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MADHU GUPTA Vs. DIRECTOR OF INCOME-TAX (INVESTIGATION) AND OTHERS
January, 16th 2013
         THE HIGH COURT OF DELHI AT NEW DELHI
%                                      Judgment delivered on: 11.01.2013

+       WP (C) No. 1417/2011

MADHU GUPTA                                               ...    Petitioner

                                         versus

DIRECTOR OF INCOME-TAX (Investigation)
AND OTHERS                             ...                       Respondents
Advocates who appeared in this case:
For the Petitioner              : Mr Dr Rakesh Gupta with Mr Ashwani Taneja and
                                  Mr Rani Kiyala
For the Respondents             : Ms Suruchi Aggarwal


CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE V.K. JAIN

                                     JUDGMENT

BADAR DURREZ AHMED, J

1.      In this writ petition, the petitioner has prayed for the following

reliefs:-

        "(I)        To declare the authorization of income-tax search u/s 132
                    of the Income Tax Act, 1961 as illegal in the case of the
                    petitioner.

        (II)        To direct the concerned authority of the income tax
                    department to vacate prohibitory order passed u/s 132(3)
                    of the Income Tax Act, 1961 with respect to three bank
                    lockers of the petitioner.







WP (C) No.1417.11                                                       Page 1 of 24
        (III) To direct the concerned authority of income tax
              department to release the papers / documents seized from
              the residence of the petitioner.

        (IV) To pass any other order or direction as this Hon'ble court
             may deem fit and proper on the facts and circumstances
             of the instant case in order to grant necessary relief to the
             petitioner."


2.      Essentially, what the petitioner is seeking is a declaration that the

warrant of search issued against the petitioner under Section 132 of the

Income-tax Act, 1961 (herein after referred to as `the said Act') was

without the authority of law and, therefore, all proceedings pursuant to the

search conducted at the residential premises of the petitioner at C-18,

Sector-26, Noida, U.P. and pertaining to the petitioner ought to be declared

as being illegal and the jewellery, articles and documents in lockers

belonging to the petitioner be released to her unconditionally and the

prohibitory orders in respect thereof be vacated.


3.      From the affidavit filed on behalf of the respondent / revenue, it

appears that an information had been received by the Deputy Director of

the Income-tax (Investigation), Unit-IV (3), New Delhi from the Director

General Central Excise Investigation, Delhi (DGCEI) in 2009 with regard

to alleged unearthing of unaccounted sales and production as well as



WP (C) No.1417.11                                                  Page 2 of 24
alleged clandestine removal / clearing of the products of M/s Dharampal

Satyapal Group from their units at Noida, Gauhati and Agartala. The

products comprised of various brands of paan masala, gutkha, such as

Rajni Gandha and Tulsi. It is further revealed in the said affidavit on behalf

of the revenue that a show cause notice had been issued by the DGCEI to

the said M/s Dharampal Satyapal Group (DS Group) for evasion of Central

Excise Duty. It is further indicated in the affidavit that on the basis of

"information" received, "secret discreet inquiries" were carried out by the

said Director of Income-tax and it was allegedly revealed that the DS

Group was involved in sales which were not accounted for in the books and

that such unaccounted income was being invested in agricultural and

immovable properties and other assets in the names of group concerns of

DS Group. The affidavit further reveals that during "discreet inquiries" the

said Deputy Director of Income-tax allegedly got information that the

undisclosed accounts of DS Groups were being kept at the residence of

Smt. Madhu Gupta, widow of Late Shri R.N. Goela residing at C-18, Sector

26, Noida, U.P. It is further indicated in the affidavit that the said Deputy

Director of Income-tax recorded a satisfaction note for the purposes of




WP (C) No.1417.11                                                Page 3 of 24
conducting a search under Section 132 (1) of the said Act on the DS Group.

