Raghuraj Pratap Singh and Others vs Assistant Commissioner of Income Tax

Pradeep Kant, J.—This is a bunch of writ petitions, which challenge the notice u/s 158BC of the IT Act, 1961, issued to all the petitioners separately and thus challenge the proceedings for block assessment initiated under Chapter XIV-B of the IT Act, for the block period commencing from 1st April, 1996, to 16th Dec, 2002. Since all the writ petitions arise out of almost similar facts and involve the same questions of law, we have proceeded to decide them by a common order but in doing so, keeping in mind the distinct circumstances, which require separate adjudication, we divide the aforesaid petitions in two sets. Writ Petn. Nos. 5731 (MB) of 2004, 5730 (MB) of 2004 and 5729 (MB) of 2004, Writ Petn. No. 5931 (MB) of 2004 and Writ Petn. No. 5932 (MB) of 2004, which have been filed, respectively, by (i) Raghuraj Pratap Singh, son of Udai Pratap Singh, (ii) Smt. Bhavni. Kumari, wife of Raghuraj Pratap Singh, (iii) Smt. Manjul Raje, wife of Udai Pratap Singh, (iv) Trilochan Pratap Singh Bagh Evam Paryavaran Sanrakshan Samiti, U.P., Bhadri District, Pratapgarh through its Mukhya Sanrakchhak Udai Pratap Singh, and (v) Shri Laxmi Narain Mandir Trust, Bhadri through its president and trustee Udai Pratap Singh, would be referred to as the "first set" of writ petitions and the remaining writ petitions, namely, Writ Petn. Nos. 5005 (MB) of 2004, 5015 (MB) of 2004 and 5017 (MB) of 2004, which have been filed, respectively, by (i) Rani Girja Devi Balika Inter College, Kunda, Pratapgarh, through its manager Raghuraj Pratap Singh, (ii) Bajrang Degree College, Kunda, Pratapgarh through its manager Dinesh Priyadarshi, son of Kunwar Avdesh Singh, and (iii) Trilochan Prasad Intermediate College, Kunda, Pratapgarh, through its manager Raghuraj Pratap Singh, would be referred to as "the second set" of writ petitions.

In the first set of writ petitions, Writ Petn. No. 5731 (MB) of 2004 has been argued as the leading writ petition whereas in the second set of writ petitions. Writ Petn. No. 5005 (MB) of 2004 was taken as the leading writ petition.

The petitioners, while challenging the block assessment proceedings, have questioned the very authority of the Department to initiate and proceed under the aforesaid Chapter XIV-B, mainly on the following grounds:

(i) the search in question cannot be said to be a valid search u/s 132 of the Act without service of warrant of authorization on the person alleged to have been searched, namely, the petitioners and in the absence of any search on the petitioners, no action could be taken u/s 158BC.

(ii) a common warrant of authorization could not have been issued u/s 132 naming more than one person;

(iii) the books of account of the bank could not be treated to be the books of account/documents of the person other than the bank and also the money deposited in the banks could not be said to be the money in possession of the person named in Clause (c) of Sub-section (1) of Section 132 of the Act;

(iv) the warrant of authorization said to have been issued u/s 132(1) of the Act and served on the bank calling upon the bank to furnish information will not constitute a legal search under the aforesaid section;

(v) the powers of calling information can be referable only to Sections 131 and 133(6) or to Section 132 of the Act also;

(vi) the requisition u/s 132A of the seized documents, books of account, assets, etc., could not be made against a person who was neither in possession of the said documents, books of account, assets, etc., as the same was not taken from the custody of the petitioners.

(vii) no requisition u/s 132A could be made from the police without obtaining permission from the appropriate Court.

In the second set of writ petitions, an additional point, which has been raised, is as under, regarding which we will consider when we address ourselves to the second set of writ petitions:

(i) the warrant of authorization could not have been issued by the Addl. Director of IT (Inv.), he not being the authority under the Act to issue any such authorization.

Responding to the aforesaid challenge, learned Counsel for the Revenue submitted that these questions cannot be allowed to be raised by the petitioners, as there are no pleadings to the said effect in their writ petitions. Supporting the aforesaid argument, attention of the Court was drawn to the pleadings in the writ petitions to indicate that no relief against the search has been claimed and that the grounds of challenge to the search, if at all could be read in the writ petitions are limited to the extent that without service of warrant of authorization on the petitioners, no search could have been conducted and that the "person" searched was the bank and not the petitioners in terms of Section 132(l)(c).

The proceedings for the block assessment, in the instant case, have been initiated u/s 158BC, which falls under Chapter XTV-B of the Act and prescribes special procedure for assessment of such cases.

Section 158BC, which is being reproduced below, makes it clear that action under the aforesaid section can be taken only if either of the two conditions or both of them exist, namely:

(i) if any search has been conducted u/s 132 of the Act; or

(ii) books of account, other documents or assets are requisitioned u/s 132A of theAct.

In case no such condition did exist, the proceedings u/s 158BC can neither be initiated nor can be proceeded with and the action so taken would be absolutely non est and would stand vitiated.:

158BC. Where any search has been conducted u/s 132 or books of account or other documents or assets are requisitioned u/s 132A, in the case of any person, then,

(a) the AO shall-

(i) in respect of search initiated or books of account or other documents or any assets requisitioned after the 30th June, 1995, but before the 1st Jan., 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days;

(ii) in respect of search initiated or books of account or other documents or any assets requisitioned on or after the 1st Jan., 1997, serve a notice to such person requiring him to furnish within such time not being less than fifteen days but not more than forty-five days, as may be specified in the notice a return in the prescribed form and verified in the same manner as a return under Clause (i) of Sub-section (1) of Section 142, setting forth his total income including the undisclosed income for the block period:

Provided that no notice u/s 148 is required to be issued for the purpose of proceeding under this chapter:

Provided further that a person who has furnished a return under this clause shall not be entitled to file a revised return;

(b) the AO shall proceed to determine the undisclosed income of the block period in the manner laid down in Section 158BB and the provisions of Section 142, Sub-sections (2) and (3) of Section 143 (s. 144 and Section 145) shall, so far as may be, apply;

(c) the AO, on determination of the undisclosed income of the block period in accordance with this chapter, shall pass an order of assessment and determine the tax payable by him on the basis of such assessment;

(d) the assets seized u/s 132 or requisitioned u/s 132A shall be dealt with in accordance with the provisions of Section 132B.

The petitioners though had taken the plea that none of the aforesaid action has been taken for the petitioners inasmuch as neither any such search has been conducted on the petitioners u/s 132 nor any books of account, other documents or assets have been requisitioned u/s 132A of the Act from them, but they do not deny the search in the banks, which, according to them, was only a mechanism for collecting information regarding the accounts of the petitioners and could not be termed as a valid "search", besides the plea that the petitioners cannot be treated to be the person searched within the meaning of Section 132(1)(c), nor the money in deposit with the bank, can be said to be in their possession.

Considering that the power of search has to be exercised with great caution since it is a serious invasion upon the rights, privacy and freedom of the taxpayer, the petitioners cannot be denied their right to question the validity of the search and to indicate such invalidity in the alleged search, which may establish that initiation of proceedings u/s 158BC would not only be merely faulty but would also be without jurisdiction and authority. When the petitioners say that there was no search ever conducted on them, they impliedly challenge the very search which is the basis of calling upon the petitioners to submit return u/s 158BC and, therefore, the onus lies upon the Revenue to prove that valid search had taken place or requisition has been validly made u/s 132A of the Act whereas the burden lies upon the petitioners to plead and prove that neither of the conditions as mentioned in Section 158BC, referred to above, did exist.

In the case of Income Tax Officer, Special Investigation Circle-B, Meerut Vs. Seth Brothers and Others etc., the apex Court while dealing with the search u/s 132 of the Act observed as under:

Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, 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 proceedings are liable to be quashed.

A Division Bench of the Delhi High Court in the case of AJIT JAIN Vs. UNION OF INDIA and Others, while considering the proceeding under Chapter XTV-B, made the observation that a search u/s 132 is a prerequisite for invoking such provision and the search should be a valid search. In this regard the observations made by the Court are being quoted below:

As the title of the said chapter suggests these are special procedures for assessment of search cases and, therefore, a search u/s 132 is a pre-requisite for invoking the provisions of the said chapter. It is axiomatic that search u/s 132, as contemplated in the chapter has to be a valid search. An illegal search is no search and as a necessary corollary in such a case Chapter XIV-B would have no application.

