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High Court Of Delhi
NALINI MAHAJAN - Appellant
Versus
DIRECTOR OF INCOME TAX (INV.) - Respondent
Decided On : 05/08/2002
Whether the Additional Director (Inv.) has the requisite jurisdiction to authorize any officer to effect search and seizure in purported exercise of its power conferred upon it under Section 132 of the Act; and Whether there had been sufficient materials before the appropriate authority to satisfy itself that the authorization for search could be issued.
Fact of the Case:
The petitioners are individuals and companies who were subjected to search and seizure operations by the Income Tax Department. The petitioners challenged the validity of the searches and seizures, arguing that the Additional Director (Inv.) did not have the requisite jurisdiction to authorize the searches, that there were insufficient materials to justify the issuance of the authorization, and that the notification dated 06.09.1989 was invalid. The Revenue contended that the searches and seizures were conducted in accordance with the provisions of the Income Tax Act, 1961, and that the Additional Director (Inv.) had the necessary jurisdiction to authorize the searches.
Finding of the Court:
The Court held that the Additional Director (Inv.) did not have the requisite jurisdiction to authorize the searches and seizures, that there were insufficient materials to justify the issuance of the authorization, and that the notification dated 06.09.1989 was invalid. The Court found that the definition of 'director' in Section 2(21) of the Act did not include the Additional Director (Inv.), and that the Additional Director (Inv.) was therefore not authorized to issue the authorization. The Court also found that there was no evidence to support the belief that the petitioners were in possession of undisclosed income, and that the searches and seizures were therefore not justified. Finally, the Court found that the notification dated 06.09.1989, which purported to authorize the Additional Director (Inv.) to issue authorizations for searches and seizures, was invalid.
Issues: 1. Whether the Additional Director (Inv.) has the requisite jurisdiction to authorize any officer to effect search and seizure in purported exercise of its power conferred upon it under Section 132 of the Act;2. Whether there had been sufficient materials before the appropriate authority to satisfy itself that the authorization for search could be issued;3. Whether the notification dated 06.09.1989 is valid in law?;4. Whether reasons for retention of books of accounts can be recorded after a period of 15 days?;5. Whether the provisions of Section 132 (9) (A) are directory in nature?
Ratio Decidendi: The Court held that the Additional Director (Inv.) did not have the requisite jurisdiction to authorize the searches and seizures, that there were insufficient materials to justify the issuance of the authorization, and that the notification dated 06.09.1989 was invalid. The Court found that the definition of 'director' in Section 2(21) of the Act did not include the Additional Director (Inv.), and that the Additional Director (Inv.) was therefore not authorized to issue the authorization. The Court also found that there was no evidence to support the belief that the petitioners were in possession of undisclosed income, and that the searches and seizures were therefore not justified. Finally, the Court found that the notification dated 06.09.1989, which purported to authorize the Additional Director (Inv.) to issue authorizations for searches and seizures, was invalid.
Final Decision: The Court allowed the writ petitions filed by Dr. Nalini Mahajan and Ram Lal Mahajan Charitable Trust, and dismissed the writ petitions filed by Mr. Rakesh Mahajan, M/s. Pan Foods Ltd., and M/s. Mahajan Industries Pvt. Ltd.
( 1 ) VALIDITY of searches and seizures, purported to have been made, in the premises of the petitioners is the subject matter of these writ petitions.
( 2 ) WE would consider the fact of the matter in brief separately :- contentions OF THE PETITIONERS :- c. W. P. Nos. 2999 and 2767 Of 2001 :-
( 3 ) ONE Ram Lal Mahajan Charitable Trust ( in short, the Trust ) was set up on or about 25. 01. 1968 wherefor an exemption in terms of section 12a of the Income Tax Act, 1961 (hereinafter referred to as, the Act ) was granted by the Commissioner of Income Tax. A trust deed was executed in terms whereof the objects of the original trust were elaborated. On or about 1. 3. 1979 a supplementary deed was also executed to conform to the provisions of Section 13 (5) of the Act whereafter, the Commissioner granted exemption in terms of Section 80g of the Act by an order dated 01. 01. 1980. It is stated that such exemption had been continued and the claims made by the trust under section 11 of the Act had been accepted.
( 4 ) FOR the assessment year 1997-98, the assessment proceedings were completed by the assessing officer ward No. 1, Panipat. Returns for the assessment years 1998-99 and 1999-2000 were also filed before the said Authority.
( 5 ) A survey purported to have been conducted inter-alia in the premises of the hospital run by the Trust, where Dr. Nalini Mahajan is employed. According to the petitioners, Dr. Nalini Mahajan does not have any other source of income except interest, dividend and salary. The assessment proceedings up to 2000-2001 had been completed by the assessing officer. During the course of survey operations, at the instance of the officers conducting the survey, search warrants were issued by the additional Director (Inv.), Delhi. Pursuant to or in furtherance of the said purported search warrants, the premises of the petitioners were searched on 29. 08. 2000. Apart from the hospital, the residence of Dr. Nalini Mahajan as also her lockers were searched. From her residence allegedly some loose papers were seized. From locker No. 1093, the following items were seized :- total jewellery found : Rs. 31,54,843. 00 jewellery seized : Rs. 5,57,276. 00 cash seized : Rs. 1,79,000. 00
( 6 ) ACCORDING to the petitioner, the third respondent prior to the search of the said locker asked her to inform as regard the contents thereof, which was complied with by a letter dated 15. 09. 2000 as containing jewellery belonging to herself, her daughter and her husband. Wealth-tax orders and valuation report had also allegedly been produced. It is alleged that the cash-in-hand had also been explained at rs. 1,67,239/- duly shown in the balance-sheet. C. W. P. NO. 4836 OF 2001 :-
( 7 ) THE petitioner is an individual and is the Managing Director of M/s. Mahajan Industries Pvt. Ltd. , New Delhi and M/s. PAN Foods ltd. , Panipat. The petitioner is deriving income mainly from salary, dividend and interest and share income from sub-letting of the property. The petitioner has a family-house at Asand Road, Panipat and has been filing his income-tax returns with the Assessing Officer, Panipat and accordingly the petitioner was assessed regularly.
( 8 ) ON 28. 08. 2001, the respondent no. 1, i. e. , Director of Income tax (Inv.) issued search warrants under Section 132 (1) of the Act in the name of the petitioner authorizing search of his residential premises situated at 31, Central Drive, Chhatarpur Farms, New Delhi.
( 9 ) THE Commissioner of Income Tax, Rohtak transferred the jurisdiction of the petitioner s case from Assessing Officer, Panipat to the assessing Officer, Central Circle 20, New Delhi vide order dated 14. 02. 2001.
( 10 ) ON 22. 02. 2001, Deputy Director of Income Tax (Inv.), i. e. , respondent no. 2 informed the petitioner that the Director of. Income Tax (Inv.), i. e. , respondent no. 1 has granted approval to him to retain the seized documents, books of accounts in the case of Mahajan Group of casesupto30. 06. 2001.
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