TaxTMI 
TaxTMI 
TaxTMI 
2020 (1) TMI 1114
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....by the Revenue through a Registered Government Valuer at Rs. 1,58,62,924/- and the same was seized and panchnama dated 11.09.2018 was drawn in this behalf. Subsequently, Assistant Director of Income Tax (INV)-2 issued summons to the Petitioner under Section 131(1A) of the Act, dated 10.09.2018 and 11.09.2018, calling upon him to furnish details regarding the seized jewellery. Later, on 13.09.2018, another summon was issued calling upon him to give certain information and documents. In response to the above summons, Petitioner filed a reply dated 17.09.2018, submitting details as required by ADIT, Investigation (AIU). He also made a request for the release of the jewellery, asserting that the same was his stock- in- trade and the seizure has resulted in hampering his business. This was followed by a reminder dated 17.09.2018, submitted with the department on 20.09.2018. On 09.10.2018, a similar request was made to the Pr.CIT-18 calling his attention to the fact that one month had expired since the seizure of stock-in-trade. Petitioner protested against the seizure, pleaded for immediate release of the seized stock-in-trade as he had been deprived of his source of livelihood. 3. At ....
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....ct. In support of his submissions, learned Counsel for the Petitioner relied upon the decision of Puspa Ranajan Sahoo vs Assistant Director of Income Tax (INV), [2012] 210 Taxman 217 (Orissa)(MAG). 6. Ms. Vibhooti Malhotra, learned senior standing counsel for the Revenue, assisted by Mr. Shailendra Singh, on the other hand, opposed the petition by arguing that the Investigation Wing of the Income Tax Department was in possession of credible information, on the basis whereof the AO formulated 'reason to believe' that the Petitioner was in possession of jewellery, representing its undisclosed income and, therefore, the search was a valid exercise of power under Section 132 (1)(c) of the Act. It was further submitted that in terms of Section 132 (1)(b)(iii), Respondent No.2 was competent to seize the jewellery found as a consequence of search. Petitioner has erroneously sought to take refuge under the proviso to the said provision which prohibits seizure of stock-in-trade of the business. He was afforded adequate opportunity to present evidence so as to demonstrate that the jewellery found was part of his regular stock-in-trade, but he failed to do so. Respondent No.2 had conducted a....
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.... placed on record. There cannot be any dispute that the Petitioner is in the business of sale and purchase of jewellery and is being assessed regularly for income tax. In support of this contention, the returns of income from AY 2015-16 to AY 2018-19 have been filed along with the petition. In the backdrop of the facts noted above, we have to examine the validity of the search and seizure action by the Respondents under Section 132 of the Act. At the outset, it would thus be apposite to refer to Section 132 of the Act, to the extent the same is relevant for the purpose of deciding the present petition. The same reads as under: "132. Search and seizure.-(1) Where the Principal Director General or Director General or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner, or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income Tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-s....
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....horised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; (ii-b) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (i) of sub-section (1) of Section 2 of the Information Technology Act, 2000, to afford the authorised officer the necessary facility to inspect such books of account or other documents; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business. (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable ar....
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....description given in the inventory prepared by the registered valuer, with entries in his books of account. The endeavour was to verify Petitioner's contention that each seized article had been accounted for and already included in the books. At the time of the hearing, Respondents also produced the satisfaction note for the perusal of this Court, recording the reason, for authorizing the search. The original file containing the satisfaction note was tendered in a sealed cover. The same was de-sealed and perused, and retained for perusal at the time of dictation of the order. 11. The satisfaction note is claimed to be privileged. We, however, do not find anything confidential in the same, as virtually the entire content thereof has been reproduced in the counter affidavit filed by the Respondents and, therefore, we consider it appropriate to extract the facts alluded to in the counter affidavit which forms the entire basis for authorizing the search. The same reads as under: "a. It is submitted that the Petitioner namely, Sh. Khem Chand Mukim while travelling from Guwahati to Delhi was intercepted by the Air Intelligence Unit (AIU) Team at Terminal- ID, IGI Airport, New Delhi an....
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....partly income or property which has not been or would not be disclosed. 8.2. Such information must be in possession of the authorised official before the opinion is formed. 8.3. There must be application of mind to the material and the formation of opinion must be honest and bona fide. Consideration of any extraneous or irrelevant material will vitiate the belief/satisfaction. 8.4. Though Rule 112(2) of the Income Tax Rules which specifically prescribed the necessity of recording of reasons before issuing a warrant of authorisation had been repealed on and from 1-10-1975 the reasons for the belief found should be recorded. 8.5. The reasons, however, need not be communicated to the person against whom the warrant is issued at that stage. 8.6. Such reasons, however, may have to be placed before the Court in the event of a challenge to formation of the belief of the authorised official in which event the court (exercising jurisdiction under Article 226) would be entitled to examine the relevance of the reasons for the formation of the belief though not the sufficiency or adequacy thereof." [Emphasis Supplied] 13. On a plain reading of sub section (1) of Section 132, it eme....
