The main legal point established in the judgment is that the power conferred by Section 132(1) must be exercised strictly in accordance with the law, and the Director of Income Tax must have a reason to believe before issuing a warrant of authorization.

(Dr. D.Y. Chandrachud, J.)

1. In these proceedings under Article 226 of the Constitution of India, petitioner has sought to question the legality of a warrant of authorization issued by the first respondent under Section 132 of the Income Tax Act, 1961 and all proceedings consequent thereto, including the assessments for Assessment Years 2001-2002, 2002-2003, 2003-2004, 2004-2005 dated 24 November, 2008. The orders of assessment stand confirmed by the Commissioner of Income Tax (Appeals) on 30 March, 2010.

The Petitioner has filed appeals against the orders of the CIT (A) which are stated to be pending before the Income Tax Appellate Tribunal. The Petitioner and his wife formed a Deed of Partnership on 1 November 1992. The partnership firm constituted by the deed of partnership was to be known by the name and style of M/s. Sriram Warehousing Corporation. The business of the partnership consisted inter alia of providing security guards, valuation, verification, inspection of stocks, fixed assets, book debts, warehousing etc. A deed of rectification was entered into thereafter on 17 November, 1993. On 19 April 2004 a deed of dissolution was entered into by which the partnership firm was dissolved with effect from 31 March 2004. The petitioner was to continue the business of the firm as sole proprietor. According to the petitioner, the fact of the dissolution of the firm was intimated to the Income Tax Officer, Ward No. 16(1)(4), Mumbai by a letter dated 29 September 2005.

2. Warrants of authorization were issued under Section 132 by the Director of Income Tax (Investigation). Search and seizure proceedings were conducted in pursuance of the warrants of authorization, inter alia at the business premises and at the residential premises of the petitioner and his wife. A notice was issued on 28 May, 2007 under Section 153(a) calling for the returns of Income for the Assessment Years 2001-02 to 2004-2005. On 29 May 2007 the petitioner filed an application before the Settlement Commission under section 245C (1). On 17 July 2007 returns of income were filed. The orders of assessment were passed on 24 November 2008. The CIT(A) disposed of the appeals filed by the petitioner by an order dated 24 November 2008. The CIT(A) held that the validity of the search and seizure cannot be challenged either before him or before the Tribunal but only before this Court in the exercise of its writ jurisdiction. As noted earlier, the petitioner is in appeal before the Tribunal against the orders passed by the C.I.T.(A).

3. Counsel appearing on behalf of petitioner submitted that the warrants of authorization under Section 132(1) are unlawful and must be set aside by this Court for the following reasons :

(i) The Director of Income Tax (Investigation) who issued the warrants of authorization had no reason to believe, within the meaning of Clause (b) of sub section (1) of section 132 that any person to whom summons or notices might be issued under sub section (3) of section 142 would not produce or cause to be produced any books of account or other documents which will be useful for or relevant to any proceedings under the Act;

(ii) The warrants of authorization were issued in the name of a dissolved firm which is not in existence in law and are therefore a nullity;

(iii) In pursuance of the warrants of authorization issued in the name of a dissolved firm, the residential premises of the erstwhile partners cannot be searched.

(iv) All the assessment proceedings which were commenced pursuant to illegal warrants of authorization and the orders of assessment would have to be quashed and set aside.

(v) The documents which were seized during the course of the search and seizure operation must be ordered to be returned, having regard to the provisions of Section 132(8). Though the petitioner had moved an application on 13 August 2007 for the release of the books of account and other documents seized, no order for release has been passed.

4. On the oth