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Chiranjilal and Another Vs. Commissioner of Income-tax, Delhi-i and Another - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberCivil Writ No. 326 of 1974
Judge
Reported in[1982]135ITR530(Delhi)
ActsIncome Tax Act, 1961 - Sections 131(1), 132, 132(1), 132(5), 132(10), 132B and 142(1)
AppellantChiranjilal and Another
RespondentCommissioner of Income-tax, Delhi-i and Another
Cases ReferredIn Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver
Excerpt:
.....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-section (4) of section 22 of the indian income-tax act, 1922 or under sub-section (1) of section 142 of this act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account, or other documents as required by such summons or notice or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced any boo the court inferred that the record leading to the search was prepared after the search..........the search is for locating secreted valuables and documents. the seized articles, such as account books, documents, cash, jewellery, etc., were seized as being valuable things, but some of them have been returned whereas the cash has been retained. 9. in n. k. textile mills ltd. v. cit , the punjab high court held the search and seizure to be invalid. this was so, because the affidavit of the commissioner was found to be defective. it was also held that there was an indiscriminate seizure which went beyond the scope of the authorisation which rendered the seizure invalid. it was also doubted that there was any information that could reasonably lead to the inference that a search was necessary. these circumstances do not exist in the present case. 10. in h. l. sibal v. cit , the search.....
Judgment:

D.K. Kapur, J.

1. On 13th March, 1974, the present writ petition was filed under arts. 226 and 227 of the Constitution of India to challenge the legality and validity of searches and seizures effected under s. 132 of the I.T. Act, 1961, at premises belonging to the petitioners who are father and son. According to the petition as originally filed, two warrants of authorisation were issued by the Commissioner of Income-tax/Director of Inspection to carry out simultaneous searches at the office and residential premises of the petitioners. These warrants were shown to the petitioners at their place of residence at 57, Jor Bagh, New Delhi. Searches and seizures were effected at Akash Deep Building, Ansal Bhawan, 16, Kasturba Gandhi Marg and Uphar Cinema at Green Park Market. In searches at 57, Jor Bagh, on 18th December, 1973, which continued up to 10.00 P. M. currency notes valued at more than Rs. 1,00,000, silver utensils worth Rs. 2,800 and jewellery of more than Rs. 42,000 belonging to Shrimati Suraj Kumari, wife of the first petitioner and jewellery worth over Rs. 24,000 belonging to Shrimathi Kusum Ansal, wife of the second petitioner, and documents, account books, share certificates and other documents were seized and inventories prepared. Some of these articles were later returned. According to the petitioners, they had given full information regarding all these items and none of them represented concealed income. It is claimed that the searches were ultra virus and infringed s. 132(1) of the I.T. Act, 1961. Various notices were served on the petitioners being annex. 'IV' dated 31st December, 1973, and annex. 'VI' dated 2nd March, 1974, and it was claimed that these notice were ultra virus as a summary order had to be passed latest by the 90th day after the search which fell on 19th March, 1974.

2. In any event, a summary order was passed, so the petition was amended only a few days after it was filed. The said order is dated 17th March, 1974, and the same has also been challenged by the amendment.

3. No return was filed to the writ petition in spite of the same having been pending in this court since 1974. When this matter came up for hearing before us on 9th April, 1980, we directed that a return must be filed and consequent to this order, the affidavit of Shri S. K. Sharma, ITO, Central Circle, has been filed. At the same time, the department has placed before us the original satisfaction file for verifying certain facts which are necessary for issuing an order under s. 132 of the Act. We have examined the said file, particularly as in this case due to the passage of time the Commissioner who had authorised the searches and seizures is no longer holding the said office and we have not had the advantage of examining his affidavit. In all other reported cases of a similar type where the warrant of authorisation has been impugned, the relevant affidavit has come from the concerned official.

4. Nevertheless, in spite of the affidavit being by an ITO who was not concerned with the actual searches and seizures, we have examined the correct position in order to determine the validity of the searches and seizures.

5. The learned counsel for the petitioner has contended that the searches were not preceded by a proper authorisation. Section 132(1) reads as follows :

'132. (1) Where the Director of Inspection or the Commissioner or any such Deputy Director of Inspection or Inspecting Assistant Commissioner as may be empowered in this behalf by the Board 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-section (4) of section 22 of the Indian Income-tax Act, 1922 or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account, or other documents as required by such summons or notice or

(b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced any books of account or other documents which will be useful for, or relevant to, any proceeding under the India 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 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).'

6. This provision shows that in there different cases when the Commissioner or other authority acting under the section has reason to believe that conditions exist, then he can issue the authorisation for carrying out the search. It is the case of the petitioners that none of these conditions existed and reference has been made to the case-law which has developed under this section. It has also been contended that the subjective satisfaction of the Commissioner is subject to the scrutiny of the court. From the file, we find that there was some material on the record suggesting that there was concealed income. It also appears that after the information had been documented the Commissioner wanted certain further information and it was only then that Commissioner made a nothing that this was a fit case for issuing a search and seizure warrant for unearthing secret valuables and documents. It is not necessary to place the information in the file as part of the case, but only to see that the Commissioner has acted in accordance with law, and it is for this reason that we have examined the file.

