Gujarat H.C : Where authorization issued under section 132(1) was based on information or material which could be termed adequately sufficient for satisfying statutory requirement, same could not be interfered with

High Court Of Gujarat

Dipin G. Patel vs. Director General of Income-tax (Investigation)

Section: 132

Akil Kureshi And Ms. Sonia Gokani, JJ.

Special Civil Application No. 14081 Of 2010

April 6, 2011


Akil Kureshi, J. – The petitioner has challenged the warrant of authorisation issued under section 132(1) of the Income-tax Act, 1961 (“the Act” for short), and consequential action of the search and seizure undertaken by the respondents.

2. Briefly stated the facts are as follows :

The petitioner is a sole proprietor of one M/s. Deepak Enterprises, a shroff-cum-commission agent. In the business premises of the petitioner at Bhavnagar, search was conducted by the Director General of Central Excise Intelligence (“the DGCEI” for short) on August 12, 2010, starting at about 11 a.m. During the course of such search, the officials of the Excise Department found cash of around Rs. 18.50 lakhs in the premises of the petitioner. When the search was going on one Shri Ishwarbhai Bharodia entered the premises of the petitioner carrying Rs. 6 lakhs in cash. It appears that the excise officers tipped of the income-tax authorities who with the team of the income-tax officials visited the premises, according to the petitioner, at around 4 p.m. on the same day.

It is not in dispute that at that time such officials did not have authorisation of search under section 132 of the Act.

It is not in dispute that at around 8 p.m., authorisation to carry out search and seizure operation was sent. Grievance of the petitioner, however, is that even at that time no original document was supplied to the petitioner. It is the case of the petitioner that though the Income-tax Officers had arrived at his business premises at 4 p.m. in the evening, search was shown to have started at 8.45 p.m.

The income-tax officials seized the entire cash of Rs. 24,50,000 which included Rs. 6 lakhs carried by Shri Ishwar Bharodia to the business premises of the petitioner. At around 1.30 a.m., search was concluded.

It is the case of the petitioner that the entire search was carried out without legal authorisation. None of the conditions specified in section 132(1) of the Act was satisfied before the issuance of authorisation. The authority did not possess any information which would authorise such search and seizure operation. It is also the case of the petitioner that by the very nature of his business, the petitioner is required to maintain cash. The amount of Rs. 18.50 lakhs seized was explained in the books of account of the petitioner. The amount of Rs. 6 lakhs brought by some other individual cannot form basis for search operation in the petitioner’s premises.

3. Appearing for the petitioner, learned senior counsel Shri S.N. Soparkar vehemently contended that none of the requirements of section 132(1) of the Act were fulfilled. The entire authorisation was, therefore, invalid. He submitted that the authority could not have had any reason to believe that search was necessary for reasons stated in clause (a), (b) or (c) of sub-section(1) of section 132.

He drew our attention to the documents on record to contend that while search of the Excise Department was going on upon finding cash in the premises of the petitioner, the Income-tax Officers intervened. They were present since 4 p.m. whereas the search authorisation was issued only at 8 p.m. He drew our attention to other provisions of the Act to contend that there was sufficient power with the authorities to cover the case of unaccounted cash, search and seizure operations having drastic repercussions on the assessee should not be lightly permitted.

In support of his contentions, he relied on the following decisions :

(1) In the decision of the Delhi High Court in the case of L.R. Gupta v. Union of India [1992] 194 ITR 32/[1991] 59 Taxman 305 wherein the court was of the opinion that the expression “information” must be something more than mere rumour or gossip or hunch. There must be some material which can be regarded as information which must exist on the file on the basis of which the authorising officer can have reason to believe that action under section 132 is called for any of the reasons mentioned in clause (a), (b) or (c). It was further observed that when the action of issuance of authorisation under section 132 is challenged in a court of law, it would be open to the petitioner to contend that, on the facts or information disclosed, no reasonable person could have come to the conclusion that action under section 132 was called for. It was further observed that the opinion which has to be formed is subjective and, therefore, the jurisdiction of the court to interfere is very limited and that the court will not act as an appellate authority and examine meticulously the information in order to decide for itself as to whether action under section 132 is called for.

