Karnataka High Court
The Deputy Commissioner Of Income Tax vs Sri C R Ram Mohan Raju on 24 April, 2026
Author: S.G.Pandit
Bench: S.G.Pandit
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WA No. 382 of 2026
R
Reserved on : 01.04.2026
Pronounced on : 24.04.2026
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 24TH DAY OF APRIL, 2026
PRESENT
THE HON'BLE MR. JUSTICE S.G.PANDIT
AND
THE HON'BLE MR. JUSTICE K. V. ARAVIND
WRIT APPEAL No. 382 OF 2026 (T-IT)
BETWEEN:
1. THE DEPUTY COMMISSIONER OF INCOME TAX
CENTRAL CIRCLE-1(4),
No.1, C.R. BUILDING,
QUEENS ROAD, BENGALURU-560 001.
2. THE PR. COMMISSIONER OF INCOME TAX,
CENTRAL RANGE-1,
C.R. BUILDING, QUEEN'S ROAD,
BENGALURU-560 001.
Digitally ...APPELLANTS
signed by
VINUTHA B S (BY SRI. RAVI RAJ Y. V., SENIOR STANDING COUNSEL A/W
Location: SRI M. DILIP, STANDING COUNSEL)
High Court of
Karnataka AND:
1. SRI C. R. RAM MOHAN RAJU,
S/O. CHANGAMARAJU,
AGED ABOUT 52 YEARS,
RESIDING AT 24, 4TH CROSS,
K.R. LAYOUT, J.P. NAGAR,
6TH PHASE, BENGALURU-560 078.
...RESPONDENT
(BY SRI A. SHANKAR, SENIOR ADVOCATE A/W
SRI CHANDRASEKHAR V., ADVOCATE)
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WA No. 382 of 2026
THIS WRIT APPEAL IS FILED UNDER SECTION 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
ORDER PASSED BY THE LEARNED SINGLE JUDGE IN WP No.
33057/2024 (T-IT) DATED 27.10.2025
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT, COMING ON FOR PRONOUNCEMENT THIS DAY,
K.V. ARAVIND J., DELIVERED THE FOLLOWING:-
CORAM: HON'BLE MR. JUSTICE S.G.PANDIT
and
HON'BLE MR. JUSTICE K. V. ARAVIND
C.A.V. JUDGMENT
(PER: HON'BLE MR. JUSTICE K. V. ARAVIND)
Heard Sri Y.V. Raviraj, learned Senior Standing Counsel,
along with Sri M. Dilip, learned Standing counsel for the
appellants-Revenue and Sri A Shankar, learned Senior Counsel
for Sri V. Chandrashekar, learned counsel for the respondent-
Assessee.
This intra-court appeal is filed by the Revenue, calling in
question the order dated 27.10.2025 passed by the learned
Single Judge in W.P.No.33057 of 2024. The present appeal is
preferred under Section 4 of the Karnataka High Court Act,
1961.
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FACTUAL MATRIX
2. The brief facts are that a search under Section 132 of the
Income Tax Act, 1961 (for short "Act") was conducted on
14.09.2017 in the case of Sri K. Narayan Raju. Pursuant to the
satisfaction recorded under Section 132 of the Act by the
competent authority, having reason to suspect that books of
account, documents, and other valuable articles or things
belonging to Sri K. Narayan Raju were kept or secreted in the
premises of the respondent, the residential premises of the
respondent came to be searched.
2.1 Thereafter, the Assessing Officer of Sri K. Narayan Raju
initiated proceedings under Section 153A of the Act. In the
course of such proceedings, the Assessing Officer recorded
satisfaction that the seized documents, books of account, and
other materials belonged to the respondent and accordingly
handed over the said material to the Assessing Officer of the
respondent.
2.2 Upon due compliance with the requirements under
Section 153C of the Act, the Assessing Officer of the
respondent issued notice under Section 153C of the Act for the
assessment years 2011-12 to 2018-19.
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2.3 The notice issued under Section 153C of the Act was
challenged in the writ petition on the ground that, since the
premises of the respondent had been searched, the respondent
ought to have been treated as a 'searched person' and
proceedings should have been initiated under Section 153A of
the Act instead of Section 153C of the Act.
2.4 The learned Single Judge, upon examining the
satisfaction recorded under Section 153C of the Act, held that
the panchanama discloses the name of Sri K. Narayan Raju as
the person in whose name the warrant was issued. However,
the respondent is shown as the owner of the residential
premises which was subjected to search, as reflected in the
panchanama. On that basis, the learned Single Judge concluded
that the respondent is to be treated as a 'searched person' and
not as an 'other person' within the meaning, scope, and ambit
of Section 153C of the Act.
2.5 The learned Single Judge, placing reliance on the
judgment of the Division Bench of this Court in the case of
Sunil Kumar Sharma v. ACIT, (2024) 159 taxmann.com
179, held that since the premises of the respondent had been
searched and documents were seized therefrom, the
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respondent would fall within the category of 'searched person'
and not the 'other person'. Consequently, it was held that the
initiation of proceedings under Section 153C of the Act is not
sustainable.
2.6 Accordingly, the notices issued under Section 153C of the
Act for the assessment years 2011-12 to 2018-19 were set
aside.
SUBMISSIONS ON BEHALF OF THE REVENUE/APPELLANT
3. Sri Y.V. Raviraj, learned Senior Standing Counsel
appearing for the appellant-Revenue, submits that the search
warrant under Section 132 of the Act was issued in the name of
Sri K. Narayan Raju. It is further submitted that the requisite
satisfaction, as contemplated under Section 132 of the Act, was
duly recorded by the competent authority.
3.1 Learned counsel contends that the provisions of Section
132 mandate the recording of satisfaction in respect of a
person, as well as the place to be searched, where the
competent authority has reason to suspect that books of
account, documents, money, bullion, jewellery, or other
valuable articles or things are kept. It is submitted that, in the
present case, the satisfaction was recorded in respect of Sri K.
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Narayan Raju, while the place for search was the premises of
the respondent.
3.2 It is further submitted that a search under Section 132 of
the Act is essentially person-specific and not premise-specific.
Once satisfaction is recorded in respect of a person, as required
under clauses (a), (b), and (c) of Section 132(1), the premises
to be searched may fall within the ambit of clauses (i) to (v)
thereof.
3.3 Learned counsel further submits that Rule 112(2A) &
112(3) of the Income Tax Rules, 1962 (for short "the Rules")
mandates the recording of satisfaction, specifying the person to
be searched and, in that context, the place or premises to be
searched. It is contended that once satisfaction is recorded
under Section 132 of the Act in respect of a person, the
premises to be searched may be any place where the
competent authority has reason to suspect that the specified
items are kept, and such premises need not necessarily belong
to the said person.
3.4 It is further submitted that, in the absence of satisfaction
recorded in respect of a person, mere search of the premises
belonging to such person would not render him as 'searched
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person' within the meaning of the Act. Learned counsel submits
that the warrant of authorization and the panchanama clearly
disclose the name of the person against whom the warrant is
issued, as well as the premises to be searched.
3.5 It is also contended that Section 153A of the Act is
attracted only where a search is initiated in the case of a
person under Section 132 of the Act. In the present case, it is
Sri K. Narayan Raju who is the person searched under Section
132 of the Act. In support of the said submission, learned
counsel has sought to rely on the satisfaction recorded under
Section 132 of the Act, the warrant of authorization, and the
panchanama.
3.6 Learned counsel further submits that the reference to the
residential premises of the respondent is only for the purpose
of identifying the place where the warrant of search is to be
executed, and not to treat the respondent as the person
searched.
3.7 In support of his contentions, learned counsel places
reliance on the judgment of the Division Bench of this Court in
PCIT v. Associated Mining Company [(2019) 108
taxmann.com 564 (Karnataka)], as well as the judgment of
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the High Court of Delhi in MDLR Resorts Pvt. Ltd. v. CIT
[(2013) 40 taxmann.com 365]. Reliance is also placed on
the judgment of the Hon'ble Supreme Court in Pooran Mal v.
Director of Inspection [(1974) 93 ITR 505 (SC)].
3.8 Learned counsel submits that the Division Bench of this
Court in DCIT v. Sunil Kumar Sharma [(2024) 159
taxmann.com 179] has not taken into consideration the
earlier judgment of this Court in PCIT v. Associated Mining
Company (supra). It is further contended that the Coordinate
Bench in Sunil Kumar Sharma (supra) has not examined the
scheme of Section 132 of the Act, the satisfaction recorded
thereunder, or the warrant of authorization for search.
3.9 It is submitted that the observations made in Sunil
Kumar Sharma (supra) are in the nature of obiter dicta,
rendered without considering the binding precedent of the
Coordinate Bench in Associated Mining Company (supra)
and the judgment of the High Court of Delhi in MDLR Resorts
Pvt. Ltd. (supra).
3.10 Learned counsel further places reliance on the judgment
of the Rajasthan High Court in CIT v. Smt. Umlesh Goyal
[(2016) 74 taxmann.com 37 (Rajasthan)], as well as the
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judgment of the High Court of Gujarat in Prabhubhai
Vastabhai Patel v. R.P. Meena [(2011) 112 Taxman 277],
to contend that a search under Section 132 of the Act is
person-specific and not premise-specific.
SUBMISSIONS ON BEHALF OF THE LEARNED SENIOR
COUNSEL FOR THE RESPONDENT/ASSESSEE
4. Sri A. Shankar, learned Senior Advocate appearing for the
respondent, submits that pursuant to the search conducted in
the residential premises of the respondent, the authorities have
seized documents belonging to the respondent and have also
recorded his statement. It is contended that, based on the
documents and other materials so seized, as well as the
statement recorded, notice under Section 153C of the Act has
been issued. It is therefore submitted that, for the purposes of
Sections 132 and 153A of the Act, the respondent is to be
treated as the 'searched person'.
4.1 Learned counsel further submits that, but for the warrant
of authorization issued for searching the premises of the
respondent, the very search would be rendered illegal. It is
contended that since the premises searched belongs to the
respondent and the seizure pertains to books of account and
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other documents of the respondent, proceedings ought to have
been initiated under Section 153A of the Act by treating the
respondent as the searched person.
4.2 It is further submitted that the person searched is to be
determined with reference to the premises subjected to search.
In this regard, it is contended that the warrant of authorization
and the panchanama record the place of search as the
residential premises of the respondent and, therefore, in the
context of Section 132 of the Act, the respondent must be
regarded as the searched person. It is also submitted that the
warrant of authorization was shown to the respondent and that
he has signed the same, thereby evidencing that he is the
person searched.
4.3 Learned counsel further submits that, upon execution of a
search warrant, certain duties are cast upon the person
searched, including cooperation with the search proceedings
and signing of the documents. It is contended that such duties
have been discharged by the respondent, thereby reinforcing
the position that the respondent is the searched person.
4.4 It is also submitted that Section 153A of the Act is
attracted where a search is initiated, and the provision must be
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construed with reference to the premises subjected to search.
Any other interpretation, according to the learned counsel,
would amount to rewriting the statutory provision, which is
impermissible.
4.5 Learned counsel further submits that a statement under
Section 132(4) of the Act has been recorded from the
respondent, and such a statement can be recorded only from
the searched person. On that basis as well, it is contended that
the respondent is the searched person.
4.6 Referring to the satisfaction note recorded under Section
153C of the Act, learned counsel submits that it itself indicates
that the respondent was subjected to search, and therefore,
the proceedings ought to have been initiated under Section
153A of the Act. It is also contended that the panchanama has
been drawn with reference to the search conducted in the
residential premises of the respondent, thereby indicating that
the respondent is the searched person.
4.7 Learned Senior Advocate further submits that prohibitory
orders were issued in the case of the respondent and that all
permissible actions under Section 132 of the Act were carried
out in respect of the respondent. It is therefore contended that,
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for the purposes of Section 153A of the Act, the respondent is
to be treated as the 'searched person'.
4.8 It is further submitted that the procedure relating to
search is governed by the provisions analogous to those under
the Code of Criminal Procedure,1973 and the warrant issued for
searching the premises of the respondent would determine the
respondent as the person searched.
4.9 Learned Senior Advocate, with reference to the second
proviso to Section 153C of the Act, submits that in the case of
proceedings under Section 153A, any pending proceedings
abate as on the date of search, and the period of six
assessment years is to be reckoned from the date of search. In
contrast, under Section 153C of the Act, the abatement is
deferred to the date on which the books of account or
documents are handed over to the Assessing Officer, and the
period of six assessment years is to be reckoned from the date
of such handing over.
4.10 It is submitted that the interpretation sought to be placed
by the Revenue on Section 153A of the Act would lead to
absurdity and would not be in favour of the Revenue. It is
further contended that such an interpretation would amount to
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rewriting the statutory provisions, which is impermissible in
law.
4.11 Learned Senior Advocate further submits that the very
contentions now urged by the Revenue have already been
considered and answered in the case of Sunil Kumar Sharma
v. DCIT [(2023) 146 taxmann.com 553 (Karnataka)],
decided by the learned Single Judge, which has been affirmed
by the Division Bench of this Court in [(2024) 159
taxmann.com 179]. It is also submitted that the Special
Leave Petition preferred by the Revenue has been dismissed
[(2024) 168 taxmann.com 77], and the review petition filed
thereafter has also been rejected by the Hon'ble Supreme
Court.
4.12 It is therefore contended that all the issues and
contentions urged in the present appeal stand concluded by the
aforesaid judgments and does not warrant interference.
4.13 Learned counsel further submits, by referring to the
panchanama and other material on record, that substantial
seizure has been effected from the residential premises of the
respondent, and that the said seized documents form the very
basis for initiating proceedings under Section 153C of the Act.
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It is contended that, in view of the search conducted in the
residential premises of the respondent and the seizure of
documents therefrom, the appropriate proceedings ought to
have been initiated under Section 153A of the Act.
4.14 In support of the above submissions, learned counsel has
placed reliance on two compilations of judgments, which are as
follows:
(i) DCIT vs. Sunil Kumar Sharma (2024) 168
taxmann.com 77 (SC)
(ii) DCIT vs. Sunil Kumar Sharma (2024) 159
taxmann.com 179 (Karnataka)
(iii) Sunil Kumar Sharma vs. DCIT (2022) 448 ITR
485 (Karnataka)
(iv) CIT vs. St. Ann's Education Society, ITA No.
1254/2006 dated 28.09.2011 (Karnataka)
(v) CIT vs. St. Ann's Education Society, ITA No.
1253/2006 dated 28.09.2011 (Karnataka)
(vi) St. Ann's Education Society vs. DCIT (Exemption)
ITA No. 165/Bang/2002 and connected matters
(Bangalore-Tribunal) dated 04.04.2006
(vii) C. Ramaiah Reddy vs. ACIT (2011) 339 ITR 210
(Karnataka)
(viii) CIT vs. IBC Knowledge Park (P.) Ltd., (2016) 385
ITR 346 (Karnataka)
(ix) CIT vs. Calcutta Knitwears (2014) 362 ITR 673(SC)
(x) Vinit Kumar vs. CBI, 2019 SCC OnLine Bom 3155
(xi) Manish Maheshwari vs. ACIT (2007) 289 ITR 341
(SC)
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(xii) CIT vs. Jasjit singh (2023) 155 Taxmann.com
155(SC)
(xiii) DCIT vs. Sunil Kumar Sharma, Review Petition
(Civil) / Diary No.60856/2024
(xiv) CIT vs. Tara Agencies, (2007) 292 ITR 444(SC)
(xv) Davanam Constructions vs. DCIT, WP 11459 of
2021
(xvi) CIT(A) and others vs. Sunil Kumar Sharma - RP
No. 218 of 2024
(xvii) CIT vs. Wipro Finance Ltd., (2010) 323 ITR 467
(Karnataka)
(xviii) Mary Pushpam vs. Telvi Curusumary and ors
Civil Appeal No.9941 of 2016
(ix) CIT vs. Sunil Kumar Sharma, SLP (Civil) Diary
No. 21526 of 2024.
(xx) CIT vs. Sunil Kumar Sharma - SLP (Civil) Diary
No.23406 of 2024
(xxi) CIT vs. Sunil Kumar Sharma - SLP (Civil) Diary
No.33939 of 2024
(xxii) Parashuram Pottery Works Co. Ltd. vs. ITO
(1977) 106 ITR 1 (SC)
(xxiii) CIT vs. Thana Electricity Supply Ltd. (1994) 206
ITR 727 (Bombay)
(xxiv) Ranganath Associates vs. Union of India, (2003)
128 Taxman 228 (Karnataka)
(xxv) Sri D. Ramachandrappa and others vs. Union of
India and others, WA 3462-63 of 2003 and
connected matters (Karnataka)
(xxvi) The Century Spinning Mfg. Co and others vs.
State of West Bengal and others (1989) 73 STC
277
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(xxvii) CIT vs. Vallabhdas Vithaldas, (2002) 123 taxman
110 (Gujarat)
(xxviii)Suganthi Suresh Kumar vs. Jagdeeshan (2002) 2
SCC 420
(xxix) CIT vs. Jagadish Jakati and Co. (1979) 119 ITR
19 (karnataka)
(xxx) CIT vs. Shaan Finance (P) Ltd., (1998) 231 ITR
308 (SC)
(xxxi) CIT vs. TVS Lean Logistics Ltd., (2007) 293 ITR
432 (Madras)
(xxxii) CESC Ltd., vs. DCIT, (2003) 263 ITR 402
(Calcutta)
(xxxiii)Amar Jewellers Ltd., vs. ACIT (2022) 137
Taxmann.com 249 (Gujarat)
(xxxiv)PCIT vs. Saumya Construction (P.) Ltd., (2016)
387 ITR 529 (Gujarat)
(xxxv)PCIT vs. Abhisar Buildwell (P.) Ltd., (2023) 454
ITR 212 (SC)
5. We have considered the submissions advanced by the
learned Senior Standing Counsel appearing for the appellant-
Revenue and the learned Senior Counsel appearing for the
respondent-assessee.
RELEVANT PROVISIONS
6. Before proceeding to consider the contentions urged by
the parties, it is necessary to examine the provisions of
Sections 132, 153A, and 153C of the Income-tax Act, 1961, as
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well as Rule 112 of the Income-tax Rules, 1962, which read as
under:
Search and seizure.
