High Court Of Allahabad
Smt. Kavita Agarwal & Anr. vs. Director Of Income Tax (Investigation) & Ors.
Sections 132(1)
M. Katju & Umeshwar Pandey, JJ.
Civil Misc. Writ Petn. No. 1205 of 2001
10th October, 2003
Counsel Appeared
S.P. Gupta & Rakesh Ranjan Agarwal, for the Petitioners : Bharatji Agarwal, for the Respondents
JUDGMENT
M. KATJU, J. :
This writ petition has been filed for a writ of certiorari quashing the entire search and seizure proceedings in regard to the jewellery found in locker No. B-237 of Standard Chartered Grindlays Bank, Karol Bagh, New Delhi on 3rd Nov., 2001, and for mandamus directing the respondents to return the jewellery seized by the respondent No. 3 on 3rd Nov., 2001, from the aforesaid locker. Heard learned counsel for the parties.
The petitioner No. 1 is the wife of petitioner No. 2. They were married in December, 1990, and the petitioner No. 2 is one of the partners of the firm M/s Lallooji & Sons at 1, Ram Bagh, Allahabad which is registered under the Partnership Act. The firm has its offices and godowns at several places as mentioned in para 8 of the writ petition. The names of the partners are mentioned in para 9 of the petition. It is alleged that the petitioner No. 1 is not a partner of the firm. It is alleged in para 12 of the petitioner that the family of petitioner No. 2 consists of three units which reside in their respective separate portions in residential house No. 16/309, Gali No. 10, Joshi Road, Karol Bagh, New Delhi. These three units are : (i) Petitioner No. 2, his wife and their children. (ii) Father of petitioner No. 2 namely, Ramesh Kumar Agarwal and his wife Madhu Agarwal; and (iii) Mukul Agarwal (brother of petitioner No. 2), his wife Smt. Ritu Agarwal and their children.
On 27th April, 2000, a search was made by the IT authorities at the business premises of the firm at its head office at No. 1, Rambagh, Allahabad as well as its other offices and godowns under s. 132(1) of the IT Act, 1961. Simultaneously on 27th April, 2000, a search was also conducted at all the aforesaid residential premises of house No. 16/309, Gali No. 10, Joshi Road, Karol Bagh, New Delhi wherein the petitioner No. 2, his parents, and his brother were separately residing in their respective portions. It is alleged in para 15 of the petitioner that at the time of the search the petitioner No. 2 was told that the warrant of authorization had been signed by respondent No. 1 and was only in the name of the petitioner No. 2. It was not told or informed that there was any warrant of authorization of search in the name of petitioner No. 1. It is alleged in para 16 of the petitioner that no copy of the warrant of authorization was given to any of the petitioners though it was asked for. The warrant of authorization was hurriedly shown to the petitioner No. 2 for a few moments. It was got signed by petitioner No. 2. In the pressure and panic of the situation it was not possible for the petitioners to make any note of its contents. In para 18 it is alleged that petitioner No. 2 had been informed that the premises of the other partners at Allahabad and Lucknow were also searched on 27th April, 2000. At the time of search of the aforesaid premises, house No. 16/309 Gali No. 10, Joshi Road, Karol Bagh, New Delhi on 27th April, 2000, keys of three lockers No. A-906, B- 237 and A-701 of Standard Chartered Grindlays Bank, Karol Bagh, New Delhi were also found. These lockers were in the joint names of three set of persons as mentioned below : (i) Locker No. A-906 was in the name of petitioner No. 2 and Smt. Madhu Agarwal mother of petitioner No. 2 and wife of Ramesh Kumar. (ii) Locker No. B-237 was in the name of petitioners. (iii) Locker No. A-701 was in the name of Smt. Ritu Agarwal and her husband Mukul Agarwal (brother of petitioner No. 2).
All the aforesaid three keys were seized by the IT authorities during the aforesaid search. During the aforesaid search the IT authorities found jewellery, cash and papers in the aforesaid three separate portions of house No.
