed as under: "The rule that cause of action attracts jurisdiction in suits is based on statutory enactment and cannot apply to writs issuable under article 226, which makes no reference to any cause of action or where it arises, but insists on the presence of the person or authority 'within the territories' in relation to which the High Court exercises jurisdiction." Thus, in Saka Venkata, AIR 1953 SC 210, the Supreme Court had expressed the view, in no uncertain words, that in the absence of a specific provision in article 226 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our.' Therefore, in determining the objection of lack of territorial jurisdiction the court must take all the facts pleaded in support of the cause of action into consideration albeit without embarking upon an enquiry as to the correctness or otherwise of the said facts. In other words, the question whether a High Court has territorial jurisdiction to entertain a writ petition must be answered on the basis of the averments made in the petition, the truth or otherwise whereof being immaterial. To put it differently, the question of territorial jurisdiction must be decided on the facts pleaded in the petition. Therefore, the question whether in the instant case the Calcutta High Court had jurisdiction to entertain and decide the writ petition in question even on the facts alleged must depend upon whether the averments made in paragraphs 5, 7, 18, 22, 26 and 43 are sufficient in law to establish that a part of the cause of action had arisen within the jurisdiction of the Calcutta High Court." In the case of Navinchandra N. Majithia v. State of Maharashtra [2000] 7 SCC 640, while relying, inter alia, on the decision in Oil and Natural Gas Commission v. Utpal Kumar Basu [1994] 4 SCC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exercise the power to issue directions, orders or writs for the enforcement of any of the fundamental rights conferred by Part III of the Constitution or for any other purpose if the cause of action, wholly or in part, had arisen within the territories in relation to which it exercises jurisdiction, notwithstanding that the seat of the Government or authority or the residence of the person against whom the direction, order or writ is issued is not within the said territories. In order to confer jurisdiction on the High Court of Calcutta, NICCO must show that at least a part of the cause of action had arisen within the territorial jurisdiction of that court. This is at best its case in the writ petition. It is well settled that the expression "cause of action" means that bundle of facts which the petitioner must prove, if traversed, to entitle him to a judgment in his favour by the court. In Chand Kour v. Partab Singh, [1888] ILR 16 Cal 98 (PC); 15 IA 156 Lord Watson said: "... the cause of action has no relation whatever to the defence which may be set up by the defendant, nor does it depend upon the character of the relief prayed for by the plaintiff. It refers entirely to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondents reacted by claiming that the action was taken by respondent No. 5 in concert with the DIT (Investigation), New Delhi, and the DIT (Investigation), Calcutta, on the basis of shared information. These averments clearly show that respondent No. 5, even according to the case of the respondents, had acted on the basis of the information, which had been shared with him by the DIT (Investigation), New Delhi, and the DIT (Investigation), Calcutta, and it was his satisfaction derived on the basis of the information so received that he issued the warrant of authorisation leading to the said search and seizure. Situated thus, it is clear that the conclusion reached by the learned single judge that the submission made, on behalf of the writ petitioners, that the DIT (Investigation), Guwahati, had issued warrants of authorisation stood belied by the materials available in the office file, we are constrained to hold, contrary to the averments made by the parties concerned and the admitted case of the respondents. When respondent No. 5, namely, DIT (Investigation), Guwahati, who is one of the authorities within the territorial jurisdiction of this court, issued warrants of autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section (1) of section 132 has, in his possession, a piece of information or a set of information and if, in consequence of such information, the authority concerned has reason to believe, inter alia, that any person is in possession of any money, bullion or jewellery or other valuable articles or things, which has not been, or would not be, disclosed for the purpose of the Act, he may issue warrant of authorisation for the purpose of search and seizure. If an information, as envisaged by section 132(1), is derived, contends the learned Additional Solicitor General, from a report of the CAG before the same is accepted or rejected by the State Legislature concerned, there is no limitation on the part of the authorities concerned, to act upon such information for initiating an action under section 132(1). Source of information, points out Mr. Pathak, is not material for the purpose of section 132(1) and, hence, there can be no limitation, on the part of authorities specified in section 132, to act upon an information derived from a report of the CAG even if the report has not been discussed and no decision has been taken thereon by the State Legislature concerned. In other words, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor General and countersigned by the CAG. The CAG's report, according to Mr. Pathak, is a public document as defined in