Income-Tax Officer, Special
Investigation Circle-B, Meerut Vs. M/S. Seth Brothers & Ors [1969] INSC 143
(15 July 1969)
15/07/1969 SHAH, J.C.
SHAH, J.C.
MITTER, G.K.
CITATION: 1970 AIR 292 1970 SCR (1) 601 1969
SCC (2) 324
CITATOR INFO:
R 1970 SC1651 (5) D 1972 SC 591 (22) R 1985
SC 989 (16)
ACT:
Indian lncome Tax Act (43 of 1961), s.
132--Search and seizure-Scope of power--Seizure of a large number of documents,
some of which not, relevant to pending proceeding under Act--If mala fide.
HEADNOTE:
Under s. 132 of the Income-tax Act, 1961, the
Commissioner of Income-tax or the Director of Inspection may, after recording
reasons, order the search of premises if he has reason to believe that one or
more of the conditions in s. 132(1) exist. The officer authorised may enter any
place and make a search where he has reason to believe that books or documents
relevant to any proceeding under the Act may be ,found. He may seize any books
or documents and place marks of identification on them, and may remove them to
the income-tax office. By the express terms of the Act and the Income-tax
Rules, the officer designated to make the search may obtain the assistance of
the police.
The Income-tax Officer issued notice to the
respondent- firm that its income chargeable to tax had escaped assessment and
that it was proposed to reassess the income.
He also gave information to the Commissioner
of Income-tax that the respondent was maintaining duplicate records for evading
assessment of the true income and requested the Commissioner for authorisation
under s. 132 to enter and search the premises where the respondent was carrying
on business. The Commissioner recorded his reasons and issued an order in the
prescribed form authorising two Income-tax Officers to enter the premises, to
search for and seize such books and documents as may be considered relevant or
useful for the purpose of reassessment, and to place identification marks
thereon and to convey them to the income-tax office.
The premises were accordingly searched and
the account books and certain documents found therein were seized and carried
to the income-tax office. Petitions were filed in the High Court for writs of
certiorari for quashing the proceedings of the Income-tax authorities, and
consequential reliefs.
The High Court granted the writs on the
grounds: (1) that the order of search was made by the Commissioner at the
direction of the Directorate of Inspection and without satisfying himself about
the existence of circumstances justifying search; (2) that besides the
documents belonging to the respondent the Income-tax Officers seized documents
relating to the transactions of their allied concern which documents were
irrelevant to the process of reassessment of the respondent; (3) that marks of
identification were not placed on certain documents at the time they were
seized;
(4) that the documents seized were detained
by the Income- tax Officer for more than two months; and (5) that the police
force employed during the raid was excessive.
In appeal to this Court,
HELD: (1) The Commissioner stated in his
counter affidavit that before issuing the authorisation he was satisfied that
it was necessary to take action under s. 132 and that the authorisation was not
issued at the 602 direction of the Directorate of Inspection. The Deputy
Director of Inspection also stated in his affidavit that he never gave any
direction to the Commissioner to issue authorisation for search and seizure.
Therefore, in reaching the conclusion that the Commissioner acted at the behest
of the Director of Inspection, the High Court was in error, because, having
held that the correctness of the opinion formed by the income-tax authorities
was not open to scrutiny in a writ petition the High Court acted on mere
affidavits and accepted the assertions of the respondents which were
specifically denied by the Revenue authorities.
[612 B-C; 613 D; 614 A-B] (2) Since the power
conferred, though not arbitrary, is a serious invasion upon the rights and
privacy of the tax- payer, the power must be strictly exercised in accordance
with law and only for the purposes for which the law authorises it to be
exercised. If the action of the officer issuing the authorisation or of the
officer designated to make the search is challenged, they must satisfy the
court about the regularity of the action taken. If the action is maliciously
taken or for collateral purpose it is liable to be struck down. But where the
power is exercised bona fide and in furtherance of the statutory duties of the
Revenue Officers any error of judgment on the part of the officers will not
vitiate the exercise of the power. The Act and the Rules do not require that
the authorization should specify the particulars of documents and books of
account; a general authorisation to search for and to seize documents and books
of account relevant to or useful for the proceeding under the Act complies with
the requirements of the Act and the Rules. It is for the officer making the
search to exercise his judgment and seize or not to seize any documents or
books of account. An error committed by the officer in seizing documents which
may ultimately be found not to be useful for or relevant to the proceeding will
not by itself vitiate the search, nor will it entitle the aggrieved person to
an omnibus order releasing all documents seized. [608 G-H; 609 A-F] In the
present ease, therefore, merely because a large number of documents, some of
which related to the concerns allied to the respondent-firm, were seized, it
could not lead to the inference that the search and seizure were for a
collateral purpose. On the contrary, the books of account and the documents in
respect of other businesses carried on by the partners of the respondent-firm
through the allied firms would be relevant, because, they would show inter-
relation between the dealings and supply materials having a bearing on the case
of evasion of income-tax by the respondents. Therefore, the search and seizure
were not illegal or mala fide. [609 G; 612 F-]H Income-tax Officer, A-ward,
Agra v. Firm Madan Mohan, 70 I.T.R. 293, approved.