The satisfaction note, inter alia, indicated as under:-

        "That the above facts indicate that the assessee group is in the
        possession of unaccounted income in the form of money,
        bullion, jewellery and other valuables / articles or things /
        papers related to the undisclosed / benami properties. These are
        likely to be found at the residence and business premises of the
        group members, their associates and family members. Keeping
        in view of the above facts, I am of belief that even if notices u/s
        142 (1) of the Act or summons u/s 131 of the Act are issued to
        the above assesses, they will not produce the documents which
        will be useful for determining the taxability under IT Act, 1961.
        Therefore, warrant of authorization u/s 132 of the IT Act may
        be issued to search the following premises."

                                                      (underlining added)


4.      In the said affidavit, it is further alleged that Smt. Madhu Goela, the

petitioner herein, who uses the name Madhu Gupta, is the widow of Late

Shri R.N. Goela, who was one of the major share-holders in the DS Group

of Companies till his death in the year 2006. He was also a director in the

said Group of Companies till his death. It is alleged in the affidavit that,

while inquiring into the allegations against the DS Group, the said Deputy

Director of Income-tax had received information that in view of the close

relationship of the petitioner with the promoters of DS Group, accounts

containing details of undisclosed sales and incomes, etc. were "likely to be




WP (C) No.1417.11                                                   Page 4 of 24
kept" at the residence of the petitioner at C-18, Sector 26, Noida, U.P. It is

further indicated in the said affidavit that the following was mentioned in

the satisfaction note prior to the conduct of the search on the residence of

the petitioner:-

        "She is the wife of deceased director and according to
        information her house is used to keep accounts which are
        unaccounted."




5.      The said affidavit further indicates that, based on the satisfaction note

prepared by the said Deputy Director of Income-tax, the Additional

Director of Income-tax (Investigation), Unit-IV recommended search under

Section 132(1) on the DS Group.                The Director of Income-tax

(Investigation)-II, New Delhi discussed the matter with the said Deputy

Director of Income-tax as also the said Additional Director of Income-tax

(Investigation) and accorded satisfaction that there were strong reasons to

believe that DS Group of companies were engaged in unaccounted

production of paan masala and other products resulting in generation of

unaccounted income which was not fully being disclosed in the income-tax

returns. Consequently, the Director of Income-tax (Investigation)-II, Delhi

authorized the search under Section 132(1) of the said Act and after such

authorization, the said Deputy Director of Income-tax carried out the search




WP (C) No.1417.11                                                   Page 5 of 24
on the DS Group on 21.01.2011. The search was also carried out on the

residential premises of the petitioner.


6.      From the above, it is clear that the warrant of authorization which

preceded the search at the residential premises of the petitioner was issued

in the name of the petitioner ­ Smt. Madhu Gupta / Goela. This is also

apparent from the copy of the panchnama which is to be found at page 56

of the paper book. The second point that is to be noted is that the allegation

was that the petitioner was the wife of a deceased director and that there

was information that her house was being used to keep the accounts of DS

Group which were unaccounted.


7.      The search on the premises of the petitioner has been challenged by

the petitioner on the ground that, although the warrant of authorization is in

the name of the petitioner, there could not have been any reason to believe

that the pre-conditions stipulated in clauses (a), (b) and (c) of Section

132(1) of the said Act had been satisfied. In fact, the exact nature of the

information is also not disclosed and, therefore, the search could not be

founded on mere surmises and conjectures. At this juncture, we may point

out that though the learned counsel for the petitioner submitted that a search




WP (C) No.1417.11                                                Page 6 of 24
under Section 132 entails serious consequences insofar as the person

searched is concerned inasmuch as the department, by virtue of Section

153A of the said Act, can re-open the assessments of six years, the learned

counsel for the revenue had conceded, on instructions, and this is recorded

in our order dated 22.02.2012, that the department shall not be proceeding

against the petitioner under Section 153A. Thus, the scope of the petition is

with regard to the lifting of the prohibitory orders and the release of the

goods / articles to the petitioner. It was first contended by the learned

counsel for the petitioner that the mere fact that the revenue had conceded

that they would not be proceeding against the petitioner under Section

153A itself meant that the initiation of the search was bad. However, the

revenue has raised certain arguments which need to be considered.

