IMPORTANT POINT
Authorities exercising power u/s 132 must record reasons in support of the ‘reasonable belief’. However, disclosure or communication of these reasons prior to authorizing the search to the person concerned is not warranted.
Reproduction of reasons for satisfaction of the authorities by the High Court in great detail in its judgment. Held to be highly premature.
Finding of the High Court touching upon sufficiency and adequacy of the reasons and the authenticity and acceptability of the information on which satisfaction had been reached by the authorities is in the nature of an appellate exercise. Not permissible under Article 226.

JUDGMENT

RANJAN GOGOI, J.

1. Leave granted.

2. The block assessment of the respondent-assessee for the assessment years 2004-05 to 2009-10 was sought to be initiated by notices issued under Section 153A of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) following a search made under the provisions of the Act. The same has been interdicted by the High Court of Delhi by interfering with the warrant of authorization for the search issued under Section 132 of the Act and the consequential search made between 19th June, 2009 to 21st July, 2009. Aggrieved, the Revenue has filed this appeal by special leave under Article 136 of the Constitution.

3. We have heard Shri Guru Krishna Kumar, learned senior counsel for the appellants and Shri Krishnan Venugopal, learned senior counsel appearing for the respondents.

4. The issues that arise in the present appeal lie within a short circumference. As the warrant of authorization under Section 132, which is required to be founded on a reasonable belief of the authorized official regarding the existence of the conditions precedent to the exercise of the power to issue the same, has been interdicted under Article 226 of the Constitution, the ambit of the power of the High Court to do so may be noticed at the outset.

5. The “classical” notion of the extent of power that the High Court would have in the exercise of its writ jurisdiction to cause such interference is formulated in ITO vs. Seth Brothers, 1969 (74) ITR 836 (SC) and Pooran Mal vs. Director of Inspection (Investigation), Income Tax, (1974) 93 ITR 505 (SC). The parameters of permissible interference as laid down in the aforesaid two decisions have stood the test of time and continue to hold the field even today. We may, therefore, advert to ITO vs. Seth Brothers (supra) in the first instance.

6. Considering the scope of Section 132 of the Act in ITO vs. Seth Brothers (supra), this Court at page 843 held that :-

“The section does not confer any arbitrary authority upon the Revenue Officers. The Commissioner or the Director of Inspection must have, in consequence of information, reason to believe that the statutory conditions for the exercise of the power to order search exist. He must record reasons for the belief and he must issue an authorisation in favour of a designated officer to search the premises and exercise the powers set out therein. The condition for entry into and making search of any building or place is the reason to believe that any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act may be found. If the Officer has reason to believe that any books of account or other documents would be useful for, or relevant to, any proceedings under the Act, he is authorised by law to seize those books of account or other documents, and to place marks of identification therein, to make extracts or copies therefrom and also to make a note or an inventory of any articles or other things found in the course of the search. Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the tax-payer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorizes it to be exercised. If the action of the officer issuing the authorization, or of the designated officer is challenged the officer concerned must satisfy the Court about the regularity of his action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the Court. If the conditions for exercise of the power are not satisfied the proceeding is liable to be quashed. But where power is exercised bona fide, and in furtherance of the statutory duties of the tax officers any error of judgment on the part of the Officers will not vitiate the exercise of the power. Where the Commissioner entertains the requisite belief and for reasons recorded by him autho