Delhi High Court
Sonu Systems Pvt. Ltd. vs Chairman, Central Board Of Direct Taxes ... on 11 December, 2000
Equivalent citations: (2001)165CTR(DEL)700, [2001]250ITR268(DELHI)
Author: Arijit Pasayat
Bench: Arijit Pasayat, D.K. Jain
JUDGMENT Arijit Pasayat, C.J.
1. In the writ petition filed the correctness of a search conducted in terms of Section 132 of the Income-tax Act, 1961 (in short the "Act"), and legality of an order under Section 142(2A) of the Act have been questioned. The legality of the search conducted on June 22, 1998, and July 7, 1998, is questioned on the ground that there was no proper authorisation for the search by a competent person in respect of the property, wherein the said search was carried out. But at the time of hearing no argument was advanced in respect of the second plea, i.e., relating to the order under Section 142(2A) of the Act.
2. The background, as projected by the petitioner, is essentially as follows :
The petitioner-company was incorporated on May 31, 1993, having its registered office at B-362/17, Gali No. 16, Block B. Bhajanpura, Delhi. On June 22, 1998, the Assistant Director of Income-tax, Unit IV (in short "A.D.I.T."), searched the premises C-397, Chadha Complex, Main Market, Bhajanpura, Delhi, and sealed the premises. A panchnama was prepared. The search party was authorised to search one Sonu Systems, whereas the petitioner is a private limited company. On July 7, 1998, a second search party again searched the premises in question. It was stated that the search was in continuation of the proceedings on June 22, 1998. A panchnama was prepared and some loose papers and books containing cable connection holders and receipt books belonging to New Star Cable Television (in short "N.S.C.") were found, with which the petitioner has no concern. The name of N.S.C. did not find place in the panchnama dated June 22, 1998, but in the panchnama dated July 7, 1998, the name of the N.S.C. was specifically mentioned in brickets. In the said panchnama, it was also specifically mentioned that the seals placed on June 22, 1998, were found intact. On September 7, 1998, the Chief Commissioner of Income-tax (in short the "Chief Commissioner") passed an order under Section 127 of the Act, whereby cases relating to Shri Tilak Raj Chadha, Chadha Cloth House, Proprietor, Smt. Veena Chadha and one Sonu Systems were transferred from Ward 24(6) to the Deputy Commissioner, SR-36, for investigation and administrative convenience. The petitioner came to know about it on June 9, 2000, when he inspected the departmental records after receipt of notice dated May 25, 2000. By the said notice, purported to have been issued under Section 158BC of the Act, the petitioner was asked to file a true and correct return in the prescribed Form No. 2B for the block period, mentioned in the notice. After receipt of the said notice on May 30, 2000, the petitioner applied for inspection of the seized records. After inspection, the petitioner came to know that there was no authorisation for the search against the petitioner-company, and obtained copies of the documents. On June 9, 2000, the petitioner submitted its reply to the notice dated May 25, 2000. It was specifically mentioned that the notice is bad and illegal, as there was no authorisation for the search in relation to the petitioner. As there was violation of the provisions of Clauses (a), (b) or (c) of Sub-section (1) of Section 132, the action was incompetent. It was further stated that the petitioner only carried on business between May 31, 1993, to February 15, 1997, and suffered huge losses and ultimately on February 15, 1997, the business was closed down. As there were huge losses and there was no positive income, the return had not been filed under the Act. Therefore, the Deputy Commissioner of Income-tax (in short the "Dy. Commissioner"), was requested to vacate the notice dated May 25, 2000, and drop the proceedings. On June 19, 2000, the Joint Commissioner of Income-tax (in short the "Jt. Commissioner") issued a letter, whereby the petitioner was informed that the case had been transferred to his jurisdiction, and that the reply dated June 12, 2000, to the notice dated May 25, 2000, was without substance, as from the panchnama dated June 22, 1998, and July 7, 1998, it was evident that warrants were issued to search the premises at C-397, Chadha Complex, Main Market, Bhajanpura, Delhi. The petitioner was again directed to file the return of income in Form No. 2B.
3. On July 5, 2000, the petitioner supplied the details of sales and brought to the notice of the Joint Commissioner that the books of account were not available, as they were burnt in the fire, which broke out on December 10, 1996. On July 14, 2000, the Joint Commissioner passed an Order under Section 142(2A) of the Act, whereby Dinesh Mehta and Co., a chartered accountant firm, were appointed to audit the seized material, along with regular books of account maintained by the assessed for the entire block period, and submit a report by December 8, 2000. The petition has been filed to challenge such action.