The Supreme Court upheld the aforesaid decision in appeal filed by the Union of India, which is reported in Union of India (UOI) Vs. Ajit Jain and Another,

The proceedings u/s 158BC since can only be initiated if either of the two conditions given therein did exist, therefore, initiation of such proceedings and continuance thereof would depend upon the jurisdiction of the IT authorities which they would only get if there has been a valid search and/or books of account, or other documents, etc., are requisitioned u/s 132A. The challenge to such a search can be made even in the collateral proceedings for which proposition of law, reference can be made to the decision of the Supreme Court in the case of Ram Chandra Arya Vs. Man Singh and Another, and Balvant N. Viswamitra and Others Vs. Yadav Sadashiv Mule (dead) through Lrs. and Others, . It is true that the petitioners in the instant case have not challenged the search by asking a relief against the aforesaid search but the pleadings do reveal that they have raised specific pleas regarding the validity of search, may be on limited grounds, as indicated above. Their case is that no search had taken place in accordance with the provisions of Section 132.

Reliance has also been placed by the petitioners on the following cases in support of their plea that when a statute vests certain power in an authority to be exercised in a particular manner, then the said authority has to exercise it in the manner provided therein : Commissioner of Income Tax, Mumbai Vs. Anjum M.H. Ghaswala and Others, Mehsana District Central Cooperative Bank Ltd. and Others Vs. State of Gujarat and Others, Dhananjaya Reddy v. State of Karnataka (2001) 4 SCC 9 and Indian Banks'' Association, Bombay and Others Vs. Devkala Consultancy Service and Others,

In view of the aforesaid settled legal proposition, the plea of the Revenue that the petitioners since have not asked for the relief against the search cannot be allowed to raise the plea of invalidity of "search" can thus not be sustained and is hereby overruled.

The first point of challenge to the search in question precisely is that without service of warrant of authorization upon the petitioners, the search in question could not be said to be a valid search; secondly, the warrant of authorization said to have been issued u/s 132 of the Act served upon the bank was only calling upon the bank to furnish information which will not constitute a legal search u/s 132 of the Act; thirdly, whether a common warrant of authorization naming more than one person could have been issued u/s 132 and also because the warrant of authorization was neither delivered nor shown to the persons searched (petitioners) in accordance with the mandatory requirement mentioned in the Circular dt. 7th March, 2001, for adhering with the terms of the taxpayers'' charter, the search was totally illegal.

The relevant portion of Section 132 is being quoted below:

(1) Where the Director General or Director or the Chief CIT or CIT or any such Jt. Director or Jt. CIT, as the case may be, empowered in this behalf by the Board, 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 IT Act, 1922 (11 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 IT 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 IT Act, 1922 (11 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, or would not be, disclosed for the purposes of the Indian IT Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property),

then-

(A) the Director General or Director or the Chief CIT or CIT, as the case may be, may authorize any Jt. Director, Jt. CIT, Asstt. Director or Dy. Director, Asstt. CIT or Dy. CIT or ITO, or

(B) such Jt. Director or Jt. CIT, as the case may be, may authorize any Asstt. Director or Dy. Director, Asstt. CIT or Dy. CIT or ITO,

(the officer so authorised in all cases being hereafter referred to as the authorised officer) to-

(i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept;

(ii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search:

Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business;

(iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom;

(v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing....

(1A) Where any Chief CIT or CIT, in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the Director General or Director or any other Chief CIT or CIT or any such Jt. Director or Jt. CIT as may be empowered in this behalf by the Board to take action under Clauses (i) to (v) of Sub-section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorization under Sub-section (1), such Chief CIT or CIT may, notwithstanding anything contained in Section 120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.

A perusal of the aforesaid provision leaves no ambiguity in assuming that it does not call for any notice much less prior notice or the information to be given to the person for the purpose of search nor it requires any service of warrant of authorization upon such person. The requirement is that there has to be information in the possession of the designated officer (Director General or the Director, or the Chief CIT or the CIT or any such Jt. Director or the Jt. CIT, as may be empowered in this behalf by the Board) who, in consequence of the information in his possession, has reason to believe that there is any person to whom either of the conditions in Sub-clause (a), (b) and (c) applies, then the Director General or the Director, or the Chief CIT or the CIT or any such Jt. Director or the Jt. CIT, as the case may be, may authorize any officer enumerated in Sub-clauses (A) and (B) to make search in the manner prescribed therein by exercising such powers, as are also detailed in the provision itself, and such an officer would be known as "authorized officer.

In the entire scheme aforesaid, there is no requirement of issuing warrant of authorization to the person whose undisclosed income and/or property is to be searched much less any service of warrant of authorization upon such person is required. The provision postulates an action of search and seizure by the Department on information being received by the designated officer and if such information is such that the officer has reason to believe that the provisions of Sub-clauses (a), (b) and (c), either singly or jointly are attracted, then at his own satisfaction on objective consideration and discretion, he would unilaterally issue the warrant of authorization and would authorize an officer as per the provisions given therein for conducting the search. This scheme does not envisage any such notice or information or service of warrant of authorization upon the person, whose undisclosed income and property is to be searched. Reference can be made to the case of I. Devarajan and Others Vs. Tamil Nadu Farmers Service Co-operative Federation and Others, (Mad) and also the decision of the Jain and Jain and others Vs. Union of India and others, , Southern Herbals Ltd. Vs. Director of Income Tax (Investigation) and others, and the case of UNION OF INDIA Vs. JUDICIAL MAGISTRATE (EASTERN RAILWAY), MUGHALSARAI, AND ANOTHER.,

In the case of I. Devarajan (supra), the search and seizure related to Tamil Nadu Farmers Service Co-operative Federation Ltd. of which one Chandrasekran was the managing director. The federation through its managing director by name Chandrasekran opened a savings bank account in Dena Bank, Mount Road, Madras, on 10th Sept., 1975, with a sum of Rs. 457.52. As on 26th May., 1976, the balance in the said account amounted to Rs. 30,41,569.16. On the basis of the information received and the enquiries made and as a result of various discussions and facts gathered, the Director of Inspection entertained the belief that the funds in the bank account represented undisclosed income or property of the federation within the meaning of Section 132 of the Act and consequently, a warrant of authorization was issued and search was conducted in the bank.

In the said case, the warrants were shown and signatures of bank officers were taken but Chandrasekran''s signatures were not to be found in the warrant of authorization, which were issued in Form 45. However, he was issued a prohibitory order. The Court found that the warrant of search of the bank premises has to be shown to the bank.

In the case of Subir Roy and Another Vs. S.K. Chattopadhyay and Others, the Calcutta High Court also held that it was not necessary to supply the warrant of search to the petitioner before hand provided they had the occasion to have and see the said warrants at the time of search.

In the case of Jain & Jain (supra) it was held that there is no provision either under the Act or the Rules for supply of copy of warrant of authorization. All that the law requires is that the authority must be produced before commencement of search and/or seizure.

Relying upon the Circular dt. 7th March, 2001, issued by the CBDT and the taxpayers'' charter, it has been urged by the petitioners that the aforesaid proposition of law regarding no requirement of service of warrant of authorization upon the person searched can be no more a good law inasmuch as that the rights and duties as laid down in the charter, mentioned aforesaid were not the subject-matter of consideration in those cases and in view of the provisions of Sub-section (14) of Section 132, the circulars have got binding force, the violation of which would make the entire proceedings vitiated.

Reliance has been placed upon the case of Union of India (UOI) and Another Vs. Azadi Bachao Andolan and Another, wherein the Supreme Court has considered the binding nature of the circular issued by the CBDT and has held that the circular issued by the CBDT is binding for execution of the Act, even if they deviate from the provisions of the Act.