132. (1) Where the Principal Director General or Director
General or Principal Director or Director or the Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner or Additional Director or
Additional Commissioner or Joint Director or Joint
Commissioner in consequence of information in his
possession, has reason to believe that--
(a) any person to whom a summons under sub-section
(1) of section 37 of the Indian Income-tax Act, 1922
(11 of 1922), or under sub-section (1) of section
131 of this Act, or a notice under sub-section (4) of
section 22 of the Indian Income-tax Act, 1922, or
under sub-section (1) of section 142 of this Act was
issued to produce, or cause to be produced, any
books of account or other documents has omitted or
failed to produce, or cause to be produced, such
books of account or other documents as required by
such summons or notice, or
(b) any person to whom a summons or notice as
aforesaid has been or might be issued will not, or
would not, produce or cause to be produced, any
books of account or other documents which will be
useful for, or relevant to, any proceeding under the
Indian Income-tax Act, 1922 (11 of 1922), or under
this Act, or
(c) any person is in possession of any money, bullion,
jewellery or other valuable article or thing and such
money, bullion, jewellery or other valuable article or
thing represents either wholly or partly income or
property which has not been, or would not be,
disclosed for the purposes of the Indian Income-tax
Act, 1922 (11 of 1922), or this Act (hereinafter in
this section referred to as the undisclosed income or
property),
then,--
(A) the Principal Director General or Director General or
Principal Director or Director or the Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner, as the case may be,
may authorise any Additional Director or Additional
Commissioner or Joint Director, Joint Commissioner,
Assistant Director or Deputy Director, Assistant
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Commissioner or Deputy Commissioner or Income-tax
Officer, or
(B) such Additional Director or Additional Commissioner or
Joint Director, or Joint Commissioner, as the case may
be, may authorise any Assistant Director or Deputy
Director, Assistant Commissioner or Deputy
Commissioner or Income-tax Officer,
(the officer so authorised in all cases being hereinafter
referred to as the authorised officer) to--
(i) enter and search any building, place, vessel,
vehicle or aircraft where he has reason to
suspect that such books of account, other
documents, money, bullion, jewellery or
other valuable article or thing are kept;
(ii) break open the lock of any door, box, locker,
safe, almirah or other receptacle for exercising the
powers conferred by clause (i) where the keys
thereof are not available;
(iia) search any person who has got out of, or is about
to get into, or is in, the building, place, vessel,
vehicle or aircraft, if the authorised officer has
reason to suspect that such person has secreted
about his person any such books of account, other
documents, money, bullion, jewellery or other
valuable article or thing;
(iib) require any person who is found to be in
possession or control of any books of account or
other documents maintained in the form of
electronic record as defined in clause (t) of sub-
section (1) of section 2 of the Information
Technology Act, 2000 (21 of 2000), to afford the
authorised officer the necessary facility to inspect
such books of account or other documents;
(iii) seize any such books of account, other documents,
money, bullion, jewellery or other valuable article
or thing found as a result of such search:
(Emphasis supplied)
Provided that bullion, jewellery or other valuable
article or thing, being stock-in-trade of the business,
found as a result of such search shall not be seized but
the authorised officer shall make a note or inventory of
such stock-in-trade of the business;
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(iv) place marks of identification on any books of
account or other documents or make or cause to
be made extracts or copies therefrom;
(v) make a note or an inventory of any such money,
bullion, jewellery or other valuable article or thing
:
Provided that where any building, place, vessel, vehicle or
aircraft referred to in clause (i) is within the area of
jurisdiction of any Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner,
but such Principal Chief Commissioner or Chief Commissioner
or Principal Commissioner or Commissioner has no
jurisdiction over the person referred to in clause (a) or clause
(b) or clause (c), then, notwithstanding anything contained
in section 120, it shall be competent for him to exercise the
powers under this sub-section in all cases where he has
reason to believe that any delay in getting the authorisation
from the Principal Chief Commissioner or Chief Commissioner
or Principal Commissioner or Commissioner having
jurisdiction over such person may be prejudicial to the
interests of the revenue :
Provided further that where it is not possible or practicable
to take physical possession of any valuable article or thing
and remove it to a safe place due to its volume, weight or
other physical characteristics or due to its being of a
dangerous nature, the authorised officer may serve an order
on the owner or the person who is in immediate possession
or control thereof that he shall not remove, part with or
otherwise deal with it, except with the previous permission of
such authorised officer and such action of the authorised
officer shall be deemed to be seizure of such valuable article
or thing under clause (iii):
Provided also that nothing contained in the second proviso
shall apply in case of any valuable article or thing, being
stock-in-trade of the business:
Provided also that no authorisation shall be issued by the
Additional Director or Additional Commissioner or Joint
Director or Joint Commissioner on or after the 1st day of
October, 2009 unless he has been empowered by the Board
to do so.
[Explanation.--For the removal of doubts, it is hereby
declared that the reason to believe, as recorded by the
income-tax authority under this sub-section, shall not be
disclosed to any person or any authority or the Appellate
Tribunal.]
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(1A) Where any Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner, in
consequence of information in his possession, has reason to
suspect that any books of account, other documents, money,
bullion, jewellery or other valuable article or thing in respect
of which an officer has been authorised by the Principal
Director General or Director General or Principal Director or
Director or any other Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner or
Additional Director or Additional Commissioner or Joint
Director or Joint Commissioner to take action under clauses
(i) to (v) of sub-section (1) are or is kept in any building,
place, vessel, vehicle or aircraft not mentioned in the
authorisation under sub-section (1), such Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner may, notwithstanding
anything contained in section 120, authorise the said officer
to take action under any of the clauses aforesaid in respect
of such building, place, vessel, vehicle or aircraft.
[Explanation.--For the removal of doubts, it is hereby
declared that the reason to suspect, as recorded by the
income-tax authority under this sub-section, shall not be
disclosed to any person or any authority or the Appellate
Tribunal.]
(2) The authorised officer may requisition the services of any
police officer or of any officer of the Central Government, or
of both, to assist him for all or any of the purposes specified
in sub-section (1) or sub-section (1A) and it shall be the duty
of every such officer to comply with such requisition.
(3) The authorised officer may, where it is not practicable to
seize any such books of account, other documents, money,
bullion, jewellery or other valuable article or thing, for
reasons other than those mentioned in the second proviso to
sub-section (1), serve an order on the owner or the person
who is in immediate possession or control thereof that he
shall not remove, part with or otherwise deal with it except
with the previous permission of such officer and such officer
may take such steps as may be necessary for ensuring
compliance with this sub-section.
Explanation.--For the removal of doubts, it is hereby
declared that serving of an order as aforesaid under this sub-
section shall not be deemed to be seizure of such books of
account, other documents, money, bullion, jewellery or other
valuable article or thing under clause (iii) of sub-section (1).
(4) The authorised officer may, during the course of the
search or seizure, examine on oath any person who is found
to be in possession or control of any books of account,
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documents, money, bullion, jewellery or other valuable
article or thing and any statement made by such person
during such examination may thereafter be used in evidence
in any proceeding under the Indian Income-tax Act, 1922
(11 of 1922), or under this Act.
Explanation.--For the removal of doubts, it is hereby
declared that the examination of any person under this sub-
section may be not merely in respect of any books of
account, other documents or assets found as a result of the
search, but also in respect of all matters relevant for the
purposes of any investigation connected with any proceeding
under the Indian Income-tax Act, 1922 (11 of 1922), or
under this Act.
(4A) Where any books of account, other documents, money,
bullion, jewellery or other valuable article or thing are or is
found in the possession or control of any person in the
course of a search, it may be presumed--
(i) that such books of account, other documents, money,
bullion, jewellery or other valuable article or thing
belong or belongs to such person;
(ii) that the contents of such books of account and other
documents are true ; and
(iii) that the signature and every other part of such books
of account and other documents which purport to be in
the handwriting of any particular person or which may
reasonably be assumed to have been signed by, or to
be in the handwriting of, any particular person, are in
that person's handwriting, and in the case of a
document stamped, executed or attested, that it was
duly stamped and executed or attested by the person
by whom it purports to have been so executed or
attested.
(5) [***]
(6) [***]
(7) [***]
(8) The books of account or other documents seized under
sub-section (1) or sub-section (1A) shall not be retained by
the authorised officer for a period exceeding thirty days from
the date of the order of assessment under section 153A or
clause (c) of section 158BC unless the reasons for retaining
the same are recorded by him in writing and the approval of
the Principal Chief Commissioner or Chief Commissioner,
Principal Commissioner or Commissioner, Principal Director
General or Director General or Principal Director or Director
for such retention is obtained :
Provided that the Principal Chief Commissioner or Chief
Commissioner, Principal Commissioner or Commissioner,
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Principal Director General or Director General or Principal
Director or Director shall not authorise the retention of the
books of account and other documents for a period
exceeding thirty days after all the proceedings under the
Indian Income-tax Act, 1922 (11 of 1922), or this Act in
respect of the years for which the books of account or other
documents are relevant are completed.
(8A) An order under sub-section (3) shall not be in force for
a period exceeding sixty days from the date of the order.
(9) The person from whose custody any books of account or
other documents are seized under sub-section (1) or sub-
section (1A) may make copies thereof, or take extracts
therefrom, in the presence of the authorised officer or any
other person empowered by him in this behalf, at such place
and time as the authorised officer may appoint in this behalf.
(9A) Where the authorised officer has no jurisdiction over the
person referred to in clause (a) or clause (b) or clause (c) of
sub-section (1), the books of account or other documents, or
any money, bullion, jewellery or other valuable article or
thing (hereafter in this section and in sections
132A and 132B referred to as the assets) seized under that
sub-section shall be handed over by the authorised officer to
the Assessing Officer having jurisdiction over such person
within a period of sixty days from the date on which the last
of the authorisations for search was executed and thereupon
the powers exercisable by the authorised officer under sub-
section (8) or sub-section (9) shall be exercisable by such
Assessing Officer.
[(9B) Where, during the course of the search or seizure or
within a period of sixty days from the date on which the last
of the authorisations for search was executed, the authorised
officer, for reasons to be recor-ded in writing, is satisfied
that for the purpose of protecting the interest of revenue, it
is necessary so to do, he may with the previous approval of
the Principal Director General or Director General or the
Princi-pal Director or Director, by order in writing, attach
provisionally any property belonging to the assessee, and for
the said purpose, the provisions of the Second Schedule
shall, mutatis mutandis, apply.
(9C) Every provisional attachment made under sub-section
(9B) shall cease to have effect after the expiry of a period of
six months from the date of the order referred to in sub-
section (9B).
(9D) The authorised officer may, during the course of the
search or seizure or within a period of sixty days from the
date on which the last of the authorisations for search was
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executed, make a reference to a Valuation Officer referred to
in section 142A, who shall estimate the fair market value of
the property in the manner provided under that section and
submit a report of the estimate to the said officer within a
period of sixty days from the date of receipt of such
reference.]
(10) If a person legally entitled to the books of account or
other documents seized under sub-section (1) or sub-section
(1A) objects for any reason to the approval given by the
Principal Chief Commissioner or Chief Commissioner,
Principal Commissioner or Commissioner, Principal Director
General or Director General or Principal Director or Director
under sub-section (8), he may make an application to the
Board stating therein the reasons for such objection and
requesting for the return of the books of account or other
documents and the Board may, after giving the applicant an
opportunity of being heard, pass such orders as it thinks fit.
(11) [***]
(11A) [***]
(12) [***]
(13) The provisions of the Code of Criminal Procedure, 1973
(2 of 1974), relating to searches and seizure shall apply, so
far as may be, to searches and seizure under sub-section (1)
or sub-section (1A).
(14) The Board may make rules in relation to any search or
seizure under this section ; in particular, and without
prejudice to the generality of the foregoing power, such rules
may provide for the procedure to be followed by the
authorised officer--
(i) for obtaining ingress into any building, place, vessel,
vehicle or aircraft to be searched where free ingress
thereto is not available ;
(ii) for ensuring safe custody of any books of account or
other documents or assets seized.
[Explanation 1.--For the purposes of sub-sections (9A), (9B)
and (9D), with respect to "execution of an authorisation for
search", the provisions of sub-section (2) of section
153B shall apply.]
Explanation 2.--In this section, the word "proceeding" means
any proceeding in respect of any year, whether under the
Indian Income-tax Act, 1922 (11 of 1922), or this Act, which
may be pending on the date on which a search is authorised
under this section or which may have been completed on or
before such date and includes also all proceedings under this
Act which may be commenced after such date in respect of
any year.
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Assessment in case of search or requisition.
153A. (1) Notwithstanding anything contained in section
139, section 147, section 148, section 149, section
151 and section 153, in the case of a person where a
search is initiated under section 132 or books of
account, other documents or any assets are requisitioned
under section 132A after the 31st day of May, 2003, the
Assessing Officer shall--
(a) issue notice to such person requiring him to furnish
within such period, as may be specified in the notice,
the return of income in respect of each assessment
year falling within six assessment years 96[and for
the relevant assessment year or years] referred to in
clause (b), in the prescribed form and verified in the
prescribed manner and setting forth such other
particulars as may be prescribed and the provisions
of this Act shall, so far as may be, apply accordingly
as if such return were a return required to be
furnished under section 139;
(b) assess or reassess the total income of six
assessment years immediately preceding the
assessment year relevant to the previous year in
which such search is conducted or requisition is
made [and for the relevant assessment year or
years] :
(Emphasis supplied)
Provided that the Assessing Officer shall assess or reassess
the total income in respect of each assessment year falling
within such six assessment years 96[and for the relevant
assessment year or years] :
Provided further that assessment or reassessment, if any,
relating to any assessment year falling within the period of
six assessment years [and for the relevant assessment year
or years] referred to in this sub-section pending on the date
of initiation of the search under section 132 or making of
requisition under section 132A, as the case may be, shall
abate :
Provided also that the Central Government may by rules
made by it and published in the Official Gazette (except in
cases where any assessment or reassessment has abated
under the second proviso), specify the class or classes of
cases in which the Assessing Officer shall not be required to
issue notice for assessing or reassessing the total income for
six assessment years immediately preceding the assessment
year relevant to the previous year in which search is
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conducted or requisition is made [and for the relevant
assessment year or years]:
[Provided also that no notice for assessment or
reassessment shall be issued by the Assessing Officer for the
relevant assessment year or years unless--
(a) the Assessing Officer has in his possession books of
account or other documents or evidence which reveal
that the income, represented in the form of asset,
which has escaped assessment amounts to or is
likely to amount to fifty lakh rupees or more in the
relevant assessment year or in aggregate in the
relevant assessment years;
(b) the income referred to in clause (a) or part thereof
has escaped assessment for such year or years; and
(c) the search under section 132 is initiated or
requisition under section 132A is made on or after
the 1st day of April, 2017.
Explanation 1.--For the purposes of this sub-section, the
expression "relevant assessment year" shall mean an
assessment year preceding the assessment year relevant to
the previous year in which search is conducted or requisition
is made which falls beyond six assessment years but not
later than ten assessment years from the end of the
assessment year relevant to the previous year in which
search is conducted or requisition is made.
Explanation 2.--For the purposes of the fourth proviso,
"asset" shall include immovable property being land or
building or both, shares and securities, loans and advances,
deposits in bank account.]
(2) If any proceeding initiated or any order of assessment or
reassessment made under sub-section (1) has been annulled
in appeal or any other legal proceeding, then,
notwithstanding anything contained in sub-section (1)
or section 153, the assessment or reassessment relating to
any assessment year which has abated under the second
proviso to sub-section (1), shall stand revived with effect
from the date of receipt of the order of such annulment by
the Principal Commissioner or Commissioner:
Provided that such revival shall cease to have effect, if such
order of annulment is set aside.
Explanation.--For the removal of doubts, it is hereby
declared that,--
(i) save as otherwise provided in this section, section
153B and section 153C, all other provisions of this
Act shall apply to the assessment made under this
section;
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(ii) in an assessment or reassessment made in respect
of an assessment year under this section, the tax
shall be chargeable at the rate or rates as applicable
to such assessment year.
Assessment of income of any other person.
153C. (1) Notwithstanding anything contained in section
139, section 147, section 148, section 149, section 151 and section
153, where the Assessing Officer is satisfied that,--
(a) any money, bullion, jewellery or other valuable
article or thing, seized or requisitioned, belongs to; or
(b) any books of account or documents, seized or
requisitioned, pertains or pertain to, or any information
contained therein, relates to,
a person other than the person referred to in section 153A,
then, the books of account or documents or assets, seized or
requisitioned shall be handed over to the Assessing Officer
having jurisdiction over such other person and that Assessing
Officer shall proceed against each such other person and issue
notice and assess or reassess the income of the other person in
accordance with the provisions of section 153A, if, that Assessing
Officer is satisfied that the books of account or documents or
assets seized or requisitioned have a bearing on the determination
of the total income of such other person 2[for six assessment years
immediately preceding the assessment year relevant to the
previous year in which search is conducted or requisition is made
and] for the relevant assessment year or years referred to in sub-
section (1) of section 153A :
(Emphasis supplied)
Provided that in case of such other person, the reference to the
date of initiation of the search under section 132 or making of
requisition under section 132A in the second proviso to sub-section
(1) of section 153A shall be construed as reference to the date of
receiving the books of account or documents or assets seized or
requisitioned by the Assessing Officer having jurisdiction over such
other person :
Provided further that the Central Government may by rules made
by it and published in the Official Gazette, specify the class or
classes of cases in respect of such other person, in which the
Assessing Officer shall not be required to issue notice for assessing
or reassessing the total income for six assessment years
immediately preceding the assessment year relevant to the
previous year in which search is conducted or requisition is
made 3[and for the relevant assessment year or years as referred
to in sub-section (1) of section 153A] except in cases where any
assessment or reassessment has abated.
(2) Where books of account or documents or assets seized or
requisitioned as referred to in sub-section (1) has or have been
received by the Assessing Officer having jurisdiction over such
other person after the due date for furnishing the return of income
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for the assessment year relevant to the previous year in which
search is conducted under section 132 or requisition is made
under section 132A and in respect of such assessment year--
(a) no return of income has been furnished by such
other person and no notice under sub-section (1)
of section 142 has been issued to him, or
(b) a return of income has been furnished by such other
person but no notice under sub-section (2) of section
143 has been served and limitation of serving the
notice under sub-section (2) of section 143 has
expired, or
(c) assessment or reassessment, if any, has been made,
before the date of receiving the books of account or documents
or assets seized or requisitioned by the Assessing Officer having
jurisdiction over such other person, such Assessing Officer shall
issue the notice and assess or reassess total income of such other
person of such assessment year in the manner provided in section
153A.
112. Search and Seizure.--(1) The powers of search
and seizure under Section 132 shall be exercised in
accordance with sub-rules (2) to (14).
(2) (a) The authorisation under sub-section (1) of Section
132 (other than an authorisation under the proviso thereto)
by the Director General or Director of Inspection or the Chief
Commissioner or Commissioner or any such Deputy Director
or Deputy Commissioner as is empowered by the Board in
this behalf shall be in Form No. 45;
(b) the authorisation under the proviso to sub-section
(1) of Section 132 by the Chief Commissioner or
Commissioner shall be in Form No. 45-A;
(c) the authorisation under sub-section (1-A) of
Section 132 by a Chief Commissioner or
Commissioner shall be in Form No. 45-B.
(2-A) Every authorisation referred to in sub-rule (2) shall
be in writing under the signature of the officer issuing the
authorisation and shall bear his seal.
(3) Any person in charge of or in any building, place,
vessel, vehicle or aircraft authorised to be searched shall, on
demand by the officer authorised to exercise the powers of
search and seizure under Section 132 (hereinafter referred to
as the authorised officer) and on production of the authority,
allow him free ingress thereto and afford all reasonable
facilities for a search therein.
(4) If ingress into such building or place cannot be so
obtained it shall be lawful for the authorised officer executing
the authority, with such assistance of police officers or of
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officers of the Central Government, or of both, as may be
required, to enter such building or place and search therein
and in order to effect an entrance into such building or place,
to break open any outer or inner door or window of any
building or place, whether that of the person to be searched
or of any other person, if after notification of his authority
and purpose and demand of admittance duly made, he cannot
otherwise obtain admittance:
Provided that, if any such building or place is an
apartment in actual occupancy of a woman, who
according to custom does not appear in public, the
authorised officer shall, before entering such apartment,
give notice to such woman that she is at liberty to
withdraw and shall afford her every reasonable facility for
withdrawing and may then break open the apartment and
enter it.
(4-A) If ingress into any vessel, vehicle or aircraft
authorised to be searched cannot be obtained because such
vessel, vehicle or aircraft is moving or for any other reason, it
shall be lawful for the authorised officer with such assistance
of police officers or of officers of the Central Government or of
both, as may be required, to stop any such vessel or vehicle
or, in the case of an aircraft, compel it to stop or land, and
search any part of the vessel, vehicle or aircraft; and in order
to effect an entrance into such vessel, vehicle or aircraft, to
break open any outer or inner door or window of any such
vessel, vehicle or aircraft, whether that of the person to be
searched or of any other person, if after notification of his
authority and purpose and demand of admittance duly made,
he cannot otherwise obtain admittance:
Provided that if any such vessel, vehicle or aircraft is
occupied by a woman, who according to custom does not
appear in public, the authorised officer shall, before
entering such vessel, vehicle or aircraft, give notice to
such woman that she is at liberty to withdraw and shall
afford her every reasonable facility for withdrawing.
