High Court Of Orissa
Liberty Marine Syndicate (P.) Ltd. vs. Pr.CIT, Cuttack
Section : 131, 132, 153A
Assessment years : 2009-10 to 2014-15
Kumari Sanju Panda And Sujit Narayan Prasad, JJ.
W.P. (C.) No. 20421 Of 2016
December 7, 2016
JUDGMENT
Sujit Narayan Prasad, J. – The notice issued U/s. 153-A for the assessment years 2009-10 to 2014-15 of Income Tax Act, 1961 dtd.30.09.2016 is under challenge in this writ petition.
2. The facts leading to institution of this writ petition is that the petitioner no. 1 is a company incorporated under the Companies Act, 1956 having its place of business as well as Registered office at Paradip and the petitioner no. 2 to 3 are the Directors of petitioner no. 1. The petitioner – company is dealing with export of iron ore and fines for few years, regularly filing its income tax return and every year scrutiny assessments are being made by the concerned Assessing Officer within the State of Orissa, due to sharp decline in the iron ore export market, the turnover of Liberty Marine has gradually decreased over time and accordingly the tax paid by the Liberty Marine has also drastically reduced.
The Income Tax Department conducted a survey U/s. 133-A of the Income Tax Act at the registered office premises of the Liberty Marine on 11.09.2014 at Paradip and taking the Law in their own hands the survey and search was conducted on 12.09.2014, no undisclosed assets or income have been found in course of search and seizure, but in spite of these aspects of the matter a notice U/s. 153-A of the Income Tax Act for the Assessment years 2009-10 to 2014-15 (Annexure-4) has been issued against the petitioner – company which is impugned in this writ petition on the ground that the notice impugned has been issued without following the pre-conditions of Section 132(1)(a), (b) or (c) of the Income Tax Act, no notice has been issued U/s. 131(1)(a) of the Income Tax Act, 1961 (herein after referred to as the Act, 1961) before proceeding with search authorization U/s. 132 of the Act, 1961, the authorities have conducted the search U/s. 132 without any rhyme and reason and as such the search and seizure conducted by the Department itself is illegal, pursuant thereof the notice U/s. 153-A has also got no sanctity in the eye of law and accordingly prayed for its quashing in this writ petition.
3. While on the other hand learned counsel for income tax department has submitted that there is no infirmity in issuing the notice U/s. 153-A of the Act, 1961 for the reason that the search and seizure was conducted on 11.9.2014 as per the subjective satisfaction of the competent authority. It has been submitted that the returns for the assessment years 2009-10 to 2013-14 have been filed but the assessee has not complied to the show cause notices issued against him U/s. 143(2) and 142(1) of the I.T. Act.
He further submits that the assessee has filed a disclosure petition admitting a part of the unaccounted income. He further submits that the authorities in exercise of power conferred U/s. 153-A of the Act have issued the notice and as such the petitioner ought to have approached the authorities concerned by giving proper reply in terms of the said notice, but instead of doing so, they have invoked the extraordinary jurisdiction conferred to this court under Article 226 and 227 of the Constitution of India and as such the same is not fit to be entertained at this stage.
He further submits that there are alternative remedies of appeal provided under the statute.
In reply, learned counsel for the petitioners has submitted that at this stage this court has got power to entertain this writ petition since the very authority of the action of the concerned authority is under challenge who has issued notice U/s. 153-A of the Income Tax which is the result of search and seizure operation conducted U/s. 132 of the I.T. Act, 1961, but the reasons which led the authority to conduct search and seizure cannot be looked into by the appellate forum and as such this writ petition has been filed, hence it can be entertained even at this stage by this Court sitting under Articles 226 and 227 of the Constitution of India.
