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TMI Blog2006 (7) TMI 195X X X X Extracts X X X X X X X X Extracts X X X X ..... for the block period commencing from 1.4.1996 to16.12.2002. Since all the writ petitions arise out of almost similar facts and involve the same questions of law, we have proceeded to decide them by a common order but in doing so, keeping in mind the distinct circumstances, which require separate adjudication, we divide the aforesaid petitions in two sets. Writ Petition Nos.5731(MB) of 2004, 5730(MB) of 2004 and 5729(MB) of 2004, Writ Petition No.5931(MB) of 2004 and Writ Petition No.5932(MB) of 2004, which have been filed respectively by (i) Raghuraj Pratap Singh, son of Udai Pratap Singh, (ii) Smt. Bhavni Kumari, wife of Raghuraj Pratap Singh, (iii) Smt. Manjul Raje, wife of Udai Pratap Singh (iv) Trilochan Pratap Singh Bagh Evam Paryavaran Sanrakshan Samiti, U.P., Bhadri district Pratapgarh through its Mukhya Sanrakchhak Udai Pratap Singh, and (v) Sri Laxmi Narain Mandir Trust,Bhadri through its President and Trustee Udai Pratap Singh, would be referred to as the 'first set' of writ petitions (hereinafter referred to as the 'first set') and the remaining writ petitions, namely, Writ Petition Nos.5005 (MB) of 2004, 5015(MB) of 2004, and 5017(MB) of 2004, which have been filed re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n additional point, which has been raised, is as under, regarding which we will consider when we address ourselves to the second set of writ petitions: (i) the warrant of authorization could not have been issued by the Additional Director of Income Tax (Investigation), he not being the authority under the Act to issue any such authorization. 5. Responding to the aforesaid challenge, learned counsel for the Revenue submitted that these questions cannot be allowed to be raised by the petitioners, as there are no pleadings to the said effect in their writ petitions. Supporting the aforesaid argument, attention of the court was drawn to the pleadings in the writ petitions to indicate that no relief against the search has been claimed and that the grounds of challenge to the search, if at all could be read in the writ petitions are limited to the extent that without service of warrant of authorization on the petitioners, no search could have been conducted, and that the 'person' searched was the Bank and not the petitioners in terms of Section 132(1)(c). 6. The proceedings for block assessment, in the instant case, have been initiated under section 158 BC, which falls under Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tax payable by him on the basis of such assessment; (d) the assets seized under section 132 or requisitioned under section 132A shall be dealt with in accordance with the provisions of section 132B." 9. The petitioners though had taken the plea that none of the aforesaid action has been taken for the petitioners inasmuch as neither any such search has been conducted on the petitioners under section 132 nor any books of account, other documents or assets have been requisitioned under section 132A of the Act from them, but they do not deny the search in the Banks, which, according to them, was only a mechanism for collecting information regarding the accounts of the petitioners and could not be termed as a valid 'search', besides the plea that the petitioners can not be treated to be the person searched within the meaning of Section 132(1)(c), nor the money in deposit with the Bank, can be said to be in their possession. 10. Considering that the power of search has to be exercised with great caution since it is a serious invasion upon the rights, privacy and freedom of the tax payer, the petitioners cannot be denied their right to question the validity of the search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a case Chapter XIV-B would have no application." 13. The Supreme Court upheld the aforesaid decision in appeal filed by the Union of India v. Ajit Jain which is reported in (2003) 260 ITR 80 (SC). 14. The proceedings under section 158BC since can only be initiated if either of the two conditions given therein did exist, therefore, initiation of such proceedings and continuance thereof would depend upon the jurisdiction of the income-tax authorities which they would only get if there has been a valid search and/or books of accounts, or other documents etc. are requisitioned under section 132(A). The challenge to such a search can be made even in the collateral proceedings for which proposition of law, reference can be made to the decision of the Supreme Court in the case of Ram Chandra Arya v. Man Singh and another, AIR 1968 SC 954 and Balvant N. Viswamitra and others v. Yadav Sadashiv Mule (2004) 8 SCC 706. It is true that the petitioners in the instant case have not challenged the search by asking a relief against the aforesaid search but the pleadings do reveal that they have raised specific pleas regarding the validity of search, may be on limited grounds, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice under sub-section (4) of section 22 of the Indian Income-tax Act,1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given to the person for the purpose of search nor it requires any service of warrant of authorization upon such person. The requirement is that there has to be information in the possession of the designated officer (Director-General or the Director, or the Chief Commissioner or the Commissioner or any such Joint Director or the Joint Commissioner, as may be empowered in this behalf by the Board) who, in consequence of the information in his possession, has reason to believe that there is any person to whom either of the conditions in sub-clauses (a),(b) and (c) applies, then the Director General or the Director, or the Chief Commissioner or the Commissioner or any such Joint Director or the Joint Commissioner, as the case may be, may authorize any officer enumerated in sub-clause(A) and (B) to make search in the manner prescribed therein by exercising such powers, as are also detailed in the provision itself, and such an officer would be known as 'authorized officer'. 