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.... register was not submitted at that time, spot inquiry was conducted and summons were issued to collect the copy of the stock register from M/s Shrimati Gems & Jewels. Shri. Vidit Jain was found at the showroom of M/s Shrimati Gems & Jewels, but since he failed to produce any documentary evidence in support of the jewellery found in the possession of Shri Khem Chand Mukim, the ADIT (INV),(AIU, New Delhi) formulated the reason to believe, noting that Shri Khem Chand Mukim was in possession of jewellery which is not related to M/s Shrimati Gems & Jewels and which is not disclosed and would not be disclosed for the purpose of the Act and accordingly, invoked the provision of Section 132 (1) of the Act and sought warrants of authorization. The Principal DIT (Inv) and DGIT (Inv) after perusing the satisfaction note considered it to be a fit case for search and seizure under Section 132 (1) of the Act and issued warrants of authorization. 16. A division bench of this Court in L.R Gupta vs. Union Of India, [1992] 194 ITR 32/[1991] 59 Taxman 305 (Delhi), while discussing the scope of exercise of jurisdiction under Section 132 held as under: "(33) The expression "information" must be som....
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....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 assessed 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 assessed 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 assessed 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. Nondisclosure of the same would not attract the provisions of Section 132(c). It may be that the opinion of the assessed 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 assessed then the Department ....
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....erminal-1 (T-1) of Indira Gandhi International Airport, New Delhi. The warrant of authorization is dated 11.09.2018 - issued under Section 132 of the Act. This was issued pursuant to the satisfaction note recorded on 11.09.2018. The search commenced on 11.09.2018 at 08:40 p.m. and closed on the same day at 10:20 p.m. The panchnama was also drawn on 11.09.2018. At the same time, it is critical to note that the Petitioner was, admittedly, intercepted on 10.09.2018. The government registered valuer for jewellery, prepared the inventory and valued the same. The valuation note is also dated 10.09.2018, and was served on the Petitioner on 11.09.2018 at 02:00 A.M, prior to the commencement of search. The Assistant Director of Income Tax also affixed his signatures on the same on 11.09.2018. The Assistant Director of Income Tax (INV), Air Intelligence Unit (Respondent No.4), issued a summon dated 10.09.2018 under Section 131(1A) of the Act for the appearance of the Petitioner and served on him at 11.30P.M on 10.09.2018. Thus, concededly the Petitioner was intercepted on 10.09.2018 at night, and the proceedings apparently continued during the night up to 2:00 a.m. on 11.09.2018. For the Res....
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....venue wants us to believe, even then we would say - it is evident that the officer in question has completely misdirected himself and acted in an arbitrary manner. The proviso to Section 132(1)(iii) and 3rd proviso of Section 132 (1) (v) of the Act deals with bullion, jewellery or other valuable article or things being stock-in-trade of business found as a result of search shall not be seized. The words in the statute are precise and unambiguous, and we are bound to uphold and expound these words in the natural and ordinary sense. The officer was already aware that the jewellery found in the Petitioner's possession was his stock-in-trade and, consequently, he was entitled to the protection provided in the proviso appearing after sub clause - (iii) to sub Section (1) of Section 132 of the Act. The officer failed to take this provision into consideration. Further, sub Section (v) of sub Section (1) of Section 132 of the Act, additionally provides that the officer is only required to inventorize money, bullion, jewellery or other valuable article or thing which is found during the course of search and seizure. This was also ignored. The proviso to Section 132(1)(iii) has been added wi....
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....e the assessee was in possession of the same, it cannot be said that the same represents income or property which has not been disclosed or will not be disclosed. Section 132(1) as noted above is a serious invasion on the privacy of the citizens, and has to be resorted to when there are pre-existing and pre-recorded good reasons to believe that the action under section 132(1) is called for. While revenue can argue that element of surprise is critical and essential for a successful operation of search and seizure, nevertheless, it has be cognizant that to balance the rights of the citizens, legislature has built in sufficient safeguards. This is to ensure that undue hardship and harassment should not be caused by the arbitrary and unfounded action of the raiding party. Moreover, as discussed above it is not imperative that every article found as a result of search has to be seized. For this purpose, the provision itself restrains and curbs the authority to make seizure of stock-in-trade. 22. We have no hesitation to observe that the officer in this case has completely ignored the mandate of law. It is also to be mentioned that despite the unlawful action, the Petitioner has been de....
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....lities referred to in clause (i) and the assessee shall be discharged of such liability to the extent of the money so applied; (iii) the assets other than money may also be applied for the discharge of any such liability referred to in clause (i) as remains undischarged and for this purpose such assets shall be deemed to be under distraint as if such distraint was effected by the Assessing Officer or, as the case may be, the Tax Recovery Officer under authorisation from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner under sub-section (5) of section 226 and the Assessing Officer or, as the case may be, the Tax Recovery Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule. (2) Nothing contained in sub-section (1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act. (3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets ....
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....in items as purchases in bulk for the purpose of molding them into specific jewellery articles such as ear rings, ear tops, sets etc. Petitioner had placed material on record to substantiate the fact that jewellery found in his possession at the time of search was his stock-in-trade. Since the Respondents did not raise any serious dispute in their counter affidavit or in the additional affidavit, therefore, in view of the mandate contained in the proviso to Section 132B(1)(i), the Respondents have no authority to retain the seized jewellery beyond the said period. The outer limit of 120 days as provided under Section 132B has also expired in the month of January 2019. 27. Before parting we may add that the opinion which has to be formed is subjective, and though the jurisdiction of the Court to interfere is very limited, and we are not to act as an Appellate Court and meticulously examine the information in order to decide whether an action under Section 132 is called for, yet at the same time we may emphasize that the power to search a person is a stringent power provided by law and this requires the officers to scrupulously follow the mandate and the rigor of the law prior to au....