JUDGMENT
1. By this petition under Article 226 of the Constitution of India, the petitioners pray for quashing the authority letter under which the income-tax authorities conducted a search on the premises of petitioner No. 1, Lajpat Rai. The petitioners further pray for a writ of mandamus commanding the respondents not to operate the locker belonging to the petitioners and not to seize or take away the ornaments kept therein. It is further prayed that the respondents be directed to return the bill books and other papers seized from petitioner No. 1 and be restrained from making any assessment against petitioner No. 1.
2. Petitioner No. 2, Smt. Suman Lata, is the wife of petitioner No. 1, Lajpat Rai. Petitioner No. 3, Smt. Sukho Kunwar, is the mother of petitioner
No. 1 and petitioner No. 4 is his sister. It is alleged that the eldest sister of petitioner No. 1, namely, Smt. Mukul Rani Varshani, was married to Sri Prem Chandra Varshani, who was the managing director of Saraikela Glass Works Ltd., Kandra, Bihar. The said Prem Chandra Varshani died about two years back and on his death his younger brother, Subhash Chandra Varshani, took over as the managing director of the said company.
3. The income-tax authorities conducted a search on February 2, 1989, at the business and residential premises of Subhash Chandra Varshani at Kandra, Calcutta, Madras and Baroda and also at his other sales and business premises in different parts of the country. In that connection, the income-tax authorities also raided the residential premises of petitioners Nos. 1, 2 and 3 on February 2, 1989, along with a large number of Income-tax Officers, inspectors and police force. The team was headed by Sri V.K. Pandey, Director of Investigation, Allahabad, who informed petitioner No. 1 that the search was directed against him in connection with the search against the said Subhash Chandra Varshani, the managing director of Saraikela Glass Works. It is contended that after the death of his sister’s husband, the petitioners are remotely connected with Subhash Chandra Varshani and there was no reason for searching the premises of the petitioners. Since the search party had come with a large force and the petitioners had nothing to hide from them, he allowed them to conduct the search of his premises. During the search, no appreciable properties were found and the raiding party took away some files, bill books connected with the business of petitioner No. 1 of supplying silica sand. The search party also took into its possession the key of locker No. 62 standing at the Allahabad Bank, Katra Branch, Allahabad. It is alleged that the said locker was initially taken by petitioner No. 3, Smt. Sukho Kunwar, the mother of petitioner No. 1 and it was later transferred in the name of petitioner No. 1. The said locker contained the ornaments of petitioners Nos. 2, 3 and 4.
4. By a notice dated February 15, 1989, respondent No. 2 directed petitioner No. 2 to report at the former’s office on February 16, 1989, in connection with the operation of the said locker. Petitioner No. 1 applied for adjournment on the ground of illness and in the meantime filed the present writ petition. It is contended that the said search is contrary to the provisions of Section 132 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”), because the authorities had no reason to believe in consequence of information in their possession that petitioner No. 1
was in possession of any assets belonging to Subhash Chandra Varshani. It is also alleged that no search warrant was issued and none shown or served on petitioner No. 1 either on February 2, 1989, or thereafter. It is claimed that there was total non-application of mind by respondent No. 3, the Deputy Director of Income-tax (Investigation), as there was no material before him justifying the search. It is claimed that the petitioner had come to know that the authority letter allegedly carried by the raiding party was not signed by any of the authorities mentioned under Section 132 of the Act.