8.      The learned counsel for the petitioner had placed reliance for his

submissions on the following decisions:-

        1)          Suresh Chand Agarwal v. Director General of Income-tax
                    (Investigation) & Others: (2004) 269 ITR 22 (All);

        2)          S.R. Batliboi & Co. v. Director of Income-tax (Investigation):
                    (2009) 315 ITR 137;

        3)          Dr Sushil Rastogi v. Director of Investigations, Income Tax
                    Department & Others: (2003) 260 ITR 249 (All);




WP (C) No.1417.11                                                     Page 7 of 24
        4)          Dr Nand Lal Tahiliani v. Commissioner of Income-tax &
                    Others: (1988) 170 ITR 592 (All);

        5)          Narayan R. Bandekar & Another: v. Income-tax Officer &
                    Others: (1989) 177 ITR 207 (Bom);

        6)          Smt. Kavita Agarwal & Another v. Director of Income-tax
                    (Investigation) & Others: (2003) 264 ITR 472 (All);

        7)          L.R. Gupta & Others v. Union of India & Others: (1992) 194
                    ITR 32 (Del);

        8)          H.L. Sibal v. Commissioner of Income-tax & Others: (1975)
                    101 ITR 112 (P&H).

9.      The contentions of the petitioner were that the opinion or the belief

amounting to a reason to believe, as indicated in Section 132(1) of the said

Act, must clearly show that the belief falls under clauses (a), (b), or (c) of

Section 132(1) and that no search could be ordered except for any of the

reasons contained in clauses (a), (b) or (c) of Section 132(1). Furthermore,

it was contended that the satisfaction note ought to show the application of

mind and formation of the opinion by the officer ordering the search and

that if the reasons recorded do not fall under clauses (a), (b) or (c), then the

authorization under Section 132(1) would be bad and would be liable to be

quashed. It was further contended that where the authorizing authority is

challenged in a judicial review, he would have to prove the basis for his

belief. Furthermore, the information on the basis of which a belief is



WP (C) No.1417.11                                                  Page 8 of 24
formed must be something more than a mere rumour or a gossip or a hunch.

There must be some material which can be regarded as information which

must exist on the file on the basis of which the authorizing officer could be

said to have a reason to believe that an action under Section 132(1) is called

for on the basis of any of the conditions mentioned in clauses (a), (b) or (c)

of Section 132(1). Furthermore, it was contended that the information has

not only to be authentic, but must be capable of giving rise to the inference

that the person was in possession of the undisclosed accounts which would

not normally be disclosed. It was submitted that before any action is taken

under Section 132(1) of the said Act, the competent authority must do so

only after a serious application of mind on the material before him. It was

also contended that the facts, which constitute an information, should be

such on the basis of which a reasonable and prudent man could come to the

requisite belief or conclusion as required under Section 132(1) of the said

Act.     The belief must not be based on mere suspicion.          He further

contended that it would be open in the course of judicial review for the

court to examine whether there was, in fact, information in the possession

of the authorizing authority and whether there was a rational connection

between information and the belief entertained by him. It was further




WP (C) No.1417.11                                                Page 9 of 24
contended that the information has to be of a fairly reliable character

because unless the information is of such a character, it could not furnish a

reliable basis for entertaining the belief that any of the circumstances

mentioned in Section 132(1) existed. The information must have a relevant

bearing on the formation of the belief and must not be extraneous or

irrelevant. It was contended that in the present case, there is no information

revealed by the revenue at all. Merely stating that some information had

been received is not sufficient. There must be tangible evidence on the file.

Secondly, the information must be such that it is reliable and on the basis of

which a reasonable and prudent man would come to the conclusion that one

of the conditions mentioned in Section 132(1) has been satisfied and,

therefore, a search was warranted. It was submitted by the learned counsel

for the petitioner that no such condition existed and, in fact, neither clause

(a) nor clause (b) nor clause (c) of Section 132 (1) was satisfied in the

present case.


