TaxTMI 
TaxTMI 
2013 (2) TMI 124
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.... private practice. His son, Vikram, is the owner of Vikram Audio Centre and he is also involved in textile business. Further, the petitioner had established a charitable institution, bearing the name 'Dr. P.G. Viswanathan Charitable Trust', wherein rehabilitation and treatment for hearing impaired children are done. 3. It had been further stated that, on 12.9.2002, raid operations had were commenced in the case of Dr. P.G. Viswanathan, the writ petitioner in W.P.No.20073 of 2003, and his wife, V. Muthulakshmi, the writ petitioner in W.P.No.20074 of 2003, in their residential premises, at Door No.20, Govind Singh Road, R.S. Puram, Coimbatore and in the premises of Vikram Hospital at No.69, West Venkatasamy Road, R.S. Puram, Coimbatore, under Section 132 of the Income Tax Act, 1961. During the search proceedings, the respondent department had seized a number of documents. They had also found a sum of Rs.10,82,850/-, in cash, in the premises of Dr. P.G. Viswanathan. They had seized a sum of Rs. 10,00,000/- from the said premises. On 8.11.2002, the department had found a sum of Rs. 2,20,560/- in the premises of Vikram Hospital. However, they had not seized the same. The respondent had....
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....earnt, by the petitioners in the said writ petitioners, that the second respondent had issued the notices for the block assessment under Sections 158-BD read with 158-BC of the Income Tax Act, 1961, for initiating the relevant proceedings for the block assessment, for the period in question, based on the searches and seizures conducted, illegally, in the residential premises, at Door No.20, Govind Singh Road, R.S. Puram, Coimbatore, and in the premises of Vikram Hospital, at No.69, West Venkatasamy Road, R.S. Puram, Coimbatore. Therefore, it had been prayed that this Court may be pleased to declare the proceedings of the second respondent, pursuant to the notices issued under Section 158-BD, read with 158-BC of the Income Tax Act, 1961, as they had been issued by the said authority, without having the jurisdiction to do so. 4. In the counter affidavit filed on behalf of the respondents, in W.P.No.20073 of 2003, it has been stated that the petitioner had been filing the income tax returns, from the assessment year, 1990-91, onwards. It has been further stated that, during the course of the search, at the premises of the petitioner, a sum of Rs.10,82,850/- had been found out of whic....
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.... found during the search had been received from a single patient, she could not furnish the details of the said patient, including the patient's name and address. 7. It had also been stated that the search conducted by the authorities concerned was not a mala fide attempt to adversely affect the petitioner, in any way. The seizure had been ordered, based on the information gathered during the pre search enquiries and on the evidence available in the income tax records relating to the petitioner. The enquiries made at the field level had also been taken into account for having the reason to believe that the petitioner was indulging in the suppression of professional receipts and in the inflation of the claims, by showing the agricultural income, in order to evade the payment of tax. 8. It had also been stated that the warrant issuing authority had applied its mind, fully, before issuing the warrants for the searches and seizures. It is a matter of record that the authority concerned had formed its belief, based on the materials collected in the course of its pre-search enquiry and after due application of mind, as per the requirements of Section 132 of the Act. 9. It has been fur....
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....' and it must exist on the file of the authority concerned, based on which he should have the reason to believe that action under Section 132 of the Act is called for. The reason to believe must be tangible in law and it should have a rational nexus with the belief. Otherwise, an order issued for the searches and seizures, by the authority concerned, would be arbitrary and illegal. 12. The learned counsel appearing on behalf of the petitioners had relied on the following decisions in support of his contentions. 12.1. In Calcutta Discount Co. Ltd. v. Income-tax Officer, Companies District I, AIR 1961 SC 372, it has been held that if the conditions precedent for the exercise of the powers of the authority concerned do not exist the high court may exercise its jurisdiction, under Article 226 of the Constitution of India, to prohibit the action initiated by the authority concerned. The existence of an alternative remedy is not always a sufficient reason for refusing the relief sought by the petitioner to prohibit an authority acting without jurisdiction from continuing such action. The expression reason to believe, in section 34(1)(a) of the Income Tax Act, 1922, postulates belief an....