(4-B) The authorised officer may require any person who
is the owner, or has the immediate possession, or control, of
any box, locker, safe, almirah or any other receptacle situate
in such building, place, vessel, vehicle or aircraft to open the
same and allow access to inspect or examine its contents,
and where the keys thereof are not available or where such
person fails to comply with any such requirement, may cause
any action to be taken including the breaking open of such
box, locker, safe almirah or other receptacle which the
authorised officer may deem necessary for carrying out all or
any of the purposes specified in the authority issued under
sub-rule (2).
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(4-C) The authorised officer may, where it is not
practicable to seize the money, bullion, jewellery or other
valuable article or thing or any books of account or document,
serve an order on the owner or the person who is in
immediate possession or control thereof that he shall not
remove, part with or otherwise deal with it except with the
previous permission of the authorised officer, who may take
such steps as may be necessary for ensuring compliance with
this sub-rule.
(5) Any person referred to in clause (iia) of sub-section
(1) of Section 132 may be searched by the authorised officer
with such assistance as he may consider necessary. If such
person is a woman, the search shall be made by another
woman with strict regard to decency.
(6) Before making a search, the authorised officer shall,--
(a) where a building or place is to be searched, call
upon two or more respectable inhabitants of the
locality in which the building or place to be
searched is situate, and
(b) where a vessel, vehicle or aircraft is to be
searched, call upon any two or more respectable
persons to attend and witness the search and may
issue an order in writing to them or any of them so
to do.
(7) The search shall be made in the presence of the
witnesses aforesaid and a list of all things seized in the course
of such search and of the places in which they were
respectively found shall be prepared by the authorised officer
and signed by such witnesses; but no person witnessing a
search shall be required to attend as a witness of the search
in any proceedings under the Indian Income-tax Act, 1922
(11 of 1922), or the Act unless specially summoned.
(8) The occupant of the building, place, vessel, vehicle or
aircraft searched, including the person in charge of such
vessel, vehicle or aircraft, or some person on his behalf, shall
be permitted to attend during the search and a copy of the
list prepared under sub-rule (7) shall be delivered to such
occupant or person. A copy thereof shall be forwarded to the
Chief Commissioner or Commissioner and, where the
authorisation has been issued by any officer other than the
Chief Commissioner or Commissioner, also to that officer.
(9) Where any person is searched under clause (iia) of
sub-section (1) of Section 132, a list of all things taken
possession of shall be prepared and a copy thereof shall be
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delivered to such person. A copy thereof shall be forwarded to
the Chief Commissioner or Commissioner and, where the
authorisation has been issued by any officer other than the
Chief Commissioner or Commissioner, also to that officer.
(10) The authorised officer shall place or cause to be
placed the bullion, jewellery and other valuable articles and
things seized during the search in a package or packages
which shall be listed with details of the bullion, jewellery and
other valuable articles and things placed therein; every such
package shall bear an identification mark and the seal of the
authorised officer or any other income-tax authority not
below the rank of Assessing Officer and the occupant of the
building, place, vessel, vehicle or aircraft including the person
in charge of such vessel, vehicle or aircraft searched or any
other person in his behalf shall also be permitted to place his
seal on them. A copy of the list prepared shall be delivered to
such occupant or person. A copy shall be forwarded to the
Chief Commissioner or Commissioner, and where the
authorisation has been issued by any officer other than the
Chief Commissioner or Commissioner, also to that officer.
(11) The authorised officer may convey the books of
account and other documents, if any, seized by him in the
course of the search made by him and the package or
packages, if any, referred to in sub-rule (10) to the office of
any income-tax authority not below the rank of Assessing
Officer (hereinafter referred to as the Custodian). Any money
seized in the search referred to above may also be deposited
with the Custodian.
(12) (i) The Custodian shall take such steps as he may
consider necessary for the safe custody of--
(a) books of account and other documents, and
(b) the package or packages, conveyed to him.
(ii) The Custodian may deposit for safe custody all or
any of the packages with any branch of the
Reserve Bank of India or the State Bank of India or
of its subsidiaries or the authorised bank or a
Government Treasury.
(iii) Where any money has been deposited with the
Custodian, he may credit the money, or remit the
money through the nearest branch of the Reserve
Bank of India or the State Bank of India or of its
subsidiaries or any authorised bank for being
credited in the personal Deposit Account of the
Chief Commissioner or Commissioner in the branch
of the Reserve Bank of India or the State Bank of
India or of its subsidiaries or any authorised bank
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at the place where the office of the Chief
Commissioner or Commissioner is situate.
(13) (i) Whenever any sealed package is required to be
opened for any of the purposes of the Act, the authorised
officer may, unless he is himself the Custodian, requisition
the same from the Custodian and on receipt of the
requisition, such package or packages, as the case may be,
shall be delivered to him by the Custodian. The authorised
officer may break any seal and open such package in the
presence of two respectable witnesses after giving a
reasonable notice to the person from whose custody the
contents were seized to be present.
(ii) Such person shall be permitted to be present till all
or any of the contents of such package are placed
in a fresh package or packages and sealed in the
manner specified in sub-rule (1) or delivered to
such person or the Custodian, as the case may be.
(14) The Assessing Officer to whom the books of account
or other documents or assets have been handed over under
sub-section (9-A) of Section 132 shall have all the powers
conferred on the authorised officer under sub-rules (11) and
(13).
ANALYSIS
7. Section 132 of the Act can broadly be understood in
distinct parts. Sub-section (1) of Section 132 deals with the
competent authority empowered to record satisfaction, on the
basis of information in its possession, for the purpose of issuing
a warrant of authorization for search. The provision
contemplates: (i) the authorities competent to record such
"reason to believe"; (ii) the authorities competent to execute
the warrant of search; (iii) the person in respect of whom such
satisfaction is to be recorded; and (iv) the premises in which
the warrant of authorization is to be executed.
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7.1 In the present appeal, there is no challenge to the
competency of the authority issuing the warrant of
authorization, nor to the validity of the search warrant or the
correctness of the premises searched. The controversy is
confined to the determination of the "searched person".
7.2 Under Section 132(1), the competent authority, in
consequence of information in its possession, may form a
"reason to believe" that: (a) any person to whom a summons
under Section 131(1) or a notice under Section 142(1) has
been issued to produce books of account or documents has
omitted or failed to produce the same; or (b) such person
would not produce the said material even if so summoned; or
(c) any person is in possession of money, bullion, jewellery, or
other valuable articles or things representing wholly or partly
undisclosed income or property. Upon recording such
satisfaction, the competent authority may authorize the
conduct of a search in terms of the provision.
7.3 Clauses (a) to (c) of Section 132(1) thus pertain to the
formation of satisfaction in respect of a person. On the other
hand, clauses (i) to (v) thereof deal with the nature of actions
that may be undertaken pursuant to such authorization,
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including the place or premises where the search is to be
carried out and the consequential steps that may follow.
7.4 Thus, while the "reason to believe" is person-centric, the
execution of the authorization extends to the premises where
the competent authority has reason to suspect that the
specified materials are kept.
7.5 When satisfaction is recorded for the issuance of a
warrant of authorization for search, the competent authority is
required to specify the details of the building, place, vessel,
vehicle, or aircraft in respect of which it has reason to suspect
that books of account, documents, money, bullion, jewellery, or
other valuable articles or things are kept.
7.6 A close reading of clauses (a) to (c) and clauses (i) to (v)
of Section 132(1) indicates that the satisfaction contemplated
under clauses (a) to (c) is in relation to a person, whereas the
authorization under clauses (i) to (v) pertains to the premises
or locations where the search is to be carried out. The provision
does not mandate that the premises to be searched must
necessarily belong to the person referred to in clauses (a) to
(c). Rather, it is sufficient if the competent authority has reason
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to suspect that the specified items are kept in such building,
place, vessel, vehicle, or aircraft.
7.7 Further, while the formation of "reason to believe" under
clauses (a) to (c) is person-centric, the standard applicable to
the place of search is one of "reason to suspect". The legislative
intent underlying Section 132(1) clearly distinguishes between
the person in respect of whom satisfaction is recorded and the
premises where the search is to be executed.
7.8 To determine who is the "searched person", clauses (a) to
(c) and clauses (i) to (v) must be read conjointly. On such a
reading, it becomes evident that the person searched is the
person against whom satisfaction is recorded under clauses (a)
to (c). Once such satisfaction is recorded for issuance of a
warrant of authorization, the place of search and consequential
actions fall within the ambit of clauses (i) to (v).
7.9 Thus, the identity of the "searched person" is to be
determined with reference to the person against whom
satisfaction is recorded, and not with reference to the
ownership of the premises searched. It follows that a search
under Section 132 of the Act is person-centric and not premise-
centric.
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8. Rule 112 of the Rules, prescribes the procedure for
search and seizure. The authorization for search is issued in
Form No.45. Sub-rule (3) mandates that any person who is in
charge of, or in possession of, any building, place, vessel,
vehicle, or aircraft authorized to be searched shall, upon
demand by the authorized officer and on production of the
warrant of authorization, permit free ingress thereto and afford
all reasonable facilities for the conduct of the search.
8.1 The remaining sub-rules delineate the manner in which
the search and seizure are to be carried out. A conjoint reading
of the provisions of Rule 112 makes it clear that the premises
to be searched need not necessarily belong to the person in
respect of whom satisfaction is recorded under Section 132 of
the Act. The place of search may well be owned, possessed, or
occupied by a person other than the person referred to in
Section 132 of the Act.
8.2 However, the precondition for such search of a premises
is that the competent authority must have "reason to suspect"
that the books of account, documents, money, bullion,
jewellery, or other valuable articles or things of the person,
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referred to in Clause (a) to (c) of Section 132(1) of the Act, are
kept in such building, place, vessel, vehicle, or aircraft.
9. In order to determine whether the warrant of
authorization was issued against the respondent, and whether
the respondent can be regarded as a 'searched person' within
the meaning of Section 132 of the Act, we directed the
appellant-Revenue, during the course of hearing, to place on
record the satisfaction note recorded under Section 132 of the
Act, the warrant of authorization in Form No.45, and the
panchanama drawn during the course of the search.
9.1 The said documents were accordingly produced before
the Court. Upon perusal of the satisfaction note, the warrant of
authorization, and the panchanama, we further directed the
officer present in Court to place attested copies of the said
documents in a sealed cover. In compliance with the said
direction, the documents have been placed before the Court in
a sealed cover.
9.2 A perusal of the satisfaction note recorded by the
competent authority indicates that the satisfaction, as
contemplated under clauses (a) to (c) of Section 132(1), has
been recorded in relation to Sri K. Narayan Raju. The "reason
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to suspect", in terms of clauses (i) to (v), refers to the
existence of material pertaining to alleged tax evasion by the
said person, which is suspected to be kept in the premises of
the respondent - residence of Mr. C.R. Ram Mohan Raju,
namely, No.24, Lakshmi Niwas, 4th Cross Road, KR Layout, JP
Nagar 6th Phase, Bengaluru.
9.3 Similarly, the warrant of authorization issued in Form No.
45 specifies the name of the person as Sri K. Narayan Raju,
while also setting out the particulars of the building, place,
vessel, vehicle, or aircraft in respect of which the competent
authority has reason to suspect that the books of account,
documents, money, bullion, jewellery, or other valuable articles
or things are kept. In this context, the residential premises of
the respondent has been described as the place of search.
9.4 The relevant portion of the warrant of authorization reads
as under:
FORM No.45
[See rule 112]
Warrant of authorisation under section 132 of the
Income -tax Act, 1961, and rule 112(1) of the
Income -tax Rules, 1962
If a summons under sub -section (1) of section 37 of
the Indian Income -tax Act, 1922, or under sub -section (1)
of section 131 of the Income-tax Act, 1961, or a notice under
sub -section (4) of section 22 of the Indian Income-tax Act,
1922, or under sub -section (1) of section 142 of the Income-
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tax Act, 1961, was issued to Mr. K. Narayana Raju [name
of the person] to produce, or cause to be produced, books of
account or other documents which will be useful for, or
relevant to, proceedings under the Indian Income tax Act,
1922, or under the Income -tax Act, 1961, he would not
produce, or cause to be produced, such books of account or
other documents as required by such summons or notice;
Sarvashri/Shri/Shrimati Mr. K. Narayana Raju are/is in
possession of any money, bullion, jewellery or other valuable
article or thing and such money, bullion, jewellery or other
valuable article or thing represents either wholly or partly
income or property which has not been, or would not be,
disclosed for the purposes of the Indian Income -tax Act,
1922, or the Income -tax Act, 1961;
And whereas I have reason to suspect that such books
of account, other documents, money, bullion, jewellery or
other valuable article or thing have been kept and are to be
found in Residence of Mr. C.R. Rammohan Raju, No.24,
Lakshmi Niwas, 4th Cross Road, K.R. Layout, J P Nagar,
6th phase, Bangalore (specify particulars of the
building/place/vessel/vehicle/aircraft); This is to authorise
and require you as per overleaf [name of the Addl. Director
or of the Addl. Commissioner or of the Joint Director or of the
Joint Commissioner or of the Deputy Director or of the Deputy
Commissioner or of the Assistant Director or of the Assistant
Commissioner or of the Income-tax Officer] -
(a) to enter and search the said
building/place/vessel/vehicle/aircraft;
..."
9.5 Similarly, in the panchanama, the warrant is shown as
having been issued in the name of Sri K. Narayan Raju. In the
column relating to the warrant of search (details and ownership
of the premises searched), the residential premises of the
respondent is mentioned.
9.6 While considering the particulars of the residential
premises of the respondent as reflected in the warrant of
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authorization, the mention of Sri K. Narayan Raju as the person
in whose name the warrant has been issued cannot be ignored.
Both aspects are required to be read conjointly.
9.7 For the sake of convenience, Columns 'A' and 'B' of the
panchanama are extracted hereunder:
PANCHANAMA
A) Warrant in the case of : Shri K. Narayan Raju
Party No. CRM-1,
B) Warrant to search : Residence of Shri C.R.
(Details & Ownership of Rammohan Raju No.24
the search) No.24, Lakshmi Niwas,
4th Cross Road, K.R. Layout,
J.P. Nagar, 6th Phase,
Bangalore.
9.8 Column 'A' of the panchanama corresponds to clauses (a)
to (c) of Section 132(1) of the Act, while Column 'B' relates to
clauses (i) to (v) thereof. This delineation makes it explicit that
the warrant of authorization is issued in the name of a person,
whereas the place of search is identified based on the "reason
to suspect" that the books of account, documents, money,
bullion, jewellery, or other valuable articles or things are kept
therein.
9.9 It thus follows that the premises to be searched need not
necessarily belong to the person referred to in clauses (a) to
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(c). Unless satisfaction, as contemplated under clauses (a) to
(c), is recorded in respect of a person, the mere fact that other
person is the owner or occupant of the premises searched, as
in the present case, would not render him a 'searched person'
within the meaning of Section 132 of the Act.
9.10 For invoking Section 153A of the Act, initiation of search
under Section 132 in the case of a person is a sine qua non.
The expression "in the case of a person where a search is
initiated under Section 132" necessarily postulates that the
conditions stipulated in clauses (a) to (c) of Section 132(1) are
satisfied in respect of such person. Mere search of a premises,
as contemplated under clauses (i) to (v), without satisfaction
recorded against the person under clauses (a) to (c), would not
attract Section 153A of the Act.
10. Learned counsel for the respondent contends that
searched person is to be determined with reference to the
premises. Acceptance of such contention results in absurdity
and renders Section 153A unworkable.
10.1 Section 132 mandates the recording of a "reason to
believe", as set out in clauses (a) to (c), in respect of a person
and a "reason to suspect" in respect of a place under clause (i).
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If a notice under Section 153A is issued solely on the basis of
the premises referred to in clause (i), there would be no
compliance with clauses (a) to (c). In that event, the very
foundation for invoking Section 153A would be absent.
10.2 It is not the case of the respondent that, where a notice
under Section 153A is issued with reference to a premises,
there is no requirement to record satisfaction in terms of
clauses (a) to (c) in respect of a person. When this aspect was
queried to the learned counsel for the respondent, it was
submitted that such a question could be raised only when a
notice under Section 153A is issued on a premise specific basis.
10.3 Section 153C of the Act, on the other hand, expressly
applies to a person other than the person referred to in Section
153A. For invocation of Section 153C, the statutory
requirements include the handing over of books of account,
documents, or assets seized or requisitioned to the Assessing
Officer having jurisdiction over such other person, and the
issuance of notice by the said Assessing Officer. These
constitute jurisdictional preconditions.
10.4 In the present case, compliance with the jurisdictional
requirements for invoking Section 153C of the Act is not in
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dispute. The challenge to the invocation of Section 153C is
founded solely on the contention that proceedings ought to
have been initiated under Section 153A of the Act, on the
premise that the residential premises of the respondent was
subjected to search.
11. The Hon'ble Supreme Court, in Pooran Mal v. Director
of Inspection [(1974) 93 ITR 505 (SC)/ 1973 SCC OnLine
SC 401], after considering Section 132 of the Act and Rule 112
of the Rules, has held as under:
"5. It will be seen in the first place that the power to direct
a search and seizure is given to the Director of Inspection or
the Commissioner. Secondly, the authorisation for such
search and seizure must be in favour of officers not below the
grade of an Income Tax Officer. Thirdly, the power to
authorise search and seizure can be exercised only when the
Director of Inspection or the Commissioner has reason to
believe (1) that in spite of the requisitions under the relevant
provisions mentioned in Section 132(1)(a) the required books
and documents have not been produced; (2) that any person,
whether requisition under the above provisions is made or
not, will not, or would not, produce or cause to be produced,
any books of account and other documents which will be
useful for, or relevant to, any proceeding under the Income
Tax Act; or (3) that any person is in possession of any
money, bullion, jewellery or any other valuable article or
thing representing either wholly or partly undisclosed income
or property. When the authorisation is given by the Director
of Inspection or the Commissioner, as the case may be, it
must be limited to the five purposes mentioned in sub-clauses
(i) to (v) of sub-section (1). Sub-section (14) provides for the
making of rules in relation to any search or seizure.
Accordingly, Rule 112 has been framed which says that the
powers of search and seizure under Section 132 shall be
exercised in accordance with sub-rules (2) to (14) under Rule
112. These are detailed rules setting out the procedure for
making the search and seizure and for the custody of what
has been seized."
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12. The Hon'ble Supreme Court in CIT v. Laljibhai
Kanjibhai Mandalia [2022 SCC OnLine SC 872 / (2022)
446 ITR 18 (SC)] has restated and elaborated the principles
governing the exercise of jurisdiction in matters of search and
seizure under Section 132 of the Act, as well as the
requirements to be satisfied for invoking the said provision, as
under:
"40. We would like to restate and elaborate the principles
in exercising the writ jurisdiction in the matter of search and
seizure under Section 132 of the Act as follows:
40.1. The formation of opinion and the reasons to believe
recorded is not a judicial or quasi-judicial function but
administrative in character.
40.2. The information must be in possession of the
authorised official on the basis of the material and that the
formation of opinion must be honest and bona fide. It cannot
be merely pretence. Consideration of any extraneous or
irrelevant material would vitiate the belief/satisfaction.
40.3. The authority must have information in its
possession on the basis of which a reasonable belief can be
founded that the person concerned has omitted or failed to
produce books of accounts or other documents for production
of which summons or notice had been issued, or such person
will not produce such books of accounts or other documents
even if summons or notice is issued to him.
40.4. Such person is in possession of any money, bullion,
jewellery or other valuable article which represents either
wholly or partly income or property which has not been or
would not be disclosed.
40.5. Such reasons may have to be placed before the
High Court in the event of a challenge to formation of the
belief of the competent authority in which event the Court
would be entitled to examine the reasons for the formation of
the belief, though not the sufficiency or adequacy thereof. In
other words, the Court will examine whether the reasons
recorded are actuated by mala fides or on a mere pretence
and that no extraneous or irrelevant material has been
considered.