4. We have heard the learned counsels for the parties and gone through the materials available on record.
Before appreciating the argument advanced on behalf of the parties, we thought it proper to have a discussion regarding the statutory provision which has got bearing for deciding the issue involved in this case which are being quoted hereunder as:—
“132 Search and seizure.. (1) Where the [Principal Director General or] Director General or [Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner 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 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 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),
[then,—
(A) the [Principal Director General or] Director General or [Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or
(B) such Additional Director or Additional Commissioner or Joint Director, or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer,
(the officer so authorised in all cases being hereinafter referred to as the authorised officer) to—]
(i) 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 valuable article or thing are kept;
(ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available;
(iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing;
(iib) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents;
(iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search:
Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business;
(iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom;
(v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing :
[Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, but such [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in section 120, it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner] having jurisdiction over such person may be prejudicial to the interests of the revenue :
Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii):
Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stock-in-trade of the business:
Provided also that no authorisation shall be issued by the Additional Director or Additional Commissioner or Joint Director or Joint Commissioner on or after the 1st day of October, 2009 unless he has been empowered by the Board to do so.
[(1A) Where any [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, in consequence of information in his possession, has reason to suspect 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 by the [Principal Director General or] Director General or [Principal Director or] Director or any other [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner to take action under clauses (i) to (v) of sub-section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-section (1), such [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner may, notwithstanding anything contained in section 120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.]
(2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (1) or sub-section (1A) and it shall be the duty of every such officer to comply with such requisition.
(3) The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned in the second proviso to sub-section (1), serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub-section.
Explanation.—For the removal of doubts, it is hereby declared that serving of an order as aforesaid under this sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under clause (iii) of sub- section (1).
(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.
Explanation.—For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.
(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed—
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
(ii) that the contents of such books of account and other documents are true ; and
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.
(5) to (7) **
(8) The books of account or other documents seized under sub- section (1) or sub-section (1A) shall not be retained by the authorised officer for a period exceeding thirty days from the date of the order of assessment under section 153A or clause (c) of section 158BC unless the reasons for retaining the same are recorded by him in writing and the approval of the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or Director General or [Principal Director or] Director for such retention is obtained :
Provided that the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or] Director General or [Principal Director or] Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed.
(8A) An order under sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order.
(9) The person from whose custody any books of account or other documents are seized under sub-section (1) or sub-section (1A) may make copies thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in this behalf, at such place and time as the authorised officer may appoint in this behalf.
(9A) Where the authorised officer has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c) of sub- section (1), the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in sections 132A and 132B referred to as the assets) seized under that sub-section shall be handed over by the authorised officer to the Assessing Officer having jurisdiction over such person within a period of sixty days from the date on which the last of the authorisations for search was executed and thereupon the powers exercisable by the authorised officer under sub-section (8) or sub-section (9) shall be exercisable by such Assessing Officer.
(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 [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or] Director General or [Principal Director or] Director 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 and the Board may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit.
(11) **
(11A) **
(12) **
[(13) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches and seizure shall apply, so far as may be, to searches and seizure under sub-section (1) or sub-section (1A).]
(14) The Board may make rules in relation to any search or seizure under this section ; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer—
(i) for obtaining ingress into any building, place, vessel, vehicle or aircraft to be searched where free ingress thereto is not available ;
(ii) for ensuring safe custody of any books of account or other documents or assets seized.
Explanation 1.—For the purposes of sub-section (9A), “execution of an authorisation for search” shall have the same meaning as assigned to it in Explanation 2 to section 158BE.
Explanation 2.—In this section, the word “proceeding” means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922 (11 of 1922), or this Act, 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.”
Section 132 confers power upon the authorities for search and seizure. The provision stipulates power upon the authorities who must have information in his possession and it is he who must have reasons to believe, it is, however, not the commissioner who does the actual search and seizure. This is left to the person whom he authorizes to carry out the search. It follows, therefore, that the seizure of books of account, documents, money, bullion, jewellery or other valuable articles would be dependent on the person so authorized being of the opinion that the same would be useful in any income tax proceeding. Therefore, the inspecting officers cannot seize documents, etc, by themselves but must be guided by the Commissioner. In other words, the things can be seized only after the Commissioner has seen them and had come to be of the opinion that they were relevant and useful, or else he must set out in the warrant of authority particulars of such documents, books of accounts, etc.
