This common judgment would dispose of the afore-captioned writ petitions preferred by Shah-E-Naaz Judge, her husband Sandeep Kohli and her daughter Sahyr Kohli, who have challenged notices under Section 153A of the Income Tax Act, 1961 (Act, for short) dated 3rd May, 2016, 8th November, 2016 and 8th November, 2016, respectively. They have also challenged warrant of authorization dated 27th June, 2014 under Section 132 of the Act for search of locker No.7325-A in the joint names of Nagina Judge and Shah-E-Naaz Judge, locker No.7637-A in the joint names of Shah-E-Naaz Judge and Sahyr Kohli and locker No. 7712-D in the joint names of Sandeep Kohli and Shah-E-Naaz Judge in Delhi Safe Deposit Company Ltd. as illegal, bad in law and without jurisdiction. Other prayers made in the writ petition include quashing of proceedings initiated pursuant to notice under Section 153A of the Act. The notices under Section 153A and the proceedings initiated under Section 153A of the Act relate to Assessment Years 2009-10 to 2014-2015.
2. Nagina Judge is sister of Shah-E-Naaz Judge and is a Non-Resident Indian. Nagina Judge has not filed any writ petition. Nagina Judge, it was stated, has filed a statutory appeal challenging the assessment order dated 10th March, 2017 under Section 153A of the Act.
3. Precursor to the search warrants noted in paragraph 1 above, were search and seizure operations under Section 132 of the Act at the residential and business premises of Karamjit Singh Jaiswal on 10th June, 2014. Karamjit Singh Jaiswal is the first cousin (Bua‟s son) of Shah-E-Naaz Judge. During the course of search at the residential premises of Karamjit Singh Jaiswal, key of locker No. 7325-A in the Delhi Safe Deposit Company in the joint names of Nagina Judge and Shah-E-Naaz Judge was found and seized. The panchnama/seizure memo specifically records that the locker was in the name of Nagina J. Water and Shah-E-Naaz J. Kohli. We are not concerned with the search and seizure operations and consequent proceedings against Karamjit Singh Jaiswal.
4. On 10th June, 2014 itself, a search team had visited Delhi Safe Deposit Company Ltd. and on inquiry had learnt about locker No.7712-D in the joint names of Sandeep Kohli and Shah-E-Naaz Judge and locker No. 7637-A in joint names of Shah-E-Naaz Judge and Sahyr Kohli. On 10th June, 2014, a restraint order under Section 132 (3) in respect of locker Nos.7325-A, 7712- D and 7637-A was passed based upon search warrants under Section 132(1) of the Act in the case of Karamjit Singh Jaiswal.
5. For the purpose of present decision, we have gone through and examined the satisfaction note in the case of Karamjit Singh Jaiswal or Jaiswal Group. Three petitioners are not mentioned and their involvement is not alluded to and alleged. The petitioners have stated that they do not have any commercial, business or financial relation with Karamjit Singh Jaiswal, Jaiswal Group or business entities managed by them. This factual position is not denied by the respondents in the counter affidavit. The respondents, however, rely on seizure of the key of locker No.7325-A from the residential premises of Karamjit Singh Jaiswal on 10th June, 2014, which locker was in the names of Nagina Judge and Shah-E-Naaz Judge.
6. On 10th June, 2014, statement of Karamjit Singh Jaiswal was recorded on oath under Section 132 (4) of the Act. Second and third question posed and the answer given by Karamjit Singh Jaiswal, which relate to locker No.7325-A read as under:-
“Q No.2 During the search at your residence i.e. The Green Rajokari a loker (sic) key mentioning locker No.7325 A with The Delhi Safe Deposit Co. Ltd was found. Please state to whom it belong?
Ans. The locker belongs to Ms. Nagina J. Water & Ms. Shah-e-naaz J. Kohli.
Q. No.3 What is the relationship with Ms Nagina J. Water & Ms. Sheh-E-naaz J. Kohli and why there keys are kept here?
Ans. Ms. Nagina J. Water is my first cusion (sic) & Ms. Sheh-e-naaz J. Kohli is Nagina J. Water‟s sister. she (sic) was staying here till April 15, 2014. she (sic) is the resident of London and British Passport holder.”
No other question or suggestion was put to Karamjit Singh Jaiswal.