10.     The learned counsel for the revenue, however, contended that the

reason to believe was in respect of the DS Group and clauses (a), (b) and

(c) were satisfied insofar as a search was warranted on the DS group.

According to the learned counsel for the revenue, the facts on the file



WP (C) No.1417.11                                                Page 10 of 24
clearly indicate that there was enough reason for the competent authority to

believe that the condition stipulated in clauses (a), (b) and (c) of Section

132(1) existed insofar as the DS Group was concerned. Once that was

satisfied, the provisions of Section 132(1) (i) clearly permitted the search to

be carried out in any building, place, etc. where the officer authorized had

"reason to suspect" that the books of accounts, other documents, etc. were

kept. It was contended by the learned counsel for the revenue that as there

was `reason to believe' insofar as the DS Group was concerned, the

authorized officer could conduct a search at any place which included the

residential premises of the petitioner at C-18, Sector 26, Noida, U.P. as also

the three bank lockers belonging to her. For conducting a search under

Section 132(1)(i), the authorized officer had only to have a `reason to

suspect' as distinct and different from a `reason to believe' as appearing in

Section 132(1). It was contended that the reason to suspect for entering any

premises could not be equated with the reason to believe, which was

necessary for directing any search of any tax payer. It was submitted that

the search of the DS Group was based on several allegations, which

according to the revenue, were found to be, prima facie, correct and once

that satisfaction was reached, the authorized officer only needed to have a




WP (C) No.1417.11                                                 Page 11 of 24
reason to suspect that some books, assets or other documents or evidence

would be found at the residence of the petitioner. It is accepted that the

search in the case of DS Group was legal and had been validly authorized.

The only issue that requires to be seen is that whether there was any reason

to suspect to enter and search the residence of the petitioner. According to

the learned counsel, there was sufficient reason to suspect and this was

enough for the issuance of a warrant to enter and search the residence of the

petitioner. She submitted that no independent search of the petitioner was

directed to be conducted and, therefore, the first requirement of Section

132(1) of the existence of a reason to believe consequent upon information

in possession was not required to be satisfied. Therefore, it was submitted

that the case law presented by the learned counsel for the petitioner as also

the propositions advanced by him relating to proper authorization of the

search based on information in possession were not at all applicable to the

facts of the present case.


11.     The provisions of Section 132(1), to the extent relevant, are set out

hereinbelow:-


        "132. Search and seizure. ­ (1) Where the Director General
        or Director or the Chief Commissioner or Commissioner or



WP (C) No.1417.11                                                Page 12 of 24
        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 Director General or Director or the Chief
                          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




WP (C) No.1417.11                                                       Page 13 of 24
                          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



WP (C) No.1417.11                                                      Page 14 of 24
                            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:"

12.     It is apparent that there are several parts to the said provision of

search and seizure. In the first part, certain persons have been named, who

would be competent to authorize other officers of the Income-tax

Department to carry out searches.               The first authority or warrant of

authorization can only be issued by the named persons, namely, the

Director General or Director or the Chief Commissioner or Commissioner

or an Additional Director or Additional Commissioner or Joint Director or

Joint Commissioner. Such warrant of authorization can only be issued by

such a person in consonance of information in his possession and after he


WP (C) No.1417.11                                                        Page 15 of 24
has formed a reason to believe that the conditions stipulated in clauses (a),

(b) and (c) existed.


13.     The information must be credible information and there must be a

nexus between the information and the belief. Furthermore, in our view,

the information must not be in the nature of some surmise or conjecture, but

it must have some tangible backing. Until and unless information is of this

quality, it would be difficult to formulate a belief because the belief itself is

not just an ipse dixit, but is based on reason and that is why the expression

used is "reason to believe" and not simply `believes".


