TaxTMI 
TaxTMI 
2003 (9) TMI 60
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....he said Act and the rules concerning purchases, utilisation and stock of raw material, production, clearance and stock of finished goods, etc. These stocks and books of account are being checked by the officials of the central excise department from time to time, including by making surprise visits to the factory. The petitioner's factory was set up in the year 1971 and has been an income-tax assessee and has indisputably been filing income-tax returns regularly, and the assessments are up to date and have been completed up to the assessment year 1998-99. It has been averred in the writ petition, which has not been denied, that the petitioner has never refused to produce the records or documents or the books of account whenever asked for by the Department during the assessment proceedings and there are no outstanding income-tax dues against the petitioner. On February 16, 2000, in the absence of the petitioner the officials of the Income-tax Department started search operations simultaneously both at the residential premises of the proprietor of the petitioner as well as on the business premises. The present writ petition is confined to the search so made at the factory premises ....
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....l Corporation [1997] 224 ITR 614, the Supreme Court observed: "Mere unexplained possession of the amount, without anything more could hardly be said to constitute information which could be treated as sufficient by a reasonable person, leading to an inference that it was income which would not have been disclosed by the person in possession for purposes of the Acts." In Dr. Nand Lal Tahiliani v. CIT [1988] 170 ITR 592, the Allahabad High Court held that the averments of information under section 132 must be in good faith and there must be rational relation between the information and the material and reasonable belief. Mere rumour of roaring practice and charging of high rate of fee and living in a posh house, in the absence of any other material, could not be construed as constituting information inconsequence of which the Director could have reason to believe that the petitioner had not disclosed his income or would not disclose it. The search and consequent actions of the Department were therefore held to be illegal. The Supreme Court dismissed the S.L.P. against the judgment. In L.R. Gupta v. Union of India [1992] 194 ITR 32, it was held by the Delhi High Court that the ex....
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....h could be treated as sufficient by a reasonable person, leading to an inference that it was income which had not been or would not have been disclosed by him for the purposes of the Act, particularly when the petitioner as well as the company, of which he was claiming to be the managing director, were regular assessees with the Income-tax Department." In Dr. Nand Lal Tahiliani's case [1988] 170 ITR 592 (All) the report on the basis of which the Commissioner of Income-tax formed his opinion under section 132 read as follows: "Enquiries with regard to the abovementioned allegations were made by the Investigation Wing at Allahabad. Mr. N.L. Tahiliani has been the most leading surgeon in the town. He is known for his roaring practice in this field of medical profession and also for his high rate of fee for operations. He stays in a posh house owned by him which is situated in a posh locality of Allahabad. The allegations made above appear to be prima facie correct on the basis of the local enquiries made. On the basis of the allegations and consequent enquiries made and also on the basis of the standard of living maintained by him and the reputation and number of patients he attrac....
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....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." The court further went on the say: "The statement that the Director of Inspection has sufficient material in his possession to believe that the person to whom summons or notice was issued was in possession of money, bullion or jewellery or other valuable articles or things, is a mere reproduction of the section. That is hardly sufficient. If the authorities can be permitted to claim that on 'consequent inquiries', they are empowered to take action without keeping on record anything to support it, then it shall be empowering them with naked powers. Inquiries should have been reduced to writing in black and white to enable the Director to discharge the statutory responsibility of issuing an authorisation or warrant after being satisfied that the action suggested w....
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....ich the authority must have reason to believe that income had not been disclosed as action under section 132 transgresses liberty of a citizen. To say the least, such an adventure should be avoided as it not only frustrates the objectives sought to be achieved by such salutary provisions but spoils the reputation of the Department and causes incalculable harm to the person concerned. Therefore, the writ petition deserves to be allowed." The judgment of this court in the case of Dr. Nand Lal Tahiliani v. CIT [1988] 170 ITR 592 has been confirmed by the Supreme Court (CIT v. Dr. Nand Lal Tahiliani [1988] 172 ITR 627). At this stage it is relevant to refer to para. 40 of the writ petition, which is quoted below: "40. That in the facts and circumstances the petitioner bonafide believes that there was no information in possession of the officer issuing the warrant of authorisation for search which could lead any reasonable person to form an opinion about existence of undisclosed assets with the petitioner. The warrant of authorisation, even if assumed that there was any, was issued mechancially arbitrarily and without application of mind and without forming the opinion about existen....