section 74 of the Evidence Act read with section 2(17)(g) and (h) of the Civil Procedure Code, the CAG's report is available at web-site and a copy of its print-out was submitted to the court and a copy thereof was also furnished to the petitioners at the time of hearing of the writ petitions. Controverting the submissions made on behalf of the Revenue, Mr. K. N. Choudhury, learned senior counsel for the writ petitioners, submits that under article 151(2), the CAG's report has to be laid before the Legislature of the State concerned, but the respondents admit to have had in their possession the CAG's report long before the same was laid before the House. Hence, the use of the said report, according to Mr. Choudhury, as information, in the possession of the authorities concerned, is in violation of the provisions of article 151. Elaborating his above submissions, Mr. Choudhury points out that in the present case, the CAG's report was used by the concerned officer for the purpose of forming their "belief" under section 132(1) of the Act, though the CAG's report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stigation. Thus, according to Mr. Choudhury, if the respondents conduct any investigation in respect of the CAG's report, it would constitute an act of breach of privilege, for, the executive cannot assume jurisdiction and conduct investigation in respect of a matter, which is under investigation, by the House or its Committee, particularly when the House and its Committee have exclusive jurisdiction over such a matter. Viewed from this angle, no officer contends Mr. Choudhury, can form a "belief", on the basis of the CAG's report, for the purpose of taking action under section 132. It is submitted by Mr. Choudhury that the PAC conducts a review of the report of the CAG under the Legislative Assembly Rules in the presence of the CAG (represented by the Accountant General in the case of States) and during the period of such review/investigation, no question on the audit report is permitted to be raised in the House till the PAC has considered the report. It is also submitted by Mr. Choudhury that if the PAC recommends an action to be taken and the same is accepted and acted upon by the Government, an action taken report is submitted before the House, which is discussed on the floo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as on the alleged non-payment of taxes by a citizen, was not on a subject-matter over which the CAG has any power and on the basis of such a report, no action could have been legally taken under section 132(1). In our constitutional scheme, according to Mr. Choudhury, since the power of the CAG is limited only to the scrutiny of accounts of the State and not of any citizen or concern, its report cannot be accepted to be authentic and acted upon unless the same has been submitted to the Governor of the State and laid before the Legislature of the State for discussion. The CAG's report could not have, therefore, provided, contends Mr. Choudhury, any factual or legal material for forming the requisite "belief" that the petitioner firm had earned any income or acquired any asset, which had not been disclosed to the income-tax authority. Quoting extensively from Erskine May's Law, Privileges, Proceedings and Usage of Parliament Mr. Choudhury points out that according to May, "Parliamentary privilege is the sum of the peculiar rights enjoyed by the House collectively as a constituent and by members of the House individually, without which they could not discharge their functions, and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d criminal proceedings that bear a nexus to their speech or vote. It is for that reason that a member is not 'liable to any proceedings in any court in respect of anything said or any vote given by him '..." In short, the sum total of Mr. Choudhury's submissions is this: In the present case, the CAG's report has to be laid before the House under article 151(2) of the Constitution and the same is, then, referred to the PAC under rule 235 of the Legislative Assembly Rules, which has the exclusive jurisdiction to deal with the same in accordance with the internal procedure of the House. Thereafter, a report is submitted to the House and the action to be taken on the CAG's report is recommended to the House and the action taken report is submitted from time to time. Thus, the matter concerning the CAG's report begins and terminates within the walls of the House. The House has the exclusive jurisdiction over the CAG's report, the same being a matter of its own internal proceedings, and, as such, anything said or any proceeding undertaken by the House with regard to the CAG's report is wholly immune from scrutiny by the executive or the court. This is, according to Mr. Choudhury, the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice, or (b) any person to whom a summons or notice as 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 Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in getting the authorisation from the Chief Commissioner 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." A bare reading of sub-section (1) of section 132 shows that this sub-section visualises three different situations in which the Director General, or the Director or the Chief Commissioner or Commissioner or Joint Commissioner may issue warrants of aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nabove are present; but this does not mean, we must hasten to add, that the Director General and other authorised officers, mentioned hereinabove, cannot initiate any investigation if they receive any information, which may not be sufficient