Section
132 of the Income Tax Act, 1961 prescribes that the competent authorities are
empowered to permit the authorized officers to enter, search, break open,
seize, place marks of identification and take other steps as contemplated under
sub-clauses (i) to (v) of Section 132(1). However, such powers can be exercised
against a person upon fulfilment of certain conditions. Rule 112 of the Income
Tax Rules, 1962 lays down the procedure, forms of authorization, manner and
other procedural effects of carrying out search and seizure action as
enumerated under section 132 of the Act.
Procedure to be followed while carrying out a search are following –
·
A
valid search warrant issued by proper authority is a must for search.
·
Recording
of valid reasons to believe and non possession of some credible information by
virtue of conditions stipulated in clauses (a), (b) and (c) of Section 132 (1).
·
Presence
of a lady officer in the search team is not negotiable.
·
Identity
of the Income Tax officers/ officials must be disclosed by showing their
identity cards and by taking the signatures of the owners on the search warrant
before the search identity.
·
Two
independent and respected witnesses of the locality should be witnessing the
search and seizure and their signatures should be taken on the search warrant.
·
A Panchnama
should be prepared on the spot which contains the proceedings of the search. A
list of all goods, documents recovered and seized/detained should be prepared
and annexed to this Panchnama
·
After
the search completes, the search warrant should be returned in original to the
issuing authority with a report regarding the outcome of the search
·
A
copy of the Panchnama should be given to the owner or the person in charge of
the premises being searched under acknowledgement.
When
a search is held as illegal by High Court :
(i)
All assets seized to be returned.
(ii)
Original copies of books of account or other documents to be released.
(iii)
No presumption under section 132(4A)/292C.
(iv) Costs may be awarded.
Validity of search cannot be challenged by the
assessee during appellate proceedings before CIT(A)/ITAT
Validity
of search cannot be examined by CIT(A)/ITAT during appellate proceedings. The
validity of search can be examined by High Court in writ jurisdiction.
Incriminating material found and seized during search
which is declared as illegal by the High Court, may be used by the department
against the assessee
As
per various judicial pronouncements, incriminating material found and seized
even in an illegal search action may be used by the income-tax department
against the assessee in appropriate proceedings.
Copy
of documents or books of account seized in an illegal action can be retained by
the department
Copy
of documents or books of accounts seized in an illegal action can be retained
by the department. Such evidences may be made use of by the department wherever
required and deemed appropriate in terms of the law.
No cogent basis for arriving at conclusion that
assessee was in possession of jewellery which represented his undisclosed
income or property was discernible from satisfaction note, impugned search and seizure
was to be quashed and all actions taken pursuant to such search and seizure
were to be declared illegal
Search
and seizure is a serious invasion on privacy of citizens, and has to be
resorted to when there are pre-existing and pre-recorded good reasons to
believe that action is called for. Sole ground for action of search and seizure
was that Investigation Wing of Income Tax department was in possession of
credible information that assessee was in possession of jewellery which
represented his undisclosed income or property, however, no cogent basis for
arriving at this conclusion was discernible from satisfaction note. Mandatory
reasons to believe were not recorded and search authorisation was not obtained
prior to interception and conduct of search.Thus, search action was a
completely unauthorized and a high-handed action on part of revenue, as mere
possession of jewellery ipso facto would not be sufficient for officer
to form a belief that same had not been, or would not be disclosed.Moreover,
even clause (c) to section 132(1) could not be invoked since assessee was
carrying on business of sale and purchase of jewellery and he was legitimately
carrying same as his stock-in-trade. Accordingly, search and seizure and ex
post facto warrant of authorization issued by respondent revenue under
Section 132 was to be quashed and all actions taken pursuant to such search and
seizure were to be declared illegal and revenue was to be directed to forthwith
return jewellery seized to assessee. [In favour of assessee] – [Khem Chand
Mukim v. Principal
Director of Income Tax (Inv.) (2020) 423 ITR 129 : 270 Taxman 252 : 186 DTR 145 :113
taxmann.com 529 (Del.)]