(3) Assuming that marks of identification
were not placed On some documents, it was a mere irregularity and, unless the
documents were shown to be tampered with, would not make the search and seizure
mala fide. [612 H] (4) A delay of two months in issuing a notice calling for
explanation is also not a ground for holding that the action was taken for a
collateral purpose. [613 A-B] (5) Keeping police officers present at the time
of search in the house of influential businessmen to ensure the protection of
the officers and the record, would not be a case of excessive use of force.
[613 B-C] 603
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 700 to 703 of 1965.
Appeals by special leave from the judgment
and order dated March 27, 1964 of the Allahabad High Court in Civil Misc. Writs
Nos. 3302, 3381, and 3382 of 1963.
Sukumar Mitra, S.K. Aiyar, R.H. Dhebar and
B.D. Sharma, for the ,appellant (in all the appeals).
M.C. Chagla, S.C. Manchanda, P.N. Pachauri,
P.N. Duda and D.N. Mukherjee, for respondent No. 1 (in C.A. No. 700 of 1965).
S.C. Manchanda, P.N. Pachauri, P.N. Duda and
D.N. Mukherjee for respondent No. 1' (in C.A. No. 701 of 1965).
S.C. Manchanda, P.N. Pachauri, S.M. Jain and
B.P. Maheshwari, for respondent No. 1 (in C.As. Nos. 702 and 703 of 1965).
The Judgment of the Court was delivered by
Shah, J. M/s. Seth Brothers run a flour mill in the name and style of
"Imperial Flour Mills". From April 1, 1953 to March 1956 the business
was carried on by M/s. Seth Brothers, of which the partners were Baikunth Nath
and Vishwa Nath. Between March 1956 and March 31, 1957, the business was
carried on by Baikunth Nath, Vishwa Nath, Dr.
Manmohan Nath, Mrs. Rama Rahi and Mrs.
Sushila Devi. On April 7, 1957 Mrs. Prem Lata was admitted as a partner. The
partners were engaged in carrying on other businesses in the names of Seth
Brothers (Private) Ltd., Nath Brothers (Private) Ltd., and Meerut Cold Storage
and General Mills.
The owners of the business were, year after
year, assessed to income-tax in respect of the income arising in the course of
the business. On March 14, 1963 the Income-tax Officer, Meerut issued a notice
under s. 148 of the Income- tax Act, 1961, intimating M/s. Seth Brothers that
there was reason to believe that their income chargeable to tax had escaped
assessment and it was proposed to reassess this income for the assessment year
1954-55. In response to the notice Baikunth Nath and Vishwa Nath flied a return
under protest. In the meantime information was received by the Income-tax
Commissioner, U.P., that M/s. Seth Brothers were maintaining "duplicate
records" and were evading assessment of their true income and that it was
necessary to seize the records which may be found at "Shanti Niketan,"
Meerut in which M/s. Seth Brothers carried on the business of Imperial Flour
Mills and other business. The Commissioner of Income- tax, U.P., on May 29,
1963 drew up a memorandum that on a report of the Income-tax Officer, D-Ward,,
Meerut requesting for 604 authorisation under s. 132 of the Income-tax Act,
1961, to.
enter and search the premises of M/s. Seth
Brothers, he was satisfied about the need for the issue of the authorisation.