The difference in between the wordings of clauses (a) and (b) of sub-section (1) of Section 132 of the Act, 1961 is that under clause (a) action may be taken if a person is searched with a summons to produce or cause to be produced, specified books of account or other documents and fails to do so. But in clause (b) the basis is somewhat different. In the latter case, the Commissioner must have reason to believe that the person to whom a summons has been issued under clause (a) or might be issued, will not produce or cause to be produced any books of account or documents which will be useful and relevant to an income tax proceeding.
Under clause (b), unless summons under clause (a) has been issued, no specification is possible. In such a case the basis is that the assessee will suppress books of account and documents which will be required. The income tax authorities require the power furnished by clause (b) for the very reason that they do not know what the relevant books of account and documents are, and are afraid that they will be concealed or suppressed. The power of seizure under section 132 shall be exercised in accordance with sub-rules (2) to (14). Sub-rule (2) provides that the commissioner must first of all record his reason for issuing a warrant of authority. It then provides as to what should be the form of such warrant and the commissioner after going through the relevant records will reduce the reasons in writing for the future exercise and as such under the law, it is the Commissioner or the competent authority who must have reason to believe that the assessee would not produce certain books of account or document is called upon to do so, and it is he who must be of the opinion that they are relevant for the purpose of any income tax proceeding, under these underlying principles the power conferred U/s. 132 is to be exercised by the competent authority.
5. Section 131(1A) reads as forllows:—
“131. (1A) If the [Principal Director General or] Director General or [Principal Director or] Director or Joint Director or Assistant Director or Deputy Director, or the authorised officer referred to in sub-section (1) of section 132 before he takes action under clauses (i) to (v) of that sub- section,] has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for the purposes of making any enquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) on the income-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other income-tax authority.”
This provision confers power upon the competent authority that if there is reason to suspect that any income has been concealed, or is likely to be concealed by any person or class of persons within his jurisdiction, then, for the purposes for making any inquiry or investigation relating thereto, it shall be competent to exercise powers conferred under sub-section (1) on the income tax authorities referred to in that sub-section, notwithstanding that no proceeding with respect to such person or class of persons are pending before him or any other income tax authority.
We gathered from the provision of Sec. 131(1A) that no pre- condition for issuance of notice upon the assessee is stipulated in the said provision before invoking the jurisdiction conferred under the provision of Section 132 of the Act.
6. Section 133(A) reads as follows:—
“133A. Power of survey. (1) Notwithstanding anything contained in any other provision of this Act, an income-tax authority may enter—
(a) any place within the limits of the area assigned to him, or
(b) any place occupied by any person in respect of whom he exercises jurisdiction, or
(c) any place in respect of which he is authorised for the purposes of this section by such income-tax authority, who is assigned the area within which such place is situated or who exercises jurisdiction in respect of any person occupying such place,
at which a business or profession is carried on, whether such place be the principal place or not of such business or profession, and require any proprietor, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession—
(i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place,
(ii) to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein, and
(iii) to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act.
Explanation.—For the purposes of this sub-section, a place where a business or profession is carried on shall also include any other place, whether any business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of his books of account or other documents or any part of his cash or stock or other valuable article or thing relating to his business or profession are or is kept.
(2) An income-tax authority may enter any place of business or profession referred to in sub-section (1) only during the hours at which such place is open for the conduct of business or profession and, in the case of any other place, only after sunrise and before sunset.
