Madhya Pradesh High Court
Smt.Suman Singhai vs Director : Income Tax Central Revenu ... on 8 November, 2010
Bench: S. R. Alam, Alok Aradhe
HIGH COURT OF MADHYA PRADESH, JABALPUR
Writ Petition No.6234 /2009(O)
Suman Singhai
Vs.
Director of Income Tax(Inv),
Hoshangabad Road, Bhopal
For petitioner: Mr. G.N. Purohit, Senior Advocate
with Shri Abhishek Oswal, Advocate.
For respondent: Mr. Rohit Arya, Senior Advocate with
Shri Sanjay Lal, Advocate.
================
Present:
HON'BLE MR. S. R. ALAM, CHIEF JUSTICE HON'BLE MR. JUSTICE ALOK ARADHE
-------------------------------------------------------------
(O R D E R) (8.11.2010) Per: S. R. ALAM, CHIEF JUSTICE In the instant writ petition under Article 226 of the Constitution of India, the petitioner has questioned the legality and validity of the warrant issued under Section 132-A of the Income Tax Act, 1961.
2. Short facts, briefly stated giving rise to the instant petition, are that petitioner carries on business of sale and purchase of ornaments of silver and gold. Petitioner deals in the business of manufacturing of silver and gold ornaments in the name and style of Singhai Jewellers and is 2 regularly assessed to income tax and has permanent account number. Petitioner is also registered dealer under the provision of M.P. Value Added Tax Act, 2002.
3. During course of routine checking by G.R.P., Katni, petitioner's employee, namely, Kamlesh Soni was found to be in possession of impure silver weighing 54.078 kg. with pure silver content of 33.738 kg. and cash of Rs.16,50,000/- in an Indica Car bearing registration number M.P.-13/T-5331. Police authorities submitted intimation to the Income Tax Department. On the basis of the information given by the police authorities a warrant of authorization dated 5.12.2008 under Section 132-A of the Income Tax Act, 1961 was issued. Authorised officer executed the warrant under Section 132-A of the Act. He was informed by G.R.P. Katni that the assets were in possession of CJM, Katni and, therefore, GRP, Katni was not in a position to handover the assets to the income tax authorities. Petitioner submitted an application (Annexure- P/5) dated 2.12.2008 for release of assets before CJM, Katni. Income Tax Department also made application for release of assets in its favour. Both the applications were decided by the CJM vide order dated 24.1.2009. Application preferred by petitioner was rejected. However, application preferred by the department was allowed and it was directed that assets be handed over to the income tax department on furnishing security to the tune of Rs.26 Lacs. Against the aforesaid order revision has been filed by the Income Tax Department which is pending before District and Sessions Judge, Katni. Petitioner has assailed 3 the warrant of authorization issued under Section 132-A of the Income Tax Act though this petition.
4. Return has been filed by respondents inter alia, pleading that order dated 24.1.2009 passed by the CJM, Katni is illegal in so far as it directs furnishing of security to the tune of Rs.26 lacs. Once warrant of authorization is issued under Section 132-A of the Income Tax Act, Magistrate or Police has no jurisdiction to deal with the seized assets in the absence of any crime having been registered and the same should be handed over to income tax department. Being aggrieved by the order of CJM, the department has preferred a revision which is pending adjudication before the Sessions Judge, Katni. It is further stated that before issuance of the warrant dated 5.12.2008, appropriate steps were taken by the income tax department and after being satisfied with regard to credibility of the information possessed by the department, the Director of Income Tax has issued the warrant of authorization under Section 132-A of the Income Tax Act. It has further been stated that the competent authority has applied its mind and has exercised the power of issuance of warrant of authorization in accordance with law.
5. We have heard learned counsel for the parties.
6. Shri G.N. Purohit, learned senior counsel appearing for petitioner vehemently contended that assets i.e. impure silver weighing 54.078 kg. with pure silver content of 33.738 kg. and cash worth Rs.16,50,000/- found in 4 possession of employee of petitioner were accompanied by a travel memo, a perusal whereof would have disclosed that seized assets belong to a person assessed to income tax. Hence, its ownership could have been ascertained. It is further contended that there was no material wherefrom a belief could be formed that assets were undisclosed assets. Therefore, the identity of the assets was well known. It is also contended that business assets should not be seized. Seizure of trading stock is prohibited under Section 132(1B)(iii) of the Income Tax Act and, therefore, taking of the possession of the trading stock in exercise of power under Section 132-A of the Income Tax Act is illegal and the same constitutes violation of fundamental right contained in Article 19(1)(g) of the Constitution of India. Learned senior counsel in support of above submissions has relied on the decisions in Dwarka Prasad Agarwal v. D.I.T.(Calcutta)-137 ITR 456, Ganga Prasad Maheshwari v. DIT(Inv) (All)-139 ITR 1043, L.R. Gupta v. Union of India(Delhi)-194 ITR 32, Ajit Jain v. Union of India(Delhi), 242 ITR 302, Union of India v. Ajit Jain-260 ITR 80, CIT v. Vindhya Metal Corporation, (1997) 224 ITR 614 (SC), Amar Agrawal v. A.D.I.T. (MP)-276 ITR 182, I.T.O. v. Seth Brothers (SC)-74 ITR 836, Naraindas v. C.I.T.(MP)-148 ITR 567, Bioara Construction v. D.I.(Inv) (MP) 281 ITR 247 and ITO v. Lakhmani Mewal Das-(1976) 103 ITR 437(SC). He lastly submitted that action of issuance of impugned warrant of authorization suffers from vice of non-application of mind inasmuch as there was no reason to believe that cash and 5 silver which was seized represents the assets which would not have been disclosed for the purpose of income tax. There was no basis for formation of belief leading to issuance of warrant of authorization under Section 132-A of the Income Tax Act.
