TaxTMI 
TaxTMI 
TaxTMI 
2019 (6) TMI 52
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....nder Section 133-A of the Act. According to the petitioner, during this procedure he voluntarily disclosed the liquidity/cash that he had in the premises to the extent of more than Rs. 2 crores. The petitioner also cooperated with the officials of the department in providing them with the books of accounts, keys of lockers and all other necessary support during the survey. The petitioner disclosed that the amount of Rs. 2,09,89,090/- was on account of advance that he had received from a reputed hospital in connection with his business. The grievance of the petitioner is that although the summons indicated survey operations but the procedure was converted into search and seizure which is impermissible in law. He further alleges complete violation of the provisions of Section 133 A (3) and (4) of the Act. The petitioner further asserts that he and all his staff members fully cooperated with the respondents and summons under Section 131 of the Act could not be issued and likewise no procedure under Section 133 (1) and (2) could be adopted unless the petitioner did not offer cooperation to attract the action under sub-section (6) of Section 133 A. Further it is stated that there has be....
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.... would be equally relevant and is, therefore, extracted herebelow :- "5 (x) That the contents of clause (x) are wrong and thus denied. The petitioner failed miserably in explaining the source of physical cash amounting to Rs. 2,09,89,090/- (Rupees Two Crores Nine Lacs Eighty- Nine Thousand and Ninety Only) found at his disposal. In this regard reference may be made to the statement of the Petitioner recorded on oath during the survey under Section 133A of the Act and later during search under Section 132(4) of the Act which are detailed in para 2.4 and para 6 under the head "Preliminary Objections." We also notice that no satisfaction was ever recorded by the respondents that the survey has to be converted into search and seizure. The reply is absolutely silent although it states that the material would be disclosed to the court at the time of hearing. We fail to understand as to why it was not appended to the reply itself. Now coming to the issue of violation of the procedure and its conversion from a survey to search and seizure, Section 131(1) of the Act confers the officers mentioned therein with the powers of a court under the Code of Civil Procedure in the matters such....
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....Section 131(1A). But, even if it is so we are of the opinion that the officers are required to state the reasons of their suspicion that any income has been concealed or is likely to be concealed. We cannot be oblivious to the fact that the summons issued to the petitioner was of a survey and as stated by him he voluntarily disclosed the retention of cash in his premises. In this situation, it was imperative upon the officials to record their suspicion to initiate further action if they wanted to convert the survey into seizure. Section 133A talks of the powers conferred upon an income-tax authority to enter in a place and inspect such books of accounts or documents as necessary. If we see the provisions of section 133A(3), it empowers the income tax authority to examine the books of accounts but if any such book has to be impounded, then reasons have to be given. Section 133A(4) prohibits the income-tax authority to remove any cash, stock or other valuable article or thing and it is only upon the non-cooperation or refusal by the person under search that powers under Section 131(1) can be resorted to. Section 133A (4) & (6) are extracted herebelow :- "133A.(4) An income-tax a....
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....spect of any year." As observed by us earlier, the respondents have not demonstrated from any material as to whether the petitioner failed to cooperate, which is an eventuality where the income-tax authority would be required to record its reasons to resort to the provisions of Section 131(1) and convert the whole process into search and seizure. But this is completely missing from the process. This to our minds is fatal to the cause of the respondents because in a procedure like this which can often turn draconian to inherent safeguard of at least recording a reason and satisfaction of non-cooperation to resort to other coercive steps need to be set out clearly by the income-tax authority. This Court in Gheru Lal Bal Chand v. Income-Tax Officer, 1982 137 ITR 190 PH observed as follows :- "4. The learned counsel for the petitioner has argued that the ITO, A-Ward, wrongly issued notices (annexs.P-1 to P-4) and wrongly passed the order (annex P-5) during the process of survey under Section 133A of the Act. This contention of the learned counsel for the petitioner must prevail. Under Sub-section (1) of Section 133A of the Act, the ITO was competent to enter the business premi....