5. In the counter-affidavit filed on behalf of the respondents and sworn by Sri T.P. Singh, Assistant Director of Income-tax (Investigation), it has been stated that petitioner No. 1 was related with Saraikela Glass Works Ltd., Kandra, as he was supplying silica sand to the said company. According to the respondents, Mrs. Mukul Rani Varshani is also a director of the said company. As already stated, according to the petition, she is the sister of petitioner No. 1. It is admitted in the counter-affidavit that Subhash Chandra Varshani aforesaid was the managing director of the said company. During the search conducted at the business and residential premises of Subhash Chandra Varshani and Saraikela Glass Works Ltd., the documents connected with the business transaction between the said company and Hanuman Minerals, proprietary business of petitioner No. 1, were found and seized. Therefore, it is incorrect to say that nothing connected with the petitioner was found during the aforesaid search. It is contended that the search and seizure operations against the petitioners were justified in so far as the concerned authorities had reason to believe that assets and valuables and/or documents connected with the transaction with Saraikela Glass Works Ltd. will be found in the said premises. The search and seizure operations were strictly conducted in accordance with Section 132 of the Act and Rule 112 of the Income-tax Rules, 1962. It is also alleged that the search party had the necessary authorisation in their possession at the time of the search and the same was shown to petitioner No. 1, who had signed it. It is contended that during the search at the premises of petitioner No. 1 incriminating documents were found and seized from petitioner No. 1 which shows that petitioner No. 1 was having a true business connection with Saraikela Glass Works Ltd. It was on the basis of prior information to that effect the residential premises of petitioner No. 1 were searched. It is also contended that during the search petitioner No. 1 did not put up any protest or objection. It is contended that the locker is in the name of petitioner No. 1 only. It is
contended that without opening the locker it cannot he said what it actually contains and whether the seizure of the ornaments allegedly kept therein would be justified.
6. In the rejoinder affidavit sworn by petitioner No. 1, it has been admitted that he was supplying silica sand to the said Saraikela Glass Works Ltd., Kandra. It is reported that no warrant of authorisation was shown to petitioner No. 1.
7. We have heard Sri V.B. Upadhyay, learned counsel for the petitioners, and Sri Bharatji Agarwal, learned standing counsel for the Income-tax Department.
8. The provisions of search and seizure are contained in Section 132 of the Income-tax Act under which a Deputy Director of Income-tax is, inter alia, authorised to issue an authorisation to conduct a search. In the present case, the warrant of authorisation for the search of the residential premises of the assessee as well as the locker was issued by the Deputy Director of Income-tax, respondent No. 3. The authority to search can be issued, if the concerned authority, in consequence of information in his possession, has reason to believe that :
(a) any person to whom a summons under the various Sections of the Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account, or other documents, as required by such summons or notice, or
(b) any person to whom a summons or notice has been issued or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act, or
(c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Act.
9. Learned counsel for the assessee contended that search is a serious encroachment on the right of privacy of the citizen and, therefore, can be conducted only if the requirements of Section 132 are fulfilled. He placed reliance on the two judgments of this court in Dr. Nand Lal
Tahiliani v. CIT [1988] 170 ITR 592 and Vindhya Metal Corporation v. CIT [1985] 156 ITR 233 and a judgment of the Punjab and Haryana High Court in Harmel Singh v. Union of India [1993] 204 ITR 334.
10. In Vindhya Metal’s case [1985] 156 ITR 233 (All), the power of requisition of books of account, assets was exercised by the income-tax authorities to take possession of certain amount of cash that was in the possession of the railway police. This power was exercised on the basis of the information that a certain person was in possession of a huge amount of cash and did not have documents regarding its ownership and the fact that his name was not found in the list of income-tax assessees. It was held that this information could not be treated as sufficient information leading a reasonable man to the inference that the amount would not be disclosed for income-tax purposes. It was held that the existence or otherwise of the condition precedent to the exercise of the powers under these provisions is open to judicial scrutiny.
11. In Nand Lal’s case [1988] 170 ITR 592 (All), this court observed that the dwelling house of a person is his fortress, and every householder, the good or the bad, the guilty or the innocent is entitled to the protection designed to secure the common interest against unlawful invasion of the house. It was held that an information of a general nature that the petitioner, a doctor, was charging a high fee for consultations and operations and was living in a posh house did not give the income-tax authorities a reason to believe that the person was in possession of any money, bullion, jewellery or other valuable articles or thing representing undisclosed income and in the absence of such plea the search was unauthorised. To the same effect is the judgment of the Punjab and Haryana High Court in Harmel Singh’s case [1993] 204 ITR 334.
