1991 Supreme(Del) 591

High Court Of Delhi
L.R.GUPTA - Appellant
Versus
UNION OF INDIA - Respondent
Civil 115 of 1991
Decided On : 11/04/1991

Headnote:Income Tax Act, 1961 - Section 132(1) — scope of section and when search and seizure under section justified discussed.

       The challenge in the writ petition was to the authorization issued by one of the respondents under section 132(1) of the Act and the subsequent search and seizure conducted.

       Allowing the petition, the Court

       Held:

       1. The sub-clause itself refers to this as "undisclosed income or property". The word "undisclosed", in that context, must mean income which is hidden from the Department. Clause (c) would refer to cases where the assessed knows that the moveable asset is or represents income which is taxable but which asset is not disclosed to the Department for the purpose of taxation. Those assets must be or represent hidden or secreted funds or assets. Where, however, existence of the money or asset is known to the Income Tax Department and where the case of the assessed is that the said money or the valuable asset is not liable to be taxed, then, the provisions of sub-clause (c) of Section 132(1) would not be attracted. An assessed is under no obligation to disclose in his return of income all the moneys which are received by him which do not partake of the character of income or income liable to tax. Where, the Department is aware of the existence of such an asset or the receipt of such an income by the assessed then the Department may be fully justified in issuing a notice under Section 148 of the Act, but no action can be taken under Section 132(1)(c). Authorisation under Section 132(1) can be issued if there is a reasonable belief that the assessed does not want the Income Tax Department to know about the existence of such income or asset in an effort to escape assessment. Section 132(1)(c) has been incorporated in order to enable the Department to take physical possession of those moveable properties or articles which are or represent undisclosed income or property. The words "undisclosed income" must mean income which is liable to be taxed under the provisions of the Income Tax Act but which has not been disclosed by an assessed in an effort to escape assessment. Not disclosed must mean the intention of the assessed to hide the existence of the income or the asset from the Income Tax Department while being aware that the same is rightly taxable.

       2. There must be material on which the mind has to be applied and opinion formed that the person concerned will not produce documents if asked to do so.

       3. A search which is conducted under Section 132 is a serious invasion into the privacy of a citizen. Section 132(1) has to be strictly construed and the formation of the opinion or reason to believe by the authorising officer must be apparent from the note recorded by him. The opinion or the belief so recorded must clearly show whether the belief falls under sub-clause (a), (b) or (c) of Section 132(1). No search can be ordered except for any of the reasons contained in sub-clause (a), (b) or (c). The satisfaction note should itself show the application of mind and the formation of the opinion by the officer ordering the search. If the reasons which are recorded do not fall under clauses (a), (b) or (c) then an authorisation under Section 132(1) will have to be quashed.

       4. Action under Section 132 results in a serious in-roads into the privacy of an individual. When any information is received on the basis of which an Appropriate Authority may form a reasonable belief that action under Section 132(1) is called for then the correctness or veracity of that information should be carefully and thoroughly examined.

       5. It is an admitted fact that the petitioner No. 1 made requests that he may be permitted to attend to his work in the High Court. This permission was not granted. The Income-tax Act does not give any power to the Income-tax Department to arrest an individual. The Department certainly has the power of recording the statement of a person in accordance with law. The petitioner No. 1 could, thereforee, be legitimately required to be present for the purpose of recording his statement. Once his statement was recorded there was no reason or justification for the Officers of the Department exercising jurisdiction which they did not possess viz. preventing the petitioner No. 1 from attending to his work. An authorisation which is issued under Section 132(1) only enables the officers of the Department to conduct search and seizure. Under Section 131 they have, inter alias the authority and the power to enforce the presence of a person for the purpose of examining him on Oath. There is no power contained in the Act or the Rules whereby the movement of a person against whom search is ordered can be restricted. By refusing to give permission to the petitioner to attend to his work in effect amounted to his confinement which is not permissible in law.

       While element of surprise may be vital or essential for a successful operation of search and seizure nevertheless unnecessary hardship or harassment should not be caused by the raiding party.

       Head Note:

       INCOME TAX Search and seizure — BASIS OF AUTHORISATION — Formation of tangible belief — Tangible information having nexus with belief under cls. (a), (b) or (c).

       HELD : A search conducted under s. 132 is a serious invasion into the privacy of a citizen. Sec. 132(1) has to be strictly construed and the formation of the opinion or reason to believe by the authorising officer must be apparent from the note recorded by him. The opinion or the belief so recorded must clearly show whether the belief falls under sub-cl. (a), (b) or (c) of s. 132(1). No search can be ordered except for any of the reasons contained in sub-cl. (a), (b) or (c). The satisfaction note should itself show the application of mind and the formation of the opinion by the officer ordering the search. If the reasons which are recorded do not fall under cl. (a), (b) or (c) then an authorisation under s. 132(1) will have to be quashed.

       Income Tax Act 1961 s.132

        Search and seizure — DETENTION — Person whose statement recorded during search cannot be prevented from attending duties.

       HELD : Once statement was recorded there was no reason or justification for the officers of the department exercising jurisdiction which they did not possess, viz., preventing the petitioner from attending to his work. An authorisation which is issued under s. 132(1) only enables the officers of the department to conduct search and seizure. Under s. 131 they have, inter alia, the authority and the power to enforce the presence of a person for the purpose of examining him on oath. There is no power contained in the Act or the Rules whereby the movement of a person against whom search is ordered can be restricted. By refusing to give permission to the petitioner to attend to his work in effect amounted to his confinement which is not permissible in law.

       Income Tax Act 1961 s.132(1)

        Search and seizure — PROCEDURE — Statement of person to be recorded before effecting seizure.

       HELD : Before any seizure is effected, statement of the person from whom the seizure is being effected should be recorded. He may have an effective Explanationn with regard to items which are found as a result of the search.

       Income Tax Act 1961 s.132(1)