TaxTMI 
TaxTMI 
TaxTMI 
2003 (1) TMI 86
X X X X Extracts X X X X
X X X X Extracts X X X X
....cial year 2000-2001 the gross receipts were of Rs. 45,37,139. The income before depreciation was Rs. 10,46,372, the tax paid was Rs. 2,12,647. True copies of the audited balance-sheets and the income-tax returns filed for the assessment years 1999-2000, 2000-2001 and 2001-2002 have been annexed as annexure I to the writ petition. These figures show a great increase in the gross receipts, as well as taxable income on which the petitioner has paid income-tax. Even for the current financial year, the petitioner has paid advance tax on the basis of gross receipt from profession estimated at around Rs. 50 lakhs. It has been stated in paragraph 2 of the petition that for the assessment year 1998-99 the petitioner's case was taken up for scrutiny by the Department and except for disallowance of certain expenditure on account of personal use no concealment or undisclosed income was found by the Department. The true copy of the assessment order dated February 2, 2001, passed by the Deputy Commissioner of Income-tax, Allahabad, is annexed as annexure II to the petition. It is stated in paragraph 3 of the petition that the entire search and seizure was illegal and there was mala fide attemp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y. The society has been demanding the said money from the petitioner as well and has written to respondent No. 2 for the release of the said amount. Copies of the letters written by respondent No. 4 to the petitioner as well as to respondent No. 2 demanding the said money are annexed as annexures IV and V to the writ petition respectively. In paragraph 15 details have been given about the jewellery seized. In the house there are three male adults and three married ladies and two male children and two female children. According to the Instruction No. 1916 dated May 11, 1994, of the Central Board of Direct Taxes the search party could seize jewellery only if it was in excess of 2,300 gms. In this case the search party found only 1,283 gms. which was much below the limit, but despite this respondent No. 2 seized 402 gms. of jewellery. The petitioner was not shown the warrant of authorisation by the search party. Hence, the petitioner has filed this writ petition. In the counter affidavit of the Department it has been stated that the search and seizure were conducted by the officials of the Income-tax Department at the residential and other premises of the petitioner at 14/20, T.B. Sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sis up to the assessment year 2001-2002 which have been under audit. Regarding the jewellery in t lockers, details have been given in paragraph 19 of the rejoinder affidavit and it is stated that the jewellery was within the permissible limits prescribed by the Central Board of Direct Taxes in its circular. It is also stated that the petitioner belongs to a "Vaishya" family in which there is a custom and practice to offer jewellery and ornaments to the newly wedded couple at the time of marriage and even thereafter on many occasions. From the facts disclosed it appears that the petitioner is a leading dental surgeon of Allahabad city and he has his clinic and residence at 14/20, T. B. Sapru Road, Allahabad, where he resides with his wife, Smt. Sarita Rastogi, two sons of 18 and 14 years, his father and mother, as well as his brother, Rajesh Rastogi, and the latter's wife and two minor daughters. The petitioner and his father and brother and their wives are all regular assessees under the Income-tax Act. During the search and seizure on November 23, 2001, cash and jewellery were seized. During the search three keys of lockers of banks were also found. One of the keys of locker No. 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n his return of income all the moneys which are received by him which do not partake of the character of income or income liable to tax. If an assessee receives, admittedly, a gift from a relation or earns agricultural income, which is not subject to tax, then he would not be liable to show the receipt of that money in his income-tax return. Non-disclosure of the same would not attract the provisions of section 132(1)(c). It may be that the opinion of the assessee that the receipt of such amount is not taxable may be incorrect and, in law, the same may be taxable, but where the Department is aware of the existence of such an asset or the receipt of such an income by the assessee, then the Department may be fully justified in issuing a notice under section 148 of the Act, but no action can be taken under section 132(1)(c)..." In Ajit lain v. Union of India [2000] 242 ITR 302 (Delhi), it was observed that: "the mere fact that the petitioner was in possession of the said amount could not straightaway lead to the inference that it was his undisclosed income...The intimation simpliciter by the CBI, that the money was found in the possession of the petitioner, which, according to the CB....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gations 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 attracts, there is every reason to believe that in the case of Sri Nand Lal Tahiliani, action under section 132 of the Income-tax Act is required. This is so because there is also reason to believe that in the normal course provided under the Act, he will not disclose to the Department his correct income and wealth which is much more than what he has been declaring to the Department'." Dealing with this report, the court observed: "What was there in the report which was not known to the Department or is not known to it against any doctor ? If the reputation of roaring practice and rumour for 'charging high rate of fee' can furnish information without any tangible material for formation of a reasonable belief under section 132, then it would amount to clothing the Department with arbitrary powers to take action against any person even for personal vendetta or through misguided zeal. What could have resulted in an action against the petitioner under section 132 was a reasonable belief that he was in possession of any money, bullion or ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ite to enable the Director to discharge the statutory responsibility of issuing an authorisation or warrant after being satisfied that the action suggested was justified and made available to the court to infer that the exercise of power was reasonable, at least. In fact, the Director appears to have mechanically endorsed the report. If the report extracted earlier was sufficient for action under section 132, then the Director could order a search against any doctor of a metropolitan town. Being known for 'roaring practice' and for, 'high rate of fee for operations' in the absence of any other material could not be construed as constituting information in consequence of which the Director could have reason to believe that the petitioner had not disclosed his income or would not disclose it. Living in a posh house or posh locality by itself were not material which could result in initiation of proceedings under section 132 of the Act specially when the petitioner is an old assessee. The standard of living maintained by him (petitioner) appears to have been added in the report more as a recital to add gloss to the recommendation than with any sense of responsibility. What led to this....