INCOME TAX: August 2019

A warrant of authorization is the key document and stepping stone for commencement of actual search. It is the main foundation of entire proceedings of search and seizure. A warrant of authorisation is an official documents to link, for the purpose of authorizing a search under section 132. A warrant of authorization is a direction from the authority competent to authorize search to officers named therein to exercise the powers and perform the functions of the authorized officers under section 132.

Issue of search warrant is merely administrative act

The issue of warrant by the competent authority under section 132 is not a judicial or quasi-judicial act, but is merely administrative act.

In Narayan R. Bandekar, the High Court of Bombay observed as under:-

“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.”

[Narayan R. Bandekar & Another: v. ITO & Others (1989) 177 ITR 207 : 46 Taxman 274 (Bom)]

Procedure for authorization
Issuance of search warrant: the authorization issued for search and seizure in the prescribed form is known as ‘search warrant’. Rule 112 of the Income Tax Rules, 1962 governs the procedure for issue of warrant. According to rule 112 (2A) every warrant of authorization shall be in writing with the signature of the authorizing officer along with his seal.

However, there is no requirement that the information on the basis of which search and seizure has been authorized should be given in the search warrant.

Service of search warrant

After the warrant is signed, actual search proceedings begin. The first duty of the authorizing officer before he commences the search is to produce and show a valid search warrant to the asessee. It is the right of the asessee to check and verify that the warrant is complete in all respects and is related to him. There is no requirement in the Income Tax Rules 1962 providing for a copy of warrant of authorization to be given to the person whose books are sought to be searched and seized before the search starts.

Search warrant need not specify the account books, documents or valuables to be seized

The search warrant need not specify which account books, documents or valuables should be seized as a general authorization of search and seizure of account books, documents, valuables etc. is not bad in law. The things or articles to be seized have to be left to the discretion of the authorized officer.

Fresh authorization against proper person

In case a warrant is issued against a particular person and during the search certain hidden assets are discovered which are claimed by another person and they are accordingly returned to the claimant, there would be no illegality in issuing a fresh authorization against such claimant.

Can search be authorized by an authority other than jurisdictional authority?

The Chief Commissioner/Commissioner of Income Tax has the power to authorize a search of any building, place, vessel, vehicle or aircraft of a person which is under his jurisdiction and also in cases where such building, place, vessel, vehicle or aircraft is in his area of jurisdiction but he has no jurisdiction over the persons concerned, if he has reason to believe that any delay in obtaining authorization from the Commissioner having jurisdiction over the person would be prejudicial to the interests of revenue. Such authorization shall be given in Form 45A. Where a search for any books of account or other documents or assets has been authorized by any authority who is competent to do so, and some other Chief Commissioner/Commissioner in consequence of information in his possession has reason to suspect that such books of account or other documents and assets etc, of the assessee are kept in any building, place, vessel or aircraft not specified in the search warrant issued by such authority, he may authorize the Authorised Officer to search such other building, place, vessel, vehicle or aircraft. Such authorization shall be given in Form 45B.

Authorisation must not be based on irrelevant considerations

‘Information’ would mean statement of facts. It may be supplied to the authorising authority in writing or orally. Though when it is made orally to him propriety demands that he should record notes of the same so as to assist him in the conclusion that there are reasons to believe that there are undisclosed moneys, ornaments etc. in the possession of any person and also to use it to justify the said conclusion in the event of necessity. However, satisfaction note cannot constitute ”information” as contemplated under the law and, therefore, in the absence of information, the order for search and seizure could not be sustained. Information must be more than a rumour or gossip or hunch. Therefore, the courts have held that authorisation cannot be issued on mere suspicion because in the Act, the word "reason" is used and not suspicion

Consequential search warrant can not be issued by the competent authority in the name of some other person, say consultant of the assessee, or employee of the assessee on the basis of suspicion

Search warrant can not be issued by the competent authority in the name of some other person merely on the basis of suspicion. For issuing search warrant in the name of some other person, the competent authority has to record “reasons to believe” in consequence of information in his possession.

Search can be conducted with respect to the person who is in joint occupation with the person searched

A person who is in joint occupation with the person searched may also be searched by the authorized officer to find out any incriminating material relating to the person searched available in his possession. However, in case the premises are independent, separate search warrant is required to enter and search such premises. Independence of the premises is a matter of fact and will depend upon particular case.