Reliance is also being placed upon the case of State of Punjab Vs. Baldev Singh, for establishing that prior information to the person who is to be searched has to be given in view of the pronouncement made therein. Reliance is being placed upon paras 24, 32 and 45 of the aforesaid judgment. In para 24, the apex Court observed as under:

There is, thus, unanimity of judicial pronouncements to the effect that it is an obligation of the empowered officer and his duty before conducting the search of the person of a suspect, on the basis of prior information, to inform the suspect that he has the right to require his search being conducted in the presence of a Gazetted Officer or a Magistrate and that the failure to so inform the suspect of his right, would render the search illegal because the suspect would not be able to avail of the protection which is inbuilt in Section 50. Similarly, if the person concerned requires, on being so informed by the empowered officer or otherwise, that his search be conducted in the presence of a Gazetted Officer or a Magistrate, the empowered officer is obliged to do so and failure on his part to do so would also render the search illegal and the conviction and sentence of the accused bad.

The aforesaid case involved the meaning and interpretation of Section 50 of the NDPS Act and not to the provisions of Section 132 of the IT Act. In para 45 the Court took note of the provisions of Section 132 and observed as under:

...Apart from the position that in Pooran Mal Vs. The Director of Inspection (Investigation), New Delhi and Others, on facts, it was found that the search and seizure conducted in the cases under consideration in that case were not vitiated by any illegality, the import of that judgment, in the present context, can only be to the effect that material seized during search and seizure, conducted in contravention of the provisions of Section 132 of the IT Act, cannot be restrained from being used, subject to law, before the IT authorities in other legal proceedings against the persons, from whose custody that material was seized by issuance of a writ of prohibition. It was not the seized material, in Pooran Mai''s case (supra) which by itself could attract any penal action against the assessee. What is implicit from the judgment in Pooran Mai''s case (supra) is that the seized material could be used in other legal proceedings against an assessee, before the IT authorities under the IT Act, dealing with escaped income. It is, therefore, not possible to hold that the judgment in Pooran Mal''s case (supra) can be said to have laid down that the ''recovered illicit article'' can be used as proof of unlawful possession of the contraband seized from the suspect as a result of illegal search and seizure.

The apex Court was thus not considering the meaning and import of Section 132 of the Act and the procedure, required to be followed therein. The stand of the prosecution relying upon the dictum of the Pooran Mal Vs. The Director of Inspection (Investigation), New Delhi and Others, for establishing the legality of the search conducted under the NDPS Act in violation of Section 50 was the subject-matter of consideration, which interpretation in no way assists or strengthens the plea of the petitioners.

The aforesaid Circular dt. 7th March, 2001, only says that the taxpayers'' charter indicating the rights and duties of the taxpayers issued by the CBDT (1994) 208 ITR 5 is enclosed herewith. This charter will henceforth become a part of the search kit to be handed over to the person searched by the authorised officer at commencement of the search to prevent avoidable harassment to persons searched. The taxpayers'' charter gives charter of rights and duties of the person searched. The rights of the person searched are; to see the warrant of authorization duly signed and sealed by the issuing authority and to verify the identity of each member of the search party, etc., and the duties of the person searched are; to allow free and unhindered ingress into the premises and to see the warrant of authorization and put signature on the same, etc. The aforesaid taxpayers'' charter does not define the meaning of "person searched". The term "person" used in Section 132(l)(a), (b) and (c) and as finds place in statutory Form 45 means and includes a person who is said to be possessed of any undisclosed income and wealth and also the person in whose custody and supervision such undisclosed income or wealth is kept. When the taxpayers'' charter says that the person who is to be searched has a right to see the warrant of authorization duly signed and sealed by the issuing authority and to verify the identity of each member of the search party and is entitled to exercise any other right mentioned therein, it only relates to the person who is in-charge of the building, place, vessel, vehicle or aircraft, which has been specified for being searched. In the instant case, the search was to be conducted in the bank and, therefore, the officer-in-charge of the bank is the person, who could exercise the right, as given in the taxpayers'' charter before allowing the authorised officer to enter search.

Likewise, where the taxpayers'' charter speaks about the duties of the person searched, it unequivocally tells duties of the person, who is in-charge of the place, namely, building, vessel, vehicle or aircraft, where the search is to be made. The duties include the duty to allow free and unhindered ingress into the premises and to see the warrant of authorization and put signature on the same, etc. Any interpretation which confines the meaning of the word "person" used in Section 132(1)(a), (b) and (c) only to the person who is said to be possessed of the undisclosed income or wealth, the provision regarding authorization of the authorised officer to enter into any building, place, vessel, vehicle or aircraft and make a search therein or to search any other person, as given in sub-para, (b) in Form 45 would all be rendered nugatory. In fact, the interpretation of the word "person" as the petitioners argue, would mean that no search can be conducted upon any place, building, vessel, vehicle or aircraft, if the person, whose concealed income and properties are to be traced out and detected unless he himself is present at the place where the search is to be made. This is neither the requirement of Section 132 or Rule 112 nor that of the warrant of authorization issued in Form 45.

The charter does not anywhere contemplate or direct that the person who owns any money, bullion, jewellery or other valuable article or thing and who is named in the warrant of authorization was necessarily to be shown the said warrant before entering in the building, place, vessel, vehicle or aircraft for the purpose of search. It only requires that wherever the search is to be made, may be the residence of the person who is named in the warrant of authorization or such place as named in the warrant of authorization, the warrant has to be shown where the search is to be made. May be that in a given case, search is to be made in the residential building of the person concerned and he is present at the time of search, he would have the opportunity to see the warrant but in case when the search is to be made at any other place like any building, place, vessel, vehicle or aircraft or in the premises of the bank, where undisclosed wealth of the person, who is charged of having undisclosed income or property is not available or even if he is available, the requirement would only be to show such warrant of authorization to the bank, viz., the officer-in-charge, as may be available in the building, place, vessel, vehicle or aircraft.

This reasoning also finds support from the fact that the statutory warrant of authorization issued in Form 45 in sub-para, (b) authorizes the authorizing officer to search any person who has got out of, or is about to get into, or is in the building/place/vessel/vehicle/aircraft, if he has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing. The term "to search any person" obviously means any person other than the person who is named in the warrant of authorization and who is said to be possessed of undisclosed income or property, may be in the form of money, bullion, jewellery or other valuable article or thing. The authority to search any person other than the person who is in possession of undisclosed income thus cannot be limited or confined to the said person but would extend to any building, place, vessel, vehicle or aircraft and to any other person, as defined in sub-para. (b). This would only conclude that the banks can very well be searched for unearthing the money, bullion, jewellery or other valuable article or thing, of the person against whom, on entertaining the reasonable belief, as per the provisions of Section 132(l)(a), (b) or (c), as the case may be, that he is possessed of the undisclosed income and/or property, the warrant of authorization has been issued.

The warrant of authorization is issued in the statutory proforma given in Form 45, as prescribed by Rule 112 of the IT Rules read with Section 132 of the Act. The requirements therein for the present controversy are that it is addressed either to the Dy. Director, Asstt. Director/Asstt. CIT or the ITO and names the person against whom information regarding possessing of undisclosed income and/or property has been received by the Director General or the Director, Chief CIT or the CIT, Dy. Director, Dy. CIT, who, on consideration of such information has reason to believe that the said 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 or, would not be, disclosed for the purposes of the IT Act, 1961, and the authorizing officer has reason to suspect that books of account, money, bullion jewellery or other valuable article or thing have been kept or are to be found in a place "specified" in the warrant, would authorize and require either of the officers, namely, Dy. Director, Asstt. Director/Asstt. CIT or the ITO to enter and search the said building, place, vessel, vehicle or aircraft and to do all other things as given in the prescribed form and to exercise all other powers and perform all other functions u/s 132 or the rules relating thereto.

Form 45 thus does not mandate that while making search, the warrant of authorization has to be issued or served upon the person, who is said to be in possession of any money, bullion, jewellery/or other valuable article or thing, which has not been disclosed and is not likely to be disclosed in the given circumstances which prima facie constitutes a case of tax evasion. Sub-para (c) also authorizes the authorized officer to place identification marks on such books of account, as may be found in the course of search and to examine such books of account and documents and make or cause to be made copies of such documents and to seize any books of account, money, bullion, jewellery or other valuable article or thing found as a result of such search and take possession thereof and perform all such functions, as given therein.

The very fact that the search is to be conducted where any money, bullion, jewellery or other valuable article or thing have been kept by a person and, of course, it has not been disclosed to the IT Department or is not likely to be disclosed, on getting an information to the satisfaction of the authority concerned and on being satisfied about his belief that such tax evasion has taken place or is likely to take place, confers power on the authorizing officer to get such premises, namely, building, place, vessel, vehicle or aircraft, searched so that the undisclosed income or property of the person concerned may be detected and proper tax may be imposed and realised.

