Rajendra Kumar Jain @ Rajesh Modi V. The Union of India & Ors.

CW/154/2003

AI Insights

The case revolves around a writ petition filed by Rajendra Kumar Jain @ Rajesh Modi challenging the legality of survey and subsequent search and seizure operations conducted by the Income Tax Department at his premises under Sections 133A and 132 of the Income Tax Act, 1961. The petitioner argued that these operations were conducted without proper legal basis and violated statutory safeguards. The Income Tax Department defended the actions, asserting that they were legally justified and necessary for protecting public revenue. The court examined the legal provisions, the circumstances of the operations, and the arguments presented by both parties before concluding that the Department acted within its rights.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 803117 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 02-02-2012
• Assessment Year: misc
• Other Referred Cases: Vinod Goel Vs. Union of India, Income Tax Officer, Special Investigation Circle B Meerut Vs. M/s. Seth Brothers and Ors., Harvest Gold Foods (India) P. Ltd. & Ors. Vs. Union of India & Ors., Sudhir Kumar Gupta & Ors. Vs. Director of Investigation Income Tax & Ors.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: ANUROOP SINGHI
• Assessee Lawyers: M M RANJAN; RAJAT RANJAN
• Keywords: Authorization; Block period; Coercion; Forgery; Malafide; Prohibitory order; Search and seizure; Survey operation; Ultra Vires; Undue Influence; Void ab initio
• Section: 142(1); 132; 131; 133A; 158BC

Judgement Text

" 1 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH ORDER S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) Date of Order : 02.02.2012 HON'BLE MR. JUSTICE ALOK SHARMA Mr. M.M. Ranjan, Sr. Advocate with Mr. Rajat Ranjan, for the petitioner-assessee. Mr. Anuroop Singhi, for the respondents. BY THE COURT : 1) By this petition filed in January, 2003 it has been prayed that survey operation under Section 133A of the Income Tax Act, 1961 (hereinafter 'the Act of 1961') and the search and seizure operation under Section 132 of the Act of 1961 carried out at the premises of the petitioner- assessee both on 11.01.2001 be declared ultra vires the said provisions – consequently void ab initio and therefore be quashed. A further prayer has been made that the respondent-Income Tax Department be directed to return the documents seized from the petitioner-assessee's premises in the search and seizure operation on 11th and 15th January, 2001. 2) The facts of the case are that a survey was initiated at the premises owned by the petitioner-assessee 2 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) with reference to Section 133A of the Act of 1961 on 11.01.2001. In pursuance to the material noticed by the Officers of the Income Tax Department duly authorized to conduct the survey, a decision appears to have been taken by the competent authority of the Income Tax Department also to resort to section 132 of the Act of 1961 for search and seizure in respect of documents relevant to the Department from the premises of the petitioner-assessee for potentially use in the assessment of the petitioner-assessee under the Act of 1961. 3) The petitioner alleges that the survey operation and the subsequent search and seizure operations were wholly illegal and contrary to the statutory safeguard provided to the citizen under the Act of 1961. Allegations of malafide have also been made however without impleading any Officer of the Income Tax Department by name. It is submitted that the officials of the Income Tax Department were biased against the petitioner-assessee's firm and both the survey and search and seizure operations against the petitioner-assessee were without good grounds and a colorable exercise of powers. Allegations of forgery have also been made – albeit boldly – as have been allegations of coercion and undue influence. It is stated that even while the time of search and seizure operation under Section 132 3 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) of the Act of 1961 was shown as 6:00 PM, in fact, the Officers of the Department had come to the petitioner- assessee's premises early in the morning as was evident from the record of the call details establishing that the Income Tax Officers had made calls from the petitioner- assessee's premises to their office earlier in the forenoon. It is further submitted that the warrant of authorization for the search and seizure operation was obtained in haste by the Officers of the Department and issued by the competent authority without due application of mind and without any reasonable cause for believing that the petitioner-assessee was in possession of documents which were relevant for the purpose of proceedings under the Act of 1961. It is further stated that the premises of the petitioner-assessee was sealed without authority of law on 11.01.2001 and was reopened only on 15.01.2001 and that following the search and seizure operation preceded by the survey operation, a notice under Section 158BC of the Act of 1961 had been issued to the petitioner-assessee by the Dy. Commissioner of Income Tax, Central Circle-2, Jaipur requiring the petitioner-assessee to prepare a true and correct return of total income in the block period of 01.04.1990 to 11.01.2001 whereupon the petitioner-assessee had already submitted his return for the said period in spite of being handicapped by the absence of document since all the books 4 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) relating to the