Authorised officer can search any place mentioned in authorisation where
he suspects that books of account belonging to assessee are kept and as such,
mere change of address of assessee even being in know how of department by
itself would not vitiate or invalidate search conducted under section 132
Search conducted at
premises in which assessee may not be carrying on business would not
nullify search. In search proceedings
location of premises is in relation to satisfaction reached by authorities
mentioned therein and authorised officer can search any place
mentioned in authorisation where he suspects that books of account belonging to
assessee are kept and as such, mere change of address of assessee even being in
know how of income tax department by itself would not vitiate or
invalidate search conducted undersection 132. [In favour of
revenue] (Related Assessment years : 2005-06 to
2010-11 – [PCIT (C) Bengaluru v.
Associated Mining Co. (2019) 417 ITR 420 : 108 taxmann.com 564 (Karn.)]
Validity of authorisation – Initiation of search
proceedings was not based upon any information or other material -
Authorisation is held to be invalid and quashed [Article 226]
A
search was conducted in case of assessee. Assessee filed instant petition
challenging authorisation issued under section 132. It was noted that no
summons or notice as envisaged under clause (a) of sub-section (1) of section
132 had been issued. - It was also noted that belief of revenue that assessee
would not respond to a summons or notice issued as envisaged under clause (b)
of sub-section (1) of section 132 was not based upon any information or other
material but was based upon conjectures and surmises that assessee would take
alibi of lack of jurisdiction on part of respondents. Thus, circumstance
envisaged under clause (b) of sub-section (1) of section 132 also did not exist
in instant case. Finally, there was nothing on record to indicate that any
belief had been formed by competent authority to effect that assessee had in
his possession any money, bullion, jewellery or other valuable article or thing
which would not have been disclosed by him for purposes of Act. In view of
aforesaid, it could be concluded that none of clauses (a), (b), or (c) of
sub-section (1) of section 132 was attracted and, thus, impugned authorisation
being invalid, search proceedings in question deserved to be quashed. [In favour
of assessee] - [Laljibhai Kanjibhai Mandalia v. PDIT (Investigation) (2019) 416
ITR 365 : 309 CTR 330 : 263 Taxman 604 180 DTR 49 : 105 taxmann.com 260 (Guj.)]
Invalid search warrant
under section 132 issued in name of deceased person cannot invalidate
consequential block assessment under section 158BD on legal heir of deceased,
as legal heir had participated in proceedings of assessment initiated under
section 158BC
Supreme
Court dismissed assessee’s SLP against Gujarat High Court judgement upholding
validity of block assessment proceedings under section 158BD; Supreme Court
noted that search warrant under section 132 was issued on a dead person and
assessee, in capacity, as a legal heir participated in block assessment
proceedings under section 158BC, subsequently notice under section 158BD was
issued on assessee based on information found during search; Rejected
assessee’s stand that since the original search warrant was invalid (being
issued in the name of deceased), the notice under section 158BD (on ‘other
person’) pursuant to search was also invalid, Supreme Court noted that assessee
did participate in the assessment proceedings under section 158BC and the issue
of invalidity of the search warrant was not raised at any point of time prior
to the notice under section 158BD; Supreme Court ruled that “The information
discovered in the course of the search, if capable of generating the
satisfaction for issuing a notice under section 158BD, cannot altogether become
irrelevant for further action under Section 158BD of the Act”; Distinguished
assessee’s reliance on co-ordinate bench ruling in A.R. Enterprises and Punjab
& Haryana High Court ruling in Rakesh Kumar, Mukesh Kumar. [In favour of
revenue] – [Gunjan Girishbhai Mehta
v. Director of Investigation (2017) 393 ITR 310 : 294 CTR 14 : 247 Taxman 22 : 80
taxmann.com 23 (SC)]
Issue of warrant of authorisation against the locker of the assessee, without disclosing any material or information stating that locker contained valuable jewellery or other articles representing undisclosed income warrant was unjustified and held to be illegal Consequently, proceedings under section 153A of the Act are also set aside and quashed
In the case of Shah E Naaz
Judge v. Addl. DIT, wherein it was held by the Delhi High Court as under:-
“32. In view of
the aforesaid discussion, we find merit in the present writ petitions and hold
that the warrants of authorization for search and seizure operations in respect
of the three lockers in the case of three petitioners are vitiated and illegal.