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40.6. Such reasons forming part of the satisfaction note
are to satisfy the judicial consciousness of the Court and any
part of such satisfaction note is not to be made part of the
order.
40.7. The question as to whether such reasons are
adequate or not is not a matter for the Court to review in a
writ petition. The sufficiency of the grounds which induced the
competent authority to act is not a justiciable issue.
40.8. The relevance of the reasons for the formation of
the belief is to be tested by the judicial restraint as in
administrative action as the Court does not sit as a court of
appeal but merely reviews the manner in which the decision
was made. The Court shall not examine the sufficiency or
adequacy thereof.
40.9. In terms of the Explanation inserted by the Finance
Act, 2017 with retrospective effect from 1-4-1962, such
reasons to believe as recorded by the Income Tax Authorities
are not required to be disclosed to any person or any
authority or the Appellate Tribunal."
13. A Coordinate Bench of this Court, while dealing with the
scope and ambit of Section 132 of the Act in C. Ramaiah
Reddy v. CIT [2010 SCC OnLine Kar 5172 / (2011) 339
ITR 210 (KAR)], has held as under:
"23. The scheme of section 132 shows that a warrant of
search can be issued on having received information and on
having reason to believe therefrom that a person is in
possession of assets which has not been or would not be
disclosed. Having received information, the authorising officer
has to satisfy himself that a particular person is in possession
of undisclosed assets. The empowered authority in
consequence of information in possession, only when he has
reason to believe that any of the conditions mentioned in
clauses (a), (b) and (c) of sub-section (1) of section 132
exists, then only he may authorise an officer mentioned in
clause (A), clause (B) of sub-section (1) of section 132 to
enter and search as provided under clauses (i), (ii), (iia),
(iib), (iii), (iv) and (v). No warrant will be issued merely on
the basis of suspicion or to make a roving or fishing enquiry
to unearth the concealed assets. It is only when the
authorising officer is fully satisfied that the information would
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lead to the discovery of undisclosed assets, that the warrant
of search will be issued. Therefore, it is obligatory on the part
of the empowered officer to record in writing the grounds of
search as set out in the aforesaid provision and then only he
can authorise an authorised officer to enter and search as
provided under the said provision. The provision of the Code
of Criminal Procedure relating to searches and seizure are
made applicable to searches and seizures under sub-section
(1) or sub-section (1A) of section 132 of the Act so far as
may be. Under the Criminal Procedure Code, the police officer
is bound to record in writing the grounds of his plea, as to the
necessity for such search and specify clearly the article or
articles for which the search is to be made. The recording of
the reasons is an important aspect in the matter of search
and to ignore it is to ignore the material part of the provisions
governing such search. If this step is ignored, search would
be in contravention of the provisions of the Act. The
requirement of sub-section (1) are clearly intended to restrain
a police officer from initiating or conducting anything in the
nature of general search. Similarly, the empowered authority
under the Act, after recording reasons only order a search of
premises, if he has reason to believe that one or more of the
conditions in section 132(1) exist. The order is in the form of
an authorisation in favour of a subordinate Departmental
officer authorising him to enter and search any building or
place specified in the order and to exercise the powers and
perform the functions mentioned in section 132(1). The
section does not confer any arbitrary authority upon the
Revenue officers. The Commissioner or the Director of
Inspection must have, in consequence of information, reason
to believe that the statutory conditions for the exercise of the
power to order search exist. He must record reasons for the
belief and he must issue an authorisation in favour of a
designated officer to search the premises and exercise the
powers set out therein. Since by the exercise of the power a
serious invasion is made upon the rights, privacy and
freedom of the tax- payer, the power must be exercised
strictly in accordance with the law and only for the purposes
for which the law authorises it to be exercised. If the action of
the officer issuing the authorisation or of the designated
officer is challenged, the officer concerned must satisfy the
court about the regularity of his action. The measure would
be objectionable if its implementation is not accompanied by
the safeguards against its undue and improper exercise. If
the safeguards are generally on the lines adopted by the
Criminal Procedure Code, they would be regarded as
adequate and render the temporary restrictions imposed by
the measure reasonable. These safeguards are:
(i) the empowered officer must have reasonable
grounds for believing that anything necessary for the
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purpose of recovery of tax may be found in any place
within his jurisdiction,
(ii) he must be of the opinion that such thing cannot
be otherwise got without undue delay,
(iii) he must record in writing the grounds of his belief,
and
(iv) he must specify in such writing so far as possible
the thing for which search is to be made. These
safeguards apply to searches under sub- section (2).
24. It clearly shows that the power to search under sub-
section (2) is not arbitrary. In the first place, it must be noted
that the power to order search and seizure is vested in the
highest officers of the Department. Secondly, the exercise of
this power can only follow a reasonable belief entertained by
such officer that any of the three conditions mentioned in
section 132(1) (a), (b) and (c) exists. In this connection, it
may be further pointed out that under sub-rule (2) of rule
112, the Director of Inspection or the Commissioner, as the
case may be, has to record his reasons before the
authorisation is issued to the officers mentioned in sub-
section (1). Thirdly, the authorisation for the search cannot
be in favour of any officer below the rank of an Income-tax
Officer. Fourthly, the authorisation is for specific purposes
enumerated in clauses (i) to (v) in sub-section (1), all of
which are strictly limited to the object of the search. Fifthly,
when money, bullion, etc., is seized the Income-tax Officer is
to make a summary enquiry with a view to determine how
much of what is seized will be retained by him to cover the
estimated tax liability and how much will have to be returned
forthwith. This is most important. Rule 112 provides for the
actual search and seizure being made after observing normal
decencies of behaviour.
14. A Coordinate Bench of this Court in CIT v. Associated
Mining Company [2019 SCC OnLine Kar 3581 / (2019)
108 TAXMANN.COM 564 (Karnataka)], while examining the
scope of Sections 132 and 153A of the Act, has held as under:
"12. A plain reading of section 153A would indicate that
it is a non obstante provision which is invoked in case of a
person where the search is initiated under section 132 or
books of account, other documents or any assets are
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requisitioned under section 132A. It mandates that notice
under section 153A is to be issued, calling upon the assessee
in whose case the search was conducted to file return of
income for six assessment years in the prescribed form and
thereupon the Assessing Officer is required to assess or
reassess the total income of the said six years. This provision
when read in conjunction with section 132 would indicate that
mere conducting of search or in other words, where a search
has been initiated under section 132 would suffice to issue
notice under section 153A and the limitation for completion of
the assessment is reckoned and would be counted for the
date as recorded in the last panchanama drawn in relation to
any person.
13. A plain reading of section 132 of the Act would
disclose that when the competent authority has reason to
believe that any person is in possession of any money,
bullion, jewellery or other valuable article or thing and such
money, bullion or jewellery or other valuable articles or other
thing represents either wholly or partly, income or property
which has not been or would not be disclosed for the
purposes of the Act would partake of the characteristic of an
undisclosed income or property, then, warrant of search
would be issued authorising the officer indicated in sub-clause
(A) or (B) to enter and search any building, place, vessel etc.,
are kept. Thus, the intention of the Legislature is clear from
the expression and language found in sub-section (1) of
section 132 that location of the premises is in relation to the
satisfaction to be reached by the authorities mentioned
therein and the authorised officer would be empowered to
search any place mentioned in the warrant as well as any
other place where he suspects that books of account
belonging to the assessee have been kept."
"16. In this background, we have perused the warrant of
authorisation issued under section 132 of the Act and rule
112(1) of the Income-tax Rules, 1962 which would clearly
indicate that the said warrant was issued for conducting the
search of M/s. Associated Mining Company expressing
thereunder that authority contemplated under sub-section (1)
of section 132 has reason to suspect that such books of
account, other documents of the noticee, are to be found in
the premises at 18/35, II link Road, Parvathinagar, Ballari.
The premises which has been searched is the same premises
as indicated in the authorisation. This fact is not in dispute.
However, what has been disputed is, the said premises did
not belong to the assessee. The language or expression of
sub-section (1) of section 132 is clear and unambiguous. The
location of the premises is in relation to the satisfaction
reached by the authorities mentioned therein and the
authorised officer can search any place mentioned in the
warrant including any other place where he suspects that the
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books of account belonging to the assessee are kept and as
such, the mere change of address of the assessee even being
in the know of the Income-tax Department by itself would not
vitiate or invalidate the search conducted under section 132
of the Act.
17. Even otherwise, in the instant case, the search
conducted is in respect of the premises where the business of
the firm carried on earlier and continued by Sri K.M.
Vishwanath, who no doubt had retired from the partnership of
the assessee-firm and it is in this premises where the books
of account relating to the assessee-firm has been found and
seized, which by itself proves the fact that the said premises
was used by the assessee even as on the date of search
conducted. In fact, the hon'ble Delhi High Court has held that
"address being different" would not vitiate the search and a
person can also operate or keep books of account, jewellery
etc., at different places and not necessarily the registered
office or where the business is conducted. Hence, the search
conducted in the premises in which the assessee may not be
carrying on the business would not nullify the search.
However, if the search is conducted in a premises other than
what is reflected in the authorisation, then, the consequences
would be different. In the instant case, search has been
conducted in the premises, the address of which is reflected
in the authorisation and undisputedly, occupied by Mr. K.M.
Vishwanath, who was the erstwhile partner of the assessee-
company till he retired on July 31, 2009. Despite notice
issued under section 153A of the Act, the said Sri K.M.
Vishwanath had not filed his return of income and had replied
to the said notice contending that he is no longer a partner by
enclosing the deed of retirement and deed of admission of
other two partners. In this background, the Assessing Officer
has concluded the proceedings under section 144 of the Act
which had been affirmed by the Commissioner of Income-tax
(Appeals) and erroneously on the ground of search having
been conducted in the premises not belonging to the
assessee, the appeal came to be allowed which is contrary to
the tenor and language of section 132 of the Act. Hence, we
answer the substantial questions of law in favour of the
Revenue and against the assessee."
15. The Rajasthan High Court in CIT v. Smt. Umlesh Goel
[2016 SCC OnLine Raj 10715 / (2016) 74 taxmann.com
37 (Rajasthan)], while examining the provisions of Sections
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132, 158BC, and 158BD, which are pari materia to Sections
153A and 153C of the Act, has held as under:
"13. On analysing the provisions of section 132(1) read
with section 158BC and 158BD, while section 132(1)
authorises to carry out search and seizure operation where
the Revenue comes into possession of information that an
assessee may be evading tax or has reason to suspect that a
person has money, bullion and jewellery and other valuable
articles or things, books of account, etc., which does not
depict true income, then a search is necessitated or got
conducted."
15. xxxxxx
15.1 Provision of section 158BC is attracted "where any
search has been conducted under section 132 in the case
of any person". In our view from these words it should
statutorily mandate that search should have been carried
out under section 132(1) in the name of a person before
invoking the provision of section 158BC. "Person" should
normally mean name depicted in the warrant of
authorisation, and the authority authorising a search has
to have information in his possession in respect of a
person and such a person should be specifically named in
the search warrant. Though "family" is not defined under
the Income-tax Act but could not be stretched to cover all
the family members, namely wife, daughter, children, etc.
Under the Income-tax Act "Person" has been defined in
section 2(31) which reads thus:
"'Person' includes--
(i) an individual;
(ii) a Hindu undivided family;"
"16. Xxxxxxx
Xxxxxx
16.3 Since by the exercise of the power a serious invasion
is made upon the rights, privacy and freedom of the
taxpayer, the power must be exercised strictly in
accordance with law and only for the purposes for which
the law authorises it to be exercised. If the action of the
officer issuing the authorisation or of the designated
officer is challenged, the officer concerned must satisfy
the court about the correctness of his action. Therefore, in
our considered view a search under section 132(1) has to
be "person specific". The authority authorising search has
to have information in his possession in respect of a
person and such a person should be specifically named in
search warrant and since names of the assessees having
not figured in the authorisation of warrant as having been
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proved on the basis of Form 45 which has been
reproduced by us in para 16 hereinbefore, the Assessing
Officer has exceeded its jurisdiction in issuing the notice
under section 158BC and initiation of the proceedings
being invalid, all subsequent action of the Assessing
Officer including order of assessment is not sustainable in
law.
16.4 xxxxxxx
16.5 For the reasons assigned and our observation that
when a search action under section 132(1) has to be
"person specific" and when admittedly the names of the
present assessees did not figure in the warrant, we hold
the Assessing Officer had committed an apparent error to
assess the assessees. Accordingly, we answer the
question of law in favour of the assessee and against the
Revenue, with no order as to costs."
16. The High Court of Delhi in Shilpa Chowdhary vs. CIT
[2020 SCC OnLine Del 2097 / (2021) 430 ITR 218
(Delhi)], while examining the provisions of Section 132 of the
Act, has held as under:
"11. Let's now examine the relevant provision. A
careful reading of section 132 discerns that the competent
authority can issue a WoA for search and seizure if such
an authority, in consequence of information in his
possession, has "reason to believe" that conditions
stipulated in either of clauses (a), (b) or (c) of the section
are satisfied. Such authorization is given in Form 45 under
section 132 of the Act read with rule 112(1) of the
Income- tax Rules, 1962. The first proviso to section
132(1) also contemplates a WoA and provides that the
Principal Chief Commissioner/Chief Commissioner or
Principal Commissioner/Commissioner of Income-tax/such
other authority as named in the said proviso, 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 Principal Chief Commissioner of
Income-tax/Chief Commissioner of Income-tax or
Principal Commissioner/Commissioner having jurisdiction
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over the person would be prejudicial to the interests of
the Revenue. This authorization is issued under Form 45A
under the first proviso to sub-section (1) of section 132 of
the Act with rule 112(2)(b) of the Rules. Section 132(1A)
envisions a different scenario. Under this provision, where
a search for any books of account/other documents/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/other
documents/assets of the assessee are kept in any
building, place, vessel, vehicle or aircraft, not specified in
the search warrant issued by such authority, he may
authorize the authorized officer to search such other
building, place, vessel, vehicle or aircraft. This warrant is
issued as per Form 45B under sub-section (1A) of section
132 read with rule 112(2)(c) of the Rules.
12. Thus, we can see that the Act provides for the three
different warrants of authorisation which apply to different
situations. Now, in the facts of the present case, the initial
warrant dated February 5, 2019 was issued against the
primary persons, i.e., the Kochar group. However, in
consequence of the information in the possession of the
revenue authorities, i.e. it was suspected that the books of
account/other document etc. were kept in the petitioner's
premises, the said property was searched. This search action
was thus under section 132(1) against the primary persons.
The petitioners have erroneously assumed that the search
action at their premises, between February 6, 2019 and
February 9, 2019 was conducted under section 132(1A) of the
Act, as a premises suspected to have material belonging to
the primary persons. As demonstrated from the material
placed on record, this is palpably incorrect. The respondents
in their counter affidavit have categorically stated that the
search was never conducted under section 132(1A) of the
Act. Having perused the WoA, we are inclined to agree. As we
have noticed above, the Act distinguishes between search
actions under sub-sections (1) and (1A) of section 132,
however the distinction is not of relevance in the facts of the
case. Although the petitioners are correct is submitting that
the threshold requirement to determine the validity of the
authorisation for such search under section 132(1A) qua the
premises is based on "reason to suspect", but they have
ignored the vital fact that for search of premises this
threshold - viz. "reason to suspect"- is also envisaged in
section 132(1)(i) in the following words "(i) enter and search
any building, place, vessel, vehicle or aircraft where he has
reason to suspect that such books of account, other
documents, money, bullion, jewellery or other valuable article
or thing are kept." The only crucial factor to be borne in mind
is that, while searching the premises under the above
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provision, there must be reason to believe with the
competent authority to search the "person", within the
contemplation of clauses (a), (b) or (c) of section 132(1).
Indeed, section 132(1) of the Act empowers the Competent
Authority to authorize search of a "person" who fails to, or if
such competent authority believes will fail to, produce books
or account or other documents in response to a summon
issued under the Act; or possesses some jewellery, money or
other valuable or thing representing income that such person
has not disclosed or would not disclose for the purposes of
the Act, and seize the relevant material found as a result of
the search. Such search against a "person" can be carried out
by the authorised officer by searching any building, place,
vessel, vehicle or aircraft where he suspects that such books
of account, other documents, money bullion, jewellery etc.
are kept. These premises to be search need not necessarily
belong to the searched person. On the other hand, section
132(1A) confers power to different set of officers to authorize
search of a 'building, place, vehicle, vessel or aircraft' based
on suspicion that any books of account or other documents,
jewellery, valuables or other article or things in respect of
which search has been authorized under section 132(1) is or
are kept, and seize the relevant material. In the case of the
petitioner, as explained above, the WoA under section 132(1)
of the Act in the case of Kochar group pertained to the
petitioner's premises wherein the issuing authority had
reasons to suspect that the undisclosed income, books of
account and documents of the Kochar group were kept or to
be found. Accordingly, the search and seizure under section
132(1) of the Act in respect of the Kochar group was carried
out at the premises of Vikas Chowdhary on February 6, 2019.
We would like to add that we have also perused the WoAs
issued by respondent No. 2 under which the searches were
initiated. As shown to us, both have been issued in Form No.
45, under section 132 read with rule 112(1) of the Income-
tax Rules 1962. WoA No. 7257 dated February 5, 2019 was
issued to the primary persons, i. e., the Kochar group, and
was in respect of the petitioner's Premises. WoA No. 7275
dated February 12, 2019 was issued to the petitioners Shilpa
and Vikas Chowdhary, and was in respect of their locker No.
150F. Thus, the distinction sought to be drawn by Mr.
Shrivastava is wholly irrelevant. Further the assumption and
contention that, since Vikas Chowdhary was not the searched
person under the WoA dated February 5, 2019, his premises
could only be searched under section 132(1A) of the Act, is
entirely misconceived and is rejected.
Validity of search carried out on September 6, 2019 on
petitioner's premises
13. We do not find any merit in the challenge raised by
the petitioners to the search carried out at the petitioner's
premises. Firstly, the petitioners have asserted that they are
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not challenging the WoA for search conducted on February 6,
2019. Secondly, no prayer has been made in this regard.
Besides, as noted above, this search action in relation to the
petitioner's premises was under the WoA against the Kochar
group under section 132(1) of the Act. The gist of the
satisfaction note, as documented in the counter affidavit, has
been extracted in the succeeding paras. The same pertains to
the Kochar group, whereunder the premises of the petitioner
were searched, reveals that the WoA were issued because it
was suspected that some of the valuables/documents of Sh.
Avtar Singh Kochar were kept at the premises of the
petitioner. The search action between February 6, 2019 to
February 9, 2019, was therefore, not against the petitioners
but against the primary persons. The petitioner's premises
was searched not for Vikas or Shilpa Chowdhary's
income/books of account/etc., but for the books of
accounts/documents/money/bullion/jewellery/etc. belonging
to the primary persons who were the subject of the search.
The respondents, on physical surveillance, observed
movement of cash from the petitioner's premises by
motorcycle borne couriers. Therefore, the premises was
identified to likely have incriminating evidence. The
connection and link between the persons subjected to search
(i. e., the primary persons) and the petitioner's premises was
thus established. We cannot ignore the fact that
documents/articles/valuables etc. belonging to primary
persons can be kept with third parties and concealed
anywhere in different places and locations. Thus, the
authorised officer can subject any such premises to search if
there are reasons to suspect that such location could be
accommodating such document/articles/valuables, etc.
Therefore, the jurisdictional precondition or the threshold for
justifying such action qua the premises, was satisfied.
Though, it has been argued that such an action is unlawful,
however the entire premise of the petitioner's case is
essentially founded on the plea that such action qua the
petitioners was under section 132(1A) of the Act and not
under section 132(1) of the Act. This factual affirmation is
incorrect and has been clarified for the reasons stated
hereinafter. Thus, there is no credible foundation laid out by
the petitioners to challenge such an action. Even otherwise,
this action of search and the consequences thereof are qua
the primary persons, i. e., the Kochar group. The petitioners
have no locus to challenge the same and we are not
concerned with this search and consequent proceedings
against the Kochar group."