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.... in him. These notices are, consequently, liable to be quashed." The action of the respondents is therefore bad in the eyes of law. Besides, the summons issued to the petitioner was totally vague. No documents were mentioned which were required of the petitioner and neither was any other thing stated. In G.M.Breweries v. Union of India, 2000(2) BCR 160 a Division Bench of the Bombay High Court held as follows :- "5. ..........The powers given to the Income-Tax Authorities under section 131(1) are powers of the Court of law. While exercising these powers, the Income-tax Authorities act in a quasi-judicial capacity. These powers must be exercised strictly for the purposes set out in subsection (1) of section 131 of the Act and not for any extraneous purposes. Powers under section 131 can be exercised only if proceedings are pending before the authority concerned under the Income-Tax Act. The same is the position under the Wealth-Tax Act and the Gift Tax Act. In the present case, the petitioners seriously challenged the exercise of the powers by the Income-tax Officer. It was contended by the petitioners before the Income-tax Officer that no proceedings whatsoever were pending ....
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....is obvious thus that the officer has yet to come to a stage where he can, within the meaning of section 147, be said to have "reason to believe" that income chargeable to tax has escaped assessment. He is still at a pre-reason to believe stage. There is a vital distinction between the pre-reason to believe stage (stage 1) and the post-reason to believe stage (stage 2). The impugned summons here, as the above letter indicates, is at stage 1 viz. pre-reason to believe stage. Section 131(1) does not confer power to compel (i) attendance of the assessee or (ii) production of documents at this stage. Indeed, stage 1 or the prereason to believe stage connotes a purely administrative function of a unilateral character. At this stage, the assessee does not come into the picture at all. It is not the object of this provision to even at this stage compel an assessee to appear and produce evidence before the officer. It is for the officer to first decide whether he has reason to believe. And only if he decides that question in the affirmative, can he then initiate proceedings under section 147 and only thereupon he becomes entitled to invoke section 131(1). "Reason to believe" is not the same....
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....s pending, under the Act. Counsel relied on Jamnadas Madhavji and Co. v.J.B.Panchal, ITO (1986) 162 ITR 331 (Bom.) and Dwijendra Lal Brahmachari v. New Central Jute Mills Co.Ltd. (1978) 112 ITR 568 (Cal.)." To our minds the income-tax authority violated the procedure completely. Nowhere was any satisfaction recorded either of noncooperation of the petitioner or a suspicion that income has been concealed by the petitioner warranting resort to the process of search and seizure. The High Court of Bombay in L.R.Gupta and others v. Union of India and others, 1992(46) DLT 14 observed as under : "35. Sub-clause (b) of Section 132(1) refers to cases where there is reason to believe that if any summons or notice, as specified in the said sub-clause (a) has been issued or will be issued then that person will not produce or cause to be produced the books of accounts etc. In other words, the said provision refers to the belief which may be formed by the Appropriate Authority to the effect that the person concerned is not likely to voluntarily or even after notice produce documents before the Income Tax authorities. Where, for example, there is information that a person is hiding or like....
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....ncome Tax Act" would be mean that income which is liable to tax but which the assessee has not returned in his Income Tax return or made known to the Income-Tax Department. The sub-clause itself refers to this as "undisclosed income or property". In our opinion the words "undisclosed", in that context, must mean income which is hidden from the Department. Clause (c) would refer to cases where the assessee knows that the moveable asset is or represents income which is taxable but which asset is not disclosed to the Department for the purpose of taxation. Those assets must be or represent hidden or secreted funds or assets. Where, however, existence of the money or asset is known to the Income Tax Department and where the case of the assessee is that the said money or the valuable asset is not liable to be taxed, then, in our opinion, the provisions of sub-clause (c) of Section 132(1) would not be attracted. An assessee is under no obligation to disclose in 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 ....