TaxTMI 
TaxTMI 
TaxTMI 
2004 (9) TMI 13
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....eizure. It is to be noted that the petitioner, M/s. Takshila Education Society, claims itself to be registered with the Registrar of Societies, New Delhi, and it was incorporated on July 9, 1997, with its registered office in New Delhi. According to them, it could obtain franchise to open schools at Patna, Bihar and Pune, Maharashtra under the aegis of Delhi Public School Society, New Delhi. The school at Patna started somewhere in April, 1999, whereas at Pune it could be started with effect from April, 2003. It is submitted that right from the incorporation registration under section 12AA of the Act was granted by the Director of Income-tax (Exemption), New Delhi, vide order dated October 1, 1997, and the petitioner's society is also registered under section 80G of the Act. According to them, the society is existing to achieve educational goals. It filed an application for approval under section 10(23C)(vi) of the Act and the competent/prescribed authority, that is, the Central Board of Direct Taxes, New Delhi, granted exemption from the accounting year 1999-2000 to 2001-2002 vide its order dated March 21, 2002. It is submitted by the society that respondent No. 2, Shri Sanjeev S....
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....nd other documents to attract clause (b). It is also submitted that after gathering/receiving information, respondent No. 1 would be obliged to record his satisfaction under clause (c) of section 132(1) of the Act because such a finding or reasons to believe are the basic foundation for an action under clause (c) of section 132(1) of the Act. According to them, the information should be a positive one and should be something more than a rumour or gossip or a hunch. According to them, a bare intimation without something more could not be considered sufficient for an action under section 132 of the Act, because reliance on such simple intimation would not authorise the authorities to direct a search. It is also submitted that the terms "reason to believe" and "reason to suspect" are different connotations and have different meaning, therefore, the authorities could not be allowed to confuse between the two and issue a warrant. It is also submitted that while acting upon the warrant, the officer taking the search or effecting seizure has to act in accordance with law and also has to make an investigation into the facts, i.e., whether the assets, funds, during search were disclosed; as....
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....he unsecured loans from Maurya Techno Securities Pvt. Ltd. to Takshila Education Society is made. On April 19, 2000, Sanjiv Kumar on behalf of the Delhi Public School, Patna, prayed for adjournment. On April 20, 2000, Sanjiv Kumar did not comply with the requirement under the summons. On April 26, 2000, a letter was issued to the Chairman, Delhi Public School, Patna, and to Sanjiv Kumar that their respective cases were fixed on May 4/5, 2000. On June 19, 2000, summons were again issued to Sanjiv Kumar of Maurya Techno Securities Pvt. Ltd. with a request to comply with the requirement latest by June 23, 2000. On June 23, 2000, Sanjiv Kumar appeared in person. His statement was partially recorded and the matter was adjourned to June 28, 2000. According to the Department, there was no compliance even on that day. On August 16, 2000, summons were issued to Sanjiv Kumar as Secretary, Takshila Education Society, and Md. Alim for compliance on August 22, 2000. On August 22, 2000, there was no compliance. A letter of even date was filed submitting, inter alia, that the case be adjourned to the second week of September, 2000. According to the respondents, being disgusted by the delaying ta....
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....n the hands of the trust and also observed that the additions would be made on protective basis in the hands of the main trustee, Sri Sanjiv Kumar (Secretary). It is further submitted that respondent No. 2 the Deputy Director of Income-tax (Investigation) on the basis of the detailed investigation presented a satisfaction note to the Additional Director of Income-tax (Investigation), Patna, on March 26, 2003. The said Additional Director of Income-tax (Investigation), Patna, on April 26, 2003, forwarded the report of the Deputy Director of Income-tax (Investigation), Patna, with his reasons of satisfaction to the Director of Income-tax (Investigation), Patna. On April 30, 2003, the Director of Income-tax (Investigation), Patna, recorded the reasons of satisfaction and issued warrant of authorisation. By the order dated May 2, 2003, the Director General of Income-tax (Investigation), Patna, approved the proposed action on the group after perusing and approving the satisfaction note as per the instruction of the Central Board of Direct Taxes. It is submitted that the petitioner-society was not paying any tax despite surplus profits in each year by creating a facade of a charitable ....
