1985 (4) TMI 323 - SC - FEMA

Search warrant and authorisation upheld; seizures valid, intelligence sources protected; allegations of malice dismissed, appeal dismissed.

SC held the search warrant and warrant of authorisation lawful and the seizures valid, finding sufficient material for the officer's 'reason to believe' ... Validity of the search warrant and warrant of authorisation - seizure of certain documents including some foreign currency - personal malice by respondent No. 6 - HELD THAT:- When an officer of the Enforcement Department proposes to act under Sec. 37 undoubtedly, he must have reason to believe that the documents useful for investigation or proceeding under the Act are secreted. The material on which the belief is grounded may be secret, may be obtained through Intelligence or occasionally may be conveyed orally by informants. It is not obligatory upon the officer to disclose his material on the mere allegation that there was no material before him on which his reason to believe can be grounded. The expression 'reason to believe' is to be found in various statutes. We may take note of one such. Sec. 34 of the Income Tax Act, 192. inter alia provides that the Income Tax officer must have 'reason to believe' that the incomes, profits or gains chargeable to income-tax have been under-assessed, then alone he can take action under sec. 34. Assuming that it was obligatory to record reasons in writing prior to directing the search, the file submitted to the court unmistakably shows that there was material enough before the officer to form a reasonable belief which prompted him to direct the search. That the documents seized during the search did not provide sufficient material to the officer for further action cannot be a ground for holding that the grounds which induced the reasonable belief were either imaginary of fictitious or mala fide conjured up. In this case, however as the documents and other materials have been sealed under the warrant of authorisation issued under Sec. 132 A of the Income Tax Act, the Enforcement Directorate may legitimately close the proceedings. We cannot move back ward and conclude that if no further proceedings are taken, at the inception the search was malafide or for reasons irrelevant or extraneous. the exercise of power. The contention therefore, must be rejected. Having examined all the limbs of the submission, we find no merit in the contention that the issuance of search warrant was illegal or the search was illegal and invalid. It was next urged that if there was no justification for issuing a search warrant, the search under the authority of such a warrant would be illegal and the respondents 1 to 4 are bound to return the documents. If the officer who issued the search warrant had material for forming a reasonable belief to exercise the power the search cannot be styled as illegal and therefore, no case is made out for directing return of the documents on the supposition that the search and seizure were illegal. The next submission was that respondent No. 6 was actuated by a personal malice and with a view to harassing and humiliating the appellants instigated and provoked his friend, the second respondent to issue the search warrant and to carry out the search. Though the submission was made at some length, Mr. Desai, learned counsel appearing for some of the respondents dispelled whatever little doubt was generated in our mind by the submissions of the first appellant He referred to Pass Book Account Nos. 132269 and 159431, both issued by the Bank of India and urged that what was mentioned was not the account number but the Pass Book numbers and the Account Nos. SB 6731 and SB 7626 both tally and therefore, the submission in this behalf is misconceived. We accept the same. It was then urged that there were some erasures in some of the loose sheets. We found none. After referring to pages 148, 149 and 150 of the diary. an argument was attempted to be built up that there is some tinkering with the same. We found the submission wholly imaginary. Therefore, there is absolutely no merit in the contention that there has been some tampering with the documents when they were sealed under the authority of the warrant of authorisation issued by the Commissioner of Income Tax. These were all the contentions raised in this appeal and as there is no merit in any of them, the appeal fails and is dismissed but with no order as to costs. Issues Involved:1. Legality of the search warrant issued by the Assistant Director, Enforcement.2. Legality of the warrant of authorization issued by the Commissioner of Income Tax.3. Allegations of personal malice by respondent No. 6.4. Requirement to return documents seized during the search.5. Compliance with procedural requirements under Sec. 37 of the Foreign Exchange Regulation Act and Sec. 165 of the Code of Criminal Procedure.6. Allegations of tampering with documents by the officers of the Enforcement Directorate.Issue-wise Detailed Analysis:1. Legality of the Search Warrant Issued by the Assistant Director, Enforcement:The appellants contended that the search warrant issued by respondent No. 2 was illegal as there was no material before him to entertain a reasonable belief that any documents useful for or relevant to an investigation under the Foreign Exchange Regulation Act were secreted in any place. The court examined the affidavit and the original papers produced and found that there was sufficient material before respondent No. 2 to justify the issuance of the search warrant. The court held that the Assistant Director, Enforcement, acted within his powers and had reasonable grounds to believe that incriminating documents were secreted in the appellants' residence.2. Legality of the Warrant of Authorization Issued by the Commissioner of Income Tax:The appellants challenged the warrant of authorization issued under Sec. 132A of the Income Tax Act, arguing that it was influenced by personal malice from respondent No. 6. The court found no substance in the allegations of personal malice and held that the warrant of authorization was issued based on sufficient material and information available to the Commissioner of Income Tax.3. Allegations of Personal Malice by Respondent No. 6:The appellants alleged that respondent No. 6 instigated the issuance of the search warrant due to personal malice. The court found the allegations to be vague and unsupported by evidence. The court noted that the affidavit of the servant, Gyan Chand, was not provided, and the allegations were deemed to be a nefarious attempt to attribute personal malice without substantial proof.4. Requirement to Return Documents Seized During the Search:The appellants argued that the documents seized during the search should be returned as the search was illegal. The court referred to the decision in Pooran Mal v. Director of Inspection (Investigations) of Income Tax, which held that relevant evidence obtained through illegal search or seizure is not excluded merely on that ground. The court concluded that even if the search was illegal, it did not necessitate the return of the seized documents.5. Compliance with Procedural Requirements under Sec. 37 of the Foreign Exchange Regulation Act and Sec. 165 of the Code of Criminal Procedure:The appellants contended that the officer issuing the search warrant must record in writing the grounds of his belief and specify the items to be searched for, as required by Sec. 165 of the Code of Criminal Procedure. The court held that Sec. 37(2) of the Act provides that the provisions of the Code relating to searches shall apply 'so far as may be,' meaning that the methodology prescribed for carrying out the search should be generally followed. The court found that there was sufficient material before the officer to form a reasonable belief and that the procedural requirements were substantially complied with.6. Allegations of Tampering with Documents by the Officers of the Enforcement Directorate:The appellants alleged that the documents were tampered with by the officers of the Enforcement Directorate. The court examined the documents and found no evidence of tampering. The court accepted the explanation provided by the respondents and concluded that the allegations were unfounded and imaginary.Conclusion:The appeal was dismissed as the court found no merit in any of the contentions raised by the appellants. The search warrant and the warrant of authorization were held to be legal and justified. The allegations of personal malice and tampering with documents were found to be unsupported by evidence. The court upheld the procedural compliance with the relevant legal provisions and dismissed the appeal with no order as to costs.