14.     We shall now examine the decisions cited by the learned counsel for

the petitioner. In H. L. Sibal (supra), the Punjab & Haryana High Court

observed as under:-

        "30. ... The word "information" has been defined in the
        Shorter Oxford Dictionary as "that of which one is apprised or
        told". The word "reason" has been defined as "a statement of
        fact employed as an argument to justify or condemn some act".
        On the other hand, the word "conclusion" is defined as "a
        judgment arrived at by reasoning; an inference, deduction,
        etc.". In other words, when the information received or the
        basic facts are harnessed in support of an argument, the
        resultant effect assumes the shape of a reason and when a
        number of reasons are considered in relation to each other, the
        final result of this consideration assumes the shape of a
        conclusion. A necessary concomitant of this approach is that



WP (C) No.1417.11                                                   Page 16 of 24
        the facts constituting the information must be relevant to the
        enquiry. They must be such from which a reasonable and
        prudent man can come to the requisite belief or conclusion. If
        either of the afore-mentioned elements is missing, the action of
        the authority shall be regarded as lying outside the ambit and
        scope of the Act. Such an action would be liable to be struck
        down on the basis of what is commonly known as "legal
        malice"."


15.     In Dr Nand Lal Tahiliani (supra), the Allahabad High Court

observed as under:-

        "5. ... The expression is "reason to believe that the income
        has not been disclosed and not probably it may not have been
        disclosed". It is not left to guessing. It carries with it the
        impress of certainty. The dwelling house of a person is his
        fortress. "Every householder, the good or the bad, the guilty or
        the innocent, is entitled to the protection designed to secure the
        common interest against unlawful invasion of the house ".
        Ransacking of the house and the act of taking away the
        property is an inroad on the citizens' right of privacy": one of
        the values of civilization. Any unwarranted intrusion on it
        cannot be countenanced. Reasonable belief exists if the
        information is not only trustworthy but reasonable and
        sufficient in itself to warrant the conclusion that the provisions
        of Section 132 were being violated. Because, if the exercise of
        power is bad or unlawful in inception, then it is not validated
        or nor does it change character from its success. It would not,
        therefore, be asking too much from the authorities to comply
        with the basic requirements of the section before they are
        permitted to invade the secrecy of one's home."

16.     In Narayan R. Bandekar (supra), the High Court of Bombay

observed as under:-




WP (C) No.1417.11                                                   Page 17 of 24
        "3. ...        A plain reading of sub-section (1) of
        section 132 makes it clear that the powers can be exercised in
        consequence of information in the possession of the Director
        of Inspection or the Commissioner of Income Tax and from
        such information of the Commissioner has reason to believe
        that (a) any person, in spite of issue of summons, has failed to
        produce the books of account or other documents, (b) any
        person is likely to fail to produce the books if so called upon,
        and (c) any person is in possession of any money, bullion,
        jewellery or other valuable articles and which are not
        accounted for and which represent undisclosed income. It
        hardly requires to be stated that the power conferred upon the
        Commissioner under section 132 is of a drastic nature and the
        exercise of power can only be after serious application of mind
        to the information in the possession of the Commissioner and
        from which a reasonable person would come to the conclusion
        that the conditions prerequisite for the exercise of power
        existed."


17.     In L.R. Gupta & Others (supra), the Delhi High Court held as under:

        "17. A search which is conducted under Section 132 is a
        serious invasion into the privacy of a citizen. Section 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-
        Clause (a), (b) or (e) of Section 13:(l). No search can be
        ordered except for any of the reasons contained in sub-Clauses
        (a) (b), or (e). The satisfaction note should itself show the
        application of mind and the formation of the opinion by the
        officer ordering the search. If the reasons which are recorded
        do not fall under Clauses (a), (b) or (e) then an authorisation
        under Section 132(1) will have to be quashed. As observed by
        the Supreme Court in Income Tax Officer v. Seth Brothers:
        (1969) 74 ITR 836 (SC):




WP (C) No.1417.11                                                 Page 18 of 24
                    `Since by the exercise of the power a serious
                    invasion is made upon the rights, privacy and
                    freedom of the tax payer, the power must be
                    exercised strictly in accordance with the law and
                    only for the purposes for which the law authorises
                    it 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 his action.
                    If the action is maliciously taken or poer 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'."


