TaxTMI 
TaxTMI 
1985 (4) TMI 1
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....nding before him made to the Chairman, Central Board of Direct Taxes, by the first appellant. Actuated by this personal malice, respondent No. 6 first instigated respondent No. 2 to issue a search warrant under, the authority of which a raid was carried out at the residence of the appellants on August 24, 1979, which led to the seizure of certain documents including some foreign currency. Thereafter, when the appellants made various representations for return of documents, again instigated by respondent No. 6, respondent No. 5 issued a warrant of authorisation under s. 132A of the I.T. Act on April 9, 1984, by which respondent No. 2 was directed to deliver such books of account and other documents and goods seized during the search to the requisitioning officer. As the documents and material seized during the search had not been returned, the writ petition as aforementioned was filed for the reliefs hereinabove set out. When the writ petition came up before a Division Bench of the Punjab and Haryana High Court, Mr. Kuldip Singh, learned counsel who appeared on behalf of the Directorate of Enforcement Department made a statement that the Directorate has closed the proceedings and d....
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.... being a friend of respondent No. 2 instigated and provoked him to exercise this power of search and seizure and not to effectuate any purpose for which power is conferred but with a view to humiliating and harassing the appellants. A little while after, we will examine the allegation of personal malice. Suffice it to say that there is no substance in the allegation. Respondent No. 2 is a responsible officer being the Assistant Director, Enforcement, Foreign Exchange Regulation Act, stationed at Jullundur. He issued the impugned search warrant which led to the seizure. In the affidavit-in-reply on behalf of the respondents No. 1 to 4, it was clearly stated that search was authorised by the second respondent after he was fully satisfied on the basis of the information available in the official record and also on the basis of the information collected by the officers of the Enforcement Directorate after making enquiries. It was repeated in para. 14 of the affidavit-in-reply, that on the basis of the official record and reliable information in possession of respondent No. 2, he entertained a reasonable belief for issuing the search warrant against the appellants. Respondent No. 2, i....
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.... 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. Section 34 of the Indian I.T. Act, 1922, inter alia, provides that if the ITO must have " reason to believe " that the income, profits or gains chargeable to income-tax have been under-assessed, then alone he can take action under s. 34. In Narayanappa v. CIT [1967] 63 ITR 219 (SC), the assessee challenged the action taken under s. 34 and amongst others it was contended on his behalf that the reasons which induced the ITO to initiate proceedings under s. 34 were justiciable, and, therefore, these reasons should have been communicated by the ITO to the assessee before the assessment can be reopened. It was also submitted that the reasons must be sufficient for a prudent man to come to the conclusion that income has escaped asse....
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....ategories mentioned in the section. The court further observed that though under the section, the officer concerned need not give reasons if the existence of belief is questioned in any collateral proceedings, he has to produce relevant evidence to sustain his belief. shield against the abuse of power was found in the provision that the officer authorised to search has to send forthwith to the Collector of Customs a copy of any record made by him. Sub-section (2) of s. 37 of the Act takes care of this position inasmuch as that, where an officer below the rank of the Director of Enforcement carried out the search, he must send a report to the Director of Enforcement. The last part of the submission does not commend to us because the file was produced before us and as stated earlier, the officer issuing the search warrant had material which he rightly claimed to be adequate for forming the reasonable belief to issue the search warrant. It was, however, contended that when sub-s. (2) of s. 37 is read in juxtaposition with sub-s. (1), the legislative mandate clearly manifests itself that before issuing a search warrant in exercise of the power conferred by s. 37(1), it is obligatory u....
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.... the search is illegal, anything seized during such an illegal search has to be returned as held by a learned single judge of the Calcutta High Court in New Central Jute Mills Co. Ltd. v. Kaul, AIR 1976 Cal 178. Section 37(2) provides that " the provisions of the Code relating to searches, shall so far as may be, apply to searches directed under section 37(1) ". Reading the two sub-sections together, it merely means that the methodology prescribed for carrying out a search provided in s. 165 has to be generally followed. The expression " so far as may be " has always been construed to mean that those provisions may be generally followed to the extent possible. The submission that s. 165(1) has been incorporated by pen and ink in s. 37(2) has to be negatived in view of the positive language employed in the section that the provisions relating to searches shall so far as may be apply to searches under s. 37(1). If s. 165(1) was to be incorporated by pen and ink as sub-s. (2) of s. 37, the legislative draftsmanship will leave no room for doubt by providing that the provisions of the Code of Criminal Procedure relating to searches shall apply to the searches directed or ordered under ....
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....would have on the seizure of the documents during such illegal search. The view taken by a learned single Judge of the Calcutta High Court in New Central Jute Mills Co. Ltd.'s case, AIR 1976 Cal 178, that once the authorisation for carrying out the search is found to be illegal on account of the absence of recording of reasons in the formation of reasonable belief, the officer who has seized documents during such search must return the documents seized as a result of the illegal search is against the weight of judicial opinion on the subject and does not commend to us. In fact this decision should not detain us at all because virtually for all practical purposes, it can be said to have been overruled by the decision of the Constitution Bench in Pooran Mal v. Director of Inspection (Investigation) of Income-tax [1974] 93 ITR 505 (SC). This court held that " courts in India and even in England have consistently refused to exclude relevant evidence merely on the ground that it is obtained by illegal search or seizure. " If, therefore, the view of the learned single judge of the Calcutta High Court were to be accepted, meaning thereby that if the search is shown to be illegal, anything....
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....wer was initially exercised malafide." The court in Puran Mal's case [1974] 93 ITR 505 (SC), held that if the books of account and other documents collected during the search were afterwards found to be not relevant, that by itself does not make the search and seizure illegal. In this case, however, as the documents and other materials have been sealed under the warrant of authorisation issued under s. 132A of the I.T. Act, the Enforcement Directorate may legitimately close the proceedings. We cannot move backward and conclude that if no further proceedings are taken, at the inception the search was malafide or for reasons irrelevant or extraneous to 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 a search warrant was illegal or that the search was illegal and invalid. It was next urged that if there was no justification for issuing search warrant, the search under the authority of such a warrant would be illegal and respondents Nos. 1 to 4 are bound to return the documents. If the officer who issued the search warrant had material for forming a reasonable be....