21. In the entire scheme aforesaid, there is no requirement of issuing warrant of authorization to the person whose undisclosed income and/or property is to be searched much less any service of warrant of auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank. 24. In the case of Subir Roy v. S.K. Chattopadhyay (1986) 158 ITR 472, the Calcutta High Court also held that it was not necessary to supply the warrant of search to the petitioner before hand provided they had the occasion to have and see the said warrants at the time of search. 25. In the case of Jain Jain (1982) 134 ITR 655; it was held that there is no provision either under the Act or the Rules for supply of copy of warrant of authorization. All that the law requires is that the authority must be produced before commencement of search and/or seizure. 26. Relying upon the Circular dated 7 th March,2001 issued by the Commissioner of Income Tax and the Tax Payers' Charter, it has been urged by the petitioners that the aforesaid proposition of law regarding no requirement of service of warrant of authorization upon the person searched can be no more a good law inasmuch as that the rights and duties as laid down in the Charter, mentioned aforesaid was not the subject matter of consideration in those cases and in view of the provisions of sub-section (14) of section 132, the Circulars have got binding force, the violation of which would make the enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng used, subject to law, before the income tax authorities in other legal proceedings against the persons, from whose custody that material was seized by issuance of a writ of prohibition. It was not the seized material, in Pooran Mal case which by itself could attract any penal action against the assessee. What is implicit from the judgment in Pooran Mal case is that the seized material could be used in other legal proceedings against an assessee, before the income tax authorities under the Income Tax Act, dealing with escaped income. It is, therefore, not possible to hold that the judgment in Pooran Mal case can be said to have laid down that the "recovered illicit article" can be used as proof of unlawful possession of the contraband seized from the suspect as a result of illegal search and seizure." 30. The apex court was thus not considering the meaning and import of section 132 of the Act and the procedure, required to be followed therein. The stand of the prosecution relying upon the dictum of the Pooran Mal case (1974) 1 SCC 345, for establishing the legality of the search conducted under the NDPS Act in violation of section 50 was the subject matter of consideration, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same etc. Any interpretation which confines the meaning of the word 'person' used in section 132(1)(a),(b) and (c) only to the person who is said to be possessed of the undisclosed income or wealth, the provision regarding authorization of the authorised officer to enter into any building, place, vessel, vehicle or aircraft and make a search therein or to search any other person, as given in sub-clause (b) in Form 45 would all be rendered nugatory. In fact, the interpretation of the word 'person' as the petitioners argue, would mean that no search can be conducted upon any place, building, vessel, vehicle or aircraft if the person, whose concealed income and properties are to be traced out and detected unless he himself is present at the place where the search is to be made. This is neither the requirement of section 132 or Rule 112 nor that of the warrant of authorization issued in Form 45. 33. The Charter does not anywhere contemplates or directs that the person who owns any money, bullion, jewellery or other valuable article or thing and who is named in the warrant of authorization was necessarily to be shown the said warrant before entering in the building, place vess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The warrant of authorization is issued in the statutory proforma given in Form 45, as prescribed by Rule 112 of the Income Tax Rules read with section 132 of the Act. The requirement therein for the present controversy, are that it is addressed either to the Deputy Director, Assistant Director/Assistant Commissioner or the Income Tax Officer and names the person against whom information regarding possessing of undisclosed income and/or property has been received by the Director General or the Director, Chief Commissioner or the Commissioner of Income Tax, Deputy Director, Deputy Commissioner of Income Tax, who, on consideration of such information has reason to believe that the said 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,1961 and the authorizing officer has reason to suspect that books of accounts, money, bullion jewellery or other valuable article or thing have been kept or are to be found in a place 'specified' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinely been kept at a given place, by the person to whom it belongs. It is in fact the concealed income or property, which has not been disclosed to the income tax authorities, nor is likely to be disclosed, even if required to do so. It is not the statutory requirement anywhere that the search should be done only after prior notice to the person who is likely to be searched and who has secretly placed his undisclosed income or property at any place which may be a building, place vessel, vehicle or aircraft. If the petitioners' plea is accepted, it would defeat the very purpose of conducting a search, as prior information or service of warrant of authorization may caution the person, who is believed to have undisclosed income. Such a requirement would also frustrate the object of the provision of search and seizure, which is to be conducted without loosing time and without forewarning the tax evader. 