9911796707
TMI Blog2024 (5) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... mmons of notice is issued to him, or such person is in possession of any money, bullion or other valuable articles which represents either wholly or partly income or property which has not been or would not be disclosed, is the foundation to exercise the power under Section 132 of the said Act. The Apex Court in Laljibhai Kanjibhai Mandalia [ 2022 (7) TMI 639 - SUPREME COURT] and in Spacewood Furnishers Pvt Ltd. [ 2011 (12) TMI 59 - BOMBAY HIGH COURT] has specifically held that such reasons may have to be placed before the High Court in the event of a challenge to formation of the belief of the Competent Authority in which event the Court would be entitled to examine the reasons for formation of the belief, though not the sufficiency or adequacy thereof. It is also necessary to note that no notice or summons have been issued to petitioners calling for any information from them at any point of time earlier to the action under Section 132 (1) of the Act to give rise to an apprehension of non-compliance by petitioners justifying action under Section 132 (1) of the Act. Therefore, no reasonable belief can be formed that the person concerned has omitted or failed to produce books of acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 132 of the Act, respondent no. 1 issued authorisations dated 7th July, 2008 in favour of respondent no. 2 and others, authorising them to enter upon and search various premises belonging to petitioners. 4. Petitioner No. 1 was incorporated on 31st December 1960 under the Companies Act 1956 and was a leading manufacturer of forging and engineering products required in the automobile industry. Petitioner no. 1 had an annual turnover of over Rs. 314 crores for the year ended 31st March 2007. Petitioners were regularly assessed to income-tax and wealth tax. It is stated in the petition that the income tax assessments of petitioner no. 1 for the last 20 years have been made under section 143 (3) of the Act by way of detailed scrutiny. It is also stated that no penalty under section 271 (1) (c) of the Act has ever been levied upon petitioners for any concealment or furnishing inaccurate particulars of income. 5. On or about 9th and 10th July 2008, a search was conducted at the business premises of petitioner no. 1 as well as at residential premises of petitioner nos. 2 to 7, pursuant to an authorization dated 7th July, 2008 issued by respondent no. 1 under section 132 (1) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chief Commissioner or Commissioner in consequence of information in his possession, has reason to believe that: (i) any person to whom a summons under section 131 (1) of the Act, or a notice under section 142 (1) of the 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 (ii) 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 Act; or (iii) any person is in possession of any money, bullion, jewellery or other valuable article or thing which represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Act, then, such Director General or Director or the Chief Commissioner or Commissioner may authorise any Officer, to enter any premises, search and seize items which he suspects to represent undisclosed income. (b) There was no question of clauses (a) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were reflected in the regular of books of account of petitioners. The jewellery or ornaments were fully disclosed in Wealth tax Returns Filed along with valuation reports giving detailed description of the items of jewellery and ornaments and their values. During the search and thereafter, before they were seized, the same were reconciled and explained by petitioners. Notwithstanding, the explanation the jewellery has been seized. Copy of the information which was in possession of the empowered officer and his satisfaction after holding preliminary inquiries needed in the circumstances of the case to verify that the information was correct, must also be made available to petitioners. 7. In the affidavit in reply, the stand taken by the revenue basically is that the grounds raised in the petition are based on presumptions and conjectures. It is submitted that respondent no. 1 had information in his possession of undisclosed assets / documents which represented income or property which has not been or would not be disclosed by petitioners under normal circumstances. There was also reason to believe that petitioners were in possession of documents relating to such undisclosed income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search and seizure under Section 132 of the Act have been elaborated in Laljibhai Kanjibhai Mandalia (Supra) and it is settled law that copy of the material leading to the search should not be made available to assessee. It was also submitted that in view of the explanation inserted in Section 132 (1) by the Finance Act 2017 with retrospective effect from 1st April 1962, the reason to believe as recorded by the Income Tax authorities under Section 132 (1) shall not be disclosed to any person or any authority or the Appellate Tribunal. 12. It was also submitted by the Learned ASG that the court may examine the information / documents based on which the authorisations of search and seizure was issued and decide the matter within the principles elaborated in paragraph 33 of Laljibhai Kanjibhai Mandalia (Supra). 