17. The High Court of Gujarat in Zinzuwadia & Sons v. CIT
[2019 SCC OnLine Guj 6952 / (2019) 265 TAXMAN 261
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(Guj)], while examining the interplay between Sections 132
and 153A of the Act, has held as under:
"6. In this case, the petitioner has challenged the order
dated February 8, 2019 passed by the Assessing Officer and
the order dated March 11, 2019 passed by the Principal
Commissioner of Income-tax on the applications made by the
petitioner under section 220(6) of the Act.
7. The challenge to the said orders is based principally on
the ground that on merits the petitioner has a very good case
and is, therefore, entitled to the grant of unconditional stay
against any recovery pursuant to the assessment order. The
first ground that is advanced before this court is that no
search was carried out at the premises of the petitioner and,
therefore, proceedings under section 153A of Act could not
have been taken against the petitioner. The second ground is
that even on merits the petitioner has a very good case,
inasmuch as, firstly, the amount of Rs. 7,88,85,082 added to
the income of the petitioner has already been offered as
sales, and hence, no addition could have been made of such
amount under section 68 of the Act; and secondly, while
holding that there was excess stock, the Assessing Officer has
not considered the stock in the vault; and that had the stock
in the vault been taken into consideration, there would have
been no excess at all. According to the learned counsel for
the petitioner, the petitioner has made out a prima facie case,
the balance of convenience lies in favour of the petitioner and
the petitioner would have to suffer undue hardship if the
demand is not stayed more particularly, considering the fact
that the demand is unreasonably high-pitched.
8. On behalf of the Revenue, it has been pointed out that
the warrant of authorisation has been issued in respect of the
petitioner whereas the places mentioned therein are places
other than the business premises of the petitioner. It has
been contended that the search is qua a person and not
location specific as is sought to be contended on behalf of the
petitioner and that it is factually incorrect to say that no
search had been conducted in respect of the petitioner. On
the merits of the assessment order, it has been contended
that what is shown as sales by the petitioner are in fact not
sales, but the petitioner's own cash in old higher
denomination notes which have been sought to be legalised
by showing cash receipt in respect of sales; that such fact is
supported by the fact that excess stock was found at the
premises of the petitioner which indicates that in fact there
were no sales.
9. In so far as the first contention namely that in the
absence of search at the premises of the petitioner, no
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proceedings could have been taken against the petitioner
under section 153A of the Act is concerned, the learned
counsel for the respondent had produced for the perusal of
the court, a copy of the warrant of authorisation, which
clearly shows that the same has also been issued in respect
of the petitioner. However, the addresses for carrying out
search are the residences of the partners and not the
business premises of the petitioner.
11. Thus, under sub-section (1) of section 132 of the Act,
the Principal Director General or Director General or Director
or the Principal Chief Commissioner or Chief Commissioner or
Principal Commissioner or Commissioner or Additional
Director or Additional Commissioner, or Joint Director or Joint
Commissioner, as the case may be (hereinafter referred to as
the higher authority), is required to form an opinion that any
person satisfies the ingredients of clause (a) or (b) or (c)
thereof, in which case he may authorise any of the officers of
the rank specified under sub-clauses (A) and (B) thereof, to
search any building, place, vessel, vehicle or aircraft where
he has reason to suspect that such books of account, other
documents, money, bullion, jewellery or other valuable article
or thing are kept. Thus, the warrant of authorisation is person
specific and states the places where search is required to be
conducted qua such person. Such search may be at the office
premises, residential premises or even at the premises of a
third person, depending on where the competent authority
has reason to suspect that books of account, other
documents, money, bullion, jewellery or other valuable article
or thing are kept. The contention based on rule 112 of the
Rules that search is location specific, therefore, does not
merit acceptance. Rule 112 of the Rules provides that the
powers of search and seizure under section 132 shall be
exercised in accordance with sub- rules (2) to (14) thereof.
Thus, rule 112 provides for the manner in which search is to
be conducted. Sub-rule (2) provides for the forms in which
authorisations are to be issued. On a bare reading of rule 112
as a whole, there is nothing therein to indicate that search is
location specific as is sought to be contended on behalf of the
petitioner.
13. Reference may also be made to the decision of the
Delhi High Court in MDLR Resorts P. Ltd. v. CIT (supra), on
which reliance has been placed by the learned advocate for
the petitioner, wherein the court has held thus (page 416 of
361 ITR):
"The contention with regard to their addresses being
different, is misconceived and mere ipse dixit. Address of
a company will normally mean its registered office, head
office, etc. A person can operate from or keep documents,
money, etc. at different places and not necessarily from
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the registered office, etc. or from where business is
conducted. The address mentioned in the warrant and the
panchanama need not be the registered office or the head
office but it has be the place where the search was to be
conducted and was conducted. The address at which
search could be conducted would be the place or location,
where books of account, documents, jewellery,
unaccounted assets, etc., could be located/found.. ..
What is noticeable is that the mandate and language
of section 153A(1) does not make any reference to
panchanama or the date of panchanama. It does not state
that the panchanama is a pre-condition for invoking the
said section. The words used by the Legislature are
'search is initiated under section 132. . .'. The word
'initiate' means to commence or start. The section is
invoked and applicable when the search is 'initiated'. In
other words, the section ticks of and comes into play
when the search commences or is undertaken against a
person. The expression 'initiate' had come up for
interpretation before the Karnataka High Court in CIT v.
Wipro Finance Ltd. [2010] 323ITR 467 (Karn) in relation
to sections 158BC, 158BD etc., and it was observed that
as per the dictionary meaning, the said word refers to
beginning, commencement or start of proceedings.
Reference was made to the decision of the Supreme Court
in Om Prakash Jaiswal v. G.K. Mittal, AIR 2000 SC 1136,
wherein the expression 'initiate any proceedings for
contempt' in section 20 of the Contempt of Courts Act,
1971, was interpreted. It was held that the word 'initiate'
means introductory steps or action or first move. Black's
Law Dictionary was referred to and it was observed that
'initiation of contempt proceedings' takes place when the
court applies its mind to allegation and decides to direct
the alleged contemnor under section 17 to show- cause as
to why he should not be punished. Thereafter, reference
was made to different factual situations. In Wipro
Finance's case (supra), it was accordingly observed (page
485):
'It is the settled principle that while assigning meaning
to any expression in any provision of a statute, the
context under which the particular expression is used has
to be borne in mind. Therefore, bearing in mind the
context in which the expression 'search initiated' has been
used under various sections of the Income-tax Act
including ss. 158BA(1), 158BC, 158BD, 158BE(1)(a) and
(b) and 253A(1)(a) and (b) and also in the light of
examining the dictionary meaning of the word 'initiate' as
extracted by the High Court of Rajasthan at para No. 34
of its judgment in the case of Rajasthan Udyog v. State of
Rajasthan, AIR 1978 Raj 31 and also in the light of the
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above observations of the hon'ble Supreme Court in the
case of Omprakash Jaiswal (supra) we may safely assign
to the expression 'search initiated'; the meaning 'search
taken' or 'search commenced' or 'making beginning of the
search'. If this is meant by expression 'search initiated' it
cannot be held that the only signing of the authorizations
by the Director of Income-tax, Bangalore, on December
30, 1996 to make a search in the premises of the
respective assessees would amount to 'initiation of
search'. The signing of the 'authorizations' would at best
amount to 'taking of the decision by the said authority to
initiate search' in the premises of respective assessees but
not initiation of search itself."
14. Thus, the court has held that the address mentioned
in the warrant and the panchanama need not be the
registered office or the head office but it has to be the place
where the search was to be conducted and was conducted.
The address at which search could be conducted would be the
place or location, where books of account, documents,
jewellery, unaccounted assets, etc., could be located/found.
15. A perusal of the record as produced by the petitioner
shows that the panchanama drawn at the time of the search
shows that the search was carried out at the house, but the
name of the petitioner also finds place in the panchanama.
The list of inventory of books of account etc. found/seized;
list of inventory of jewellery etc. found/seized; inventory of
cash found/seized; all bear the name of the petitioner along
with the other persons in respect of whom warrant of
authorisation was issued.
16. Evidently therefore, the search had been conducted in
the case of the petitioner at the locations stated in the
authorisation. This court is in complete agreement with the
view taken the Delhi High Court in MDLR Resorts P. Ltd. v.
CIT (supra), to the effect that the address at which search
could be conducted would be the place or location, where
books of account, documents, jewellery, unaccounted assets,
etc. could be located/found and it need not be the registered
office/head office of the person concerned. Under the
circumstances, the contention that no proceedings under
section 153A of the Act could have been initiated against the
petitioner does not merit acceptance."
18. The High Court of Delhi in MDLR Resorts (P) Ltd. v.
CIT [2013 SCC OnLine Del 5174 / (2013) 40
taxmann.com 365], while examining the provisions of
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Sections 153A and 132 of the Act, as well as the search
warrant in Form No. 45, has critically analysed the issue as
under:
"11. Names of parties to be subjected to search have
been mentioned at two separate places on the first page of
search warrants Form No. 45. The first point or place refers to
pre-conditions mentioned in section 132(1)(a) and (b) and
the second point or place refers to the pre-conditions
stipulated in section 132(1)(c). Second page of the form
requires mentioning the address where the suspected books
of account, other documents, money, bullion, jewellery,
valuable articles, etc., were kept, by the persons who were
being subjected to search.
12. In the panchanamas relating to MDLR Estate P. Ltd.,
MDLR Hotels P. Ltd. and Shivgori Builders P. Ltd., it was
noticed that their names were not included in the names of
the persons mentioned in the column relating to clauses (a)
and (b) of section 132(1) of the Act. However, their names
were mentioned in the column relating to section 132(1)(c) of
the Act. In these circumstances, suspicion of the petitioners is
not affirmed. It does not impel us to form and decide the
contention in favour of the petitioners.
13. The contention with regard to their addresses being
different, is misconceived and mere ipse dixit. Address of a
company will normally mean its registered office, head office,
etc. A person can operate from or keep documents, money,
etc., at different places and not necessarily from the
registered office, etc., or from where business is conducted.
The address mentioned in the warrant and the panchanama
need not be the registered office or the head office but it has
to be the place where the search was to be conducted and
was conducted. The address at which search could be
conducted would be the place or location, where books of
account, documents, jewellery, unaccounted assets, etc.,
could be located/found."
19. From the aforesaid judgments, the following principles
emerge:
(i) The formation of "reason to believe" under Section
132(1) of the Act is required to be recorded in
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respect of a person, as contemplated under clauses
(a) to (c).
(ii) The competent authority must also have "reason to
suspect" that the books of account, documents,
money, bullion, jewellery, or other valuable articles
or things are kept in any building, place, vessel,
vehicle, or aircraft, and the authorization is issued
for the purposes enumerated in clauses (i) to (v) of
Section 132(1).
(iii) Where, in consequence of information in its
possession, the competent authority has reason to
believe that any of the conditions stipulated in
clauses (a) to (c) of Section 132(1) are satisfied, it
may authorize the designated officer to carry out
search and seizure operations in terms of clauses (i)
to (v).
(iv) The legislative scheme of Section 132 makes a clear
distinction between the person in respect of whom
satisfaction is recorded and the place where the
search is to be conducted. The location of the
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WA No. 382 of 2026
premises is incidental to, and consequent upon, the
satisfaction recorded against the person.
(v) The warrant of authorization is person-specific. The
name of the person reflected in the warrant of
authorization is determinative of the "searched
person".
(vi) A search under Section 132(1) of the Act is,
therefore, person-centric, being founded on the
"reason to believe" recorded against such person.
(vii) The expression in Section 153A, "where a search is
initiated under Section 132 in the case of a person"
refers to the person contemplated under clauses (a)
to (c) of Section 132(1), against whom the
satisfaction has been recorded.
(viii) The premises to be searched need not necessarily
belong to the said person. The authorized officer
may search any building, place, vessel, vehicle, or
aircraft where there is reason to suspect that the
specified materials are kept.
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(ix) The place of search may include the residential
premises, business premises, or even the premises
of a third party, depending upon where the
competent authority has reason to suspect that the
relevant materials are located.
(x) Thus, the address mentioned in the warrant of
authorization merely identifies the location where
the search is to be carried out and does not
determine the identity of the "searched person".
20. Learned counsel for the respondent has placed extensive
reliance on the judgment of this Court in CIT v. Sunil Kumar
Sharma (DB) (supra), as well as the order of the learned
Single Judge in the said case, to contend that the "searched
person" is the person whose premises is subjected to search
and from whom seizure is made.
21. Before examining the said contention, it is necessary to
note the chronology of the decisions. The order of the learned
Single Judge in Sunil Kumar Sharma, WP No.9937/2022 and
connected matters is dated 12.08.2022 and the judgment of
the Division Bench is dated 22.01.2024. However, the earlier
judgments of this Court dealing with the very same issue,
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WA No. 382 of 2026
namely C. Ramaiah Reddy v. CIT (supra) dated 08.09.2010
and CIT v. Associated Mining Company (supra) dated
22.07.2019, precede the aforesaid decisions.
22. It is also pertinent to note that the judgments of other
High Courts, including the High Court of Delhi, Rajasthan High
Court, and High Court of Gujarat, on the same issue, were
rendered much prior to both the decisions in Sunil Kumar
Sharma.
23. A perusal of the judgments in Sunil Kumar Sharma
would indicate that the earlier binding precedents of this Court
in C. Ramaiah Reddy (supra) and Associated Mining
Company (supra), as well as the judgments of the High Courts
of Delhi, Rajasthan and Gujarat on the issue, were not
considered therein.
24. This Court, in CIT v. Sunil Kumar Sharma (DB)
(supra), while considering the question as to the validity of the
notice issued under Section 153C of the Act and after referring
to the provisions of Section 153C of the Act, has held as under:
"30. ....... Thus, it transpires that the essential
conditions to invoke section 153C of the Income-tax Act,
1961 are:
(i) There must exist primary person on whom search
must be conducted.
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WA No. 382 of 2026
(ii) There must be discovery of documents found in the
custody of the "searched person" relating to the "other
person".
(iii) Such documents found must be incriminating
material to invoke proceedings against the "other
person".
As the title enunciates, "Assessment of income of any
other person", no search is sine qua non for issuance of
proceedings under section 153C of the Income-tax Act,
1961. The searched person in the instant case is the
petitioner, as the search was conducted in his premises,
which is evident from the panchanama. The distinction
between "searched person" and "other person" is
misinterpreted in the case advanced by the appellant-
Revenue, as the premises of the respondent were
searched and documents pertaining to him were seized,
thereby making him the searched person.
The stipulated conditions have not been satisfied in
the instant case."
25. The aforesaid conclusion has been arrived at primarily on
the basis of the panchanama. In this context, the High Court of
Delhi in MDLR Resorts (P) Ltd. v. CIT (supra), while
considering the judgment of this Court in CIT v. Wipro
Finance Ltd. [(2010) 323 ITR 467 (Karn)], has held as
under:
"17. What is noticeable is that the mandate and language
of section 153A(1) does not make any reference to
panchanama or the date of panchanama. It does not state
that the panchanama is a pre-condition for invoking the said
section. The words used by the Legislature are "search is
initiated under section 132.
"The word "initiate" means to commence or start. The
section is invoked and applicable when the search is
"initiated". In other words, the section ticks of and comes into
play when the search commences or is undertaken against a
person. The expression "initiate" had come up for
interpretation before the Karnataka High Court in CIT v.
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WA No. 382 of 2026
Wipro Finance Ltd. (2010) 323 ITR 467 (Karn) in relation to
sections 158BC, 158BD, etc., and it was observed that as per
the dictionary meaning, the said word refers to beginning,
commencement or start of proceedings. Reference was made
to the decision of the Supreme Court in Om Prakash Jaiswal
v. D.K. Mittal [2000] AIR 2000 SC 1136, wherein the
expression "initiate any proceedings for contempt" in section
20 of the Contempt of Courts Act, 1971, was interpreted. It
was held that the word "initiate" means introductory steps or
action or first move. Black's Law Dictionary was referred to
and it was observed that "initiation of contempt proceedings"
takes place when the court applies its mind to allegation and
decides to direct the alleged contemnor under section 17 to
show cause as to why he should not be punished. Thereafter,
reference was made to different factual situations. In Wipro
Finance's case (supra), it was accordingly observed (page
485):
"It is the settled principle that while assigning meaning
to any expression in any provision of a statute, the
context under which the particular expression is used has
to be borne in mind. Therefore, bearing in mind the
context in which the expression 'search initiated' has been
used under various sections of the Income-tax Act
including sections 158BA(1), 158BC, 158BD, 158BE(1)(a)
and (b) and 253A(1)(a) and (b) and also in the light of
examining the dictionary meaning of the word 'initiate' as
extracted by the High Court of Rajasthan at para. No. 34
of its judgment in the case of Rajasthan Udyog v. State of
Rajasthan, AIR 1978 Raj 31 referred to and also in the
light of the above observations of the hon'ble Supreme
Court in the case of Omprakash Jaiswal (supra) we may
safely assign to the expression 'search initiated'; the
meaning 'search taken' or 'search commenced' or 'making
beginning of the search'. If this is meant by expression
'search initiated' it cannot be held that the only signing of
the authorisations by the Director of Income-tax,
Bangalore, on December 30, 1996, to make a search in
the premises of the respective assessees would amount to
'initiation of search'. The signing of the 'authorisations'
would at best amount to 'taking of the decision by the said
authority to initiate search' in the premises of respective
assessees but not initiation of search itself."
26. As held by the High Court of Delhi, Section 153A of the
Act does not refer to the panchanama as a precondition for
invoking the said provision. In the present case, a copy of the
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panchanama has been placed before this Court in the
compilation filed by the respondent. The relevant portion
thereof reads as under:
PANCHANAMA
A) Warrant in the case of : Shri K. Narayan Raju
Party No. CRM-1,
B) Warrant to search : Residence of Shri C.R.
(Details & Ownership of Rammohan Raju No.24
the search) No.24, Lakshmi Niwas,
4th Cross Road, K.R. Layout,
J.P. Nagar, 6th Phase,
Bangalore.
26.1 Column 'A' of the panchanama refers to the warrant
issued in the case of the person, wherein the name of Sri K.
Narayan Raju is mentioned. Column 'B' pertains to the warrant
to search (details and ownership of the premises searched),
wherein the residential premises of the respondent is indicated.
Column 'A' thus corresponds to the person referred to in
clauses (a) to (c) of Section 132(1) of the Act, whereas Column
'B' relates to the place of search contemplated under clauses (i)
to (v) thereof.
26.2 While adverting to Column 'B', Column 'A' cannot be
disregarded. The determinative factor is the person against
whom "reason to believe" has been recorded under clauses (a)
to (c) of Section 132(1) of the Act.
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WA No. 382 of 2026
26.3 As held by the High Court of Delhi in MDLR Resorts (P)
Ltd. v. CIT (supra), the panchanama is not a precondition for
invoking Section 153A of the Act. In Sunil Kumar Sharma
(supra), this Court has proceeded on the basis that since the
search was conducted in the premises of the assessee and
documents pertaining to him were seized, it would render him
as the "searched person", as reflected in the panchanama.
27. However, the said judgment does not advert to or
consider the scheme of Sections 132 and 153A of the Act in
their proper perspective. Further, the earlier binding precedents
of this Court in C. Ramaiah Reddy (supra) and Associated
Mining Company (supra) have not been considered. The view
taken in Sunil Kumar Sharma (supra) being founded primarily
on the panchanama, runs contrary to the principles laid down in
the aforesaid judgments.
28. The view taken by this Court in C. Ramaiah Reddy
(supra) and Associated Mining Company (supra) is fortified
by the consistent line of reasoning adopted by other High
Courts, including the High Court of Delhi in MDLR Resorts (P)
Ltd (supra) and Shilpa Chowdhary (supra), the Rajasthan
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WA No. 382 of 2026
High Court in Smt. Umlesh Goel (supra) and the High Court of
Gujarat in Zinzuwadia & Sons (supra).