[(2A) Without prejudice to the provisions of sub-section (1), an income-tax authority acting under this sub-section may for the purpose of verifying that tax has been deducted or collected at source in accordance with the provisions under sub-heading B of Chapter XVII or under sub-heading BB of Chapter XVII, as the case may be, enter, after sunrise and before sunset, any office, or any other place where business or profession is carried on, within the limits of the area assigned to him, or any place in respect of which he is authorised for the purposes of this section by such income-tax authority who is assigned the area within which such place is situated, where books of account or documents are kept and require the deductor or the collector or any other person who may at that time and place be attending in any manner to such work,—
(i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place, and
(ii) to furnish such information as he may require in relation to such matter.]
(3) An income-tax authority acting under this section may,—
(i) if he so deems necessary, place marks of identification on the books of account or other documents inspected by him and make or cause to be made extracts or copies therefrom,
(ia) impound and retain in his custody for such period as he thinks fit any books of account or other documents inspected by him:
Provided that such income-tax authority shall not—
(a) impound any books of account or other documents except after recording his reasons for so doing; or
[(b) retain in his custody any such books of account or other documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Principal Chief Commissioner or the Chief Commissioner or the Principal Director General or the Director General or the Principal Commissioner or the Commissioner or the Principal Director or the Director therefor, as the case may be,]
(ii) make an inventory of any cash, stock or other valuable article or thing checked or verified by him,
(iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act :
[Provided that no action under clause (ia) or clause (ii) shall be taken by an income-tax authority acting under sub-section (2A).]
(4) An income-tax authority acting under this section shall, on no account, remove or cause to be removed from the place wherein he has entered, any cash, stock or other valuable article or thing.
(5) Where, having regard to the nature and scale of expenditure incurred by an assessee, in connection with any function, ceremony or event, the income-tax authority is of the opinion that it is necessary or expedient so to do, he may, at any time after such function, ceremony or event, require the assessee by whom such expenditure has been incurred or any person who, in the opinion of the income-tax authority, is likely to possess information as respects the expenditure incurred, to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act and may have the statements of the assessee or any other person recorded and any statement so recorded may thereafter be used in evidence in any proceeding under this Act.
(6) If a person under this section is required to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income-tax authority shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement made :
Provided that no action under sub-section (1) shall be taken by an Assistant Director or a Deputy Director or an Assessing Officer or a Tax Recovery Officer or an Inspector of Income-tax without obtaining the approval of the Joint Director or the Joint Commissioner, as the case may be.
Explanation.—In this section,—
(a) “income-tax authority” means a [Principal Commissioner or] Commissioner, a Joint Commissioner, a [Principal Director or] Director, a Joint Director, an Assistant Director or a Deputy Director or an Assessing Officer, or a Tax Recovery Officer, and for the purposes of clause (i) of sub-section (1), clause (i) of sub-section (3) and sub-section (5), includes an Inspector of Income-tax;
(b) “proceeding” means any proceeding under this Act in respect of any year which may be pending on the date on which the powers under this section are exercised 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.”
This section confers power upon the authority to conduct survey which authorizes the income tax authority to enter in any place within the limits of the area assigned to him, or any place occupied by any person in respect of whom he exercises jurisdiction or any place in respect of which he is authorized for the purposes of this section by such income tax authority, who is assigned area within which such place is situated or who exercises jurisdiction in respect of any person occupying such place.
7. Section 153-A reads as follows:—
“153A. Assessment in case of search or requisition (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall—
(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made:
Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate:
Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made.
(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub- section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the [Principal Commissioner or] Commissioner:
Provided that such revival shall cease to have effect, if such order of annulment is set aside.
Explanation.—For the removal of doubts, it is hereby declared that,—
(i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section;
(ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year.”
Section 153-A confers power upon the authorities for making an assessment in case of search or requisition which provides that notwithstanding anything contained in Sec.139, 147, 148, 149, 151 and 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned U/s. 132-A after the 31st day of May, 2003, the Assessing Officer shall issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause-(b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and to assess or re-assess the total six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made.
This provision confers power for making assessment after the search and seizure as contemplated under the provision of sec.132 and sec.133-A in order to reassess the income due to suppression or concealment of the documents of the undisclosed income.