Guiding principles for formation of opinion

The Hon`ble Gujarat High Court in (1997) 226 ITR 781 (Guj) in the case of Prabhubhai Vastabhai Patel v. Meena (RP) laid down the following principles relating to the use and relevance of the information in possession of the authority and formation of information therefrom:

(a) the authority must be in possession of information and must form opinion that there is reason to believe that the article or property has not been or would not be disclosed;

(b) the information must exist before the opinion is formed;

(c) the authorised person must apply his mind to the information in his possession and form opinion whether there is reason to believe or not. The opinion must be formed on the basis of the material available at that time;

(d) The opinion must be based on the material which is available and it should not be formed on the basis of extraneous or irrelevant material;

(e) The formation of opinion must have rational connection and bearing to the reasons for such opinion. The formation of opinion should be based on application of mind and be bona fide and not be accentuated by mala fide, bias or based on extraneous or irrelevant material. The belief must be bona fide and cogently supported;

(f) The existence or otherwise of the condition precedent is open to judicial scrutiny. Courts can examine whether the authorised person had material before it on which he could form the opinion whether there is rational connection between the information possessed and the opinion formed;

(g) However, the court will not sit in appeal over the opinion formed by the authorised person if the authorised person had information in his possession and the opinion formed is on the basis of such material. The court will not examine whether the material possessed was sufficient to form an opinion. The court cannot also go into the question of opinion or sufficiency of the grounds upon which the subjective satisfaction is based;

(h) If the belief is bona fide and is cogently supported, the court will not interfere with, or sit in appeal over it.

Basic contents of a search Warrant of authorisation

(i) Warrant should be in writing

Under rule 112(2A) every warrant of authorization shall be in writing with the signature of the authorizing officer along with his seal. Signing of blank warrant of authorisation makes the search illegal.

Blank warrants are illegal

General warrants are no warrants at all because they know no one. Use of such a blank form was held to be illegal and seized materials were ordered to be returned. - [Manmohan Krishan Mahajan v. CIT (1977) 107 ITR 420 (P&H)]

Blank warrants can not be issued

A search warrant should be complete in all respects. It must mention the name and address of the person to be searched. Blank authorization without mentioning the name and place is illegal. The most serious content of the warrant of authorization is the name of the person whose premises, etc., are sought to be searched. The search would be illegal and the articles seized would be returned.

[Jagmohan Mahajan v. CIT (1976) 103 ITR 579 (P & H)

(ii) Essential portion of a warrant

(a) The name(s) of the authorized officer(s) and his (their) designation(s);

(b) The name(s) of the person(s) to be searched;

Irrelevant portions in the warrant must be struck out.

[Dwarka Prosad Agarwalla v. Director of Inspection (1982) 137 ITR 456 (Cal)]

Non-striking of irrelevant portions and non-filling up of blank portions of the warrant would indicate non-application of mind. The search was held to be illegal.

[Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver (1967) 66 ITR 664 : 20 STC 453 (SC)

(iii) Warrant to mention the specific person (Specifies ‘Person’)

A warrant should specify the person in respect of whom it is being issued.

The petitioner Smt. Sita Devi is the mother of Kewal Krishan and Narain Dutt Dhablania who resided along with her in one residential premises. Warrant were issued in the names of the sons of Smt. Sita Devi as she was living in the same premises whith her sons. The jewellery recovered was claimed by Smt. Sita Devi to belong to her. The jewellery was returned to her and was then again seized under a fresh authorrisation issued in her name. The seizure from Smt. Sita Devi under fresh authorization was held valid. - [Smt. Sita Devi v. CIT (1980) 122 ITR 105 (1979) 2 Taxman 463 (P&H)]

(iv) Description of the premises (Specifies ‘Premises’)

Proper description of the premises to be covered is absolutely essential. The exect description of the premises should be stated in the relevant columns.

Specific mention is must

Karnataka High Court in the case of Nenmal Shankarlal Parmer v. ACIT (1992) 195 ITR 582 at page 586. In that case, the search warrant was in the name of the firm but the residential premises of the partners were searched without any warrant in their names. The Karnataka High Court held that the mere mention of the residential premises did not enable the department to effect seizure of assets etc. belonging to the partners from such premises.

(v) Warrant to search residential premises

When more than one adult member of the family reside in one residential premises, warrant issued in the name of any one of them would suffice.

(vi) Warrant to search business premises

In the warrant for business premises, the name of the person occupying the premises and doing business therein, is given along with the trade name i.e. Company, firm or proprietor, as the case may be.

Nexus between person and premises etc.

There should be a nexus between the person searched and the place, building or vehicle searched; otherwise the authorization, search and seizure would be invalid.

Grounds for search action not to be stated

The grounds which induced reasonable belief need not be stated in the warrant of authorization. - [Dr. Partap Singh v. Director of Enforcement (1985) 155 ITR 166 (SC)]

Warrant of authorization not to specify documents to be seized

The Act and the rules do not require that the warrant of authorization should specify the particulars of documents and the books of account. A general authorization to search for and seize documtnes and books of account relevant to or useful for any proceeding complies with the requirements of the Act and the Rules. It is for the officer making the search to exercise his judgment and seize or not to seize any documents of books of account. - [ITO v. Seth Bros. (1969) 74 ITR 836 (SC)]

Forms of authorization

Various forms of warrant of authorization are prescribed in Rule 112 of the Income Tax Rule, 1962 for an action of search and seizure under section 132 and for requisition under section 132A as per details given below:

