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N. K. Textile Mills and Another Vs. Commissioner of Income-tax, New Delhi, and Others. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Writ No. 550-D of 1965
Reported in[1966]62ITR58(P& H)
AppellantN. K. Textile Mills and Another
RespondentCommissioner of Income-tax, New Delhi, and Others.
Cases ReferredIn Seth Brothers v. Commissioner of Income
Excerpt:
- sections 80 (2) & 89 & punjab motor vehicles rules, 1989, rules 85 & 80: [t.s. thakur, cj, jasbir singh & surya kant, jj] appeal against orders of state or regional transport authority imitation held, a stipulation regarding the period of limitation available for invoking the remedy shall have to be strictly construed. that is because any provision by way of limitation is in the nature of a restraint on the remedy provided under the act. so viewed two inferences are clear viz., (1) sections 80 and 89 of the act read with rule 85 of the rules make it obligatory for the authorities making the order to communicate it to the applicant concerned and (2) the period of limitation for any appeal against the order is reckonable from the date of such communication of the reasons would imply.....a. n. grover, j. - this is a petition under articles 226 and 227 of the constitution of india filed by n. k. textile mills, 22e, bungalow road, delhi, a registered partnership firm, which carries on the business of manufacturing and sale of cotton textile, etc., etc., the partners being smt. maya agarwal, wife or shri t. c. agarwal, smt. kusum rani wife or shri jawahar lal and arun lal, son of shri ram babu lal. the petitions directed against a warrant of authorisation dated the 13th august, 1965, issued by the commissioner of income-tax under section 132 of the income-tax act, 1961, read with rule 112 of the income-tax rules, 1962 (copy annexure 'r.1/2') and subsequent proceedings taken pursuant there to of seizure of books of account, various documents and money lying in 22e, bungalow.....
Judgment:

A. N. GROVER, J. - This is a petition under articles 226 and 227 of the Constitution of India filed by N. K. Textile Mills, 22E, Bungalow Road, Delhi, a registered partnership firm, which carries on the business of manufacturing and sale of cotton textile, etc., etc., the partners being Smt. Maya Agarwal, wife or Shri T. C. Agarwal, Smt. Kusum Rani wife or Shri Jawahar Lal and Arun Lal, son of Shri Ram Babu Lal. The petitions directed against a warrant of authorisation dated the 13th August, 1965, issued by the Commissioner of Income-tax under section 132 of the Income-tax Act, 1961, read with rule 112 of the Income-tax Rules, 1962 (copy annexure 'R.1/2') and subsequent proceedings taken pursuant there to of seizure of books of account, various documents and money lying in 22E, Bungalow Road, Delhi.

It is apparent from annexure 'R.1/1', which is copy of a report submitted by the Inspecting Assistant Commissioner of Income-tax, Shri S. N. Sen, on the 12th August, 1965, to the Commissioner of Income-tax, that some informant met him and stated that he had received information from a very reliable source that the petitioner had a spacious basement below its office in 22E, Bungalow Road, which was being utilized for manipulating accounts with a view to showing reduced income for purposes of taxation. It was further stated that the source of this information was an employee or ex-employee of the firm, who did not want his name to be disclosed. It was add by Shri Sen :

'The records show that the assessee has not filed returns for the years 1963-64, 1964-65 and 1965-66. The return for the year 1961-62 was filed as early as 14th May, 1963. The assessment for 1960-61 was finalised on 29th March, 1963. The fact that the assessee has not filed returns for so many years apparently suggested that the information is correct.

Shrialso suggested that unless action is taken early, there is every possibility of the books being shifted to some other place.

I agree.

Sd/- R. N. Limaya.

From the facts stated in the above paragraphs it is quite clear that the assessee will not produce any books of account or other documents which will be useful for or relevant to the proceedings for the years 1962-63, 1963-64, 1964-65 and 1965-66.

The assessee also has factory premises near Clock Tower, Sabzi Mandi

Issue

authorisation.

Sd/- R. N. Limaya. 12-8-1965.

The information is placed before you for your kind decision regarding issue of authorisation under section 132 of the Income-tax Act, 1961.'