to issue a warrant of authorisation, but which may be sufficient for the purpose of initiating investigation to ascertain if the power contained in section 132(1)(c) needs to be invoked. This subtle, but very fine and firm distinction between the power to issue a warrant of authorisation and the power to initiate investigation needs to be kept in mind, while we deal with the question as to whether the CAG's report could have at all been used by the income-tax authorities and, if so, what could have been the extent of its use. Bearing in mind the scope and ambit of section 132(1)(c), we proceed to determine the issue at hand, namely, as to whether the CAG's report could have been taken into consideration by the respondent authorities concerned for the purpose of initiating action under section 132(1) of the Act before the same was disposed of by Nagaland State Legislative Assembly and, if so, what could have been the scope of the role of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the provisions of section 132(1)(c), how the information has come to be in possession of the Directorate of Investigation (Income-tax) is quite immaterial. It is worth noticing that the provisions of section 132 were put to challenge in Pooran Mal [1974] 93 ITR 505 (SC) on the ground that these provisions were violative of articles 14, 19(1)(f), (g) and 31 of the Constitution of India. The apex court, however, held the said provisions to be in conformity with the requirements of the Constitution. The apex court clarified that when no provision of the Evidence Act, 1872, which is a law consolidating, defining and amending the law of evidence, is challenged as violating the Constitution and when the Evidence Act permits relevancy as the only test of admissibility of evidence and the Income-tax Act or any other similar law in force does not exclude relevant evidence from being admitted on the ground that it was obtained under an illegal search and seizure, it will be wrong to invoke the supposed spirit of our Constitution for excluding such evidence. Bearing in mind, thus, the fact that for the purpose of starting an investigation into evasion of tax, the source of information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... down the report is not an empty formality. The State Legislature is to refer it to the Public Accounts Committee under rule 235 (volume II) of the Nagaland Legislative Assembly Rules for examination and recommendations. The recommendations of the Public Accounts Committee have to be laid before the Legislative Assembly for disposal. In the instant case, the report of the CAG was placed before the Legislative Assembly, State of Nagaland, and it was referred to the Public Accounts Committee. The Public Accounts Committee examined the correctness of the report and submitted its report in the month of March, 2002, and this was discussed and accepted. Thus the recommendations of the Public Accounts Committee as accepted, bind the Government and the executive and its prior user would amount to infringement of the privilege of the House. In the instant case, as stated earlier, the Public Accounts Committee did not find reason to accept the report of the CAG and the matter thus stood disposed of. The report, during this period, being exclusively the property of the House could not be said to be in the possession of the Revenue authorities within the meaning of section 132 of the Act. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s shortly, it is not material as to whether the report in question was a final one or not and/or as to whether the report in question was under consideration of the Legislature of the State, when action was taken by the respondent authorities concerned. The fact of the matter is that the report was a final report and the action was taken thereon before the report was laid on the table of the House, and could be considered by the Legislature of the State. Notwithstanding the fact, as contended by the Revenue, that the CAG's report in question was a final report, the question, however, is as to whether this report or any part thereof could have been used as a piece of information for the purpose of section 132 of the Act and, if so, how and to what extent. Keeping in mind the reasons as to why the learned single judge has concluded that the CAG's report could not have formed the legal basis for issuance of warrant of authorisation, let us have a small survey of the various provisions of the Constitution, which may have a bearing in determining the question raised before us. Article 148 lays down that there shall be a Comptroller and Auditor General of India, who shall be appoin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... system in England reflects, to some degree, the supremacy of Parliament over the two organs of the State, namely, the Executive and the Judiciary. In India, however, it is the Constitution, which is supreme. Since there is no expressed bar in the Constitution prohibiting the use of the report of the CAG by the Executive or the Judiciary, one has to closely analyse the provisions relating to the CAG's report as contained in the Constitution. When so analysed, it clearly transpires that the CAG's report is, initially, meant for the Legislature House-be it the Houses of Parliament or the Legislature of the State. It has been pointed out, as already indicated hereinabove, on behalf of the writ petitioners that the CAG's role is confined to the auditing of the accounts of the State and the CAG cannot audit the accounts of a citizen and, hence, any observation made in a CAG's report against evasion of tax by a citizen cannot form the