High Court Of Patna
Smt. Sharmishtha Sinha vs. CIT & Anr.
Section 132, 158BB, 158BC, 260A
Block period 1986-87 to 1996-97
S.K. Katriar & Jyoti Saran, JJ.
Misc. Appeal No. 184 of 2002
18th August, 2009
Counsel Appeared :
Krishna Nandan Prasad & K.C.K. Sinha, for the Appellant : Harshwardhan Prasad & Rishi Raj Sinha, for the Respondents
JUDGMENT
By the court :
The assessee has preferred this appeal under the provisions of s. 260A of the IT Act, 1961 (hereinafter referred to as “the Act”), challenging the order dt. 7th Nov., 2001, passed by the Tribunal, Patna Bench, Patna, in IT(SS)A No. 106/Pat/1997, for the block period 1986-87 to 199697, affirming the order dt. 28th Nov., 1997, passed by the learned Asstt. CIT, Patna, being the assessing authority. A brief statement of facts essential for the disposal of the appeal may be indicated. The appellant claims to be an employee in the Department of Prisons of the undivided State of Bihar. Her husband, Dr. Shashi Kumar Singh, was an employee in the Department of Animal Husbandry, of the undivided State of Bihar. In or around 1995 or 1996, a major scam in the Department of Animal Husbandry was busted showing involvement of a large number of Government servants. One Dr. Shyam Bihari Sinha, a resident of Ranchi and senior functionary of the Department of Animal Husbandry, was the king-pin of the scam. Persons like Dr. Shashi Kumar Singh as well as the present appellant were also integral part of the conspiracy in the scam and were henchmen of leading conspirators like Dr. Shyam Bihari Sinha and others, and made hay while the sun was shining. The matter at the stage of investigation was being monitored by a Division Bench of this Court on the criminal side as well as on the taxation side. A large number of employees of the State Government were, during the course of investigation, found involved in a scam of gigantic proportions. In such a situation, it was suspected that such Government employees like the present appellant and her husband had also disproportionate assets in their hands.
The IT authorities under the IT Act conducted a raid in the residence of the appellant and her husband which had gone on from 27th Sept., 1996 to 19th Nov., 1996. The premises are situated in an area known as Buxi Compound, Bariatu, Ranchi. A large number of documents and other incriminating materials were seized during the course of search. Indeed materials found during the course of search provided the authorities materials for interrogation. The search had taken place under the provisions of s. 132 of the Act. After following the prescribed procedure, assessment for the block period was done in terms of s. 158BC of the Act. Thereafter as per the prescribed procedure notice was served on the appellant as well as her husband, who was being separately proceeded against, the authorities took steps for valuation of the house. The said house in Buxi Compound, Bariatu, Ranchi, was perhaps in the appellant’s name. Copies of the valuation report and other relevant documents were supplied to the appellant. She did not initially appear and refused to co-operate in the assessment proceeding. After considerable difficulties, the appellant’s husband along with a lawyer appeared before the learned assessing authority. On a consideration of the materials on record, the learned AO enhanced the valuation of the property, and also held that a bank account at Ranchi had not been disclosed, and further found that journey expenses to Australia to attend to Dr. Shyam Bihari Sinha was not accounted for and were added to the undisclosed income. Consequently, the three items constituted undisclosed income and were assessed together as per the prescribed procedure. The learned AO has also noted that the authorities under the Act had prohibited the appellant from operating a particular bank account notwithstanding which it was operated on two occasions which was also added upto the undisclosed income and were taxed in accordance with law. The appellant challenged the order dt. 28th Nov., 1997, passed by the learned Asstt. CIT, by preferring appeal before the Tribunal, Patna Bench, Patna, and was registered as IT(SS)A No. 106/Pat/1997 for the block period 1986-87 to 1996-97. The learned Tribunal allowed the appeal in part, but dismissed it substantially by order dt. 7th Nov., 2001 and impugned herein.