Warrants of authorization against the petitioners are quashed and set aside.
Consequently, proceedings under section 153A of the Act are also set aside and
quashed. We, however, clarify that we have not commented on evidence, if any,
collected during the course of search and whether the said evidence or material
can be used in any proceedings initiated by the income-tax authorities in
accordance with law. Writ petitions are allowed in the aforesaid terms..”. (Related
Assessment years : 2009 -10 to 2014-15) – [Shah E Naaz Judge v. Addl. DIT (2019) 306 CTR
42 260 Taxman 116 : 173 DTR 169 : (2018) 100 taxmann.com 346 (Del.)]
No
material or information in possession of authorities giving rise to existence
of any circumstances as specified in section 132 – Search illegal and
unauthorised
On
writ the Court held that : (i) the competent authority had reason to believe
and formed his opinion for taking action under section 132 of the Act, based on
relevant materials. The conditions for conducting search under section 132 of
the Act were fully satisfied in the case of assessees in two of the petitions.
The search was valid. (ii) That with regard to the assessees in the third
petition, there was no material or information in the possession of the income-tax
authorities as required under section 132(1) of the Act giving rise to the
existence of any circumstances as specified in clauses (a), (b), (c) of
sub-section (1) of section 132 of the Act and the search was illegal and unauthorised.
- [D.S. (India) Jewelmart (P) Ltd. v. UOI (2016) 387 ITR 593 (All); Mayank
Chaturvedi v. UOI (2016) 387 ITR 593 (All.)]
Search proceedings initiated cannot be declared
illegal if there is sufficient material before the Income Tax Authorities on
the basis of which satisfaction is arrived at that the assessee has huge
undisclosed income
Writ
petition was filed by the assessee challenging the legality and validity of the
search and seizure operations carried out by the Income Tax Authorities under
section 132. High Court dismissed the writ petition and upheld the validity of
the search operations on several counts. High Court observed that there was
sufficient material before the Income Tax Authorities that the assessee had not
disclosed huge income. Further, before the issuance of the warrant of
authorisation by the Director of Income Tax to carry out search and seizure,
the procedure prescribed under section 132 had been followed. High Court
further observed that it need not approve the subjective satisfaction arrived
at by the lower authorities. It was sufficient if there are supporting
documents with a satisfaction note which is approved before the issuance of a
warrant of authorisation for carrying out search and seizure operations.—[Emaar
Alloys (P) Ltd. v. DGIT (Inv.) & Ors. (2016) 288 CTR 413: 138 DTR 54 :
(2015) 235 Taxman 569 (Jharkhand)]
Tribunal
cannot consider validity of search
The
satisfaction to be reached by the authority issuing a warrant of authorisation
is an administrative function and its validity cannot be called into question
by Assessing Officer or Tribunal. - [CIT v. A. K. Bansal (Dr.) (2013) 355
ITR 513 (All.)]
Since pre-conditions had not been satisfied, the warrant of authorisation would have to be quashed, 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, accordingly, the jewellery/other articles/documents are to be unconditionally released to the petitioner
In this the court held as under:-
“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 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.” - [Madhu Gupta v. DIT (Investgation) (2013) 350 ITR
598 : 214 Taxman 246 : 30 taxmann.com 92 (Del.]
Powers – Search and seizure – Authorisation – Recording of satisfaction – Notice under sections 131(1A), 133(6)
If
there is sufficient and intangible material available on record, prior to search,
based on which the concerned officer has formed the requisite belief under
section 132(1), merely because certain other information has been sought for by
authorized officer or any other officers mentioned in section 131(1A) the same
would not render the search proceedings invalid. It may be possible that notice
under section 131(1A) issued after search might itself be invalid but it cannot
invalidate search conducted under a valid authorization under section 132(1).
In the absence of any specific allegation against any particular officer,
notice under section 133(6) cannot be challenged as suffering from malafides. –
[Neesa Liesure Ltd. v. UOI (2011) 338 ITR 460 : 245 CTR 634 : 64 DTR 312
(2012) 204 Taxman 86 (Guj.)]