16/309. The IT authorities, however, did not seize the jewellery and cash found in any of the three portions. Only papers and keys were seized. A copy of the Panchanama dt. 27th April, 2000, along with its various annexures of the inventories as well as seizure of the aforesaid keys, a restraint order under s. 132(3) of the Act was also passed by the authorized officer of the raiding party against the aforesaid three sets of persons and the manager of the bank in respect of the operation of the aforesaid three lockers. A copy of restraint order is Annexure 2. In para 25 of the petition it is alleged that it was only from the contents of the Panchanama and the restraint order that the petitioners learnt that the warrant of authorization was only in the name of the petitioner No. 2 and it was dt. 28th March, 2000. On 22nd June, 2000, a representation was made to the respondent No. 2 wherein a complaint was made to respondent No. 1 regarding the infirmities and illegalities of the aforesaid search dt. 27th April, 2000. Copy of representation dt. 22nd June, 2000, is Annexure 3. An oral request praying for certain papers was made but the same were not supplied. It is alleged in para 28 of the petition that the restraint order had ceased to be in force after the expiry of a period of 60 days from 27th April, 2000, in view of the provisions of s. 132(8A) of the Act. On 11th Oct., 2001 the petitioner No. 2 applied to respondent No. 3 in writing for the revocation of the restraint order and for release of the keys of the locker vide Annexure 4. The application was sent to all the three authorities mentioned in it. The respondent No. 3 issued three letters dt. 16th Oct., 2001, asking them to be present in the bank on 3rd Nov., 2001, at 10 A.M. for the opening of the locker in their presence. A copy of the letter issued to the petitioners is Annexure 6. On 3rd Nov., 2001 the petitioners, Smt. Madhu Agarwal and Smt. Ritu Agarwal reached the bank. In the bank there were IT authorities headed by respondent No. 3, prior to the opening of the lockers, for which the petitioner and the other persons had been called, respondent No. 3 told them that he was in possession of a warrant of authorization to search and seize the contents of the lockers. The petitioners were informed that the search warrant in respect of locker No. B-237 was in the names of the petitioners. However, no copy of the search warrant was given to the petitioners. It was hurriedly shown for few moments. In the pressure and panic of the situation as had been created by the IT authorities in the bank the petitioner No. 2 was asked to put his signatures on it. It is alleged in para 36 that the warrant in the name of the petitioner was not in their capacity as partners of the firm. In fact, the petitioner No. 1 is not a partner of the firm. In para 37 of the petition it is alleged that on 3rd Nov., 2001, the three lockers including B-237 were opened. The valuer of the Department was called. The jewellery of the petitioner No. 1 found in the locker No. B-237, was valued at Rs. 6,28,861. The entire jewellery was seized. The description of the jewellery was made in Annexure J to that Panchanama. A copy of that Panchnama including its Annexures was given to the petitioners. A copy of that Panchnama is Annexure 7. It is alleged in para 38 of the petitioner that locker No. A-906 in the name of Madhu Agarwal and Vipul Agarwal was also opened and inventory of the jewellery was prepared but the same was not seized as per the Panchnama. However, the jewellery of locker No. A-701 in the name of Ritu Agarwal and Mukul Agarwal after opening the locker, was inventorised and seized as per the Panchnama. Subsequently the respondent No. 3 wrote a letter whereby it has been informed that the restraint order dt. 27th April, 2000, has been vacated vide Annexure 8. It is alleged in para 43 of the petition that seizure is wholly without jurisdiction and void. It is alleged in para 44 of the petition that the seizure of the aforesaid jewellery found in locker B-237 is a fraud in law in view of provisions of s. 132(8A) of the Act. After the expiry of period of 60 days the restraint order was wholly illegal and without jurisdiction.