The Commissioner also issued an order in Form
45 prescribed under Rule 112 of the Income-tax Rules, 1962, authorising two
Income-tax Officers--R. R. Agarwal and R. Kapoor--to enter the premises known
as "Shanti Niketan", at Meerut and to search for and seize such books
and documents as may be considered relevant or useful for the purpose of the
proceeding of reassessment, and to place identification marks thereon and to
convey them to the Income-tax Office.
On the. 7 and 8 of June, 1963 the premises
described in the order were searched and account books and certain documents
found therein were seized and were carried to the Income-tax Office. M/s. Seth
Brothers then moved a petition in the High Court of Allahabad, for an order
quashing the proceedings of the Income-tax authorities. Petitions were also
filed by Nath Brothers (Private) Ltd., Seth Brothers (Private) Ltd. and Seth
Brothers, Meerut for the same relief. By these petitions they claimed writs of
certiorari quashing the letters authorising search of the premises at Shanti
Niketan, and writs of mandamus directing the Income-tax Officer to return all
the books, papers and articles seized during the search and for writs of
prohibition restraining the Income-tax Department from using any information
gathered as a result of the search. It was submitted by the petitioners that
K.L. Ananda, Income-tax Officer and Satya Prakash an "ex-employee" of
M/s. Seth Brothers had given false information to the Deputy Director of
Inspection with a view to blackmail the partners of M/s.
Seth Brothers, and that the order of search
was made by the Commissioner of Income-tax at the direction of the Deputy
Director of Inspection, that the action of the Income-tax Officer in searching
the premises and in seizing the books of account was malicious and that in any
event s. 132 of the Income-tax Act, 1961, and the rules framed thereunder, were
violative of the fundamental freedoms guaranteed by Arts. 14, 19(1)(f) &
(g) and 31 of the Constitution.
Affidavits were filed on behalf of M/s. Seth
Brothers.
It was affirmed that "the so-called
duplicate records" seized by the Income-tax Officer were copies of the
books of account and that action had been taken by the Commissioner of
Income-tax, not on his own initiative but at the behest of the Directorate of
Inspection. In reply to the contentions raised by the assessees several
affidavits sworn by Officers of the Income-tax Department were filed. The
Commissioner of Income-tax stated in his affidavit that before issuing letters
of authorisation and the warrant of search he was satisfied that it was
necessary to take action 605 under s. 132 of the Indian Income-tax Act, 1961,
and that the letters of authorisation were not issued at the direction of the
Directorate of Inspection. The Income-tax Officers stated that in consequence
of the search a large number of "duplicate account books and records"
maintained by M/s. Seth Brothers were recovered, that the search was carried
out according to law and in the presence of two of the partners of the firm and
their advocates, that all the documents seized were relevant for the purpose of
reassessment, that there was close connection between the different business
activities of the partners of M/s. Seth Brothers and that all the documents
which were seized were in relation to those activities. The Deputy Director of
Inspection in his affidavit stated that he did not give any direction to the
Commissioner to issue authorization for search and seizure.
The High Court of Allahabad held on a
consideration of the averments made in the affidavits filed on l behalf of M/s
Seth Brothers and the revenue that "there was reason to believe" that
instructions were issued by the Directorate of Inspection for a general raid
and seizure of all account books and papers which may be found at the premises
of the firm; that some out of the documents seized by the Income- tax Officers
were irrelevant for the purpose of any proceeding under the Act: that besides
the documents belonging to M/s Seth Brothers the Income-tax Officers seized
documents relating to the transactions of the allied concerns; that marks of
identification were not placed on certain documents at the time they were
seized; that the documents seized were detained by the Income-tax Officer for
more than two months; and that the police force employed during the raid was
excessive. The High Court concluded:-- "It is true that there was no
iII-will between the ...... (partners of Seth Brothers) on one side and
respondent Nos. 1, 3 and 4 (Commissioners of Income-tax, U.P. & Punjab and
Income-tax Officer, Special Investigation Circle A, Meerut) on the other side.
But the extent of the seizure was far beyond the limits of s. 132 of the Act.
The action was mala fide in the sense that, there was abuse of power conferred
on Income-tax Officers by s. 132 of the Act. The act being main fide, the proceedings
.should be quashed by this Court by issuing a writ of mandamus." The
Income-tax Officer, S.I. Circle has appealed to this Court with special leave.
