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Writ court need not interfere with seizure of cash by the police based upon warrant issued u/s 132A by the I-T Department, where such action is not arbitrary or mala fide: HC

2019-TIOL-2026-HC-AHM-IT

IN THE HIGH COURT OF GUJARAT

AT AHMEDABAD

R/Special Civil Application No. 3347 of 2019

KAMLESHBHAI RAJNIKANT SHAH

Vs

DEPUTY DIRECTOR OF INCOME TAX, SURAT

J B Pardiwala & A C Rao, JJ

Dated: August 27, 2019

Appellant Rep by: Mr JP Shah Senior Advocate with Ms Ashlesha M Patel (6127)
Respondent Rep by: 
Deleted(20) Mrs Mauna M Bhatt (174)

Income Tax – Writ – Section 132A.

Keywords: Jurisdiction of High Court – Warrant of Authorization.

Department of Income Tax received information on August 30, 2018 from one Mr.V.R. Bhawad, Police Inspector, Songadh Police Station, regarding seizure of cash of the amount Rs.2,45,50,000/- from two persons namely Surajbhai Pravinchandra Mehta and Rajendrasinh Viramji Vagghela. Both those persons were travelling on same date from Nagpur to Ahmedabad via Surat in a bus. Upon physical search of the Bus, two bags containing seven packets of cash aggregating Rs.2,45,50,000/- were recovered by the Songadh Police, Tapi and the police took the possession of the entire cash. Upon interrogation of Surajbhai and Rajendrasinh, it was revealed that they were employees of one Angadiya Company running in the name of M/s.V.P. Angadiya and Courier Service. In their statements, they disclosed that as employees of the courier company, they were asked to deliver the cash at Ahmedabad. The police also the recorded the statement of one Hitendrabhai Babubhai Patel, an employee of the Angadiya Company at Surat Branch.

Therefore, summons u/s 131(1) were issued to Mr.Surajbhai Mehta and Mr.Rajendrasinh Vaghela asking them to attend the office of the DDIT (Investigation-III), Surat along with the necessary details as regards the cash recovered from their possession. The statements of Mr.Suraj and Mr.Rajendrasinh were recorded on oath u/s 131. Both made themselves clear that they were not the owners of the cash but they were only employees of the courier service company. Thereafter, summons u/s 131 came to be issued to Kaushikkumar Dahyalal Soni, a Partner of M/s.V.P. Angadiya and Courier Service, Ahmedabad and his statement was also recorded on 7/9/2018 as regards the recovery of the cash. The Partner of the Firm declared that the seized cash is of the writ applicant. The cash was handed over to the courier firm at Nagpur to be delivered to Ahmedabad.

Thereafter, the statements of the assessee was also recorded u/s 131, where it was submitted that said cash of Rs.2,45,50,000/- was withdrawn from various bank accounts and also from cash book. Assessee also produced the details as regards the ITR, computation of income, cash book, audit report along with the trading account, P&L account, balance-sheet for A.Y. 2016-17 and A.Y.2017-18. He also produced the cash book for A.Y. 2017-18 and the cash book from 1/4/2018 to 21/8/2018. However, such seizure of the cash by the police ultimately led to some proceedings before the Judicial Magistrate, First Class, Songadh u/s 451 of the Code of Criminal Procedure. Thereafter, the assessee preferred an application seeking possession of the cash and at the same time, the Department also preferred an application that the cash should be handed over to them. The Magistrate allowed the application preferred by the Department and ordered that the cash be handed over to the authorized officer of the I-T Department, whereas, the application preferred by the assessee came to be rejected. Against the common order passed by the Judicial Magistrate, First Class, Songadh disposing of such two applications, a Criminal Revision application came to be filed by the assessee before the Sessions Court. In the said Criminal Revision Application, an application Ex.5 was preferred by the assessee praying for the stay of the operation of the order passed by the Magistrate to handover the cash to the I-T department. The application Ex.5 came to be allowed by the Principal District and Sessions Judge, Tapi at Vyara vide order dated 10/1/2019. The operation of the order passed by the Judicial Magistrate came to be stayed till the final disposal of the Revision Application. Ultimately, Warrant of Authorization under sub-section (1) of section 132A came to be issued by the Principal director of Income Tax (Investigation), Surat in Form No.45C in accordance with the Rule 112D(1) of the Rules. Therefore, being aggrieved, assessee filed present writ petition.

The High Court held that,

Whether in the event of police seizure of cash which belongs to assessee, issuance of Warrant of Authorization u/s 132A by the I-T department, which is not arbitrary or malafide, can be interfered by the High Court while disposing a writ petition – NO: HC

++ In ITO Versus Seth Brothers, 2002-TIOL-1015-SC-IT, 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 132A 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 the powers exercised by the Commissioner u/s 132 is not a judicial or quasi judicial power and that the court cannot substitute its own opinion for that of the Commissioner;

++ when issuance of an authorization u/s 132A is challenged in a court of law, it will be open to the assessee to contend that on the facts or information disclosed, no reasonable man could have arrived at the conclusion that the action u/s 132A was called for although the formation of opinion under the said section is subjective. It is well to remember that the jurisdiction under Article 226 of the Constitution of India of this Court is very limited. In fact, this Court should not act as an appellate or revisional court and as such, has no justification to examine meticulously the information in order to decide for itself as to whether the action u/s 132A was called for or not. Suffice it to say that in exercise of the extraordinary jurisdictions this Court can examine whether the act or issuance of an authorization u/s 132A is arbitrary or malafide or whether the subjective satisfaction which is recorded is such that it indicates lack of application of mind of the appropriate authority. The reason to believe must be based on definable material or materials and if the information or the reason to believe has no nexus with the belief or there is no definable material or tangible information for formation of such belief, then, in such a case, action taken u/s 132A would be treated as illegal;

++ the scope of interference with the Warrant of Authorization in a writ application under Article 226 of the Constitution is very limited. As held by this Court in the case of Shalini Verma, whether on the information the authority concerned should have exercised his power u/s 132A must be decided by the said authority and not by this Court. The concerned authority u/s 132A alone is entrusted with the power to demonstrate the same. If from the materials disclosed, it must be prima facie said that the authority had reason to believe that any of those conditions existed, then, it is not open for this Court while exercising power under Article 226 of the Constitution to set aside the Warrant of Authorization on a reappraisal of the evidence;

++ In the case of N.K. Jewellers, an employee of the assessee was returning from Amritsar and he was found to be in possession of Rs.30,00,000 in cash in a search by the railway police. Upon receipt of the information by the department, a Warrant of Authorization u/s 132 was issued by the Director of Income Tax and the cash of Rs.30,00,000/- was requisitioned and assessed. The proceedings for assessment for the Block Period from April 1, 1991 to June 3, 2000 u/s 158 BD were initiated. The explanation of the assessee before the AO was that his employee had gone to Amritsar to make some purchase of gold but the transaction did not materialize. The AO was of the view that the amount represented the sale of goods made by the assessee on the earlier occasions and the sale proceedings were being carried back to Delhi. After considering the statements of various persons and other materials on record, the authorities came to the conclusion that it was concealed income and assessed the assessee to tax. It was argued before the Assessee that the proceedings initiated u/s 132 itself were invalid for the reason that it could not have been based on a search conducted on a train by the police authority and therefore, the proceedings initiated for the Block Assessment for the relevant period were without jurisdiction;

++ in the case of Vindhya Metal Corporation and others, one Vinodkumar Jayswal was travelling from Mirzapur to Calcutta by train. He was detained at the Mogal Sarai Railway station by the railway police and a bag containing a sum of Rs.4,63,000/- was seized from him on the suspicion that the money was stolen property or had been obtained through some other offence. Investigation in connection with the the said seizure of cash ultimately led to issue a Warrant of Authorization u/s 132A(1). The said Warrant of Authorization was challenged before the High Court by filing a writ application. The Allahabad High Court in such case, after considering the materials on record, had recorded a finding that on such information no reasonable person could have entertained a belief that the amount in possession of Vinod Kumar Jaiswal represented income which would not have been disclosed by him for the purposes of the Act. Thus, the facts in the case of Vindhya Metal Corporation persuaded the High Court to arrive at such conclusion and the Supreme Court affirmed such conclusion arrived at by the High Court. In the case on hand, the authority concerned has produced the file containing the satisfaction note as well as the materials based on which the satisfaction came to be recorded for the perusal of this Court. On scrutiny of the records produced before this Court, it is evident that a detailed proposal / satisfaction note had been prepared by the DIT (Investigation) based on the information collected during the inquiry which has been duly considered by the Principal DIT, who in turn recorded the satisfaction that this was a fit case for action u/s 132(1);

++ assessee declared that he had withdrawn the amount from his bank accounts as well as from the accounts of his wife. He also declared that some amount was also taken from his cash book. However, when asked to submit the bank account details and cash withdrawals so far as the account of his wife is concerned, the assessee declined to submit the details and prayed for some more time to produce the relevant documents. The assessee was also asked to submit confirmation from the parties with respect to cash payment along with the relevant cash as well as bills. However, the information provided by the assessee was not found convincing. The authority found the statement of the assessee recorded periodically quite contrary to each other. In the overall view of the matter, the Court is convinced that it should not interfere in the present matter. There is not found any palpable error or gross illegality in the issue of Warrant of Authorization under subsection (1) of section 132A.