18.     In Dr Sushil Rastogi (supra), the decisions in Dr Nand Lal (supra)

as also in L.R. Gupta (supra), were followed. The same is the position

with Smt. Kavita Agarwal (supra) wherein, while considering the said

decisions in Dr Nand Lal (supra) and L.R. Gupta (supra), a Division

Bench of the High Court of Allahabad observed as under:-

        "5. On the facts of the case we are of the opinion that this
        writ petition deserves to be allowed. The law is well settled
        that a warrant of search and seizure under Section 132(1) can
        only be issued on the basis of some material or information on
        which the Commissioner/Director has reason to believe that
        any person is in possession of money, jewellery or other
        valuable articles representing wholly or partly income or
        property which has not been or would not be disclosed, under
        the IT Act. In the present case the respondents have not
        disclosed what was the material or information on the basis of
        which the Director/Commissioner entertained the belief that
        the lockers contained valuable jewellery or other articles



WP (C) No.1417.11                                                           Page 19 of 24
        representing undisclosed income. It is well settled that the
        satisfaction of the authorities under Section 132 must be on the
        basis of relevant material or information. The word used in
        Section 132(1) are "reason to believe" and not "reason to
        suspect". In the counter-affidavit it has been specifically stated
        in para. 18 that the authorized officer had reason to suspect
        and not reason to believe."


19.     In Suresh Chand Agarwal (supra), the High Court of Allahabad held

as under:-


        "12. As regards the allegations in paragraphs 11, 12, 13, 14 and 15
        of the counter affidavit to the effect that the assessee could not give
        a satisfactory explanation regarding certain assets or documents
        found during the search, this court held in the case of Smt. Kavita
        Agarwal v. Director of Income Tax (Investigation): [2003] 264 ITR
        472 that the material on the basis of which the reason to believe of
        the Commissioner/Director is said to exist must be such material
        which was brought to the knowledge of the said authority prior to
        the search. In other words, the authorities cannot rely on material
        found during the search for taking the plea that this was the basis of
        the reason to believe, unless such material was brought to the
        knowledge of the authority who signs the warrant of authorisation
        before or at the time when he signs it. To take a contrary view
        would mean that the Commissioner/Director can issue a warrant of
        authorisation under Section 132(1) without considering any
        material, and thereafter the Income Tax authorities can indulge in a
        fishing enquiry to uncover some undisclosed asset. No such view
        can be countenanced by this court as it would give unbridled and
        arbitrary powers to the Income Tax authorities to harass the
        citizens.

        13. For the reasons given above, the writ petition is allowed and
        the impugned warrant of authorisation is quashed and the entire
        search and seizure is declared illegal. The respondents are directed
        to release the cash, articles and documents seized from the


WP (C) No.1417.11                                                   Page 20 of 24
        petitioner or his wife from their residence as well as the bank locker
        forthwith."


20.     Finally, in S.R. Batliboi and Company (supra), the Delhi High Court

held as under:-

        "9. It would be perilous and fatal to lose sight of the reality
        that the powers of the Search and Seizure are very wide and
        thus the legislature has provided a safeguard that the Assessing
        Officer should have reasons to believe that a person against
        whom proceedings under Section 132 are to be initiated is in
        possession of assets which have not been or would not be
        disclosed. Secondly, the authorized officer is also required to
        apply his mind as to whether the assets found in the Search
        have been disclosed or not, and if no undisclosed asset is
        found no action can be taken under Section 132(1)(iii) or (3).
        An arbitrary seizure cannot be maintainable even where the
        authority has seized documents with ulterior motives.

        xxxx         xxxx         xxxx         xxxx         xxxx


        12. Over two score years ago the Division Bench of this
        Court had opined in N.K. Textiles Mills v. CIT [1966] 61 ITR
        58 propounded that it was necessary and essential for these
        officers to take into custody only such books as were
        considered relevant to or useful for the proceedings in
        question. It was not open to them to indiscriminately,
        arbitrarily and without any regard for relevancy or usefulness,
        seize all the books and documents which were lying in the
        premises, and, if they did so, the seizure would be beyond the
        scope of the authorization. Our learned Brothers have
        designedly used the words proceeding in question, in order to
        clarify that material that may possibly be of relevance to the
        affairs of a third party, unconnected with the raided assessee
        and beyond the contemplation of the search and seizure