S. No.	Form No.	Section	Rule	Particulars
1	45	132	112(2)(a)	This form should be used where a search is authrised under section 132(1) by the Director General or Director or Chief Commissioner or Commissioner or other competent authority empowered by the Board in this behalf, for non- compliance with summons under section 131 or notice under section 142(1) or for possession of unaccounted assets. This form is used in situations other than those indicated in the first proviso to section 132(1).
2	45A	132(1)	112(2)(b)	This form should be used by the Chief Commissioner or Commissioner in a situation referred to in the first proviso to section 132(1), that is, where any building, place, vessel, vehicle or aircraft but not the person falls within the area of his jurisdiction. He can authorise a search if he has reason to believe that delay in obtaining the authorisation form the Chief Commissioner or Commissioner having jurisdiction over such person may be prejudicial to the interests of the revenue.
3	45B	132(1A)	112(2)(c)	This form should be used by the Chief Commissioner or Commissioner in a situation referred to in section 132(1A) of the Income Tax Act, 1961, that is, where in consequence of information in his possession, he has reason to suspect that the existing authorisation is inadequate because the books of accounts, money, jewellery, or other valuable article or thing are kept at some other building, place, vessel, vehicle or aircraft.
4	45C	132A	112D(1)	The authorisation under section 132A(1) by the Director General or Principal Director or the Chief Commissioner or Principal Commissioner or Commissioner shall be in Form No. 45C, shall be in writing under the signature of the officer issuing the authorisation and shall bear his seal.

Warrants to lawyers, Chartered Accountants

CBDT’s Instruction No. 7/2003, dated 30.07.2003

With a view to focus on high revenue yielding cases and to make the optimum use of manpower, the Board has decided that officers deployed in the Investigation Wing should restructure their activities. They should adhere to the following guidelines:

(a) Searches should be carried out only in cases where there is credible evidence to indicate substantial unaccounted income/assets in relation to the tax normally paid by the assessee or where the expected concealment is more than Rs. 1 crore;

(b) Search operation will also be mounted when there is evidence of hidden unaccounted assets arising out of a conspiracy to cause public harm, terrorism, smuggling, narcotics, fraud, gangsterism, fake currency, fake stamp papers and such other manifestations;

(c) Tax payers who are professionals of excellence should not be searched without there being compelling evidence and confirmation of substantial tax evasion.

Henceforth, search operations shall be authorized only by the concerned DGIT (Inv.), who will be accountable for the action initiated by the officers working under him. He should also ensure that all the work relating to search and seizure, like post-search inquiries, preparation of appraisal report and handing over of seized books of account, etc., should be completed by the Investigation Wing within a period of 60 days from the date on which the last of the authorizations for search was executed.

Authorising Authority and Authorised Officer under Section 132(1)

A warrant of authorisation is a direction from the authority competent to authorize search to officers named therein to exercise the powers and perform the functions of the authorized officers under section 132. Income tax authority, having power to initiate search under section 132, can authorize its subordinate(s) (not below the rank of Income tax officer) to conduct search. Following subordinates can be authorised

S. No.	Income-tax authorities competent to authorise the authorities to carry out search and take other related actions	Income-tax authorities who can be authorised by the authorities to carry out search and take other related actions
S. No.	AUTHORISING OFFICER [who gives the authority to search)	AUTHORISED OFFICERS (who actually conducts search and seizure operation)
1.	(i) Principal Director General; or (ii) Director General; or (iii) Principal Director; or (iv) Director; or (v) Principal Chief Commissioner; or (vi) Chief Commissioner; or (vii) Principal Commissioner; or (viii) Commissioner	(i) Additional/Joint Director; or (ii) Additional/Joint Commissioner; or (iii) Addl./Joint Director; or (iv) Addl./ Joint Commissioner; or (v) Assistant Director; or (vi) Deputy Director; or (vii) Assistant Commissioner; or (viii) Deputy Commissioner; or (ix) Income tax officer
2.	Such (i) Additional/ Joint Director; or (ii) Additional/ Joint Commissioner; or (iii) Addl./ Joint Director; or (iv) Addl./Joint Commissioner (on the basis of authorization from above authority and being empowered by the Board)	(i) Assistant Director; or (ii) Deputy Director; or (iii) Assistant Commissioner; or (iv) Deputy Commissioner; or (v) Income tax officer

Notification No. 82/2009 dated 11.11.2009

In exercise of the powers conferred by the fourth proviso to section 132(1) of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby empowers all the Additional Directors of Income-tax and Joint Directors of Income-tax working under the Director General of Income-tax (Investigation) and Director General of Income-tax (Intelligence) to issue authorisation under section 132(1) of the Income-tax Act, 1961 (43 of 1961).

