TaxTMI 
TaxTMI 
2013 (1) TMI 318
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Essentially, what the petitioner is seeking is a declaration that the warrant of search issued against the petitioner under Section 132 of the Income-tax Act, 1961 (herein after referred to as 'the said Act') was without the authority of law and, therefore, all proceedings pursuant to the search conducted at the residential premises of the petitioner at C-18, Sector-26, Noida, U.P. and pertaining to the petitioner ought to be declared as being illegal and the jewellery, articles and documents in lockers belonging to the petitioner be released to her unconditionally and the prohibitory orders in respect thereof be vacated. 3. From the affidavit filed on behalf of the respondent / revenue, it appears that an information had been received by the Deputy Director of the Income-tax (Investigation), Unit-IV (3), New Delhi from the Director General Central Excise Investigation, Delhi (DGCEI) in 2009 with regard to alleged unearthing of unaccounted sales and production as well as alleged clandestine removal / clearing of the products of M/s Dharampal Satyapal Group from their units at Noida, Gauhati and Agartala. The products comprised of various brands of paan masala, gutkha, such as Ra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....inst the DS Group, the said Deputy Director of Income-tax had received information that in view of the close relationship of the petitioner with the promoters of DS Group, accounts containing details of undisclosed sales and incomes, etc. were "likely to be kept" at the residence of the petitioner at C-18, Sector 26, Noida, U.P. It is further indicated in the said affidavit that the following was mentioned in the satisfaction note prior to the conduct of the search on the residence of the petitioner:- "She is the wife of deceased director and according to information her house is used to keep accounts which are unaccounted." 5. The said affidavit further indicates that, based on the satisfaction note prepared by the said Deputy Director of Income-tax, the Additional Director of Income-tax (Investigation), Unit-IV recommended search under Section 132(1) on the DS Group. The Director of Income-tax (Investigation)-II, New Delhi discussed the matter with the said Deputy Director of Income-tax as also the said Additional Director of Income-tax (Investigation) and accorded satisfaction that there were strong reasons to believe that DS Group of companies were engaged in unaccounted prod....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nitiation of the search was bad. However, the revenue has raised certain arguments which need to be considered. 8. The learned counsel for the petitioner had placed reliance for his submissions on the following decisions:- 1) Suresh Chand Agarwal v. Director General of Income-tax (Investigation) & Others: (2004) 269 ITR 22 (All); 2) S.R. Batliboi & Co. v. Director of Income-tax (Investigation): (2009) 315 ITR 137; 3) Dr Sushil Rastogi v. Director of Investigations, Income Tax Department & Others: (2003) 260 ITR 249 (All); 4) Dr Nand Lal Tahiliani v. Commissioner of Income-tax & Others: (1988) 170 ITR 592 (All); 5) Narayan R. Bandekar & Another: v. Income-tax Officer & Others: (1989) 177 ITR 207 (Bom); 6) Smt. Kavita Agarwal & Another v. Director of Income-tax (Investigation) & Others: (2003) 264 ITR 472 (All); 7) L.R. Gupta & Others v. Union of India & Others: (1992) 194 ITR 32 (Del); 8) H.L. Sibal v. Commissioner of Income-tax & Others: (1975) 101 ITR 112 (P&H). 9. The contentions of the petitioner were that the opinion or the belief amounting to a reason to believe, as indicated in Section 132(1) of the said Act, must clearly show that the belief falls under clau....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evant bearing on the formation of the belief and must not be extraneous or irrelevant. It was contended that in the present case, there is no information revealed by the revenue at all. Merely stating that some information had been received is not sufficient. There must be tangible evidence on the file. Secondly, the information must be such that it is reliable and on the basis of which a reasonable and prudent man would come to the conclusion that one of the conditions mentioned in Section 132(1) has been satisfied and, therefore, a search was warranted. It was submitted by the learned counsel for the petitioner that no such condition existed and, in fact, neither clause (a) nor clause (b) nor clause (c) of Section 132 (1) was satisfied in the present case. 10. The learned counsel for the revenue, however, contended that the reason to believe was in respect of the DS Group and clauses (a), (b) and (c) were satisfied insofar as a search was warranted on the DS group. According to the learned counsel for the revenue, the facts on the file clearly indicate that there was