petitoiner-assessee's accounts were seized by the respondent-Department at the time of search and seizure operation and not returned to the petitioner- assessee either in original or as photocopies in spite of the petitioner-assessee's request by an application dated 12.06.2002. It is submitted that about two years thereafter a notice under Section 142(1) of the Act of 1961 was issued by the Income Tax Officer (DIB), Jaipur to the petitioner- assessee requiring him to submit a true and correct return of his income, his firm's income, family's income, company's income etc. and the petitioner-assessee was required to appear before the Income Tax Officer on 11.11.2002. It has been submitted that the documents seized by the respondent-Department in the search and seizure on 11.01.2001 were being unlawfully retained by the respondent-Department prejudicing the petitioners- assessee's defence in the assessment proceedings being unlawfully carried on by the respondent-Department under the Act of 1961. Jurisdiction of the Income Tax Officer to engage in the proceedings under Section 132 of the Act of 1961 has also been impugned and it has been submitted that procedural safeguard as embedded in Income Tax Act for the protection of the citizen-assessee were not complied in true spirit but only mechanically. The warrant of authorization is stated to have been ante-dated for several 5 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) reasons and it has been submitted that the proceedings against the petitioner-assessee were wholly without jurisdiction. 4) Reply to the petition has been filed by the Income Tax Department and it has been submitted that survey proceedings under Section 133A of the Act of 1961 were carried out at the premises of M/s Mayur Printers on 11.01.2001. On the basis of the survey operation undertaken by the Officers of the respondent-Department and the impressions gathered thereon, a decision was taken by the competent authority of respondent-Department to also invoke Section 132 of the Act of 1961 and have carried out search and seizure operation in continuation of the survey proceedings at the premises of the petitioner- assessee. It has been submitted that both the survey operation and the search and seizure operation were carried out with due authorization by the competent authority and the certificates of authorization have been annexed with the reply to the petition as Annexures R/1 and R/2. It has been submitted that the authorization of survey was duly served on Mr. Vipin Kumar who received the same in his capacity as Manager of the firm in the control of the petitioner-assessee. Similarly the authorization of search was also served upon the said Mr. Vipin Kumar and his 6 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) signature obtained on the authorization. The allegation of bias of the Department against the petitioner-assessee has been denied. It has been submitted that the entire activity of search and seizure was carried out with proper and due application of mind and on careful and professional consideration of the material on record. It has been submitted that the conditions required for issuance of warrant of authorization both for survey and search/seizure were duly fulfilled and nothing amiss in law can be attributed to the exercise of statutory power by the Income Tax Department. Allegation of forgery have been debunked as being vacuous and unsupported by any specific allegation qua the documents alleged to have been forged. It has been submitted that the 'Panchnama' for the search operation rightly indicated the time as 6:00 PM as the search proceedings were carried out commencing 6:00 PM as initially the survey proceedings were carried out on the petitioner-assessee's premises with due authorization in the morning. It has been submitted that as the petitioner- assessee was not available at the premises at the time of search and seizure, all books of accounts, document and other papers kept at the petitioner-assessee's office were placed under a prohibitory order passed under Section 132 (3) of the Act of 1961. It has been stated that the search proceedings were temporarily stopped on 11.01.2001 7 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) towards the day's end and restarted and concluded on 15.01.2001. It has been submitted that the petitioner- assessee's premises was sealed on the basis of an order in accordance with the provisions of Section 132(3) of the Act of 1961. It has been further submitted that notice under Section 158BC of the Act of 1961 was issued to the petitioner-assessee requiring him to file a block return for the period 01.04.1990 to 11.01.2001 and the petitioner- assessee even though first required the copies of certain documents seized at the time of search and seizure operation subsequently without waiting for the photocopies required filed the required return of income for the block period 01.04.1990 – 11.01.2001 on 18.06.2002 as required. The allegation against the respondent-Department denying the petitioner-assessee the documents sought and obstructing his right to defend a fresh assessment for the block period of ten years has been emphatically denied. It has been submitted that on 19.06.2002 notice under Section 143(2) of the Act of 1961 was issued to the petitioner- assessee requiring him to appear on 27.06.2002. The notice was served on him well in time but the petitioner-assessee however sought adjournment and did not appear. It has been submitted that even in respect of the notice under Section 142(1) of the Act of 