These statutory provisions have been taken note by the Hon’ble Supreme Court as well as by various High Courts dealing with the power of search and seizure. The Hon’ble Apex Court while discussing the issue in the case of Pooran Mal v. Director of Inspector [1974] 93 ITR 505 has been pleased to hold the constitutional validity of Sec.132 and it has been laid down that the necessity of recording of reasons in support of the reasonable belief contemplated by Sec.132, however, the principle has been laid down that the reason which led the authorities to conduct search and seizure need not to be disclosed or communicated to the person against whom the warrant of authorization has been issued. The same view has been reiterated in the case of Dr. Pratap Singh v. Director of Enforcement, [1985] 155 ITR 166/22 Taxman 30 (SC).
We, after going through the statutory provisions as well as the authoritative pronouncements as referred herein above, have found that before taking decision for search and seizure as contemplated under the provision of Sec.132 or 133-A of the I.T. Act, 1961 it is the bounden duty of the competent authority to be satisfied before invoking the said jurisdiction and its is also the cardinal principle of Law that no action be taken without any justified reason and if the action is without any reason, the said action will be said to be unjustified and an arbitrary exercise of authority in complete mis-utilization of the official position.
The grounds or reasons which lead to the formation of the belief must have a material bearing on the question of concealment of income by the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income Tax Officer to form the above belief, that would be sufficient to clothe him to invoke the jurisdiction of section 132 of the Act. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of the grounds which induce the Income Tax Officer to act is therefore not a justiciable issue, though he cannot make a search or authorize any officer to make a search unless he has reason to believe the existence of the facts mentioned in the section, the section does not compel him to give reasons and non-mention of reasons in itself does not vitiate the order and the Court will never go into the adequacy of such reason as has been held by Hon’ble Apex Court in the case of S. Narayanappa v. CIT [1976] 63 ITR 219.
We further gathered from the statutory provision as contained in Sec.132 of the I.T. Act that before invoking the jurisdiction conferred under the said provision the ‘reason to believe’ must be there for making search and seizure of the premises of the assessee in order to know the real fact as to whether the income disclosed by way of income tax return for a particular year is in consonance with the income being possessed by the said assessee. If authorities have found from any sources that the income disclosed by the income tax return, yearly basis, is less than the entire assets and property, then certainly the statute confers power upon the authorities U/s. 132 to conduct a search and seizure although there is provision of Sec.147 of I.T. Act which deals with the provision for making assessment of escaped assessment.
8. From the case in hand, as we have gathered from the notice impugned dtd.30.9.16, that a search and seizure operation U/s. 132 of the Act, 1961 had been conducted on 11.9.14 and subsequent dates in the residential as well as business premises of the petitioner company. The survey operations U/s. 133-A were also carried out at various places of Kolkata and Paradip. The authorities have invoked this provision after the assignment of jurisdiction to the circle in question U/s. 127 of the Act, 1961.
We have further gathered that the authorities have issued a notice U/s. 143(2) and 142(1) of the Income Tax Act. Section 143(2) contains a provision that where a return has been furnished under section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer or the prescribed income tax authority, as the case may be, if considers it necessary or expedient to ensure that the assessee has not understated the income or has not computed excessive loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein.
While section 142(1) contains provision of making an assessment after the return having been filed U/s. 139.
It is evident from the notice dtd.30.9.2016 that after filing of return the authorities have exercised their power conferred U/s. 142(1) and 143(2) of the Act by issuing a notice for compliance of the provision contained therein, but not responded by the assessee.
It further transpires that an exercise has been taken by the authorities as contemplated U/s. 132 of the Income Tax Act, 1961 and accordingly search and seizure was conducted on 11.09.2014 and on subsequent dates in the residential as well as business premises of the petitioner – company, survey operation U/s. 133-A of the Income Tax Act, 1961 were also carried out at various places of Kolkata and Paradip, in view of the decision taken by the authorities U/s. 127 of the Income Tax Act, 1961.
