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PUNJAB & HARYANA HIGH COURT
A.N.Grover and S.B.Capoor JJ.
N.K.Textile Mills
Versus
Commissioner Of Income-tax, New Delhi, And Others.
Civil Writ No. 550 of 1965,
Decided On : FEBRUARY 2, 1966
INCOME TAX - Search and seizure - Validity of warrant of authorisation - Belief of Commissioner - Sufficiency of reasons - Excessive seizure - Abuse of power - Mala fides.
Fact of the Case:
The petitioner, a registered partnership firm, challenged the validity of a warrant of authorisation issued by the Commissioner of Income-tax under section 132 of the Income-tax Act, 1961, and subsequent proceedings taken pursuant thereto of seizure of books of account, various documents and money lying in their office premises.
Finding of the Court:
The court held that the Commissioner's belief that the assessee would not produce any books of account or other documents, which would be useful or relevant to the proceedings for certain years of assessment, was not based on sufficient reasons and was, therefore, not justified. The court also held that the seizure of all the books and documents from the premises was excessive and an abuse of power, as the Income-tax Officer failed to consider the relevancy or usefulness of each document before seizing it.
Issues: 1. Whether the provisions of section 132 and rule 112 of the Income-tax Act are ultra vires the Constitution? 2. Whether the mandatory provisions of section 132 of the Act were followed, and could they be invoked in the present case? 3. Whether the search and the seizure were vitiated by mala fides in the sense that there was abuse of power and the books and documents seized in utter disregard of authority conferred on the officers concerned by the warrant issued under section 132 of the Act? 4. Whether the provisions of the Code of Criminal Procedure, 1898, relating to searches and seizure, which are made applicable by sub-section (13) of section 132 were not complied with?
Ratio Decidendi: 1. The court held that the provisions of section 132 and rule 112 of the Income-tax Act are not ultra vires the Constitution, following the decision of a Bench of this court in Writ No. 225 of 1964, Roshan Lal and Co. v. Commissioner of Income-tax. 2. The court held that the mandatory provisions of section 132 of the Act were not followed, as the Commissioner's belief that the assessee would not produce any books of account or other documents was not based on sufficient reasons. The court also held that the seizure of all the books and documents from the premises was excessive and an abuse of power, as the Income-tax Officer failed to consider the relevancy or usefulness of each document before seizing it. 3. The court held that the search and the seizure were vitiated by mala fides in the sense that there was abuse of power and the books and documents seized in utter disregard of authority conferred on the officers concerned by the warrant issued under section 132 of the Act. 4. The court held that the provisions of the Code of Criminal Procedure, 1898, relating to searches and seizure, which are made applicable by sub-section (13) of section 132 were not complied with, as the Income-tax Officer failed to make a list of the books of account and documents seized and to place identification marks on them.
Final Decision: The writ petition was allowed, the search and the seizure of the books of account were quashed, and the respondents were directed to restore all the books and the documents which have so far not been returned to the petitioner.
A.N.GROVER, J.
1. This is a petition under articles 226 and 227 of the Constitution of India filed by N. K. Textile Mills, 22E, Bungalow Road, Delhi, a registered partnership firm, which carries on the business of manufacturing and sale of cotton textile, etc., etc., the partners being Smt. Maya Agarwal, wife or Shri T. C. Agarwal, Smt. Kusum Rani wife or Shri Jawahar Lal and Arun Lal, son of Shri Ram Babu Lal. The petitions directed against a warrant of authorisation dated the 13th August, 1965, issued by the Commissioner of Income-tax under section 132 of the Income-tax Act, 1961, read with rule 112 of the Income-tax Rules, 1962 (copy annexure "R.1/2") and subsequent proceedings taken pursuant there to of seizure of books of account, various documents and money lying in 22E, Bungalow Road, Delhi.
2. It is apparent from annexure "R.1/1", which is copy of a report submitted by the Inspecting Assistant Commissioner of Income-tax, Shri S. N. Sen, on the 12th August, 1965, to the Commissioner of Income-tax, that some informant met him and stated that he had received information from a very reliable source that the petitioner had a spacious basement below its office in 22E, Bungalow Road, which was being utilized for manipulating accounts with a view to showing reduced income for purposes of taxation. It was further stated that the source of this information was an employee or ex-employee of the firm, who did not want his name to be disclosed. It was add by Shri Sen :
The records show that the assessee has not filed returns for the years
1963-64, 1964-65 and 1965-66. The return for the year 1961-62 was filed as early
as 14th May, 1963. The assessment for 1960-61 was finalised on 29th March, 1963.
The fact that the assessee has not filed returns for so many years apparently
suggested that the information is correct.
Shrialso suggested that unless action is taken early, there is every
possibility of the books being shifted to some other place.
I agree.
Sd/- R.N.Limaya.
From the facts stated in the above paragraphs it is quite clear that the
assessee will not produce any books of account or other documents which will be
useful for or relevant to the proceedings for the years 1962-63, 1963-64,
1964-65 and 1965-66.
The assessee also has factory premises near Clock Tower, Sabzi Mandi
Issue
authorisation.
Sd/- R.N.Limaya
12-8-1965.
The information is placed before you for your kind decision regarding
issue of authorisation under section 132 of the Income-tax Act, 1961.
3 It will be seen from what has been reproduced above that on the margin, on the left hand side of this hand side of this report, the Commissioner expressed his agreement and ordered the issuing of the necessary authorisation, Annexure "R.1/2" is a copy of the warrant of authorisation, which was on a cyclostyled form in which only the necessary entries were made in ink. The persons authorised to carry on the search and effect the seizure were Shri S. N. Sen, Inspecting Assistant Commissioner, and Sarvshri Balwant Singh, R. K. Singh and H. R. Chhabra, Income-tax Officers. The aforesaid officers entered the premises in question on the 13th August, 1965, but, according to them, since neither of the partners not the general manager of the firm happened to be there, they left without carrying out the search. They found one Jagan Nath and some other employees of the firm, and the former is said to have contacted the general manager, T. C. Agarwal, at Agra, who was informed that the premises would be searched again on the 14th August, 1965, when the partners should be present at the premises. On that day the officers reached the premises in the morning, but they did not find any of the partners not did any of the employees turn up. The premises were, however, searched and books of account and documents were seized as also a sum of Rs. 3,214.82 P. (vide affidavit of Shri Balwant Singh, Income-tax Officer, dated the 22nd Octob
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