1st Proviso to sub-section (1) of Section 132

This proviso empowers any Chief CIT or CIT who has jurisdiction over the area in which the search premises are situated but having no jurisdiction over the person to be searched for authorizing the search where he has reason to believe that any delay in getting the authorization from the Chief CIT or CIT having jurisdiction over such person may be prejudicial to the interests of the Revenue (Warrant of Authorization in such case can be issued in Form No.45A)

Sub-section (1A) of section 132

This sub-section empowers the Chief CIT or CIT to authorize an Authorized Officer to exercise the powers as contained in clauses (i) to (v) also in respect of any such premises which are not covered by the Authorization given under subsection (1) of section 132 (Such warrant of authorization can be given in Form No.45B)

KEY NOTE

Every authorization shall be in writing under the signature of the officer issuing the authorization and shall bear his seal.

Warrant of authorization - Section did not compel him to give reasons and non-mention of reasons in itself did not vitiate the order and the court would never go into the adequacy of such reason - Writ petition is held to be not maintainable

Dismissing the petition, the Court held that; Once there existed reasonable grounds for the authority to form the above belief, that was sufficient to invoke the jurisdiction under section 132. Whether the grounds were adequate or not was not a matter for the court to investigate. The sufficiency of the grounds which induced the Income-tax Officer to act was therefore not a justifiable issue, though he could not make a search or authorise any Officer to make a search unless he had the reason to believe the existence of the facts mentioned in the section. The section did not compel him to give reasons and non-mention of reasons in itself did not vitiate the order and the court would never go into the adequacy of such reason. (Related Assessment years 2009-10 to 2014-15) - [Aditya Narayan Mahasupakar v. CCIT (2017) 392 ITR 131 : 293 CTR 73 : 246 Taxman 106 : 147 DTR 373 (Orissa)]

A search action under section 132(1) has to be 'person specific' and when admittedly the names of the assessees did not figure in the warrant, the Assessing Officer had committed an apparent error to assess the assessees. - [CIT v. Smt. Umlesh Goel (2016) 74 taxmann.com 37 (Rajasthan)]

Warrant of authorisation – Relevant clause to be specified

The opinion or the belief so recorded must clearly show whether the belief falls under clause (a) or (b) or (c) of section 132(1) of the Act. The satisfaction note should itself show the application of mind and the formation of opinion by the officer ordering the search. In order to justify the action the authority must have relevant materials on the basis of which he can form an opinion that he has reason to believe that action against a person under section 132 of the Act is needed. The belief should not be based on some suspicion or doubt. - [Visa Comtrade Ltd. v. UOI (2011) 338 ITR 343 : 243 CTR 348 : 201 Taxman 413 : 60 DTR 81 (Orissa)]

Joint Director of Investigation does not have any statutory power to issue authorization under section 132(1) and therefore the search and seizure operation carried out on the basis of authorization issued by him was invalid and no block assessment could be framed on the basis of said search. - [Capital Power Systems Ltd. v. ACIT (2008) 115 TTJ 531 (Del)]

However Joint Director of Investigation is empowered to authorize consequential search. - [Mrs. Aanisa Batool Gilani v ACIT (2008) 21 SOT 323 (ITAT Delhi)]

Issue of warrant of authorization was held to be valid

Section 158BC : Block assessment – Search- Addition was made on the basis of seized material – Block assessment cannot be held to be invalid on the ground that the authorisation was not in the name of the assessee but the premises of the assesee – Neither Assessing Officer nor Tribunal in appeal could examine warrant of authorization for purpose of examining whether there existed reasons to believe on material before competent authority to order search under section 132(1) . Assessee has not disputed the panchanama prepared by the search team in the name of assessee- Block assessment is held to be valid . In the present case search and seizure was actually made on the premises on the premises of assessee and documents and material collected therefrom also pertain to it , therefore Section 158BD is not attracted

Allowing the appeal of the revenue the Court held that , neither Assessing Officer nor Tribunal in appeal could examine warrant of authorization for purpose of examining whether there existed reasons to believe on material before competent authority to order search under section 132(1). Assessee has not disputed the panchanama prepared by the search team in the name of assessee.Block assessment is held to be valid. Addition was made on the basis of seized material ,Block assessment cannot be held to be invalid on the ground that the authorisation was not in the name of the assessee but the premises of the assesee. Dismissing the appeal of the assessee the Court held that, Section 158BD would have been attracted only when the search and seizure was made in the premises of another person and material collected belong to another person. In the present case , search and seizure was actually made on the premises on the premises of assessee and documents and material collected therefrom also pertain to it, therefore Section 158BD is not attracted. [Block Period 01.04.1994 to 28.11.1996) - [CIT v. Verma Roadways (2018) 304 CTR 163 : 165 DTR 377 (All)]

Warrant authorization in the name of assessee and not in name of bank account of assessee –Search valid