It will be seen from what has been reproduced above that on the margin, on the left hand side of this hand side of this report, the Commissioner expressed his agreement and ordered the issuing of the necessary authorisation, Annexure 'R.1/2' is a copy of the warrant of authorisation, which was on a cyclostyled form in which only the necessary entries were made in ink. The persons authorised to carry on the search and effect the seizure were Shri S. N. Sen, Inspecting Assistant Commissioner, and Sarvshri Balwant Singh, R. K. Singh and H. R. Chhabra, Income-tax Officers. The aforesaid officers entered the premises in question on the 13th August, 1965, but, according to them, since neither of the partners not the general manager of the firm happened to be there, they left without carrying out the search. They found one Jagan Nath and some other employees of the firm, and the former is said to have contacted the general manager, T. C. Agarwal, at Agra, who was informed that the premises would be searched again on the 14th August, 1965, when the partners should be present at the premises. On that day the officers reached the premises in the morning, but they did not find any of the partners not did any of the employees turn up. The premises were, however, searched and books of account and documents were seized as also a sum of Rs. 3,214.82 P. (vide affidavit of Shri Balwant Singh, Income-tax Officer, dated the 22nd October, 1965). A number of police constables also accompanied these officers.

On the 17th August, 1965, a letter was addressed by Shri G. C. Sharma, advocate (copy annexure 'B'), protesting against the action taken and challenging the legality and validity of the warrant of search as also the seizure of the books. This was followed by a letter by Shri T. C. Agarwal, general manager, dated the 18th August, 1965 (copy annexure 'C'), giving details of damage caused and of articles missing. In this letter it was mentioned that these articles were found missing -

'Cash Rs. 38,214.82 P.

All cheques received from the various parties.

All cheque books.

30 cloth sheets.

All account books with subsidiary books and records.

All files and correspondence records.

Many inspection notes issued by the Governments Inspection Department against which payment was to be received from Government. Several railway receipts and motor truck receipts of goods.

Various sale deeds of land and properties.

Various other miscellaneous papers, documents and account books pertaining to our business and our sister concerns.'

The Commissioner sent a reply dated 17th September, 1965, to the letter sent by Shri G. C. Sharma, advocate of the petitioner, justifying the proceeding taken against the firm (copy annexure 'D.1/3'). In this letter it was denied that any damage had been caused except what was necessary for breaking open the five steel almirahs. As regards the amount of cash it was mentioned that only a sum of Rs. 3,214.82 P. had been removed. Regarding other documents, all that was stated was that the cheque books has not been removed in their entirety and only a few of them, which were considered relevant, were brought for examination. In paragraph 5 it was stated that the books of accounts, etc., Which were seized, were brought in the cloth sheets in which they were found tied originally, numbering 32.

The present petition was filed on 20th September, 1965. On 22nd September, 1965, an order was made by a division Bench Application (Civil Miscellaneous) (3194-D of 1965) came up for hearing before the Bench on the 22nd September, 1965, when an order was made as follows :

'Mr. Hardy assures us that the income-tax authorities will within two weeks return the books not required and also, of course, other documents not needed by the authorised.

No further order in necessary at this stage.'

On the 1st October, 1965, the Income-tax Officer sent seven lists to the petitioner-firm enumerating the document and account books, which were intended to be returned, out of those which had been seized. He also desired that some one should attend on behalf of the firm on 6th October, 1965, to collect the same. On 12th October, 1965, Mr. G. C. Sharma, advocate, addressed a letter to the Income-tax Officer saying that most of the account books, in which transactions had been entered and were necessary for carrying on the business of the firm, had not been returned, and, therefore, it was requested that all those as also the other books and documents, which has been seized, might be returned. Dr. Dina Nath was appointed by the firm for receiving delivery of the books. According to the respondents, the books, which they had offered to return, were not taken away by the firm. It was only during the course of the hearing that the documents and books in question were actually returned to the petitioner and taken away by it under our directions.