Legality of Search Warrant against a Deceased person - Search warrant
issued under section 132 in name of a dead person is invalid and void ab initio
and no valid assessment can be made on strength of such an invalid search
warrant
M' had died prior to the
issuance of search authorization and, thus, the search warrant was issued in
the name of a dead person and the panchnama was also prepared in the name of
the dead person. Thus, not only the search was invalid, but the authorization
for conducting search itself was invalid and void ab initio. Therefore,
the order passed by the Assessing Officer under section 158BC(c)/144 was
illegal, as the same was passed in consequence of a search warrant which was
issued in the name of a dead person. Such search warrant is against the law of
natural justice. No valid assessment could have been made on the strength of
such an invalid search warrant. Therefore, the order of the Tribunal deserved
to be upheld. (Block period from 01.04.1996 to 23.07.2002 -- [CIT v. Rakesh
Kumar Mukesh Kumar (2009)313 ITR 305 : (2008) 219 CTR 494 : 178 Taxman 224
: 13 DTR 209 (P&H)]
The High Court was of
the view that the search and seizure were invalid and illegal. Consequentially,
all actions taken by the appellants on the basis of such illegal search and
seizure were quashed. The appellants were directed to forthwith return the gold,
diamond and jewellery and ornaments seized from the respondents with interest
at the rate of 8 per cent per annum on the value of the jewellery and ornaments
which the High Court quantified at Rs. 84.68 lakhs from the date of seizure
till payment.
Held : Without going
into the question as to the payability of interest on the value of goods found
by the Court to have been illegally seized, we hold that the appellants are
liable to compensate the respondents at least by way of costs. The loss
obviously suffered by the respondents during the pendency of the proceedings
before the High Court was further aggravated by the delay in complying with the
High Court's decision. In the circumstances, we direct the appellants to pay a
sum of Rs. 75,000 to the respondents on account of costs which the respondents
will accept in full and final settlement of the claim towards the quantum of
interest under the impugned order. Such payment is to be made within a period
of four weeks. In the event such payment is not made, this appeal will stand
dismissed with costs. – [DGIT v. Diamondstar Exports
Ltd. (2007) 293 ITR 438 : (2006) 156 Taxman 299 (SC)]
Mere information from CBI that cash was found from the
possession of an individual cannot justify a search
Mere
information from CBI that cash was found in possession of individual, not
“Information” for purposes of authorizing Search. A Search based on such
information and consequent block assessment not valid. (Related Assessment year
: 1986-97) – [UOI v. Ajit Jain & Anr. (2003) 260 ITR 80 : 181 CTR 22
:129 Taxman 74 (SC)]
Allegation that Income Tax Authorities had taken a bribe would not invalidate the search
It was argued that the Inspector of Income-tax
Department had acted in an illegal manner in demanding the sum of Rs. 2,80,000.
Without in any way reflecting upon the merits of this accusation, even though
transcripts of some tape recorded conversation had been produced, these events
even if they were assumed to be correct, would not directly affect the legal
propriety of the search and seizure under section 132. The latter proceedings
would not be invalidated because of a subsequent illegal action. – [Kamal Khosla v. Director of Income Tax: SLP (c.) Nos. 12242-43: (2003)
264 ITR 140 (St.) SLP rejected, (2003) 264 ITR 140 (St.)]
Search
cannot be resumed after a gap of 14 days
It
was held that there is no provision in the Criminal Procedure Code or in the
Income Tax Act therein, for postponing the search for such a long period. It is
worthwhile to extract the decision of the Kerala High Court, which in clear
terms brings out the concept of search and validity of the authorisation issued
for the search.
“Similarly, in circumstances not covered under those
provisions, it is open for him to pass a prohibitory order under sub-section
(3) not amounting to seizure which order will be in force for a period of 60
days after securing the possession of the materials, articles etc., in the
aforesaid manner. Action under section 132(3) of the Income Tax Act can be
resorted to only if there is any practical difficulty in seizing the item which
is liable to be seized. When there is no such practical difficulty, the officer
is left with no other alternative but to seize the item, if he is of the view
that it represented undisclosed income. Power under Section 132(1)(iii) of the
Income-tax Act thus cannot be exercised, so as to circumvent the provisions of
section 132(1)(iii) read with section 132(1)(v) of the Income Tax Act. It is
open for the authorised officer to visit the place for the purpose of
investigation securing further particulars. Under the scheme, the law provides
for such procedure. But not when he visits the premises for further
investigation for the materials already secured. It does not amount to search
as the materials to be looked into and investigated is already known and is the
subject-matter of a prohibitory order or a restraint order. Though it is not
seizure or deemed seizure, it amounts to deemed possession. What is in your
possession is to be looked into to find out, is there any incriminating material.