Survey was conducted at premises of assessee on 14 December 2009 which was subsequently converted into search under section 132(1). In consequence to the search, prohibitory orders under section 132(3) were passed in case of the assessee addressing to their banker not to allow any operation to the assessee either in premises or in the bank locker. Subsequently again a search was conducted on 11 February 2010. The search warrant was issued in the name of bank account maintained by assessee with bank. Regarding the validity of search, ITAT held that on the basis of the panchanama, it gives an impression that search has taken place not on the assessee but in respect of the bank account of the assessee. Submission of the Counsel is based on the panchanama and not on the basis of the warrant of authorization. The copy of the warrant of authorization was not produced by the assessee. Panchanama is not the conclusive evidence that the search is not in the name of the assessee or search warrant is not in the name of the assessee. In this case, the Tribunal directed the Ld. Departmental representative to produce search warrant. It was found that the warrant of authorization is in favour of the assessee not in the name of the bank account and therefore, search cannot be held to be invalid. (Related Assessment years 2004-05 to 2006-07) - [ACIT v. Budhiya Marketing (P) Ltd. (2015) 173 TTJ 649 : 154 ITD 650 (ITAT Kolkata)], ACIT v. Edward Supply Pvt. Ltd. (2015) 173 TTJ 649 : 154 ITD 650 (ITAT Kolkata)]

Copy of search warrant should be given to the searched person. Defects in the panchnama do not invalidate the search or the Section 153A assessment proceedings

A search under section 132 was conducted on the premises of the assessee and its group concerns. Though a panchnama was prepared, the assessee’s name did not appear therein. An assessment order under section 153A was passed to assess the alleged undisclosed income. The assessee claimed that as section 153B imposed a limitation for passing of a section 153A order by reference to the last panchnama drawn in relation to the searched person, the absence of the assessee’s name in the panchnama meant that the section 153A assessment order could not be passed. A Writ Petition was filed to challenge the assessment. HELD by the High Court dismissing the Petition:

The Delhi High Court on dismissing the Writ Petition filed by the assessee held that the non-reference to the name of the assessee and the suspension/ conclusion of the search is a lapse and failure to comply with the requirements of the search and seizure manual. However, this does not affect the validity of the search or the assessment order under section 153A. The department should take remedial steps and ensure that such lapses do not occur in future. Also, the department should give a copy of the search warrant to the person searched so as to curtail allegations of interpolation, addition of names etc.

[MDLR Resorts (P) Ltd. v. CIT – Dated 23.12.2013 (Del)]

Warrant of authorization - Firm - Dissolution - Validity - Writ - Warrant of authorization which had been issued in the name of dissolved firm as well as in the name of assessee and his wife cannot be said to be invalid

The assessee and his wife formed a partnership. The firm was dissolved on 19.04.2004. The assessee continued the business of the firm as sole proprietor. Warrant of authorization were issued under section 132 at the business premises and residential premises of assessee and his wife. The notice was issued to file the return for the Assessment years 2001-02 to 2004-05. The assessment was done and when the appeal was pending the assessee challenged the validity of search issue of warrant of authorization by way of writ petition on the ground that the DIT(Investigation) did not entertain a bonafide belief as required under section 132(1) and secondly, warrants of authorisation were issued in name of a dissolved firm which was not in existence in law. The court held that the warrant of authorization was issued in the name of assessee as well as his spouse hence, the issue of warrant of authorization was held to be valid. Accordingly the writ petition was dismissed. (Related Assessment years 2001-02 to 2004-05) - [Hemedra Ranchhoddas Merchent v. DIT (2013) 351 ITR 206 (2012) 250 CTR 229 : 206 Taxman 596 : 71 DTR 361 (Bom)]

Warrant - legal representative - Warrant in the name of mother as legal representative - block assessment in consequence of search held to be valid

Search was carried out to find out the undisclosed income of deceased P. Balaji. On his demise the estate was represented by his legal heirs including the minor son. The estate was represented by the minor through his mother. Block assessment was made pursuant to the search made in the premises of the deceased and the warrant in the name of mother as a representative of the legal heir (Minor son) of the deceased was held to be valid. The High Court confirmed the order of Tribunal and dismissed the appeal of assessee. (Block period 1988 to 1997-98) - [P. Balaji v. DCIT (2012) 251 CTR 418 : 75 DTR 6 (Mad); CIT v. P. Shanthi (Smt.) LR of Minor P. Balaji (2012) 251 CTR 418 : 75 DTR 6 (Mad)]

Warrant - No evidence produced by persons carrying silver articles to establish ownership - Action of authorities held proper - Criminal Court - Appropriate Authority

The restrictions placed by the provisions of sections 132 and 132A of the Act, and rule 112A of the Income-tax Rules, 1962, are not unreasonable restrictions on the freedom under Articles 19(1)(f) and (g) or Article 14 of the Constitution. No documentary evidence was produced by the persons carrying silver ornaments and articles in response to inquiries made at the time of recording of statements under section 131 of the Act to establish the source, acquisition and ownership of the silver articles. Thus, the act on the part of the concerned authority could not be said to be unreasonable justifying interference at this stage. Section 451 of the Code of Criminal Procedure, 1973, makes the criminal court custodial egis of the property produced before the court in connection with the case regarding which an offence appears to have been committed or which appears to have been used for the commission of the offence. Therefore, the contention of the petitioners that the criminal court was not the appropriate authority or the person in terms of sub-section (2) of section 132A was not tenable. - [Sunil Vidhyasagar Gat & Anr. v. Shalini Verma Dy. Director of Income-tax (Inv.) & Ors. (2012) 347 ITR 1 : 249 CTR 172 : 69 DTR 233 (Guj)]