While assailing the validity of the impugned order, learned counsel for the appellant submits that the search and seizure does not satisfy the mandatory requirement of s. 132 of the Act and, therefore, further action is bad in law. He has in the same vein submitted that there was no objective material in terms of s. 132 of the Act to ensure satisfaction of the authorities to conduct the search. He relies on the following reported judgments : (i) ITO vs. Seth Bros. & Ors. (1969) 74 ITR 836 (SC); (ii) Smt. Kavita Agarwal & Anr. vs. Director of IT (Inv.) & Ors. (2003) 185 CTR (All) 129 : (2003) 264 ITR 472 (All); (iii) Suresh Chand Agarwal vs. Director General of IT (Inv.) & Ors. (2004) 191 CTR (All) 274 : (2004) 269 ITR 22 (All); and (iv) Union of India vs. Ajit Jain & Anr. (2003) 181 CTR (SC) 22 : (2003) 260 ITR 80 (SC).
6. Learned counsel for the appellant has further submitted that search of the residential premises is an invasion on the privacy of the assessee and, therefore, the prescribed procedure had to be meticulously followed. He next submits that the procedure for assessment of block period is prescribed in s. 158BC, and provides that limited materials may be taken into account for the purpose of assessment, inter alia, for the reason that this is after the regular assessment has taken place. In his submission, the authorities have violated the prescribed procedure and have violated the mandatory conditions provided by s. 158BC of the Act. He further submits in the same vein that the prescribed procedure of ss. 132 and 158BC has to be meticulously followed. The assessment proceeding for the block period has been confined to “undisclosed income” within the meaning of s. 158BC of the Act. He relied on the following reported judgments : (i) CIT vs. Ravi Kant Jain (2001) 167 CTR (Del) 566 : (2001) 250 ITR 141 (Del); and (ii) CIT vs. Jupiter Builders (P) Ltd. (2006) 205 CTR (Del) 553 : (2006) 287 ITR 287 (Del). Learned counsel for the appellant next submits that valuation of the property by the valuer is an extraneous material and consideration of the same is bad in law. He relies on the judgment in the case of CIT vs. Vinod Danchand Ghodawat (2000) 163 CTR (Bom) 432 : (2001) 247 ITR 448 (Bom). He wrapped up his arguments by submitting that the order of the learned AO is perverse.
Learned junior standing counsel has supported the impugned order. He first of all submits that the order of the learned AO has lost importance and has merged into the order of the learned Tribunal. Therefore, any criticism of the order of the learned AO is meaningless. He submits in the same vein that a provision for appeal or revision is provided for correction of errors in the impugned order. He also submits that the search had taken place in the residential premises of the appellant situate at Buxi Compound, Ranchi, in the presence of the appellant and her husband and a large number of materials were seized during the course of the search. He next submits that law is well-settled in India that an illegal or irregular search cannot by itself invalidate the subsequent action. The primary question in his submission, therefore, is the validity of the subsequent action. He relies on the judgment of the Supreme Court in the case of Seth Bros. & Ors. (supra). He also invokes the provisions of s. 158BH of the Act which is in the nature of a saving clause. He further submits that more than adequate opportunity was afforded to the appellant before the learned AO as well as before the learned Tribunal, though the appellant as well as her husband had failed to extend adequate co-operation in concluding the assessment proceedings. Notices as per the prescribed procedure as well as copies of the valuation report of the house in question, as well as documents were provided to the appellant to put up her defence. He submits that s. 158BB(1) permits taking into account a large number of materials for the purpose of block assessment. He severely criticized unauthorised operation of the bank account in a situation where the authorities had prohibited operation of the same. We have perused the materials on record and considered the submissions of learned counsel for the parties. Learned junior standing counsel has produced in a sealed cover confidential file with respect to the search and seizure. In view of the position that the file contains confidential information about other persons unconnected with the assessment proceedings in question, we have chosen to peruse the same by ourselves. We shall advert to the materials disclosed therein, if necessary. While admitting this appeal on 25th July, 2006 this Court had formulated the following substantial questions of law :
“(i) Whether the three requirements envisaged in s. 132 of the IT Act were available for search and seizure ?
(ii) Whether during the search any such documents were found for the block assessment ?”