Assessee’s writ petition dismissed

JUDEMENT

Per: J B Pardiwala:

1.00. RULE, returnable forthwith. Ms.Mauna Bhatt, learned counsel waives the service of notice of rule for and on behalf of the respondent No.1.

2.00. By this writ application under Article 226 of the Constitution of India, the writ applicant has prayed for the following main relief:-

“(16)(A). Your Lordships may be pleased to quash and set aside the Warrant of Authorization dated 30/10/2018 issued by the respondent – Income Tax department, Surat under Section 132A(1) of the Income Tax Act, 1961, whereby respondent No.1 requisitioned the amount of Rs.2,45,50,000/- seized from two persons of the Angadiya Courier Service by Police Inspector Shri M.V. Kikani, Songadh Police Station, Songadh, District Tapi by passing writ of mandamus, certiorari or any other writ or direction.”

3.00. The case of the writ applicant in his own words as pleaded in the writ application is as follows :-

“(2). The petitioners by way of this petition beg to challenge, the illegal and the arbitrary action of the respondent no.1 Income Tax Department to claim the amount of the petitioner, which is seized by the respondent no.2 in casual checking and also challenging the warrant of authorization dated 30/10/2018 issued by the respondent Income Tax Department, Surat under Section 132A (1) of the Income Tax Act, 1961, whereby respondent no.1 requisitioned the amount of Rs. 2,45,50,000/- seized from two persons of the Angadiya Courier Services by Police Inspector Shri M.V.Kikani, Songadh Police Station, Songadh, District Tapi.

(3). The brief fact of the present petition is such that the present petitioner is doing business in the name and style of S.K.Traders. The petitioner is dealing mainly with the selling of vegetable fruits and agricultural products, milk and post harvesting crop activity. It is submitted that the petitioner’s business is considered as a Micro Small and Medium Enterprise. The petitioner has 38 bank accounts and 40 offices in all over India. It is submitted that his business is in entire country and mainly dealing with the farmers and therefore, the business is on the basis of the cash amount but the petitioner is regular paying income tax and shown all the transaction is his account.

(4). It is submitted that the petitioner for the purpose of the business was at Nagpur (Maharshtra) and he collected cash from 01/04/2018 to 28/08/2018 and he was having Rs. 2,45,50,000/- on hand and for security reasons, he has decided to send cash from Nagpur to Ahmedabad by Angadia service and he travelled alone from Nagpur to Ahmedabad and will collect cash from Angadia at Ahmedabad himself. Accordingly he sent the said amount through V.P.Angadia and Courier Services. It is submitted that said courier service provider has packed said cash in seven packs at Nagpur Branch and the petitioner also went to Ahmedabad from where he has to collect the cash. It is submitted that two Angadia person namely Surjabhai Mehta and Rajendrsinh Vaghela were carrying cash from Nagpur to Ahmedabad in bus. It is submitted that when they at the Jurisdiction of Songadh Police at Tapi District, on checking and inquiry by police, the packet of Cash amount were seized by the police Department. It is submitted that the said cash is of the petitioner.

(5). It is submitted that police has made routine check and it was not a pre-decided or pre-arranged check. It is submitted that the petitioner has applied for the releasing of cash before the learned Magistrate under Section 451 of Cr.P.C. On 01/09/2018 being Criminal Misc. Application No. 42 of 2018. It is submitted that the notice was issued to police department and police has informed the Income Tax Department. Therefore. On 01/11/2018 i.e after two months, the Income Tax Department also filed an application to hand over the cash to the Income Tax Department being Criminal Misc. Application No. 93 of 2018. It is pertinent to note that as per the statement made in the application by the Income Tax Department, the warrant of authorization under Section 132A of the Income Tax Act 1961 was issued on 30/10/2018 and therefore, on next day on 01/11/2018 the application was filed taking stand that now the amount to be given to the income tax department. It is submitted that after hearing as the statement was made by department that proceedings under Section 132A of the Act has been initiated. The application of the petitioner is rejected by order dated 05/01/2019 and the application of the IT Department is allowed by the same order.

(6). It is submitted that against the said order, the petitioner has tiled Revision Application being Criminal Revision Application before the learned Sessions Court, Tapi and same is pending. However, stay is granted.

(7). It is submitted that the Income tax department has issued a summons to the petitioner on 11/09/2018 calling the petitioner on 14/09/2018 at 11:00 am. It is submitted that the petitioner appeared before the Income Tax Department and recorded his statement.

(8). It is submitted that again the petitioner was called upon by the respondent No.1 department on 11/10/2018. It is stated in the summons that the petitioner has to remain present on 18/10/2018 and has to give explanation regarding cash amount as specified in the notice. It is submitted that the appeared before the department and explain each and every thing with documents regarding the accounts. The petitioner has satisfied the department regarding the cash amount.

(9). It is submitted that the petitioner has shown the entire cash in his cash book and therefore, it cannot be said to be illegal cash. The petitioner has submitted copy of the cash book certified by the Chartered Accountant.

(10). It is also pertinent to note that recently on 04/01/2019, the cash amount of Rs. 61,82,000/- was seized by the respondent no.1 department and they have immediately investigated the matter with the present petitioner and it is found that on 31/03/2016 Rs. 14,96,62,718/-, on 31/03/2017 Rs.9,59,38,652/- and 31/03/2018 Rs. 27,75,30,010/- was the balance of cash shown in the balance sheet and even on 04/01/2019 cash balance was of Rs. 3,33,15,028/- was shown for his business. Therefore, the respondent No.1 Department come to the conclusion that it is purely a valid and legal amount and immediately released the amount by his order dated 05/02/2019.

(11). It is submitted that the date 30/10/2018 is very important because the alleged cash was found on 30/08/2018, the petitioner has filed an application on 01/09/2018 and thereafter two months, i.e. on 30/10/2018, the warrant of authorization was issued. Therefore, it is very clear that the warrant of authorization was issued with malaflde intention and with ulterior motive. It is also pertinent to note that so-called the warrant of authorization, is not received by the petitioner as well as not produced before the learned Magistrate.”

4.00. Thus, it appears from the materials on record that the writ applicant seeks to challenge the Warrant of Authorization dated 30/10/2018 issued by the Principal Director of Income Tax (Investigation), Surat under section 132A(1) of the Income Tax Act, 1961 (for short “the Act”).

4.01. The Warrant of Authorization was issued authorizing the Income Tax Officer for requisitioning the cash worth Rs.2,45,50,000/- from the Officer In-charge of the Songadh Police Station, Songadh, District Surat (at the relevant time).

4.02. It appears from the materials on record that the Department of Income Tax received information on 30/8/2018 from one Mr.V.R. Bhawad, Police Inspector, Songadh Police Station, regarding seizure of cash of the amount Rs.2,45,50,000/- from two persons namely Surajbhai Pravinchandra Mehta and Rajendrasinh Viramji Vagghela. Both these persons were travelling on 30/8/2018 from Nagpur to Ahmedabad via Surat in a bus of Srinath Travels. Upon physical search of the Bus, two bags containing seven packets of cash aggregating Rs.2,45,50,000/- were recovered by the Songadh Police, Tapi. The police took the possession of the entire cash. Upon interrogation of Surajbhai and Rajendrasinh, it was revealed that they were employees of the Angadiya Company running in the name of M/s.V.P. Angadiya and Courier Service. In their statements, which came to be recorded, they disclosed that as employees of the courier company, they were asked to deliver the cash at Ahmedabad. The police also the recorded the statement of one Hitendrabhai Babubhai Patel, an employee of the Angadiya Company at Surat Branch.