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....ce of a search warrant is a serious matter and it would be advisable not to dispose of an application for search warrant in a mechanical way by a laconic order. Issue of search warrant being in the discretion of the Magistrate it would be reasonable to expect of the Magistrate to give reasons which swayed his discretion in favour of granting the request. A clear application of mind by the learned Magistrate must be discernible in the order granting the search warrant." 12.5 In Balwant Singh v. R.D. Shah, Director of Inspection, [1969] 71 ITR 550 (Delhi), it had been held as follows: "Search and seizure is a serious invasion on the rights of the subjects. The search and seizure was really not known at earlier stages to common law. When it was for the first time introduced, it was confined only to stolen goods, but its usefulness soon forced its recognition and was, from time to time, extended to such like searches and seizures. It is true that sometimes the over-zealousness of the authorities led to its abuse and it appears that for this reason the Fourth Amendment was introduced in the American Constitution in recognition of the fact that a man's house is his castle not to be inv....
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.... has been revealed for the purpose of the Act, get redress and more so, when, proceeded the submission, they has laid claimed to the amount on the footing that they had secured it by way of loan from various traders and had deputed Vinod Kumar Jaiswal to proceed with it to Calcutta to participate in an auction in connection with their business. We are not inclined to accept the submission, or, we feel that in a case like the present when the action is wholly without jurisdiction and is, consequently, not backed by any authority of law, denial of relief would encourage arbitrary action on the part of the authorities. As consistently held by this Court, noticeably in the case of Manju Tandon [1978] 115 ITR 473 (All), the plea of alternative remedy is of no avail where the action is wholly without jurisdiction and results in infringement of any fundamental right of the petitioners." 12.7 In Dr. Nand Lal Tahiliani v. Commissioner of Income-Tax [1988] 39 Taxman 127 (ALL), it had been held as follows: "In the instant case, the information given by the complainant was of a very general nature. What could have resulted in action against the petitioner under section 132 was a reasonable b....
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....has reason to believe is the foundation for action. It sets the machinery in motion. Therefore, it has not only to be authentic but capable of giving rise to inference that the person was in possession of undisclosed income, which has not been or would not be disclosed. Ganga Prasad Maheshwari's case (supra), Vindhya Metal Corpn. v. CIT [1985] 156 ITR 233 (All.). In order that formation of opinion must be in good faith and not mere pretence it is necessary that information in consequence of which it is formed must be valid and linked with the ingredients mentioned in the section, that is, there must be rational connection between the information or material and the belief about undisclosed income. 4. Unfortunately the record produced by the learned standing counsel left us not only dazed but shocked....... Prakash, J Privacy is a very valuable right of a civilised society and violation thereof is not permissible except by authority of law and, therefore, the department should not only be slow but slowest in acting upon the information being given by an informer. Before acting upon the information, source of knowledge of an informer should be fully tested and unless the departmen....
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....rd to the documents, the ote states that action under section 132(1) is being taken to discover and take possession of the relevant documents of incriminating nature. The power of discovery is contained in section 31 of the Act and not under Section 132. That apart, there must be material on which the mind has to be applied and opinion formed that the person concerned will not produce documents if asked to do so. The satisfaction note of respondent No.2 is completely silent on this aspect....... 39. A search which is conducted under section 132 is a serious invasion into the privacy of a citizen. Section 132(1) has to be strictly construed and the formation of the opinion or reason to believe by the authorising officer must be apparent from the note recorded by him. The opinion or the belief so recorded must clearly show whether the belief falls under sub-clause (a), (b) or (c) of section 132(1). No search can be ordered except for any of the reasons contained in sub-clause(a), (b) or (c) . The satisfaction note should itself show the application of mind and the formation of the opinion by the officer ordering the search. If the reasons which are recorded do not fall under clause ....
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....t of the Assistant Director for action under Section 132 was endorsed by the Deputy Director and approved by respondent No.1. Repeated assertions had been made both, in the files of the department as well as in the pleadings before the Court, that information was available 'on record', the information had been laid before me' and 'that the conditions precedent for issuance of a search warrant existed...'. However, at the time of the hearing of the case and in spite of repeated opportunities, the department could not produce any record indicating the existence of any information. In the 'satisfaction note produced by the department, it had undoubtedly been stated that B was very likely to have invested monies in the business of his father-in-law. This was, however, a mere guess or a surmise. At best, it was a conjecture. Admittedly, there was no information. At least none was produced, in spite of various opportunities. Similarly, in the warrant of authorisation, it was claimed by the Director of Inspection (Investigation) that 'information had been laid before' him and that on the consideration thereof, he had reason to believe that 'if a summons under sub-section(1) of section 131....