Revenue authorities are competent to conduct search in premises of partners of firm when names of all partners are specifically mentioned in warrant of authorization issued in name of partnership firm. - [Naresh Chand Baid v. ACIT, Investigation (2012) 23 taxmann.com 378 (Chhattisgarh)

Validity of search proceedings initiated in pursuance of warrant of authorisation issued in name of dissolved firm as well as in name of erstwhile partners of dissolved firm was to be upheld. - [Hemendra Ranchhoddas Merchant v. DIT (Investigation) (2012) 20 taxmann.com 219 (Bom)]

Warrant of authorization not valid

Warrant of authorization was issued merely on hypothecated grounds, which is not sustainable under the law

Where satisfaction in case of assessee was entirely based on a document which neither bore assessee's name nor was it was related to him, issue of warrant and subsequent search and seizure proceedings were liable to be quashed.

Search and seizure proceedings were conducted in premises of a Government Officer on warrant issued by Director, Investigation. The satisfaction note was centered in respect of search conducted in premises of Dr. Yogi Raj Sharma about 9 months ago, from where a document had been found. During search, all documents, books and vouchers of assessee were taken away without verification. On writ, assessee challenged the issuance of warrant of authorization and contended that subsequent search and contended seizure proceedings were mala fide and out of prejudice. The High Court observed that the satisfaction note was in respect of three officers including assessee and the entire satisfaction note was centered in respect of the search conducted in the premises of Dr. Yogi and on the basis of a document it was recorded that petitioner had invested money in house and land property. The aforesaid money was received by him in respect of supply orders of medicines, medical equipments etc. The Court noted that the entire basis of recording satisfaction was the search conducted in the premises of Dr. Yogi. The said document does not bear the name of the petitioner, but on the basis of word 'ch', a conclusion had been recorded that it indicated the assessee. In absence of name, what evidence was there before the revenue to indicate that the word 'ch' indicated the petitioner, is not clear. The Court further observed that the search was carried out in the premises of Dr. Yogi in September 2007. At the relevant time, assessee was the Chief Health Secretary and this fact was within the knowledge of the respondents, but there is no explanation why the search was conducted after a period of near about 9 months. The document was seized from the premises of Dr. Yogi, but until and unless there was corroborating evidence, the respondents could not have formed the basis of issuing warrant of authorization. If there was some material with the Department that the assessee had purchased some house or land property, then there could have been definite evidence in this regard, but for a period of 8 months no information was collected and all of a sudden the warrant of authorization was issued. From the perusal of panchnama prepared during seizure, it appears that no objectionable document or undisclosed property was found except those which were declared in the earlier return. There is no other evidence available on record that the document related to the petitioner and the word 'ch', of which correctness is disputed by the assessee, indicted him. The Court held that, in absence of any cogent reasons in the present matter, warrant of authorization could not have been issued. Issuance of warrant of authorization is a serious action and for this authorization officer should have recorded his satisfaction. Though normally Court does not look for the reasons of satisfaction, but in the present case it appears that the warrant of authorization was issued merely on hypothecated grounds, which is not sustainable under the law. - [Rajesh Rajora v. Union of India (2014) 220 Taxman 146 (MP) - (SLP dismissed vide SLP (Civil) No. 29358/2013)]

Authorization of search - No mention of assesses HUF - Addition was liable to be quashed

A search was conducted at premises of assessee HUF and another HUF consisting of brothers and other relatives of assessee. Assessee challenged impugned search proceedings contending that warrant of authorization for impugned search was issued against 'KS', which belonged to other HUF and since assessee had no relation with 'KS', search proceedings initiated against assessee was invalid. Documents on record showed that before issuing warrant of authorization, department considered information which was available in respect of 'KS' and other associates and there was no mention of name of assessee. The Court held that merely because originally members of family of other group were engaged in electrical business of larger HUF and that assessee in its business of electrical goods was supplying goods to other group company, assessee could not be implicated. Further, issuance of authorization of search and seizure warrant without there being any information in possession about assessee and without recording satisfaction about not producing relevant books of account and other documents could not be sustained. Thus, in absence of compliance of requirement of section 132, authorization for search and seizure and consequent search and seizure in respect of assessee's properties was liable to be quashed. - [Tejram Omprakash (HUF) v. DIT (2014) 220 Taxman 85 (Mag) (MP)]

Issuance of authorization of search and seizure warrant in the absence of information in possession about assessee and without recording satisfaction about not producing relevant books of account is not valid. - [Tejram Omprakash (HUF) v. Director of Income-tax (Investigation) (2013) 262 CTR 82 (MP)]

Warrant without information is invalid.