29. It is also pertinent to note that the judgment of the
learned Single Judge in Sunil Kumar Sharma does not take
into consideration the earlier Division Bench judgments of this
Court in C. Ramaiah Reddy (supra) and Associated Mining
Company (supra), as well as the judgments of the High Courts
of Delhi, Rajasthan and Gujarat, which were holding the field at
the relevant point of time.
30. The Five-Judge Bench of the High Court of Madhya
Pradesh, in Jabalpur Bus Operators Association v. State of
M.P., [2002 SCC OnLine MP 631], has held as under:
6. Article 141 of the Constitution of India envisages that--
"The law declared by the Supreme Court shall be binding
on all Courts within the territory of India."
Therefore, all Courts in India are bound to follow the
decision of the Apex Court, exception being doctrine of 'per
incuriam' and 'sub-silentio'. This article empowers the Apex
Court to declare the law which becomes the law of the land
which is essential for a proper administration of justice with
the expectation that like cases should be decided alike. Every
Court is bound to follow any case decided by a Court above it
in the hierarchy and Court is bound by precedents. A case is
regarded as a precedent when it furnishes rules which may be
applied in settling the rights of the parties. The doctrine
"Stare-decisis", commonly called "The doctrine of precedent"
means adherence to decide cases on settled principles and
not to disturb matters which have been established by judicial
decisions. The precedent should serve as a rule for future
guidance in deciding analogous cases (Words and Phrases,
Permanent Edition Vol. 33 P. 372-373). It cannot be doubted
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that in the development of law, promotion of consistency and
certainty in decisions on all the law is maintained and
inconsistency avoided. However, perusal of various decisions
demonstrates that the Apex Court and High Courts have been
called upon to consider the question of binding precedents
from time to time. Indisputable question is that the law
declared by the Supreme Court shall be binding on all Courts
within the territory of India. There seems no dispute to the
proposition that decision of larger Bench of the Apex Court is
binding on smaller Bench of the same Court and the High
Courts. The difficulty arises in case of conflict between the
two decisions by Benches consisting of same number of
Judges, whether to follow the earlier or later and in absence
of the Apex Court decision, similar difficulty may arise with
regard to the High Court decisions. The normal rule is that in
the absence of any decision of the Apex Court, subordinate
Courts are bound to follow the decisions of High Court to
which they are subordinate and where conflict is between the
judgments of a single Bench and Division Bench, Division
Bench decision will have to be followed and where there is
conflict between Division Bench and larger Bench, the
decision of larger Bench has to be followed. But where the
conflict is between two decisions pronounced by Benches
consisting of same number of Judges, difficulty arises which
decision is to be followed when after careful examinations of
the decisions, conclusion is that both of them directly apply to
the case before the Court, High Courts have expressed
different views, we have found, some taking the line that the
Court will be at liberty to follow that decision which seems to
it more correct irrespective of the fact it is earlier or later in
point of time while others hold that the earlier decision should
be followed.
30.1 The legal position governing precedential value has been
succinctly summarized by the Bombay High Court in CIT v.
Thana Electricity Supply Ltd. [1993 SCC OnLine Bom
591/(1994) 206 ITR 727(Bombay)], has held as under:
"20. From the foregoing discussion, the following
propositions emerge:
(a) The law declared by the Supreme Court being
binding on all courts in India, the decisions of the
Supreme Court are binding on all courts, except,
however, the Supreme Court itself which is free to
review the same and depart from its earlier opinion
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if the situation so warrants. What is binding is, of
course, the ratio of the decision and not every
expression found therein.
(b) The decisions of the High Court are binding on the
subordinate courts and authorities or Tribunals
under its superintendence throughout the
territories in relation to which it exercises
jurisdiction. It does not extend beyond its territorial
jurisdiction.
(c) The position in regard to the binding nature of the
decisions of a High Court on different Benches of
the same court may be summed up as follows:
(i) A single judge of a High Court is bound by
the decision of another single judge or a
Division Bench of the same High Court. It
would be judicial impropriety to ignore that
decision. Judicial comity demands that a
binding decision to which his attention had
been drawn should neither be ignored nor
overlooked. If he does not find himself in
agreement with the same, the proper
procedure is to refer the binding decision
and direct the papers to be placed before
the Chief Justice to enable him to constitute
a larger Bench to examine the question
(see Food Corporation of India v. Yadav
Engineer and Contractor, (1982) 2 SCC 499
: AIR 1982 SC 1302).
(ii) A Division Bench of a High Court should
follow the decision of another Division Bench
of equal strength or a Full Bench of the
same High Court. If one Division Bench
differs from another Division Bench of the
same High Court, it should refer the case to
a larger Bench.
(iii) Where there are conflicting decisions
of courts of co-ordinate jurisdiction, the
later decision is to be preferred if
reached after full consideration of the
earlier decisions. ..........
(Emphasis supplied)
30.2 In view of the principles summarized above, where there
are conflicting decisions of courts of coordinate jurisdiction, the
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later decision is to be preferred only if it is rendered after due
consideration of the earlier decisions.
31. In the present case, as noticed hereinabove, the Division
Bench of this Court in Sunil Kumar Sharma (supra) has not
considered or adverted to the earlier Division Bench judgments
of this Court in C. Ramaiah Reddy and Associated Mining
Company, which had already dealt with the identical issue. In
the absence of such consideration, the judgment in Sunil
Kumar Sharma (supra) cannot be regarded as laying down
the correct binding precedent on the issue.
32. The Hon'ble Supreme Court, in the following Judgments,
while analysing the law relating to binding precedents, ratio
decidendi, per incuriam, and sub silentio, has held as under;
(i) In CIT v. Sun Engineering Works (P) Ltd., [1992
SCC OnLine SC 287 / (1992) 198 ITR 297 (SC)] :
"39. ........ It is neither desirable nor permissible to pick out
a word or a sentence from the judgment of this Court,
divorced from the context of the question under consideration
and treat it to be the complete 'law' declared by this Court.
The judgment must be read as a whole and the observations
from the judgment have to be considered in the light of the
questions which were before this Court. A decision of this
Court takes its colour from the questions involved in the case
in which it is rendered and while applying the decision to a
later case, the courts must carefully try to ascertain the true
principle laid down by the decision of this Court and not to
pick out words or sentences from the judgment, divorced from
the context of the questions under consideration by this
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Court, to support their reasonings. In Madhav Rao
Scindia v. Union of India [(1971) 1 SCC 85 : (1971) 3 SCR 9]
this Court cautioned:
"It is not proper to regard a word, a clause or a
sentence occurring in a judgment of the Supreme Court,
divorced from its context, as containing a full exposition
of the law on a question when the question did not even
fall to be answered in that judgment."
(ii) In Bilkis Yakub Rasool v. Union of India, [2024 SCC
OnLine SC 25] :
"152. In the earlier litigation of Synthetics &
Chemicals [Synthetics & Chemicals Ltd. v. State of U.P.,
(1990) 1 SCC 109] , the question was whether the State
Legislature could levy vend fee or excise duty on industrial
alcohol. The seven-Judge Bench [Synthetics & Chemicals
Ltd. v. State of U.P., (1990) 1 SCC 109] answered in the
negative as industrial alcohol being unfit for human
consumption, the State Legislature was incompetent to levy
any duty of excise either under Entry 51 or Entry 8 of List II
of Schedule VII. While doing so, the Bench recorded the
above conclusion. It was not preceded by any discussion. No
reason or rationale could be found in the judgment.
Therefore, it was held by the two-Judge Bench [State of
U.P. v. Synthetics & Chemicals Ltd., (1991) 4 SCC 139] that
the same was per incuriam and was liable to be ignored in a
subsequent matter between the same parties. The courts
have taken recourse to this principle for relieving from
injustice being perpetrated by unjust precedents. It was
observed that uniformity and consistency are core of judicial
discipline. But, if a decision proceeds contrary to the law
declared, it cannot be a binding precedent. It was further
observed that the seven-Judge Bench in Synthetics &
Chemicals [Synthetics & Chemicals Ltd. v. State of U.P.,
(1990) 1 SCC 109] did not discuss the matter and had
observed that the State cannot levy sales tax on industrial
alcohol. In the subsequent matter which arose from the High
Court between the same parties, it was held by this Court
that the conclusion of law by the Constitution Bench that no
sales or purchase tax could be levied on industrial alcohol was
per incuriam and also covered by the rule of sub silentio and
therefore, was not a binding authority or precedent.
153. Thus, although it is the ratio decidendi which is a
precedent and not the final order in the judgment, however,
there are certain exceptions to the rule of precedents which
are expressed by the doctrines of per incuriam and sub
silentio. Incuria legally means carelessness and per incuriam
may be equated with per ignoratium. If a judgment is
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rendered in ignoratium of a statute or a binding authority, it
becomes a decision per incuriam. Thus, a decision rendered
by ignorance of a previous binding decision of its own or of a
court of coordinate or higher jurisdiction or in ignorance of
the terms of a statute or of a rule having the force of law is
per incuriam. Such a per incuriam decision would not have a
precedential value. If a decision has been rendered per
incuriam, it cannot be said that it lays down good law, even if
it has not been expressly overruled vide Mukesh K.
Tripathi v. LIC [Mukesh K. Tripathi v. LIC, (2004) 8 SCC 387 :
2004 SCC (L&S) 1128] , para 23. Thus, a decision per
incuriam is not binding.
154. Another exception to the rule of precedents is the
rule of sub silentio. A decision is passed sub silentio when the
particular point of law in a decision is not perceived by the
court or not present to its mind or is not consciously
determined by the court and it does not form part of the ratio
decidendi it is not binding vide Arnit Das (1) v. State of
Bihar [Arnit Das (1) v. State of Bihar, (2000) 5 SCC 488 :
2000 SCC (Cri) 962] ."
(iii) In Property Owners Association v. State of
Maharashtra, [2024 SCC OnLine SC 3122] :
"153. Not every observation in a judgment of this Court is
binding as precedent. Only the ratio decidendi or the
propositions of law that were necessary to decide on the
issues between the parties are binding. [Halsbury, 2nd Edn.,
Vol. 19, Para 556.] Observations by the Judge, even
determinative statements of law, which are not part of her
reasoning on a question or issue before the court, are termed
obiter dicta. Such observations do not bind the court. More
simply, a case is only an authority for what
it actually decides."
(iv) In Union of India v. Dhanwanti Devi, [(1996) 6 SCC
44] :
"9. Before adverting to and considering whether solatium
and interest would be payable under the Act, at the outset,
we will dispose of the objection raised by Shri Vaidyanathan
that Hari Krishan Khosla case [1993 Supp (2) SCC 149] is not
a binding precedent nor does it operate as ratio decidendi to
be followed as a precedent and is per se per incuriam. It is
not everything said by a Judge while giving judgment that
constitutes a precedent. The only thing in a Judge's decision
binding a party is the principle upon which the case is decided
and for this reason it is important to analyse a decision and
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isolate from it the ratio decidendi. According to the well-
settled theory of precedents, every decision contains three
basic postulates--(i) findings of material facts, direct and
inferential. An inferential finding of facts is the inference
which the Judge draws from the direct, or perceptible facts;
(ii) statements of the principles of law applicable to the legal
problems disclosed by the facts; and (iii) judgment based on
the combined effect of the above. A decision is only an
authority for what it actually decides. What is of the essence
in a decision is its ratio and not every observation found
therein nor what logically follows from the various
observations made in the judgment. Every judgment must be
read as applicable to the particular facts proved, or assumed
to be proved, since the generality of the expressions which
may be found there is not intended to be exposition of the
whole law, but governed and qualified by the particular facts
of the case in which such expressions are to be found. It
would, therefore, be not profitable to extract a sentence here
and there from the judgment and to build upon it because the
essence of the decision is its ratio and not every observation
found therein. The enunciation of the reason or principle on
which a question before a court has been decided is alone
binding as a precedent. The concrete decision alone is binding
between the parties to it, but it is the abstract ratio decidendi,
ascertained on a consideration of the judgment in relation to
the subject-matter of the decision, which alone has the force
of law and which, when it is clear what it was, is binding. It is
only the principle laid down in the judgment that is binding
law under Article 141 of the Constitution. A deliberate judicial
decision arrived at after hearing an argument on a question
which arises in the case or is put in issue may constitute a
precedent, no matter for what reason, and the precedent by
long recognition may mature into rule of stare decisis. It is
the rule deductible from the application of law to the facts
and circumstances of the case which constitutes its ratio
decidendi.
10. Therefore, in order to understand and appreciate the
binding force of a decision it is always necessary to see what
were the facts in the case in which the decision was given and
what was the point which had to be decided. No judgment
can be read as if it is a statute. A word or a clause or a
sentence in the judgment cannot be regarded as a full
exposition of law. Law cannot afford to be static and
therefore, Judges are to employ an intelligent technique in
the use of precedents. It would, therefore, be necessary to
see whether Hari Krishan Khosla case [1993 Supp (2) SCC
149] would form a binding precedent. Therein, admittedly the
question that had arisen and was decided by the Bench of
three Judges was whether solatium and interest are payable
to an owner whose land was acquired under the provisions of
the Central Act? On consideration of the facts, the relevant
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provisions in the Central Act and the previous precedents
bearing on the topic, the Court had held that solatium and
interest are not a part of compensation. It is a facet of the
principle in the statute. The Central Act omitted to provide for
payment of solatium and interest since preceding the
acquisition the property was under requisition during which
period compensation was paid to the owner. The position
obtained and enjoyed by the Government during the period of
requisition continued after acquisition. The same principle was
applied without further elaboration on entitlement to payment
of interest of an owner. It is true that the decisions relied on
by Shri Vaidyanathan on the principle of payment of interest
as part of compensation in respect of land acquired were
brought to the attention of this Court for discussion. What
would be its purport would be considered a little later. Suffice
it to say for the present that the finding that solatium and
interest are not payable for the lands acquired under the
Central Act as part of compensation is a binding precedent.
Obviously, therefore, this Court followed the ratio therein
in Distt. Judge case [(1994) 4 SCC 737 : JT (1994) 3 SC
629]. The contention, therefore, that Hari Krishan Khosla
case [1993 Supp (2) SCC 149] cannot be treated as a binding
precedent since therein there is no ratio but a conclusion
without discussion, is not tenable and devoid of force. In that
view, it is not necessary to discuss in extenso the effect of the
decisions cited by Shri Vaidyanathan. Equally, the contention
of Shri Vaidyanathan that the ratio in Hari Krishan Khosla
case [1993 Supp (2) SCC 149] is in conflict with the ratio
in Satinder Singh case [(1961) 3 SCR 676 : AIR 1961 SC
908] which was neither distinguished nor overruled and that
the decision of a coordinate Bench cannot have the effect of
overruling decision of another coordinate Bench, cannot be
given countenance. The effect of the ratio in Satinder Singh
case [(1961) 3 SCR 676 : AIR 1961 SC 908] will be
considered a little later; suffice it to state that there is no
conflict in the ratio of these two cases if the facts in Satinder
Singh case [(1961) 3 SCR 676 : AIR 1961 SC 908] are closely
analysed and the principle laid down therein is understood in
its proper perspective. Therefore, Hari Krishan Khosla
case [1993 Supp (2) SCC 149] cannot be held to be per
incuriam nor has it the effect of overruling the ratio
decidendi of Satinder Singh case [(1961) 3 SCR 676 : AIR
1961 SC 908] ."
(v) In MCD v. Gurnam Kaur, [1988 SCC OnLine SC
259]:
"11. Pronouncements of law, which are not part of the
ratio decidendi are classed as obiter dicta and are not
authoritative. With all respect to the learned Judge who
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passed the order in Jamna Das case [ Writ Petitions Nos. 981-
82 of 1984] and to the learned Judge who agreed with him,
we cannot concede that this Court is bound to follow it. It was
delivered without argument, without reference to the relevant
provisions of the Act conferring express power on the
Municipal Corporation to direct removal of encroachments
from any public place like pavements or public streets, and
without any citation of authority. Accordingly, we do not
propose to uphold the decision of the High Court because, it
seems to us that it is wrong in principle and cannot be
justified by the terms of the relevant provisions. A decision
should be treated as given per incuriam when it is given in
ignorance of the terms of a statute or of a rule having the
force of a statute. So far as the order shows, no argument
was addressed to the court on the question whether or not
any direction could properly be made compelling the
Municipal Corporation to construct a stall at the pitching site
of a pavement squatter. Professor P.J. Fitzgerald, editor of
the Salmond on Jurisprudence, 12th Edn. explains the
concept of sub silentio at p. 153 in these words:
A decision passes sub silentio, in the technical
sense that has come to be attached to that
phrase, when the particular point of law involved
in the decision is not perceived by the court or
present to its mind. The court may consciously
decide in favour of one party because of point A,
which it considers and pronounces upon. It may
be shown, however, that logically the court should
not have decided in favour of the particular party
unless it also decided point B in his favour; but
point B was not argued or considered by the
court. In such circumstances, although point B
was logically involved in the facts and although
the case had a specific outcome, the decision is
not an authority on point B. Point B is said to pass
sub silentio.
12. In Gerard v. Worth of Paris Ltd. (k). [(1936) 2 All ER
905 (CA)] , the only point argued was on the question of
priority of the claimant's debt, and, on this argument being
heard, the court granted the order. No consideration was
given to the question whether a garnishee order could
properly be made on an account standing in the name of the
liquidator. When, therefore, this very point was argued in a
subsequent case before the Court of Appeal in Lancaster
Motor Co. (London) Ltd. v. Bremith Ltd. [(1941) 1 KB 675] ,
the court held itself not bound by its previous decision. Sir
Wilfrid Greene, M.R., said that he could not help thinking that
the point now raised had been deliberately passed sub
silentio by counsel in order that the point of substance might
be decided. He went on to say that the point had to be
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decided by the earlier court before it could make the order
which it did; nevertheless, since it was decided "without
argument, without reference to the crucial words of the rule,
and without any citation of authority", it was not binding and
would not be followed. Precedents sub silentio and without
argument are of no moment. This rule has ever since been
followed. One of the chief reasons for the doctrine of
precedent is that a matter that has once been fully argued
and decided should not be allowed to be reopened. The
weight accorded to dicta varies with the type of dictum. Mere
casual expressions carry no weight at all. Not every passing
expression of a judge, however eminent, can be treated as
an ex cathedra statement, having the weight of authority."
(vi) In Secunderabad Club v. CIT, [2023 SCC OnLine
SC 1004/ (2023) 457 ITR 263]:
"65. Reliance could also be placed on the dissenting
judgment of A.P. Sen, J. in Dalbir Singh v. State of
Punjab [Dalbir Singh v. State of Punjab, (1979) 3 SCC 745 :
1979 SCC (Cri) 848] , wherein his Lordship observed that a
decision on a question of sentence depending upon the facts
and circumstances of a particular case, can never be regarded
as a binding precedent, much less "law declared" within the
meaning of Article 141 of the Constitution so as to bind all
courts within the territory of India. According to the well-
settled theory of precedents, every decision contains three
basic ingredients:
(i) findings of material facts, direct and inferential. An
nferential finding of fact is the inference which the Judge
draws from the direct or perceptible facts;
(ii) statements of the principles of law applicable to the
legal problems disclosed by the facts; and
(iii) judgment based on the combined effect of (i) and (ii)
above.
For the purposes of the parties themselves and their
privies, ingredient (iii) is the material element in the
decision, for, it determines finally their rights and liabilities in
relation to the subject-matter of the action. It is the
judgment that estops the parties from reopening the dispute.
However, for the purpose of the doctrine of precedent,
ingredient (ii) is the vital element in the decision. This is
the ratio decidendi. It is not everything said by a Judge when
giving a judgment that constitutes a precedent. The only
thing in a Judge's decision binding a party is the principle
upon which the case is decided and for this reason it is
important to analyse a decision and isolate from it the ratio
decidendi."