basis for initiating action under section 132(1)(c) of the Act. While dealing with the above aspect of the matter, it needs to be noted that the CAG's report, generally speaking, is a report on the scrutiny of the accounts maintained by the State. Duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gislature of the State. In the case at hand, the CAG, admittedly, forwarded a copy of its report to the Union Finance Minister. If the forwarding of the report to the Finance Minister by the CAG is treated as a breach of privilege of the Legislative Assembly of Nagaland, it is really for the Legislative Assembly of Nagaland to proceed with the matter; but it gives no right to the writ petitioners to claim that the privilege of the Legislative Assembly of Nagaland has been violated or breached by the CAG. With regard to the above, it is noteworthy that neither the CAG nor the Speaker of the Nagaland Legislative Assembly is a party to the writ petitions. We are, therefore, not concerned as to whether the CAG committed any breach of privilege in forwarding the report to the Finance Minister. What, however, we are concerned with is as to whether the scheme, which the Constitution envisages for dealing with the CAG's report, has any room permitting the respondent/authorities concerned to take action on a report of the CAG, which alleged that the taxes liable to-be paid by Mr. M. K. Subba and others had not been paid, even though the report had not been laid before, and considered by, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty under the law to arrest evasion of taxes if the CAG's report gives indication of evasion of taxes by a citizen, while dealing with a Department of the Government. This question in turn brings us to a more fundamental question and the question is as to what powers, immunities and privileges the House of a Legislature enjoys under the scheme of our Constitution. Let us, therefore, determine now as to what powers, privileges and immunities the House of a Legislature enjoys under the scheme of the Constitution. A discussion on this aspect of the matter can be of no avail without referring to, and taking into account, what article 194 has to say in this regard. For the purpose of resolving the controversy raised in this appeal, we quote, hereinbelow, article 194, which runs as follows: "194. Powers, privileges, etc., to the Houses of Legislatures and of the members and committees thereof.-(1) Subject to the provisions of this Constitution and to the rules and standing orders regulating the procedure of the Legislature, there shall be freedom of speech in the Legislature of every State. (2) No member of the Legislature of a State shall be liable to any proceedings in any court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... press bar restricting Parliament from waiving its privilege. So long as this Constitutional provision remains, Parliament cannot enact a law authorising courts to inquire into as to what advice the Council of Ministers had tendered to the President, for, such a statutory provision is not permissible in the face of the embargo imposed by article 74(2). However, in respect of those privileges, which the Constitution do not specifically bar the Legislature from waiving or not claiming, the Legislature may, by enacting law, give up its privilege. This fundamental aspect of the scope of "privilege" of a Legislature has to be kept in mind in deciding the question which we are concerned with. It is also of some significance to note that under clause (3) of article 194, the House of the Legislature of a State has the power to define, by making law, its privileges. In other words, the Legislature may, by making law, define the ambit of its own privileges. This shows that the Legislature may expressly define the ambit of its privileges by enacting a specific law in this regard or it may enact a statute in such a way that it reduces, by implication, the ambit of its own privileges, which it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e House is not made public; can the authorities, who are concerned with, and responsible for, ensuring that evasion of tax does not take place, be debarred from making any investigation into the question as to whether Y or Z, as the case may be, has evaded payment of tax or not. If the authorities concerned with the collection of tax, on coming to know of this accusation from any source whatsoever, decide to start an investigation, can Y or Z resist the investigation, if initiated by the Tax Department, merely on the ground that the information, which the tax authorities had happened to receive, was based on the proceedings of the House, which had not been made public and it was, therefore, constitutionally impermissible to be acted upon? The answer to this question has to be an emphatic "no", for while it is undoubtedly for the House to decide whether it would take action on the information of non-deduction of tax at source by the Government from a taxpayer, it is the duty of the Directorate of Investigation (Income-tax) to ensure that no one evades payment of tax. Since it is the duty of the Directorate of Investigation to ensure that no citizen evades payment of tax, it logicall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter and ascertain if the "information" received is true or not? Assuming that the proceeding, in question, has not been made public, but the Home Minister or the Chief Minister of the State asks the officer-in-charge of the police station concerned to report as to whether the information with regard to commission of murder is correct or not. Can the officer-in-charge concerned, in