4. A counter-affidavit has been filed and we have carefully perused the same.
5. On the facts of the case we are of the opinion that this writ petition deserves to be allowed. The law is well settled that a warrant of search and seizure under s. 132(1) can only be issued on the basis of some material or information on which the Commissioner/Director has reason to believe that any person is in possession of money, jewellery or other valuable articles representing wholly or partly income or property which has not been or would not be disclosed, under the IT Act. In the present case the respondents have not disclosed what was the material or information on the basis of which the Director/Commissioner entertained the belief that the lockers contained valuable jewellery or other articles representing undisclosed income. It is well settled that the satisfaction of the authorities under s. 132 must be on the basis of relevant material or information. The word used in s. 132(1) are “reason to believe” and not “reason to suspect”. In the counter-affidavit it has been specifically stated in para. 18 that the authorized officer had reason to suspect and not reason to believe.
6. This Court in a very recent decision in Dr. Sushil Rastogi vs. Director of Investigation (2003) 182 CTR (All) 194 : 2003 UPTC 167, considered the legal position on this point, and has discussed the case law.
7. In CIT vs. Vindhya Metal Corporation & Ors. (1997) 139 CTR (SC) 495 : (1997) 224 ITR 614 (SC), the Supreme Court observed :
“Mere unexplained possession of an amount, without anything more, could hardly be said to constitute information which could be treated as sufficient by a reasonable person, leading to an inference that it was income which would not have been disclosed by the person in possession for purposes of the Act.”
8. In Dr. Nand Lal Tahiliani vs. CIT (1988) 69 CTR (All) 91 : (1988) 170 ITR 592 (All) the Allahabad High Court held that the averments of information under s. 132 must be in good faith and there must be a rational relation between the information and the material and the reasonable belief. Mere rumour of roaring practice and charging of high rate of fee and living in a posh house, in the absence of any other material, could not be construed as constituting information in consequence of which the Director could have reason to believe that the petitioner had not disclosed his income or would not disclose it.
The search and consequent actions of the Department were therefore, held to be illegal. The Supreme Court dismissed the SLP against the judgment. In L.R. Gupta vs. Union of India & Ors. (1992) 101 CTR (Del) 179 : (1992) 194 ITR 32 (Del) it was held by the Delhi High Court that the expression “information must be something more than a mere rumour or a gossip or a hunch. There must be some material, which can be regarded as information, which must exist on the file on the basis of which the authorizing officer can have reason to believe that action under s. 132 is called for. It was also observed “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 is not subject to tax, then he would not be liable to show receipt of that money in his income-tax return. Non- disclosure of the same would not attract the provisions of s. 132(1)(c). It may be that the opinion of the assessee 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 assessee, then the Department may be fully justified in issuing a notice under s. 148 of the Act, but so action can be taken under s.
132(1)(c)”.
In Ajit Jain vs. Union of India (2000) 159 CTR (Del) 204 : (2000) 242 ITR 302 (Del) it was observed that the mere fact that the petitioner was in possession of the said amount could not straightaway lead to the inference that it was his undisclosed income. The intimation simpliciter by the CBI, that the money was found in possession of the petitioner which, according to the CBI, was undisclosed, in our view, without something more, did not constitute information within the meaning of s. 132 so as to induce a belief that the cash represented the petitioner’s income which has not been or would not be disclosed. A bare intimation by the police or for that matter by any person, without something more, cannot be considered sufficient for action under s. 132 of the Act, for it would be giving naked powers to the authorities to order search against any person and prone to be abused. This cannot be permitted in a society governed by rule of law. Even assuming that the said amount was not reflected in the books of account of the company, as claimed by the petitioner, the mere possession of the said amount by the petitioner could hardly by said to constitute information which could be treated as sufficient by a reasonable person, leading to an inference that it was income which has not been or would not have been disclosed by him for the purposes of the Act, particularly when the petitioner as well as the company were regular assessee, with the IT Department.”
In Dr. N.L. Tahliyani vs. CIT (supra) this Court observed : “The statement that the Director of Inspection has sufficient material in his possession to believe that the person to whom summons or notice was issued was in possession of money, bullion or jewellery or other valuable articles or things is a mere reproduction of the section.
