TaxTMI 
TaxTMI 
2018 (12) TMI 292
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....Judge and Sahyr Kohli and locker No. 7712-D in the joint names of Sandeep Kohli and Shah-E-Naaz Judge in Delhi Safe Deposit Company Ltd. as illegal, bad in law and without jurisdiction. Other prayers made in the writ petition include quashing of proceedings initiated pursuant to notice under Section 153A of the Act. The notices under Section 153A and the proceedings initiated under Section 153A of the Act relate to Assessment Years 2009-10 to 2014-2015. 2. Nagina Judge is sister of Shah-E-Naaz Judge and is a Non-Resident Indian. Nagina Judge has not filed any writ petition. Nagina Judge, it was stated, has filed a statutory appeal challenging the assessment order dated 10th March, 2017 under Section 153A of the Act. 3. Precursor to the search warrants noted in paragraph 1 above, were search and seizure operations under Section 132 of the Act at the residential and business premises of Karamjit Singh Jaiswal on 10th June, 2014. Karamjit Singh Jaiswal is the first cousin (Bua's son) of Shah-E-Naaz Judge. During the course of search at the residential premises of Karamjit Singh Jaiswal, key of locker No. 7325-A in the Delhi Safe Deposit Company in the joint names of Nagina Judge....
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.... was put to Karamjit Singh Jaiswal. 7. On 27th June, 2014, search warrant was issued in the names of Nagina Judge, Shah-E-Naaz Judge, her husband Sandeep Kohli and her daughter Sahyr Kohli in respect of three lockers. For the sake of convenience, we would reproduce the relevant portions of the search warrant in the names of Nagina Judge and Shah-E-Naaz Judge Kohli, which reads as under:- "Whereas information has been laid before me and on the consideration thereof I have reason to believe that:- x x x x xx ..........It a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 131 of the Income-tax Act, 1961, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of the Income-tax Act, 1961, is issued to Ms. Nagina Judge and Ms. Shah Naaz J. Kohli [name of the person] to produce, or cause to be produced, books of account or other documents which will be useful for, or relevant to, proceedings under the Indian Income-tax act, 1922, or under the Income-tax Act, 1961, he would not produce, or cause to be produced, such books of account or other do....
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....rm all other functions under section 132 of the Income-tax Act, 1961, and the rules relating thereto. You may requisition the services of any police officer or any officer of the Central Government, or of both, to assist you for all or any of the purposes specified in subsection (1) of section 132 of the Income-tax Act, 1961. " [We have omitted the portion which has been scored off in the warrant of authorization dated 27th June, 2014 issued by the Additional Director of Income-tax (Inv.)]. 8. On opening, locker Nos. 7712-D and 7637-A were found to be empty. Accordingly, nothing was seized and recovered. In locker No.7325-A in the name of Nagina Judge and Shah-E-Naaz Judge, jewellery worth Rs. 49,73,295/- was found. Nagina Judge was questioned and her statement on oath under Section 132 (4) of the Act was recorded on 27th June, 2014. Nagina Judge had confirmed that she was a Non-Resident Indian residing in the United Kingdom. For the last 2-3 years, she had been filing her wealth tax and income tax returns in India. She would frequently visit India and mostly reside with her cousin Karamjit Singh Jaiswal. With reference to the locker key and jewellery found, the following ....
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....ary, 2017, she had stated:- "As per the last Wealth Tax Return the jewellery of Mrs. Surinder Ajeet Judge (mother) was 740 gms. Thus the balance jewellery owned by both sisters is 1128.90 gms. as computed below:- Jewellery accounted by M/s Swastic Jewellers, 1668, Dariba Kalan, Delhi-110006 1868.90 gms Less Jewellery declared by Mrs. Surinder Ajeet Judge 740.00 gms Balance jewellery jointly owned by Mrs.Nagina Judge and Mrs. Shah Naaj. J. Kohli 1129.90 gms The Jewellery in the hands of Mrs. Nagina Judge is 1 ½ of the aforesaid quantity i.e. 564.45 gms" We shall subsequently deal with the said contention and the argument of the respondent that "statements of the petitioners and Nagina Judge were not credible and ex-facie untruthful and designed to pervert the cause of justice." 11. The primary contention and submission of the respondents is that on discovery of key of locker No.7325-A, consequential search warrants dated 27th June, 2014 were issued under Section 132 (1A) for search of the three lockers. These consequential warrants of authorization under sub-section (1A) to Section 132 were issued against the searched person i.e. Karamjit Sing....