such a case, use the proceedings of the House as a shield to say that since the matter has been raised on the floor of the House and is a privileged proceeding, he cannot make any investigation and/or inquiry into the matter? The answer to this question has to be in the negative, for, when it is the statutory duty of a police officer to make investigation into "information" of cognizable offence and the officer concerned has not made such an investigation on account of non-receipt of any information in this regard, he cannot be legally stopped from carrying out investigation to determine if Z has really been killed by Y merely because a Member of the House has, in the meanwhile, raised the question on the floor of the House. The conclusion drawn from such a situation is that when the law enjoins upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty of the Legislature and the Legislature had not made the same public. In other words, the information derived not merely on the basis of a public document, but also from a privileged document can if need be, be acted upon under section 154 of the Criminal Procedure Code. While dealing with the above aspects of the matter, one has to bear in mind that a person or authority, which enjoys a power, is equally liable to exercise that power as a matter of duty. An officer-in-charge of a police station is empowered to investigate into information of cognizable offence; at the same time, one can safely say that it is also the duty of such a police officer to investigate into the information of cognizable offence. Similarly, though it is the power of the officers specified in section 132(1) to issue warrant of authorisation, the same provisions can also be construed as forming part of the duty of those officers to issue warrant of authorisation if the conditions precedent maintained in section 132(1) are satisfied. Lest the evasion of tax may bleed the economy white and make the Government bankrupt, the power to act even on "information", which is believable, has to be conferred on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legislative intendment is that if such an information, after conducting investigation or otherwise, can give rise to reasonable belief about the existence of the conditions warranting resort to issuance of warrant of authorisation for search and seizure, the authority/authorities concerned shall suffer from no limitation and must act upon such information. By consciously using the word "information" and by not specifically restricting the source from which the information is received or derived, the Legislature has, in fact, waived any privilege that it might have had in respect of such an information and has thereby made it possible for the authority/authorities concerned to act upon such information. Had there been a constitutional bar on the part of the Legislature itself to waive such a privilege, then, the situation would have, perhaps, been a little different. Can information derived from such a statement, which has not been made public by the House, form the basis for an investigation to ascertain if "Y" or "Z" has or has not made payment of tax? Will the authority concerned be liable for breach of privilege of the House if, on coming to know about such an accusation made on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to waive its privilege, if any, in this regard and has thereby made it constitutionally and legally possible and permissible for the authorities specified in section 132(1) to act upon the "information" received by them whatever may be the source of their information provided, of course, that the reasons to believe the information as envisaged by section 132 exist. Taking of such action by the authority/authorities cannot be dubbed, in such a case, illegal or unconstitutional. What emerges from the above discussion is that when the Legislature itself, knowing as to what it was doing, has intentionally and dispassionately used the word "information" and has not restricted the authorities concerned under section 132(1) from acting upon the information which may be derived by the authorities concerned from the report of the CAG, which has not been laid and discussed by the State Legislature, it would be, in our opinion, realistic to hold that the legislative intendment is that even if the authority concerned received the information about evasion of tax from the report of the CAG, which has not been laid in the House concerned or discussed in the House concerned, there is no legal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id or discussed by the Legislative Assembly of the State concerned, can be acted upon by the authorities concerned under section 132(1), for the legislative intendment is that the evasion of tax is not allowed to continue for a moment even if the authorities concerned have received information about such an evasion from the report of the CAG, which has not been laid or discussed in the Legislative Assembly of the State concerned. Viewed from this angle, the fact that the CAG report in question had not been laid and/ or discussed by the State Legislature could not have restrained the respondents from acting upon the same. Question No. (iii): Turning to question No. (iii), namely, as to whether the respondents/authorities had in their possession within the meaning of section 132(1) of the Act, any "information" other than the CAG's report, enabling them to initiate action(s) thereunder, it is necessary to recall that at para. 41 of this judgment, we have already clarified as to what the conditions, precedent are for invoking of the powers under section 132(1)(c). We have