4.03. Summons under section 131(1) of the Act were issued to Mr.Surajbhai Mehta and Mr.Rajendrasinh Vaghela asking them to attend the office of the DDIT (Investigation-III), Surat along with the necessary details as regards the cash recovered from their possession. The statements of Mr.Suraj and Mr.Rajendrasinh were recorded on oath under section 131 of the Act on dated 7/9/2018. Both made themselves clear that they were not the owners of the cash but they were only employees of the courier service company.

4.04. Thereafter, Summons under section 131 of the Act came to be issued to Kaushikkumar Dahyalal Soni, a Partner of M/s.V.P. Angadiya and Courier Service, Ahmedabad and his statement was also recorded on 7/9/2018 as regards the recovery of the cash. The Partner of the Firm declared that the seized cash is of the writ applicant. The cash was handed over to the courier firm at Nagpur to be delivered to Ahmedabad.

4.05. It appears that the statements of the writ applicant came to be recorded on dated 14/9/2018 under section 131 of the Act. In his statement, the writ applicant stated that he is engaged in the business of trading of vegetables, fruits and flowers in the States of Gujarat, Maharashtra etc. He further declared that he is the proprietor of a Proprietorship firm running in the name of M/s.S.K. Traders. The writ applicant further stated that the said cash of Rs.2,45,50,000/- was withdrawn from his various bank accounts and also from his cash book. Later in point of time, the writ applicant produced the details as regards the ITR, computation of income, cash book, audit report along with the trading account, profit and loss account, balance-sheet for A.Y. 2016-17 and A.Y.2017-18. He also produced the cash book for A.Y. 2017-18 and the cash book from 1/4/2018 to 21/8/2018.

4.06. At this stage, it would be relevant to state that the seizure of the cash by the police ultimately led to some proceedings before the Judicial Magistrate, First Class, Songadh under section 451 of the Code of Criminal Procedure. It appears that the writ applicant preferred an application seeking possession of the cash and at the same time, the Department also preferred an application that the cash should be handed over to them. The Magistrate allowed the application preferred by the Department and ordered that the cash be handed over to the authorized officer of the Income Tax Department, whereas, the application preferred by the writ applicant came to be rejected. Against the common order passed by the Judicial Magistrate, First Class, Songadh disposing of the above two applications, a Criminal Revision application came to be filed by the writ application before the Sessions Court, which came to be registered as the Criminal Revision Application No.15 of 2019. In the said Criminal Revision Application, an application Ex.5 was preferred by the writ applicant praying for the stay of the operation of the order passed by the Magistrate to handover the cash to the Income Tax department. The application Ex.5 came to be allowed by the Principal District and Sessions Judge, Tapi at Vyara vide order dated 10/1/2019. The operation of the order passed by the Judicial Magistrate came to be stayed till the final disposal of the Revision Application.

4.07. We are informed that the Criminal Revision Application, referred to above, is yet to be heard finally.

4.08. Ultimately, the impugned Warrant of Authorization under sub-section (1) of section 132A of the Act came to be issued by the Principal director of Income Tax (Investigation), Surat in Form No.45C in accordance with the Rule 112D(1) of the Rules. The same reads as under:-

“FORM NO. 45C V

(SEE RULE 112D(1))

Warrant of authorization under subsection (1) of section

132A of the Income Tax Act, 1961

No.000451

To,

The Deputy Director, Abhishak Gramin

The Deputy Commissioner,

The Assistant Director, Aditya Bikram

The Assistant Commissioner,

The Income-Tax Officer,

The assets taken into custody by Shri M.V.Kikani, Police Inspector, Songadh Police Station, (Name and designation of the officer or authority) represent either wholly or partly Income or property which has not been or would not have been, disclosed for the purpose of the Indian Income-Tax Act, 1922, or the Income-Tax, 1961, by Surajbhai P. Mehta, Rajendrasinh V. Vagghela and Kamlesh R.Shah (Name of the person) from whose possession or control such asset have been taken into custody by the officer/authority aforesaid. This is to authorized you as above (Name of the Deputy Director or the Deputy Commissioner or of the Assistant Director or of the Assistant Commissioner or the Income-tax Officer).

To require the said. Officer or authority to deliver to you the books of account, other documents or assets as aforesaid.

Sd/-

Director General of Director

Chief Commissioner or

Commissioner of Income-Tax

(RAJ TANDON)

Pr. Director of Income-Tax (Inv) Surat.

4.09. The aforesaid Warrant of Authorization is the subject matter of challenge in the present writ application.

5.00. Submissions on behalf of the writ applicant :

5.01. Mr.J.P. Shah, the learned Senior Counsel appearing for the writ applicant vehemently submitted that the impugned Warrant of Authorization is not tenable at law, as the writ applicant has yet to file his Income Tax Return for the year during which the cash is seized.

5.02. Mr.Shah, submitted that having regard to the peculiar facts of the case, the competent authority could not have arrived at any reason to believe that the cash represents either wholly or partly the income or the property which has not been or would not have been disclosed for the purposes of the Act.

5.03. Mr.Shah, submitted that there are two important phrases in section 132(A)(C) of the Act. First phrase is “has not been” and the second phrase is “would not have been”. According to Mr.Shah, as the Income Tax Return for the year during which the cash has been seized, is yet to be filed, the case would not fall within the ambit of “has not been”. At the same time, according to Mr.Shah, there is no material on record to arrive at the subjective satisfaction that the amount of cash would not have been declared by the writ applicant in the Return of Income which he would be filing for the current year during which the case has been seized. Mr.Shah submitted that the date of seizure is 30/8/2018 and therefore, the Assessment Year would be 2019-20. For the A.Y. 2019-20, return is yet to be filed and as the cash has been withdrawn from the bank accounts and cash book, the writ applicant would have definitely disclosed the same in his Return of Income. In such circumstances, according to Mr.Shah, the Warrant of Authorization is not justified and the cash should be ordered to be handed over to the writ applicant.

5.04. Mr.Shah, took us through few documents more particularly, bank accounts etc. This exercise was undertaken by Mr.Shah to demonstrate that the writ applicant is in the business of fruits, vegetables and flowers and that too on large scale. According to Mr.Shah, the amount which has been seized in cash, is to be paid to the farmers from whom the writ applicant purchased the goods to be sold to the retailers. Mr.Shah laid much emphasize on the fact that in the bank accounts, huge amount has been shown which would indicate that the cash was, in fact, withdrawn from the bank accounts as well as from the cash book.

5.05. Mr.Shah also brought to our notice that the writ applicant submitted few documents vide letter dated 18/10/2018. The documents are in the form of (1) Indemnity Bond; (2) Cash Book duly certified by the Chartered Accountant Mr.Mayur Shah, for the period between 1/4/2018 and 21/8/2018; (3) sales of Vegetables and Fruits of dated 10/4/2018, 10/5/2018, 10/6/2018 and 10/7/2018 by 45 offices of the writ applicant all over the India in the name of M/s.S.K. Traders. All these details also were in the form of certified copies duly signed by the Chartered Accountant.

5.06. Mr.Shah, in support of his submissions, has placed reliance on the following decisions :

(1) Commissioner of Income-tax Vs. Vindhya Metal Corporation and another, reported in (1997) 224 ITR 614 (SC) = 2002-TIOL-2538-SC-IT as well as;

(2) Prakash Jaichand Shah Versus Director of Incometax (Investigation) and others, reported in (2013) 350 ITR 336 (Guj.); = 2012-TIOL-1072-HC-AHM-IT

In such circumstances, referred to above, Mr.Shah prays that the impugned Warrant of Authorization may be quashed and set aside and the cash may be ordered to be handed over to the writ applicant.

6.00. Submissions of the Department :

6.01. On the other hand, this writ application has been vehemently opposed by Mr.M.R. Bhatt, the learned Senior Counsel appearing for the revenue. Mr.Bhatt submitted that no error not to speak of any error of law could be said to have been committed by the authority in passing the impugned Warrant of Authorization.

6.02. Mr.Bhatt submitted that the scope of investigation at the stage of section 132A of the Act is very limited. According to Mr.Bhatt, this Court would be justified in exercising its jurisdiction under Article 226 of the Constitution only if the Warrant of Authorization issued under section 132A of the Act is found to be absolutely erroneous in law or contrary to the provisions of section 132 of the Act. To put in other words, the Court would be justified to exercise its power to set aside the Warrant of Authorization issued under section 132 of the Act, if the conditions precedent to the exercise of the jurisdiction does not exist.

