High Court Of Calcutta
Mahesh Kumar Agarwal vs. Deputy Director Of Income Tax (Inv.)& Ors.
Sections 132(1), 132(3), 132(8A)
Amitava Lala, J.
Writ Petn No. 2506 of 2001
8th October, 2002
Counsel Appeared
Mihirlal Bhattacharya with Rajarshi Bharadwaj, for the Petitioner : Dipak Kr. Shome with Jaydab Chandra Saha, for the Respondents
JUDGMENT
AMITAVA LALA, J. :
This writ petition is made by an individual claims to be the sole proprietor of a business under the name and style of “Pratik Food Product” at 58, Jawaharlal Nehru Road, Calcutta-700071. He is residing at a flat being No. 9C/9D, 87, Southern Avenue, Calcutta-700029.
2. The petitioner alleged that on 24th Sept., 2001, the Dy. Director of Income-tax (Inv.) along with other officers of the IT Department initiated a search at the place of petitioner’s business at 58, Jawaharlal Nehru Road,Calcutta 700001. The search commenced at 8 A.M. of the day and ended at 1.15 A.M. of the next day. Therefore, no business was held on that very day. The respondent No. 1 prepared an inventory of bank a/c, Demat accounts, foreign exchange, machineries, shares, finished goods, raw materials and packaging materials. They had seized Rs. 4,50,000 in cash, bunch of loose sheets, computer (CPU) printouts and some documents relevant for preparing final books of accounts. The Panchnama under s. 132 of the IT Act and list of inventories were served only on 25th Sept., 2001. Simultaneously with the aforesaid search and seizure on 24th Sept., 2001 at around 8.30 A.M. a similar set of officers took out search and seizure proceeding under s. 132 of the IT Act at the residence of the petitioner and after making an inventory of the articles namely credit card, jewellery, books of accounts, documents, cash and seized a bunch of loose papers, cash of Rs. 50,000 and jewellery estimated at Rs. 78,313. The Panchnama in respect of such inventory was also served along with the list of inventories on the same day. It is significant to note hereunder that both the Panchnamas and list of inventories are made in the name of M/s Pratik Food Products (P) Ltd. but not in the name of Pratik Food Products, the proprietorship concern of the petitioner. On 26th Sept., 2001, the petitioner received a letter from his two bankers that pursuant to the prohibitory order of the respondent No. 1, dt. 26th Sept., 2001, under s. 132(3) of the said Act the bankers are not in a position to allow the operations of the bank a/cs of the petitioner along with bank a/cs of some others.
3. On 10th Oct., 2001, the petitioner made a request to the respondent No. 1 to release all the bank a/cs and other individuals as the petitioners have no personal connection with others and they are individual-assessee and their bank a/cs are reflected in their respective balance sheets and submitted by them along with returns. The petitioner further stated that those assessees have also individually applied to the respondent No. 1 on 11th Sept., 2001, for revocation of the prohibitory order but no action has been taken. By two letters dt. 11th Oct., 2001 and 17th Oct., 2001 the petitioner clarified that his concern “Pratik Food Products” is a proprietorship concern but not a private limited company against whom the search and seizure was conducted. It is also mentioned that the bank a/cs under prohibitory order are all disclosed bank a/cs and explained the true legal ownership of the seized goods and prayed for copies of seized documents. In response thereto, by a letter dt. 15th Oct., 2001, petitioner had given details of the petitioner’s business, bank a/cs, family members and their income-tax returns with balance sheets and P&L a/cs. Upon being satisfied with the reply to the queries the respondent No. 1 revoked the prohibitory order under s.
132(3) of the Act in connection with the bank a/cs of the Pratik Food Products but did not revoke such prohibitory order in respect of other assessees. Under such circumstances, it is evident that the action on the part of the respondent-authority is on the basis of assumption and without fulfilment of the test and requirement of search and seizure. Therefore, the search and seizure is wholly arbitrary, illegal and without jurisdiction. Fishing and roving enquiry in the name of search is not only illegal but also without jurisdiction.