(2) In the case of H.L. Sibal v. CIT [1975] 101 ITR 112 (Punj. & Har.), wherein the High Court in the context of previously concluded assessments, observed that the Commissioner while acting under section 132(1) must come into possession of some new material before he can take resort to drastic measure of issuing a search warrant. When he received some relevant new information, it would perhaps be permissible for him to look in to the old record for his satisfaction but it is extremely doubtful if he can give his own interpretation to the circumstances on the basis of which assessments have been framed against an assessee for previous years for the purpose of issuing a search warrant.

(3) In the case of Vindhya Metal Corpn. v. CIT [1985] 156 ITR 233 (All), wherein the Bench observed that the existence or otherwise of the condition precedent for exercise of power under section 132 is open to the judicial scrutiny. It was a case where a sum of Rs. 4,63,000 was seized from a person by the railway police. At the time of seizure by the police, no papers or documents regarding ownership or possession of the amount in possession of that person were found. The name of such person was not found in the general index register of income-tax assessees of the income-tax office at Mirzapur. The High Court held that these facts would not constitute information relevant for forming a belief that the amount recovered from him represented wholly or partly income which had not been or would not have been disclosed for the purpose of the Indian Income-tax Act, 1922.

(4) In the case of Union of India v. Ajit Jain [2003] 260 ITR 80/129 Taxman 74 (SC) wherein the apex court upheld the decision of the High Court holding that for a valid search there should be information which provides reason for believing that person concerned is in possession of money or other assets representing, either wholly or in part, income which has not been or which would not be disclosed by such person and in the absence of such information search could not be validly authorised.

(5) We may notice that in the abovereferred judgment, the apex court had confirmed the view of the Delhi High Court in the case of Ajit Jain v. Union of India [2000] 242 ITR 302/[2001] 117 Taxman 295, wherein the High Court found that intimation simpliciter by the CBI that cash was found in possession of individual, will not be information sufficient for action under section 132 of the Act.

(6) In the case of Dr. (Mrs.) Anita Sahai v. DIT (Investigation) [2004] 266 ITR 597/136 Taxman 247 (All), wherein the Division Bench of the Allahabad High Court held that the Income-tax Department had acted only on rumours. The petitioners therein were leading doctors of Noida having huge practice and were regularly assessed to tax and had filed the income-tax returns. It was observed that there had been indiscriminate seizure without any application of mind.

4. On the other hand, learned counsel Shri Manish Bhatt appearing for the Revenue relied on the affidavit-in-reply as well as the original note-sheet to contend that there was sufficient material with the competent authority to authorise search. He submitted that the search actually started only after authorisation was issued. He contended that the mentioning of 4 p.m. in the panchnama was an error. He relied on the following decisions in support of search authorisation :

(1) In the case of Pooran Mal v. Director of Inspection (Investigation ) [1974] 93 ITR 505 (SC).

(2) In the case of Ramjibhai Kalidas v. I.G. Desai, ITO [1971] 80 ITR 721 (Guj).

(3) In the case of Maneklal Bhagwandas v. N.N. Sheth, ITO [1974] 94 ITR 287 (Guj).

(4) In the case of Bhupendra Ratilal Thakkar v. CIT [1976] 102 ITR 531 (SC).

Heavy reliance was also placed on unreported decision of this court dated March 4, 2011, (Neesa Leisure Ltd. v. Union of India [2011] 338 ITR 460/16 163/[2012] 204 Taxman 86 (Guj)).

He highlighted the following sequence of events leading to issuance of authorisation for search and conduct of actual search operation :

12-8-2010 (3 p.m.)