39. The imperative of service of warrant of authorization is neither for the person who is said to be possessed undisclosed income or property nor for the bank, but it would be sufficient compliance of principle of natural justice that the warrant of authorization is shown to the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame has no legal basis. A bare glance at Form 45 and the relevant prescribed proforma where the name of the person who is said to be in possession of any money, bullion, jewellery or other valuable article or thing, which has not been disclosed or would not be disclosed under the Act, is mentioned, has a column, which is as follows: " Sarvashri/Shri/Shrimati.........." 43. The very description of naming these persons would satisfy that when the word 'Sarva Shri' has been used along with the word 'Shri' and 'Shrimati', it takes note of a single person as well as several persons. The word 'Sarvashri' does not require any interpretation, which undoubtedly mean more than one person. 44. In the case of Madhupuri Corporation v. Prabhat Jha, Deputy Director of Income -Tax (Investigation), (2002) 256 ITR 498, the plea aforesaid has not found favour of the court. 45. The court observed as under: ". .....There was no prohibition against issuance of common authorization when the competent authority had reason to believe that a number of persons were involved in interconnected transactions as reflected from the prima facie material available with the competent authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e books of account and money etc. in various accounts of the bank must necessarily belong to such person and must be in his possession also and in the absence of any such belonging and possession, the said money, bullion, jewellery or other valuable article or thing or the books of account cannot be searched under section 132, as, such money in the bank accounts cannot be said to be the money of the 'person' who is said to be searched nor the books of account can belong to such person. 49. Strengthening the aforesaid plea, learned counsel has gone to the extent of saying that in fact under the existing provisions of the Income Tax Act, namely, section 132, no search could be made so far as bank accounts are concerned where it is said that money of the person, who is being searched, is kept in deposit nor the books of accounts, can be, for the same reason, searched or seized. 50. In support of the aforesaid stand, it has been argued that the relationship between the depositor and the bank is only that of a 'creditor' and 'debtor' wherein the bank has full authority to use the money of the depositor without his permission and earn profits by way of interest with the only req ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Khan v. Attar Singh, (1936) 2 All England Reports 545 (PC) and the case of N. Joachimson( A Firm Name) v. Swiss Bank Corporation, (1921) 2 All England Reports 92 were also cited to buttress the argument that a deposit of money is not confined to a bailment of specific currency to be returned in specie. As in the case of a deposit with a banker it does not necessarily involve the creation of a trust, but may involve only the creation of the relation of debtor and creditor, a loan under conditions. 55. Contesting the plea of the petitioner that the bank accounts can neither be searched nor seized and that since the money in the said accounts is with the bank wherein the relationship of creditor and debtor exist between the depositor of the money and the bank and, therefore, it cannot be treated as money of the person, who is being searched, learned counsel for the respondent submitted that in the light of the provisions of section 132(1) (a),(b) and (c) read with Rule 112 and Form 45, it would be evident that if such a plea is accepted, the same would make the entire provision of search and seizure practically ineffective and unenforceable. The scheme of the provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his argument that if the warrant of authorization has been issued, authorizing the officer to conduct search in the bank or the premises of the bank, it would be a search upon the bank and the undisclosed income and the property in that case would be of the Bank which cannot be taken to be the income and property of the person, named in the warrant of authorization, who is said to be in possession of any undisclosed income. 58. When the authorised officer is authorised to enter and search any premises, may be, the Bank, he makes search in the said bank of money, bullion, jewellery or other valuable article or thing in respect of the person who is said to be possessed of such money, bullion, jewellery or other valuable article or thing. The premises searched is the bank and the person who is said to be possessed of such money, bullion, jewellery or other valuable article or thing is the person who has been named in the warrant of authorization, to whom not only the so discovered, concealed wealth belongs but he is also possessed of the same, within the meaning of Section 132(1)(c). 59. In respect of the FDRs it has been urged that they are not the valuable articles wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ras High Court in the case of I. Devarajan (1981) 131 ITR 506 and the decision of the Supreme Court in Sir Shadilal Sugar and General Mills Ltd. v. CIT, (1987) 168 ITR 705 and few other cases and held that the FDRs cannot be taken as valuable articles. 