13. Ms Nagraj submitted that the reason behind insertion of the Explanation is to remove the ambiguity created by judicial decisions regarding disclosure of reasons recorded to any person or to any authority. Petitioners request for sharing a copy of the satisfaction note to examine whether the satisfaction note discloses any satisfactory information for the purpose of carr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Principal Commissioner or Commissioner has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in section 120, it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the Principal Chief Commissioner or Chief Commissioner or Principal 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the High Court is plainly incorrect. The necessity of recording of reasons, despite the amendment of Rule 112(2) with effect from 1-10-1975, has been repeatedly stressed upon by this Court so as to ensure accountability and responsibility in the decision-making process. The necessity of recording of reasons also acts as a cushion in the event of a legal challenge being made to the satisfaction reached. Reasons enable a proper judicial assessment of the decision taken by the Revenue. However, the above, by itself, would not confer in the assessee a right of inspection of the documents or to a communication of the reasons for the belief at the stage of issuing of the authorisation. Any such view would be counterproductive of the entire exercise contemplated by Section 132 of the Act. It is only at the stage of commencement of the assessment proceedings after completion of the search and seizure, if any, that the requisite material may have to be disclosed to the assessee. 22. At this stage we would like to say that the High Court had committed a serious error in reproducing in great detail the contents of the satisfaction note(s) containing the reasons for the satisfaction arrived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vii) The question as to whether such reasons are adequate or not is not a matter for the Court to review in a writ petition. The sufficiency of the grounds which induced the competent authority to act is not a justiciable issue; viii) The relevance of the reasons for the formation of the belief is to be tested by the judicial restraint as in administrative action as the Court does not sit as a Court of appeal but merely reviews the manner in which the decision was made. The Court shall not examine the sufficiency or adequacy thereof; ix) In terms of the explanation inserted by the Finance Act, 2017 with retrospective effect from 1.4.1962, such reasons to believe as recorded by income tax authorities are not required to be disclosed to any person or any authority or the Appellate Tribunal. 16. A similar matter came up for consideration before the Division Bench of this Court (Nagpur bench) in the case of Balkrushna Gopalrao Buty Ors. Vs. The Principal Director (Investigation), Nagpur Ors. Judgment dated 23rd April 2024 in Writ Petition No. 1729 of 2024. In that case also assessee was questioning the search and seizure carried out in his premises pursuant to the provisions of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jewellery or other valuable article which represents either wholly or partly income or property which has not been or would not be disclosed. 8.2 Such information must be in possession of the authorized official before the opinion is formed. 8.3 There must be application of mind to the material and the formation of opinion must be honest and bona fide. Consideration of any extraneous or irrelevant material will vitiate the belief/satisfaction. 8.4 Though Rule 112 (2) of the Income Tax Rules which specifically prescribed the necessity of recording of reasons before issuing a warrant of authorisation had been repealed on and from 1-10-1975 the reasons for the belief found should be recorded. 8.5 The reasons, however, need not be communicated to the person against whom the warrant is issued at that stage. 8.6 Such reasons, however, may have to be placed before the Court in the event of a challenge to formation of the belief of the authorised official in which event the court (exercising jurisdiction under Article 226) would be entitled to examine the relevance of the reasons for the formation of the belief though not the sufficiency or adequacy thereof. (emphasis supplied) 18. Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion under Section 132 (1) of the Act. Therefore, no reasonable belief can be formed that the person concerned has omitted or failed to produce books of accounts or other documents for production of which summons or notice had been issued, or that such person will not produce such books of accounts or other documents even if summons or notice is issued to him. 21. As regards the averments in the affidavit in reply, we agree with the view expressed in Balkrushma Gopalrao Buty (Supra) that respondents cannot rely upon what has been unearthed pursuant to the search and seizure action as the information giving a reason to believe as contemplated under Section 132 (1) of the said Act must be prior to such seizure. 22. We have read the contents of the file of the department given to us in a sealed envelope by counsel for respondents. Having considered the contents thereof, we are of the opinion that it does not disclose any information which would lead the Authorities to have a reason to believe that any of the contingencies as contemplated by Section 132 (1)(a) to (c) of the said Act are satisfied. The reasons recorded, in our view, only indicates a mere pretence. The material considere ..... X X X X Extracts X X X X X X X X Extracts X X X X
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