enough reason for the competent authority to believe that the condition stipulated in clauses (a), (b) and (c) o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elevant, are set out hereinbelow:- "132. Search and seizure. - (1) Where the Director General or Director or the Chief Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business; (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing:" 12. It is apparent that there are several parts to the said provision of search and seizure. In the first part, certain persons have been named, who would be competent to authorize other officers of the Income-tax Department to carry out searches. The first authority or warrant of authorization can only be issued by the named persons, namely, the Director General or Director or the Chief Commissioner or Commissioner or an Additional Director or Additional Commissioner or Joint Director or Joint Commissioner. Such warrant of authorization can only be issued by such a person in consonance of information in his possession and after he has formed a reason to believe that the conditions stipulated in clauses (a), (b) and (c) existed. 13. The information must be c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he citizens' right of privacy": one of the values of civilization. Any unwarranted intrusion on it cannot be countenanced. Reasonable belief exists if the information is not only trustworthy but reasonable and sufficient in itself to warrant the conclusion that the provisions of Section 132 were being violated. Because, if the exercise of power is bad or unlawful in inception, then it is not validated or nor does it change character from its success. It would not, therefore, be asking too much from the authorities to comply with the basic requirements of the section before they are permitted to invade the secrecy of one's home." 16. In Narayan R. Bandekar (supra), the High Court of Bombay observed as under:- "3. ... A plain reading of sub-section (1) of section 132 makes it clear that the powers can be exercised in consequence of information in the possession of the Director of Inspection or the Commissioner of Income Tax and from such information of the Commissioner has reason to believe that (a) any person, in spite of issue of summons, has failed to produce the books of account or other documents, (b) any person is likely to fail to produce the books if so called upon, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing the said decisions in Dr Nand Lal (supra) and L.R. Gupta (supra), a Division Bench of the High Court of Allahabad observed as under:- "5. On the facts of the case we are of the opinion that this writ petition deserves to be allowed. The law is well settled that a warrant of search and seizure under Section 132(1) can only be issued on the basis of some material or information on which the Commissioner/Director has reason to believe that any person is in possession of money, jewellery or other valuable articles representing wholly or partly income or property which has not been or would not be disclosed, under the IT Act. In the present case the respondents have not disclosed what was the material or information on the basis of which the Director/Commissioner entertained the belief that the lockers contained valuable jewellery or other articles representing undisclosed income. It is well settled that the satisfaction of the authorities under Section 132 must be on the basis of relevant material or information. The word used in Section 132(1) are "reason to believe" and not "reason to suspect". In the counter-affidavit it has been specifically stated in para. 18 that the authori....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o action can be taken under Section 132(1)(iii) or (3). An arbitrary seizure cannot be maintainable even where the authority has seized documents with ulterior motives. xxxx xxxx xxxx xxxx xxxx 12. Over two score years ago the Division Bench of this Court had opined in N.K. Textiles Mills v. CIT [1966] 61 ITR 58 propounded that it was necessary and essential for these officers to take into custody only such books as were considered relevant to or useful for the proceedings in question. It was not open to them to indiscriminately, arbitrarily and without any regard for relevancy or usefulness, seize all the books and documents which were lying in the premises, and, if they did so, the seizure would be beyond the scope of the authorization. Our learned Brothers have designedly used the words proceeding in question, in order to clarify that material that may possibly be of relevance to the affairs of a third party, unconnected with the raided assessee and beyond the contemplation of the search and seizure exercise, should not be retained. All remaining doubts will be dispelled on a perusal of H.L. Sibal v. CIT: 1975 CTR (P&H) 302 in which the Division Bench has, inter alia, analysed....