12. On the other hand, Sri Bharatji Agarwal, learned counsel for the respondents, placed reliance on a judgment of the Supreme Court in ITO v. Seth Brothers [1969] 74 ITR 836 in which it was observed that when the 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 authorises 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. Any irregularity in the course of entry, search and seizure committed by the officer acting in pursuance of the authorisation will not be sufficient to vitiate the action taken, provided the officer has, in executing the authorisation, acted bona fide.
13. The Supreme Court reiterated its view as declared in ITO v. firm Madan Mohan Damma Mal [1968] 70 ITR 293 (All), in which it was observed that the issue of a search warrant by the Commissioner is not a judicial or a quasi-judicial act and even if the Commissioner is enjoined to issue a warrant only when in fact, there is information in his possession in consequence of which he may form the necessary belief, the matter is not thereby subject to scrutiny by the court. The mere fact that it may ultimately be found that some documents seized were not directly relevant to any proceeding under the Act or that another officer with more information at his disposal may have come to a different conclusion will not be a ground for setting aside the order and the proceeding for search and seizure.
14. Jt is in the light of the above law that the validity of the actions under challenge is to be scrutinised.
15. We may first take up the search held on February 2, 1989. This search was completed and was authorised by respondent No. 2, the Deputy Director of Income-tax (Investigation), Allahabad.
16. Learned counsel for the respondents produced before us the record of the proceedings and supplied photostat copies of the report of the Assistant Director asking for the issue of authorisation under Section 132 to enable him to search the premises of petitioner No. 1. A copy of the warrant of authorisation has also been placed before us and it bears the signature of petitioner No. 1 under the endorsement dated February 2, 1989, stating “seen”. The allegation of the petitioner in the writ petition that the officers were not in possession of any warrant of authorisation is, therefore, false and we may state that the aforesaid contention was not repeated before us during the hearing.
17. As regards the reasons for the issue of a warrant of authorisation, admittedly it was a search consequent to the search at the business premises of Saraikela Glass Works Ltd., Kandra. The report of the A. D. I. states that he had received telephonic information from one Sri Dev Burman, Deputy Director of Investigation, Calcutta, that a search against the said Saraikela Glass Works Ltd. has been started at Jamshedpur and a few of its agents in Calcutta. The report further stated that as per information the present petitioner was a person connected with the company
and appears to be in possession of some incriminating documents and the assets pertaining to the said company and its managing director, Subhash Chandra Varshani. The Deputy Director of Investigation, Calcutta, felt that a consequential search immediately was necessary. It was on these facts, that were placed before the Deputy Director of Investigation, Allahabad, that a warrant of authorisation was issued and the search against the petitioner was directed.
18. Learned counsel for the petitioner contended that the mere fact that petitioner No. 1 had been supplying silica sand to the said Saraikela Glass Works Ltd. was not sufficient to give the Deputy Director of Income-tax reason to believe that if a summons or notice under the Income-tax Act is issued to petitioner No. 1, the same would not be complied with. The facts as they have come on record are that petitioner No. 1 was not an ordinary supplier. He was the brother-in-law of the former managing director and brother of one of the present directors of the company. The fact that petitioner No. 1 was “supplying” silica sand to the said Saraikela Glass Works Ltd. was not disclosed in the petition and it has been admitted only in the rejoinder affidavit after the respondents made an allegation to that effect. Similarly, the fact that petitioner No. 1’s sister, Smt. Mukul Rani, widow of Prem Ghandra Varshani, was a director of the said company at the material time was also not disclosed in the petition and was admitted only in the rejoinder affidavit. The income-tax authorities at Allahabad did not initiate the search against the petitioner. It was on the request of the Deputy Director of Investigation, Calcutta, who was in the process of search at the business premises of Saraikela Glass Works Ltd. and, as the report of the A. D. I. shows, who had gathered information that the petitioner appeared to be in possession of some incriminating documents and assets pertaining to the said company and its managing director, Subhash Chandra Varshani. It was not even contended that during the search against Saraikela Glass Works Ltd. no such information was gathered. Therefore, the search on February 2, 1989, conducted at the residential premises of the assessee was a consequential search and on the basis of the telephonic information received by the A. D. I., Investigation at Allahabad, the Deputy Director of Investigation could reasonably believe that petitioner No. 1 was in possession of books of account or other documents which will be useful for or relevant to the proceedings under the Income-tax Act, 1961, against the said company or its directors. The close relationship between petitioner No. 1 and the persons in control of the said company would certainly lead one to believe that, in the ordinary course, petitioner No. 1 would not comply with the
notice under the Income-tax Act and produce the materials in his possession which would be adverse to the company and the said relatives.