Section 132 as originally enacted by Act 43
of 1961 was substituted by a modified provision by the Finance Act of 1964
which in its turn was replaced by s. 1 of the Income-tax (Amendment) Act, 1965.
By s. 8 of that Act it was provided, inter alia, 606 that any search of a
building or place by an ......
Income-tax Officer purported to have been
made in pursuance of sub-s. (1) of s. 132 of the principal Act shall be deemed
to have been made in accordance with the provisions of that sub-section as
amended by the Act of 1965 as if those provisions were in force on the day the
search was made ...... The relevant part of s. 132 as substituted by the
Income-tax (Amendment) Act, 1965 may, therefore, be set out:
"132.. Search and seizure.--(1) Where
the Director of Inspection or the Commissioner, in consequence of information
in his possession, has reason to believe that-- (a) any person to whom a
summons under sub-section (1) of section 37 of the Indian Income-tax Act,1922
(XI of 1922), or under sub-section (1) of section 131 of this Act, or a notice
under sub-section (4) of' section 22 of the Indian Income-tax Act, 1922,or
under sub-section (1) of section 142 of this Act was issued to produce, or
cause to be produced, any books of account or other documents has omitted or
failed to produce, or cause to be produced, such books of account or other
documents as required by such summons or notice, or (b) any person to whom a
summons or notice as aforesaid has been or might be issued will not, or would
not, produce or cause to be produced, any books of account or other documents.
which will be useful for, or relevant to., any proceeding under the Indian
Income-tax Act, 1922 (XI of 1922), or under this Act, or (c) any person is in
possession of any money, bullion, jewellery or other valuable article or thing
and such money, bullion, jewellery or other valuable article or thing
represents either wholly or partly income or property which has not been
disclosed for the purposes of the Indian Income-tax Act, 1922 (XI of 1922), or
this Act (hereinafter in this section referred to as the undisclosed income or
property), he may authorise any Deputy Director of Inspection, Inspecting
Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer
(hereinafter referred to as the authorised officer) to-- (i) enter and search
any building or place where he has reason to suspect that such books of
account, other documents, money, bullion, jeweler or other valuable article or
thing are kept;
607 (ii) break open the lock of any door,
box, locker, safe, almirah or other receptacle for exercising the powers
conferred by clause (i) where the keys thereof are not available;
(iii) seize any such books of account, other
documents, money, bullion, jewellery or other valuable article or thing found
as a result of such search;
(iv) place marks of identification on any
books of account or other documents or make' or cause to be made extracts or
copies there from;
(v) make a note or an inventory of any such
money, bullion, jewellery or other valuable article or thing.
(2) The authorised officer may requisition
the services of any police officer or of any officer of the Central Government
or of both, to assist him for all or any of the purposes specified in
sub-section (1) and it shall be the duty of every such officer to comply with
such requisition.
(3) The authorised officer may, where it is
not practicable to seize any such books of account, other document, money,
bullion, jewellery or other valuable article or thing, serve an order on the
owner or the person who is in immediate possession or control thereof that he
shall not remove, part with or otherwise deal with it except with the previous
permission of such officer and such officer may take such steps as may be
necessary for ensuring compliance with this sub-section.
.................................
(8) The books of account or other documents
seized under sub-section (l ) shall not be retained by the authorised officer
for a period exceeding one hundred and eighty days from the date of the seizure
unless the reasons for retaining the same are recorded by him in writing and
the approval of the Commissioner for such retention is obtained:
Provided (13) The provisions of the Code of
Criminal Procedure, 1898 (V of 1898), relating to searches and seizures shall
apply, so far as may be, to searches and seizure under sub- section (1)."
608 The Central Board of Direct Taxes has, in exercise of the power conferred
by s. 295(1) of the Act, framed r. 112 prescribing the procedure to be followed
by the Commissioner and the authorised officers.
The Commissioner or the Director of Inspection
may after recording reasons order a search of premises, if he has reason to
believe that one or more of the conditions in s. 132(1) exist. The order is in
the form of an authorization in favour of a subordinate departmental officer
authorising him to enter and search any building or place specified in the
order, and to exercise the powers and perform the functions mentioned in s. 132
(1 ). The Officer so authorised may enter any building or place and make a
search where. he has reason to believe that any books of account or other
documents which in his opinion will be useful for, or relevant to any
proceeding under the Act, may be found. The Officer making a search may seize
any books of account or other documents and place marks of identification on
any such books of account or other documents or make or cause to be made
extracts or copies there from and may make an inventory of any articles or
things found in the course of any search which in his opinion will be useful
for, or relevant to. any proceeding under the Act, and remove them to the
Income-tax Office or prohibit the person in possession from removing them. He
may also examine on oath any person in possession of or control of any books of
account or documents or assets.