4. The condition precedent of search and seizure is “reason to believe” under s. 132 of the Act which cannot be equated with “reason to suspect”. The expression “reason to believe” postulates belief and the existence of reasons for that belief. The belief must be held in good faith. It cannot be merely a pretence. It is true to say that the expression “reason to believe” does not mean purely subjective satisfaction on the part of the authority in making the seizure but the reasons for the belief must have a rational connection or a relevant bearing for the formation of the belief, not extraneous or irrelevant for the said purpose.
5. As and when places of persons of diverse activities and unconnected with each other are searched and their bank a/cs are freezed by the authority to get or gather materials and information to form a belief that the assessee is avoiding tax is wholly outside the scope of the search and seizure under the said Act. Bank a/cs of persons unconnected with the petitioner and reflected in their return are kept under the prohibitory order even after 60 days which is bad, illegal and should be se aside. This attitude of the respondent-authorities in making fishing and roving out enquiries reflects that the authorities are not in position is form their opinion for search and seizure. On the other hand, it is to be remembered that by such activities, the authorities have interfered with the right of the petitioner protected under Art. 19(1)(g) r/w Art. 300A of Constitution of India. Therefore, such search and seizure could be declared by this Court as bad in law and the authorities and/or each of them or servants and agents could be directed to withdraw, rescind and/or cancel impugned search and seizure and consequential proceedings and release the seized articles. They could also be prohibited from taking steps in pursuance of the said search and seizure and consequential proceedings. They could also be directed to produce all documents in connection with this case to render a conscienciable justice and to quash the entire proceeding.
6. Before going into the case of the respondents I clarify one part hereunder that although various statements are made in connection with the bank a/cs and search and seizure of others but the Court is noway concerned with such submission. No prohibitory order against any of the bank a/cs or any premises of the writ petitioner were in force on the date of filing of the writ petition. Therefore, the Court is only concerned with regard to search and seizure of the petitioner alone. The petitioner as an individual and sole proprietor of a concern made this writ petition but not under representative capacity.
7. The respondents by the pen of one Phague Oram, Dy. CIT (Inv.), Unit II(2), Calcutta, stated various facts in their affidavit-in-opposition. Firstly, the writ petition is not maintainable because it involves disputed questions of facts and no formal demand of justice has been made. Secondly, the search and seizure was conducted at the residence and business premises of the writ petitioner who is a key person of “Haldiram Bhujiawala Group” in Kolkata. The search and seizure was conducted along with his elder brother since both of them are running business under the brand name of “M/s Haldiram Bhujiawala”. Allegation of tax evasion is there and the information gathered by the Department that the group does most of the transactions in cash and does not record the actual transactions in the books of accounts. The petitioner engaged in the business of manufacturing and selling the products of “M/s. Haldiram Bhujiawala”. Thirdly, the search and seizure was conducted at the business and residential premises of “Haldiram Bhujiawala Group”. The petitioner is one of the key persons of the group. He is selling the goods along with other or others under the brand name of “Haldiram Bhujiawala”. Fourthly, the Panchnama was drawn up at the end of search proceedings on the day and copy, along with the annexures, were given to the petitioner. Fifthly, satisfaction was recorded in writing by the competent authority prior to issue of warrants of authorisation for such search. Sixthly, there is no dispute that “Pratik Food Products” is a proprietorship concern but due to inadvertent mistake “M/s Pratik Food Products (P) Ltd.” has been incorporated. The panchnama has been drawn in the name of proprietorship concern. The prohibitory order of bank a/cs of the said concern have already been revoked on 9th Nov., 2001, such mistake, omission or any clerical to technical error cannot vitiate substance of the proceeding. Seventhly, procedure for authorisation of search and seizure has been fully adhered by the competent authority. Eighthly, prohibitory orders were not renewed beyond 60 days of the date of issue. The prohibitory orders were served on 24th Sept., 2001, and 25th Sept., 2001, and lapsed on 25th Nov., 2001, and 26th Nov., 2001, respectively. Thus, when the writ petition was filed on 12th Dec., 2001, no prohibitory order was extended by the authority beyond 60 days. Lastly, due to volume of papers although the verification took considerable time i.e., till 1.15 A.M. on 25th Sept., 2001, but the regular business of the petitioner was not stopped by such team. However, availability of the various books, papers, amount, jewelleries, etc. is giving rise to a case of tax evasion.