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....ct qua person, key of the subject locker no. 7325-A maintained with The Delhi Safe Deposit Co. Limited, New Delhi was unearthed. The petitioner was the joint holder of the said locker No. 7325-A with her sister Ms. Nagina Judge. Following discovery of the key of the Locker No. 7325-A, a restraint order under section 132(3) of the Act was issued in respect of the locker on 10.06.2014. Subsequently, the locker was searched by the warrant issued under section 132(1) of the Act." xxx "29. That before issuing the warrant of authorization under section 132(1) of the Act, reason to believe with respect to conditions mentioned under section 132(1)(a) or 132(1)(b) or 132(1)(e) of the Act is qua person. Under section 132(1)(i) of the Act, the warrant of authorization qua place is on the basis of reason to suspect. In the present case, as mentioned above, pursuant to discovery of the key of the locker no. 7325-A during the search under section 132(1) of the Act in the case of Shri Karamjit Singh Jaiswal from his residential premise on 10.06.2014 which was duly authorized by the Director of Income-tax (Investigation)-II, Delhi after recording the 'reason to believe/satisfaction note ....
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....llion, 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), then,- (A) the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or (B) such Additional Director or Additional Commissioner or Joint Director, or Joint Commissioner, as the case may be, may authorise any 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 r....
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....pal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner having jurisdiction over such person may be prejudicial to the interests of the revenue : Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may 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 authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii): Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stock-in-trade of the business: Provided also that no authorisation shall be issued by the Additional Director or Additional Commissioner or Joint Director or Joint Commissioner on or after the 1st day of October, 2009 unless he has been empowered by....
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....c measure to get at such income and property for recovery of government dues were justified and required. The search and seizure provisions were reasonable restrictions and curbs on the freedoms mentioned under Article 19 (1)(f) and (g) of the Constitution. 14. The aforesaid legal position, viz., on the statutory mandate to record "reasons to believe" and their nexus with the three pre-conditions in clauses (a), (b) and (c) to Section 132 was thereafter emphasized and elucidated by the Supreme Court in Director General of Income Tax (Investigation), Pune and Ors. Vs. Spacewood Furnishers Private Limited and Ors. (2015) 12 SCC 179, which also refers to an earlier decision of the Supreme Court in ITO Special Investigation Circle-B, Meerut Vs. Seth Brothers & Ors.etc. (1969) 2 SCC 324 and Partap Singh Vs. Director of Enforcement Foreign Exchange Regulation Act & Ors. (1985) 3 SCC 72. Spacewood Furnishers Private Limited (supra) has laid down the following principles:- "8. The principles that can be deduced from the aforesaid decisions of this Court which continue to hold the field without any departure may be summarised as follows: 8.1. The authority must have information in ....
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....le man is applied. We would to avoid prolixity not quote from the aforesaid decisions, except the decision in the case of Madhu Gupta (supra) as in the said case, an identical plea relying upon the language of clause (i) to Section 132(1) of the Act was raised to submit that "reasons to suspect" and not "reasons to believe" were suffice in cases of consequential search. In the said case widow of the ex-Director, who had died, had been subjected to search on the ground that there was evidence and material that the assessee as a group was in possession of unaccounted income in the form of money, bullion, jewellery and other valuable articles or things or papers relating to the undisclosed or benami properties as "these are likely to be found at the residence and business premises of the group members, their associates and family members". The reasons recorded to justify the search had stated there was a close relationship between the widow of the ex-Director and the group and it was likely that accounts relating to undisclosed income, sales etc. would be kept at her premises. The search was held to be illegal and violating Section 132 (1), as the provisions permit and authorize searc....
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....ch represent either wholly or partly income or property not disclosed or would not be disclosed for the purpose of Income Tax Act, 1961, even if, summons u/s 131 of the I.T. Act, are issued to them. Accordingly, it is requested that three (3 warrants) consequential warrants of authorization in the name of persons and lockers as mentioned above may be issued to search/seal the above lockers in the banks." 17. The satisfaction note dismally ignores the statutory mandate and requirements of clauses (a), (b) and (c) of Section 132 (1) of the Act. Note begins by referring to the factum that residential premise of Karamjit Singh Jaiswal was subjected to search on 10th June, 2014. Thereafter, it states that information had been received that three bank lockers were being maintained in Delhi Safe Deposit Co. Ltd. at Janpath, New Delhi. Without referring to any "information" in the form of material and evidence, the note proceeds to imprudently and on pretence record "In my opinion, the lockers may contain valuables such as cash, jewellery, FDRs and other important documents, etc, which represent either wholly or partly income or property not disclosed for the purpose of Income Tax Act, ....
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....The Court observed that the authorities had sufficient opportunity to peruse the material already seized from the residential premises and inspite of time and opportunity, the report did not contain any material or reason to justify search of the locker. Consequently, the authorization was based on irrelevant consideration and was quashed. This verdict highlights need to protect citizens from unnecessary and unsubstantiated assertion resulting in breach and violation of right to privacy. Search is not valid when there was no material and evidence to justify intrusion and interference. In the present case also, there was time gap between the date of search on 10th June, 2014, i.e., the date of the seizure of locker key, and the date of authorization i.e. 27th June, 2014. The respondent authorities, therefore, had sufficient time to ascertain and verify facts and form an informed and considered opinion. We have also quoted the questions put and answers given by Karmajit Singh Jaiswal on 10th June, 2014 on the locker key. Satisfaction note does not state that any attempt was made to verify and ascertain facts post discovery of the locker key. The note had not indicated that the statem....