[Suvidha Association v. Addl. DIT (Inv.) (2010) 320 ITR 461(Guj)]

Banks can be searched in relation to a person against whom the warrant of authorisation has been issued. - [Raghu Raj Pratap Singh v. ACIT (2009) 179 Taxman 73 (All)]

Search on Partnership Firm is not valid on the basis of search warrant in the name of Partner. - [K. R. Modi & Co. v. DDIT (Inv.) (2005) 272 ITR 587 (Cal)]

Assessing Officer or Appellate Authority can not ask for verification of authorisation warrant issued for search

Assessing Officer or Tribunal, in appeal, cannot summon and examine warrant of authorisation for purpose of examining whether there existed reasons to believe on materials before competent authority to order search under section 132(1).

Whether initiation of search by issue of warrant of authorisation is a subject matter of assessment and Assessing officer can question validity of search while completing assessment - Held, no - Whether, Tribunal, in appeal, can summon and examine warrant of authorisation for purpose of examining whether there existed reasons to believe, on materials before competent authority, to order search under section 132(1) and question validity of search - Held, no [Paras 23 to 28] [In favour of revenue]

[CIT v. Dr. A. K. Bansal (2013) 355 ITR 513 : 262 CTR 355 : 216 Taxman 23 (All)]

Warrant of authorisation – Reason to believe – Existence of tangible material a pre-requisite – Mere reason to suspect not sufficient, articles seized to be released to assessee

The assessee challenged the search action. Allowing the petition the Court held that the so-called information was undisclosed and what exactly that information was, was also not known. At one place in the affidavit of the Deputy Director of Income-tax, it had 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 assessee. That by itself would amount only to a surmise and conjecture and not to solid information and since the search on the premises of the assessee was founded on this so-called information, the search would have to be held to be arbitrary. When the search was conducted on January 21, 2011, no documents belonging to the DS group were, in fact, found at the premises of the assessee. The warrant of authorisation was not in the name of the DS group but was in the name of the assessee. In other words, the warrant of authorization under section 132(1) had been issued in the name of the assessee and, therefore, the information and the reason to believe were to be formed in connection with the assessee and not the DS group. None of clauses (a), (b) or (c) mentioned in section 132(1) stood satisfied in the assessee’s case and, therefore, the warrant of authorisation was without any authority of law. Had the warrant of authorisation 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 assessee had also been searched, the position might have been different. But that had not happened in the case of the assessee. The warrant of authorisation was in the name of the assessee 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 was the position, the consequence would be that all proceedings pursuant to the search conducted at the premises of the assessee would be illegal and therefore, the prohibitory orders would also be liable to be quashed. The jewellery/other articles/documents were to be unconditionally released to the assessee. - [Madhu Gupta v. DIT (Inv) (2013) 350 ITR 598 : 256 CTR 21 : 214 Taxman 246 : 82 DTR 116 (Del)]

Warrant of authorization - Condition precedent - Satisfaction - Inspection must be allowed

For issuing warrant of authorization satisfaction must be based on information coming into possession of department. In the absence of new material with authorities, loose satisfaction notes placed by authorities based on the high growth of company, is not sufficient to meet the requirements of provisions. Accordingly the action of search and seizure was held to be invalid. As the search and seizure was held to be invalid the notices under section 153A was held to be bad in law. The Court also held that if appropriate prayer is made, inspection of such documents may be required to be allowed. (Related Assessment years 2004-05 to 2009-10) - [Spacewood Furnishers (P) Ltd. and others v. DIG (Investigation) (2012) 340 ITR 393 : 246 CTR 313 : 204 Taxman 392 : 65 DTR 281 (Bom)]

Any Search warrant issued under section 132 in name of a dead person is invalid and void ab initio. - [CIT, Karnal v. Rakesh Kumar, Mukesh Kumar (2009) 313 ITR 305 : 178 Taxman 224 (P&H)]

KEY NOTE

Against this, Special Leave Petition [SLP(C) NO...CC 3623/2009 has been dismissed by the Supreme Court.

Search warrant is issued in the name of a person, place to be searched is to be mentioned therein, but it is not necessary that such place or building must belong to that person in whose name search warrant is issued. - [ACIT v. Vinod Goel (2008) 111 ITD 70 (ITAT Amritsar)]

Warrant in the name of more than one person is valid.