The argument of the learned Counsel for the petitioners that non-issuance of warrant of authorization to the petitioners and absence of its service upon them, vitiates the search appears to be based on complete misreading of the provisions of Section 132 and Rules 112 and 112A read with the requirements of Form 45 as incorporated therein. The search takes place for unearthing undisclosed income or property, which has secretly and clandestinely been kept at a given place, by the person to whom it belongs. It is in fact the concealed income or property, which has not been disclosed to the IT authorities, nor is likely to be disclosed, even if required to do so. It is not the statutory requirement anywhere that the search should be done only after prior notice to the person who is likely to be searched and who has secretly placed his undisclosed income or property at any place which may be a building, place, vessel, vehicle or aircraft. If the petitioners'' plea is accepted, it would defeat the very purpose of conducting a search, as prior information or service of warrant of authorization may caution the person, who is believed to have undisclosed income. Such a requirement would also frustrate the object of the provision of search and seizure, which is to be conducted without losing time and without forewarning the tax evader.

The imperative of service of warrant of authorization is neither for the person who is said to be possessed undisclosed income or property nor for the bank, but it would be sufficient compliance with the principles of natural justice that the warrant of authorization is shown to the officer-in-charge in the bank before entering into search. There is no requirement that the person against whom the belief has been formed by the authorizing officer of being possessed of undisclosed income or property to be either served with the warrant of authorization or he be necessarily shown the same, when the premises searched is a premises like bank or any other such premises, namely, building, place, vessel, vehicle or aircraft.

This can more appropriately be understood by taking the example that if a person who is said to be possessed of undisclosed income and has kept his money, bullion, jewellery or other valuable article or thing in an "aircraft" may be for sending it to a far off destination, and he himself is not in the aircraft, the authorizing officer, on the basis of the information received, if he is satisfied and has reason to believe that such money, bullion, jewellery or other valuable article or thing is undisclosed income of any person and the case falls under any of the Clauses (a), (b) and (c) of Section 132(1), he would be fully in his authority to search the aircraft and seize such money, bullion, jewellery or other valuable article or thing by issuing a warrant of authorization and in all this process neither it would be necessary to associate the person to whom such money, bullion, jewellery or other valuable article or thing belongs nor is it practically possible nor workable to first find out the said person and then, after showing him the warrant of authorization, proceed for making search in the aircraft. So, is the case, when search is to be made of a premises like the bank.

It is not the case of the petitioners that the warrant of authorization was not shown to the concerned officer in the bank or that the prohibitory orders u/s 132(3) were not passed or issued but their grouse is that at no point of time the warrant of authorization was either served upon them or shown before the search. The plea aforesaid does not at all affect the proceedings for search or prohibitory orders passed u/s 132(3) of the Act, being devoid offeree.

So far as the challenge to the warrant of authorization on the ground that it has been issued in more than one name, i.e., for more than one person, therefore, it violates the provisions of Section 132 of the Act and vitiates the search is concerned, the same has no legal basis. A bare glance at Form 45 and the relevant prescribed proforma where the name of the person who is said to be in possession of any money, bullion, jewellery or other valuable article or thing, which has not been disclosed or would not be disclosed under the Act, is mentioned, has a column, which is as follows:

Sarvashri/Shri/Shrimati....

The very description of naming these persons would satisfy that when the word "Sarvashri" has been used along with the word "Shri" and "Shrimati", it takes note of a single person as well as several persons. The word "Sarvashri" does not require any interpretation, which undoubtedly mean more than one person.

In the case of Madhupuri Corporation Vs. Prabhat Jha, Deputy Director of Income Tax (Investigation), , the plea aforesaid has not found favour of the Court.

The Court observed as under:

...There was no prohibition against issuance of common authorization when the competent authority had reason to believe that a number of persons were involved in interconnected transactions as reflected from the prima facie material available with the competent authority.

The warrant of authorization, therefore, cannot be faulted with, only on account, that it names more than one person, namely, the petitioners or a common warrant of authorization has been issued. The warrant of authorization having been issued by the Director authorizing an officer to enter and search the bank''s premises, and in fact a search of a bank in respect of any money, bullion, jewellery or other valuable article or thing said to be in possession of the persons named in the warrant of authorization within the meaning of Section 132 of the Act is the search in accordance with the provisions of the Act and the Rules.

The next contention, which has been very forcefully and vehemently advanced by learned Counsel for the petitioners is regarding the relationship of the bank and its customers in respect of the account maintained by the customer, which leads to a further argument that whether the books of account can be treated to be the books of account of the person searched and whether the money deposited in the bank would be treated as the money of such person as his undisclosed income under Clause (c) of Section 132(1) of the Act. In substance, the plea is that the books of account and other documents including the FDRs must be of a person referred to in Clauses (a), (b) and (c). Under Clause (c), the person should be in possession of any money, bullion, jewellery or other valuable article or thing and that the books of account of the bank cannot be the books of account of the person having account in the bank, nor the money in deposit can be taken as the money of such "person", as mentioned in the said Clause (c).

Elaborating the aforesaid plea, reliance is being placed upon the provisions of Section 132(1) and its Clauses (a), (b) and (c) along with Sub-section (4A). Analysing the aforesaid provisions, it has been contended that Sub-section (1) describes the officer, who, on information received, has reason to believe that any person who was covered by any of the Clause (a), (b) or (c) is to be searched, then the authorization can be made in accordance with Sub-clauses (A) and (B) in favour of an officer, who would be the "authorised officer" to enter and make the search. The term "any person" used in Clauses (a), (b) and (c) is being interpreted as the person, who is to be searched and, therefore, the books of account and money, etc., in various accounts of the bank must necessarily belong to such person and must be in his possession also and in the absence of any such belonging and possession, the said money, bullion, jewellery or other valuable article or thing or the books of account cannot be searched u/s 132, as such money in the bank accounts cannot be said to be the money of the "person" who is said to be searched nor the books of account can belong to such person.

Strengthening the aforesaid plea, learned Counsel has gone to the extent of saying that in fact under the existing provisions of the IT Act, namely, Section 132, no search could be made so far as bank accounts are concerned where it is said that money of the person, who is being searched, is kept in deposit nor the books of account, can be, for the same reason, searched or seized.

In support of the aforesaid stand, it has been argued that the relationship between the depositor and the bank is only that of a "creditor" and "debtor" wherein the bank has full authority to use the money of the depositor without his permission and earn profits by way of interest with the only requirement that when the depositor asks back the money, the bank would be obliged to repay the same with prevalent rate of interest. Such a relationship is not that of "trustee" and "beneficiary" and such money cannot be said to be in "trust" with the bank. The books of account are of the bank and not of the depositor and, therefore, neither the money in the account of the bank nor the books of account could be searched and/or seized in view of the aforesaid provision incorporated in Section 132.

"Bankers'' books" is defined in the Bankers'' Books Evidence Act, 1891. Section 2(3) says "bankers'' books" include ledgers, day-books, cash-books, account books, and all other books used in the ordinary business of a bank.

In support of the aforesaid submission, the case of Commissioner of Income Tax, Poona Vs. Bhaichand H. Gandhi, has been cited, wherein the Court held as under:

...it is fairly well-settled that when the moneys are deposited in a bank, the relationship that is constituted between the banker and the customer is one of the debtor and creditor and not of trustee and beneficiary. Applying this principle, the pass book supplied by the bank to its constituent is only a copy of the constituent''s account in the books maintained by the bank. It is not as if the pass book is maintained by the bank as the agent of the constituent, nor can it be said that the pass book is maintained by the bank under the instructions of the constituent. In view of this, the Tribunal was, with respect, justified in holding that the pass book supplied by the bank to the assessee in the present case could not be regarded as a book of the assessee, that is, a book maintained by the assessee or under his instructions.

Reliance has also been placed upon the case of Shanti Prasad Jain us. Shanti Prasad Jain Vs. The Director of Enforcement, wherein the Supreme Court held that when the moneys are deposited in a bank, the relationship that is constituted between the banker and the customer is one of a debtor and creditor and not trustee and beneficiary. The banker is entitled to use the monies without being called upon to account for such user, his only liability being to return the amount in accordance with the terms agreed between him and the customer.