We would first of all clear the issue relating to the sentimental argument advanced on behalf of the appellant to win our undeserved sympathy. Learned counsel submitted that the appellant, who is separated from her husband was living alone in the house in question; the impugned search was in gross violation of the procedure prescribed under s. 132 of the Act. It appears to us from the materials on record including the confidential file that the raid was conducted in the presence of the appellant and her husband. Indeed the learned Tribunal has recorded the finding that they are living together. Except the oral submission of learned counsel for the appellant, no other material has been brought to our notice that she is separated from her husband and she was living alone in her house. Such unsubstantiated submissions are usual to evade the rigours of law. We refuse to be swayed by the irrelevant consideration. The attempt on the part of the appellant to deflect the course of justice is hereby negatived. It appears to us on a perusal of the materials on record that the raid was conducted in the presence of the appellant and her husband. The procedure for such a raid is prescribed in s. 132 of the Act. It appears on a perusal of the notice that the procedure prescribed by s. 132 of the Act was substantially followed. It further appears from a perusal of the confidential file that summons was issued, but a copy of the same is not available. We consider it to be an irregularity fit to be condoned because of substantial compliance of s. 132 of the Act. The judgment of the Supreme Court in the case of Seth Bros. & Ors. (supra) is illuminating and supports our view. It has been observed therein that if the conditions for the exercise of the power are not satisfied the proceeding is liable to be quashed. But where power is exercised bona fide, and in furtherance of the statutory duties of the tax officers, any error of judgment on the part of the officers will not vitiate the exercise of the power. Where the CIT entertains the requisite belief and for reasons recorded by him authorises a designated officer to enter and search the premises for books of account and documents relevant to or useful for any proceeding under the Act, the Court, in a petition by an aggrieved person, cannot be asked to substitute its own opinion whether an order authorising search should have been issued. Any irregularity in the course of entry, search and seizure committed by an officer acting in pursuance of the authorisation will not be sufficient to vitiate the action taken provided the officer has, in executing the authorisation, acted bona fide.
On a perusal of materials on record, we are convinced that the prescribed procedure was substantially followed. There were adequate materials for the satisfaction of the authorities to conduct search in the residential premises of the appellant. The persons so authorised conducted the search and acted bona fide and any minor irregularity in following the prescribed procedure does not, in the circumstances of the case, render the search invalid. The contention is rejected. The first question of law is accordingly answered in favour of the Revenue and against the assessee. We now take up the second question of law formulated by this Court. We notice on a perusal of the materials on record and the confidential file that a large number of documents were seized during the course of the search. The Panchnama (the seizure document) was prepared and is on record. The same discloses that the couple owned seven houses and commercial flats in the township of Ranchi, Patna, and other places, and the premises at Buxi Compound, is one of them. The search also disclosed a large number of bank accounts of the couple, fixed deposits as well as bank locker, which constitute “undisclosed income” within the meaning of s. 158BC of the Act. The assessment order was passed on a close scrutiny of these materials, in the presence of the appellant and her husband, and the findings of facts were accordingly recorded. We must also note that the learned assessing authority had taken steps for valuation of the premises at Buxi Compound, in the presence of the couple, a copy of the valuation report was made available to the appellant. This is in one sense a protection to the assessee. This was a bona fide procedural step taken to ensure accurate assessment proceedings and we do not find fault with the same. We do not find any fault with the order of the learned AO whereby he directed valuation of the property by a valuer.
Aggrieved by the order of the learned AO, the appellant herein had preferred the appeal which was allowed in part and impugned herein. The view taken by the learned Tribunal on the four issues, namely, the movable properties, bank accounts, expenses over foreign trip and the immovable properties have been taken after being duly scrutinized by the learned Tribunal, and are substantially issues of fact. The plea taken by the appellant that the couple had accompanied the said Dr. Shyam Bihari Sinha to Australia for the latter’s treatment and the expenses were paid by him was an issue of fact, and has been rejected by the learned Tribunal. We entirely agree with this part of the findings recorded by the Tribunal. In other words, the learned Tribunal came to the conclusion that in the absence of any material to support the fact that the journey expenses of the couple were borne by Dr. Shyam Bihari Sinha, the same has to be taken to be an expense made by the appellant and has been taken to constitute “undisclosed income”. We entirely agree with the same. In the result, we do not find any merit in this appeal. Insofar as the first question is concerned, we are convinced that the three ingredients engrafted in s. 132 of the Act which constitute a valid search are satisfied in the present case, is answered against the assessee, and in favour of the Revenue. As to the second question, materials were indeed collected during the course of the search which led to the order of assessment. The second substantial question of law is also answered against the appellant, and in favour of the Revenue. The appeal is dismissed with costs quantified at Rs. 10,000, which shall form part of the demand notice. The confidential file is hereby returned to the learned standing counsel.
[Citation : 321 ITR 271]