19. We are, therefore, of the view that the search against petitioner No. 1 was properly authorised and the consequent proceedings in seizing certain accounts cannot be quashed. The petitioners can ask for the return of the books in accordance with the provisions of the Income-tax Act.
20. As regards the locker, in the search conducted on February 2, 1989, the authorities found the concerned key of the locker at the Katra Branch of the Allahabad Bank. The authorisation dated February 2, 1989, authorised search at the residential premises of Lajpat Rai, petitioner No. 1, and, therefore, the locker at the bank could not be searched in the execution of the said authorisation. A fresh authorisation for the search of the locker was necessary and the same was issued on February 27, 1989. In the meantime, the petitioners filed the present writ petition and by an order dated February 27, 1989, itself, the respondents were restrained from operating the said locker.
21. The A. D. I. Investigation submitted a report dated February 27, 1989, to the Deputy Director of Investigation asking for the consequential warrant of authorisation. The said report states as under :
‘ “A search and seizure operation under Section 132(1) was carried out in the residential premises of Shri Lajpat Rai on February 2, 1989. In the course of the search a key No. … in respect of locker No. …. in the Allahabad Bank, Katra Branch, Allahabad, was seized. A notice was issued to the assessee to co-operate in the operation of the said locker. However, he appears unwilling to co-operate in the operation of the locker and search and seizure proceedings under the Income-tax Act thereon. An order under Section 132(3) was served on the bank manager on February 4, 1989. Later on, a letter was written to him stating therein that operation of the locker may be allowed to the authorised officer in view of the explicit provision in the Income-tax Act in the absence of the assessee. The Bank Manager has agreed on telephonic talk that the locker may be operated today. In view of the above, a consequential warrant of authorisation may be issued. Put up for signature.
(Sd.) Illegible
A. D. I. T. (Investigation)
Seen. I after that authorisation is permitting for operating it.
(Sd.) Illegible
D. D. I. T.
February 27, 1989.”
22. This report was made 25 days after the earlier search was conducted and in the meantime, the authorities at Allahabad must have perused the material already seized from the residential premises of petitioner No. 1 and also could have had detailed information from their counterpart at Calcutta to satisfy themselves about the necessity of a search of the locker in question. In spite of this sufficient opportunity, the report, as reproduced above, does not state that there was any information that any valuable assets or documents useful for the assessment of Saraikela Glass Works Ltd. and/or its directors was reasonably expected to be stored in the locker. Nor does the report state that the said locker is believed to contain the unaccounted income/assets of petitioner No. 1. The report on its very face does not contain any material or reason to justify a search of the locker. The reluctance of petitioner No. 1 to allow the locker to be searched cannot be the basis of the required reason to believe.
23. In our view, therefore, the income-tax authorities had no justification for proceeding to search the locker and the authorisation in question was based on irrelevant considerations. The warrant of authorisation dated February 27, 1989, is, therefore, in our view, against the provisions of Section 132 of the Act and must be quashed to protect a citizen from unnecessary breach of his privacy.
24. The petitioner has also made a prayer that the respondents may be restrained from making any assessment against petitioner No. 1. The proceedings for assessments under the Income-tax Act or the Wealth-tax Act are statutory proceedings and the petition does not state that any assessment proceedings have been initiated in violation of the statutory provisions. Such a relief, therefore, cannot be granted.
25. For the above reasons, this writ petition is partly allowed and the warrant of authorisation dated February 27, 1989, directing a search of the locker standing in the name of petitioner No. 1 at Allahabad Bank, Katra Branch, in the city of Allahabad is hereby quashed.
26. In the circumstances of the case, the parties shall bear their own
costs.
