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3. At the very outset, for convenience, the facts in each case and the stand of the Revenue are proposed to be reflected in brief.

Facts in W. P. (C) No. 1552 of 2000:

4. The petitioner, M/s. M. S. Associates, is a partnership firm duly registered under the provisions of the Indian Partnership Act, 1932. Smt. Jyoti Limbu and Smt. Tilmaya Chong are the two partners of the firm having its registered office at Connaught Place, New Delhi, and branch office at GNG Road, Silpukhuri, Guwahatu. The petitioner-firm is engaged in the business of selling of State organised lottery tickets of various States, namely--Assam, Manipur and Meghalaya. The firm's responsibilities are limited to the extent of assisting the State Government to sell lottery tickets. The petitioner firm has been regularly filing income-tax returns before the income-tax authorities which were finalised after scrutiny. The business premises of the petitioner firm as well as the residential and official premises of the persons associated with the firm were searched on June 17/23, 1999 and on October 29, 1999, in pursuance of the warrants of authorisation issued under Section 132 of the Act, and a large amount of cash, jewellery, investment certificates, fixed deposit receipts and other documents including books of account were seized. The search was carried out in the office premises of the petitioner at Guwahati, Tinsukia and other places. Though the warrants were issued in the name of Mr. M.K. Subba, Mr. A.K. Subba and Mr. S.R. Subba, the search was in reality carried out against the petitioner firm. The warrants of authorisation were issued in violation of the provisions of Section 132 by respondents Nos. 2, 3 and 5 without any authority of law on the basis of various news items published in newspapers based on the draft and unsigned report of the Comptroller and Auditor General of India, hereinafter referred to as the "CAG". The report of the CAG was in the draft form and did not acquire any legal status. Therefore, it could not be treated as information within the meaning of Sub-section (1) of Section 132. That apart, the Nagaland State Assembly referred the report to the Public Accounts Committee, and the said Committee submitted its recommendations to the Legislative Assembly. The Public Accounts Committee did not recommend any action, against the petitioner firm. The petitioner firm is assessed to tax at New Delhi and respondent No. 5 based at Guwahati without any authority of law issued the warrants of authorisation. The satisfaction for search and seizure in respect of the petitioner firm was that of the Director, Income-tax (Investigation), New Delhi. It is further averred that the CAG carried out an audit pursuant to a complaint filed by one Mr. Munkala Kishna Rao, a business rival of the petitioner firm. The report of the CAG contains sweeping adverse remarks against the petitioner firm indicating that the firm was involved in some sort of scam with the Directorate of Lotteries. The search and seizure were carried out during the period when the matter was pending before the State Legislature. The respondent authorities also initiated proceedings under Section 158BB of the Act. Hence, it has been prayed that the search and seizure conducted in the office premises of the petitioner firm at Tinsukia, Guwahati and other places on June 23, 1999, be declared illegal, unconstitutional and void ab initio, and for further directions to the income-tax authorities not to take any action under the provisions of the Act, and to return the documents/valuables seized in pursuance of the illegal search.

38. Mr. S.S. Ray, learned senior counsel, laid maximum emphasis on this question and argued at length to justify that the pre-conditions required for issuance of warrants of authorisation were non-existent when the warrants were issued. Mr. Ray further submitted that the draft report of the CAG being a property of the State Legislature could not be treated as an information within the meaning of Section 132(1) for the purpose of issuance of warrants for search and seizure. According to Mr. Ray, the draft report of the CAG cannot be treated as information in the possession of the respondent authorities for invoking the jurisdiction under Section 132. Mr. R.P. Agarwal, learned senior counsel for the respondents, however, submitted that the report of the CAG was one of the sources of information in the possession of the Department and the respondent authorities formed the belief as is required under Section 132 on consideration of various information including the CAG report. According to Mr. Agarwal, there is no illegality or unconstitutionality in considering the CAG report along with other information in possession for the purpose of drawing satisfaction and forming the "reasons to believe" as contemplated in Section 132.

45. Mr. Agarwal, learned senior counsel, submitted the office file during the course of argument in order to show that there was information from various sources in the possession of the concerned officers on the basis of which "belief" as required under Section 132 was formed. Shri Agarwal further added that the report of the CAG was not the lone material in the possession of the concerned officers, as alleged by the writ petitioners.

46. At this stage, it would be relevant to examine the status of the report of the CAG. The scope and power of the CAG is existent, as provided in the Constitution, only for the scrutiny of the accounts of the State and not of any citizen or concern. As such, the report of the CAG cannot be accepted as authentic and acted upon for initiation of consequential proceedings. The CAG report, till disposed of by the concerned Legislature, cannot provide factual or legal material for forming the requisite belief to the fact that an assessee has not disclosed any income or property in his return. The report of the CAG cannot be said to be "in the possession of the concerned authority" till it is disposed of by the concerned Legislature and, therefore, this cannot form the basis on which belief can be formed. In support of this argument, reference may be made to the decisions in Ajit Jain v. Union of India [2000] 242 ITR 302 (Delhi); Coca-Cola Export Corporation v. ITO [1998] 231ITR 200 (SC); Vindhya Metal Corporation v. CIT [1985] 156 ITR 233 (All) and Anand Swaroop v. CIT [1976] 103 ITR 575 (P&H).

47. The report of the Comptroller and Auditor General relating to the accounts of a State is required to be submitted before the Governor, who shall cause it to be laid before the Legislature of the concerned State, here the State of Nagaland (reference article 151(2)). The State Legislature is required to refer it to the Public Accounts Committee for examination and recommendations. The recommendations of the Public Accounts Committee have to be laid before the Legislative Assembly. In the instant case, the report of the CAG was placed before the Legislative Assembly, State of Nagaland, and it was referred to the Public Accounts Committee under Rule 235 (Volume II) of the Nagaland Legislative Assembly Rules. The Public Accounts Committee examined the correctness of the report and submitted its recommendation in the month of March, 2002, to the effect that the report is not sustainable. The recommendations of the Public Accounts Committee were accepted by the State Legislature. Prior use of such a report would definitely amount to breach of the privilege of the House. In the instant case, as stated earlier, the Public Accounts Committee did not find reason to accept the report of the CAG and the matter thus stood disposed of. The report, during the period when it was exclusively the property of the House, could not be said to be in the possession of the Revenue authorities within the meaning of Section 132(1) of the Act. There is no dispute that the warrants of authorisation were issued during the period when the CAG report was under consideration of the Assembly. This document, in my opinion, could not be treated as in the possession of the taxing authorities. It is also not a public document within the meaning of Section 75 of the Evidence Act read with Section 2(17)(g) and (h) of the Code of Civil Procedure. This view gains support from the decision of the Delhi High Court in B.L. Wadhera v. Union of India (C. W. P. No. 1716 of 2000 decided on May 16, 2001) in which case the Delhi High Court refused to issue any direction to the respondent authorities to perform their Constitutional duty to ensure that all the Ministries/Departments submit respective replies/action taken notes on the report of the CAG. Therefore, any action taken by any authority during the period in which the report of the CAG was under consideration of a State Legislature cannot be sustained in law. The discussion above lead to the conclusion that the report of the CAG could not form the legal basis for the purpose of formation of the "belief" as required under Section 132(1) of the Act. Thus, in short, is the answer to the second question enumerated in para. 23 (page 132) of this judgment.