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....nt of Scientific Educational Promotion and Medical Aid Foundation. They submitted that the respondents were absolutely justified in issuing authorisation warrants, making search and effecting seizure in view of the materials available before them. Learned counsel for the petitioner submitted that if the material was available with the respondents in the year 2001, there was no good reason to conduct the search and seizure on May 8, 2003. It is also submitted that the respondents have not recorded any reason into their satisfaction nor have disclosed any information to the petitioner which led to the belief of the respondents that the petitioners were violating the provisions of law. It is submitted that in fact the whole game was played to vindicate the honour of respondent No. 2. On the same facts three assessments were reopened and in the reassessment order in the case of M/s. Aayaton was not referred. It is also submitted that the secretary of the petitioner in response to the notice issued under section 131 of the Act, appeared before the authority and did not adopt any delaying tactics. It is also contended that the grounds under section 132(1)(a),(b) and (c) of the Act are n....
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....any other authority. It is also submitted that any material collected during the course of search and seizure may not prove sufficient for the purpose of assessment but recovery of materials in itself would not be sufficient to say that the search was conducted with mala fide intention. It is submitted that recovery of any article, if considered to be the foundation for justifying the search it would lead to chaotic results. A search, even in the absence of recovery of incriminating articles, would not be illegal because the search is made after recording the reasons. It is also submitted that day-to-day diary is not to be maintained by the Department just like an investigating agency but they have to collect the evidence, information and facts and after scrutinising the same, have to record a finding that given would be a fit case for issuing warrant of authorisation. They have submitted that the materials available in the confidential documents were justifying the action taken by them. We have heard the parties and have gone through the complete records and the judgments on which reliance has been placed. Section 131 of the Act relates to power regarding discovery, production o....
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....Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to- (i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; (iib) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 20....
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....1969] 74 ITR 836 (SC), the action taken under section 132 of the Income-tax Act, 1961, was taken up for consideration. The Supreme Court observed that since by the exercise of the power under section 132 of the Income-tax Act, 1961, a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorises it to be exercised. If the action of the officer issuing the authorisation or of the designated officer is challenged, the officer concerned must satisfy the court about the regularity of his action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the court. If the conditions for the exercise of the power are not satisfied the proceeding is liable to be quashed. But where power is exercised bona fide, and in furtherance of the statutory duties of the tax officers, any error of judgment on the part of the officers will not vitiate the exercise of power. Where the Commissioner entertains the requisite belief and for reasons recorded by him authorises a designated officer to....
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....made it should direct oral evidence to be taken. From the said judgment of the Supreme Court, it would be clear that an action can be taken for issuance of warrant of authorisation and action must be taken in good faith, bona fide and on the basis of genuine material. The aggrieved party can challenge the action before a competent court alleging, inter alia, that the action was ill motivated. It was taken with vengeance and it was mala fide and actuated with malice. The Supreme Court further observed that the High Court in such a case where there are allegations and counter allegations should not proceed to determine merely on affidavits important issues of facts especially where serious allegations of improper conduct are made against the public servants and the officers assert that they acted in good faith in discharge of their duties. From the above referred judgment, it would also be clear that the authorities have to record their personal satisfaction and there is always scope or margin of error of judgment. If there is no malice or the allegation of malice fails then the action cannot be termed to be bad. In the matter of Pooran Mal v. Director of Inspection (Investigatio....