It has been necessary to seat out the entire sequence of events in some detail because one of the principal contentions on behalf of the petitioner-firm has been that there was an excessive seizure of books and documents in total disregard of their relevancy or usefulness for the purpose for which seizure was authorised by the Commissioner, and that there has been an abuse of power as also arbitrary exercise of authority inasmuch as even the current books, which were required for carrying on the business of the firm, were not returned immediately after it was found that they were neither relevant nor required nor required for the proceedings, which were either pending or contemplated against the petitioner, under the Income-tax Act.

There is a certain measure of difference between the allegations relating to the years for which the returns had been filed or not filed, and, therefore, I would proceed on the assumption that the facts stated in the affidavit of Shri Balwant Singh, Income-tax Officer, with regard to them, are correct. It is not denied that the petitioner was assessed to income-tax for the first time in respects of the assessment years 1959-60 in the status of an unregistered firm. Registration for the assessment year 1960-61 was granted and the assessment was completed in the status of a registered firm. On 14th August, 1965, two returns, with regarding to Shri Balwant Singh, showed different incomes. No return had been filed for the assessment year 1963-64. The allegation in the petition that returns for the assessment year 1961-62, 1964-65 and 1965-66 has been submitted was not denied. It is further stated in the affidavit of Shri Balwant Singh in paragraph 5 that for the assessment year 1962-63, the assessee filed an application dated 1st November, 1962, requesting for extension of time for filing of a return up to 30th November, 1962, which request was repeated by further applications made on 2nd December, 1962, 1st January, 1963, and 2nd March, 1963. Notice under section 139(2) of the Income-tax Act was served upon the assessee on 4th March, 1963, requiring the assessee to file the returns within 30 days. No further application for extension of time was filed. Thus, the assessee had not filed the return for the year 1962-63, although time for doing so had expired long ago. With regard to the assessment year 1963-64 also, notice under section 148 of Act had been issued to the assessee on 2nd March, 1965, and served on it on 3rd March, 1965, requiring filing of the return within 30 days, but no such return was filed.

According to the petitioner, the Income-Tax Officer had never called upon it to produce any account books required by the department, and there was no legal or other justification for seizing all the document, and there was no legal or other justification for seizing all the documents, which were mentioned broadly in paragraph 13 of the petition, being 'diverse papers and book, original contacts, hounds, title deeds, cash, cheque books, cheques received from various parties, railway and motor truck receipts and sheets of cloth...' The reply contained in the affidavit of Shri Balwant Singh to these allegations was given in paragraphs 5 and 13. It was sought to be inferred from the non-filing of the returns for the year 1962-63 and 1963-64, in spite of service of notice and the various extensions granted in respect of the same, that the assessees claim that it had never failed to produce books of account, document or other material was not correct. There was no specific denial of the allegations about the nature and type of document or books which were seized in paragraph 13 of the aforesaid officers affidavit.

The learned counsel for the petitioner sought to raise the following points before us :

(1) Provisions of section 132 and rule 112 of the Income-tax Act are ultra vires the Constitution, being violative of articles 14, 19(1) (f) and (g) and 31.....

(2) The mandatory provision of section of section 132 of the Act were not followed, nor could they be invoked in the present case, and the authorisation warrant was illegal and without jurisdiction.

(3) The search and the seizure were vitiated by mala fides in the sense that there was abuse of power and the books and documents seized in utter disregard of authority conferred on the officers concerned by the warrant issued under section 132 of the Act.

(4) Provisions of the Code of Criminal Procedure, 1898, relating to searches and seizure, which are made applicable by sub-section (13) of section 132 were not complied with.

As regards the vires and constitutionality of section 132 and rule 112, it is unnecessary to refer to any case decided by other courts, because, with respect, we must follow the Bench Decision of this court in Writ No. 225 of 1964, Roshan Lal and Co. v. Commissioner of Income-tax, decided by Dulat and P. C. Pandit JJ. The view of the Calcutta High Court in Surajmull Nagarmull v. Commissioner of Income-tax was followed and it was held that section 132 in no way affected any provision of the Constitution. Learned counsel for the reasoning of the petitioner has not made a serious attempt to show any infirmities in the reasoning of the Bench to persuade us to take a different view and refer the matter to a larger Bench. An effort has certainly been made to assail the validity of sub-section (5) of section 132, but that is hardly a question which is of much consequence in the present case, as the position of the respondent from the beginning was that the money which has been seized would be returned, and it had to be taken into custody because no one was present on behalf of the petitioner in the premises when the search and the seizure took place. Indeed, during the course of the hearing before us, the money was afforded to be returned, and must have been taken back by the petitioner under our verbal directions.