In reply thereto, the petitioner has specifically stated that he has no business connection or nexus with his elder brother. He runs the proprietary business under the name and style of “Pratik Food Products” and sell under the brand name of “Haldiram Bhujiawala”. The books of accounts were kept as per the provision of law. From the affidavit-in-opposition it is apparent that the search and seizure had been initiated merely on the basis of suspicion and hunch and there is no “reason to believe”, the fishing and roving enquiry at the name of search is made only to gather information that there is evasion of tax which is unsustainable in the eye of law. No satisfaction was arrived at or before the initiation of search and seizure. Against this factual background, learned counsel appearing for the parties argued at length on two very important aspects. Firstly, whether there was any “reason to believe” prior to search and seizure or even without such “reason to believe” the authority concerned can proceed with the same. Secondly, whether the petitioner’s case is falling under some of any block assessment or not. Mr. Mihirlal Bhattacharjee, learned senior counsel appearing for the petitioner, contended before this Court that search and seizure of “M/s Pratik Food Products (P) Ltd.” having no existence is void ab initio. The provision of search and seizure is made under s. 132 of the Act. For the purpose of “reason to believe” three tests are to be satisfied which are given under sub-s. (1), cls. (a), (b) and (c) of the same are as follows : (a) any person to whom a summons under sub-s. (1) of s. 37 of the Indian IT Act, 1922 (11 of 1922), or under sub-s. (1) of s. 131 of this Act, or a notice under sub-s. (4) of s. 22 of the Indian IT Act, 1922, or under sub-s. (1) of s. 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 of other documents which will be useful for, or relevant to, any proceeding under the Indian IT 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 purpose of the Indian IT Act, 1922 (11 of 1922), of this Act (hereinafter in this section referred to as the undisclosed income or property).
The case of the respondent-authorities are falling under cl. (c). No test has been satisfied in respect of such “reason to believe”. A reason is objective when a belief is subjective. Therefore, when no reason has been shown and no record has been produced it can be construed that there was no reason. A block assessment is subsequent event to search and seizure. If the search and seizure fails due to the test of law then the block assessment will have no leg to stand. I record hereunder that Mr. Dipak Kumar Shome, learned senior counsel, appearing for the IT authorities very fairly concerned that if the first test fail to satisfy, the second test cannot stand. Therefore, the Court is eager to know the first test. Mr. Bhattacharjee relied upon Ganga Prasad Maheshwari & Ors. vs. CIT (1981) 21 CTR (All) 83 : (1983) 139 ITR 1043 (All) at its p. 1050 whereunder a Division Bench of the Allahabad High Court held that the “reason to believe” is a common feature in taxing statutes. It has been considered to be the most salutary safeguard on the exercise of power by the office concerned. It is made of two words “reason” and “believe”. The word “reason” means cause or justification and the word “believe” mean to accept as true or to have faith in it. Before the officer has faith or accepts a fact to exist there must be a justification for it. The belief may not be open to scrutiny as it is the final conclusion arrived at by the officer concerned, as a result of mental exercise made by him on the information received. But, the reason due to which the decision is reached can always be examined. When it is said that reason to believe is not open to scrutiny what is meant is that the satisfaction arrived at by the officer concerned in immune from challenge but where the satisfaction is not based on any material or it cannot withstand a test of reason which is an integral part of it, then it falls through and the Court is empowered to strike it down. Belief may be subjective but reason is objective. In ITO vs. Lakhmani Mewal Das 1976 CTR (SC) 220 : (1976) 103 ITR 437 (SC), the Supreme Court, while interpreting a similar expression used in s. 147 of the Act, held that “the expression ‘reason to believe’ does not mean a purely subjective satisfaction on the part of the ITO. The reason must be held in the good faith. It cannot be merely a pretence”. Thereafter he cited ITO vs. Seth Bros. & Ors. (1969) 74 ITR 836 (SC) at p. 843. It appears from there that Supreme Court held