The Jt. DIT (Inv.) Unit-I, Ahmedabad, receives a telephonic message from the Addl. Commissioner of Central Excise, DGCEI, Ahmedabad, that his team has found some cash at the business premises of M/s. Deepak Enterprises, Prop. Shri Dipin G. Patel.
12-8-2010 (3.05 p.m.) The Jt. DIT (Inv.), Unit-I, Ahmedabad, informs the ADIT (Inv.), Bhavnagar, on telephone and directs him to reach at the business premises of M/s. Deepak Enterprises and also to contact Mr. G. Philips, Intelligence Officer of DGCEI on telephone.
12-8-2010 (4 p.m.) After talking with Mr. G. Philips, the ADIT (Inv.) reaches the said premises and finds the team of the DGCEI conducting search. The team of DGCEI informs that cash amounting to Rs. 24,50,000 has been found.
12-8-2010 (5 p.m.) Mr. Dipin G. Patel, Prop. of M/s. Deepak Enterprises is questioned about the source of cash of Rs. 24,50,000. He has not been able to explain the entire cash as the cash book was not written up to date. The Jt. DIT (Inv.), is informed about this discrepancy.
12-8-2010 (7. 45 p.m.) Warrant of authorisation under section 132 is received through FAX which is shown to the assessee at about 8 p.m.
12-8-2010 (11.45 p.m.) Warrant of authorisation (in original) is received and shown to the assessee.
13-8-2010 (1.30 a.m.)

Search concluded without any protest from the assessee.


He contended that the DGCEI officials had informed the Income-tax Department that they had found some unexplained cash at the business premises of the petitioner. When the Income-tax Officers entered the premises at about 4 p.m., the petitioner could not explain the source of the entire cash as the cash book was not written up to date. Books of account were not maintained properly. In short, the assessee was not able to explain the source of cash. He further submitted that during the search operation, certain vouchers were found from the premises of the assessee. On verification of the vouchers and the cash book, it was found that no entries were made with respect to such vouchers.

5. Original note-sheets leading to the issuance of authorisation for the search were placed for our perusal. We find that the satisfaction note was recorded by the DDIT (Investigation) Unit I, Ahmedabad, on August 12, 2010. The same was placed before the Joint DIT who perused the same and put his detailed comments and suggested that the same be placed for approval. This in turn was placed before the DGIT who again recorded that he had carefully perused the note of the DDIT and that of the Joint DIT. He made his detailed notes and recorded his satisfaction that he had reason to believe that the requirements of section 132(1)(c) are satisfied. He, therefore, proposed to issue warrant of authorisation under sub-section (1) of section 132. However, as per the CBDT’s instructions, he directed that note be put up for the DGIT (Investigation), Ahmedabad, for administrative approval. This in turn was placed before the DGIT (Investigation), Ahmedabad, after perusal of the notes by the DDIT, by the Joint DIT and by the DIT (Investigation). He thereupon granted approval for issuance of authorisation. Thereupon, search was authorised.

6. We have perused the satisfaction note. We have also perused further notes recorded by the higher income-tax authorities. We find that the finding of cash of Rs. 24,50,000 from the petitioner’s premises, which he could not explain the source of on the basis of books of account, was not the isolated reason for issuance of authorisation of search. Such authorisation was based on additional other information or materials which can be termed adequately sufficient for the purpose of satisfying statutory requirement. Since proceedings consequent to search and seizure operations are going on, at this delicate stage, it would not be appropriate on our part to divulge in detail about the satisfaction note. Suffice it to record, in our opinion, there were sufficient grounds enabling the authorities to hold belief that case of the petitioner is covered under sub-clause (c) of sub-section (1) of section 132 which permits the authorising officer to issue authorisation of search if he has reason to believe that any person is in possession of money, bullion, jewellery or other valuable articles or thing and such money, bullion, jewellery or other valuable articles or thing represents either wholly or partly income or property which has not been or would not be disclosed for the purposes of the Act.

7. We further find that the satisfaction note placed by the DDIT was minutely scrutinised. Firstly, the Joint DIT offered his own comments. Thereafter, by the DIT and finally by the DGIT who authorised the issuance of search authorisation. We find that necessary care was taken and the case properly scrutinised before issuance of authorisation. It is not a case of either hurriedly or perfunctorily issuing search authorisation.

8. In the result, we do not find any reason to interfere. We may recall that court cannot scrutinise satisfaction recorded by the authority as appellate authority.

9. In the result, the petition fails. The same is dismissed.

[Citation : 339 ITR 636]

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