WP (C) No.1417.11                                                  Page 21 of 24
        exercise, should not be retained. All remaining doubts will be
        dispelled on a perusal of H.L. Sibal v. CIT: 1975 CTR (P&H)
        302 in which the Division Bench has, inter alia, analysed
        Commissioner of Commercial Taxes v. Ramkishan Shrikishan
        Jhaver: [1967] 66 ITR 664 (SC) into four concomitants (1)
        The authorized officer must have reasonable grounds for
        believing that anything necessary for the purpose of recovery
        of tax may be found in any place within his jurisdiction; (2) he
        must be of the opinion that such thing cannot be otherwise got
        at without undue delay; (3)he must record in writing the
        grounds of his belief; and (4) he must specify in such writing,
        so far as possible, the thing for which search is to be made.
        Where material or document or assets belong to a third party,
        totally unconcerned with the person who is raided, none of
        these conditions are fulfilled. In Sibal the belongings of a
        house-guest of Shri Sibal were searched and some money
        found therein was seized. The Court had concluded that the
        authorization for the search of the house-guest was prepared
        after the planned search of Shri Sibal. The warrants were
        quashed partly for this reason."


21.     These are the principles of law which have been set down by several

judicial pronouncements. In the present case, we find that the so-called

information is undisclosed and what exactly that information was, is also

not known. At one place in the affidavit of Deputy Director of Income-tax,

it has been mentioned that he got information that there was a "likelihood"

of the documents belonging to the DS Group being found at the residence

of the petitioner. That by itself would amount only to a surmise and

conjecture and not to solid information and since the search on the premises




WP (C) No.1417.11                                                 Page 22 of 24
of the petitioner was founded on this so-called information, the search

would have to be held to be arbitrary. It may also be pointed out that when

the search was conducted on 21.01.2011, no documents belonging to the

DS Group were, in fact, found at the premises of the petitioner.


22.     With regard to the argument raised by the learned counsel for the

respondent that there was no need for the competent authority to have any

reason to believe and a mere reason to suspect would be sufficient, we may

point out that the answer is provided by the fact that the warrant of

authorization was not in the name of the DS Group but was in the name of

the petitioner. In other words, the warrant of authorization under Section

132(1) had been issued in the name of the petitioner and, therefore, the

information and the reason to believe were to be formed in connection with

the petitioner and not the DS Group. None of the clauses (a), (b) or (c)

mentioned in Section 132(1) stood satisfied in the present case and,

therefore, the warrant of authorization was without any authority of law

insofar as the petitioner was concerned. Had the warrant of authorization

been issued in the name of the DS Group and in the course of the searches

conducted by the authorized officer, the premises of the petitioner had also

been searched, then the position might have been different. But, in the



WP (C) No.1417.11                                                  Page 23 of 24
present case, that is not what has happened. The warrant of authorization

was in the name of the petitioner and, therefore, it was absolutely necessary

that the pre-conditions set out in Section 132(1) ought to have been

fulfilled. Since those pre-conditions had not been satisfied, the warrant of

authorisation would have to be quashed. Once that is the position, the

consequence would be that all proceedings pursuant to the search

conducted on 21.01.2011 at the premises of the petitioner would be illegal

and, therefore, the prohibitory orders would also be liable to be quashed. It

is ordered accordingly. The jewellery / other articles / documents are to be

unconditionally released to the petitioner. The writ petition is allowed as

above. There shall be no order as to costs.



                                BADAR DURREZ AHMED, J




                                              V.K. JAIN, J
JANUARY 11, 2013
dutt




WP (C) No.1417.11                                                Page 24 of 24
 
 
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