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....ondly such information had to have a nexus to the belief that could be reasonably formed that she is in possession of any money, jewellery or valuable representing her income which has not been or would not be disclosed by her. The mere fact that the key to the locker which she was operating was found during the search of her uncle Mr Suresh Nanda would not constitute 'information' leading to the reasonable belief that the locker would contain jewellery, or other valuable articles which she would not have disclosed in her returns. There obviously had to be something more. Therefore the jurisdictional pre-condition justifying the invocation of the power of search under Section 132 (1) of the Act against the Petitioner, was not fulfilled in the present case. 21. The counter affidavit filed by the Respondents suggests that they were not treating the Petitioner as part of the Nanda Group. In such event, there was no basis at all in proceeding to issue a search authorisation in the name of the Petitioner since the locker key was found during the search of the Nanda Group. Mr. Ruchir Bhatia, learned counsel appearing for the Revenue, however, urged that this Court should not g....
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....e present case, the Respondents did not opt for the alternative." 20. This judgment refers to an earlier decision of Allahabad High Court in the case of Smt.Kavita Agarwal & Anr. v. Director of Income Tax (Investigation) & Ors. (2003) 264 ITR 472 (All). This again was a case in which during the course of search, keys of three lockers were found and seized. Thereafter, search warrants were issued simply on the ground that the keys of the lockers have been found during the course of search. The warrants of authorization were struck down observing that the respondent authorities had failed to disclose the material and information on the basis of which they had entertained the belief recorded that the lockers contained money, jewellery, valuables and other articles representing disclosed income. Formation of belief by the authorities justifying the search must be based upon relevant information or material to satisfy the mandate of Section 132 (1) of the Act. This decision clearly holds that the law requires existence of "reasons to believe" and not "reasons to suspect". This was despite use of the expression "reasons to suspect" in clause (i) to Section 132 (1) of the Act. 21. N....
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....ing, vehicle etc. was being subjected to search. Some latitude and stringent requirements in comparison may not be required when the satisfaction note records the reason for issue of warrants of authorization under clause (i) of Section 132(1) of the Act. However, the satisfaction note in such cases must evince and bespeak this reason. Confluence and connection between the justification and reasons to believe recorded earlier meeting the mandate of clause (a), (b) and (c) of Section 132(1) and the consequential warrant of authorization under clause (i) of Section 132(1) of the Act should be indicated and so stated. Clause (i) of Section 132(1) of the Act is not a substitute and an independent provision to authorize search and seizure operations against third persons not included and subjected to the search after recording "reasons to believe". Connection and link between "such" assets, articles etc. of the person subjected to search and the place, building etc. to be intruded and subjected to search must be elucidated by setting out "reasons to suspect" why "such" infringing articles could be found in the place, building, vehicle etc. mentioned in the authorization under clause (i)....
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....rily the person holding custody of it will readily deliver it up to the income-tax department. Such article or thing, I think, requires neither search nor seizure." 23. In Motilal and Ors. (supra), it was held that where an article, money or bullion is already seized, search under clause (i) to Section 132(1) of the Act cannot be authorized. Ratio of this decision was upheld by the Supreme Court in Commissioners of Income Tax Haryana, Himachal Pradesh and Delhi & Ors. Vs. Tarsem Kumar and Anr. (1986) 161 ITR 505 (SC). The aforesaid ratio exposits the object and purpose behind using the expression "reasons to suspect" with reference to "such" books of account, bullion, articles etc. The expression "reasons to suspect" used in clause (i) and subsection (1A) to Section 132 is not to dilute the requirement of "reasons to believe" but to only clarify that on occasions authorities will not know the exact location or the place where the offending books of account, money, bullion etc., may be kept for which consequential warrant of authorization can be issued. We are conscious and aware that "such" documents, articles etc. can be hidden off and kept with third parties and clandestinely ....
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...." or lapse was noticed during the course of hearing as recorded in the order dated 15th January, 2018. We would observe that this was a legal flaw and defect in the writ petition, consequences whereof were not understood by the counsel for Shah-E-Naaz Judge till arguments by the Revenue were made. Amendment application, C.M. No. 3504/2018 was filed and allowed by order dated 29th January, 2018 permitting Shah-E-Naaz Judge to challenge the warrant of authorization. This order also records that merits were not required to be gone into at that stage and that all issues were left open. The respondents have filed reply to the amended writ petition. 26. Shah-E-Naaz Judge, we state at the risk of repetition, had not accepted validity of search of locker No.7325-A as is apparent from the pleadings even in the original writ petition. She had challenged proceedings under Section 153A of the Act, which proceedings were initiated in view of the search of the locker. The original writ petition had proceeded on the basis that the respondents had assessed and taxed the jewellery found in the said locker in the hands of Nagina Judge. We have also quoted the statement of Nagina Judge recorded on....