It does not amount to search as understood under section 132 of the Act. It is
only because of paucity of time he has gone back and wants to come back and
look into the matter leisurely. There is no provision in the Criminal Procedure
Code or in the Income-tax Act or the rules for postponing the search for a long
period. Then, the concept of search as understood either under the provisions
of the Criminal Procedure Code or the Act which are made applicable expressly,
would lose its meaning.”—[Dr. C. Balakrishnan Nair v. CIT (1999) 237 ITR 70
(Ker.)]
Illegal
search will not invalidate seizure
It
was held that illegal search will not invalidate seizure of the articles. In
such cases only the court is to scrutinize the evidence carefully. - [Thakursidas
Banwarilal v. CIT (1998) 232 ITR 846 (Gau.)]
In
Ali Mustafa Abdul Rahman Moosa v. State of Kerala (1994) 6 SCC 569 (SC),
a case relating to prosecution under Narcotic Drugs & Psychoptropic Substances
Act, 1985, after distinguishing Pooranmal‘s case, it has been held that
material found during illegal search cannot be used as evidence to prove
possession. Under Narcotic Drugs & Psychoptropic Substances Act, 1985,
possession of prohibited substance has to be proved by prosecution beyond
reasonable doubt and it was held that due to illegality, possession cannot be
proved in the instant case.
Mere doubt cannot be the basis
In
the case of L.R. Gupta, who is a Senior Advocate of Delhi
High Court, wherein it was held by the Delhi High Court as
under:-
“49. As we have come to the conclusion that, in the
present case, no reasonable person could have come to the conclusion that the
ingredients contained in clause (a), (b) or (c) of
section 132 were attracted, therefore, we issue a writ of mandamus quashing the
impugned authorisation and also the further action which has been taken by the
respondents pursuant to the said authorisation including the seizure of all
documents, cash and jewellery. The respondents are directed to return the said
documents, cash and jewellery, seized by them, to the petitioners within two
weeks from today.
50.The petitioners will also be entitled to costs.
Counsel’s fee Rs. 1,000.”
[L.R.
Gupta v. Union of India (1992) 194 ITR 32 : (1991) 59 Taxman 305 (Del.)]
Enormity of search party is not a
valid objection
When in pursuance of information received from
Ministry of Finance regarding tax evasion by assessee, competent authority
issued authorisation, directing search of petitioner’s premises after due
enquiries and reconnaissance, it could be said that conditions precedent for
assumption of jurisdiction under section 132 were satisfied. Burden is on
petitioner to prove mala fides when he alleges same. It is not necessary to
supply search warrant to person concerned before hand. Warrant of authorisation
should not specify particulars of documents, etc. Error committed by authorised
officer in seizing documents which may later turn but to be irrelevant, will not
vitiate proceedings. Any error of judgment on part of officer will not vitiate
exercise of power under section 132 where power is exercised bona fide. It is not
necessary for authorities to record reasons for authorising search in writing.
Exception can not be taken to presence of police personnel at time of search in
absence of allegation of use of force or excessive force. - [Subir Roy v.
S.K. Chattopadhyay (1986) 158 ITR 472 : 29 Taxman 13 (1987) 64 CTR 191 (Cal)]
In the case of Naraindas v. CIT, the petitioner
contended that the action of the authorised officers in making search and
seizure was illegal and out the following irregularities : (i)
respectable persons of the locality were not called as witnesses, (ii)
inventory of the books of account and documents was not made, (iii)
boxes were not sealed, and (iv) ornaments were also seized from the
ladies in the family. The
Hon’ble Court held as under:
“In our opinion, none of these objections can be
reasonably sustained or can make the search and seizure illegal. It is stated
in the return that the names of the witnesses were suggested by the
petitioners. They wanted that outsiders should not be called as that would have
affected their credit and prestige. The petitioners cannot now complain that
the witnesses suggested by them were not respectable persons of the locality.
