1985 (4) TMI 1 - SC - Income Tax

Court upholds search warrant legality, dismisses malice claims. Good faith stressed in warrant issuance. Seized documents retained.

The court upheld the legality of the search warrant issued by the Assistant Director of Enforcement, finding it based on sufficient material. Allegations ... Search and seizure under s. 37 of the Foreign Exchange Regulation Act - reason to believe - application of the Code of Criminal Procedure provisions to statutory searches 'so far as may be' - recording of reasons for search and entitlement to disclosure - illegality of search and admissibility of seized material - warrant of authorisation under s. 132A of the Income-tax Act - malafide / personal malice - judicial scrutiny of grounds for beliefSearch and seizure under s. 37 of the Foreign Exchange Regulation Act - reason to believe - judicial scrutiny of grounds for belief - Validity of the search warrant issued under s. 37 of the Foreign Exchange Regulation Act and whether there was material to ground the issuing officer's reasonable belief. - HELD THAT: - The Court examined the file produced by the respondents and held that the Assistant Director of Enforcement had material in official records and information collected by officers which furnished grounds for entertaining a reasonable belief that documents useful to investigation under the Act were secreted in the appellants' house. Reliance was placed on established principles that the expression 'reason to believe' does not equate to mere subjective satisfaction and that the court's role is limited to ascertaining whether the reasons bear a rational connection to the belief and are not extraneous. Having inspected the record, the Court was satisfied the officer was justified in issuing the search warrant.The search warrant was validly issued; the officer had adequate material to form a reasonable belief and was justified in directing the search.Application of the Code of Criminal Procedure provisions to statutory searches 'so far as may be' - recording of reasons for search and entitlement to disclosure - Whether s. 37(2) of the Act imported s.165(1) CrPC so as to make prior written recording of reasons a mandatory precondition to issuing a search warrant and whether those reasons must be disclosed to the person affected. - HELD THAT: - The Court held that s. 37(2)'s phrase 'so far as may be' means the procedural methodology of s.165 may be generally followed but does not effect a literal incorporation of s.165(1) into s.37(1). Thus the officer need not, as a matter of law, record reasons in writing in the search warrant or disclose the material relied upon simply on allegation of absence of reasons. If deviation from CrPC procedure occurs, justification must be offered when challenged. The Court aligned this view with prior decisions which did not require that the grounds inducing belief be set out in the warrant itself.It is not obligatory as a matter of law to record the grounds in writing prior to directing the search, nor must those grounds necessarily be disclosed to the person affected; s.37(2) does not incorporate s.165(1) CrPC by pen and ink.Illegality of search and admissibility of seized material - warrant of authorisation under s. 132A of the Income-tax Act - Consequence of illegality in issuance or conduct of a search on the retention and use of documents seized during that search and whether seized documents must be returned. - HELD THAT: - The Court rejected the contention that illegality in the authorisation or conduct of a search automatically requires return of seized material. Relying on the settled principle in Pooran Mal and other authorities, the Court held that courts have generally refused to exclude relevant evidence solely because it was obtained by an illegal search; illegality does not automatically vitiate evidence. Where seized materials are sealed under an authorisation (here under s.132A I.T. Act) and proceedings are closed by the Enforcement Directorate, absence of further proceedings does not in itself prove mala fides or render the initial search illegal.Illegality in the method or initiation of a search does not, by itself, entitle the person to return of seized documents; such material may be admitted subject to careful judicial scrutiny.Malafide / personal malice - Allegation that respondent No.6 instigated the search out of personal malice and that the search was prompted by such malafice. - HELD THAT: - The Court examined the averments relied upon by the appellants and found them scanty, vague and unsubstantiated: crucial affidavits and identifiable witnesses were absent and the narrative was fanciful. On the material before it, the Court concluded the allegation of personal malice was concocted and without substance, and there was no merit in the contention that the search was instigated out of malice.Allegations of personal malice are negatived; the search was not shown to have been instigated by malafide motives.Tampering with seized documents - warrant of authorisation under s. 132A of the Income-tax Act - Contention that documents were tampered with or