The section does not confer any arbitrary
authority upon the Revenue Officer. 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 authorization 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, 0r 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 there from 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 609 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 authorises a designated Officer to enter and search premises
for books of account and documents relevant to or useful for any proceeding
under the Act, the Court in a petition by an aggrieved person cannot be asked
to substitute its own opinion whether an order authorising search should have
been issued. Again, any irregularity in the course of entry, search and seizure
committed by the Officer acting in pursuance of the authorisation will not be
sufficient to vitiate the action taken, provided the Officer has in executing
the authorisation acted bona fide.
The Act and the Rules do not require that the
warrant of authorisation should specify the particulars of documents and books
of account: a general authorisation to search for and seize documents and books
of account relevant to. or useful for any proceeding complies with the
requirements of the Act and the Rules. It is for the Officer making the search
to exercise his judgment and seize or not to seize any documents or books of
account. An error committed by the Officer in seizing documents which may
ultimately be' found not to be useful for or relevant to the proceeding under
the Act will not by itself vitiate the search, nor will it entitle the
aggrieved person to an omnibus order releasing all documents seized.
The aggrieved party may undoubtedly move a
competent Court for an order releasing the documents seized. In such a
proceeding the Officer who has made the search will be called upon to prove how
the documents seized are likely to be useful for or relevant to a proceeding
under the Act. If he is unable to do so, the Court may order that those
documents be released.. But the circumstance that a large number of documents
have been seized is not a ground for holding that all documents seized are
irrelevant or the action of the Officer is mala fide. By the express terms of
the Act and the Rules the Income-tax Officer may obtain the assistance of a
police officer. By sub-s. (13) of s. 132 the provisions of the Code of Criminal
Procedure, 1898, relating to searches apply so far as may be, to searches under
s. 132. Thereby it is only intended that the officer concerned shall issue the
necessary warrant, keep present respectable persons of the locality to witness
the search, and generally carry out the search 610 in the manner provided by
the Code of Criminal Procedure.
But sub-s.(2) of s., 132 does not imply that
the limitations prescribed by s. 165 of the Code of Criminal Procedure are also
incorporated therein.
In Income-tax Officer, A-Ward, Agra &
Others v. Firm Madan Mohan Demma Mal and Another(1), it was observed that the
issue of a search warrant by the Commissioner is not a judicial or a
quasi-judicial act and even if the Commissioner is enjoined to issue a warrant
only when in fact there is information in his possession in consequence of
which he may form the necessary belief, the matter is not thereby subject to
scrutiny by the Court. Section 132 of the Income-tax Act does not require
specific mention by description of each particular document which has to be
discovered on search: it is for the Officer who is conducting the search to
decide whether a particular document found on search is relevant for the
purpose or not.
That statement of the law, in our judgment,
accurately states the true effect of s. 132. The mere fact that it may
ultimately be found that some document seized was not directly relevant to any
proceeding under the Act or that another officer with more information at his
disposal may have come to a different conclusion will not be a ground for
setting aside the order and the proceeding for search and seizure.
The authorisation issued by the Commissioner
was, in the view of the High Court, open to challenge on the ground that the
Commissioner did not apply his mind to the existence of circumstances which
justified the exercise of the power to issue authorisation. The action of the
Income-tax Officers who. searched the premises was quashed on the ground that
they seized some documents which were irrelevant to the process of
reassessment. In our judgment, in reaching their conclusion that the
Commissioner acted at the behest of the Director of Inspection, the High Court
ignored important evidence on the record. It was averred in the petition of M/s
Seth Brothers that-- "(56) It appears that the Deputy Director of
Inspection at the instigation of Shri K.L.
Nanda and Sri Satya Prakash, without making
any enquiries or having any material, 'ordered a raid for search and seizure of
all ,the account books and papers, which could be found.