also stated therein that the conditions precedent are as under: (i) There must be information in the possess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng facts or particulars or as to the law relating to a matter, which has bearing on the assessment. What transpires from the above discussion is that the word "information" is nothing but knowledge communicated or received concerning a particular fact or circumstance. The source of information is not material; but the "information" must not be a mere gossip, rumour, hunch or intuition. The expression "reason to believe" is subjective as well as objective, but the area of objectivity is limited and the court cannot substitute its opinion for that of the authorities specified. No doubt, "reasons to believe" is not akin to "reasons to suspect" and, therefore, a higher test has to be fulfilled; but it is not necessary for the authorising authority to reach that "belief" by a process akin to a judicial process. His "reason" and his "belief" do not constitute a judicial or a quasi-judicial act nor is the act of issuing authorisation a judicial or quasi-judicial function. Where the facts show that the authorising authority had bona fide reason for formation of the belief, the search can be held to be valid and the court would not substitute its own opinion as to the reasonableness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a mere doubt or suspicion. The words "has reason to believe" are stronger than the words "is satisfied". The "belief" entertained by the authority must not be arbitrary and irrational. As held by the apex court in Ganga Saran and Sons (P.) Ltd. v. ITO [1981] 130 ITR 1, it must be "reasonable" or, in other words, it must be based on reasons, which are relevant and material. The "belief" must be held in good faith and it cannot be merely a pretence. It is open to the court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of a belief or not and whether the reasons for the belief are extraneous or irrelevant. The expression "reason to believe" predicates that the authority holds the belief induced by the existence of reasons for such belief. It contemplates existence of "reason" on which the "belief" is founded and not merely a "belief" in the existence of reasons inducing the belief. Such a belief should not be based on mere suspicion and it must be founded upon information. It is correctly pointed out by Mr. Choudhury that a mere report/letter/note of a Government Department sent to the income-tax authority cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise of powers under section 132(1) of the Act is open to judicial scrutiny. The court can examine whether the authorised person had materials before him on which he could form the opinion and whether there is a rational connection between the information possessed and the opinion formed. The absence of the conditions precedent would have the effect of vitiating the authorisation. While the sufficiency or otherwise of the information cannot be examined by the court, the existence of information and its relevance to the formation of the belief can, undoubtedly be gone into. What is basic, while considering the legality or propriety of the issuance of warrant of authorisation, is the existence of the relevant material and the actual application of mind of the authorising authority, who issued the warrant. Bearing in mind the principles of law mentioned hereinabove, when we revert to the question at hand, namely, as to whether the respondents/authorities had, in their possession, within the meaning of section 132(1) of the Act, any "information", other than the CAG's report, enabling them to initiate action(s) thereunder, what attracts our attention most prominently, is that the Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote of satisfaction based on various information obtained from the Delhi Directorate and discreet inquiries. The allegations of tax evasion are relatable to five instances and the discreet field inquiries reveal voluminous information relatable to tax evasion. The report of the CAG was also one of the sources of information, which was in addition to the aforesaid information collected from various sources. The note of satisfaction further shows that the authority was satisfied that the concerned group are not disclosing their true income to tax and, as such, even if a notice under section 131 is issued, the said group will not disclose the true income before the income-tax authorities. The note of satisfaction does not indicate that the report of the CAG was the prime consideration of the income-tax authorities in forming the required 'belief. 56. Similar is the decision with regard to the note of satisfaction of the authorities at Guwahati. The note of satisfaction at Guwahati was drawn on the report of the DDIT (Investigation), Siliguri, wherein information has been disclosed of accumulation of property undisclosed to tax. Though this note of satisfaction also refers to the rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issuance of authorisation for search and seizure is challenged by a person, the Revenue shall have the onus of satisfying the court that its action was justified under the law. Thus, it is the court, which has to be satisfied, that on the basis of the materials placed before it, the action taken under section 132 was in consonance with law. We are unable to read into the decision rendered in Seth Brothers [1969] 74 ITR 836 (SC) any requirement of law making it obligatory, on the part of the Revenue, to disclose to the person, who approaches the court, the materials, which had been relied upon and/or