foisted upon the appellants after seizure and while sealed under a s.132A authorisation. - HELD THAT: - The Court considered the specific examples advanced by the appellants, inspected the relevant pages and passbook references, and found the suggested discrepancies to be misconceived or imaginary. The respondents dispelled doubts as to account/passbook numbers and no erasures or tampering were found on inspection.No tampering or foisting of documents was established; the contention is rejected.Final Conclusion: All contentions raised by the appellants were examined and rejected: the search warrant and search were lawful, there was no obligation to disclose prior written grounds as a matter of law under s.37(2), illegality of search does not automatically require return of seized material, allegations of personal malice and tampering were unproved; the appeal is dismissed with no order as to costs. Issues Involved:1. Legality of the Search Warrant Issued by Respondent No. 22. Allegations of Personal Malice by Respondent No. 63. Obligation to Record Grounds for Belief Before Issuing a Search Warrant4. Return of Seized Documents Due to Alleged Illegality of Search5. Alleged Tampering with Seized DocumentsDetailed Analysis:1. Legality of the Search Warrant Issued by Respondent No. 2The appellants challenged the legality of the search warrant issued by Respondent No. 2 (Assistant Director, Enforcement) on the grounds that there was no material before him to entertain a reasonable belief that documents useful for investigation under the Foreign Exchange Regulation Act, 1973, were secreted in the appellants' house. The court found that Respondent No. 2, a responsible officer, had issued the search warrant after being fully satisfied based on information available in the official record and information collected by the Enforcement Directorate. The court examined the original records and was fully satisfied that there was material before Respondent No. 2 to justify the issuance of the search warrant.2. Allegations of Personal Malice by Respondent No. 6The appellants alleged that Respondent No. 6 (Assistant Commissioner of Income-tax) bore personal malice towards them and instigated Respondent No. 2 to issue the search warrant. The court found no substance in this allegation. The allegations of malafides were deemed scanty and vague. The court noted that the affidavit of the servant involved in the alleged incident was not produced, and the names of the friend and the police officer were not disclosed, making the allegations unsubstantiated and imaginary.3. Obligation to Record Grounds for Belief Before Issuing a Search WarrantThe appellants contended that the officer issuing the search warrant must disclose the material on which the reasonable belief was based. The court held that it is not obligatory for the officer to disclose his material on the mere allegation that there was no material before him. The expression 'reason to believe' is not synonymous with the subjective satisfaction of the officer and must be held in good faith. The court found that the grounds for the belief had a rational connection to the formation of the belief and were not extraneous or irrelevant. The court also clarified that the methodology prescribed for carrying out a search under Section 165 of the Code of Criminal Procedure should be generally followed, but deviations are permissible if justified.4. Return of Seized Documents Due to Alleged Illegality of SearchThe appellants argued that if the search was illegal, the seized documents should be returned. The court referred to the Constitution Bench decision in Pooran Mal v. Director of Inspection (Investigation) of Income-tax, which held that relevant evidence obtained by illegal search or seizure should not be excluded. The court concluded that the illegality of the search does not vitiate the evidence collected during such search. The court emphasized that the authority before which such evidence is placed must be cautious in dealing with it. The court found no merit in the contention that the search was illegal and, therefore, no case was made out for directing the return of the documents.5. Alleged Tampering with Seized DocumentsThe appellants alleged that there had been tampering with the documents 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 regarding the passbook and account numbers and found the appellants' submission to be misconceived and imaginary. The court concluded that there was no merit in the contention that there had been tampering with the documents.Conclusion:The court dismissed the appeal, finding no merit in any of the contentions raised by the appellants. The search warrant issued by Respondent No. 2 was deemed legal, the allegations of personal malice by Respondent No. 6 were found to be unsubstantiated, and the obligation to record grounds for belief before issuing a search warrant was clarified. The court also held that the illegality of the search does not necessitate the return of seized documents, and there was no evidence of tampering with the seized documents. The appeal was dismissed with no order as to costs.