4. The petitioner in support of the stand, that there was no proper authorisation by the competent authority, submitted that the same was by the Additional Deputy Director of Income-tax (Investigation). Reference is made to Section 2(21) of the Act to contend that there was no post of Additional Deputy Director of Income-tax in existence and, therefore, the authorisation was not in order. Learned counsel for the Revenue, on the other hand, submitted that the search was conducted after authorisation by the competent authority. A copy of the warrant clearly mentioned the name of Sonu Systems Pvt. Ltd. The panchnama also mentions the name of the party searched, i.e., Sonu Systems Pvt. Ltd. The A. D. I. T. sealed the premises on June 22, 1998. The premises sealed were at C-397, Chadha Complex, Main Market, Bhajanpura, Delhi. The panchnama was prepared on the basis of proper warrant of authorisation in the name of Sonu Systems Pvt. Ltd., which was issued and signed by the A. D. I. T. (Investigation), Unit-III. On July 7, 1998, search was conducted in continuation of the proceedings, which started on June 22, 1998. Inventories were made of the seized documents and a panchnama was prepared. On July 7, 1998, during the search operation, it was found that the premises had been given on rent by the assessed to N.S.C. as stated by Atul Kapoor, proprietor of N.S.C. His statement was also recorded. In the statement, Atul Kapoor stated that the board of Sonu Systems Pvt. Ltd., was hanging on the premises prior to his taking the premises on rent. He also stated that, to the best of his knowledge, Sh. T. R. Chadha was the main person in Sonu Systems Pvt. Ltd. That being the background, the seized documents can be used against the petitioner. The search was a consequence of an action on Shri T. R. Chadha group, as is evident from the search warrant and the same has been signed and authorised by the A. D. I. T., Unit-III, on June 22, 1998. The name of Sonu Systems Pvt. Ltd., C-397, Chadha complex, Main Market, Bhajanpura, Delhi, is duly mentioned in the authorisation on page (2), para. (1), of the panchnama. It is clearly stated that the panchas were called on June 22, 1998, at 8.30 a.m.. on the basis of warrant of authorisation dated June 22, 1998. The date June 19, 1998, mentioned in the restraint order under Section 132(3) of the Act is the date on which the original warrant in the case of the T. R. Chadha group was signed. Reference was made to the copy of the sales tax return, wherein the party's address was stated to be C-397, Main Market, Bhajanpura, Delhi, from where the incriminating documents were seized. It was submitted that the order dated September 7, 1998, by the Chief Commissioner of Income-tax, Delhi, does not pertain to the assessed and is irrelevant for the purpose of the case at hand. In the aforesaid background, it has been contended that the writ petition is thoroughly misconceived.
5. Before we go to the factual position, highlighted by the parties, it is necessary to take note of a few provisions of the Act. Section 2(28C) was inserted with effect from October 1, 1998, by the Finance (No. 2) Act, 1998. Section 2(28D) was also inserted with effect from the said date. The expression "Joint Commissioner" means a person appointed to be a Joint Commissioner or an Additional Commissioner under Sub-section (1) of Section 117. "Joint Director" means a person appointed to be a Joint Director or an Additional Director under Sub-section (1) of Section 117. Section 2(21) deals with Director General or Director. By the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1988, the definition was changed. Prior to the substitution it read as follows :
" 'Director of Inspection' means a person appointed to be a Director of Inspection under Sub-section (1) of Section 117, and includes a person appointed to be an Additional Director of Inspection, a Deputy Director of Inspection or an Assistant Director of Inspection."
6. After substitution it reads presently as follows :
"'Director General or Director' means a person appointed to be a Director General of Income-tax or, as the case may be, a Director of Income-tax, under Sub-section (1) of Section 117, and includes a person appointed under that sub-section to be an Additional Director of Income-tax or a Joint Director of Income-tax or an Assistant Director or Deputy Director of Income-tax."
7. It is to be noted that the expression "an Additional Director of Income-tax" was inserted by the Finance Act, 1994, with effect from June 1, 1994. The word "Joint" as presently appearing was substituted for "Deputy" by the Finance (No. 2) Act, 1998, with effect from October 1, 1998. Similarly, the expression "or Deputy Director" was inserted by the said Finance (No. 2) Act, 1998.
8. Much has been made of what is mentioned in the panchnama where the expression "Deputy Director" which was already existing was corrected by addition of the word "Additional" without deletion of the word "Deputy". It is fairly accepted by learned counsel for the petitioner that there is no post of Additional Deputy Director. We have perused the original records produced before us. They clearly show that the order was passed by the Additional Director of Income-tax on June 22, 1998. The authorisations were issued to Shri Rattan Singh, Anil Kumar, Yogesh Kumar and Vikram Sahay. The authorisation was in respect of Sonu Systems Pvt. Ltd., C-397, Chadha Complex, Main Market, Bhajanpura, Delhi. The records clearly reveal that the authorisation was done by the Additional Director. An innocuous omission to delete the word "Deputy" from the panchnama in the printed format cannot affect the validity of the search. If such clerical mistakes or omissions are used as the foundation for nullifying or otherwise to prevent legitimate action, that would be improper and inappropriate. It has been fairly accepted by learned counsel for the petitioner that the officer who had signed the warrant of authorisation was acting as the Additional Director. That lends credence to the stand of the Revenue. An innocuous mistake in deleting the word "Deputy" should not be fatal to the legality of the search. We find no substance in the plea that the search conducted was illegal. As indicated above, no other plea has been pressed into service.
9. The writ application is accordingly dismissed.