(57) That, according to such directions of
the Directorate, the Commissioner of Income- tax, U.P. Lucknow, was made to
issue authorisations under s. 132 of the Act of 1961 in- favour of opposite
Parties Nos. 3 and 4 to search out the (1) 70 I.T.R. 293.
611 premisses of Shanti Nikethan',Civil
Lines, Meerut, premises of 'Shanti Niketan'and to seize the account 'books,
documents and papers, which could be recovered therefrom.
................................
The High Court observed that even though a
number of affidavits were' filed by the Income-tax authorities, no reference to
paragraph 56 of the writ petition was made and the "only affidavit filed
by Shri A.L.Jha, Commissioner of Income-tax was vague in the extreme". The
allegation in paragraphs 56 & 57 of the writ petition made no definite
allegation. that the Commissioner of Income-tax acted at the behest of the
Deputy Director of Inspection and not on his own satisfaction reached in
consequence of information in his possession. In the verification clause
Baikunth Nath stated that the contents of paragraph 57 were true on information
received from Deputy Director of Inspection (Investigation), Income-tax,
Central Revenue Buildings, New Delhi. but said nothing about the contents of
paragraph 56.
The 'affidavits filed on behalf of the
Income-tax Department specifically denied the allegations made in paragraphs 56
& 57. R. R. Agarwal (one of the Income-tax Officers authorised to conduct
the search) in his affidavit affirmed that the letter of authorisation was
issued to him by the Commissioner of Income-tax, U.P. Lucknow, after the
Commissioner had been satisfied on the report submitted by the deponent.
The Commissioner of Income-tax, Mr. A.L. Jha,
by his affidavit denied that letters of authorisation were issued under the
directions of the Deputy Director of Inspection or anybody connected with
Directorate. He also stated that in respect of the case of M/s. Seth Brothers
some information was brought to him by the Directorate and that information
corroborated the report made to him by Mr.
R.R.. Agarwal and that after taking into
consideration all those materials he was satisfied that a search of the
premises of M/s. Seth Brothers "was called for" and that he issued
the impugned letters of authorisation.
Mr. R.V. Ramaswamy, Deputy Director of
Inspection (Investigation) in paragraph 6 of his affidavit denied that the raid
or search of the premises of M/s. Seth Brothers was ordered by him.
The affidavit of R. Kapur, Income-tax
Officer, Special Investigation Circle, who was authorised by the Commissioner
of Income-tax to make the search is also relevant. Mr. Kapur averred that some
information was received by Mr. R.R. Agarwal from which it appeared that the
firm of M/s. Seth Brothers and its partners were "evading tax by maintaining
duplicate sets of accounts" and by suppressing relevant documents and
papers 612 from the Department; that Mr. R.R. Agarwal made a written request to
the Commissioner of Income-tax for letters of authorisation in order to carry
out the search of the assessee's premises and in pursuance thereof on May 29,
1963 the Commissioner of Income-tax issued three authorisation letters, two in
favour of Mr. R.R. Agarwal and one in favour of the deponent authorising them
to, carry out the search in accordance with the terms of the 'authorisation
letters.
In this state of the record we are unable to
agree with the High Court that the letters of authorisation were issued by the
Commissioner of Income-tax at the direction of the Director of Inspection
(Investigation). The attention of the Court was presumably not invited to the
relevant paragraphs of the 'affidavits of the Officers concerned.
It is true that a large number of documents
were seized from the premises of M/s. Seth Brothers but that has by itself no
direct beating on the question whether the Income- tax Officer acted mala fide.
If the Income-tax Officer in making 'a search had reason to believe that any
books of account or other documents useful for, or relevant to, any proceeding
under the Act may be found, he may make a search for and seize those 'books of
account 'and other, documents. Some books, maps of the cold storage, assessment
returns, and doctor's prescriptions were seized by the Income-tax Officer. It
appears, however, from the inventory that a large number of documents which
related to the business of the assessees and their allied concerns were also
seized. It would be impossible merely from the circumstance that some of the
documents may be shown to have no clear or direct relevance to any proceeding
under the Act that the entire search and seizure was made not in bona fide
discharge of official duty but for a collateral purpose. The suggestion that
the books of 'account and other documents which could be taken possession of
should only be those which directly related to the business carried on in the
name of M/s. Seth Brothers has, in our judgment, no substance. The books of
account and other documents in respect of other businesses carried on by the
partners of the firm of the assessees would certainly be relevant because they
would tend to show interrelation between the dealings 'and supply materials
having a bearing on the case of evasion of income-tax by the firm. We are
unable to hold that because the Income-tax Officers made a search for and
seized the books .of account and documents in relation to business carried on
in the names of other firms and companies, the search and seizure were illegal.