On the second point, reference may be made to the relevant part of section 132 of the Act. Sub-section (1) provides :

'132. (1) Where the Director of Inspection or the Commissioner, in consequence of information in this possession, has reason to believe that - ...

(b) any person to whom a summons or notice as aforesaid has been or might be used will not, or would not, produce or case to be produced, any book of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or

(c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or party income or property which has not been disclosed for the propose of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (here in after in this section refereed to as the undisclosed income or property),

he may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspector or Income-tax Officer (hereinafter referred to as the authorised officer) to -

(i) enter and search any building or place where he has reason to suspect that such books of account, other document, money, bullion jewellery or other valuable article or thing are kept.'

It is contended that there was hardly any material on which the commissioner could have reason to believe that the petitioner would not produce or case to be produced any book of account or other documents which would be useful for or relevant to any proceeding under the Act, or that any person was in possession of any money, bullion, etc., that represent either wholly or partly income or property, which had not been disclosed. Annexure 'R.1/1' only refers to some information, which the informant, who had actually supplied the information, to Shri S. N. Sen, had received from some other source, namely, an employee or ex-employee of the firm and the sole information was that accounts were being manipulated with a view to showing reduced income. Mr. Hardayal Hardy, learned counsel for the respondents, has placed before us the original statement recorded by Shri S. N. Sen of the informant, which does not show that the person, who had made the statement, had received any information from some other source, i.e., some employee or ex-employee of the firm. It appears that this informant, whose statement he had recorded.

In Calcutta Discount Co. v. Income-tax Officer, Shah J., delivering the judgment of the court, has observed with regard to the true import of the expression 'has reason to believe' in section 34 (1) (a) of the Income-tax Act, 1922, that it postulates belief and existence of reasons for that belief. The belief must be held in good faith : it cannot be merely a pretence. It does not mean a purely subjective satisfaction of the Income-tax Officer : the from of decision as to the existence of reasons and the belief is not in the mind of the Income-tax Officer. The existence of the belief and the reasons for the belief, but not the sufficiency of the reasons, will be justiciable. The Income-tax Officer must on information at his disposal believe that the income has been under assessed by reason of failure, fully and truly, in to disclose all material facts necessary for the assessment. Such a belief may not be based on mere suspicion. It must be based upon information. Keeping in mind the above observations of their Lordships, it is not possible to say in the present case that there was a reason for holding the belief, which led the commissioner to direct the issue of a warrant under section 132 of the Act, the reason for the belief being the information supplied by the informant with regard to the allegations that books of account were being manipulated by the petitioner-firm, nor would the sufficiency of the reason be justiciable.

The next question, which requires investigation, is the existence of the belief. The warrant (copy annexure 'R.1/2'), which was issued by the Commissioner, certainly recites that the had reason to believe, which would imply existence of the belief, but it has been contended by the learned counsel for the petitioner that the affidavit, which the commissioner had filed and by which alone he could satisfy this court that he had really applied his mind to the matter and had come to believe what was stated in the warrant, does not satisfy the requirements of the law, and should not be accepted in the matter of correctness of the facts averred therein. In his affidavit dated 22nd October, 1965, Shri R. N. Limaya, Commissioner of Income-tax, has, inter alia, stated : 'Having regard to the facts and circumstances mentioned in the Inspecting Assistant Commissioner of Income-taxs report, supported by the informers statement in writing, I agreed with will be useful or relevant to the proceedings subsequent to the assessment year 1961-62.' Verification clause in the affidavit is in the following terms :

'I, deponent, above-named, do hereby declare that whatever has been stated above is true and correct to a my knowledge derived from the official record and no portion is false nor has anything been concealed therefrom.'