6.03. Mr.Bhatt further submitted that the provisions of section 132, 132A and Rule 112A are directed against the persons who are believed on good ground to have illegally evaded the payment of tax on their income and property. Mr.Bhatt also submitted that the power to order search and seizure is vested in the highest officers of the department. The exercise of this power can only follow a reasonable belief entertained by such officer that any of the three conditions mentioned in section 132A(1)(a), (b) and (c) exists.

6.04. Mr.Bhatt thereafter invited our attention to the following averments made in the Affidavit-in-reply filed on

“I. With reference to paragraphs 1 to 7, the contents of the extents it does not form part of the record are denied. I submit that the information was received on 30/08/2018 from Shri V. R. Bhawad, Police Inspector, Songadh Police Station, Tapi regarding interception of cash of Rs.2,45,50,000/- from Surajbhai Pravinchandra Mehta and Rajendrasinh Viramji Vaghela. Cash was intercepted from a Shreenath Travels bus on 30.08.2018, in which above persons were travelling from Nagpur to Ahmedabad via Surat. Upon physical search of bus, two bags containing 7 packets of cash totalling Rs.2,45,50,000/- was found by Songadh Police, Tapi. When enquiries were made from these two persons, no legitimate documentary evidence was produced by them before the police. Therefore, information in this regard was passed on to Additional Director of Income-tax (Investigation), Surat on 30.08.2018 requesting to take over investigation in this matter. The enquires in this case were assigned to the undersigned i.e. Deputy Director of Income-tax (Investigation), Unit-3, Surat by Addl. DIT(Inv.), Surat. Upon receipt of intimation about seizure of cash, investigation was undertaken and statements of the Surajbhai Mehta and Rajendrsinh Vaghela along with panchnama and other documents were called for from Police Inspector, Songarh Police Station vide letter dated 04.09.2018. On perusal of the statements of Surajbhai Pravinchandra Mehta and Rajendrasinh Viramji Vaghela given to police authorizes, it is seen that they have stated that they are employees of M/s V. P. Angadia & Courier Service who are working as courier boys but had no explanation about the source of cash, as they were only delivering packed parcels as part of their duty. Statement of Shri Hitendrabhai Babulal Patel – an employee of M/s V. P. Angadia & Courier Service at Surat branch of courier firm was also recorded by police. Further, summons u/s. 131(1) of the Act were issued to the said two couriers requesting to attend the office of the undersigned and furnish the details/evidences related to cash found from their possession. Statements of Surajbhai Pravinchandra Mehta and Rajendrasinh Viramji Vaghela, were recorded on oath u/s 131 of the Income Tax Act, 1961 on 07.09.2018. Both the subjects have stated in their statements that the seized cash of Rs.2,45,50,000/- did not belong to them. They also stated that they are employees of M/s V. P. Angadia & Courier Service and were merely acting as courier boys. Thereafter, Summon u/s 131 of the Act was issued to Shri Kaushikkumar Dhayalal Soni, partner of M/s V. P. Angadia & Courier Service, Ahmedabad and his statement was also recorded on 07.09.2018 to enquire further about the cash. When asked about the sources of cash, he had stated that the seized cash of Rs. 2,45,50,000/- belongs to the Petitioner, resident of Ahmedabad. The cash was being delivered from Nagpur to Ahmedabad on petitioner’s behalf.

Subsequently, the petitioner was contacted over phone no. 9376186864 on 07.09.2018 and he was asked to furnish all documentary evidences and other relevant details about source of cash seized before the respondent no. 1 by 11.09.2018. However, the Petitioner failed to appear on 11.09.2018 before respondent no. 1. The Petitioner was again contacted over his phone no. 9376186864 on 11.09.2018 and was asked why he did not appear before the investigating officer on 11.09.2018. In reply, the Petitioner requested for one more opportunity to be given to him to appear before the investigating Officer (respondent no. 1) on 14.09.2018 along with all relevant documents to explain the sources of cash worth Rs. 2,45,50,000/- seized by Songadh police. The Petitioner appeared before the investigation officer on 14.09.2018 when his statement on oath was recorded u/s 131 of the Act. The above facts that he did not appear on 11.09.2018 despite being informed about it were again confirmed by him in Statement recorded u/s 131 of the Act.

I submit that when asked about the source of Rs.2,45,50,000/- cash seized by Songadh Police, the Petitioner stated that he had withdrawn amount from his bank accounts as well as from his wife’s bank accounts. The Petitioner further stated that some amount was also taken from his cash book. However, when asked to submit bank account-wise and date-wise cash withdrawals along with details about cash withdrawal from his wife’s bank accounts to support his claim, the Petitioner expressed his inability to submit the details and asked for some time to produce required documents. The Petitioner was asked that despite the fact that he was informed on 07.09.2018 itself and again on 11.09.2018 about documentary evidences required about the source of Rs. 2,45,50,000/- cash seized, he appeared on 14.09.2018 before the investigating officer without the required documentary evidence in this regard. In reply, the Petitioner merely stated that he needed more time to produce the details asked. However, no such required documentary evidences were furnished by the Petitioner before the investigating Officer. However, copy of an affidavit along with cash book for FY 2017-18 and cash book from 1.4.2018 to 22.08.2018 was submitted to the office of the Investigating officer. To enquire further about the source of cash seized, summons dated 11.10.2018 was issued to the Petitioner asking him to submit name, address and Income Tax Return details of parties from whom he had received the following cash payments which are reflected in his cash book submitted:

DateTransaction particularsAmount
10/04/18Vegetable and fruit salesRs.1,95,76,350/-
10/05/18Vegetable and fruit salesRs.1,90,65,854/-
10/06/18Vegetable and fruit salesRs.1,66,45,254/-
10/07/18Vegetable and fruit salesRs.2,28,65,790/-

I further submit that the Petitioner was also asked to submit confirmation from the parties with respect to the above cash payments along with relevant cash sales bills. The said summons was served upon the Petitioner on 15 .10.2018. The Petitioner’s reply was received on 18.10.2018 wherein an indemnity bond along with cash book from 01.04.2018 to 21.08.2018 was submitted. Further, it was also stated that Vegetable and fruit sales dated 10.04.2018, 10.05.2018, 10.06.2018 and 10.07.2018 were his collections from 45 offices all over India. I submit that merely breakup of total amounts was provided by the Petitioner without any other details as required through summon. Further, till date the Petitioner has not submitted bank account-wise and date-wise cash withdrawals along with details about cash withdrawal from his wife’s bank accounts which was stated to be the source of cash seizure of Rs. 2,45,00,000/-. Thus, even after provided with multiple opportunities to furnish documentary evidence, the Petitioner has not submitted satisfactory explanation about the source of cash seized. After perusing and applying mind on the above information and inquires, warrant of authorization u/s 132A of the Act was issued by the Pr. Director of Income Tax (Investigation), Surat on 30.10.2018.

Thus, it becomes clear that that information about cash seizure was passed on to Income tax authority by Songadh Police on 30.08.2018. Further, about two months time was consumed in procuring warrant u/s 132A of the Act because enquiries had to be conducted about the source of cash seized. I submit that in due compliance of principles of natural justice, sufficient opportunities were provided to the Petitioner to submit evidence in support of his claim and thereafter in the absence of any satisfactory explanation, reason to believe had to be formed that prima facie the cash seized was unexplained and unaccounted for. I submit that the warrant of authorization was issued after following the laid down procedures.

II. With reference to paragraph 8, the contentions therein are denied. I submit that the following submissions were made by the Petitioner on 18.10.2018: (1) a covering letter dated 18.10.2018. (2) cash book from 1.4.2018 to 21.08.2018 (3) Indemnity bond dated 18.10.2018 and (4) Breakup of cash receipts on 10.4.2018, 10.5.2018, 10.06.2018 and 10.7.2018. I humbly submit that the details submitted do not satisfactorily explain the source of cash seized. No details related to confirmation letters and sale bills were produced by the petitioner. Further, no details have been provided about bank account cash withdrawals to substantiate cash seized. Thus, the claim of the petitioner that each and everything was explain to the department is incorrect and denied.

III. With reference to paragraph 9, the Petitioner has contended that he had shown the entire cash in his cash book and therefore. It cannot be said to be illegal cash.

