TaxTMI 
TaxTMI 
TaxTMI 
2018 (12) TMI 292
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....-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 and Shah-E-Naaz Judge was found and seized. ....
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....earch 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 documents as required by such summons or notice. Sarvashri/Shri/Shrima....
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.... 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 questions and answers were put to and given by Nagina Judge:- "Q. No.9 Where do you keep your loc....
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....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 Singh Jaiswal and not the petitioners. Validity of these search warrants should meet the parameter and the test of "reasons to suspect" and not on the legal requ....
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....older 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 with respect to conditions of section 132(1)(b) and 132(1)(c) of the Act qua person and detection of the other two lockers during subsequent investigation, conseq....
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.... 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 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, a....
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....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 the Board to do so. 37[Explanation.-For the removal of doubts, it is hereby declared that the reason to believe, as recorded by the income-tax authority under this sub-section, shall not be disclosed to any person or any authority or the Appellate Tribunal.] (1A) Whe....
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....egal 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 its possession on the basis of which a reasonable belief can be founded that- (a) the person concerned has omitted or failed to produce books of account or other documents for production of which summons or notice had been issued or such person will not produce such books of accoun....
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....o 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 search on the basis of credible information and not mere suspicion. There must be nexus between the information and the "reasons to believe". Information, which is relied upon must not be in the nature of surmise or conjecture but must have tangible backing and some basis. It should not be mere ipse dixit but based upo....
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....ay 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, 1961, even if, summons u/s 131 of the I.T. Act, are issued to them." The satisfaction note woefully forms the negative conclusion and finding without referring to material and evidence that had led and prompted the author to reach the denouncement. Use of the word "may" to presume presence of undisclosed assets in the locker, given the absence of....
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....t 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 statement on oath by Karamjit Singh Jaiswal was incorrect and false. On the other hand, assertion of Karamjit Singh Jaiswal that the locker key belonged to his cousins was found to be correct. On 10th June, 2014 and even subsequently Karamjit Singh Jaiswal was not questioned that the locker belongs to him or stores assets belonging to him. No attempt was ma....
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....ot 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 go by what is stated in the counter affidavit but only by what is stated in the Satisfaction Note. Even then, the Satisfaction Note does not throw any further light on how the authority could form a reasonable belief that the Petitioner was connected with the Nanda Group and that her locker would contain money, jewellery etc that constituted her undisclosed ....
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....reafter, 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. Notwithstanding use of the expression "reason to suspect" in clause (i) to Section 132 (1) of the Act, the Supreme Court in its earlier judgments in Seth Brothers, Pooran Mal and Spacewood Furnishers Private Limited(supra) has consciously emended to the effect that satisfaction in the form of "reasons to believe" is required and mandated by law. Decision of a Divisi....
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....en 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) to Section 132(1) of the Act. Appropriate in this regard would be the following observations of the Allahabad High Court in Motilal and Ors. Vs. Preventive Intelligence Officer, Central Excise and Customs, Agra & Ors. (1971) 80 ITR 418 (All), wherein it was observed as under:- "It is clear that the articles or things referred to in Subsection (3) of Section 132 are....
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.... 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 concealed at different places and locations to prevent seizure and hamper investigation. It is in this context that a Division Bench of this Court in Strategic Credit Capital Pvt. Ltd. & Ors. Vs. Ratnakar Bank Ltd. & Anr. (2017) 395 ITR 391 (Del) had observed that Section 132 (1) of the Act envisages that a person could be in possession of undisclosed income not only in ....
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.... 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 27th June, 2014 on the said aspect. Given the background we would not apply the principle of estoppel to dismiss the writ petition filed by Shah-E-Naaz Judge. 27. We also do not agree with the respondents that the amendment application should not have been allowed as trial had commenced. This is not the correct way to interpret the power of the writ court to permit amendment....