[Anjuga Chit Funds (P) Ltd. v. DCIT (2008) 304 ITR 374 (ITAT Chennai)

If there is no search warrant in the name of the firm, no search can be conducted on the firm on the basis of search warrant in the name of partner. - [K.R. Modi & Co. v. DDIT (Inv.) (2005) 272 ITR 587 (Cal)]

Warrant of authorization under section 132 could not be issued where money & documents were taken in possession by a Police Inspector

No warrant of authorization under section 132 could be issued where money and documents were taken possession of by a police inspector and the CIT could have no reason to believe within the meaning of section 132 when he did not know anything about the person concerned and made no enquiry from the ITO concerned as regards evasion of tax. The High Court relied on the following observations at pages 478-479 of the report:

“I have come to the conclusion that the search and seizure warrants issued under section 132(1) of the Income-tax Act were illegal, firstly, because the search and seizure warrants were issued in the name of Ramesh Chander and he was in fact not in possession of either the currency notes or account books, and secondly, the income tax authorities could not seize the currency notes and account books from the police officer who is duty bound to proceed with the case property in accordance with the pro visions of the Code of Criminal Procedure."

[Ramesh Chander & Ors. v. CIT & Ors. (1974) 93 ITR 450 (P&H)] Further approved by Hon’ble Supreme Court in CIT v. Tarsem Kumar (1986) 161 ITR 505 : 58 CTR 129 (SC)]

KEY NOTE

However, he can take possession after requisition under section 132A if the same is in custody of any other authority under any other law.

Search conducted held to be illegal as the satisfaction made it obvious that the record relating to the authorisation for a search of the premises of the petitioner was prepared after the search was conducted

The search conducted in H. L. Sibal v. CIT was held to be illegal as the satisfaction made it obvious that the record relating to the authorisation for a search of the premises of the petitioner was prepared after the search was conducted. The record did not represent the contemporaneous thinking and activities of the Commissioner. The search and seizure was held to be mala fide in the circumstances of the case. It was held to be a random search. Moreover, the said search was based on some policy decision. There were some special circumstances in this case which suggested that the name of Shri Gurdial Singh Mann had been introduced into the official record in somewhat extraordinary circumstances. The Court inferred that the record leading to the search was prepared after the search had actually been conducted, therefore, the warrant was bad. - [H. L. Sibal v. CIT (1975) 101 ITR 112 (P & H)]

KEY NOTE

On the same reasoning the search conducted in the case of S. C. Sibal v. CIT (1977) 106 ITR 102 (P & H), was held to be illegal.

At the time of issue of search warrants, the assessee must be in possession of the property to be searched and seized

Whether, therefore, since at time when search warrants were issued and when they were executed, ‘RC’ was not in possession of currency notes and account books, but in fact Police authorities were in possession of same, search warrants were illegal – Held, yes – Whether, in such circumstances, income-tax authorities were to be directed to return money and documents seized from police station to police authorities – Held, yes

[CIT v. Ramesh Chandar (1974) 93 ITR 450 (P&H)]

Assessee can not ask for a copy of warrant

The assessee is, however, entitled to go through the warrant. In fact, the authorised officer is duty bound to produce it and in evidence of production thereof, he may obtain the signatures of the assessee or his representative along with the signatures of two witnesses, Rule 112(3) requires only production of warrant not its service. Non-issuance of warrant of authorisation to assessee and absence of its service upon him shall not vitiates search see also [Instruction No 530 Dated 22.03.1973].

CBDT’s Instruction No 530 dated 22.03.1973

In the circumstances normally the search warrant is only required to be produced to the person whose premises are searched and it is not necessary that a copy of the search warrant should be supplied to him. If, however, a writ petition is filed in the High Court challenging the validity of the search and the High Court directs that a copy of the search warrant should be furnished to the person whose premises are searched it should be complied with.

Authorization of search - No mention of assesses HUF - Addition was liable to be quashed

No reason to issue authorization to conduct the search did not exist - Search was invalid

In this case, search was conducted only on the basis of information received from SP, CBI that the assessee was carrying undisclosed cash. There was no complete information in the possession of SP, CBI that the any bullion, jewellery, cash or any incriminating document was in possession of the assesse. Accordingly department acted on the said information provided by the Police & concluded the search on the same day. Thereafter notice under section 153A of the Act was issued by the Assessing Officer. Before CIT (A), the assessee challenged the validity of search since the reasons for authorization was based on the information from other agencies & therefore operation under section 132 was invalid. CIT (A) upheld the order passed by Assessing Officer. On further appeal in Tribunal, the Tribunal allowed the appeal of the assessee & held that if condition of existence of reason to believe in the consequence of information in the possession of the officer is not satisfied, there can possibly be no authorization & if any search is conducted in pursuance of any authorisation issued in absence of the eventualities mentioned in Clause (a) to (c) of sub-section (1)of 132 cannot be said to be a valid search . Nothing was brought on record by department to substantiate that cash or incriminating document or any valuable article or thing was found in the possession of assessee. Therefore, Assessment order was invalid based on said search. (Related Assessment years : 2001-02 to 2003-04, 2005-06 & 2007- 08) - [Parma Ram Bhakar v. DCIT (2013) 94 DTR 342 / 157 TTJ 866 (ITAT Jodhpur)]

INCOME TAX

Monday, 26 August 2019

Warrant of Authorisation for Income Tax Search

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