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"69. The doctrine of binding precedent helps in promoting
certainty and consistency in judicial decisions and enables an
organic development of the law besides providing assurance
to individuals as to the consequences of transactions forming
part of daily affairs. Thus, what is binding in terms of Article
141 of the Constitution is the ratio of the judgment and as
already noted, the ratio decidendi of a judgment is the reason
assigned in support of the conclusion. The reasoning of a
judgment can be discerned only upon reading of a judgment
in its entirety and the same has to be culled out thereafter.
The ratio of the case has to be deduced from the facts
involved in the case and the particular provision(s) of law
which the court has applied or interpreted and the decision
has to be read in the context of the particular statutory
provisions involved in the matter. Thus, an order made
merely to dispose of the case cannot have the value or effect
of a binding precedent.
70. What is binding, therefore, is the principle underlying
a decision which must be discerned in the context of the
question(s) involved in that case from which the decision
takes its colour. In a subsequent case, a decision cannot be
relied upon in support of a proposition that it did not decide.
Therefore, the context or the question, while considering
which, a judgment has been rendered assumes significance.
71. As against the ratio decidendi of a judgment,
an obiter dictum is an observation by a court on a legal
question which may not be necessary for the decision
pronounced by the court. However, the obiter dictum of the
Supreme Court is binding under Article 141 to the extent of
the observations on points raised and decided by the Court in
a case. Although the obiter dictum of the Supreme Court is
binding on all courts, it has only persuasive authority as far as
the Supreme Court itself is concerned."
(vii) In Haryana Financial Corpn. v. Jagdamba Oil Mills,
2002 SCC OnLine SC 140 :
"19. Courts should not place reliance on decisions without
discussing as to how the factual situation fits in with the fact
situation of the decision on which reliance is placed.
Observations of courts are not to be read as Euclid's
theorems nor as provisions of the statute. These observations
must be read in the context in which they appear. Judgments
of courts are not to be construed as statutes. To interpret
words, phrases and provisions of a statute, it may become
necessary for Judges to embark upon lengthy discussions but
the discussion is meant to explain and not to define. Judges
interpret statutes, they do not interpret judgments. They
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interpret words of statutes, their words are not to be
interpreted as statutes. In London Graving Dock Co.
Ltd. v. Horton [1951 AC 737 : (1951) 2 All ER 1 (HL)] (at p.
761) Lord MacDermot observed : (All ER p. 14C-D)
"The matter cannot, of course, be settled
merely by treating the ipsissima verba of
Willes, J., as though they were part of an Act
of Parliament and applying the rules of
interpretation appropriate thereto. This is not
to detract from the great weight to be given
to the language actually used by that most
distinguished Judge."
21. Circumstantial flexibility, one additional or different fact
may make a world of difference between conclusions in two
cases. Disposal of cases by blindly placing reliance on a
decision is not proper."
33. If the binding nature of the judgment of this Court in
Sunil Kumar Sharma (supra), rendered by a Division Bench,
is examined in the context of the earlier decisions on the very
same issue in C. Ramaiah Reddy (supra) and Associated
Mining Company Ltd. (supra), the principle of per incuriam
would aptly apply. The said decision has been rendered without
consideration of the statutory provisions of Section 132, 153A,
153C and the aforesaid judgments of this Court in C. Ramaiah
Reddy (supra) and Associated Mining Company Ltd.
(supra).
34. Further, the judgment in Sunil Kumar Sharma (supra)
has not considered two judgments of the High Court of Delhi
and one judgment each of the High Courts of Gujarat and
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Rajasthan, wherein the identical issue has been decided, laying
down principles consistent with those enunciated in C.
Ramaiah Reddy (supra) and Associated Mining Company
Ltd. (supra). All the aforesaid judgments were rendered much
prior even to the order of the learned Single Judge in Sunil
Kumar Sharma (supra).
35. In the light of the principles laid down by the Hon'ble
Supreme Court in Bilkis Yakub Rasool (supra) and other
judgments referred (supra), we are inclined to follow the earlier
judgments of this Court in C. Ramaiah Reddy (supra) and
Associated Mining Company Ltd. (supra), wherein the
provisions of Section 132 have been analysed in detail and the
judgments of other High Courts on the same issue have also
been duly considered.
36. In that view of the matter, we deem it appropriate to
follow the principles laid down by the earlier Division Benches
of this Court in C. Ramaiah Reddy (supra) and Associated
Mining Company (supra).
37. Learned counsel for the respondent, however, contended
that the Special Leave Petition preferred by the Revenue
against the judgment of the Division Bench in Sunil Kumar
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Sharma (supra) has been dismissed by the Hon'ble Supreme
Court, and that the review petition filed thereafter has also
been rejected. In support of the said contention, reliance is
placed on the orders passed by the Hon'ble Supreme Court
dismissing the Special Leave Petition as well as the review
petition. The Hon'ble Supreme Court, while dismissing the
Special Leave Petition, has observed as under:
"We are not inclined to interfere with the impugned judgment
passed by the High Court. Hence, the special leave petitions are
dismissed."
38. The Hon'ble Supreme Court in Kunhayammed v. State
of Kerala [2000 SCC OnLine SC 1008] has held that
dismissal of a Special Leave Petition without assigning reasons
does not amount to affirmation of the judgment impugned
therein. It is also well settled that where an SLP is dismissed
without a speaking order, the doctrine of merger does not
apply. The Hon'ble Supreme Court, in paragraphs 25, 26
and 27, has held as under:
"Dismissal of SLP by speaking or reasoned order -- no merger
but rule of discipline and Article 141 attracted
25. The efficacy of an order disposing of a special leave
petition under Article 136 of the Constitution came up for the
consideration of the Constitution Bench in Penu Balakrishna
Iyer v. Ariya M. Ramaswami Iyer [AIR 1965 SC 195 : (1964)
7 SCR 49] in the context of revocation of a special leave once
granted. This Court held that in a given case if the respondent
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brings to the notice of the Supreme Court facts which would
justify the Court in revoking the leave earlier granted by it,
the Supreme Court would in the interest of justice not
hesitate to adopt that course. It was therefore held that no
general rules could be laid down governing the exercise of
wide powers conferred on this Court under Article 136;
whether the jurisdiction of this Court under Article 136 should
be exercised or not and if used, on what terms and conditions,
is a matter depending on the facts of each case. If at the
stage when special leave is granted the respondent-caveator
appears and resists the grant of special leave and the ground
urged in support of resisting the grant of special leave is
rejected on merits resulting in grant of special leave then it
would not be open to the respondent to raise the same point
over again at the time of the final hearing of the appeal.
However, if the respondent-caveator does not appear, or
having appeared, does not raise a point, or even if he raised a
point and the Court does not decide it before grant of special
leave, the same point can be raised at the time of final
hearing. There would be no technical bar of res judicata. The
Constitution Bench thus makes it clear that the order
disposing of a special leave petition has finality of a limited
nature extending only to the points expressly decided by it.
26. The underlying logic attaching efficacy to an order of the
Supreme Court dismissing SLP after hearing counsel for the
parties is discernible from a recent three-Judge Bench
decision of this Court in Abbai Maligai Partnership Firm v. K.
Santhakumaran [(1998) 7 SCC 386] . In the matter of
eviction proceeding initiated before the Rent Controller, the
order passed therein was subjected to appeal and then
revision before the High Court. Special leave petitions were
preferred before the Supreme Court where the respondents
were present on caveat. Both the sides were heard through
the Senior Advocates representing them. The special leave
petitions were dismissed. The High Court thereafter
entertained review petitions which were highly belated and
having condoned the delay reversed the orders made earlier
in civil revision petitions. The orders in review were
challenged by filing appeals under leave granted on special
leave petitions. This Court observed that what was done by
the learned Single Judge was "subversive of judicial
discipline". The facts and circumstances of the case persuaded
this Court to form an opinion that the tenants were indulging
in vexatious litigations, abusing the process of the Court by
approaching the High Court and the very entertainment of
review petitions (after condoning a long delay of 221 days)
and then reversing the earlier orders was an affront to the
order of this Court. However the learned Judges deciding the
case have nowhere in the course of their judgment relied on
doctrine of merger for taking the view they have done. A
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careful reading of this decision brings out the correct
statement of law and fortifies us in taking the view as under.
27. A petition for leave to appeal to this Court may be
dismissed by a non-speaking order or by a speaking order.
Whatever be the phraseology employed in the order of
dismissal, if it is a non-speaking order, i.e., it does not assign
reasons for dismissing the special leave petition, it would
neither attract the doctrine of merger so as to stand
substituted in place of the order put in issue before it nor
would it be a declaration of law by the Supreme Court under
Article 141 of the Constitution for there is no law which has
been declared. If the order of dismissal be supported by
reasons then also the doctrine of merger would not be
attracted because the jurisdiction exercised was not an
appellate jurisdiction but merely a discretionary jurisdiction
refusing to grant leave to appeal. We have already dealt with
this aspect earlier. Still the reasons stated by the Court would
attract applicability of Article 141 of the Constitution if there is
a law declared by the Supreme Court which obviously would
be binding on all the courts and tribunals in India and
certainly the parties thereto. The statement contained in the
order other than on points of law would be binding on the
parties and the court or tribunal, whose order was under
challenge on the principle of judicial discipline, this Court
being the Apex Court of the country. No court or tribunal or
parties would have the liberty of taking or canvassing any
view contrary to the one expressed by this Court. The order of
Supreme Court would mean that it has declared the law and
in that light the case was considered not fit for grant of leave.
The declaration of law will be governed by Article 141 but still,
the case not being one where leave was granted, the doctrine
of merger does not apply. The Court sometimes leaves the
question of law open. Or it sometimes briefly lays down the
principle, may be, contrary to the one laid down by the High
Court and yet would dismiss the special leave petition. The
reasons given are intended for purposes of Article 141. This is
so done because in the event of merely dismissing the special
leave petition, it is likely that an argument could be advanced
in the High Court that the Supreme Court has to be
understood as not to have differed in law with the High
Court."
38.1 In that view of the matter, we are unable to accept the
contention urged on behalf of the respondent that the dismissal
of the Special Leave Petition filed by the Revenue amounts to
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affirmation of the judgment of the Division Bench of this Court
in Sunil Kumar Sharma (supra).
39. Learned counsel for the respondent has raised an
additional contention with regard to the validity of the
satisfaction note recorded under Section 153C of the Act. It is
contended that a separate satisfaction note is required to be
recorded for each assessment year, and that a consolidated
satisfaction note would vitiate the entire assessment
proceedings. This issue has not been addressed by the learned
Single Judge. In view of the said contention being urged before
us, we deem it appropriate to examine the same. Section
153C(1) of the Act reads as under:
Assessment of income of any other person.
153C. (1) Notwithstanding anything contained in section
139, section 147, section 148, section 149, section
151 and section 153, where the Assessing Officer is satisfied
that,--
(a) any money, bullion, jewellery or other
valuable article or thing, seized or
requisitioned, belongs to; or
(b) any books of account or documents, seized
or requisitioned, pertains or pertain to, or
any information contained therein, relates
to,
a person other than the person referred to in section 153A,
then, the books of account or documents or assets, seized or
requisitioned shall be handed over to the Assessing Officer
having jurisdiction over such other person and that
Assessing Officer shall proceed against each such other
person and issue notice and assess or reassess the income
of the other person in accordance with the provisions
of section 153A, if, that Assessing Officer is satisfied that the
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books of account or documents or assets seized or
requisitioned have a bearing on the determination of the
total income of such other person 2[for six assessment years
immediately preceding the assessment year relevant to the
previous year in which search is conducted or requisition is
made and] for the relevant assessment year or years
referred to in sub-section (1) of section 153A :
Provided that in case of such other person, the reference to
the date of initiation of the search under section 132 or
making of requisition under section 132A in the second
proviso to sub-section (1) of section 153A shall be construed
as reference to the date of receiving the books of account or
documents or assets seized or requisitioned by the Assessing
Officer having jurisdiction over such other person :
Provided further that the Central Government may by
rules made by it and published in the Official Gazette,
specify the class or classes of cases in respect of such other
person, in which the Assessing Officer shall not be required
to issue notice for assessing or reassessing the total income
for six assessment years immediately preceding the
assessment year relevant to the previous year in which
search is conducted or requisition is made 3[and for the
relevant assessment year or years as referred to in sub-
section (1) of section 153A] except in cases where any
assessment or reassessment has abated.
40. Section 153C was introduced into the statute by the
Finance Act, 2003. Prior to its insertion, the corresponding
provision governing such cases was Section 158BD of the Act,
which is pari materia to Section 153C. The said provision reads
as under:
Undisclosed income of any other person.
158BD. Where the Assessing Officer is satisfied that any
undisclosed income belongs to any person, other than the
person with respect to whom search was made under section
132 or whose books of account or other documents or any
assets were requisitioned under section 132A, then, the
books of account, other documents or assets seized or
requisitioned shall be handed over to the Assessing Officer
having jurisdiction over such other person and that
Assessing Officer shall proceed under section 158BC against
such other person and the provisions of this Chapter shall
apply accordingly.
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41. Before adverting to the submissions made by the learned
counsel for the respondent, it is both relevant and appropriate
to notice the legal position as declared by the Hon'ble Supreme
Court and this Court.
42. The Central Board of Direct Taxes, in Circular No. 24 of
2015 dated 31.12.2015, has clarified that the interpretation
placed by the Hon'ble Supreme Court in CIT v. Calcutta
Knitwears [2014 SCC OnLine SC 227 / (2014) 362 ITR
673], while construing Section 158BD of the Act, would equally
apply to proceedings under Section 153C of the Act, the said
provisions being substantially similar and pari materia.
43. The Hon'ble Supreme Court in CIT v. Calcutta
Knitwears (supra), upon an elaborate and detailed analysis of
the provisions contained in Chapter XIV-B of the Act, has laid
down the conditions precedent for invoking Section 158BD of
the Act, as under:
"35. Having said that, let us revert to the discussion of
Section 158-BD of the Act. The said provision is a machinery
provision and inserted in the statute book for the purpose of
carrying out assessments of a person other than the searched
person under Sections 132 or 132-A of the Act. Under Section
158-BD of the Act, if an officer is satisfied that there exists
any undisclosed income which may belong to any other
person other than the searched person under Sections 132 or
132-A of the Act, after recording such satisfaction, may
transmit the records/documents/chits/papers, etc. to the
assessing officer having jurisdiction over such other person.
After receipt of the aforesaid satisfaction and upon
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examination of the said other documents relating to such
other person, the jurisdictional assessing officer may proceed
to issue a notice for the purpose of completion of the
assessments under Section 158-BD of the Act, the other
provisions of Chapter XIV-B shall apply.
36. The opening words of Section 158-BD of the Act are
that the assessing officer must be satisfied that "undisclosed
income" belongs to any other person other than the person
with respect to whom a search was made under Section 132
of the Act or a requisition of books was made under Section
132-A of the Act and thereafter, transmit the records for
assessment of such other person. Therefore, the short
question that falls for our consideration and decision is at
what stage of the proceedings should the satisfaction note be
prepared by the assessing officer: whether at the time of
initiating proceedings under Section 158-BC for the
completion of the assessments of the searched person under
Sections 132 and 132-A of the Act or during the course of the
assessment proceedings under Section 158-BC of the Act or
after completion of the proceedings under Section 158-BC of
the Act.
37. The Tribunal and the High Court are of the opinion
that it could only be prepared by the assessing officer during
the course of the assessment proceedings under Section 158-
BC of the Act and not after the completion of the said
proceedings. The courts below have relied upon the limitation
period provided in Section 158-BE(2)(b) of the Act in respect
of the assessment proceedings initiated under Section 158-
BD i.e. two years from the end of the month in which the
notice under Chapter XIV-B was served on such other person
in respect of search initiated or books of account or other
documents or any assets are requisitioned on or after 1-1-
1997. We would examine whether the Tribunal or the High
Court are justified in coming to the aforesaid conclusion.
38. We would certainly say that before initiating
proceedings under Section 158-BD of the Act, the assessing
officer who has initiated proceedings for completion of the
assessments under Section 158-BC of the Act should be
satisfied that there is an undisclosed income which has been
traced out when a person was searched under Section 132 or
the books of accounts were requisitioned under Section 132-A
of the Act. This is in contrast to the provisions of Section 148
of the Act where recording of reasons in writing are a sine
qua non. Under Section 158-BD the existence of cogent and
demonstrative material is germane to the assessing officers'
satisfaction in concluding that the seized documents belong to
a person other than the searched person is necessary for
initiation of action under Section 158-BD. The bare reading of
the provision indicates that the satisfaction note could be
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prepared by the assessing officer either at the time of
initiating proceedings for completion of assessment of a
searched person under Section 158-BC of the Act or during
the stage of the assessment proceedings. It does not mean
that after completion of the assessment, the assessing officer
cannot prepare the satisfaction note to the effect that there
exists income tax belonging to any person other than the
searched person in respect of whom a search was made
under Section 132 or requisition of books of accounts was
made under Section 132-A of the Act. The language of the
provision is clear and unambiguous. The legislature has not
imposed any embargo on the assessing officer in respect of
the stage of proceedings during which the satisfaction is to be
reached and recorded in respect of the person other than the
searched person."
44. A similar issue concerning the interpretation of Section
153C of the Act came up for consideration before the Hon'ble
Supreme Court in Super Malls (P) Ltd. v. CIT [2020 SCC
OnLine SC 306]. Applying the principles laid down in
Calcutta Knitwears (supra), it has been held as under:
"7. This Court had an occasion to consider the scheme of
Section 153-C of the Act and the conditions precedent to be
fulfilled/complied with before issuing notice under Section 153-
C of the Act in Calcutta Knitwears [CIT v. Calcutta Knitwears,
(2014) 6 SCC 444] as well as by the Delhi High Court in Pepsi
Food (P) Ltd. [Pepsi Food (P) Ltd. v. CIT, 2014 SCC OnLine Del
4029 : (2014) 367 ITR 112] As held, before issuing notice
under Section 153-C of the Act, the assessing officer of the
searched person must be "satisfied" that, inter alia, any
document seized or requisitioned "belongs to" a person other
than the searched person. That thereafter, after recording such
satisfaction by the assessing officer of the searched person, he
may transmit the records/documents/things/papers, etc. to the
assessing officer having jurisdiction over such other person.
After receipt of the aforesaid satisfaction and upon examination
of such other documents relating to such other person, the
jurisdictional assessing officer may proceed to issue a notice for
the purpose of completion of the assessment under Section
158-BD of the Act and the other provisions of Chapter XIV-B
shall apply.
7.1. It cannot be disputed that the aforesaid requirements
are held to be mandatorily complied with. There can be two
eventualities. It may so happen that the assessing officer of the
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searched person is different from the assessing officer of the
other person and in the second eventuality, the assessing
officer of the searched person and the other person is the
same. Where the assessing officer of the searched person is
different from the assessing officer of the other person, there
shall be a satisfaction note by the assessing officer of the
searched person and as observed hereinabove that thereafter
the assessing officer of the searched person is required to
transmit the documents so seized to the assessing officer of the
other person. The assessing officer of the searched person
simultaneously while transmitting the documents shall forward
his satisfaction note to the assessing officer of the other person
and is also required to make a note in the file of a searched
person that he has done so. However, as rightly observed and
held by the Delhi High Court in Ganpati Fincap [Ganpati Fincap
Service (P) Ltd. v. CIT, 2017 SCC OnLine Del 8666 : (2017)
395 ITR 692] , the same is for the administrative convenience
and the failure by the assessing officer of the searched person,
after preparing and dispatching the satisfaction note and the
documents to the assessing officer of the other person, to make
a note in the file of a searched person, will not vitiate the entire
proceedings under Section 153-C of the Act against the other
person. At the same time, the satisfaction note by the
assessing officer of the searched person that the documents,
etc. so seized during the search and seizure from the searched
person belonged to the other person and transmitting such
material to the assessing officer of the other person is
mandatory. However, in the case where the assessing officer of
the searched person and the other person is the same, it is
sufficient by the assessing officer to note in the satisfaction
note that the documents seized from the searched person
belonged to the other person. Once the note says so, then the
requirement of Section 153-C of the Act is fulfilled. In case,
where the assessing officer of the searched person and the
other person is the same, there can be one satisfaction note
prepared by the assessing officer, as he himself is the assessing
officer of the searched person and also the assessing officer of
the other person. However, as observed hereinabove, he must
be conscious and satisfied that the documents seized/recovered
from the searched person belonged to the other person. In such
a situation, the satisfaction note would be qua the other person.