As regards the inventory of the books and other documents seized, the return discloses
that after the seizure of books and documents, Naraindas said that he was not
feeling well and that the work of preparing the inventory could not be carried
on. Naraindas requested that the books and documents be kept in a box and that
he will himself come next day to Jabalpur and the inventory may then be
prepared. It was on this request that the books and documents were kept in a
box locked by Naraindas and the department. Similar request was made after the
seizure of books of account and other documents of Venkatesh Trading Co. and
Maheshwari Lime Works by Y.K. Maheshwari who was present at the time of the
search of the business premises of these two concerns which are at the same
place. Maheshwari signed the panchnama showing that the documents recovered
were put in two boxes which were locked by the department and also by him. The
returns clearly state that this was done at the request of the petitioners on
the plea that Naraindas was not well. It is, thus, clear that the inventory of
the books of account and other documents seized could not be made because of
the request made by the petitioners themselves. They cannot now complain that
the officers conducting the search did not make the inventory of the books of
account and other documents, that were seized, then and there. As regards the
objection that ornaments from the ladies were also seized, the fact is denied
in the return. In the return it is clearly stated that nothing was seized from
the ladies of the family. We are satisfied that none of the objections raised
by the learned counsel for the petitioners has any weight. Moreover, as
observed by the Supreme Court in the case of ITO v. Seth Brothers (1969) 74 ITR
836 (SC), any irregularity in the course of search and seizure committed by the
officers acting in pursuance of the authorisations will not be sufficient to
vitiate the action taken provided the officers had in executing the
authorisations acted bona fide. In this case we are satisfied that the authorised officers had acted bona fide and, therefore,
even if there was some irregularity, the action taken is not vitiated.” - [Naraindas v. CIT (1984)
148 ITR 567 : (1983) 14 Taxman 447 (MP)]
Illegality
of a search does not vitiate the evidence collected during such illegal search
It
was held that though such evidence is not excluded, the same has to be
carefully scrutinized:
“It has been often held that the illegality in the
method, manner or initiation of a search does not necessarily mean that
anything seized during the search has to be returned. After all, in the course
of a search, things or documents are required to be seized and such things and
documents when seized may furnish evidence. Illegality of the search does not
vitiate the evidence collected during such illegal search. The only requirement
is that the court or the authority before which such material or evidence
seized during the search shown to be illegal is placed has to be cautious and
circumspect in dealing with such evidence or material. This is too
well-established to necessitate its substantiation by a precedent.”—[Dr. Pratap
Singh v. Director of Enforcement (1985) 155 ITR 166 (SC)]
The
issue of admissibility of evidence seized during search has also been tested in
terms of Article 20 of Constitutuion in Dwarka Prasad Agarwalla v. Director
of Inspection and it was held that: “In view of the decision of the Supreme
Court in the case of Ramesh Chandra Mehta v. State of West Bengal, AIR 1970
SC 940, and the observations of the court at p. 946, it is clear that a
person whose house is being searched for gathering the materials as contemplated
under sub-section (1) of section 132 is not an accused and, therefore, no
question of testamentary compulsion arises.”—[Dwarka Prasad Agarwalla v.
