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High Court Of Delhi
AJIT JAIN - Appellant
Versus
UNION OF INDIA - Respondent
Civil Writ 3756 of 1997
Decided On : 01/31/2000
Held:
For authorising action under Section 132, the conditions precedent are: (i) the information in the possession of the named authority; and (ii) in consequence of which he may have reason to believe that the person concerned is in possession of money, bullion etc. which represents, either wholly or partly, income which has not been or would not be disclosed for the purpose of the Act. If either of these conditions are missing or have not been adhered to, then power under Section 132 cannot be invoked. Tints, the basis of exercise of power under Section 132(1) has to be formation of belief and the belief has to be formed on the basis of receipt of information by the authorising officer that the person is in possession of money etc. which represents undisclosed income.
"Information", in consequence of which the Director General or the Chief Commissioner etc., as the case may be, has from to his belief is not only to be authentic but capable of giving rise to the inference that a person is in possession of money etc. which has not been or would not be disclosed for the purpose of the Act. In other words, it must necessarily be linked with the ingredients mentioned in the Section.
By now it is well settled that while the sufficiency or otherwise of the information cannot be examined by the court in writ jurisdiction, the existence of information and its relevance to the formation of the belief is open to judicial scrutiny because it is the foundation of the condition precedent for exercise of a serious power of search of a private property or person, to prevent violation of privacy of a citizen. In Balwant Singh and Ors. v. R.D. Shah, Director of Inspection, Income Tax New Delhi and Ors. a Division Bench of this Court, while reiterating that the High Court cannot test the adequacy of the grounds leading to the satisfaction recorded, under Section 132 of the Act, observed that if the grounds on which the belief is founded are non-existent or are irrelevant or are such on which no reasonable person can come to that belief, the exercise of power under the said Section would be bad; short of that, the Court cannot interfere with the belief bona fide arrived at by the Director of Inspection. But the Court could examine whether the reasons for the belief have a rational connection or relevant bearing to the formation of the belief and search warrant could not be issued merely with a view to making a roving or fishing enquiry.
The expression reason to believe has been explained in various decisions by the Apex Court and High Courts while dealing with Sections 132 and 148 of the Act. It has been held that the word "reason to believe" means that a reasonable man, under the circumstances, would form a belief which will impel him to take action under the law. The formation of opinion has to be in good faith and not on mere pretence. For the purpose of Section 132 of the Act, there has to be a rational connection between the information or material and the belief about undisclosed income, which has not been and is not likely to be disclosed by the person concerned.
( 1 ) RULE D. B.
( 2 ) SINCE a short point of law is involved and there is not much controversy on facts, with the consent of counsel for the parties, we proceed to decide the petition finally at this stage itself.
( 3 ) THE petitioner, an individual and claiming himself to be the Managing Director of an incorporated company, impugnes in this petition under Article 226 of the Constitution of India, the legality and the validity of the authorisation dated 11th January, 1996, issued by Director of Income-tax (Inv), Chennai - respondent No. 4 herein, under Section 132 (1) of the Income-tax Act, 1961 (for short "the Act"); the subsequent conduct of search by the Assistant Director of Income-tax (Inv) - respondent No. 5 herein, on the same date and finally the block assessment order, dated 31st January, 1997, passed under Section 158 BC/144 of the Act by the Deputy Commissioner, Special Range 31, New Delhi - respondent No. 2 herein.
( 4 ) ACCORDING to the petitioner, he and the company, of which he is the Managing Director, are regular assesses at Delhi with permanent account numbers; the company is carrying on business of imports in PU Synthetic Linings along with other items from Taiwan and Korea; on 7th January, 1996 the petitioner was informed by his customs clearing agent at Chennai that four consignments imported by his company had arrived at Chennai Port and a sum of approximately Rs. 25 lakhs was required for payment of customs duty and allied expenses for getting the goods cleared from the Customs Department; at that point of time, in its current account with Corporation Bank, Mint Street Branch, Chennai, the company was having approximately Rs. 17 lakhs to its credit and, therefore, a further sum of Rs. 8. 5 lakhs was required to be arranged for the aforesaid purpose; on 9th January, 1996, the petitioner went to Chennai with a sum of Rs. 8. 60 lakhs, duly reflected in the company s cash book and stayed in Hotel Chola Sheraton, Chennai; the said money was to be deposited with the Bank for making a bank draft for payment of Customs duty on 12th January, 1996; while he was staying in the said hotel, a raid was conducted by the officers of the CBI on 11th January, 1996 and an amount of Rs. 8. 5 lakhs was recovered from him; on the information of the CBI, respondents No. 4 and 5 arrived in the room and took into possession the said amount of Rs. 8. 5 lakhs; the statement of the petitioner was recorded on oath by respondent No. 5 wherein, in answer to the question with regard to the source and the purpose for which the money was kept with him, he stated that the money was out of the sale proceeds fully recorded in the books of the company and he was carrying it because the same was to be deposited with SIB (Customs); the petitioner was summoned to appear before respondent No. 5 on 12th January, 1996 with proof for the said amount having been reflected in the cash book, which he claims to have done by getting copies of cash book and ledger faxed from Delhi office to respondent No. 4 showing that the money was reflected in the cash book; on 12th January, 1996, respondents No. 4 and 5 directed Assistant Director of Income-tax (Inv) New Delhi - respondent No. 3 herein, to conduct survey under Section 133-A of the Act on the company to ascertain whether the cash of Rs. 8. 6 lakhs was reflected in the accounts of the company; survey was conducted but no report was supplied to the petitioner; on 13th January, 1996, an order under Section 132 (3) of the Act was passed by respondent No. 5 prohibiting the operation of the account of the company in Corporation Bank, Chennai; subsequently, the petitioner was summoned by respondent No. 3 to bring all the records of the company, which were produced on 16th June, 1996 and were retained by the said respondent. It is averred that the company filed its audited balance sheet with the Income-tax Department for the assessment year 1995-96 showing turn-over of Rs. 4. 89 crores with a
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