that s. 132(1) does not confer any arbitrary authority upon the Revenue officers. The CIT or the Director of Inspection must have, in consequence of information, reason to believe that the statutory conditions for exercise of the power to order search exist. He must record reasons for belief and he must issue an authorisation in favour of a designated officer to search the premises and exercise the power set out therein. The condition for entry into and making search of any building or place is the reason to believe that any books of accounts or other documents which will be useful for, or relevant to, any proceeding under the Act may be found. If the officer has reason to believe that any books of account or other documents would be useful for, or relevant to, any proceedings under the Act, he is authorised by law to seize those books of accounts or other documents and the place mark for identification therein to make extracts of copies therefrom and also to make a note or an inventory of any articles of other things found in the course of the search. Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with law and only for the purpose for which the law authorised to be exercised. If the action of the officer issuing the authorisation or of the designated officer is challenged, the officer concerned must satisfy the Court about the regularity of the action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the Court. If the conditions for exercise of the power are not satisfied the proceeding is liable to be quashed.
Then he cited Shyam Jewellers & Anr. vs. Chief CIT (Admn.) & Ors. (1992) 196 ITR 243 (All) at pp. 264 and 265 whereunder the Division Bench of the Allahabad High Court (Lucknow Bench) held that s. 132 of the IT Act, empowers the Chief CIT or the CIT to pass an order for search and issue a warrant authorising a particular officer when he has reason to believe that any of the three conditions mentioned in sub-cls. (a), (b) and (c) of sub-s. (1) of s. 132 of the IT Act, exists. If either of these conditions is not satisfied or have not been adhered to, then the authority is precluded from invoking the powers under this section. By showing L.R. Gupta & Ors. vs. Union India & Ors. (1992) 101 CTR (Del) 179 : (1992) 194 ITR 32 (Del), he contended that a Division Bench of Delhi High Court held that a search conducted under s. 132 of the IT Act, 1961, is a serious invasion into the privacy of a citizen. Sec. 132(1) has to be strictly construed and the formation of the opinion or reason to believe by the authorising officer must be apparent from the note recorded by him. The opinion or the belief so recorded must clearly show whether the belief falls under sub-cls. (a), (b) or (c) of s. 132(1). No search can be ordered except for any of the reasons contained in sub-cls. (a), (b) or (c).
The satisfaction note should itself show the application of mind and the formation of opinion by the officer ordering the search. If the reasons which are recorded do not fall under cls. (a), (b) or (c), then the authorisation under s. 132(1) will have to be quashed. In Dwarka Prosad Agarwalla vs. Director of Inspection (1981) 25 CTR (Cal) 58 : (1982) 137 ITR 456 (Cal)) at p. 466 Justice Sabyasachi Mukherjee (as His Lordship then was) has also taken the similar view. In addition to the aforesaid judgment the petitioner has relied upon an unreported judgment of this Court in Writ Petn. No. 18191(W) of 2001 along with other connected matters (Sugandha Industries (P) Ltd. vs. Chief Commr. of Customs & Ors.) delivered by this Court on dt. 6th March, 2002, on the self-same point. So far as the subsequent point is concerned, learned counsel appearing for the petitioner relied upon the judgment Dr. C. Balakrishnan Nair & Anr. vs. CIT & Anr. (1999) 154 CTR (Ker) 523 : (1999) 237 ITR 70 (Ker) at p. 82 and contended that if the proceedings taken under s. 132 of the Act fails and/or declared invalid the block assessment, if any, will automatically fail. However, I do not want to go to such controversy for the simple reason that Mr. Shome, learned senior counsel appearing for the authorities has supported the contention. Mr. Dipak Kumar Shome, learned senior counsel, appearing for the IT authorities contended before this Court that it is true to say that reasons are objective but belief is subjective. There should be a nexus in between “reason” and “belief”. This cannot be construed as an absurd proposition of law. But it has to be read with its true perspective. There cannot be any straightjacket formula. It has to be done in good faith. The cls. (a), (b) and (c) under sub-s.