60. The case of Bhagwandas (1975) 98 ITR 194, decided by the Gujarat High Court was a case dealing with section 132(5) of the Income Tax Act, 1961. This provision stands omitted by the Finance Act, 2002 w.e.f. 1.6.2002. The Court giving meaning to the aforesaid provision, observed as under: ".....Therefore, by using the words " valuable article or thing", what the legislature had intended to imply is that the assets covered by these words should be such as could be converted into cash so that the tax liability of the assessee concerned, as revealed from his undisclosed income, could be duly satisfied. In other words, the thing or article, which can be retained under section 132(5), should be one, which is carrying its own intrinsic value in terms of money. A document of title relating to an immovable property or even a fixed deposit receipt issued by a bank does not possess any intrinsic market value. They can ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... released only after the issue of the ownership of the FDRs had been finally decided in the income-tax proceedings of the Anand Group. 64. In the instant case also only a restraint order under section 132(3) has been passed in respect of FDRs and, of course, since sub-section (5) of section 132 already stood omitted by Finance Act, 2002 on the date of search, the question of passing any order under the said provision did not arise nor the plea of the petitioners that the FDRs could not be searched nor seized would make the present search illegal. 65. The petitioner's further plea that since Annexure-6 to the counter affidavit (assessment order) states that warrant of authorization issued under section 132(1) of the Act which was served on the bank was in respect of furnishing details of bank accounts, therefore, even assuming that relevant material was with the authority, action under section 132 could not have been taken for collecting the information and the said action of the Income Tax Department at best was only an exercise of collecting information, which cannot be termed as 'search', has to be seen in the light of the relevant provisions regarding search and collec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the language used in the assessment order that the details were to be found out from the banks would not mean that it was not the search proceedings but only the act of collecting information from the bank. Had it been so, steps under sub-section (1A) of section 131 or section 133(6) could have been taken. But here after the search, orders under section 132(3) were also passed. 71. In the case of a search in the bank, the bank would necessarily be asked to give details of the undisclosed income, money, bullion, jewellery or other valuable article or thing, for which purpose the details of the bank accounts, FDRs and the lockers, would have to be given and disclosed to the authorised officer. The authorised officer would act as per terms of the warrant of authorization and the relevant provisions of the Act and the Rules framed thereunder. The search in a bank cannot be made by pouncing upon the ledgers and books of account, the bank records or the FDRs. The only way to make search in the bank is to ask the officer-in-charge of the bank to give the details of such accounts, FDRs etc. which action is nothing but a search under the relevant provisions of the Act and the Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , that the Revenue was making roving and fishing enquiry, which argument in other word would mean that there was no material for forming the reasonable belief, we summoned the record from the department and gone through it. 78. The petitioners have relied upon the case of Dr. Mrs. Anita Sahai v. Director, Income Tax (Investigation), (2004) 266 ITR 697 in support of the plea that the reasons to believe must exist and must be taken into consideration by the Director/Commissioner at the time of issuing the warrant of authorization and the material recovered from the search cannot justify the search. In the aforesaid case notice under section 131 was issued after the commencement of the search. In the facts of the aforesaid case, the court held that it appeared that the Income-tax Department had only acted on the rumours and the very fact that the respondents issued notices under section 131(1A) after the search and seizure operation under section 132 of the Act showed that there was neither reason to believe nor material before the Assessing Officer on the basis of which he could issued a warrant under section 132. 79. In L.R. Gupta v. Union of India (1992)194 ITR 32 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o are believed on good grounds to have illegally evaded the payment of tax on their income and property. Therefore, drastic measures to get at such income and property with a view to recover the Government dues would stand justified in themselves. When one has to consider 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. 84. The court also looked into the inbuilt safeguards in section 132 of the Income Tax Act. It was noted that the power to order search and seizure is vested in the highest officers of the department and that the exercise of this power can only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned from the police and which have also been brought on record alongwith the counter affidavit, did show various income and expenditure from different businesses including illegal sale of liquor and fish, by Raghuraj Pratap Singh, which were never shown in the return filed by him did constitute the relevant material for entertaining the reasonable belief that it is a case of tax evasion wherein undisclosed income and property has not been subjected to any tax and it would not be made available if the notices are issued. The case will fall under sub-clause (c) of section 132(1). There was thus enough corroborative evidence apart from newspaper reports which in isolation may not have been made the basis for issuance of warrant of authorization or warrant of requisition under section 132(1) and 132A respectively. On scrutiny of the documents having been done and considering the relevant information received, the warrant of authorization under section 132(1) was issued, after satisfaction of the Director (Investigation) in accordance with the provisions of the Act and the Rules. 