9911796707
TMI Blog2004 (2) TMI 55X X X X Extracts X X X X X X X X Extracts X X X X ..... Noida, Dr. Shard B. Sahai, her husband, is a qualified radiologist and is running a diagnostic centre in the name and style of Transmed Diagnostics at A-759, Sector 19, Noida, which is also the residence of both the petitioners. The petitioners have challenged the validity of the warrant of authorisation under section 132(1) of the Income-tax Act, 1961, and the initiation of block assessment proceedings, by issue of notice under section 158BC of the Act by respondent No.5, and continuation thereof by respondent No.6 by issue of notice dated October 26, 2002, under section 142(1) of the Act. The facts of the case are that on March 19, 2002, at about 8.00 a.m. the respondents authorities their officers, servants and agents in purported exercise of the powers under section 132(1) of the Income-tax Act started search at the aforesaid premises of the petitioners as stated in paragraph 7 of the petition. It is alleged in paragraph 7 of the petition that the aforesaid premises have been disclosed in the returns of the petitioners year after year. In paragraph 8 of the petition it is mentioned that during the course of simultaneous search operation at the aforesaid premises the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and who has been living there for quite some time. Despite this cash of Rs. 1.50 lakhs was seized. In paragraph 10 of the petition it is alleged that from the panchnama it appears that the warrant of authorisation under section 132 to carry out the search was issued by the Joint Director of Income-tax (Investigation), Meerut, who was present at the time of the search. Locker No. 18, with the Oriental Bank of Commerce, Sector 27, Noida, standing in the joint names of the petitioners was subjected to prohibitory under section 132(3) of the Act on March 19,2002. The said locker was opened on March 23,2002, and cash amounting to Rs. 5 lakhs and some household jewellery was seized, vide panchnama dated March 23, 2002, annexure VI, to the writ petition. It is alleged in paragraph 12 of the petition that the cash found in the locker was part of the withdrawals made by the petitioner Dr. Mrs. Anita Sahai to the extent of Rs. 1.50 lakhs and of Dr. Sharad B. Sahai to the extent of Rs. 3.50 lakhs from their professional receipts. It is alleged that the same being disclosed assets no seizure could have been done in respect of them. It is alleged in paragraph 13 of the petition that with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a representation dated July 6, 2002, vide annexure 14 to the writ petition to the Director of Income-tax (Investigation), Kanpur, objecting to the validity of the search and requesting that the satisfaction note recorded prior to the issue of warrant of authorisation be supplied to the petitioner so that the petitioner can examine the alleged material on the basis of which the warrant under section 132 was issued. In paragraph 33 of the petition the petitioner had stated that she had objected to the transfer of jurisdiction from Noida to Meerut. The petitioners have also challenged the continuation of the block assessment proceedings and the notice dated October 26, 2002, issued by respondent No.5 under section 142(1) of the Act. The respondents have filed a counter affidavit. In paragraph 3 of the same it has been stated that a valid warrant of authorisation under section 132(1) was issued by respondents Nos. 1 and 3 and block assessment proceedings were validly initiated. In paragraph 5 of the same it is stated that the petitioner had not fully disclosed her income from the medical profession. In this connection a letter of the Joint Director of Income-tax, Meerut, to the Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lding with basement and this property exclusively belongs to Dr. Sharad B. Sahai for the use of his wife running her clinic. Hence, the fair market value of rent is assessable in the hands of Dr. Sharad B. Sahai. Hence, it is alleged that his income has not been fully or truly declared. In paragraph 11 it is denied that the petitioner has explained the source of cash of Rs. 5 lakhs kept in the locker. In paragraph 14 of the counter affidavit it is alleged that the petitioner has made surrender of his income/investment of his own free will without any force or compulsion by the search party. The search and seizure operation was legal and valid. In paragraph 16 it is denied that there existed no information on the basis of which the warrant could be issued. In paragraph 20 of the counter affidavit it is stated that the original warrants of authorisation were issued by the Director of Income-tax (Investigation), Kanpur, in respect of premises No. A-759, Sector 19, Noida, and B237, Sector 19, Noida. The Joint Director of Income-tax (Investigation), Meerut, has issued consequential warrant of authorisation only in respect of two lockers as per law. It is settled that the Central Bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of