(1) of s. 132 are disjunctive. Sec. 132(1A) which has been inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 1st Oct., 1975, postulates a power of the authority to proceed on the basis of the “reason to suspect” in consequence of opinion that any books of account, other documents money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised can take an action. Therefore, “reason to suspect” cannot be an absolute bar unlike Customs Act or Central Excise Act, etc. Therefore, the ratio of the unreported judgment of this Court in Sugandha Industries (P) Ltd. (supra) cannot be applied herein. That apart there is a factual difference in between such case and the present one. In the referred case, there was a serious lapse on the part of the Central excise authority in not disclosing the documents before the Court to prove that there was a “reason to believe” of the authority to make of the enquiry, investigation and/or search and seizure. But in the instant case the documents have been produced by the Department before this Court for the purpose of perusal and passing necessary orders. Therefore, either factually or legally such judgment cannot stand in the way of the action of the Department. He has further drawn my attention to the sub-s. (4A) of the s. 132 of the Act. There also I find that by way of amendment in the year 1975, such sub-section was inserted. Such provision says where any books of account, other documents, money bullion, jewellery or other valuable article or things are or is found in the possession or control of any person in the course of a search it may be presumed that such documents or articles belong or belongs to such person or persons. The contents of books of account and other documents are true, Signatures and handwritings, stamp, execution or attestation have been done by such person from whose possession or custody these documents were found available. Therefore, when “reason to suspect” is not exclusive bar and when certain things are found available from the custody of the petitioner, law does not prohibit the IT authorities from proceeding in according with law. He has further drawn my attention to s. 132(1)(c)(B)(i) and stated that the officer so authorised is entitled to enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other available article or thing are kept.
16. He relied upon various judgments in support of his case. Firstly, he relied upon Sriram Jaiswal vs. Union of India & Ors. (1989) 75 CTR (All) 41 : (1989) 176 ITR 261 (All) at pp. 265 and 266 whereunder a Division Bench of the Allahabad High Court held that merely on the basis of the denial of the petitioner, the respondents cannot be called upon to disclose the information they received for having acted upon under s. 132(1) of the Act. If it is taken from the another angle it can be seen that certain amounts of assets were acquired from undisclosed sources as per the order under s. 132(5). The question is whether, on these facts it will be proper or just to exercise discretionary jurisdiction under Art. 226 of the Constitution. When already the ITO has found in the order passed under s. 132(5) that the petitioner had acquired the seized assets from undisclosed sources and when the petitioner has an alternative remedy under sub-s. (11) of s. 132 by way of filing objections before the CIT, the writ Court should be loath in interfering with the same. He further relied upon Rugmini Ram Raghav Spinners (P) Ltd. & Ors. vs. Union of India & Ors. (1990) 87 CTR (Mad) 35 : (1992) 196 ITR 674 (Mad) at pp. 680 to 681 and contended that it is well-settled that the adequacy or sufficiency of the materials cannot be the subject-matter of scrutiny of the Court. He also relied upon Balwant Singh & Ors. vs. R.D. Shah, Director of Inspection, IT & Ors. (1969) 71 ITR 550 (Del) at p. 562 whereunder a Division Bench of Delhi High Court held that “reason to believe” does not mean a purely subjective on the part of the ITO. The belief must be held in good faith; it cannot be merely a pretence. To put it differently, it is open to the Court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. He