7. In Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver : [1967]66ITR664(SC) , the Supreme Court examined the constitutional validity of search made under the Madras General Sales Tax Act, 1959, and found that there were certain safeguards under the Act. Those safeguards were that the empowered official must have reasonable grounds for believing that a search was necessary; he must believe that the required object cannot otherwise be obtained without undue delay; he must record reasons in writing; he must specify the object for which the search is made. It was also held that the search had to be made in accordance with the Criminal Procedure Code and hence the provision was intra vires.

8. In this case, the opinion of the Commissioner satisfies these tests. The information is not set out in the order of the Commissioner, but is in a note form. The Commissioner merely states that he has studied the nothing that it is a fit case for search and the search is for locating secreted valuables and documents. The seized articles, such as account books, documents, cash, jewellery, etc., were seized as being valuable things, but some of them have been returned whereas the cash has been retained.

9. In N. K. Textile Mills Ltd. v. CIT , the Punjab High Court held the search and seizure to be invalid. This was so, because the affidavit of the Commissioner was found to be defective. It was also held that there was an indiscriminate seizure which went beyond the scope of the authorisation which rendered the seizure invalid. It was also doubted that there was any information that could reasonably lead to the inference that a search was necessary. These circumstances do not exist in the present case.

10. In H. L. Sibal v. CIT , the search and seizure was held to be mala fide in the circumstances of the case. It was held to be a random search. Moreover, the said search was based on some policy decision. There were some special circumstances in this case which suggested that the name of Shri Gurdial Singh Mann had been introduced into the official record in somewhat extraordinary circumstances. The court inferred that the record leading to the search was prepared after the search had actually been conducted, thereforee, the warrant was bad.

11. Learned counsel also referred to R. v. IRC : Ex parte Rossminster Ltd. [1979] 3 All ER 385; [1980] 1 WLR 1 (CA), wherein a search under the equivalent English statute was struck down on the ground that there was no way of finding out whether the property and document had been validly or legally seized.

12. These cases are distinguishable in the present case for very obvious reasons. If the court can be shown that the authority had been improperly granted by the Commissioner, then we would have no hesitation to strike down the search. If it is shown that the search was beyond the scope of authorisation, we would also strike down the search and all its consequences. As we have not been shown any infirmity either in the scope of authorisation, we would also strike down the search and all its consequences. As we have not been shown any infirmity either in the scope of the search or the authorisation on which the search was based, we cannot apply the ratio of these cases. All cases have to depend on their own facts. All we know is that on a particular date there was a search conducted at 57, Jor Bagh, New Delhi, in which several items of property and account books were searched. The cash amount of Rs. 1,00,000 has been dealt with in an order passed by the ITO under the provisions of s. 132(5). The other property has been returned, i.e., the jewellery belonging to the wives of the two petitioners and the silver utensils. Apparently, the only thing retained is the sum of Rs. 1,00,000 cash, a list of share certificates which in any case is not the original shares and some account books. We have not been told how the documents and account books were outside the scope of the search. In fact, the search was for discovering a duplicate set of books, so neither the authorisation nor the scope of the search itself can be said to be beyond the scope of the section. Hence, we cannot strike down the search.

13. There is an order under s. 132(5) passed on 17th March, 1974, which has dealt with the requirements given in the section. It is provided in s. 132(5) that these seizures have to be dealt with by the ITO under the provisions of s. 132B, and further, the order under s. 132(5) is subject to an appeal or reconsideration by the Board of Direct Taxes. The provisions of s. 132(10) to (12) are as follows :

'132. (10) If a person legally entitled to the books of account or other documents seized under sub-section (1) or sub-section (1A) objects for any reason to the approval given by the Commissioner under sub-section (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents.

(11) If any person objects for any reason to an order made under subsection (5), he may, within thirty days of the date of such order, make an application to such authority, as may be notified in this behalf by the Central Government in the Official Gazette (hereinafter in this section referred to as the notified authority) stating therein the reasons for such objection and requesting for appropriate relief in the matter.

(12) On receipt of the application under sub-section (10) the Board, or on receipt of the application under sub-section (11) the notified authority, may after giving the applicant an opportunity of being heard pass such orders as it thinks fit.'

14. These provisions provide an adequate opportunity to the petitioners to get back any property that might have been wrongly seized and even the order under s. 132(5) of the Act can be re-examined. Moreover s. 132B shows the manner in which the retained goods have to be used. In this case, the retained property is only cash and it has to be utilised to recover income-tax or penalty levied in an assessment. It, thereforee, appears to us that there is an adequate remedy of appeal and provision even otherwise for dealing with any wrongful retention of the cash which may have resulted in this case. No circumstances are disclosed calling for our interference under are. 226 of the Constitution. So, we dismiss the writ petition with costs.


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