The case of Nawab Major Sir Mohammad Akbar Khan v. Attar Singh (1936) 2 All ER 545 (PC) and the case of N. Joachimson (A firm name) v. Swiss Bank Corporation (1921) 2 All ER 92 were also cited to buttress the argument that a deposit of money is not confined to a bailment of specific currency to be returned in specie. As in the case of a deposit with a banker it does not necessarily involve the creation of a trust, but may involve only the creation of the relation of debtor and creditor, a loan under conditions.

Contesting the plea of the petitioner that the bank accounts can neither be searched nor seized and that since the money in the said accounts is with the bank wherein the relationship of creditor and debtor exists between the depositor of the money and the bank and, therefore, it cannot be treated as money of the person, who is being searched, learned Counsel for the respondent submitted that in the light of the provisions of Sections 132(1)(a), (b) and (c) r/w Rule 112 and Form 45, it would be evident that if such a plea is accepted, the same would make the entire provision of search and seizure practically ineffective and unenforceable. The scheme of the provisions relating to search and seizure has been framed keeping in mind that a tax evader, who has concealed his income and wealth, for avoiding any sort of disclosure, detection or exposure, of his undisclosed income or property, can keep it secretly at any other place, may be, building, vessel, vehicle, etc., and, therefore, on coming to know about such possession of wealth and on good grounds of reasonable belief, the power has been conferred under the Act upon the various officers to enter upon such place, building, vessel or vehicle, etc., so as to uncover the undisclosed income and property. The person, who is to be searched, as given in the aforesaid Clauses (a), (b) and (c), would mean a person who is supposed to be possessed of undisclosed income and wealth and the search can be made both of his person and property and also at any place where his undisclosed income or wealth is suspected to be kept. The powers have been given to search any premises, vessel, vehicle, etc., where it is reasonably suspected that undisclosed income and wealth of the person, who is being searched is or might be kept. In case the petitioner''s plea is accepted, it would give licence to the tax evaders of putting their money in the bank accounts, as such money in deposit will remain immune from the clutches of law and in particular Section 132 of the IT Act. This is not the intention nor philosophy or object of the Act. The plea is wholly devoid of force and is based on absolute misconstruction of the language used in the aforesaid Clauses (a), (b) and (c) of Section 132(1).

The simple meaning of the word "search" is to explore all over in trying to find something; to examine closely; to examine for hidden articles; to scrutinize; to probe; to put to test; to make an examination, etc., to look or hunt; a thorough examination, etc., and no interpretation which militates against the legislative intent of the provision can be allowed to be made. In normal course, what the authorised officer is to do, is to find out, detect and unearth the concealed income or wealth for which purpose the warrant of authorization has been issued.

It has rightly been submitted by the learned Counsel for the petitioner that it is not necessary that any person whose wealth is being searched must be an assessee of the Income Tax and that he may be any person but we find no force in his argument that if the warrant of authorization has been issued, authorizing the officer to conduct search in the bank or the premises of the bank, it would be a search upon the bank and the undisclosed income and the property in that case would be of the bank which cannot be taken to be the income and property of the person, named in the warrant of authorization, who is said to be in possession of any undisclosed income.

When the authorised officer is authorised to enter and search any premises, may be, the bank, he makes search in the said bank of money, bullion, jewellery or other valuable article or thing in respect of the person who is said to be possessed of such money, bullion, jewellery or other valuable article or thing. The premises searched is the bank and the person who is said to be possessed of such money, bullion, jewellery or other valuable article or thing is the person who has been named in the warrant of authorization, to whom not only the so discovered, concealed wealth belongs but he is also possessed of the same, within the meaning of Section 132(l)(c).

In respect of the FDRs it has been urged that they are not the valuable articles within the meaning of the provisions of Section 132 and therefore, they could not be searched nor seized. In support of this contention reliance has been placed upon the case of The Commissioner of Income Tax Vs. Shri Mohan Lal Sharma, . In this case, a Division Bench of the Court was considering the meaning of concealment of income in penal proceedings u/s 271(1)(c) of the Act as given in Expln. 5 to the aforesaid section, wherein the assessee was an individual and was doing business of purchase and sale of silver ornaments. The income declared by the assessee was accepted but soon after the filing of the return a search was conducted u/s 132 of the Act on the business as well as residential premises of the assessee. During the course of search four FDRs in the name of four minor children of the assessee were found and seized from the locker of the bank, owned by the assessee. In the statement recorded at the time of the opening of the locker, the assessee stated that the FDRs in the name of four minor children are kept in the locker and they were all disclosed under the income tax/wealth-tax. During the course of proceedings u/s 132(12) of the Act, the CIT held that there was no source of income with the minors and thus the source of FDRs was not proved and it being relatable to the assessee, directions were issued to the AO to assess these FDRs, in the hands of the assessee. Thereafter, the assessee filed a revised return including the said FDRs of Rs. 3,45,000 in his income. The assessment proceedings were completed afresh and thereafter a penalty of Rs. 2,50,000 was imposed. The penalty was initially reduced by the appellate authority, but in the second appeal, the Tribunal quashed the penalty. The Tribunal while quashing the penalty held that to attract the provisions of Expln. 5 to Section 271(l)(c), the assessee must be found in possession of any valuable article or thing. Relying upon the dictum of the Gujarat High Court in the case of Bhagwandas Narayandas Vs. Commissioner of Income Tax, Ahmedabad and Others, the Tribunal held that these FDRs were not money, bullion, jewellery. The Division Bench took note of the provisions of Expln. 5 to Section 271(l)(c) and also the provisions of Section 132(12) and the aforesaid case of the Gujarat High Court along with the decision of the Madras High Court in the case of J. Devarqjan v. Tamil Nadu Farmers Service Cooperative Federation and Ors. (supra) and the decision of the Supreme Court in Sir Shadi Lal Sugar and General Mills Ltd. and Another Vs. Commissioner of Income Tax, Delhi, and few other cases and held that the FDRs cannot be taken as valuable articles.

The case of Bhagwandas v. CIT (supra), decided by the Gujarat High Court was a case dealing with Section 132(5) of the IT Act, 1961. This provision stands omitted by the Finance Act, 2002, w.e.f. 1st June., 2002. The Court giving meaning to the aforesaid provision, observed as under:

Therefore, by using the words ''valuable article or thing'', what the legislature has intended to imply is that the assets covered by these words should be such as could be converted into cash so that the tax liability of the assessee concerned, as revealed from his undisclosed income, could be duly satisfied. In other words, the thing or article, which can be retained u/s 132(5), should be one, which is carrying its own intrinsic value in terms of money. A document of title relating to an immovable property or even a fixed deposit receipt issued by a bank does not possess any intrinsic market value. They can neither be negotiated nor be transferred for valuable consideration. Thus, they are not covered by Section 132(5) of the Act or Rule 112A of the Rules.

In the instant case, there is no occasion for considering the application or applicability of Section 132(5). However, the aforesaid provision was available under the Act with a purpose of recovering the amount against the tax liability, as may be determined from the undisclosed income of the assessee so as to avoid further complication in the matter of recovery and to facilitate the recovery.

In the case of Mohan Lai Sharma (supra), the matter was with respect to the penalty being imposed u/s 271(l)(c). The interpretation given with respect to the FDRs in the aforesaid two judgments is whether they are "valuable article" within the meaning of Section 132 or not cannot be nor would be applicable in the case of search u/s 132 of the Act. The interpretation made with respect to the provisions of Sub-section (5) of Section 132 and Expln. 5 to Section 271(1)(c) with regard to the FDRs in the aforesaid cases would not mean that the FDRs could not be searched or seized or prohibitory orders could not be passed u/s 132(3) of the Act.

In the case of Raj Kumar and Others Vs. Union of India and Others, a search was conducted on an authorization being given in the bank and certain FDRs which allegedly were benami and were actually in the name of one group, namely, Anand Group were discovered. The said FDRs were seized by means of an oral order. The proceeds of the FDRs after getting encashed were realised by the IT Department. The Court found that though the Asstt. Director of IT was holding a valid authorization for searching the bank and seizing the FDRs, she had no jurisdiction to order the encashment of the FDRs and recover the proceeds thereof u/s 132(1) of the Act. Though the credit in the bank was a valuable thing and liable to attachment but such action could only be taken under Sub-section (3) of Section 132 of the Act by passing a restraint order. Since there was no written order to encash the FDRs and to handover the proceeds, the seizure by an oral order was without jurisdiction. The Court, however, further held that the said FDRs would be deemed to be frozen and would be released only after the issue of the ownership of the FDRs had been finally decided in the IT proceedings of the Anand Group.