89. In a case of search and seizure, where search has illegally been conducted, mere disclosure of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch he could entertain the necessary belief. 92. The documents produced before the court show that not only there was relevant material or information with the Director but he had also applied his mind and assessed the material and after secret enquiries relevant for the purpose and after recording a satisfaction note he has issued the warrant of authorization. This establishes that there was not only relevant material but also sufficient material/information with the Director and that he had taken all necessary steps before authorizing the search since he had reason to believe that undisclosed income or property was kept in the banks of the person(s), who were named in the warrant of authorization. The formation of such reasonable belief on the aforesaid grounds cannot be said to be invalid or in any way an action of making any roving and fishing enquiry. 93. The subsidiary argument is that documents/material seized by the police from the house of Hari Om Shanker Srivastava, firstly, could not have been requisitioned by the income tax authorities without the permission of the court and; secondly, the information submitted by the police was wholly inadmissible and could no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as and when required and to give effect to the further orders of the court as to the disposal of the same. In the instant case, the documents seized by the police did not become the case property nor were custodia legis, the requisition was rightly made under section 132A of the Act, which cannot be faulted with. The District Magistrate, Pratapgarh himself had written the letter to the Income Tax Officer, Pratapgarh mentioning that the documents seized by the police show large tax evasion and various illegal activities of sale of liquor and fish. The action of requisitioning the documents from the authority of police, was taken on satisfaction of reasonable belief, that if the documents are returned, the same would not be produced when demanded. Second Set of Writ Petitions: 96. In regard to the second set of writ petitions, apart from the aforesaid pleas, the main point which has been urged is that the Additional Director, (Investigation) was not at all competent to issue the warrant of authorization under section 132 (1) of the Act. Learned counsel for the petitioner in this regard has reiterated that if a statute provides a particular thing to be done in a particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention of Mr. Ddhabe that the report made under Section 5-A of the Act by the Sub-Divisional Officer was done in his capacity as a Revenue Officer so as to be amenable to the appellate jurisdiction of the Commissioner under Section 247 of the Maharashtra Land Revenue Coded. This contention must, therefore, fail." 99. In the case of Dr. Nalini Mahajan and others v. Director of Income Tax (Investigation), (2002) 257 ITR 123 (Del), the court made the following observations: "...However, the principal question, which would arise for consideration of this court would relate to an interpretation of the expression "Director" as contained in section 2(21) of the Act. The interpretation clause as contained in section 2 begins with the words" unless the context otherwise requires". The definition of "Director-General" or "Director" are exhaustive ones. ".Thus unless and until an amendment is carried out, by reason of the redesignation itself, read with the provisions of the General Clauses Act, the Additional Director does not get any statutory power to issue authorization to issue warrant. We, therefore, are of the opinion that the Additional Director (Investigation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifferent from that contained in the interpretation clause." 102. The Court further observed that the provisions of the Income Tax Act clearly envisage a hierarchy of officers. Had the intention of Parliament been to confer the power of issuing authorization or warrant upon all officers, who come within the purview of the interpretation clause of "Director" or "Director-General", it was not necessary to mention therein that where the Director or the Director-General or the Chief Commissioner or the Commissioner or any such Joint Director or the Joint Commissioner, as the case may be, empowered in this behalf by the Board inasmuch as the latter authorities would have also come within the purview of the definition of the Director-General or the Director. If the contention is accepted, then even an authority, who is lower in rank, may also issue authorization in favour of an officer of higher rank, which situation cannot, in our opinion, countenanced. 103. The Court also observed that the words, which are used in declaring the meaning of other words, may also need interpretation and the Legislature may use a word in the same statute in several senses. In that view of the matt ..... X X X X Extracts X X X X X X X X Extracts X X X X
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