7. On 27th June, 2014, search warrant was issued in the names of Nagina Judge, Shah-E-Naaz Judge, her husband Sandeep Kohli and her daughter Sahyr Kohli in respect of three lockers. For the sake of convenience, we would reproduce the relevant portions of the search warrant in the names of Nagina Judge and Shah-E-Naaz Judge Kohli, which reads as under:-
“Whereas information has been laid before me and on the consideration thereof I have reason to believe that:-
……….It a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 131 of the Income-tax Act, 1961, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of the Income-tax Act, 1961, is issued to Ms. Nagina Judge and Ms. Shah Naaz J. Kohli [name of the person] to produce, or cause to be produced, books of account or other documents which will be useful for, or relevant to, proceedings under the Indian Income-tax act, 1922, or under the Income-tax Act, 1961, he would not produce, or cause to be produced, such books of account or other documents as required by such summons or notice. Sarvashri/Shri/Shrimati Ms. Nagina Judge and Ms. Hah Naaz J. Kohli possession of money, bullion, jewellery or other valuables articles 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 Income-tax Act, 1922, or the Income-tax, 1961;
And whereas I have reasons to suspect that such books of account, other documents, money, bullion, jewellery or other valuable articles or thing have been kept and are to be found in Locker No.7325-A, The Delhi Safe Deposit Co. Ltd., 86, Janpath, New Delhi (Specify particular of the building/place/vessel/vehicle/aircraft);
This to authorise and require you as mentioned over leaf [Name of the Deputy Director or of the Deputy Commissioner or of the Assistant Director or of the Asistant Commissioner or the Income-tax Officer]
(a) to enter and search the said building/place/vessel/vehicle/aircraft;
(b)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 you have 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 think;
(c) to place identification marks on such books of account and document as may be found in the course of search and as you may consider relevant to or useful for the proceeding aforesaid and to make a list thereof together with particular of the identification mark;
(d)to examine such books of account and documents and make, or cause to be made, copies or extracts from such books of account and documents
(e) to seize any such books of account, documents, money bullion, jewellery or other valuable article or thing found as a result of such search and take possession thereof;
(f)to make a note or an inventory of any such money bullion, jewellery or other valuable article or thing;
(g)to convey such books of account, documents, money bullion, jewellery or other valuable article or thing to the office of the Deputy Commissioner of Income-tax or any other authority not below the rank of Incometax Officer employed in the execution of the Incometax Act, 1961: and
(h)to exercise all other powers and perform all other functions under section 132 of the Income-tax Act, 1961, and the rules relating thereto.
You may requisition the services of any police officer or any officer of the Central Government, or of both, to assist you for all or any of the purposes specified in subsection (1) of section 132 of the Income-tax Act, 1961. ”
[We have omitted the portion which has been scored off in the warrant of authorization dated 27th June, 2014 issued by the Additional Director of Income-tax (Inv.)].
8. On opening, locker Nos. 7712-D and 7637-A were found to be empty. Accordingly, nothing was seized and recovered. In locker No.7325-A in the name of Nagina Judge and Shah-E-Naaz Judge, jewellery worth Rs.49,73,295/- was found. Nagina Judge was questioned and her statement on oath under Section 132 (4) of the Act was recorded on 27th June, 2014. Nagina Judge had confirmed that she was a Non-Resident Indian residing in the United Kingdom. For the last 2-3 years, she had been filing her wealth tax and income tax returns in India. She would frequently visit India and mostly reside with her cousin Karamjit Singh Jaiswal. With reference to the locker key and jewellery found, the following questions and answers were put to and given by Nagina Judge:-
“Q. No.9 Where do you keep your locker key usually?
Ans Generally, I keep my locker key in my sister house S-137, Panchsheel Park, New Delhi or in London or in Chandigarh or in Rajokari.
Q. No.10 When you have operated your locker last time?
Ans. 27th March, 2014 or in last week of March, 2014.
Q. No.11 Please explain how your locker key has gone at 6, The Green Rajokari, New Delhi in Karamjit Singh Jaiswal Houses.
Ans. I was staying with him before I left for London in first week of April, 2014 and I was due to return shortly after. So I left the key alongwith other personal affect in his residence.
Q. 12. As per the valuation of your jewellery total Net weight is 1868.900 gms whereas no wealth tax return is filed by you. So you are entitled only 500 gms of jewellery. Please explain why rest of the jewellery may be seized?
Ans. It was not filed previously as I only acquired the jewellery in March, 2014.
Q. No.13. Please explain from where you have acquired the jewellery in March, 2014?
Ans. My sister & I divided my late mother jewellery in March 2014. Although she had passed away in November 2011.
Q. No.14. Do you have any proof that you and your sister have divided the jewellery in the m/o March 2014 which pertain to your deceased mother?
Ans. We have no return (sic) proof but we have a witness and we both can swear an affidavit to that affect.
Q. No.15 How much jewellery you have received from the said distribution of your mother jewellery?
Ans. As of today it was evaluated at Rs.49 lacs. Out of this most of it pertains to my mother.
Q. No.16. Please explain did your mother was filing wealth tax return before expire as most of the share of jewellery as stated by you pertains to your mother?
Ans. I am not sure.
Q. No.17. Do you want to say anything else?
Ans. No. Thanks. ”
Nagina Judge had subsequently filed an affidavit dated 18th November, 2016 accepting that the jewellery found belonged to her and not her sister.
9. Pertinently, Shah-E-Naaz Judge was not examined on oath under Section 132 (4) of the Act, though she was present when the three lockers were forced open on 27th June, 2014.