The second requirement of transmitting the documents so
seized from the searched person would not be there as he
himself will be the assessing officer of the searched person and
the other person and therefore there is no question of
transmitting such seized documents to himself.
45. Similarly, Section 153C of the Act came up for
consideration before a Division Bench of this Court in
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Commissioner of Income Tax v. IBC Knowledge Park Pvt.
Ltd, [2016 SCC Online Kar 6036 / (2016) 385 ITR 346
(Karnataka)]. This Court, after noting that Section 153C is
pari materia with Section 158BD of the Act, has held as under:
"50. xxxxx
Section 153C is in pari materia with section 158BD
conferring jurisdiction over third parties to a search
providing certain conditions before the Assessing Officer
having jurisdiction over a third party can assume
jurisdiction. Materials such as books of account,
documents or valuable assets found during a search
should belong to a third party which would lead to an
inference of undisclosed income of such third party. Such
an inference should be recorded by the Assessing Officer
having jurisdiction over the searched persons and
communicated to the Assessing Officer having jurisdiction
over such third party along with the seized documents and
other incriminating materials on the basis of which the
Assessing Officer having jurisdiction over such third party
would issue notice under section 153C. On receipt of the
aforesaid material, the Assessing Officer having
jurisdiction over such third party would proceed against
the said third party. Thus, where no material belonging to
a third party is found during a search, but only an
inference of an undisclosed income is drawn during the
course of enquiry, during search or during post-search
enquiry, section 153C would have no application. Thus,
the detection of incriminating material leading to an
inference of undisclosed income is a sine qua non for
invocation of section 153C of the Act."
46. The principle that emerges from the aforesaid judgments
is that, prior to issuance of notice under Section 153C of the
Act, the Assessing Officer of the searched person must be
satisfied that, inter alia, the documents or assets seized or
requisitioned belong to a person other than the searched
person.
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47. Upon recording such satisfaction, the Assessing Officer of
the searched person is required to transmit the relevant
records, documents, or assets to the Assessing Officer having
jurisdiction over such other person. Upon receipt of the said
material and the satisfaction note, the jurisdictional Assessing
Officer of such other person, after due examination, may
proceed to issue notice and initiate assessment proceedings in
accordance with Section 153C of the Act, and the other
applicable provisions.
48. The Hon'ble Supreme Court has contemplated two distinct
situations. The first is where the Assessing Officer of the
searched person is different from the Assessing Officer of the
"other person". The second is where the Assessing Officer of
both the "searched person" and the "other person" is one and
the same.
49. In a case where the Assessing Officer of the "searched
person" and that of the "other person" is the same, it has been
held to be sufficient if the Assessing Officer records, in the
satisfaction note, that the documents seized from the searched
person belong to the "other person". Once such satisfaction is
recorded, the requirement of Section 153C of the Act stands
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fulfilled. Section 153C of the Act does not mandate that
satisfaction be recorded with reference to a specific assessment
year.
50. In such a situation, a single satisfaction note would
suffice, as the Assessing Officer is common to both the
searched person and the "other person". However, it is
imperative that the Assessing Officer consciously arrives at,
and records, satisfaction that the documents seized or
requisitioned from the searched person indeed belong to the
"other person".
51. In such cases, the requirement of transmitting the seized
material from one Assessing Officer to another would not arise,
since the same officer exercises jurisdiction over both the
searched person and the "other person". Consequently, there
would be no question of the Assessing Officer transmitting the
seized material to himself.
52. From the principles laid down in the aforesaid judgments,
it is evident that there is no requirement under Section 153C of
the Act to record a separate satisfaction note for each
assessment year.
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53. The Hon'ble Supreme Court in Calcutta Knitwears
(supra), upon referring to earlier precedents, has held that a
taxing statute must be construed strictly, having regard to the
language employed therein. Nothing can be read into the
provision, nor can anything be implied. At the same time, while
interpreting machinery provisions, the Court must adopt a
construction that effectuates the object of the statute and
makes the provision workable.
54. The conclusion reached in Sunil Kumar Sharma (supra)
is thus contrary to the law declared by the Hon'ble Supreme
Court in the aforesaid decisions and without considering the
earlier decision of the Division Bench in IBC Knowledge Park
(P) Ltd. (supra). Consequently, the contention that a separate
satisfaction note is required to be recorded for each assessment
year is unsustainable.
55. In the present case, the satisfaction note, produced as
Annexure-B, upon perusal, is found to be in conformity with the
requirements of Section 153C of the Act. The satisfaction has
been duly recorded by the Assessing Officer of the searched
person. It is also not in dispute that the notice under Section
153C of the Act, in respect of the respondent, being the "other
person", has been issued by the very same Assessing Officer.
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56. In such circumstances, having regard to the principles
laid down by the Hon'ble Supreme Court in Super Malls (P)
Ltd. (supra), there is no requirement of recording a separate or
additional satisfaction by the Assessing Officer of the "other
person".
57. The consolidated satisfaction note recorded, as well as
the notices issued under Section 153C of the Act for the
assessment years 2012-13 to 2017-18, are in compliance with
the statutory requirements and are in consonance with the law
laid down by the Hon'ble Supreme Court in Calcutta
Knitwears (supra) and Super Malls (P) Ltd. (supra), as well
as the judgment of this Court in IBC Knowledge Park (P) Ltd
(supra).
58. The judgment in Sunil Kumar Sharma (supra),
rendered by a Coordinate Bench of this Court, does not
advance the case of the respondent.
59. The bona fides of the respondent in filing the writ petition
also merit consideration. The respondent has filed the writ
petition seeking to quash the notices under Section 153C
issued for the assessment years 2011-12 and 2018-19, both
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dated 07.11.2019. The other impugned notices, relating to the
assessment years 2012-13, 2013-14, 2014-15, 2015-16,
2016-17, and 2017-18, are dated 30.03.2019. The statement
of objections filed by the Revenue in the writ proceedings
discloses that multiple notices under Section 142(1) of the Act
were issued between 19.11.2019 and 01.11.2024, in all eight
notices, none of which were complied with by the respondent-
assessee.
60. It is also brought on record that the assessments were
required to be completed on or before 31.12.2024, whereas the
writ petition came to be filed on 26.11.2024. Thus, the writ
petition has been instituted after a lapse of more than four and
a half years from the date of issuance of the impugned notices,
and barely a month prior to the expiry of the time limit for
completion of the assessment.
61. No doubt, there is no prescribed period of limitation for
invoking the writ jurisdiction of this Court. However, such
jurisdiction cannot be invoked at the whims of the litigant. The
remedy must be exercised within a reasonable time. A delay of
more than four years, in the facts of the present case, cannot
be regarded as reasonable.
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62. The Hon'ble Supreme Court in Mrinmoy Maity v.
Chhanda Koley [2024 SCC OnLine SC 551] has held as
under:
"9. Having heard rival contentions raised and on perusal of the
facts obtained in the present case, we are of the considered
view that the writ petitioner ought to have been non-suited or
in other words the writ petition ought to have been dismissed
on the ground of delay and laches itself. An applicant who
approaches the court belatedly or in other words sleeps over his
rights for a considerable period of time, wakes up from his deep
slumber ought not to be granted the extraordinary relief by the
writ courts. This Court time and again has held that delay
defeats equity. Delay or laches is one of the factors which
should be borne in mind by the High Court while exercising
discretionary powers under Article 226 of the Constitution of
India. In a given case, the High Court may refuse to invoke its
extraordinary powers if laxity on the part of the applicant to
assert his right has allowed the cause of action to drift away
and attempts are made subsequently to rekindle the lapsed
cause of action.
10. The discretion to be exercised would be with care and
caution. If the delay which has occasioned in approaching the
writ court is explained which would appeal to the conscience of
the court, in such circumstances it cannot be gainsaid by the
contesting party that for all times to come the delay is not to be
condoned. There may be myriad circumstances which gives rise
to the invoking of the extraordinary jurisdiction and it all
depends on facts and circumstances of each case, same cannot
be described in a straitjacket formula with mathematical
precision. The ultimate discretion to be exercised by the writ
court depends upon the facts that it has to travel or the terrain
in which the facts have travelled.
11. For filing of a writ petition, there is no doubt that no
fixed period of limitation is prescribed. However, when the
extraordinary jurisdiction of the writ court is invoked, it has to
be seen as to whether within a reasonable time same has been
invoked and even submitting of memorials would not revive the
dead cause of action or resurrect the cause of action which has
had a natural death. In such circumstances on the ground of
delay and laches alone, the appeal ought to be dismissed or the
applicant ought to be non-suited. If it is found that the writ
petitioner is guilty of delay and laches, the High Court ought to
dismiss the petition on that sole ground itself, inasmuch as the
writ courts are not to indulge in permitting such indolent litigant
to take advantage of his own wrong. It is true that there cannot
be any waiver of fundamental right but while exercising
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discretionary jurisdiction under Article 226, the High Court will
have to necessarily take into consideration the delay and laches
on the part of the applicant in approaching a writ court."
63. Applying the aforesaid principles, we are of the
considered view that the writ petition was filed after an
inordinate and unexplained delay and was, therefore, liable to
be dismissed on the ground of laches. Tested on the touchstone
of the principles laid down by the Hon'ble Supreme Court in the
judgment referred to above, the learned Single Judge has erred
in entertaining the writ petition despite such delay.
64. Learned counsel for the respondent has placed reliance
on two compilations of judgments, comprising 14 judgments in
Compilation No.1 and 22 judgments in Compilation No.2. We
shall advert to the judgments which have been specifically
relied upon.
64.1 Reliance is placed on the order of the Income Tax
Appellate Tribunal in St. Ann's Education Society,
Bangalore v. DCIT (Exemption) in ITA No.
165/Bang/2002 and connected matters dated 04.04.2006,
to contend that a search is premises-specific. The said order
was carried in appeal before this Court in ITA No. 1254 of
2006. This Court dismissed the appeal on the ground that the
assessment was barred by limitation. No principle of law
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relevant to the issue arising in the present case has been laid
down therein. Accordingly, the said decision does not advance
the case of the respondent.
64.2 Reliance is also placed on the judgment of the Hon'ble
Supreme Court in CIT v. Jasjit Singh [(2023) 19 SCC 427].
The said judgment, while interpreting Section 153C of the Act,
deals with the question relating to the computation of the
period of six assessment years in the light of the second
proviso to Section 153C of the Act. The said issue does not
arise for consideration in the present case. Hence, the reliance
placed on the said judgment is misplaced.
64.3 Learned counsel has further relied on the judgment of the
Hon'ble Supreme Court in CIT v. Tara Agencies [(2007) 292
ITR 444], to contend that the intention of the legislature must
be gathered from the language employed in the statute, giving
due regard to what has been stated as well as what has not
been stated. There is no dispute with regard to the said
principle. The same has already been duly considered in the
earlier part of this judgment.
64.4 Reliance is placed on the order of the learned Single
Judge in W.P. No. 11459 of 2021 dated 04.12.2024 in the
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case of M/s Davanam Constructions (P) Ltd. v. DCIT,
wherein the judgment in Sunil Kumar Sharma (supra) has
been followed. It is submitted that the Revenue has preferred a
writ appeal against the said order, which is presently pending
consideration before the Division Bench. In view of the findings
recorded by us hereinabove, the said judgment does not have
any bearing on the present case.
64.5 Similarly, reliance is placed on the order passed in
Review Petition No. 218 of 2024 in Sunil Kumar Sharma
(supra), whereby the review sought by the Revenue came to be
rejected. The said order also does not advance the case of the
respondent.
64.6 Reliance is further placed on the judgment of the Calcutta
High Court in Century Spinning & Manufacturing Co. Ltd. v.
State of West Bengal [(1989) 73 STC 277], to contend that
the High Court cannot explain or interpret a judgment of the
Hon'ble Supreme Court. There is no dispute with regard to the
said proposition.
64.7 Learned counsel has also relied upon the judgment of the
Gujarat High Court in CIT v. Vallabhdas Vithaldas [(2002)
253 ITR 543], to contend that the law declared by the Hon'ble
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Supreme Court is binding under Article 141 of the Constitution
of India. The said proposition is well settled and requires no
further elaboration.
64.8 Reliance is also placed on the judgment of the Hon'ble
Supreme Court in Suganthi Suresh Kumar v. Jagdeeshan
[(2002) 2 SCC 420], to contend that it is not permissible for
the High Court to disregard or overrule a decision of the Apex
Court, even on the ground that certain aspects were not
considered therein. There is no quarrel with the said
proposition.
64.9 Reference is also made to the judgment of this Court in
CIT v. Jagadish Jakati & Co. [(1979) 119 ITR 19], as well
as the judgment of the Hon'ble Supreme Court in CIT v.
Shaan Finance (P) Ltd. [(1998) 97 Taxman 435 (SC)].
However, the said judgments are not relevant to the issue
arising in the present case.
64.10 Reliance on the judgment of the Madras High Court
in CIT v. TVS Lean Logistics Ltd. [(2007) 293 ITR 432],
and that of the Calcutta High Court in CESC Ltd. v. CIT
[(2003) 263 ITR 402], on the principle of literal
interpretation of statutes, does not require further
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consideration in view of the findings already recorded
hereinabove.
64.11 Similarly, reliance placed on the judgment of the
Gujarat High Court in CIT v. Saumya Construction (P) Ltd.
[(2016) 387 ITR 529] does not warrant elaboration in light
of the conclusions already reached.
64.12 The judgment of the Hon'ble Supreme Court in CIT
v. Abhisar Buildwell (P) Ltd. [(2023) 454 ITR 212 (SC)],
which deals with the scope of income that can be assessed
under Section 153A of the Act, is not relevant to the
controversy in the present case.
64.13 Further reliance is placed on the judgment of the
Gujarat High Court in Paras Chandreshbhai Koticha v. ITO
[(2026) 485 ITR 628], to contend that the respondent ought
to be treated as a "searched person". The said judgment,
however, deals with the validity of reopening of assessment
under Section 148 of the Act based on material found during
search, and the question whether proceedings ought to be
initiated under Section 148 or under Sections 153A/153C. The
said issue does not arise for consideration in the present case
and, therefore, the reliance placed thereon is misplaced.
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65. The learned Single Judge, while quashing the notice
issued under Section 153C of the Act, has held as under:
"As stated supra, in the instant case, the petitioner was the
Chairman and Managing Director of M/s. Kalyani Group which
was searched and in the light of the undisputed fact that the
premises of the petitioner was searched and documents
seized form him, by recording his statement, the sole /
unmistakable conclusion / inference that can be arrived at
from the material on record is that the petitioner was a
searched person and not a non-searched person / such other
person as contemplated under Section 153C of the I.T. Act
and consequently, Section 153C would neither be applicable
no invocable as against the petitioner, who was a searched
person to whom this provision would not apply and the
impugned notice being illegal, arbitrary and without
jurisdiction or authority of law and all further proceedings
pursuant thereto deserve to be quashed."
66. The said conclusion has been reached after extensively
extracting the judgment of the Division Bench in Sunil Kumar
Sharma (supra). It proceeds on the basis that the premises of
the respondent were searched and, therefore, the respondent
was a searched person; consequently, the initiation of
proceedings under Section 153C of the Act, treating the
respondent as 'other person', is unsustainable.
67. The Revenue has relied upon the judgment of the Co-
ordinate Bench in Associated Mining Company (supra) and
the judgment of the Delhi High Court in MDLR Resorts (P)
Ltd. (supra), both of which deal with the identical issue
involved. In addition, reliance is also placed on judgments of
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other High Courts. However, upon consideration of only those
judgments, the following observations are made:
"15. Insofar as the various judgments relied upon by both
sides are concerned, having regard to the facts and
circumstances narrated hereinbefore, coupled with the fact
that the said decisions rendered in the facts of the said cases
would not be applicable to the facts of the instant case and as
such, the same are not elaborately dealt with for the purpose
of the present order."
68. In the light of the discussions made above, we are of the
view that the order of the learned Single Judge is not
sustainable. The learned Single Judge has not analysed the
provisions of Sections 132, 153A and 153C of the Act, nor the
binding precedents. The reliance placed on the judgment of the
Division Bench in Sunil Kumar Sharma (supra) is also
misplaced. The Division Bench in Sunil Kumar Sharma
(supra) does not examine the binding precedents, the
provisions of Sections 132, 153A and 153C of the Act, and Rule
112 of the Rules.
CONCLUSION
(i) Section 132 of the Act is person-centric and not
premises-centric. The expression "searched person"
refers to the person in respect of whom satisfaction
has been recorded under clauses (a) to (c) of sub-
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section (1) of Section 132, and not merely the person
whose premises has been subjected to search.
(ii) The scheme of Section 132 of the Income-tax Act,
1961 draws a clear distinction between the person in
respect of whom "reason to believe" is recorded under
clauses (a) to (c) of sub-section (1), and the premises
in respect of which "reason to suspect" is formed
under clauses (i) to (v) thereof. The warrant of
authorization is, therefore, fundamentally person-
specific, while the place of search is merely incidental
to such satisfaction.
(iii) The expression "searched person" must be construed
to mean the person against whom satisfaction is
recorded and in whose name the warrant of
authorization is issued, and not the person whose
premises are merely subjected to search. A search
conducted at the premises of a third party, on the
basis of "reason to suspect" that material belonging to
the searched person is kept therein, does not render
such third party a "searched person".
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(iv) The procedure under Section 153A of the Income-tax
Act, 1961 is confined to the person against whom
search is initiated within the meaning of Section 132.
Proceedings against any other person, in whose
premises a search is conducted or from whom material
is seized, can be initiated only under Section 153C,
subject to satisfaction of the statutory conditions.
(v) The proceedings initiated against the respondent--
being the occupant of the premises--under Section
153C of the Income-tax Act, 1961, treating him as an
"other person", are in accordance with law. The
contention that such proceedings ought to have been
initiated under Section 153A of the Act is devoid of
merit.
(vi) Section 153C of the Income-tax Act, 1961 does not
mandate the recording of a separate satisfaction note
for each assessment year. A consolidated satisfaction
note, duly recording that the seized material belongs
to or pertains to the "other person", satisfies the
jurisdictional requirement.
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69. For the aforesaid reasons, the order of the learned Single
Judge is not sustainable and is liable to be set aside.
70. Accordingly, we pass the following:
ORDER
(i) The Writ Appeal is allowed.
(ii) The impugned order dated 27.10.2025 in W.P.No.33057/2024, passed by the learned Single Judge, is set aside.
(iii) W.P. No.33057/2024 is dismissed.
(iv) The notices issued under Section 153C of the Act, at Annexures A1 to A8, for the Assessment Years 2011-12 and 2018-19, dated 07.11.2019, and for the assessment years 2012-13, 2013-14, 2014- 15, 2015-16, 2016-17 and 2017-18, dated 30.03.2019, are hereby restored.
(v) Costs made easy.
We place on record our appreciation for the able assistance rendered by Sriyuths Sri Damodar M. Nayak and
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WA No. 382 of 2026Amaregouda Kellur, Research Assistants, and Sri Harshith .A, Law intern.
SD/-
(S.G.PANDIT) JUDGE SD/-
(K. V. ARAVIND) JUDGE MV