two conditions which are required to be fulfilled before any action is taken under section 132(1). These conditions are: (a) the Assessing Officer has reason to suspect that any income has been concealed or is likely to be concealed and, (b) he can make the enquiry before he takes action under clauses (i) to (v) of section 132(1). Learned counsel for the petitioner has submitted that while section 131(1A) uses the expression "reason to suspect", section 132(1) uses the expression "reason to believe". Reason to believe stands on a higher footing than reason to suspect, as held by the Constitution Bench of the Supreme Court in M. Ct. Muthiah v. CIT [1956] 29 ITR 390. Similarly in ITO v. Lakhmani Mewal Das [1976] 103 ITR 437; [1976] 3 SCC 757, the Supreme Court held that the words used in section 147/148 of the Income-tax Act are reason to believe and not reason to suspect. We are of the opinion that the submission of learned counsel for the petitioner is correct. The respondents in their counter affidavit have stated that it was respondent No.4 who had sent the material to respondent No.1 on the basis of which respondent No.1 had recorded his satisfaction under section 132(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed officer at the time of seizure and indiscriminate seizure has been made by it contrary to the guidelines of the Central Board of Direct Taxes, etc. Learned counsel for the petitioner has relied on the decisions in Om Parkash Jindal v. Union of India [1976] 104 ITR 389 (P&H) and Balwant Singh v. R.D. Shah, Director of Inspection [1969] 71 ITR 550 (Delhi). In the present case it appears that there has been an indiscriminate seizure without any application of mind in as much as all the books of account which were duly reflected in the balance-sheet, income-tax returns, patient case records which are required for medico-legal cases purposes, computers and other professionally related documents and articles have been seized by the Department. The respondents are trying to justify the seizure on the basis of post search materials, which in our opinion cannot be legally done. It is a well-established law as laid down by the Supreme Court of India that the order originally passed cannot be improved by way of affidavits vide Mohinder Singh Gill v. Chief Election Commissioner [1978] 1 SCC 405. Learned counsel for the petitioner has relied on several decisions of the Supreme Court and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment may be fully justified in issuing a notice under section 148 of the Act, but no action can be taken under section 132(1)(c) . . ." In Ajit Jain v. Union of India [2000] 242 ITR 302 (Delhi), it was observed (vide page 311): "The mere fact that the petitioner was in possession of the said amount could not straightaway lead to the inference that it was his undisclosed income. . . the intimation simplicitor by the CBI that the money was found in the possession of the petitioner, which, according to the CBI, was undisclosed, in our view, without something more, did not constitute information within the meaning of section 132 so as to induce a belief that the cash represented the petitioner's income which has not been or would not be disclosed. A bare intimation by the police or for that matter by any person, without something more, cannot be considered sufficient for action under section 132 of the Act, for it would be giving naked powers to the authorities to order search against any person and prone to be abused. This cannot be permitted in a society governed by rule of law. Even assuming that the said amount was not reflected in the books of account of the company, as claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant of authorisation which led to formation of reason to believe that the petitioners had undisclosed assets or undisclosed income. No doubt para. 16 of the counter affidavit has mentioned that the Director has recorded satisfaction note on February 26, 2002, but the said note has not been annexed to the counter affidavit, and we are unaware of its contents. The case was heard on many dates but yet the respondents have not filed copy of the alleged satisfaction note dated February 26, 2002, and hence no reliance can be placed on the same. It may be mentioned that search and seizure cannot be a fishing expedition. Before search is authorised the Director must on the relevant material have reason to believe that the assessee has not or would not have disclosed his income. In our opinion the reason to believe must exist and must be taken into consideration by the Director/Commissioner at the time of issuing of warrant of authorisation. If the reason to believe comes into existence later, i.e., after issuance of warrant of authorisation, then in our opinion the warrant of authorisation and entire search and seizure will be illegal even if the material on the basis of which the Direc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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