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....a view to making a roving or fishing enquiry. 13. The expression 'reason to believe' has been explained in various decisions by the Apex Court and High Courts while dealing with Sections 132 and 148 of the Act. It has been held that the word "reason to believe" means that a reasonable man, under the circumstances, would form a belief which will impel him to take action under the law. The formation of opinion has to be in good faith and not on mere presence. For the purpose of Section 132 of the Act, there has to be a rational connection between the information or material and the belief about un-disclosed income, which has not been and is not likely to be disclosed by the person concerned." 12.11. In Union of India v. Ajit Jain, [2003] 129 Taxman 74, it had been held as follows: "The availability of an alternative remedy is not an absolute bar to the entertainment of a petition under article 226 though on account of availability of statutory remedies the Courts normally do not entertain writ petitions but where an action is wholly without jurisdiction and results in the infringement of any fundamental right, the plea of alternative remedy is of no avail. The instant case did fal....
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....ace Wood Furnishers (P.) Ltd. v. Director General of Income Tax (Investigation), Pune, [2012] 17 Taxmann.com 114 (Bom.), it had been held as follows: "Section 132 deals with search and seizure. It contemplates and springs to life when the various officers mentioned therein have, because of information in their possession, 'a reason to believe' that steps as prescribed in its clauses (a), (b) and thereof are necessary. Thus, this 'reason to believe' is required to be of the Director General or Director or the Chief Commissioner or the Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner." 12.16. The learned counsel appearing on behalf of the petitioner had submitted that a circular had been issued, bearing Instruction No.7 of 2003, dated 30.7.2003, relating to search and seizure, under Section 132 of the Income Tax Act, 1961, wherein, the Director Generals of Income-tax (Investigation), had been instructed that tax payers, who are professionals of excellence, should not be searched without there being compelling evidence and confirmation of substantial tax evasion. 12.17. In Pradip J.Mehta v. Commissioner of Income-Tax, AIR 2008 S....
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.... (ii) in consequence of which he may have reason to believe that the person concerned is in possession of money, bullion, etc., which represents, either wholly or partly, income which has not been or would not be disclosed for the purpose of the Act. If either of the conditions are missing or has not been adhered to, then the power under Section 132 cannot be invoked. Thus, the basis of the exercise of the power under Section 132(1) has to be the formation of belief and such belief has to be formed on the basis of the receipt of the information, by the authorising officer concerned, that the person is in possession of the money etc. and the possession of money is disclosed. The information and on the consequence of which the authority concerned has to form its belief should not only be authentic but also capable of giving rise to the inference that a person is in possession of money etc., which has not been or would not be disclosed for the purpose of the Act. Even though it is well settled that, while the sufficiency or the otherwise of the information cannot be examined by the Court under its writ jurisdiction, the existence of the information and its relevance to the formation o....
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....he action under section 132 of the Income Tax Act, 1961, for search and seizure, can be taken only in consequence of the information in the possession of the Department, for the authorities concerned to have reasons to believe that the persons concerned would not produce the books of accounts and other relevant materials, which may be said to be relevant for the purpose of assessment of the income of such persons. As such, the reasonable belief is the condition precedent for ordering the search and seizure. The belief of the authorities concerned must be a honest belief, based on cogent materials. It cannot be based on anonymous letters. It had also been held that the 'reasons' are matters of subjective satisfaction of the department concerned. However, when the matter is brought before the court of law, it must be shown as to what objective materials were available before the authorities concerned, for arriving at the belief necessary for the issuance of the warrant of search and seizure. 21. In SPACEWOOD FURNISHERS (P) LTD., v. DIRECTOR GENERAL OF INCOME TAX (INVESTIGATION) PUNE, [2012] 17 TAXMANN. COM 114 (BOM.), the Bombay High Court had observed that the satisfaction of the a....
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....d amendment, Rule 112 of the Income Tax Rules, 1962, there is no necessity to record the reasons for ordering the search. 24. The learned counsel for the respondents had further stated that the authorities concerned had reasons to believe that the assessees were in possession of undisclosed income and properties, on account of the suppression of a large amount of professional receipts passed off as agricultural income, based on the information received in the form of various inquiries and reports. Based on the satisfaction note of the authorities concerned, the warrant of authorisation had been issued for the search and seizure of the premises in question, as per the provisions of Section 132(1) (c) of the Act. 25. It had also been stated that the satisfactory note for the search and the issuance of warrants for authorisation, by the Director of the Income Tax (Investigation), Chennai, the first respondent herein, is a simultaneous process. The satisfaction note of the department is not a public document, as per the provisions of Section 24, read with item 16 of the Right to Information Act, 2005. It has also been stated that the provisions of Section 147 of the Income Tax Act, 1....