This, it is started, does not and cannot establish the correctness of the statement in the affidavit with the regard to the belief of the Commissioner which had nothing to do with the official records, but the correctness of which he could affirm only from his own knowledge. It has also been pointed out that the Commissioner never applied his mind to the matter and merely acted on the suggestions of Shri S. N. Sen, which showed that he did not bring to bear his own independent mind on his question of forming the belief that the assessee would not produce the books of account, etc., when required to do so.

In the State of Bombay v. Purushottam Jog Naik, verification of the affidavit was regarded as defective. The body of the affidavit there disclosed that certain matters were known to the secretary, who made the affidavit, personally. The verification, however, stated Lordships pointed out that slipshod verifications of that type might well in a given case lead to rejection of the affidavit. The remarks of Jenkins C.J. and Woodroffe J. in Padmabati Dasi v. Rasik Lal Dhar were endorsed. It is apparent that the affidavit of the Commissioner with regard to his belief that the assessee will not produce any books of account or other documents, etc., was defective and cannot be accepted for the purpose of establishing that he held such belief. The essential requirement and condition, therefore, of section 132, which must be complied with before any warrant of authorisation can be held to be valid, were not satisfied in the present case.

As regards the contention that the Commissioner never applied his own mind and merely acted on the suggestion of Shri S. N. Sen, reference may be made to certain decisions of this court in which the scope and applicability of rule 16.38 of the Punjab Police Rules came up for examination. In Nand Singh v. Superintendent of Police, Harbans Singh J. was of the view that where the superintendent of Police, after making accusations against a police officer, had suggested a departmental enquiry, and the District Magistrate had merely noted the word 'allowed' on that memorandum, the mandatory requirements of rule 16.38(1) had been violated. To similar effect is the decision of P. C. Pandit J. in Gobind Singh v. D. I. G. of Police. Shamsher Bahadur J. in Walaiti Ram v. State of Punjab recorded that where the Superintendent of Police had himself made a suggestion of a departmental enquiry, and the District Magistrate had conveyed his acceptance of the suggestion through someone else without assigning his own reasons, police rule 16.38 had been breached. However, the requirement of that rule is that a District Magistrate, while deciding whether a departmental enquiry should be held instead of a judicial trial, had to give reasons. There is no such requirement in section 132 of the Act. In the present case, it is true that Shri Sen, in his report, the relevant portion of which has been reproduced before, made a suggestion that the assessee would not produce any books of account or other documents, which would be useful or relevant to the proceedings for certain years of assessment, but he left it to the decision of the Commissioner whether to issue authorisation under section 132 or not. In such matters it would have been highly desirable if the Inspecting Assistant Commissioner of Income-tax had only stated the facts and not expressed his own opinion which might have influenced the Commissioner, but it is difficult to apply the ratio of the decisions given under police rule 16.38 to the present case, as there was no question of giving any reasons in this case.