further relied upon B.K. Nowlakha & Ors. vs. Union of India & Ors. (1992) 101 CTR (Del) 73 : (1991) 192 ITR 436 (Del) at p. 440 whereunder the Division Bench of Delhi High Court held that the order of restraint may not be continued indefinitely. Sub-s. (8A) of s. 132 of the Act provides that the restraint order can be continued for a period not exceeding 60 days from the date of the order. But before expiry of 60 days, for reasons to be recorded, the CIT may extend the period. Therefore, by and large the judgment is based on the incidental point in respect of keeping the seized articles, etc. and renewal of the period of 60 days to get attraction (extension) of the prohibitory order. However, the respondents have contended that no prohibitory order is directed to be continued. Those were already lapsed much prior to the filing of the writ petition. Mr. Shome further contended that in view of the reasons given in the affidavit-in-opposition is entitled to make a search and seizure. The notice for block assessment has already been served. In reply thereto, Mr. Bhattacharjee contended that when there is non fulfilment of condition prescribed under s. 132(1) of the Act precised by cl. (c), no proceeding shall lie under sub-s. (1A). Question of block assessment cannot arise if search and seizure of the company known as “M/s Pratik Food Products (P) Ltd.” appears to be wrong or erroneous.
I have carefully considered the respectful submissions of the counsel appearing for the parties. I have gone through the records produced by the respondents in this Court. I am very much candid to say that steps of the IT authority to make “Haldiram Bhujiawala” block to get attracted an individual-assessee and then proceeded for search and seizure is misconceived in nature. Block assessment is made for the block period. As because one is running business of selling products of “Haldiram Bhujiawala” in the name of “M/s Pratik Food Products” cannot be said that he will be liable for block assessment. If the brand name “Haldiram Bhujiawala” is taken for judicial notice then whosoever is selling the product either in India or abroad under such brand name is to be assessed under the block. Flourishing of business under the brand name cannot be the reason to believe of invasion of tax law. I am sorry to say this is not the true import of the law. One cannot put cart before the horse. Evenrequirement of block assessment ipso facto cannot be the “reason to believe” under s. 132 of the Act. Sec. 132 has its independent face value. If one is attracted by such section he can be assessed in a proper manner under the prescription of law. If one is not attracted under s. 132 then there is no question of any block assessment on the basis of search and seizure. Therefore, let me confine to the question as to whether search and seizure was made following the prescription of law or not. According to me prescription of law about “reason to believe” in between IT Act and Central Excise Act or Customs Act is different. In the cases of Central Excise Act or Customs Act “reason to believe” is the sole requirement. But under the IT Act, “reason to suspect” is also available but subject to “reason to believe”. Mr. Shome brought to my notice the scope and ambit of sub-ss. (1A), (4A), etc. related to “reason to suspect” at first to impress upon the Court that “reason to suspect” is not an absolute bar. But there is a fallacy of such argument. One is to be testified by the test of “reason to believe” under s. 132(1). One cannot travel beyond such sub-section to get attracted by sub-s. (1A) or sub-s. (4A) made for “reason to suspect” independently. Therefore, “reason to suspect” in such sub-sections are subject to satisfaction of the primary test of “reason to believe” under s. 132(1) of the Act. In other words, unless one successfully cross the hurdle of “reason to believe” under s. 132(1) of the Act there is no scope to get attracted by sub-ss. (1A) and (4A) of the Act. Therefore, the “reason to believe” is the mandatory requirement of law for search and seizure.