1961 and the questionaire sent along with, the petitioner-assessee did not respond or 8 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) furnish any required information. It has been further pointed out that in spite of various summons under Section 131 of the Act of 1961 issued to the petitioner-assessee, he never appeared before the Assessing Officer. It has been submitted that the seized record has been retained in accordance with law in view of the pending assessment with the proper approval of the competent authority. It has been submitted that a retention order for the purpose has been passed from time to time, last which was on 31.12.2009. It has also been submitted that the various incriminating documents, papers and records were found during the search operation. In the aforesaid facts detailed by the respondent-Department, it has been prayed that the writ petition should be dismissed. 5) I have heard the counsel for the parties and perused the writ petition as also reply thereto. 6) The issue regarding the power of Income Tax Department to conduct survey operation under Section 133A of the Act of 1961 and search and seizure operation under Section 132 of the aforesaid Act is a non-sequitor. The Act of 1961 provides for such prower in the interest of public revenues. The question which arises in the present writ petition is as to whether the search and seizure operation under Section 132 of the Act of 1961 could 9 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) immediately following the survey under Section 133A of the Act of 1961 was legal and whether the statutory safeguards provided for under Section 132 of the Act of 1961 on the one hand and under Section 133A of the aforesaid Act on the other have been adhered to in the instant case. 7) As far as the first question is concerned, the issue of search and seizure under Section 132 of the Act of 1961 immediately following a survey operation under Section 133A of the aforesaid Act is fully covered by the judgment of the Hon'ble Punjab and Haryana High Court in the case of Vinod Goel Vs. Union of India [(2001) 252 ITR 29 (P&H)]. The Hon'ble Punjab and Haryana High Court in the aforesaid case dealing with the similar situation held that nothing illegal could be found in the exercise of power under Section 132 of the Act of 1961 immediately following the exercise of power under Section 133A of the Act of 1961. Further, a bare reading of the provisions in issue would indicate that there is no time lag mandated for the exercise of power under Section 132 of the Act of 1961 subsequent to a survey under Section 133A of the aforesaid Act. On the contrary, it is quite conceivable and even likely that in the course of survey operation under Section 133A of the Act of 1961 for the purpose of inspecting of books of account or other documents kept or 10 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) required to be kept by an assessee and while checking or verifying the cash, stocks, article or funds relating to the business of the assessee, the competent authority on being conveyed the status of the petitioner-assessee's compliance or lack of it with the provisions of the Act of 1961 may decide to exercise its power under Section 132 of the Act of 1961. The facts obtaining in a given case may persuade and give the competent authority reason to believe that the exercise of power under Section 132 of the Act of 1961 – a power more intrusive in nature than the power to conduct survey – for the protection of the interest of revenue is necessary. The powers to survey under Section 133A of the Act of 1961 on the one hand and search and seizure under Section 132 of the aforesaid Act on the other are different aspects of the powers conferred on statutory authority under the Act of 1961 to ensure the full compliance by an assessee of his obligation to adhere to his duties under the Act of 1961. I am therefore of the view that the statutory provisions of the Income Tax Act, 1961 do not require a hiatus between the exercise of power under Section 133A of the Act of 1961 on the one hand and under Section 132 of the aforesaid Act on the other. 8) The issue that now remains to be considered is as to whether the statutory preconditions of the exercise of 11 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) power under Section 133A of the Act 1961 and under Section 132 of the aforesaid Act were fulfilled. A bare look at the warrant of authorization under Section 133A of the Act of 1961 which has been annexed to the reply to the petition shows that the said warrant of authorization was issued in respect of the petitioner-assessee's business over which the competent authority exercised its jurisdiction for the purpose of facilitating the inspection of the books of account and other documents as available at the premises of the petitioner-assessee. Similarly a bare look at the warrant of authorization under Section 132 of the Act of 1961 which has also been annexed to the reply to the petition shows that the competent authority was of the view that there was material in its possession to suspect that the books of account, other documents and valuable articles had been kept and could be found at the premises of the petitioner- assessee, M.I. Road, Jaipur and that if a summon under Sub- section (1) of Section 131 of the Act of 1961, or a notice under Sub-section (1) of Section 142 of the Act of 1961 were issued to the petitioner-assessee to produce, or cause to be produced, books of account or other documents which would be useful for, or relevant to