TaxTMI 
TaxTMI 
2005 (7) TMI 42
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....hram Road, Calicut, belonging to Dr. N. M. Mathai and his son, George Mathai, for a sum of Rs. 59 lakhs. An enquiry conducted by the investigation wing of the Department revealed that the petitioners had sold their residential house with 11.5 cents of land at Mavoor Road for a consideration of Rs. 42 lakhs and in turn purchased the residential house of one Dr. N.M. Mathai and his son for a consideration of Rs. 29 lakhs, but the consideration shown was only Rs. 12 lakhs. Both the transactions were registered on the same day, i.e., July 29,1995. Based on the information, a search was organised by the then Assistant Director of Income-tax (Investigation I), Calicut, as per the warrant of authorisation issued by the Director of Income-tax, Bangalore, under section 132 of the Income-tax Act. Search operations were conducted on October 27,1995, at the residence of Sri K.T. Hamza, Proprietor of Sagar Hotel at Kunnamangalam, residence of Dr. Balakrishnan Nair and Dr. K. Narayani at Sathram Road, Calicut, and at the residence of Dr. N.M. Mathai, Nedumchalil House at Muvattupuzha. During the course of the search on October 27, 1995, a preliminary statement and sworn statement under section 1....
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....total consideration of Rs. 22 lakhs for which only Rs. 9 lakhs was shown in the registration deed. It was further stated that out of the amount of Rs. 22 lakhs received he had given 50 per cent, to his son George Mathai (joint owner), Rs. 6 lakhs deposited in F.D. with the Union Bank of India, Muvattupuzha, and the balance amount of Rs. 5 lakhs was given to his relatives and the old age home at Muvattupuzha. Further he also confirmed that he and his son had received Rs. 13 lakhs towards unaccounted consideration in the deal. The post-search investigations were conducted by the then Assistant Director of Income-tax (Investigation I), Calicut, Sri P. N. Devadasan, who organised and executed the search operations and the relevant records were transferred to the Assistant Commissioner of Income-tax Investigation Circle I, Calicut, for further action. Accordingly notices under section 158BC were issued by the Assistant Commissioner of Income-tax, Investigation Circle I, Calicut, on April 16, 1996, on the basis of the records and the reports received from the concerned Assistant Director of Income-tax. The petitioners then filed their returns under section 158BC on June 13, 1996. T....
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....ted October 27,1995, is produced herewith and marked as exhibit PI. Before leaving the search premises the said officer Sri Ravindran issued a prohibitory order in respect of an almi-rah kept in the residential premises and left the place forcefully taking a number of valuable documents without the knowledge or consent of either of the petitioners or the two panchas present which is per se against the mandatory provision of section 132(3) read with the provision of the Code of Criminal Procedure. The said officer recorded a statement from the first petitioner. A true copy of the said statement dated October 27, 1995, is produced herewith and marked as exhibit P2. Exhibit P2 was extracted from the petitioner under threat and coercion as would be revealed from this sentence quoted from exhibit P2. I am aware of the consequence of i.e., penalty and prosecution in case any of the facts proved to be false." Further, it is also stated by the writ petitioners as follows: "The petitioners could not keep the house in order as the search operations were still incomplete. The first petitioner telephoned the officer and requested him to complete the search so that he could set his hou....
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....sought to be inducted into the premises of the petitioners." The petitioners also raised various other procedural violations in the conduct of search and seizure which we will deal with in the latter part of the judgment. The second respondent filed a detailed counter affidavit on October 23, 1996. Additional counter affidavit was filed by the second respondent on January 13, 1998, and also filed an affidavit in the writ appeal on February 15, 1999, to expunge the adverse remarks made in the judgment of the learned single judge. The first respondent filed a counter affidavit on November 18, 1997. The statement was filed by counsel on behalf of the respondents on October 23, 1998. Counter affidavit was filed by the first respondent in the writ petition on June 2, 1998. The second respondent also filed additional counter affidavit in the writ petition on December 7, 1998. The second respondent in the various counter affidavits refuted the allegations raised and also supported the action of the Department in carrying out the search and seizure. Inspection Wing, it was stated, had followed all the statutory and other procedures laid down in the conduct of search and seizure. Refe....
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....ingle judge after hearing counsel on either side and after perusing the various averments contained in the counter affidavits and reply affidavit, took the view that the action of the second respondent and the members of the investigation team in keeping the seized documents in an almirah in the house of the assessee violated the mandatory requirements and there is no explanation whatsoever as to why books of account, documents, etc., found out during the search on October 27, 1995 could not be seized. The learned single judge took the view that in the absence of any satisfactory explanation as to why the books of account, pass book and the documents were not practicable to be seized on October 27, 1995, itself, it is a case of contravention of sub-section (3) of section 132 of the Act. The learned single judge also noticed that though search was commenced on October 27, 1995, the same could be resumed only on November 10, 1995, and there was no explanation for the delay of fourteen days in resuming the search. Further the learned single judge found that there is no provision in the Code of Criminal Procedure or in the Income-tax Act or the rules for postponing the search for such ....