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.... and (g) of the Constitution of India. One cannot possibly ignore the fact that such evasions relating to payment of tax eat into the vitals of economic life of the community. Therefore, in the interest of the community, it is only right that the fiscal authorities should have sufficient powers to prevent tax evasion. As a broad proposition, it can be stated that if the safeguards, while carrying out search and seizure, are generally on the lines adopted by the Criminal Procedure Code, they would be regarded as adequate and render the temporary restrictions imposed by the measures as reasonable. It had also been stated that the safeguards provided under Section 132 of the Income Tax Act, 1961 and Rule 112 of the Income Tax Rules, 1962, are adequate to render the provisions of search and seizure as less onerous and restrictive under the circumstances. Therefore, the provisions relating to search and seizure, in Section 132 of the Income Tax Act and Rule 112 of the Income Tax Rules, cannot be regarded as violative of Articles 19(1)(f) and (g) of the Constitution of India. 29. The learned counsel had also relied on the decision of the High Court of Bombay, in HEMENDRA RANCHHODDAS MER....
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....lows: "51. In the decision of the Delhi High Court, wherein an earlier decision of the same High Court reported in (1992) 194 ITR 32 (L.R.Gupta v. Union of India), has been pointed out wherein it is stated that there must be some material which can be regarded as information which must exist on the file and that the authority cannot proceed based on mere rumour or a gossip or a hunch. In the case on hand, the concrete information was furnished by the respondent himself which was exclusively known to him was revealed to the first appellant. Therefore, it will have to be found out whether based on the said information he had sufficient reason to believe for initiating an action under Section 132. 52. In that respect in that very decision it is pointed out that the opinion which has to be formed by the officers is subjective and the jurisdiction of the Court to interfere is very limited and that the Court will not act as an appellate authority and examine meticulously the information in order to decide for itself as to whether action under Section 132 was called for. 53. The only other aspect which the Court can examine would be whether the reason to believe was tangible in law and....
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....imbatore, and in the premises of Vikram Hospital, at No.69, West Venkatasamy Road, R.S.Puram, Coimbatore. 37. The learned counsels appearing on behalf of the petitioners had submitted that none of the requirements prescribed in Clauses (a) to (c) of Section 132 (1) of the Income Tax Act, 1961, were existing at the time of the passing of the order, by the respondent department, to conduct the search and seizure operations in the premises in question. Since, the search and seizure operations, ordered under Section 132 of the Income Tax Act, 1961, is a serious invasion of the privacy of a citizen, the power to order such searches and seizures should be considered in a strict sense. The authority concerned, empowered to order the searches and seizures, should have the necessary information to form a belief that a search is necessary, as per the provisions of the said section. Thus, it is clear that extraneous reasons cannot be the basis for the issuing of an order of search and seizure by the authority concerned. 38. It had been further contended that the information, based on which an order for search and seizure is issued, must be something more than a mere rumor, a gossip or a hun....
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....petitioners to stall further proceedings relating to the allegations of evasion of payment of Income tax, by the petitioners, by raising the issues relating to the jurisdiction of the respondent department to issue the search warrants. Of course, it would be open to the petitioners to defend themselves by showing, at the appropriate stage of the proceedings, that they are not liable to pay the Income tax, as assessed by the authorities of the respondent department. The belief of the authorities concerned that the petitioners had secreted certain documents relevant for the purpose of investigation of the matter relating to the alleged evasion of Income tax, by the petitioners, is based on certain materials available before the said authorities. 42. It is clear that the formation of the opinion, prior to the issuance of the search warrants, had been based on the materials available before the authority concerned. As such, it would not be appropriate for this Court to analyse, in detail, whether the decision of the respondent department to issue the warrants of search and seizure is perfect or logical in nature. It would be sufficient if there were certain materials, which could have....
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....l the more important for the authorities concerned, authorized by law, to unearth and to bring to light large scale evasions in the payment of taxes and other such serious irregularities being committed with impugnity. Even if there had been certain minor irregularities committed by the authorities concerned, relating to the procedural aspects of the search and seizure operations, they cannot be held to be substantial or sufficient in nature to declare the search and seizure operations as illegal and void. Based on the specific directions issued to the respondents, they had placed before this Court the original records, based on which the respondent department had a reason to believe that there was a necessity to issue the warrants to search the premises in question. On a perusal of the said records this Court is inclined to hold that the opinion formed by the respondent department that there was a necessity to issue the warrants of search, to search the premises concerned, cannot be held to be arbitrary or void, as prayed for by the petitioners, in the present writ petitions. 46. There is no doubt that the personal liberty and the privacy of a citizen stands on a high pedestal in....