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2004 Supreme(Gau) 372
GAUHATI HIGH COURT
D.Biswas, J.
M.S .Associates -Appellant
Versus
Union of India -Resopndent
W.P.(C) Nos. 1552,137,6965, 7008 and 8648 of 2000 and 2889,2890,3729 and 8647 of 2001
Decided On : 31-05-2004
R.L.Jain, P.Upadhyay, P.Agarwal, K.N.Choudhary, B.K.Das, S.S.Ray, R.P.Agarwal, S.C.Singha, U.Bhuyan, S.Shyam
Headnote:
The court held that the search and seizure operations were carried out as a consequence of information in possession of the Department and in full compliance with the provisions of Section 132 of the Act, and that the report of the CAG is one of the sources of information on the basis of which satisfaction required under Section 132 has been founded.
Fact of the Case:
The petitioners, who are engaged in the business of selling lottery tickets, challenged the legality and validity of the search and seizure operations carried out by the Income Tax Department under Section 132 of the Act of 1961. The petitioners claimed that the searches were conducted primarily because of their employment in the firm of M/S Jyoti and Company as the proprietor of the said firm has business connection with M/S M.S. Associates.
Finding of the Court:
The court found that the warrants of authorization were issued in the name of the persons and in respect of identifiable premises and that the provisions of Chapter-XVI-B of the Act shall apply in case of all the persons searched for the purpose of correct determination of the petitioner's income after completing the assessment with due opportunity to the petitioner firm.
Issues: 1. Whether the search and seizure operations were carried out as a consequence of information in possession of the Department and in full compliance with the provisions of Section 132 of the Act? 2. Whether the report of the CAG is one of the sources of information on the basis of which satisfaction required under Section 132 has been founded?
Ratio Decidendi: The court held that the search and seizure operations were carried out as a consequence of information in possession of the Department and in full compliance with the provisions of Section 132 of the Act, and that the report of the CAG is one of the sources of information on the basis of which satisfaction required under Section 132 has been founded. The court relied on the following principles: * The power to authorize search and seizure under Section 132 of the Act is not arbitrary and must be exercised strictly in accordance with the law. * The authorizing officer must have reason to believe that the statutory conditions for the exercise of the power exist. * The belief must be held in good faith and cannot be merely a pretence. * The existence of the belief can be challenged by the assessee, but not the sufficiency of the reasons for the belief. * The court cannot substitute its own opinion whether an order authorizing search should have been issued.
Final Decision: The court dismissed all the writ petitions.
The above mentioned writ petitions have been filed before this Court by the writ petitioners disputing the legality and validity of the search and seizure operations carried out by the respondent authorities on different dates. The writ petitions pose common question of law on identical facts and, therefore, are being disposed of by this common judgment.
2. Mr. S.S. Ray, learned senior counsel appeared for the writ petitioners in W.P.(C) Nos.1552/2000, 137/2000, 6965/2000, 7008/2000,2889/2001, 2890/2001, 8647/ 2001 and 8648/2001 along with Mr. K.N. Choudhury, learned senior counsel and assisted by Mr. S. Shyam, learned counsel. Mr. P. Upadhaya, learned counsel appeared for the petitioner in W.P.(C) No.3729/2001. The respondent authority have been represented by Shri R.P. Agarwal, learned senior counsel assisted by Mr. U. Bhuyan, learned counsel.
3. At the very outset, for convenience, the facts in each case and the stand of the Revenue are proposed to be reflected in brief.
Facts in W.P.(C) No. 1552 of 2000 :
4. The petitioner M/S M.S. Associates is a partnership firm duly registered under the provisions of the Indian Partnership Act, 1931. Smti Jyoti Limbu and Smti Tilmaya Chong are the two partners of the firm having its registered office at Connaught Place, New Delhi and branch office at GNB Road, Silpukhuri, Guwahati. The petitioner firm is engaged in the business of selling of State Organised Lottery Tickets of various States, namely - Assam, Manipur and Meghalaya. The firm's responsibilities are limited to the extent of assisting the-State Governments to sell lottery tickets. The petitioner firm has been regularly filing Income Tax Returns before the Income Tax Authorities which were finalised after scrutiny. The business premises of the petitioner firm as well as the residential and official premises of the persons associated with the firm were searched on 17th to 23rd June, 1999 and on 29th October, 1999 in pursuance of the warrants of authorization issued under Section 132 of the Act, and a large amount of cash, jewellery, investment certificates, fixed deposit receipts and other documents including books of account were seized. The search was carried out in the office premises of the petitioner at Guwahati ,Tinsukia and other places. Though the warrants were issued in the name of Mr. M.K. Subba, Mr. A.K. Subba and Mr. S.R. Subba, the search was in reality carried out against the petitioner firm. The warrants of authorization were issued in violation of the provisions of Section 132 by the respondents No.2,3 and 5 without any authority of law on the basis of various news items published in newspapers based on the draft and unsigned report of the Comptroller and Auditor General of India, hereinafter referred to as the "CAG". The report of the CAG was in the draft form and did not acquire any legal status. Therefore, it could not be treated as information within the meaning of sub-section (1) of Section 132. That apart, the Nagaland State Assembly referred the report to the Public Accounts Committee, and the said Committee submitted its recommendations to the Legislative Assembly. The Public Accounts Committee did not recommen any action against the petitioner firm. The petitioner firm is assessed to tax at New Delhi and the Respondent No.5 based at Guwahati without any authority of law issued the warrants of authorization. The satisfaction for search and seizure in respect of the petitioner firm was that of the Director, Income-Tax (Investigation), New Delhi, It is further averred that the C AG carried out an audit pursuant to a complaint filed by one Mr. Munkala Kishna Rao, a business rival of the petitioner firm. The report of the CAG contain sweeping adverse remarks against the petitioner firm indicating that the firm was involved in some sort of scam with the Directorate of Lotteries. The search and seizure were carried out during the period when the matter was pending before the State Legislature. The re
