ORAL JUDGMENT

(PER : HONOURABLE MS.JUSTICE HARSHA DEVANI)

1. Leave to amend the prayer clause.

2. By this petition under Article 226 of the Constitution of India, the petitioner has prayed to quash the impugned warrant of authorisation and has challenged the proceedings of search initiated against the petitioner and all consequential actions taken pursuant thereto.

3. The facts as averred in the petition are that the petitioner is a high net worth individual and has been paying tax regularly and the accounts of the petitioner are being audited on a regular basis. The petitioner was looking for an avenue to invest some money. By that time, a company by the name of Goan Recreation Clubs Private Limited was in the process of setting up a new business in Goa. The said company was in need of finance for setting up its business and consequently, approached the petitioner for a loan. On the petitioner asking for some sort of security, the said company offered that another company being Royale Recreation Private Limited would give its property bearing Sub Plot No.65 admeasuring 346 square metres and Sub-Plot No.68 admeasuring 463.50 square metres, in all, admeasuring 809.50 square metres constituting a part of Aldeia De Goa of property known as “Nauxim” or “Chicalium Bhat” bearing Survey No.31/1-A admeasuring 1,06,950 square metres situated in village Bambolim, in registration sub-District Ilhas, District North Goa in the State of Goa as security for the said loan. Subsequently, an agreement was reached and a registered deed of mortgage came to be executed for the property between the petitioner, Goan Recreation Clubs Private Limited (also referred to as the “borrower company”) and Royale Recreation Private Limited (also referred to as the “guarantor company”) on 22.6.2016. Pursuant to the said agreement, an amount of Rs.10,00,00,000/- (rupees ten crore) came to be given by the petitioner to the borrower company at the agreed rate of interest and on agreed terms. So as to avoid any technical breach of law, the petitioner was advised to become Director of the borrower company at the time of giving the loan. The petitioner, therefore, became a Director of Goan Recreation Clubs Private Limited on 18.5.2016. However, soon after the loan formalities were completed, the petitioner resigned as a Director of Goan Recreation Clubs Private Limited on 25.6.2016. Accordingly, the petitioner remained as a Director of the borrower company for a little over one month.

4. It is the case of the petitioner that the borrower company which was a new venture was in the process of setting up its business, had yet to start its business when the petitioner resigned as a Director of that company and in fact it did not commence business for a further period of one month after the petitioner resigned as a Director of the company. According to the petitioner, his only role was to give a loan of Rs.10,00,00,000/- to the company, which amount was completely accounted for and its source was not only disclosed but also very well-known to the department. In due course, the borrower company repaid the loan along with the interest due to the petitioner. Consequently on 10.7.2017, a deed for release of mortgage came to be executed between the petitioner, Royale Recreation Private Limited (the guarantor company) and Goan Recreation Clubs Private Limited (the borrower company). It is the case of the petitioner that he has diligently paid tax on interest that he had earned from the loan. However, on 10.8.2018, the officers of the Income Tax Department conducted a search on the residential premises of the petitioner which went on till 3.00 a.m. on 11.10.2018. During the course of search, the petitioner was orally informed that the warrant of authorisation in the present matter has been issued by the Principal Director of Income Tax (Investigation), Kolkata. According to the petitioner as such no reason to believe was shown to the petitioner; however, in the course of search, t