information or set of information, which had been acted upon, for the purpose of issuing authorisation. Though Mr. Choudhury has laid great emphasis on the fact that since the respondents/authorities concerned have not claimed any privilege, they ought to have disclosed to the writ petitioners the materials, which were relied upon for issuing warrant of authorisation, we, as already indicated hereinabove, find this submission, made on behalf of the writ petitioners, somewhat, misconceived in law, for, when the action of the authorities concerned is challenged, the respondents/author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials and/or information before the authority and whether the "reasons for the belief" have rational connection with, a relevant bearing to, the formation of the "belief" and/or whether the reasons were extraneous and irrelevant for the purpose of section 132, it is not necessary, while considering these facts by the court, that the information and the materials should be disclosed to the assessee. In K.S. Rashid and Son v. ITO [1964] 52 ITR 355, the apex court held that the assessee is not entitled to a copy of the reasons recorded at the time of issue of notice under section 34 of the Indian Income-tax Act, 1922. Again, in S. Narayanappa v. CIT [1967] 63 ITR 219, the apex court, while examining the proceedings under section 34 of the Indian Income-tax Act, 1922, held that the stage of the proceeding for recording of reasons by the Income-tax Officer and obtaining of sanction of the Commissioner are administrative in character and are not quasi-judicial. There is no requirement in any of the provisions of the Act laying down as a condition for initiation of the proceedings that the "reasons" and/or material and/or information must be communicated to the assessee as and when a ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g extracts of the audit report from the CAG. Consequent to the information so received by the Union Finance Minister, an independent investigation was launched by the Revenue Department and the investigation, so made, led to the preparation of reports by the DIT, (Investigation), New Delhi, Guwahati and Calcutta. On the basis of the result of the investigation made by these three authorities, they shared the information with each other and on the formation of belief by each of them, the warrants of authorisation for search and seizure were issued. This shows that warrants of authorisation were not issued based solely on the contents of the CAG's report; rather, the information derived therefrom was investigated into. In the course of investigation, materials were collected and it was on these materials that the "belief" of the authorities concerned rested. This is, therefore, not one of those cases, where one can say that the material was non-existent for the purpose of formation of belief. While dealing with this aspect of the matter, we have to keep in mind that it is the existence of the "belief", which can be challenged by the assessee, but not the sufficiency of the "reason" f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved by the learned single judge, and noticed by this court also, could have made any prudent man believe that the persons, against whom warrants of authorisation had been eventually issued, were in possession of money, bullion, jewellery or other valuable articles or things and that the same represented undisclosed income or property, which would not be disclosed. In a situation, such as the present one, this court finds no reason to hold that the action taken by the authorities concerned was illegal, impermissible and/or unconstitutional. Mr. Choudhury has also laid emphasis on the fact that one of the documents relied upon by the Revenue is allegedly an interview of Shri M. K. Subba published in a magazine called Roto Gham, but Shri Subba denied having given any such interview and in Writ Petition No. 7008 of 2000, the Sikkim High Court has held that the said magazine was a fake and fabricated one. While dealing with the above aspect of the matter, it must be remembered that the object of article 226 of the Constitution is the enforcement and not the establishment of right or title and, hence, a petition under article 226 cannot be converted into a suit and the High Court can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judged by taking note of the subsequent events or explanations, which may be furnished. Thus, if incriminating materials are seized during a search, it will not justify the warrant of authorisation for search and seizure if no materials for forming "belief" existed at the time of issuing the warrant of authorisation. Conversely, if no incriminating material is found or seized, it would not vitiate the warrant of authorisation if materials for "belief" existed at the time of issuing the warrant of authorisation. There is nothing in the materials on record to indicate that there was any finding from any court at or before the time when the authorisation was issued, in the present case, that the magazine Roto Gham was a fake and fabricated one. In such a situation, the mere fact that subsequent to the issue of the authorisation, a finding has been rendered that Roto Gham is a fabricated magazine, cannot evaporate the other incriminating materials, which were available on record. If the action of the officer issuing the authorisation or of the designated officer is challenged, the officer concerned must satisfy the court about the regularity of his action. If the action is maliciou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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