On the third point, the learned counsel for the petitioner has referred to the relevant facts in the affidavit of Shri Balwant Singh, to which reference has already been made, and has further called attention to the numerous lists (annexures 'D-1' to 'D-33') of books and documents prepared by Shri H. R. Chhabra, Income-tax Officer, which were seized. Roughly, the number of documents and books thus seized, comes to 518. Annexure 'D-1' shows that 15 cheques, which had been issued by third parties in favour of the petitioner as also 3 cheque books of Messrs. Devkaran Nanjee Banking Company Limited, Delhi, as well as the letter dated the 5th November, 1964, from Dr. Med Otto Martin Luzern to Mr. T. C. Agarwal, were taken into possession. The cheques were of the years 1964 and 1965. According to the petitioner, the letter from Dr. Luzern was in connection with some medical consultation, which Mr. T. C. Agarwal had with that doctor. There is no statement in any affidavit made on behalf of the respondents showing what relevancy and usefulness this letter would have had for the purposes of any proceeding, which were pending or were contemplated with regard to the assessment years in question. Admittedly such proceedings had concern with the assessment years 1962-63 and 1963-64, and the argument that has been addressed on half of the petitioner is that these documents had, firstly, no relevancy for the aforesaid assessment years, and, secondly, even otherwise, by their taking into possession by the respondents, the current business of the petitioner was very much affected. It would be pointless to refer to each one of these documents, but some glaring and salient features may be mentioned, as pointed out by the learned counsel for the petitioner. Annexure 'D-3' show that two sale deeds relating to some plots, one executed by Haji Mohd. Makshi, in favour of Haji Mohd. Usma in 1946, and the other by Haji Mohd. Usma in favour of Jagannath Sharma in 1957, were taken into possession. Item 5 is a post-card dated the 30th April, 1965, from Dr. D. R. Kapurs office regarding Civil Writ No. 311-D of 1964 along with a copy of this courts order dated the 19th February, 1965, in that writ petition. Annexure 'D-8' contains mention of one journal written from the 29th October, 1964, and one pass-book of N. K. Land and financiers in Devkaran Nanjee Banking Company Limited, from the 26th October, 1964, to the 8th May, 1965. In annexure 'D-8', item 2 is a bahi from the 18th September, 1964, to 24th July, 1965, and item 3 is a bahi (ledger) from October, 1964, to June, 1965. Similarly, item 6 is a bahi (cash book) for the period 3rd September, 1964, to 12th July, 1965. In annexure 'D-20', item 2 is a railway receipt register from 1959. Annexure 'D-23' contains 30 items, which all relate to the period 1958-1961. Similarly, annexure 'D-25' contains several items which range from 1947 to 1962. Item 6 in annexure 'D.26' is a cash book from June, 1964.

It has been contended that under section 132 (1) (5) the books of account or other documents have to be such which will be useful for or relevant to any proceedings under the Act. The warrant of authorisation was issued in prescribed form No. 45, by means of which the officers authorised to effect search and seizure were authorised and required -

'(a) to enter and search the said premises;

(b) to place identification marks on such books of account and documents as may be found in the course of the search and as you may consider relevant to or useful for the proceedings aforesaid and to make a list thereof together with particulars of the identification marks...'

It was, consequently, necessary and essential for these officers to take into custody only such books as were considered relevant to or useful for the proceedings in question. It was not open to them to indiscriminately, arbitrarily and without any regard for relevancy or usefulness, seize all the books and documents which were lying in the premises, and, if they did so, the seizure would be beyond the scope of the authorisation.

The relevant provisions of the Act and the authority which was conferred by means of the warrant of search leave no room for doubt that the officers, who had been so authorised, were not empowered to seize and take into possession each and every document or book which was lying on the premises. They had to make up their mind, at least prima facie, while seizing books as to which would be relevant and useful in the matter of any proceedings relating to the period 1st April, 1962, onwards, as contained in annexure 'R.1/2' (the warrant of authorisation under section 132 of the Act). Although all the lists were signed by Sri H. R. Chhabra, Income-tax Officer, the only affidavit, which has been filed on behalf of the Income-tax Officer, was of Shri Balwant Singh. It is nowhere mentioned in his affidavit that he or any of his colleagues considered each one of the documents and the books, which were taken into possession, to be relevant and useful for the purpose of the proceeding for the assessment years, 1st April, 1962, onwards. Indeed, in the absence of any such fact in the affidavit of Shri Balwant Singh, Mr. Hardy, learned counsel for the respondent, wanted to show that the books and the documents, which had been seized, were relevant and useful, but that is not a matter which could be established by the counsel by a general argument or submission that all these documents could have been helpful even if they related prior to or subsequent to the period for which they were required for the purpose of finding out whether the petitioner was guilty of manipulation of books. It may be that in view of Explanation 2 appearing in section 132, according to which the word 'proceeding' means any proceeding in respect of any year, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act, which may be commenced after such date in respect of any year, the Income-tax Officers could have taken into possession even those books and documents which related to the period prior to 1962, but it was for them to disclose by means of affidavits that all the books and the documents, which had been seized, were considered relevant and useful. It is somewhat surprising that a letter written by a counsel in connection with some writ petition pending in this court was also considered relevant and useful in the matter.