The said contention is self serving and denied. I submit that the statement of Petitioner was recorded on 14.09.2018 on oath u/s 131 of the Act which has evidentiary value. It was stated in reply to question no. 10 that the source of cash seized of Rs.86,00,000 is withdrawal from Canara bank account no. 3179214000008 and from other bank accounts. Further, the Petitioner also stated that he had withdrawn some amount from bank account of his wife also. Lastly, the Petitioner also stated that some cash amount was taken from cash on hand as per his cash book. Thus, the stand taken by the petitioner now is in total contradiction to what he had stated on oath before the investigating officer. I submit that the Petitioner has failed to satisfactorily explain the source of cash seized.

IV. With reference to paragraph 10, the Petitioner has referred to the instance of cash seized of Rs.61,82,000/- by the income Tax department, Ajmer and its release thereof.

I submit that reliance on the above aspect have no bearing on the issue under consideration. I submit that the enquiries were conducted with regard to cash of Rs. 62,82,000/- seized by DDIT(Inv.), Ajmer and the cash may have been released after investigating Ajmer was satisfied that an explanation has been furnished by the petitioner. However, it is stated that facts related to each instance of cash seizure are different including the amount of cash seized. In each such instance of cash seizure, the investigating officer has to be offered a satisfactory explanation about the source of cash seized. It cannot be argued that since the investigating officer i.e. DDIT(Inv.), Ajmer was satisfied with the explanation offered related to cash seizure of Rs. 62,82,000/-, the same explanation is sufficient to justify the source of cash seizure of Rs. 2,45,50,000/-. In the instant case, the petitioner has failed to offer a satisfactory explanation about the source of cash seized even after providing multiple opportunities. Thus, the report of DDIT(Inv.), Ajmer dated 05.02.2019 has no relevance to this proceedings.

V. With reference to paragraph 11, the contentions therein are denied. I submit that there are laid down rules and procedure to be followed while enquiring about cash seizure information which was passed on to investigation officer by Songadh police. The information was received by the investigating officer on 30.08.2018 and the enquiry into the case began thereafter. Two months time was consumed in procuring warrant u/s 132A of the Act because enquiries had to be conducted about the source of cash seized and as per principles of natural justice, sufficient opportunities had to be provided to the Petitioner to submit evidence in support of his claim and thereafter in the absence of a satisfactory explanation, reason to believe had to be formed that prima facie the cash seized was unexplained and unaccounted for. This legal procedure had to be followed as per law and rules laid down in this regard. Therefore, the contention that the warrant of authorization is issued with malafide intention and ulterior motive is baseless and denied.

VI. With reference to paragraphs 12 (A) to 12(C), the contentions therein are denied. I submit that the cash amount seized has been requisitioned from police as per section 132A of the Act after following due procedure in this regard. I reiterate that the warrant of authorization has been issued after perusal of information as well as the post seizure inquiries. I submit that no satisfactory explanation about the source of cash seized has been furnished by the petitioner. Further, whether an FIR has been lodged in the case is also an irrelevant fact. The enquiry about the source of the cash seized was initiated once information to this effect was received by the investigating officer from Songadh police. Issuance of warrant u/s 132A was based on the outcome of initial enquiries conducted and the same is legal and valid.

VII. With reference to para 12 (D), I submit that the statement of Petitioner was recorded on 14.09.2018 on oath u/s 131 of the Act which has evidentiary value. It was stated in reply to question no. 10 that the source of cash seized of Rs.86,00,000/- is withdrawal from Canara bank account no. 3179214000008 and from other bank accounts. Further, the Petitioner also stated that he had withdrawn some amount from bank account of his wife also. Lastly, the Petitioner also stated that some cash amount was taken from cash on hand as per his cash book. Thus, the stand taken by the petitioner now is in total contradiction to what he had stated on oath before the investigating officer. I submit that the Petitioner has failed to satisfactorily explain the source of cash seized.

VIII. With reference to para 12(E), I submit that incident of cash seizure took place in Songadh which falls under territorial jurisdiction of the undersigned. Therefore, the respondent is well within its rights and duties to enquire about the source of cash seized.

IX. With reference to para 12(F), I reiterate that ample opportunities were provided to the petitioner to submit documentary evidences on 11.09.2018, 14.09.2018, 18.10.2018 etc. The petitioner stated on oath in his statement u/s 131 of the Income Tax Act, 1961 that the source of cash seized are (1) withdrawals from his bank accounts (2) withdrawals from his wife’s bank accounts and (3) cash book. The petitioner was asked to submit date-wise and bank account-wise withdrawals in support of his claim. However, no such required details have been submitted by the petitioner before the respondent till date. Thus, the contention of the petitioner that no opportunity to be heard was given to him is totally false, incorrect and misleading.

X. With reference to para 12(G) and 12(H), the Petitioner has reiterated that the cash seized is accounted amount and warrant of authorization is illegal.

XI. The said contention is denied. I reiterate that no satisfactory explanation has been provided by the petitioner to explain the source of cash seized. Reasons to believe has been recorded in writing based on the information in possession of the Pr. DIT(Inv.), Surat in this case. Warrant of authorisation under section 132A has been issued as per law and after following due procedures and rules.

XII. With reference to 12(I) and 12(K), the Petitioner has relied on the no objection certificate issued by the department as well as the order passed by the Hon’ble Rajasthan High Court. I submit that the said no objection as well as the order passed by the Hon’ble Rajasthan High Court has no relevance to the present proceedings as the Petitioner has failed to satisfactorily explain the source of cash seized. I reiterate the foregoing submissions.”

6.05. Mr.Bhatt in support of his submissions, placed reliance on the following decisions :-

[1] Sunil vidhyasagar Gat and another Versus Shalini Verma Officer of Dy. Director of Income Tax (Inv.) and others, reported in [2012] 347 ITR 1;

[2] Neesa Leisure Limited and others Versus Union of India, reported in [2011] 338 ITR 460 and

[3] N.K. Jewellers and another Versus Commissioner of Income Tax, reported in [2017] 398 ITR 116 (SC) =2017-TIOL-364-SC-IT.

In such circumstances referred to above, Mr.Bhatt, the learned senior counsel prays that there is no merit in the writ application and the same may be rejected.

ANALYSIS:-

7.00. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the authority concerned committed any error in issuing the Warrant of Authorization under clause (c) of sub-section (1) of section 132A of the Act.

Section 132A relevant for our purpose reads thus :

132A. Powers to requisition books of account, etc.

(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-

(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 or Director or the Chief Commissioner or Commissioner may authorise any Additional Director, Additional Commissioner, 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.

(2) On a requisition being made under sub-section [1], the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, of that sub-section shall deliver the books of account, other documents or assets to the requisitioning officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody.

[2] Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of subsections (4A) to (14) (both inclusive) of section 132 and section 132B shall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of subsection (1) of this section and as if for the words “the authorized officer” occurring in any of the aforesaid subsections (4A) to (14), the words “the requisitioning officer” were substituted.”

7.01. The constitutional validity of section 132A of the Act has already been upheld by the Supreme Court long back in the case of Pooram Mal Versus Director of Inspection (Investigation), reported in IT AIR 1974 SC 348. IT has been observed :-

“17. We are not, therefore, inclined to hold that the restrictions placed by way of the provisions of Section 132, 132A or Rule 112A are unreasonable restrictions on the freedom under Article 19(1) (f)&(g).”

7.02. It is almost a settled law that in exercise of powers under the writ jurisdiction, the High Court has the inherent powers to enter into the question of existence of information, which would provide a basis to form a reason to believe that the amount seized has not been or would not have been disclosed for the purpose of the Act.

7.03. At this stage we deem it appropriate to deal with the scope and ambit of powers under section 132A of the Act with regard to search and seizure. In ITO Versus Seth Brothers, reported in 1969 (74) ITR 836 (SC) =2002-TIOL-1015-SC-IT, 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 132A 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 the powers 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.

7.04. It is further true that when issuance of an authorization under section 132A of the Act, is challenged in a court of law, it will be open to the petitioner to contend that on the facts or information disclosed, no reasonable man could have arrived at the conclusion that the action under section 132A was called for although the formation of opinion under the said section is subjective. It is well to remember that the jurisdiction under Article 226 of the Constitution of India of this Court is very limited. In fact, this Court should not act as an appellate or revisional court and as such, has no justification to examine meticulously the information in order to decide for itself as to whether the action under section 132A was called for or not. Suffice it to say that in exercise of the extraordinary jurisdictions this Court can examine whether the act or issuance of an authorization under section 132A is arbitrary or malafide or whether the subjective satisfaction which is recorded is such that it indicates lack of application of mind of the appropriate authority. According to us, the reason to believe must be based on definable material or materials and if the information or the reason to believe has no nexus with the belief or there is no definable material or tangible information for formation of such belief, then, in such a case, action taken under section 132A of the Act would be treated as illegal.