In the instant case also only a restraint order u/s 132(3) has been passed in respect of FDRs and, of course, since Sub-section (5) of Section 132 already stood omitted by the Finance Act, 2002, on the date of search, the question of passing any order under the said provision did not arise nor the plea of the petitioners that the FDRs could not be searched nor seized would make the present search illegal.

The petitioner''s further plea that since Annex. 6 to the counter-affidavit (assessment order) states that warrant of authorization issued u/s 132(1) of the Act which was served on the bank was in respect of furnishing details of bank accounts, therefore, even assuming that relevant material was with the authority, action u/s 132 could not have been taken for collecting the information and the said action of the IT Department at best was only an exercise of collecting information, which cannot be termed as "search", has to be seen in the light of the relevant provisions regarding search and collecting information, namely, Sections 132, 131 and 133(6) of the Act.

Section 131(1) gives power to the IT authorities like the powers of the civil Court under the CPC when trying a suit, namely, for discovery, inspection, enforcing the attendance of any person, including any officer of a banking company and examining him on oath and compelling the production of books of account and other documents and issuing summons. The aforesaid Sub-section (1) of Section 131 relates to the proceedings pending and continuing before the IT authorities.

Sub-section (1A) confers power upon the officers named therein to make an enquiry or investigation, if he has reason to suspect, that any income has been concealed or is likely to be concealed by any person or class of persons, before he takes action under Clauses (i) to (v) of sub-section (1) of Section 132, then for the purposes of making any enquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under Sub-section (1) on the IT authorities referred to in that Sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other IT authorities. Thus, Sub-section (1A) vests powers upon the IT authorities to make enquiry and investigation, even though no proceedings with respect to such person are pending before him or any other IT authorities.

Section 133(6) also confers power upon the named officers for calling for the information asking any person including a banking company or any officer thereof to furnish information in relation to such points or matters or to furnish statements of accounts duly verified in the manner specified, if in the opinion of the IT authorities, it would be useful for, or relevant to, any enquiry or proceedings under the Act.

The warrant of authorization has been duly issued by the Director of IT (Inv.) for searching the banks which means bank accounts, statement of accounts, FDRs and all other valuable articles, thing, money, bullion and jewellery, etc., which may be discovered therein.

The warrant of authorization has been issued in Form 45 and it authorizes the authorised officer to enter into and search the bank. Under the circumstances, it cannot be said that the language used in the assessment order that the details were to be found out from the banks would not mean that it was not the search proceedings but only the act of collecting information from the bank. Had it been so, steps under Sub-section (1A) of Sections 131 or 133(6) could have been taken. But here after the search, orders u/s 132(3) were also passed.

In the case of a search in the bank, the bank would necessarily be asked to give details of the undisclosed income, money, bullion, jewellery or other valuable article or thing, for which purpose the details of the bank accounts, FDRs and the lockers would have to be given and disclosed to the authorised officer. The authorised officer would act as per terms of the warrant of authorization and the relevant provisions of the Act and the Rules framed thereunder. The search in a bank cannot be made by pouncing upon the ledgers and books of account, the bank records or the FDRs. The only way to make search in the bank is to ask the offlcer-in-charge of the bank to give the details of such accounts, FDRs, etc., which action is nothing but a search under the relevant provisions of the Act and the Rules.

Apart from the above, Annex. 6 is the assessment order and any recital made in that order by the assessing authority with respect to the search already conducted would not be relevant for finding out as to whether it was a search u/s 132 or a case of collecting information.

The case in hand is not a case of collecting information from the bank but it was a case of search conducted upon the bank with respect to the undisclosed income and property of the persons named in the warrant of authorization. The plea that there was no search and it was only an action of collecting information from the bank thus is devoid of force and fails.

Lastly, the petitioners submitted that the entire exercise of the alleged search was nothing, but making a roving and fishing enquiry, which cannot be permitted u/s 132.

The petitioners'' submission that reason to believe stands on a higher footing than reason to suspect and action u/s 132 cannot be resorted to for conducting roving and fishing enquiry cannot be disputed nor can it be said that merely on whims, caprice or the own imagination or guess or on mere rumours any search can be conducted or the seizure can be effected but such a challenge is to be seen in each and every case as per the pleadings raised.

It would be apposite to put on record that in none of the writ petitions, the petitioners have challenged the search on the ground that there was no material/information relevant for forming the reasonable belief, as required u/s 132(1). The search has been challenged only on the ground that the warrant of authorization was not issued to the petitioners nor served upon them and as such it cannot be said that any search was conducted upon the petitioners or they are the "person searched". A corollary to the aforesaid argument further was that even if the banks were searched and could be searched, that is again a search upon the bank and not a search upon the petitioners and, therefore, no moneys and FDRs. etc., which were in the bank could be treated to be the moneys or FDRs of the petitioners because they are not the person searched, nor such moneys or FDRs can be said to be in their possession.

We have already recorded our findings on the aforesaid two issues hereinbefore. However, since it has been orally argued, though without pleadings, that the Revenue was making roving and fishing enquiry, which argument, in other words would mean that there was no material for forming the reasonable belief, we summoned the record from the Department and gone through it.

The petitioners have relied upon the case of Dr. Mrs. Anita Sahal Vs. Director of Income Tax (Investigation) and Others, in support of the plea that the reasons to believe must exist and must be taken into consideration by the Director/CIT at the time of issuing the warrant of authorization and the material recovered from the search cannot justify the search. In the aforesaid case, notice u/s 131 was issued after the commencement of the search. In the facts of the aforesaid case, the Court held that it appeared that the IT Department had only acted on the rumours and the very fact that the respondents issued notices u/s 131 (1A) after the search and seizure operation u/s 132 of the Act showed that there was neither reason to believe nor material before the AO on the basis of which he could issue a warrant u/s 132.

In L.R. Gupta and Others Vs. Union of India and Others, , it was held as under:

A search which is conducted u/s 132 is a serious invasion into the privacy of a citizen. Section 132(1) has to be strictly construed and the formation of the opinion or reason to believe by the authorizing officer must be apparent from the note recorded by him. The opinion or the belief so recorded must clearly show whether the belief falls under Clause (a), (b) or (c) of Section 132(1). No search can be ordered except for any of the reasons contained in Clauses (a), (b) or (c). The satisfaction note should itself show the application of mind and the formation of the opinion by the officer ordering the search. If the reasons which are recorded do not fall under Clauses (a), (b) or (c), then the authorization u/s 132(1) will have to be quashed.

In, the case of Ajit Jain (supra), it has been observed that "information" in consequence of which the Director General or the Chief CIT, etc., as the case may be, has to form 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. In other words, it must necessary be linked with the ingredients mentioned in the section. 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 belief are 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 and to prevent violation of the privacy of a citizen.

In the Constitution Bench judgment in the case of Pooran Mal v. Director of Inspection (Inv.) (supra) upholding the validity of the search and seizure u/s 132 of the Act and Rule 112 of the IT Rules, 1962, the apex Court held that they do not violate the fundamental rights guaranteed under Article 19(l)(g) of the Constitution. The restrictions placed by any of the provisions of Section 132, 132A or Rule 112A are reasonable restrictions on the freedom under Article 19(1)(g). Sub-sections (5) to (7) of Section 132 have since been omitted w.e.f. 1st June, 2002. The Court dealing with the challenge under Article 19(l)(g) noted that the provisions are evidently directed against persons who are believed on good grounds to have illegally evaded the payment of tax on their income and property. Therefore, drastic measures to get at such income and property with a view to recover the Government dues would stand justified in themselves. When one has to consider the reasonableness of the restrictions or curbs placed on the freedoms mentioned in Article 19(l)(f) and (g), one cannot possibly ignore how such evasions eat into the vitals of the economic life of the community. It is a well known fact of our economic life that huge sums of unaccounted money are in circulation endangering its very fabric. In a country which has adopted high rates of taxation, a major portion of the unaccounted money should normally fill the Government coffers. Instead of doing so, it distorts the economy. Therefore, in the interest of the community, it is only right that the fiscal authorities should have sufficient powers to prevent tax evasion.