7. Learned senior counsel appearing for the Revenue while opposing the petition submitted that warrant of authorization was issued by the Director of Income Tax as he was in possession of information on the basis of which he had reason to believe that cash and silver which were seized represent the assets which would not have been disclosed for the purpose of income tax. Warrant of authorization was issued after due application of mind and after having been satisfied that there is material on record for formation of belief for exercise of power under Section 132-A of the Income Tax Act. It has further been contended that Section 132-A(3) of the Act raises a presumption that a person who is in possession of the assets is owner thereof. It has further been brought to our notice that though assets were seized on 29.11.2008, yet the warrant of authorization was issued on 5.12.2008. Thus, the competent authority has formed an opinion on the basis of enquiry and the relevant material. No fault can be found with the action of the department and its bona fide cannot be doubted. Learned senior counsel has produced the record for perusal of this Court.
8. We have considered the submissions made on behalf of both the sides.
69. Before adverting to merits of the case it would be useful to have a quick look of Section 132-A of the Income Tax Act which deals with power to requisition books of account, etc. Relevant extract of Section 132-A reads as under:
"Powers to requisition books of account, etc. 132-A.(1) Where the Director General or Director or the Chief Commissioner or Commissioner, in consequence of information in his possession, has reason to believe that-
(a) ...........xxx.............
(b) .......... xxx.........
(c) any assets represent either wholly or partly income or property which has not been, or would not have been disclosed for the purposes of the Indian Income-tax Act, 1922(11 of 1922), or this Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force, then, the Director General of Director or the Chief Commissioner or Commissioner may authorize any joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax officer hereafter in this section and in sub-
section(2) of Section 278D referred to as the requisitioning officer to require the officer or authority referred to in clause
(a) or clause (b) or clause (c ), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer."
710. At this stage we deem it appropriate to deal with the scope and ambit of powers under Section 132-A of the Income Tax Act with regard to search and seizure. In Seth Brothers (supra), the Supreme Court while dealing with the provisions of Section 132 of the Income Tax Act relating to search and seizure which is pari materia to Section 132-A of the Income Tax Act has held that Section does not confer any arbitrary power on revenue officers. It was further observed that if the action of the officer issuing the authorization or of the designated officer is challenged, the officer concerned must satisfy the court about the regularity of the action. If it is found that action has been taken maliciously or power is exercised for collateral purpose, the same is liable to be struck down by the Court. It has been further held that power exercised by the Commissioner under Section 132 is not a judicial or quasi judicial power and that the Court cannot substitute its own opinion for that of the Commissioner.
11. In Lakhmani Mewal Das (supra), the Supreme Court while dealing with Section 147 (a) of the Income Tax Act held that grounds or reasons which lead to the formation of the belief contemplated by Section 147(a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Whether the grounds are adequate or not is not a matter for the Court to investigate. The sufficiency of the grounds which induces the Income Tax Officer to act is, therefore, not a justifiable issue. However, the expression 8 "reason to believe" does not mean a purely subjective satisfaction on the part of the Income Tax Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the Court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purpose of the Section. Thus, reasons for formation of belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment because of his failure to disclose fully and truly all material facts.
12. In Vindhya Metal Corporation(supra), it was held by the Supreme Court that mere unexplained possession of an amount, without anything more, cannot be said to constitute information which could be treated as sufficient by a reasonable person, leading to an inference that it was income which had not been disclosed by the person in possession for purposes of Section 132 A of the Act.
13. Division Bench of Delhi High Court in Ajit Jain v. Union of India & Others (supra) held that expression "reason to believe" means that a reasonable man, under the circumstances, would form a belief which would impel him to take action under the law. The information of 9 opinion has to be in good faith and not on mere pretence. For the purpose of Section 132 of the Act, there has to be a rational connection between the information or material and the belief about undisclosed income which is not likely to be disclosed by the person concerned. The aforesaid decision was affirmed by the Supreme Court in Union of India v. Ajit Jain and another, (2003) 260 ITR 80(SC).