It is also said that marks of identification
were not placed on several documents. Assuming that this allegation is true, in
the absence of anything to show that the documents were' either re- 613 placed
or tampered with, that irregularity will not by itself supply a ground for
holding that the search was mala fide. A delay of two months in issuing a
notice calling for explanation is also not a ground for holding that the action
was taken for a collateral purpose.
It is not disputed that 'assistance of the,
police may be obtained in the course of a search. The High Court has, however,
found that the police force employed was excessive.
But we are unable to hold that on the
evidence, in keeping police officers present at the time of the search in the
house of influential businessmen to ensure the protection of the officers and
the record, "excessive force was used." We accordingly see no good
grounds to accept the finding recorded by the High Court that the manner in
which the search and seizure were conducted "left no room for doubt that
the Income-tax Officer did not apply his mind and formed no opinion regarding
the relevancy or usefulness of the account books and documents for any
proceedings under the Income-tax Act." The High Court accepted that the
correctness of the opinion actually formed by the Income-tax Officer .was not
open to scrutiny, in a writ petition, but in their view no opinion was in fact
formed by the Officer and the search and seizure of documents and books of
account must on that account be held as made in excess of the powers conferred
upon the Income-tax Officer and mala fide. For these observations we find no
warrant. The Income-tax Officers concerned have sworn by their affidavits that
they did in fact form the requisite opinion under s.
132 of the Act and the other evidence and the
circumstances do not justify us in discarding that assertion.
These proceedings were brought before the
High Court by way of a writ petition under Art.. 226 of the Constitution before
any investigation was made by the Income-tax Officers pursuant to the action
taken by them. In appropriate eases a writ petition may lie challenging the
validity of the action on the ground of absence of power or on a plea that
proceedings were taken maliciously or for a collateral purpose. But normally
the High Court in such a ease does not proceed to determine merely on
affidavits important issues of fact especially where serious allegations of
improper conduct are made against public servants. The Income-tax Officers who
conducted the search asserted that they acted in good faith in discharge of
official duties and not for any collateral purpose. The Commissioner of Income-
tax also denied that he acted at the direction of the Deputy Director of
Inspection and that case was supported by the Deputy Director of Inspection. If
the ,learned Judges of the High Court were of the view that the question was
one in respect of which an investigation 614 should be made in a petition for
the issue of a writ, they should have directed evidence to be taken viva voce.
The High Court could not, on the assertions by the partners of the firm which
were denied by the Income-tax Officer, infer that the premises of M/s. Seth
Brothers were searched and documents were seized for a collateral purpose,
merely from the fact that many documents were seized or that on some of the
documents seized marks of identification were not put or that the documents
belonging to the "sister concerns" of the "Imperial Flour
Mills" were seized.
In our view the decision of the High Court
that the action of the Commissioner of Income-tax, U.P., and the Income-tax
Officers who purported to act in pursuance of the letters of authorisation was
mala fide, cannot be accepted as correct.
Counsel for M/s. Seth Brothers contended that
opportunity may be given to the assessees to lead evidence viva voce to prove that
the revenue officers acted for a collateral purpose. We do not entertain this
request since we propose to remand the case to the High Court to decide
questions which have not been decided. The applicants, if so advised, may move
the High Court for leave to lead evidence. It is for the High Court to decide
whether at this stage after nearly six years leave to examine witnesses should
be granted.
The order passed by the High Court is set
aside and the proceeding is remanded to the High Court. The High Court will
deal with and dispose of the proceeding according to law. We may observe that
counsel for the Income-tax Officer did not invite us to decide the question of
the vires of s. 132 of the Income-tax Act on which the High Court has expressed
no opinion. M/s. Seth Brothers and the other petitioners in the High Court will
pay the costs of these appeals in this Court. There will be one hearing fee.
Costs in the High Court will be costs in the
petition.
V.P.S. Appeals allowed and case remanded.
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