TaxTMI 
TaxTMI 
TaxTMI 
2002 (10) TMI 49
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....ch of loose sheets, computer (C.P.U.) print outs and some documents relevant for preparing final books of account. The panchanama under section 132 of the Income-tax Act, 1961, and list of inventories were served only on September 25, 2001. Simultaneously, with the aforesaid search and seizure on September 24, 2001, at around 8.30 a.m., a similar set of officers took out search and seizure proceeding under section 132 of the Income-tax Act at the residence of the petitioner and after making an inventory of the articles, namely, credit card, jewellery, books of account, documents, cash and seized a bunch of loose papers, cash of Rs. 50,000 and jewellery estimated at Rs. 78,313. The panchanama in respect of such inventory was also served along with the list of inventories on the same day. It is significant to note hereunder that both the panchanamas and the list of inventories are made in the name of Pratik Food Products (Pvt.) Ltd. but not in the name of Pratik Food Products, the proprietorship concern of the petitioner. On September 26, 2001, the petitioner received letter from his two bankers that pursuant to the prohibitory order of respondent No. 1, dated September 26, 2001, u....
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....n "reason to believe" does not mean purely subjective satisfaction on the part of the authority in making the seizure but the reasons for the belief must have a rational connection or a relevant bearing for the formation of the belief, not extraneous or irrelevant for the said purpose. As and when places of persons of diverse activities and unconnected with each other are searched and their bank accounts are freezed by the authority to get or gather materials and information to form a belief that the assessee is avoiding tax it is wholly outside the scope of the search and seizure under the said Act. The bank accounts of persons unconnected with the petitioner and reflected in their return are kept under the prohibitory order even after 60 days which is bad, illegal and should be set aside. This attitude of the respondent authorities, in making fishing and roving enquiries reflects that the authorities are not in a position to form their opinion for search and seizure. On the other hand, it is to be remembered that by such activities, the authorities have interfered with the right of the petitioner protected under article 19(1)(g) read with article 300A of the Constitution of Indi....
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....hujiawala". Fourthly, the panchanama was drawn tip at the end of search proceedings on the day and a copy along with the annexures were given to the petitioner. Fifthly, satisfaction was recorded in writing by the competent authority prior to the issue of warrants of authorisation for such search. Sixthly, there is no dispute that "Pratik Food Products" is a pro prietorship concern but due to inadvertent mistake "Pratik Food Product (Pvt.) Limited" has been incorporated. The panchanama has been drawn in the name of the proprietorship concern. The prohibitory order of the bank accounts of the said concern have already been revoked on November 9, 2001. Such mistake, omission or any clerical or technical error cannot vitiate the substance of the proceeding. Seventhly, the procedure for authorisation of search and seizure has been fully adhered to by the competent authority. Eighthly, the prohibitory orders were not renewed beyond 60 days of the date of issue. The prohibitory orders were served on September 24, 2001, and September 25, 2001, and lapsed on November 25, 2001, and November 26, 2001, respectively. Thus, when the writ petition was filed on December 12, 2001, no prohibitory o....
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.... produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property)." The case of the respondent authorities are falling under clause (c). No test has been satisfied in respect of such 'reason to believe". A reason is objective when a belief is subjective. Therefore, when no reason has been shown and no record has been produced it can be construed that there was no reason. A block assessment is a subsequent event to search and....
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....d reasons for the belief and he must issue an authorisation in favour of a designated officer to search the premises and exercise the power set out therein. The condition for entry into and making search of any building or place is the reason to believe that any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act may be found. If the officer has reason to believe that any books of account or other documents would be useful for, or relevant to, any proceedings under the Act, he is authorised by law to seize those books of account or other documents, and to place marks of identification therein, to, make extracts of copies thereform and also to make a note or an inventory of any articles or other things found in the course of the search. Since by the exercise of the power 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....
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....he self-same point. So far as the subsequent point is concerned, learned counsel appearing for the petitioner relied upon the judgment reported in Dr. C. Balakrishnan Nair v. CIT [1999] 237 ITR 70 (Ker) at its page 82 and contended that if the proceedings taken under section 132 of the Act fail and/or are declared invalid the block assessment, if any, will automatically fail. However, I do not want to go to such controversy for the simple reason that Mr. Shome, learned senior counsel appearing for the authorities, has supported the contention. Mr. Dipak Kumar Shome, learned senior counsel, appearing for the income-tax authorities, contended before this court that it is true to say that the reasons are objective but the belief is subjective. There should be a nexus in between "reason" and "belief". This cannot be construed as an absurd proposition of law. But it has to be read with its true prospective. There cannot be any straight-jacket formula. It has to be done in good faith. The clauses (a), (b) and (c) under sub-section (1) of section 132 are disjunctive. Section 132(1A) has been inserted by the Taxation Laws (Amendment) Act, 1975, with effect from October 1, 1975, postulate....
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....ed upon various judgments in support of his case. Firstly, he relied upon Sriram jaiswal v. Union of India [1989] 176 ITR 261 in its pages 265 and 266 whereunder a Division Bench of the Allahabad High Court held that merely on the basis of the denial of the petitioner, the respondents cannot be called upon to disclose the information they received for having acted under section 132(1) of the Act. If it is taken from another angle it can be seen that certain amounts of assets were acquired from undisclosed sources as per the order under section 132(5). The question is whether, on these facts, it will be proper or just to exercise discretionary jurisdiction under article 226 of the Constitution. When already the Income-tax Officer has found in the order passed under section 132(5) that the petitioner had acquired the seized assets from undisclosed sources and when the petitioner has an alternative remedy under sub-section (11) of section 132 by way of filing objections before the Commissioner, the writ court should be loath in interfering with the same. He further relied upon Rugmini Ram Raghav Spinners (P.) Ltd. v. Union of India [1992] 196 ITR 674 (Mad) at its pages 680 to 681 and....
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....et attracted an individual assessee and then proceeded for search and seizure is misconceived in nature. Block assessment is made for the block period. As because one is running business of selling products of "Haldiram Bhujiawala" in the name of "Pratik Food Products" cannot be said that he will be liable for block assessment. If the brand name "Haldiram Bhujiawala" is taken for judicial notice then whosoever is selling the product either in India or abroad under such brand name is to be assessed under the block. Flourishing of business under the brand name cannot be the reason to believe of evasion of tax law. I am sorry to say this is not the true import of the law. One cannot put the cart before the horse. Even requirement of block assessment ipso facto cannot be the "reason to believe" under section 132 of the Act. Section 132 has its independent face value. If one is attracted by such section he can be assessed in a proper manner under the prescription of law. If one is not attracted under section 132, then there is no question of any block assessment on the basis of search and seizure. Therefore, let me confine to the question as to whether search and seizure was made follow....
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....of the examples are given hereunder. Although the petitioner and his brother are doing business separately but both are doing under the same brand name. The business of No. 58, Jawaharlal Nehru Road is closely monitered by the petitioner. The entire affairs are controlled by the petitioner along with his brother. As per information gathered documents, papers, undisclosed cash, jewellery and other assets are likely to be found at his residence. Therefore, both the place of business and residence are covered for action under section 32(1) of the Income-tax Act, 1961. The petitioner transferred his place of business. He is running a proprietorship concern by the name of "Pratik Food Products". There is all likelihood that papers relating to his unconnected income and assets may be found at his residence. Can it be said that the afore said recordings form satisfaction of "reason to believe". It is a known fact that the petitioner is doing similar business like his brother separately under the same brand name. It is also known what is the business place. He is a regular assessee. Change of residence ipso facto cannot be an offence. This is not a case of absconding. Therefore, what are t....