The main thrust of argument of learned counsel for the petitioner that there should not be any exercise in routine manner by the authorities by exercising jurisdiction U/s. 132 since it is extreme condition leading to stigma to the assessee, but very surprisingly, the search and seizure conducted in the month of September, 2014 but this has not been challenged fairly for a period of more than two years and it is now been questioned by the petitioner when a notice U/s. 153-A of the Act, 1961 has been issued.
It is evident from the materials available on the notice dtd.30.09.2016 that the assessee has been given ample opportunity to satisfy the authority before resorting to the provision of Section 132 of the Act, 1961 and when the assessee has not responded to the same, the authorities has resorted to the provision of Section 132 of the Act, 1961. The assessee filed a disclosure petition admitting a part of unaccounted income to the tune of Rs. 5,00,50,000/-.
In the light of these factual aspects we have appreciated the argument advanced on behalf of learned counsel for the petitioner by taking into consideration the statutory provisions as contemplated U/s. 132, 133-A, 142(1) and 143(2) of the Income Tax Act, 1961.
There is no dispute about the fact that the provision of Section 132 of the Act confers power upon the authorities to conduct search and seizure, but subject to the fact that if the authorities has got information on the basis of which he has reason to believe that any person to whom summons under sub-section (1) of section 37 of the Indian Income Tax Act, 1922, or under sub-section (1) of sub-section 131 of the Act, 1961, 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 the Act, 1961 was issued to produce or cause to be produced, any books of accounts 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 any person to whom a summon 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 Indian Income Tax Act, 1922 or Income Tax Act, 1961, or 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 for the purpose of the Indian Income Tax Act, 1922, or the Act, 1961, the authorities can initiate proceeding U/s. 132 of the Act, 1961.
In the instant case notice U/s. 142(1) of the Act, 1961 has been given and thereafter U/s. 143(2) but the assessee – petitioner has failed to comply the same which led the competent authority to invoke the jurisdiction of Section 132 of the Act, 1961.
Learned counsel for the petitioners submits that in absence of any reason which led the authority to resort to the provision of Section 132 of the Act, 1961, the notices U/s. 153-A is not tenable in the eye of law.
We have examined this argument in the light of the statutory provision as well as the authoritative pronouncements in this regard by the Hon’ble Apex Court as referred to above and have found that the competent authority can resort to, if he is of the opinion that the assessee is flouting the provision of the Income Tax Act and if in that situation he comes to conclusion that it is necessary to resort to the provision of Section 132, then it cannot be said that there was no reason behind resorting to the provision of Section 132 of the Act, 1961, moreover, the initiation of proceeding U/s. 132 has never been questioned by the petitioner before any Court of Law save and except this writ petition wherein also the proceeding U/s. 132 is not under challenge, rather the notice U/s. 153-A has been challenged which is in consequence of the action of the authorities initiated after invoking the jurisdiction conferred U/s. 132 of the Act, 1961.
It is not in dispute that the reason to believe cannot be shown to the assessee during pendency of the assessment.
9. The learned counsel for the petitioner has given much emphasis, when the argument has been advanced on behalf of learned counsel for Income Tax that there are alternative remedies of appeal before various forums. Countering this argument it has been submitted by him that the appellate forum has got jurisdiction to adjudicate the issue without asking the petitioner to avail alternative remedy of appeal.
There is no doubt about the fact that in appropriate case a writ petition may lie challenging the authority of the action on the ground of absence of power or on a plea that proceedings were taken maliciously or for collateral purpose, but normally High Court in such cases should not proceed merely on affidavits. The High Court can also proceed in a situation when there is allegation of mala fide or malicious proceeding, but we found from the pleading that no such allegation has been leveled against the Assessing authority that they are proceeding with ulterior motive.