In Seth Brothers v. Commissioner of Income-tax, on which the learned counsel for the petitioner has largely relied, search and seizure had been assailed on grounds which have a certain amount of similarity with the facts in the present case. There 500 documents had been seized. After saying that section 132 did not contemplate a fishing enquiry, and that a number of police officers had accompanied the Income-tax Officer during the raid, for which there was no justification, and several documents had been taken into possession that were current books of account, detention of which for over two months must have seriously prejudiced the petitioners in their business activities, and that marks of identification had not been put on a number of documents, their Lordships struck down the seizure on the ground that the search did not appear to be bona fide. It was observed that although no ill will had been established between the petitioners and the respondent, the extent of the seizure was far beyond the limits of section 132 of the Act, and the action was mala fide in the sense that there was abuse of power.

Mr. Hardy has relied on paragraph 31 of the affidavit of Shri Balwant Singh, in which it is stated that books of account of seven concerns were seized, and their examination revealed, for instance, that in the books of Messrs. Agarwal and Company, a sum of Rs. 10,000 was shown to have been received on a particular date during the accounting year 1962-63 from the assessee-firm, but no such entry was found in the books of the assessee-firm. Likewise, the various account-sheets purporting to be the accounts of one sister concern in the books of these concerns showed that they had been obtained and got for the purposes of removing certain entries and introducing or making other adjustment entries in the books of account, where on a particular date the cash position was such as permitted such adjustments. Similarly, the documents, which are mentioned in this paragraph, indicated that the deeds had not been drawn up even till 14th August, 1962, on the stamp papers. It was also stated that there were letter writing pads relating to various firms, which were blank, and, therefore, the search had disclosed considerable volume of evidence, which established the case of attempted fabrication of books of account and other documents with the object of defrauding revenue. It may be that after looking into as many as 518 documents the Income-tax Officer was able to fish out some material which might be helpful for establishing the charge of fabrication of books against the petitioner, but that is hardly a matter which would justify the initial seizure of all the books regardless of the requirement of the law and the limited authority conferred by the warrant of authorisation, according to which the Income-tax Officer had to decide on the spot and seize only those documents and books which he considered relevant and useful for the purpose of the proceedings in question. That was never done in this case, and, therefore, it must be held that the seizure was altogether excessive, and was on abuse of power in the sense explained in the Allahabad decision. The sequence of events, which has figured in the beginning of the judgment, is also tell-tale. Even though all the current books were taken into attempt was make till 1st October, 1965, in spite of the letter dated the 17th August, 1965, addressed by Shri G. C. Sharma, an advocate of the petitioner, protesting against the action taken, and the subsequent letter of Shri T. C. Agarwal dated the 18th August, 1965, in which he had alleged that all the books, etc., had been removed, to offer to return those documents, which were not required, or at least the current books of account without which no commercial concern can possibly carry on its business.

As has been stated before, by the letter dated the 1st October, 1965, documents and books contained in seven lists were offered to be returned, the total of which comes to 293. It would seem that at least these books were not found useful or relevant and that is the reason why the Income-tax Officer offered to return them. At any rate, even in the letter dated the 1st October, 1965, a copy of which has been produced before us, and is not disputed, it was not stated that the remaining books and documents were considered relevant and useful and were, therefore, being detained for examination, and not returned. All this supports and substantiates the case of the petitioner that the books and documents had been seized in their entirety from the premises and whatever was found lying there was taken into possession irrespective of any consideration of the question, which it was mandatory both under the provisions of section 132 and under the warrant of authorisation for the Income-tax Officer, whether it was relevant or useful for the purposes of the proceedings for the assessment years 1962-63 onwards or not. The search and the seizure, in the circumstances, must be held to be illegal as being arbitrary and an abuse of power.

The fourth point was not seriously pressed. However, in view of the decision on points Nos. 2 and 3, this writ petition must succeed, and it is allowed. The search and the seizure of the books of account are hereby quashed. The respondents are directed to restore all the books and the documents which have so far not been returned to the petitioner. In view of the entire circumstances, the parties are left to bear their own costs.

S. B. CAPOOR J. - I agree.


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