2006 (7) TMI 195 - HC - Income Tax

Court Rules on Warrants & Search Procedures Under Income Tax Act: No Prior Notice, Bank Books Valid

RAGHU RAJ PRATAP SINGH AND OTHERS Versus ASSISTANT COMMISSIONER OF INCOME-TAX

The court held that a warrant of authorization under Section 132 of the Income Tax Act does not require prior notice to the person being searched. Issuing ... Challenge to notice u/s 158 BC – search - block assessment u/ch XIV-B – Held that Additional Director does not get any statutory power to issue authorization to issue warrant – consequently, search, block assessment, issuance of notice u/s 158 BC made in pursuance of such authorization are liable to be set aside – plea of invalidity of search on ground that search was not made as per s. 132, is accepted – held that common authorization in respect of more than one person is permissible Issues Involved:1. Validity of search under Section 132 of the Income Tax Act without service of warrant of authorization.2. Issuance of a common warrant of authorization naming more than one person.3. Treatment of bank books of account as books of account/documents of the person other than the bank.4. Legality of warrant of authorization served on the bank for furnishing information.5. Powers of calling information under Sections 131, 133(6), and 132 of the Act.6. Requisition under Section 132(A) against a person not in possession of the seized documents, books of accounts, assets, etc.7. Requisition under Section 132(A) from the police without court permission.8. Competence of the Additional Director of Income Tax (Investigation) to issue the warrant of authorization.Issue-wise Detailed Analysis:1. Validity of Search under Section 132 without Service of Warrant of Authorization:The court held that Section 132 of the Income Tax Act does not require prior notice or service of the warrant of authorization on the person whose premises are to be searched. The provision mandates that the designated officer must have information leading to a reasonable belief that the conditions in sub-clauses (a), (b), or (c) of Section 132(1) are met. The court cited several cases, including I. Devrajan v. Tamil Nadu Farmers Service Co-operative Federation and Jain & Jain v. Union of India, to support that the warrant need not be served on the person being searched but must be shown to the officer-in-charge of the premises being searched.2. Issuance of a Common Warrant of Authorization Naming More than One Person:The court found that issuing a common warrant of authorization naming more than one person is permissible under the Act. The term 'Sarvashri' used in Form 45 indicates the inclusion of multiple persons. The court referenced Madhupuri Corporation v. Prabhat Jha, which upheld the issuance of common authorization when interconnected transactions involving multiple persons are suspected.3. Treatment of Bank Books of Account as Books of Account/Documents of the Person Other than the Bank:The court rejected the argument that bank books of account cannot be treated as the books of account of the person being searched. It emphasized that the relationship between a bank and its customer is that of debtor and creditor, and the money in the bank account can be considered the money of the person being searched. The court cited several cases, including Commissioner of Income Tax v. Bhaichand H. Gandhi, to support this view.4. Legality of Warrant of Authorization Served on the Bank for Furnishing Information:The court held that the warrant of authorization served on the bank for furnishing information constitutes a legal search under Section 132. It reasoned that the search in a bank involves obtaining details of accounts, FDRs, and other valuable articles, which is a legitimate part of the search process.5. Powers of Calling Information under Sections 131, 133(6), and 132 of the Act:The court clarified that while Sections 131 and 133(6) allow for calling information, Section 132 specifically deals with search and seizure. The warrant of authorization issued under Section 132 was valid for conducting a search in the bank, and the subsequent actions taken under Section 132(3) were also valid.6. Requisition under Section 132(A) Against a Person Not in Possession of the Seized Documents, Books of Accounts, Assets, etc.:The court found that requisition under Section 132(A) is valid if the documents or assets are seized from the custody of a person related to the person being searched. The requisition made in the case was justified as the documents seized by the police were not in court custody and were relevant for the investigation.7. Requisition under Section 132(A) from the Police without Court Permission:The court held that requisitioning documents from the police without court permission is valid under Section 132(A) if the documents are not custodia legis. The documents seized by the police in this case were not in court custody, making the requisition valid.8. Competence of the Additional Director of Income Tax (Investigation) to Issue the Warrant of Authorization:The court agreed with the Delhi High Court's decision in Dr. Nalini Mahajan v. Director of Income Tax (Investigation), holding that the Additional Director (Investigation) does not have the authority to issue a warrant of authorization under Section 132. The court found that the warrant issued by the Additional Director was invalid, and the subsequent search and block assessment proceedings were without jurisdiction.Judgment:The court dismissed the first set of writ petitions (Writ Petition Nos. 5731(MB) of 2004, 5730(MB) of 2004, 5729(MB) of 2004, 5931(MB) of 2004, and 5932(MB) of 2004) and allowed the second set of writ petitions (Writ Petition Nos. 5005(MB) of 2004, 5015(MB) of 2004, and 5017(MB) of 2004). The court quashed the search proceedings and block assessment proceedings in the second set of writ petitions, restraining the income-tax authorities from proceeding under Section 158 BC against the petitioners in the second set.