7.05. In the case of Shalini Verma (supra) this Court (wherein one of us, Justice J.B. Pardiwala is a party), had an occasion to consider sections 132, 132A, as well as Rule 112A in detail. In Shalini Verma (supra), the petitioner had prayed for a writ of mandamus and had also prayed for quashing and setting aside the impugned Warrant of authorization. In the said decision, this Court in paras 9, 10, 11, 12, and 13 has held as under :-

“9. After hearing the learned counsel for the parties and after going through the materials on record including the provisions of the Act under which the proceedings have been initiated we find that the restriction placed by the provisions of Sections 132, 132-A or Rules 112-A are not unreasonable restrictions on the freedom under Articles 19 (1) (f) and (g) or Article 14 of the Constitution.(See Pooran Mal v. Director of Inspection (Investigation) of Income-tax, New Delhi and others reported in AIR 1974 SC 348 and Bhupendra Ratilal Thakkar and another v. Commissioner of Income-Tax, Gujarat I reported in AIR 1976 SC 636.) = 2002-TIOL-1600-SC-IT-LB.

10. The provisions of Sections 132 (1) (5), 132A and R. 112A are directed against persons who are believed on good grounds to have illegally evaded the payment of tax on their income and property. Therefore, drastic measures to get at such income and property with a view to recover the government dues would stand justified in themselves. In the interest of the community, it is only right that the fiscal authorities should have sufficient powers to prevent large-scale tax evasion.

11. 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 132A (1) (a), (b) and (c) exists. The safeguards in Ss. 132, 132-A and Rules 112-A are adequate to render the provisions of search and seizure as less onerous and restrictive as is possible under the circumstances.

12. Since, this application has been filed challenging the impugned warrant of authorization dated February 16, 2011 issued by the respondent No.1 under section 132A of the Act, we cannot lose sight to of the fact that the scope of investigation is very limited at this stage.

13. The High Court exercising jurisdiction under Article 226 of the Constitution has power to set aside a warrant of authorization issued under Section 132A of the Act, if the condition precedent to the exercise of the jurisdiction does not exist. The Court may in such a proceeding, in exercise of its powers, ascertain whether the authority issuing such authorization is the appropriate authority who in consequence of information in his possession, had reason to believe that the conditions mentioned in either of the sub-sections (a) or (b) or (c) of the Section 132A (1) were present. The Court may also decide whether from the circumstances of the case, the appropriate authority might have reason to believe that any of those conditions existed. However, the jurisdiction of the Court extends no further. Whether on the information in his possession, the said authority should exercise his power under Section 132A, must be decided by the said authority and not by the High Court. The concerned authority under Section 132A alone is entrusted with the power to administer the same. If from the materials disclosed it may be prima facie said that he had reason to believe that any of those conditions existed, it is not open to the High Court, exercising powers under Article 226 of the Constitution, to set aside the warrant of authorization on a re-appraisal of the evidence. On the other hand, if the writ petitioner can establish mala fides on the part of the authorities concerned or that in the circumstances, no reasonable person would come to the conclusion that the conditions mentioned therein existed, the High Court can interfere at that stage.”

7.06. Thus, the scope of interference with the Warrant of Authorization in a writ application under Article 226 of the Constitution is very limited. As held by this Court in the case of Shalini Verma (supra), whether on the information the authority concerned should have exercised his power under section 132A must be decided by the said authority and not by this Court. The concerned authority under section 132A alone is entrusted with the power to demonstrate the same. If from the materials disclosed, it must be prima facie said that the authority had reason to believe that any of those conditions existed, then, it is not open for this Court while exercising power under Article 226 of the Constitution to set aside the Warrant of Authorization on a reappraisal of the evidence.

7.07. We requested Mr.Bhatt, the learned Senior Counsel appearing for the revenue to call for the original file from the office of the Deputy Director of Income Tax (Investigation), Unit-III, Surat, so as to verify in what manner the satisfaction has been arrived at and recorded for the purpose of the issue of Warrant of Authorization. Mr.Bhatt, made the original file available for us for our perusal through a messenger. We have gone through the original file more particularly the Satisfaction Note dated 25/10/2018 put up by DDIT (Investigation-III), Surat and the satisfaction recorded in writing by the Principal DIT (Investigation), Surat. Having regard to the satisfaction Note, we may only say at this stage that there is more than a prima facie case for the purpose of justifying the issue of Warrant of Authorization.

7.08. In the case of N.K. Jewellers (supra), an employee of the assessee was returning from Amritsar and he was found to be in possession of Rs.30,00,000 in cash in a search by the railway police. Upon receipt of the information by the department, a Warrant of Authorization under section 132 of the Act was issued by the Director of Income Tax and the cash of Rs.30,00,000/- was requisitioned and assessed. The proceedings for assessment for the Block Period from April 1, 1991 to June 3, 2000 under section 158 BD of the Act were initiated. The explanation of the assessee before the Assessing Officer was that his employee had gone to Amritsar to make some purchase of gold but the transaction did not materialize. The Assessing Officer was of the view that the amount represented the sale of goods made by the assessee on the earlier occasions and the sale proceedings were being carried back to Delhi. After considering the statements of various persons and other materials on record, the authorities came to the conclusion that it was concealed income and assessed the assessee to tax. It was argued before the Assessee that the proceedings initiated under section 132 of the Act itself were invalid for the reason that it could not have been based on a search conducted on a train by the police authority and therefore, the proceedings initiated for the Block Assessment for the relevant period were without jurisdiction. Such contention raised before the Supreme Court came to be negatived by the Supreme Court by observing as under :-

“This plea was not raised by the appellant before any of the authorities. Further, we find that in view of the amendment made in section 132A of the Income-tax Act, 1961 by the Finance Act of 2017, the “reason to believe” or “reason to suspect”, as the case may be, shall not be disclosed to any person or any authority or the Appellate Tribunal as recorded by the income-tax authority under section 132 or section 132A. We, therefore, cannot go into that question at all. Even otherwise, we find that the explanation given by the appellant regarding the amount of cash of Rs.30 Lakhs has been treated as income not recorded in the books of account maintained by it.”

7.09. In Neesa Leisure Limited & Ors. (supra), this Court had the occasion to extensively consider section 132A of the Act. We may quote the relevant observations :

“The aforesaid pronouncements have exhaustively settled the guidelines with reference to scrutiny by the Court while examining the legality, propriety or otherwise of the issuance of search warrants under section 132(1) of the Act. From the principles enunciated in the above referred decisions, it is apparent that for the purpose of exercise of powers under section 132 of the Act, two conditions precedent are required to be satisfied. The first condition is that the concerned officer must have some information in his possession, and the second condition is that, in consequence of such information he must have reason to believe that the statutory conditions for exercise of the power to order search exist. The basis for exercise of power must be some material which can be regarded as information which must exist on the file on the basis of which the authorizing officer can have reason to believe that action under section 132 is called for. Such information should be fairly reliable and should not be a mere rumour or an unverified piece of gossip or a hunch. The Court, therefore, while examining the validity of the authorization issued under section 132 of the Act would firstly be required to examine as to whether there exists any information of the nature referred to hereinabove in the possession of the concerned officer, on the basis of which he could have formed a reason to believe. The next requirement which would be required to be satisfied is as to whether before issuance of the authorization, the concerned official has recorded the reasons for his belief. If reasons have been recorded, the opinion which has to be formed being subjective, the jurisdiction of the court to interfere is very limited. The court will not act as an appellate authority and examine meticulously the information in order to decide for itself as to whether the action under section 132 is called for. But the court would be acting within its jurisdiction in seeing whether the act of issuance of authorization under section 132 is arbitrary or malafide or whether the satisfaction recorded is such which shows lack of application of mind on the part of the appropriate authority. The reason to believe must be tangible in law and if the information or reason has no nexus with the belief or there is no material or tangible information for the formation of the belief, action taken under section 132 would be bad in law. If reasons have been recorded and the concerned officer is satisfied that there is reason to believe, the court cannot sit in appeal over the decision of the said officer regarding the existence of the reason to believe nor can the court examine the adequacy of the grounds on which the reason to believe entertained by such officer is based. But there is a limited area within which such reason to believe entertained by the officer can be scrutinized by the Court. If the grounds on which “reason to believe” is founded are not relevant to the subject matter of inquiry or are extraneous to the scope and purpose of the statute or are such as no rational human being can consider connected with the fact in respect of which the belief is to be entertained so that no reasonable man can come to such a belief, the exercise of the power would be bad. In appropriate cases a writ petition may lie challenging the validity of the action on the ground of absence of power or on a plea that proceedings were taken maliciously or for a collateral purpose.