That’s hardly sufficient if the authorities can be permitted to claim that on ‘consequent inquiries’, they are empowered to take action without keeping on record anything to support it, then it shall be empowering them with naked powers. Inquiries should have been reduced to writing in black and white to enable the Director to discharge the statutory responsibility of issuing in authorization or warrant after being satisfied that the action suggested was justified and made available to the Court to infer that the exercise of power was reasonable, at least. In fact, the Director appears to have mechanically endorsed the report. If the report extracted earlier was sufficient for action under s. 132, then the Director could order a search against any doctor of a metropolitan town. Being known for
‘roaring practice’ and for ‘high rate of fee for operations’ in the absence of any other material could not be construed as constituting information in consequence of which the Director could have reason to believe that the petitioner had not disclosed his income or would not disclose it. Living in a posh house or posh locality by itself were not material which could result in initiation of proceedings under s. 132 of the Act, specially when the petitioner is an old assessee.
The standard of living maintained by him (petitioner) appears to have been added in the report more, as a recital to add gloss to the recommendation than with any sense of responsibility. What led to this inference is not stated. Not a word has been mentioned in the report, nor could any record be shown to demonstrate that the standard of living was out of proportion so as to warrant the conclusion that the petitioner was concealing income. Even if the recommending authority had some notions of his own either on personal knowledge or on any inquiry, it should have been made available to the Director to draw the inference, as the action was to be taken by him. The requirement of ‘reason to believe’ is not an empty formality. The Director and the Commissioner have been authorized to take action as they, being the senior officers of the Department, are expected to project their experience while invoking power under this section. The Director failed to live up to this expectation. He appears to have surrendered his reason to the report made by his Dy./Asstt. Director, which was an attempt to initiate fishing and roving inquiry for reasons best known to him as he did not consider it proper to place the result of the local inquiry” before the Director.”
In Lajpat Rai & Ors. vs. CIT (1995) 128 CTR (All) 467 : (1995) 215 ITR 608 (All), a Division Bench of this Court held that where the IT authorities had no information or material that any valuable asset or documents relating to company was stated in the locker, they had no justification to proceed with the search and seizure, and the warrant of authorization in question was passed on irrelevant considerations.
In Smt. Manju Tandon vs. T.N. Kapoor 1978 UPTC 349 a Division Bench of this Court held that the expression “reasons to believe” does not mean a purely subjective satisfaction on the part of the authority concerned. The reasons must be held in good faith and they cannot be merely a pretence.
In CIT vs. Vindhya Metal Corporation (supra) the facts were that a resident or Mirzapur was detained while travelling to Calcutta by train, and cash of Rs. 4,63,000 was seized from him by the police on the suspicion that the money was stolen property or had been obtained through some other offence. The CIT issued a warrant of authorization under s. 132A(1) of the IT Act. A search was conducted under s. 132 of the Act on the premises of the of the respondent-firm. The respondent-firm filed a writ petition questioning the validity of the warrant of authorization issued by the CIT under s. 132A(1) of the Act. The High Court held that on the information in the possession of the CIT, no reasonable person could have entertained a belief that the amount in his possession represented undisclosed income.
In L.R. Gupta vs. Union of India (supra) the Delhi High Court held that the information under s. 132 must be move than gossip, rumour or hunch. The existence of tangible material is the prerequisite to warrant satisfaction under s.132. This view was followed in Ajit Jain vs. Union of India (supra).
In the present case averments have been made in paras. 45 to 48 of the writ petition that there was no material on the basis of which there could be a reason to believe that the valuables in locker No. B-237 in the Standard Chartered Grindleys Bank, Karol Bagh, New Delhi represented undisclosed income. These averments have not been replied to at all in paras 34 to 36 of the counter-affidavit. It may be mentioned that the material on the basis of satisfaction under s. 132 has to exist must be material brought to the knowledge of the Commissioner/Director prior to the search, and the authorities cannot rely in material found during the search.
For the reasons given above the writ petition is allowed. The entire search and seizure proceedings in regard to the jewellery found in locker No. B-237 of Standard Chartered Grindlays Bank, Karol Bagh, New Delhi is quashed and the respondents are directed to return the jewellery forthwith to the petitioners.
[Citation : 264 ITR 472]