The petitioner has taken a ground that before resorting to the provision of Section 132 of the Act, 1961, a notice ought to have been issued U/s. 131(1A) of the Income Tax Act, 1961, but from the bare reading of the said provision it is not required under the provision of Section 131(1A) that before proceeding with the provision of Section 132 a notice is required to be given to the assessee and it cannot be because the provision of section 132 provides power of search and seizure and if the notice would be given, then the whole purpose of conducting search and seizure will vanish, as because the assessee after knowing the fact that a notice for initiating proceeding U/s. 132 has been given, he will destroy all the documents making the proceeding a futile exercise.
The learned counsel for the petitioner at last argued that the appeal lie before the authority, who is lower in hierarchy than those taken decision to resort to the provision of Section 132 of the Act and as such, the assessee will be prejudiced but we are of the considered view that if an authority is taking recourse on the basis of the material come in consequence of the result of the provision of Section 132, the Assessing Officer is required to assess the income on the basis of facts as found and the requirement of allowing the assessee an opportunity of explaining the material is necessary and the same has been provided to the assess by issuing notice under Section 153(A) of the Act and as such it cannot be said that the Assessing Officer while exercising the jurisdiction U/s. 153-A will act with ulterior motive. In this regard reference may be made to the judgment rendered by Hon’ble Apex Court in the case of H.C. Narayanappa v. State of Mysore AIR 1960 SC 1073 wherein the Hon’ble Apex Court has been pleased to observe as follows:—
“It is also true that the Government on whom the duty to decide the dispute rests, is substantially a party to the dispute but if the Government or the authority to whom the power is delegated acts judicially in approving or modifying the scheme, the approval or modification is not open to challenge on a presumption of bias. The Minister or the officer of the Government who is invested with the power to hear objections to the scheme is acting in his official capacity and unless there is reliable evidence to show that he is biased, his decision will not be liable to be called in question, merely because he is a limb of the Government.”
In view of the fact that the assessee – petitioner’s premises has been subjected to search and seizure under the provision of Section 132 on being failure on the part of the assessee to comply with the notice issued U/s. 143(2) and 142(1) of the Income Tax Act, 1961, a notice U/s. 153-A of the Income Tax Act for the financial years 2009-10 to 2014-15 has been issued, that too after taking into consideration the admission on the part of the assessee.
We, after taking into consideration the notice dtd.30.09.2016 have found that ample materials are available, which led the authority to come to subjective satisfaction to initiate an action U/s. 132 of the Income Tax Act, 1961. We at this stage cannot direct the authority to come out with the specific reason as has been laid by the Hon’ble Apex Court in the case of Director General of Income Tax (Investigation) v. Spacewood Furnishers (P.) Ltd. [2015] 6 SCALE 291.
We, also after taking into consideration the factual aspect of the matter, are of the considered view that the matter pertains to factual determination of the issue and as such this Court cannot assume the power of appellate court, moreover, it is not that there is no other efficacious alternative remedy available to the petitioner – assessee, ground on which the jurisdiction of this Court under Article 226 of the Constitution of India is to be invoked, taking into consideration the fact that there is availability of alternative remedy of appeal, we thought it proper not to interfere with the issue since only notice U/s. 153-A has been issued to the petitioner with a direction to satisfy the authority, moreover, the search and seizure was conducted on 11.09.2014, well within the knowledge of the petitioner – assessee, but he has not challenged the authority of the jurisdiction under the Act fairly for a period of more than two years and it is only after the notice U/s. 153-A of the Act, 1961 issued, this writ petition has been filed.
Hence we are of the considered view that this is not the appropriate stage to entertain the writ petition for the reasons discussed herein above.
Accordingly the writ petition is dismissed, however reserving liberty to the petitioners that if they chose to avail the alternative remedy of appeal, they may avail the same by raising all points which are available to them and in that situation the authority concerned will take decision in accordance with law.
Accordingly the writ petition disposed of.
[Citation : 394 ITR 277]