Examining the facts of the present case in the aforesaid legal backdrop, it has been contended on behalf of the petitioners that the authorizations issued by the respondent No.2 Director General of Income-tax are illegal and invalid inasmuch as there were no grounds before him on the basis of which he could have reason to believe that the petitioners were in possession of undisclosed income or property. For this purpose, the respondent authorities had produced the file containing the satisfaction note as well as the material based on which the satisfaction had been recorded, for the perusal of the Court. On scrutiny of the record produced before the Court, it has been noticed that a detailed proposal/satisfaction note has been prepared by the ADIT (Investigation) based on the information collected during the course of presearch inquiries, which has been duly considered by the Additional DIT, who in turn has recorded satisfaction that this is a fit case for action under section 132(1) of the Act. The DIT (Investigation) upon considering the proposal as well as the material on record, has discussed the case with the concerned officers and has recorded satisfaction that if summons under section 131 of the Act and notice under section 142(1) is issued, the persons referred to in the satisfaction note would not be produced or cause to be produced, the books of account or other documents which will be useful or relevant to any proceedings under the Income Tax Act within the meaning of section 132(1) (b) of the Act. The respondent No.2, Director General of Income Tax (Investigation) has also perused various notes recorded by the ADIT (Investigation), the Additional DIT (Investigation) as well as the DIT (Investigation) as well as the material on record and has discussed the same with concerned officials. While recording satisfaction, the respondent No.2 has discussed the relevant facts on record and has recorded satisfaction that this is a fit case for issue of warrant of authorization under section 132(1) of the Act. In the affidavit-in-reply filed by the respondent No.2, it has been asserted that the satisfaction note produced for the perusal of the Court shows that pre-search inquiries clearly indicated that the assessee group was in possession of documents which would not be produced by issuance of summons or other notice in terms of provisions of section 132(1)(b) of the Act as also assets as contemplated under clause (c) of section 132(1). It has been categorically averred that the pre-search inquiries formed reason for believing the aspect enumerated in clauses (b) and (c) of section 132(1) and that the satisfaction recorded has been vindicated even from the findings in the search. The record indicates that exhaustive inquiries have been made and it is on the basis of the material collected during the course of such inquiries, that the satisfaction has been recorded. On a perusal of the material, based on which satisfaction has been recorded by the respondent No.2 before issuance of authorization under section 132 of the Act, it cannot be said that based on such material no reasonable person could have formed the opinion that reasons for exercise of powers under section 132 exist. In the opinion, of this court, the record of the case clearly indicates that there was sufficient and relevant material before the respondent No.2 to form the requisite opinion as contemplated under section 132(1) of the Act. As noted hereinabove, at the stage of considering the validity of authorization to search and seize under section 132(1) of the Act, the consideration is as to whether there is some relevant material so as to warrant proceedings under section 132 of the Act and the question of sufficiency cannot be gone into.”

7.10. We shall now look into the two decisions relied upon by Mr.Shah, the learned Senior Counsel appearing for the writ applicant.

7.10.1. In the case of Vindhya Metal Corporation and others (supra), one Vinodkumar Jayswal was travelling from Mirzapur to Calcutta by train. He was detained at the Mogal Sarai Railway station by the railway police and a bag containing a sum of Rs.4,63,000/- was seized from him on the suspicion that the money was stolen property or had been obtained through some other offence. Investigation in connection with the the said seizure of cash ultimately led to issue a Warrant of Authorization under section 132A(1) of the Act. The said Warrant of Authorization was challenged before the High Court by filing a writ application. The Supreme Court reproduced the findings of the Allahabad High Court in its judgement, which reads as under :-

“(a) a sum of Rs. 4,63,000/- had been seized by the Government Railway Police from the possession of one Vinod Kumar Jaiswal, resident of Imamganj, Durga Devi, Mirzapur;

(b) at the time to the seizure by the Railway Police, no papers or documents in regard to the ownership or possession of the amount were in possession of Vinod Kumar Jaiswal, and

(c) no person by the name of Vinod Kumar Jaiswal was borne on the General Index Register of Incometax assessee of the Income-tax Office at Mirzapur. The High Court, after considering the material on which reliance was placed by the Commissioner, has held that on the information in possession of the Commissioner no reasonable person could have entertained a belief that the amount in possession of Vinod Kumar Jaiswal represented income which would not have been disclosed by him for purpose of the Acts. The High Court has observed :-

“Vinod Kumar Jaiswal, according to the information in possession of the Commissioner, was not borne on the General Index Register of Income-tax assessee of the Income- Tax Offices at Mirzapur to which place he belonged. Obviously, therefore, there was not occasion for him to have disclosed the amount as his income in any assessment proceedings under the Act. Without anything more than what was actually there before the Commissioner, how could it have been assumed that he would not have disclosed it for purposes of any proceedings under the Act. There was nothing before the Commissioner to suggest that it was, in fact, wholly or in part, income of any person connected with Vinod Kumar Jaiswal so as to induce a belief that, if called upon, Vinod Kumar Jaiswal would not have disclosed it for the purpose of the Act. The mere fact this amount and did not have any documents with him regarding its ownership or possession could not be treated as appears to have been done by the Commissioner as information relatable to a conclusion that it represented income which would not have been disclosed by Vinod Kumar Jaiswal of purpose of the Act. Mere unexplained possession of the amount, without anything more, could hardly be said to constitute information which could be treated as sufficient by the reasonable person, leading to an inference that it was income which would not have been disclosed by the person in possession for purposes of the Act.”

The Supreme Court after reproducing the aforesaid findings recorded by the Allahabad High Court, ultimately held as under :-

“We have heard the learned counsel for the appellant in support of the appeal and we have perused the impugned judgment of the High Court. Having considered the facts and circumstances of the case, we do not find any ground to interfere with the impugned judgment of the High Court. The appeal is, therefore, dismissed. No order as to costs.”

The Allahabad High Court in the aforesaid case, after considering the materials on record, had recorded a finding that on such information no reasonable person could have entertained a belief that the amount in possession of Vinod Kumar Jaiswal represented income which would not have been disclosed by him for the purposes of the Act. Thus, the facts in the case of Vindhya Metal Corporation (supra) persuaded the High Court to arrive at such conclusion and the Supreme Court affirmed such conclusion arrived at by the High Court. In the case on hand, as noted above, the authority concerned has produced the file containing the satisfaction note as well as the materials based on which the satisfaction came to be recorded for the perusal of this Court. We have observed above that on scrutiny of the records produced before this Court, it is evident that a detailed proposal / satisfaction note had been prepared by the DIT (Investigation) based on the information collected during the inquiry which has been duly considered by the Principal DIT, who in turn recorded the satisfaction that this was a fit case for action under section 132(1) of the Act.

7.10.2. In the case of Prakash Jaichand Shah (supra), this Court had the occasion to consider the decision of the Supreme Court in the case of Vindhya Metal Corporation (supra). In the said case, the petitioner therein was carrying cash of Rs.11,00,000 and was detained by the police authorities and the cash of Rs.11,00,000 was seized by the police authorities under section 102 of the Code of Criminal Procedure. Later, the Police Officer informed the Income Tax department to record the statement of the petitioner therein, thereafter the Dy.Director prepared a Satisfaction Note and placed the same along with the statement and other documents before the respondent No.1 therein who recorded the satisfaction and issued the Warrant of Authorization under section 132A of the Act. Again having regard to the facts of that case and evidence on record, this Court, by relying on the decision in the case of Vindhya Metal Corporation (supra) took the view that no reasonable person could have come to the conclusion that the amount of Rs.11 Lac belonged to the petitioner or that the petitioner would not have disclosed the same to the Income Tax Authority under the provisions of the Act. This decision also, in our opinion, does not help the writ application in any manner.