20. The next question is rigidity or flexibility of the “reason to believe”. From the analysis of different judgments I find that since by the exercise of power a serious invasion is made upon the rights, privacy and freedom of taxpayer, power must be exercised strictly in accordance with law and only for the purpose for which the law authorised to be exercised. If either of the conditions under sub-s. (1) of the s. 132 is not fulfilled then the authority is precluded from invoking any powers under this section. “Reason to believe” is a common feature of taxing statute. It has been considered to be the most salutory safeguard on the exercise of the power by the authorities. On the other hand, adequacy or sufficiency of the materials cannot be the subject-matter of scrutiny of the Court. The belief must be held in good faith. Therefore, there should have to be a balance. Against this background when I go through the record being satisfaction notes I find more difficult to construe that there was a reason to believe. The purported reason is in the form of statement. Some of the examples are given hereunder. Although the petitioner and his brother are doing business separately but both are doing under the same brand name. The business of 58, Jawaharlal Nehru Road is closely monitored by the petitioner. The entire affairs is controlled by the petitioner along with his brother. As per information gathered documents papers, undisclosed cash, jewelleries and other assets are likely to be found at his residence. Therefore, both the place of business and residence are covered for action under s. 132(1) of the IT Act, 1961. The petitioner transferred his place of business. He is running a proprietorship concern by the name of “Pratik Food Products”. There is all likelihood that papers relating to his unconnected income and assets may be found at his residence. Can it be said that aforesaid recordings form satisfaction of “reason to believe”. It is known fact that the petitioner is doing similar business like his brother separately under the same brand name. It is also known what is the business place. He is a regular assessee. Change of residence ipso facto cannot be an offence. This is not a case of absconding. Therefore, what are the “reasons to believe”. Likelihood of getting undisclosed things at best can be a “reason to suspect” but does not form any “reason to believe”. The respondent-authorities have filed to follow such subtlety of the provision of the Act. Therefore, obvious result is (a) release of the prohibitory orders about bank a/cs, and (b) return of maximum seized articles even at the date and time of search leaving aside taken of it to substantiate the case of appropriate search and seizure by them. This is not the true import of s. 132(1)(c) of the Act. It says 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 purpose of the Act, where is the ‘reason to believe’ that such things are not disclosed or would not be disclosed ? Even in the list of inventory of jewelleries amounting to Rs. 7,18,867, why the jewelleries for an amount of Rs. 78,313 only seized and others are released is not known.
Similarly out of Rs. 78,500 why Rs. 50,000 was seized leaving aside Rs. 28,500 is not known. This is also similarly placed with the showroom.
Therefore, can it be safely said that there was a “reason to believe.” It is mere pretence. Question of good faith will arise when the authorities are confirmed that the income has not been or would not be disclosed. The petitioner is a regular assessee. There is no bar for regular assessment. Impression about his elder brother or others may not be similar. There might have been cause for the same. Each case has to be independently established within the room of “reason to believe” under s. 132(1)(c) of the Act. Thereafter question of nexus or connection with others will arise. Therefore, ratio of one of the cited decisions of Mr. Shome does not help him. The ratio speaks it is open to the Court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. Against this background even if remedy lies before the authorities under sub-ss. (5) and (11) of s. 132 of the Act as per the respondents but writ Court can avoid its responsibility to adjudge the merit in view of the question of serious invasion of the personal right of a citizen. Lastly the 60 days period provided under s. 132(8A) is mandatory in nature which shall not be in force after the expiry of the period. It is an admitted position that such period has expired before filing of the writ petition. There is no indication as to whether such seized articles or things handed over to the AO within a period of 60 days from the date on which the last of the authorisation for search was executed. Therefore, continuance of proceeding of search and seizure is absolutely illegal after expiry of the period. The authorised officer has no jurisdiction to withhold the seized articles. Hence, taking into the totality of the matter I am of the view that the search and seizure proceeding has to be quashed and accordingly quashed without affecting any assessment by the AO independently. Seized articles will be returned to the writ petitioner within a period of fortnight from the date of making application on his behalf. Thus, the writ petition stands disposed of. Interim orders, if any, stand confirmed. However, no order is passed as to costs.
[Citation : 260 ITR 67]