Director of Inspection (1982) 137 ITR 456 (Cal)]
Even
the illegality of the search, seized material may be looked into
Even
the illegality of the search, does not vitiate the evidence, collected during
such search. The materials searched and seized can still be looked into and
relied for the purpose of assessment. - [New Street Oil Mills v. State of
Kerala (1978) 111 ITR 463 (Ker)]
Department is not precluded from using the document –
Even assuming that the search and seizure were in contravention of the
provisions of section 132 of the Income-tax Act, still the material seized was
liable to be used subject to law before the income-tax authorities against the
person from whose custody it was seized
It
was held that, even assuming that the search and seizure were in contravention
of the provisions of section 132 of the Income-tax Act, still the material
seized was liable to be used subject to law before the income-tax authorities
against the person from whose custody it was seized. There is no quarrel with
the said legal proposition. In the first place, the provisions relating to the
block assessment were not in the statute on the day the said judgment was
delivered by the apex Court. Secondly, prior to the incorporation of the
provisions of block assessment for an assessment, search was not a condition
precedent. It is in that context it was held even if search and seizure is
illegal, the material recovered during such illegal search and seizure could be
looked into for the purposes of assessment and act, but that is not possible,
in case of block assessment. Even if a return is filed in pursuance of a
direction issued under the said Chapter and the material secured during search
and seizure which is declared as illegal is looked into, still the order of
assessment passed in this proceeding would be a nullity because the very
initiation of the proceedings is void. Those materials secured in the illegal
search and seizure would certainly be made use of the assessment proceedings
under the Act other than the block assessment proceedings and, therefore, the
contention that the assessment order would not get vitiated because of illegal
search and seizure as it is based on the returns filed and the materials
secured during the illegal search and seizure is, without any substance. (Related
Assessment years : 1969-70, 1970-71) - [Pooran Mal v. Director of Inspection
(Investigation) (1974) 93 ITR 505 (SC)]
Search and seizure of the books of account was held to
be illegal as no reason was recorded by the Commissioner for taking action
under section 132 against the petitioner
The
Commissioner appeared to be labouring under a great misconnection with regard
to the scope of section 132. The seizure of the books of account of a
businessman is a serious encroachment upon his fundamental right to carry on
business. Such an encroachment, of course, is permitted by law in public
interest. But it is necessary that the powers under section 132 as also under
section 131 should be exercised strictly in accordance with the law and the
principles of natural justice. The assessee asked for the copies of the search
warrants and the reasons recorded by the Commissioner for authorising the
search. That request was refused. The assessee then applied for inspection.
That too was refused by the Commissioner on the ground that there was no
provisions permitting the inspection of the documents. This approach of the
Commissioner was obviously erroneous. Unless there is a statutory prohibition,
a person against whom action is being taken under section 132 is entitled to
inspect the record of the proceedings and to obtain copies of the orders passed
in those proceedings. If such a right is denied to him, he will not be able to
satisfy himself that the action against him is justified and to seek redress
against any illegal action taken or order passed. It is well-known maxim that “justice
not only should be done, but should be seem to have been done”. An aggrieved
person is entitled to know that the requirements of the law have been complied
with. Thus, the Commissioner was not justified in refusing to the assessee the
inspection of the record or copies asked for by him. In a given case, it might
be possible for the Commissioner to treat a particular information or a
document as confidential and to withhold its inspection. But, that was not the
case of the department in the instant case. Wholesale refusal to grant copies
or allow inspection was not justified by law.
Section
132 itself does not require the Commissioner to record any reason unlike
section 131 which requires the ITO to record reasons before impounding the
documents produced before him. However, rule 12 requires that reasons should be
recoded by the Commissioner before issuing warrants of authorization to carry
out a search and seizure. Rule 12 has been framed by the Central Board of
Direct Taxes in exercise of the powers given to it under sub-section (14) of
section 132. These rules, therefore, have statutory force. Any search and
seizure made in contravention of rule 12 would thus be illegal. The initial
seizure of books of accounts being illegal, their retention would also be
illegal. [In favour of petitioner/assessee] - [New Kashmir and Oriental
Transport Co. (P) Ltd. v. CIT (1973) 92 ITR 334 (All.)]
It
was held that where, by and large, the documents seized appear to be such as
could lead a reasonable man to believe that they were useful and relevant, the
search and seizure cannot be struck down on the ground of absence of
application of the mind. The mere presence of a few documents, which may have
no bearing, among those seized would not go to show that there was a complete
absence of application of mind. - [Zalwant Singh v. R.D. Shah (1969) 71 ITR
550 (Del.)]
Section 132 of the Income-tax Act, 1961, does not
require specific mention by description of each particular document which has
to be recovered on search. It is for the officer who is conducting the search
to decide whether a particular document found on search was relevant for the purpose
or not, therefore, there was nothing so illegal in search as to make it wholly
without jurisdiction and documents really recovered at search could be utilized
for purpose of assessment if they belonged to assessee.