7.11. At this stage, our attention has been invited by Mr.Bhatt, the learned counsel appearing for the revenue to the decision of the Supreme Court in the Case of Director General of Income Tax (Investigation) Pune & Ors. Versus M/s. Spacewood Furnishers Pvt. Ltd. & Ors., [2015] 374 ITR 595 (S.C.) = 2015-TIOL-118-SC-IT. We are referring to this decision only with a view to highlight the scope of interference in such type of matters, more particularly in cases where the Warrant of Authorization is issued under section 132A of the Act. We may quote the relevant observations made by the Supreme Court, in the case of M/s. Spacewood Furnishers Pvt. Ltd. & Ors. in paragraph Nos.5 to 9 :-

“5. The “classical” notion of the extent of power that the High Court would have in the exercise of its writ jurisdiction to cause such interference is formulated in ITO vs. Seth Brothers1 and Pooran Mal vs. Director of Inspection (Investigation), Income Tax2. The parameters of permissible interference as laid down in the aforesaid two decisions have stood the test of time and continue to hold the field even today. We may, therefore, advert to ITO vs. Seth Brothers (supra) in the first instance.

6. Considering the scope of Section 132 of the Act in ITO vs. Seth Brothers (supra), this Court at page 843 held that :-

“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 authorization in favour of a designated officer to search the premises and exercise the powers set out therein. The condition for entry into and making search of any building or place is the reason to believe that any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act may be found. If the Officer has reason to believe that any books of account or other documents would be useful for, or relevant to, any proceedings under the Act, he is authorized by law to seize those books of account or other documents, and to place marks of identification therein, to make extracts or copies therefrom and also to make a note or an inventory of any articles or other things found in the course of the search. 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 authorizes it to be exercised. 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 his action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the Court. If the conditions for exercise of the power are not satisfied the proceeding is liable to be quashed. But where power is exercised bona fide, and in furtherance of the statutory duties of the tax officers any error of judgment on the part of the Officers will not vitiate the exercise of the power. Where the Commissioner entertains the requisite belief and for reasons recorded by him authorizes a designated officer to enter and search premises for books of account and documents relevant to or useful for any proceeding under the Act, the Court in a petition by an aggrieved person cannot be asked to substitute its own opinion whether an order authorising search should have been issued. Again, any irregularity in the course of entry, search and seizure committed by the officer acting in pursuance of the authorization will not be sufficient to vitiate the action taken, provided the officer has in executing the authorization acted bona fide.

The Act and the Rules do not require that the warrant of authorization should specify the particulars of documents and books of accounts a general authorization to search for and seize documents and books of account relevant to or useful for any proceeding complies with the requirements of the Act and the Rules. It is for the officer making the search to exercise his judgment and seize or not to seize any documents or books of account. An error committed by the Officer in seizing documents which may ultimately be found not to be useful for or relevant to the proceeding under the Act will not by itself vitiate the search, nor will it entitle the aggrieved person to an omnibus order releasing all documents seized.”

7. In Pooran Mal vs. Director of Inspection (supra) the constitutional validity of Section 132 was under challenge. While negating the said challenge, this Court at page 515 of its report had held that:

“Dealing first with the challenge under Article 19(1)(f) and (g) of the Constitution it is to be noted that the impugned provisions are evidently directed against persons who are believed on good grounds to have illegally evaded the payment of tax on their income and property. Therefore, drastic measures to get at such income and property with a view to recover the government dues would stand justified in themselves. When one has to consider the reasonableness of the restrictions or curbs placed on the freedoms mentioned in Article 19(1)(f) and (g), one cannot possibly ignore how such evasions eat into the vitals of the economic life of the community. It is a well-known fact of our economic life that huge sums of unaccounted money are in circulation endangering its very fabric. In a country which has adopted high rates of taxation a major portion of the unaccounted money should normally fill the Government coffers. Instead of doing so it distorts the economy. Therefore, in the interest of the community it is only right that the fiscal authorities should have sufficient powers to prevent tax evasion.”

8. What is significant and, therefore, must be noticed is that in both the aforesaid two decisions while this Court has emphasized the necessity of recording of reasons in support of the ‘reasonable belief’ contemplated by Section 132, nowhere, in either of the decisions any view had been expressed that the reasons recorded prior to authorizing the search needs to be disclosed or communicated to the person against whom the warrant of authorization is issued. The same is the view expressed by this Court in Dr. Pratap Singh vs. Director of Enforcement3 while considering a para material provision in the Foreign Exchange Regulation Act.

“The material on which the officer has reasons to believe that any documents will be useful for or relevant to any investigation need not be disclosed in the search warrant; such material may be secret, may have been obtained through intelligence, or even conveyed orally by informants. In the said case, the petitioner contended that, if the court is going to look into the file produced on behalf of the officer who authorized the search, it must be disclosed to the petitioner so that the petitioner “can controvert any false or wholly unreasonable material set out in the file”, but the Supreme Court did not accept this submission. The Supreme Court also referred to an earlier decision in S. Narayanappa v. CIT [1967] 63 ITR 219 (SC) = 2002-TIOL-2086-SC-IT-LB, to hold that whether grounds for ordering search were sufficient or not is not a matter for the court to investigate. However, the court may examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the 3 (1985 (155) ITR 166 (SC) = 2002-TIOL-1784-SC-IT belief and are not extraneous or irrelevant for the purpose of the section.”

9. The principles that can be deduced from the aforesaid decisions of this Court which continue to hold the field without any departure may be summarized as follows :

“(i) The authority must have information in its possession on the basis of which a reasonable belief can be founded that-

(a) the concerned person has omitted or failed to produce books of account or other documents for production of which summons or notice had been issued

OR

such person will not produce such books of account or other documents even if summons or notice is issued to him.

OR

(b) 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.

(ii) Such information must be in possession of the authorized official before the opinion is formed.

(iii) There must be application of mind to the material and the formation of opinion must be honest and bonafide. Consideration of any extraneous or irrelevant material will vitiate the belief/satisfaction.

(iv) Though Rule 112(2) of the Income Tax Rules which specifically prescribed the necessity of recording of reasons before issuing a warrant of authorization had been repealed on and from 1st October, 1975 the reasons for the belief found should be recorded.

(v) The reasons, however, need not be communicated to the person against whom the warrant is issued at that stage.

(vi) Such reasons, however, may have to be placed before the Court in the event of a challenge to formation of the belief of the authorized official in which event the court (exercising jurisdiction under Article 226) would be entitled to examine the relevance of the reasons for the formation of the belief though not the sufficiency or adequacy thereof.”

7.12. The Affidavit-in-reply filed on behalf of the respondent speaks for itself. Initially the writ applicant declared that he had withdrawn the amount from his bank accounts as well as from the accounts of his wife. He also declared that some amount was also taken from his cash book. However, when asked to submit the bank account details and cash withdrawals so far as the account of his wife is concerned, the writ applicant declined to submit the details and prayed for some more time to produce the relevant documents. The writ applicant was also asked to submit confirmation from the parties with respect to cash payment along with the relevant cash as well as bills. However, the information provided by the writ applicant was not found convincing. The authority found the statement of the writ applicant recorded periodically quite contrary to each other.

7.13. In the overall view of the matter, we are convinced that we should not interfere in the present matter. We do not find any palpable error or gross illegality going to the root of the matter in the issue of Warrant of Authorization under subsection (1) of section 132A of the Act.

7.14. Mr.Shah, the learned Senior Counsel appearing for the writ applicant vehemently submitted that the amount which has been seized needs to be paid to the farmers. Mr.Shah laid much emphasis on the goodwill which the writ applicant claims to be enjoying amongst the farmers across the country. According to Mr.Shah, the huge turnover in crores of rupees and that too in cash is indicative of the fact that the farmers trust the writ applicant like anything and the default in making the necessary payments, may affect the goodwill of the writ applicant. We do not intend to go into the issue of goodwill which the writ applicant might be enjoying. However, we inquired with Mr.Shah as to whether, the writ applicant is ready and willing to give a running Bank Guarantee of any Nationalized Bank of the equivalent amount. We expressed our inclination to release the cash amount, which has been seized, in favour of the writ applicant subject to the writ applicant furnishing a running Bank Guarantee of any Nationalized Bank. However, Mr.Shah, the learned Senior Counsel appearing for the writ applicant submitted that it would be too difficult for the writ applicant to furnish a Bank Guarantee of the amount of Rs.2 Crore and odd.

8.00. In such circumstances, referred to above, this writ application fails and is hereby rejected. Rule is discharged. In the facts and circumstances of the case, there shall be no order as to costs.

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