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....mitted that the learned single judge has committed an error in not properly understanding the difference between the wordings in the proviso to section 132(1) relating to the practicability of seizure and also the wordings in section 132(3) relating to the procedure where it is not practicable to seize the materials. Counsel also submitted that there are sufficient reasons for resuming the search on November 10, 1995, since it was not complete on October 27, 1995. The finding that the search party had taken away various documents on October 27, 1995, is only a mere surmise and not supported by any evidence. Counsel submitted that the learned single judge is not justified in placing reliance on exhibit P5 which was not proved by the assessee since disputed by the Department. Counsel submitted that the burden is entirely on the assessee to prove exhibit P5 and its contents. Comparison of the signature, according to counsel, would not establish the contents of the documents. Counsel submitted, the learned single judge has committed an error in not properly appreciating the facts and therefore came to a wrong conclusion on facts and law. Counsel submitted that the Department has got th....
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....ng belonging to the respondents at Mavoor Road and the petitioners in turn had purchased the property from Dr. N.M. Mathai. Enquiry conducted by the investigation wing of the Department revealed that the petitioners had sold their residential house with 11.5 cents of land for a consideration of Rs. 42 lakhs. Though the amount admitted in the document was only Rs. 12 lakhs they purchased the residential house from Dr. N. M. Mathai for a consideration of Rs. 29 lakhs as against the recorded price of Rs. 9 lakhs. Both the transactions were registered on the same day, July 29, 1995. Based on the above information, the Assistant Director of Income-tax (Investigation I), Calicut, organised a search as per the warrant of authorisation issued under section 132 of the Act by the Director of Income-tax, Bangalore. The second respondent was deputed as the authorised officer by the superior officers. The fact of deputation was made known to the writ petitioners just before the commencement of search. Search operations were conducted not only at the residence of the petitioners but also at the residence of Dr. N.M. Mathai. During the course of the search on October 27, 1995, the statements were....
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....exhibit P1 panchanama dated October 27, 1995, admitted to have been signed by the writ petitioners and the two panchas. Paragraph 11 of the panchanamas is extracted below for easy reference. "Before leaving the abovementioned place of search the entire search party again offered themselves for personal search which was taken/declined. The above panchanama has been read by us/explained to us in local language." Sri T. Ravindran has put his signature which has been correctly recorded. If there was any attempt to take away any document from the premises of the writ petitioners they should have objected the same since the departmental officials headed by the authorised officer had offered themselves for personal search before and after the search. Search team consisted of 21 persons and not the second respondent alone. No complaint has been raised against the other persons who have all come as a team. Original of the panchanama has been produced by the second respondent as exhibit R2(c). It has been stated in para. 10 of the panchanama that the search commenced on November 10, 1995 at 11.00 a.m. and the proceedings were closed on the same day at 3.00 p.m. Paragraph 11 of the panc....
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....ts and the same may be irrelevant but they kept all those documents and records in an almirah and sealed the same for further scrutiny. If it was not practicable to seize all the books of account and records as per the second proviso to sub-section (1) of section 132 the Authorised Officer has to serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such Officer and such Officer may take such steps as may be necessary for ensuring compliance with the sub-section. The Explanation to section 132(3) states that serving of an order under sub-section (3) of section 132 shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery, etc. The facts would indicate those procedures have been complied with by the search team. The learned judge, in our view, has completely misunderstood the scope of sub-section (9A) of section 132 in holding that the seized materials were not handed over to the Income-tax Officer within fifteen days of the seizure. It may be pointed out that there was no seizure on October 27, 19....
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....re is a delay of fourteen days for which the Department have given acceptable explanation. In the absence of any time limit prescribed in the Code of Criminal Procedure or the Income-tax Act, we are not prepared to say that the delay in conducting the search has vitiated the search and seizure. We are not prepared to say that the procedure adopted by the second respondent and the inspection team is in any way violative of article 21 of the Constitution of India or discriminatory. The apex court in Pooran Mal v. Director of Inspection (Investigation) [1974] 93 ITR 505 had elaborately considered the scope of section 132 of the Income-tax Act and rules 112 and 112A of the Income-tax Rules, 1962, as well as articles 14 and 19(1)(f) and (g) of the Constitution of India and held as follows: "It is a well-known fact of our economic life that huge sums of unaccounted money are in circulation endangering its very fabric. In a country which has adopted high rates of taxation a major portion of the unaccounted money should normally fill the Government coffers. Instead of doing so it distorts the economy. Therefore, in the interest of the community, it is only right that the fiscal autho....
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....time also he had no case that the second respondent had taken away any records or documents from his residence on October 27, 1995. The Department has got reliable information to hold that the retraction statement by the writ petitioner is not correct. In the statement of N. M. Mathai, residential house at Calicut was sold to the first writ petitioner for a total consideration of Rs. 22 lakhs but only Rs. 9 lakhs was shown in the registration deed. Detailed information was furnished by Mathai which would disprove the subsequent retraction statement made by the petitioners. The petitioners have not attributed any ill-motive or malice against the second respondent. The learned single judge after holding so should not have held that the action of the second respondent was arbitrary and his conduct was unbecoming of an officer and his action has affected the credibility of the Department. The conclusions of the learned judge are entirely rested on exhibit P5 which was not proved. The learned judge, in our view, has completely misdirected in placing reliance on that document which is a subsequent creation. Unwanted and untenable allegations have been raised against the second respondent....