Section
132 does not require specific mention by description of each particular
document which had to be discovered at search. Several trading units and one
trust was governed by assessees who were members of a family. Commissioner
found that firm, constituted by assessees carried out large scale business in
manufacture and sale of liquid gold but profits therefrom were not incorporated
in accounts books. He issued search warrants in respect of residence and
business premises of assessees. it was also found from affidavit of IAC that he
had prima facie information that alleged incomes were not accounted. Further,
one employee of firm stated that realization from sale of liquid gold was also
not accounted for. In view of above there was no reason to doubt that
Commissioner had information which led him to issue necessary warrant. Mere
fact that some premises were searched for which there was no warrant specifying
that place, would not be material when document recovered at those two places
which were not mentioned in warrant had no hearing on assessment made.
Therefore, there was nothing so illegal in search as to make it wholly without
jurisdiction and documents really recovered at search could be utilized for
purpose of assessment if they belonged to assessee. - [ITO v. Firm
Madan Mohan Damma Mal (1968) 70 ITR 293 (All.)]
Enormity of a search cannot be a ground for condemning the same if the search is otherwise justified
There
was information in possession of Commissioner that petitioners had manufactured
their books of account and other documents to wipe out real profits made by
creating losses arising out of fictitious transactions. He issued warrants of
authorisation and written instruction to seize books of accounts and documents
disclosing real state of affairs relating to business transaction. In written
instruction, Commissioner indicated nature and class of books to be searched
for and seized. During search at office premises, books and documents, which
were not necessary, were left and certain other books which were necessary for
day to day work were returned. Documents found at residence of petitioners
were, with consent and approval of petitioners, were brought to office of
department. Search for books and documents at petitioners’ office and residence
were not carried out indiscriminately and arbitrarily. Written instructions
bore ample testimony to fact that Commissioner applied his mind to question of
relevancy of books and documents which ITOs were to search for and seize. Therefore,
search and seizure was not bad in law. [In favour of the revenue] - [Mamchand & Co. v.
CIT (1968)
69 ITR 631 (Cal.)]
Mere fact that a few
documents, which do not apparently seem to be relevant to any pending
proceedings, were seized will not render the search mala fide
Words of section 6 of Amendment Act being very
wide, any search made before commencement of Amendment Act shall be deemed to
have been made under amended section 132 as if amended section was in force on
day search was made. Even searches, which were held by courts to be illegal or
unconstitutional will be deemed to have been made under amended section 132 and
not under original section 132. Thus, section 6 of Income-tax (Amendment) Act,
1965 which amended section 32 does not infringe Article 14. Petitioners, in
writ petitions, alleged that search of their premises and seizure of a large
number of documents, were arbitrary and indiscriminate besides being mala fide,
and that Commissioner authorised search without applying his mind and with
recording any reasons. They prayed that search and seizure be declared illegal
and unconstitutional and that seized articles be returned to them. Seizure of a
few documents which did not apparently seem to be relevant to any pending
proceeding would not render search mala fide. Fact that at time of seizure ITO
did not record reasons showing that seized documents were relevant to any
proceeding would not vitiate search as there was no statutory requirement to
record, at time of search reasons showing relevancy of seized documents to a
proceeding. Sub rule (1) of rule 112A is not imperative but is directory and
therefore, a notice issued after expiry of 15 days from date of seizure was not
illegal. Hence,
the petitions were dismissed. [In favour of the revenue] - [Hindustan Metal
Works v. CIT (1968) 68 ITR 798 (All.)]
It
was held by the Supreme Court that where a search warrant issued by a
Magistrate is shown to be defective because he had not applied his mind to the
question of issuing it, anything recovered on the basis of such a warrant from
the search of a residential house must be returned. - [Commissioner of
Commercial Taxes v. Ramkishan Shrikishan Jhaver (1967) 66 ITR 664 : 20 STC 453
: (1968) 1 SCR 148 (SC)]
Test
of admissibility of evidence lies in its relevancy and not on how it was
obtained
The
admissibility of evidence in Courts in India is dependent on its relevancy as
per the provisions of Indian Evidence Act. Illegality or impropriety in
obtaining the evidence will not affect its admissibility, if it is otherwise
relevant.
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