proceedings under the Act of 1961, the petitioner-assessee would not produce or cause to be produced such books of account or other documents as required by such summon or notice. The 12 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) Hon'ble Supreme Court in the case of Income Tax Officer, Special Investigation Circle B Meerut Vs. M/s. Seth Brothers and Ors. [AIR 1970 SC 292] has held that where the power of statutory authority under the Act is exercised bona fide and in furtherance of the statutory duties of the tax officers and where the Commissioner entertains the requisite belief and for reasons to be recorded by him authorises a designated officer to enter and search premises of a assessee qua books of account and documents relevant to or useful for any proceedings under the Act of 1961, the court in a petition by an aggrieved person cannot be asked to substitute its own opinion whether an order authorising the search should have been issued. It has further been held by the Hon'ble Supreme Court that in fact even any irregularity in the course of entry, search and seizure committed by the officer authorized would not be sufficient to vitiate the action taken except in cases of proved malafide. 9) In the case of Harvest Gold Foods (India) P. Ltd. & Ors. Vs. Union of India & Ors. [(2006) 282 ITR 83 (Raj.)], this Court has held that the law is settled that the courts are only concerned with the satisfaction and have to see where any material was available to issue a warrant of authorization and that sufficiency of material with regard 13 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) to application of mind for issue of a warrant under Section 132 of the Act of 1961 is not a matter for the consideration of the courts. 10) Further in the case of Sudhir Kumar Gupta & Ors. Vs. Director of Investigation Income Tax & Ors. [(1993) 202 ITR 829 (All)], the Hon'ble Division Bench of the Allahabad High Court has held that information in the possession of the competent authority under Section 132 and reason to believe based thereupon provide the foundation for the exercise of power under Section 132 of the Act of 1961. It has been held that before the competent authority exercises its jurisdiction to direct search and seizure it has to have information in its possession and if such information is indeed available with the competent authority the belief based thereon cannot be open to the scrutiny as it is the final conclusion arrived at by the officer concerned as a result of mental exercise made by him. It has been held that “reason to believe” is not open to scrutiny and satisfaction arrived at by the officer concerned is immune from a challenge except in cases of ex-facie, arbitrary and malafide exercise of power. 11) In the context of the aforesaid enunciation of law, the only question which arises for the consideration in this 14 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) writ petition is whether from the existing material on record with the competent authority under the Act of 1961 an inference could be drawn by him to have a reason to believe that warrants of authorisation for survey and search and seizure operations were in order. 12) From the facts on record it transpires that a survey operation was authorized under Section 133A of the Act of 1961. In the course of search operation, the working of the petitioner-assessee in accordance with the Income Tax, 1961 or lack of it was obviously made apparent to the officer authorized. This factum appears to have been communicated to the competent authority whereupon under Section 132 of the Act of 1961 and in the context of the information thus received with regard to the manner of compliances or lack of it with the Act of 1961 by the petitioner-assessee, the competent authority with the view to safeguard public revenue on the information available come to have a reason to believe that for safeguarding public revenue, it was necessary to engage in the more intrusive inquiry by way of a search and seizure operation under Section 132 of the Act of 1961. As against this, the allegations of malafide and forgery have been casually made by the petitioner-assessee without any material particulars consequent to which the exercise of jurisdiction vested in 15 S.B. CIVIL WRIT PETITION NO.154/2003 (Rajendra Kumar Jain @ Rajesh Modi Vs. The Union of India & Ors.) the competent authority under Section 133A and Section 132 of the Act of 1961 cannot be displaced. 12) Consequently, I find no force in the writ petition. No illegality has vitiated the statutory protection for the petitioner-assessee against the untrial inquiry as under Section 133A of the Act of 1961 and thereafter immediately following a more intrusive inquiry under Section 132A of the Act of 1961. In fact, it is on record that relevant material was found by the authorized officer in the search and seizure operation based whereupon a notice under Section 158BC was issued to the petitioner-assessee to furnish his return for the block period 01.04.1990 to 11.01.2001 which reassessment is underway. It is quite apparent that survey or further material search and seizure was not casually resorted to by the income tax authority and were founded on information and good reason to believe that the powers under Section 133A and 132 of the Act of 1961 be exercised. 14) The writ petition is dismissed accordingly. Stay application also dismissed. (ALOK SHARMA), J MS/- All corrections made in the judgment/order have been incorporated in the judgment/order being emailed. - Manoj Solanki, Jr. P.A. "