The Court also looked into the inbuilt safeguards in Section 132 of the IT Act. It was noted that the power to order search and seizure is vested in the highest officers of the Department and that the exercise of this power can only follow a reasonable belief entertained by such officer that any of the three conditions mentioned in Section 132(l)(a), (b) and (c) exists. The authorization for the search cannot be in favour of any officer below the rank of an ITO.

Dealing with the subject of reasonable belief under Clause (c) of Section 132(1), which is attracted in the present case, the apex Court observed that if the authority has received any secret information, which, in its opinion, was reliable, it may be possible for it to have reason to believe that any person is in possession of any money, bullion, jewellery, etc., which is undisclosed income or property and such property is secreted in some place.

The petitioners are closely related to each other. Raghuraj Pratap Singh alias Raja Bhaiya, the then MLA, at present a Minister in the Government of U.P., is the son of Udai Pratap Singh and Manjul Raje whereas Bhavni Kumari is his wife. The trust and the institutions are also managed by them or their close relatives. The satisfaction has been arrived at by the Director (Inv.) on seeing and assessing the information received and enquiries made.

The file submitted to the Court unambiguously shows that there was enough material before the officer who formed the belief, which prompted him to make the search against these petitioners.

We do not find it necessary to give the entire material/information gathered by the IT Department, as there is no challenge at all on the existence of the material or relevance thereof but in order to test the oral challenge made by the petitioners, we had gone through the record and we find that the information received by the Director of IT (Inv.) and the material available including the fax message sent by the Secretary, National Urban Co-operative Bank Ltd., Pratapgarh, showing a huge amount of money in the account of Udai Pratap Singh, amounting to Rs. 3 crores or so, who never filed any IT return and the information sent by the District Magistrate, Pratapgarh, to the ITO, Pratapgarh, and forwarded to the Director of IT (Inv.), Allahabad, through the Dy. Director and Addl. Director and also the discreet enquiries made from the local people and the facts gathered from the newspaper reports, which stood corroborated by the documents requisitioned from the police and which have also been brought on record along with the counter-affidavit, did show various income and expenditure from different businesses including illegal sale of liquor and fish by Raghuraj Pratap Singh, which were never shown in the return filed by him did constitute the relevant material for entertaining the reasonable belief that it is a case of tax evasion wherein undisclosed income and property has not been subjected to any tax and it would not be made available if the notices are issued. The case will fall under Clause (c) of Section 132(1). There was thus enough corroborative evidence apart from newspaper reports which in isolation may not have been made the basis for issuance of warrant of authorization or warrant of requisition under Sections 132(1) and 132A respectively. On scrutiny of the documents having been done and considering the relevant information received, the warrant of authorization u/s 132(1) was issued after satisfaction of the Director (Inv.) in accordance with the provisions of the Act and the Rules.

In a case of search and seizure, where search has illegally been conducted mere disclosure of undisclosed income and property may not justify the illegal search nor would allow the block assessment proceedings to be carried through but the discovery of huge amount of undisclosed income and property on search being made after satisfaction recorded by the Director in this regard after entertaining the reasonable belief about the prima facie tax evasion, the fact that the huge money and property was discovered and in assessment proceedings, an amount to the tune of several crores has been assessed towards tax, do certainly supports the view that the satisfaction arrived at by the Director (Inv.), on the basis of the documents, for issuing requisition u/s 132A(1) and for issuing warrant of authorization u/s 132(1) for search cannot be said to be based on wholly irrelevant material, and for extraneous consideration or for collateral purposes. We are informed that in the assessment orders, liability of few crores have been imposed upon the petitioners. We may clarify that we are not commenting upon the assessment orders made, as they may be the subject-matter of challenge in the appropriate forum but we have observed the aforesaid facts only to substantiate the plea of the Revenue that the action of requisition and search was taken on consideration of relevant material and after application of mind.

It is only the relevancy of the material and not the sufficiency of the same, which can be scrutinized by the Court. The bare fact that after making the search on reasonable belief no incriminating documents or undisclosed income could be unearthed would not make the search itself bad nor to the contrary if without there being relevant material on which no good ground exists for having such reasonable belief and merely because the search has been made and undisclosed income or property has been discovered may not make the search valid.

It is a different matter, as observed in Pooran Mal''s case (supra) that indeed, the accident that undisclosed property is found on a search may not be a justification for the authorization of a search if, in fact, there has been no ground for entertaining reasonable belief. But, finding of assets as expected by the Director of Inspection on the information received by him would at least support the view that the authority concerned had reliable information on which he could entertain the necessary belief.

The documents produced before the Court show that not only there was relevant material or information with the Director but he had also applied his mind and assessed the material and after secret enquiries relevant for the purpose and after recording a satisfaction note he has issued the warrant of authorization. This establishes that there was not only relevant material but also sufficient material/information with the Director and that he had taken all necessary steps before authorizing the search since he had reason to believe that undisclosed income or property was kept in the banks of the person(s), who were named in the warrant of authorization. The formation of such reasonable belief on the aforesaid grounds cannot be said to be invalid or in any way an action of making any roving and fishing enquiry.

The subsidiary argument is that documents/material seized by the police from the house of Hari Om Shanker Srivastava, firstly, could not have been requisitioned by the IT authorities without the permission of the Court and; secondly, the information submitted by the police was wholly inadmissible and could not be treated as relevant for ordering authorization of search. In this regard reference has been made to the provisions of Section 132A and reliance has been placed upon the case of Motilal and Others Vs. Preventive Intelligence Officer and Others, and Commissioner of Income Tax, Haryana, Himachal Pradesh and Delhi and Others Vs. Tarsem Kumar and Another, where the Court held that the power u/s 132 cannot be exercised in respect of the things which are already in the custody of an authority. Note is to be taken that in view of the aforesaid decisions, special power of requisition has been conferred upon the authorities u/s 132A of the Act.

A perusal of Section 132A(1) of the Act would reveal that the power to requisition the books of account, etc., is in respect of and against a person from whose custody the said books of account, other documents or assets have been taken by any officer or authority. Sub-section (3) again says that requisition has to be done in respect of the books of account, other documents or assets seized from the custody of the person referred to in Clause (a), (b) or (c) of Section 132(1) of the Act. Sub-section (13) of Section 132 has been made applicable to Section 132A meaning thereby that the provisions of the Cr.PC 1973, relating to search and seizure shall apply to Section 132A of the Act.

It is not the case of the respondents that the documents which were intercepted or obtained from the house of Hari Om Shanker Srivastava, personal accountant of the petitioner Raghuraj Pratap Singh were seized by the police and given in the custody of the Court. Reference to the case of Sadruddin Javeri Vs. Government of Andhra Pradesh and Others, would not be of any assistance to the petitioners in which case the alleged assets, delivery of which was taken by the police from the IT Department was in respect of seizure which was made in connection with the alleged offence and according to the respondents held u/s 102 of the Cr.P.C, 1973. The Court found that the police officer seizing any such property shall forthwith report the seizure to the Magistrate having jurisdiction and where the property seized is such that it cannot be conveniently transported to the Court he may give custody thereof to any person on his executing a bond undertaking to produce the property before the Court as and when required and to give effect to the further orders of the Court as to the disposal of the same. In the instant case, the documents seized by the police did not become the case property nor were custodia legis, the requisition was rightly made u/s 132A of the Act, which cannot be faulted with. The District Magistrate, Pratapgarh, himself had written the letter to the ITO, Pratapgarh, mentioning that the documents seized by the police show large tax evasion and various illegal activities of sale of liquor and fish. The action of requisitioning the documents from the authority of police was taken on satisfaction of reasonable belief that if the documents are returned, the same would not be produced when demanded.

Second set of writ petitions:

In regard to the second set of writ petitions, apart from the aforesaid pleas, the main point which has been urged is that the Addl. Director of IT, (Inv.) was not at all competent to issue the warrant of authorization u/s 132(1) of the Act. Learned Counsel for the petitioner in this regard has reiterated that if a statute provides a particular thing to be done in a particular manner and by specified authority, the same has to be done in the same manner and not otherwise. Any action taken in violation of the given provisions would be a nullity and would stand vitiated. Reliance has been placed upon the case of Sahni Silk Mills (P) Ltd. and Another Vs. Employees'' State Insurance Corporation, wherein the Court observed:

The maxim delegatus non potest delgare was originally invoked in the context of delegation of judicial powers saying that in the entire process of adjudication a Judge must act personally except insofar as he is expressly absolved from his duty by a statute. The basic principle behind the aforesaid maxim is that a discretion conferred by statute is prima facie intended to be exercised by the authority on which the statute has conferred it and by no other authority...