14. Learned single judge of this Court in Biaora construction (P) Ltd. V. Director of Income Tax (Investigation) and Others, (2006) 281 ITR 247 (MP) has held that it is only when the assessee fails to explain its source when called upon to do so or when the source to acquire the assets is found to be not legal or when it could not be explained satisfactorily that information of belief is made out in favour of the Revenue resulting in attracting the rigour of Section 132-A.
15. Keeping in view above well settled principles of law, we may now advert to the facts of the present case. Pursuant to the order dated 25.2.2009 record has been produced by respondents for our perusal. We find that a note was prepared by DIT(Investigation), Bhopal running into eleven pages. On 4.12.2008, on the basis of aforesaid note, another note dated 5.12.2008 was prepared which is mentioned below :
"DIT(Inv), Bhopal may kindly peruse the secret note dated 04.12.2008 prepared by Arvind Nashkar, ITO(Inv), Jabalpur on prepage 1-11.1
As per information received from collector and District Magistrate, Katni, the Railway Police Katni has seized cash Rs.16, 50,000/- along with silver claimed to be 33.738 kg (on weighing it is found to be 54.118 kg) from one Shri Kamlesh Soni, S/ o Shri Krishnand Soni, Shiv Nagar, Nadipur, Katni who has claimed to have been given to him by one Shri Vipul Jain of Ujjain. As detailed in the report of the ITO(Inv), Jabalpur, investigation by Police, ITO, Katni, ITO (Inv), Jabalpur and DDIT(Inv), Indore, it emerges that the cash and silver seized by GRPF is undisclosed as there are no signs of activity of manufacturing at the shop in Ujjain, no books of accounts were available and the same were not produced or claimed to exist by Shri Vipul Jain in his telephomic conversation with ITO (Inv) Jabalpur and DDIT(Inv), Indore, no return of income pertaining to Shri Kamlesh Soni or Shri Vipul Jain or his alleged concern, M/s Singhai Jewellers, Ujjain has been evidenced/produced and none has responded to the summons u/s 131 served by affixture on the shop of M/s Singhai Jewellers (since mother of Shri Vipul Jain had refused to receive the summons).
On the basis of above, it is clear that the cash and silver seized by GRPF, Katni is undisclosed and that Shri Vipul Jain or Shri Kamlesh Soni have not disclosed to the department the true nature of it and thus there is reason to believe that they will not disclose their affairs of business to the department in response to statutory notices.
Under the circumstance it is proposed that Warrant of Authorization u/s 132 A in respect of the above stated cash and silver 1 be issued to Thana Incharge Railway Police, Katni so as to seize the undisclosed cash and jewellery."
16. The matter was then put up before respondent No.1 who recorded his satisfaction under Section 132- A as under :
"I have perused the notes of the Additional DIT(Inv), Jabalpur and the ITO(Inv), Jabalpur. I have also discussed the details of the case with both of them.
In this case after the receipt of information regarding seizure of cash and silver by the police, subsequent enquiries were conducted by the Income Tax Department to establish the nature of cash and silver. As per the details given in the notice of the ITO(Inv) Investigation and enquiry have been carried out from the persons carrying cash and silver and also at place i.e. Ujjain where the claim of carrying business was stated. The contradictions in statement, in the challan and the actual measurement of silver, nonexistence of working business as pointed out in the above notes along with absence of supporting documents regarding cash and silver clearly indicate that the assets are unaccounted and they would not be disclosed for the purpose of Income Tax Act. Therefore, I have reason to believe that this is a fit case for issue of authorization u/s 132 A."
17. It is worth mentioning here that neither there is any allegation of malice against respondent No.1 in the petition nor it was argued that he acted with malice while issuing 1 warrant of authorization. Record produced by the respondents clearly establishes that respondent No.1 was in possession of the information on the basis of which he had reason to believe that cash and silver which was seized represent the assets which would not have been disclosed for the purpose of Income Tax. From the reasons recorded by respondent No.1, it is apparent that it has rational connection and relevant bearing on the formation of belief leading to issuance of warrant of authorization under Section 132-A of the Income Tax Act. There is a direct nexus between material coming notice of the authority and formation of belief for issuance of warrant under Section 132-A of the Income Tax Act.
18. For the aforesaid reasons, we are unable to hold that issuance of warrant of authorization under Section 132-A of the Income Tax Act, in the facts and circumstances of the case is illegal. The writ petition fails and is hereby dismissed. However, there shall be no order as to costs.
(S.R. Alam) (Alok Aradhe)
Chief Justice Judge
snb/-
1
HIGH COURT OF MADHYA PRADESH, PRINCIPAL SEAT AT JABALPUR Writ Petition No.6234/2009 (O) Suman Singhai Vs. Director of Income Tax (Inv), Hoshangabad Road, Bhopal ORDER for consideration:
(S. R. Alam) Chief Justice .11.2010 HON'BLE MR. JUSTICE ALOK ARADHE -
(Alok Aradhe)
Judge
.11.2010
ORDER post for: 8.11.2010
(S. R. Alam)
Chief Justice
.11.2010
1