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.... be objectionable if its implementation is not accompanied by safeguards against its undue and improper exercise. As a broad proposition it is now possible to state that if the safeguards 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 measure reasonable. (iv) An innocent person who is merely in custody of cash, bullion or other valuables, etc., not knowing that it was concealed income is likely to be harassed by a raid for the purpose of search and seizure. That cannot be helped. Since the object of the search is to get at concealed incomes, any person who is in custody without enquiring about its true nature, exposes himself to search. Section (4) of section 132 shows the way how such an innocent person can make the impact of the search on him bearable. All that he has to do is to tell the true facts to the searching officer explaining on whose behalf he held the custody of the valuables. It will be then for the Income-tax Officer to ascertain the person concerned under sub-section (5). (v) Though in a very rare case a tax evader may comply with a requisition, the Director ....
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.... High Court found that that was not a case where on the information which in fact was in the form of rumour or gossip, the authorities could record their satisfaction or record reason to believe that the assessee has not disclosed the income and on being asked is not going to disclose the same. The Department has placed its reliance upon a judgment of the Karnataka High Court in the matter of Southern Herbals Ltd. v. Director of Income-tax (Investigation) [1994] 207 ITR 55. The High Court has observed that the law does not require a copy of the warrant of authorisation to be delivered or furnished to the persons against whom it is issued. It is sufficient if such a person is shown the warrant of authorisation. The High Court further observed that it is not for the court to examine the sufficiency of the material leading to the belief of the authority that search shall have to be conducted, the court has to see that the belief was reasonable, in the sense, it was formed on the basis of relevant material (information). The court cannot substitute its own opinion as to the reasonableness of the belief. The court has to examine to see whether the belief is an irrational or blind belie....
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....ollected during the course of investigation, has also to go through the two reports prepared by the Deputy Director and the Additional Director and thereafter has to record his own satisfaction before the warrant of authorisation is issued. In the present matter, the Director of Investigation has recorded his own satisfaction and the reasons to believe in his own handwriting. After going through the said three reports, we must hold that the action, was not actuated with malice. It was not mala fide nor was it to vindicate the honour of respondent No. 2. The Department has sufficient material with it. Some of the materials have already been disclosed in the counter affidavit filed by the respondents and they have claimed privilege in relation to the other materials so that any other subsequent action is not otherwise prejudiced. In our opinion, the respondent could not be compelled by the petitioners to divulge or disclose any material collected by the Department. The petitioners could not justifiably ask the Department to supply the reports of the three officers. The reasons to believe are to be recorded after marshalling the evidence collected during the course of investigation. ....
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.... given case, if there are strong reasons to believe that on search incriminating articles would be recovered, but the searching party does not recover any article, in that case if accepting the argument of the petitioner, search is held to be illegal then it would virtually be violation of the Act itself. "Reasons to believe" cannot be equated with positive proof. "Reasons to suspect", if it is something less than "reasons to believe" then positive proof would be of much higher standard than "reason to believe". In a given case, the "reason to believe" may be founded on certain information which prima facie appears to be valid and genuine. In a given case, the reasons may not prove the test of bona fides or genuineness but the court is required to see first whether the officer acted honestly and had no reason to create or concoct the reasons or manufacture or forge the grounds to believe. In our considered opinion, the disclosure of the materials or information to the persons against whom action under section 132 is proposed is not mandatory because the very disclosure of the facts already collected by the Department would adversely affect or hamper the investigation. It would als....
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....statutory empowerment was coloured, only by reason thereof, by any bias. The Supreme Court observed that bias cannot be said to be established only because the authorised officer and the Assessing Officer are one and the same person. So far as the question of bias is concerned, it goes without saying that the said question will have to be decided on the facts of each case whether there is judicial bias or administrative bias or personal bias. Evidence will have to be led and the facts proved. In a case of allegation of bias the evidence must be strong. The party alleging bias must prove the fact and should leave no scope for any other finding. Where an officer is sought to be condemned on the ground that he was personally biased then the character of such officer is under assassination. Every person who acts as an officer has to face such situation. Every person who is aggrieved by the action of such an officer would always raise such allegation. If the simple allegations which are devoid of legal proof are allowed to stand then it would become impossible for an officer specially administrative officer to work. The allegation that an officer is prejudiced or biased would not be su....