In Commissioner of Police, Bombay Vs. Gordhandas Bhanji, the Court made the following observations:

Public authorities cannot play fast and loose with the powers vested in them, and persons to whose detriment orders are made are entitled to know with exactness and precision what they are expected to do or forbear from doing and exactly what authority is making the order.

It is clear to us from a perusal of these rules that the only person vested with authority to grant or refuse a licence for the erection of a building to be used for purposes of public amusement is the Commr. of Police. It is also clear that under Rule 250, he has been vested with the absolute discretion at any time to cancel or suspend any licence which has been granted under the Rules. But, the power to do so is vested in him and not in the State Government and can only be exercised by him at his discretion. No other person or authority can do it.

In Fulchand Bhagwandas Gugale and Another Vs. State of Maharashtra and Others, , the apex Court observed as under:

10 ...It may be true that, both the Sub-Divisional Officer or collector and the Commr. are Revenue officers as defined in Section 2(31) of the Maharashtra Land Revenue code, 1966. But, when they act under the provisions of the Act, they are not acting as Revenue officers under the Maharashtra Land Revenue Code, 1966, but as designated authorities under the Act. When they function under the provisions of the Act, their powers are determined by the provisions of the Act and not by the provisions of the Maharashtra Land Revenue Code. It is not possible to accept the contention of Mr. Dhabe that the report made u/s 5A of the Act by the Sub-Divisional Officer was done in his capacity as a Revenue Officer so as to be amenable to the appellate jurisdiction of the CIT u/s 247 of the Maharashtra Land Revenue Code. This contention must, therefore, fail.

In the case of Dr. Nalini Mahajan, Ram Lal Mahajan Charitable Trust, Shri Rakesh Mahajan, Pan Foods Ltd. and Others and Mahajan Industries Pvt. Ltd. and Others Vs. Director of Income Tax (Inv.) and Others, , the Court made the following observations:

However, the principal question, which would arise for consideration of this Court would relate to an interpretation of the expression ''Director'' as contained in Section 2(21) of the Act. The interpretation clause as contained in Section 2 begins with the words ''unless the context otherwise requires''. The definition of Director-General'' or ''Director'' are exhaustive ones.

Thus unless and until an amendment is carried out, by reason of the redesignation itself, read with the provisions of the General Clauses Act, the Addl. Director does not get any statutory power to issue authorization to issue warrant. We, therefore, are of the opinion that the Addl. Director (Inv.) cannot be said to have any power to issue any authorization or warrant to the Jt. Director, New Delhi.

In response, learned Counsel for the respondents submitted that in view of the Division Bench judgment of the Punjab & Haryana High Court in the case of Vinod Goel and Others Vs. Union of India and Others, the Addl. Director of IT (Inv.) was fully authorised to issue the warrant of authorization. The Punjab & Haryana High Court, after considering the provisions of Sections 2(21) and 116(cc), held as under:

A perusal of the above extracted provisions shows that the definition of Director-General is exhaustive and the inclusion of Addl. Director of IT in the said definition would have the effect of entitling the holder of that post to exercise all those powers which can be exercised by the Director-General under various provisions of the 1961 Act and absence of express enumeration of the post of Addl. Director in the list of authorities embodied in Section 132 cannot lead to an inference that the Addl. Director is not entitled to exercise the power of the Director-General under that section.

We are further of the view that the insertion of Clause (cc) in Section 116 of the 1961 Act has no bearing on the interpretation of the expression ''Director-General'' appearing in Section 132 which, as mentioned above, shall be governed by the definition of the said expression in Section 2(21) of the 1961 Act.

In Dr. Nalini Mahqjan''s case (supra), S.B. Sinha, J. the then Chief Justice of Delhi High Court, specifically considered the plea "whether the Addl. Director (Inv.) has the requisite jurisdiction to authorize any officer to effect search and seizure in purported exercise of power conferred upon him u/s 132 of the Act ?" While dealing with the aforesaid question, the scheme of the Act as given u/s 132 and the definition as given in Section 2(21), 2(28D) and the provision of Section 120 were taken into consideration. The Court held as under:

It is well-settled principle of law that although the definition would govern the statute whenever that word is used in the body thereof, where the context makes the definition given in an interpretation clause inapplicable, a defined word may have to be given a meaning different from that contained in the interpretation clause.

The Court further observed that the provisions of the IT Act clearly envisage a hierarchy of officers. Had the intention of Parliament been to confer the power of issuing authorization or warrant upon all officers, who come within the purview of the interpretation clause of "Director" or "Director-General", it was not necessary to mention therein that where the Director or the Director-General or the Chief CIT or the CIT or any such Jt. Director or the Jt. CIT, as the case may be, empowered in this behalf by the Board inasmuch as the latter authorities would have also come within the purview of the definition of the Director-General or the Director. If the contention is accepted, then even an authority, who is lower in rank, may also issue authorization in favour of an officer of higher rank, which situation cannot, in our opinion, countenanced.

The Court also observed that the words, which are used in declaring the meaning of other words, may also need interpretation and the legislature may use a word in the same statute in several senses. In that view of the matter, it would not be correct to contend that the expression as defined (sic) the interpretation clause would necessarily carry the same meaning (sic) out the statute.

(sic) Court was of the view that had the Addl. Director been (sic) the purview of the definition of "Director-General or (sic) no necessity of defining "Jt. Director" again, as has been done in Section 2(28D) of the Act, in terms whereof also a Jt. Director would be an Addl. Director.

An interpretation clause is not a positive enactment. It is also well settled that an interpretation clause, having regard to its limited operation, must be given a limited effect. While giving effect thereto, the Court must not forget that the scope and object of such a provision are subject to its applicability and it is used having relation to the context only.

The Delhi High Court also considered the case of Vinod Goel (supra) but did not subscribe to the view expressed therein for the reason given in the order.

When a statutory power is conferred on a particular statutory authority, it has to be exercised by the same authority and the scope of such power cannot be lessened or enhanced by giving a wider interpretation to the definition clause.

The Delhi High Court also considered the case of Sonu Systems Pvt. Ltd. Vs. Chairman, Central Board of Direct Taxes and Others, wherein having regard to an innocuous omission to delete the word "Deputy", it was held that the said defect did not vitiate the entire search or seizure. This judgment was also placed before us.

We have given our anxious and thoughtful consideration to the provisions of Sections 2(21), 2(28D), 116, 117(1) and 132 and the reasoning adopted by the Punjab & Haryana High Court in the case of Vinod Goel (supra) and by the Delhi High Court in the case of Dr. Nalini Mahqjan (supra) and with profound respect we find ourselves in respectful agreement with the view expressed by the Delhi High Court in the case of Dr. Nalini Mahajan (supra) holding that the Addl. Director was having no jurisdiction or authority to issue warrant of authorization, he having not been conferred with the said power under the statute.

In the second set of writ petitions, the warrant of authorization having been issued by the Addl. Director of IT (Inv.) can thus not be said to be legal authorization and the search made in pursuance of such authorization can also not be saved. The entire proceedings of search and initiation of block assessment proceedings and issuance of notice u/s 158BC are wholly without jurisdiction and authority and consequently they are liable to be set aside. We accordingly quash the entire proceedings of search and also the proceedings initiated u/s 158BC of the Act.

In view of our findings arrived at in the first set of writ petitions, Writ Petn. Nos. 5731 (MB) of 2004, 5730 (MB) of 2004, 5729 (MB) of 2004, 5931 (MB) of 2004 and 5932 (MB) of 2004 are hereby dismissed whereas Writ Petn. Nos. 5005 (MB) of 2004, 5015 (MB) of 2004 and 5017 (MB) of 2004, are alloweo.

We futther issue a writ in the nature of prohibition restraining the IT authorities from proceeding with the proceedings u/s 158BC in pursuance of search against the petitioners in the second set of writ petitions. 1

No order as to costs.