10. We, however, would notice the contention of the Revenue that Nagina Judge had subsequently oscillated as in her subsequent letter dated 27th February, 2017, she had stated:-
“As per the last Wealth Tax Return the jewellery of Mrs. Surinder Ajeet Judge (mother) was 740 gms. Thus the balance jewellery owned by both sisters is 1128.90 gms. as computed below:-
We shall subsequently deal with the said contention and the argument of the respondent that “statements of the petitioners and Nagina Judge were not credible and ex-facie untruthful and designed to pervert the cause of justice.”
11. The primary contention and submission of the respondents is that on discovery of key of locker No.7325-A, consequential search warrants dated 27th June, 2014 were issued under Section 132 (1A) for search of the three lockers. These consequential warrants of authorization under sub-section (1A) to Section 132 were issued against the searched person i.e. Karamjit Singh Jaiswal and not the petitioners. Validity of these search warrants should meet the parameter and the test of "reasons to suspect" and not on the legal requirement of "reason to believe". A lower test and requirement of “reason to suspect” is sufficient. This plea and reference to Section 132 (1A) of the Act was specifically taken and made in the written submissions dated 6th December, 2017, described as written statement, filed before us by the respondents. The submission asserts that the petitioners have misinterpreted the search and seizure actions as the search was in respect of the lockers and not against the petitioners in person. However, in the counter affidavit dated 27th March, 2018 filed to the amended W.P. (C) No.5937/2016 in the case of ShahE-Naaz Judge, the respondents had taken a different stand and stance. They have stated that warrants of authorization dated 27th June, 2014 in the present case were issued under clause (i) to sub-section (1) to Section 132 in respect of the place i.e. locker, on the basis of “reasons to suspect” as key of locker No.7325-A was discovered and seized during the course of search under Section 132(1) in the case of Karamjit Singh Jaiswal and it was learnt subsequently that Shah-E-Naaz Judge, who was joint holder of locker No.7325- A with Nagina Judge, was also joint holder with her husband Sandeep Kohli and daughter Sahyr Kohli of locker Nos.7712-D and 7637-A respectively, in Delhi Safe Deposit Company Ltd. “Reasons to believe” with reference to sub-sections (a) (b) and (c) to Section 132(1) was against or qua the person, whereas warrant of authorization qua place or location under clause (i) to Section 132 (1) do not require recording of “reasons to believe”. Warrants of authorization qua the place/location i.e. the lockers, was issued on the basis of “reasons to suspect”. For clarity, we would like to reproduce the stand taken by the respondents in response to ground V and paragraph 29 of the counter affidavit, which reads:-
19. In Ameeta Mehra Vs. Additional Director of Income-tax (Inv)-Unit (2017) 395 ITR 185 (Delhi) in similar circumstances a locker key belonging to Ameeta Mehra was found in the residential and business premises of the person searched. Consequential search warrant was issued after recording the satisfaction note. Consequential search was struck down observing that the satisfaction note must contain credible information to trigger search action. Mere recovery of a locker‟s key by itself would not be sufficient justification for such search unless the person searched had some link in the business or otherwise connected activities of the person searched. Secondly, the opinion recorded in the satisfaction note must show nexus to the formation of the belief that Ameeta Mehra was in possession of money, jewellery or valuables representing her income which had not been disclosed. The decision upholds that the courts in a limited way can examine whether the belief formed was devoid of any basis and irrational in the extreme sense to fall foul of the Clapham Omnibus test. It was observed as under:-
“20. Turning to the case on hand, in the first place there is nothing in the Satisfaction Note to indicate that there was any credible information available with the Department that the Petitioner belonged to the „Nanda Group‟ who were being searched. It must be recalled that the Petitioner is a regular Assessee. The information needed to trigger the search action against the Petitioner had to be such that would show that she is linked in some manner to the business or other activities of the „Nanda Group‟. Secondly such information had to have a nexus to the belief that could be reasonably formed that she is in possession of any money, jewellery or valuable representing her income which has not been or would not be disclosed by her. The mere fact that the key to the locker which she was operating was found during the search of her uncle Mr Suresh Nanda would not constitute 'information' leading to the reasonable belief that the locker would contain jewellery, or other valuable articles which she would not have disclosed in her returns. There obviously had to be something more. Therefore the jurisdictional pre-condition justifying the invocation of the power of search under Section 132 (1) of the Act against the Petitioner, was not fulfilled in the present case.
21. The counter affidavit filed by the Respondents suggests that they were not treating the Petitioner as part of the Nanda Group. In such event, there was no basis at all in proceeding to issue a search authorisation in the name of the Petitioner since the locker key was found during the search of the Nanda Group. Mr. Ruchir Bhatia, learned counsel appearing for the Revenue, however, urged that this Court should not go by what is stated in the counter affidavit but only by what is stated in the Satisfaction Note. Even then, the Satisfaction Note does not throw any further light on how the authority could form a reasonable belief that the Petitioner was connected with the Nanda Group and that her locker would contain money, jewellery etc that constituted her undisclosed income.
22. Mr. Bhatia repeatedly urged that the mere fact that nothing was found in the locker, would not for that reason alone, render the search illegal. This proposition is unexceptionable and to be fair to Mr M. S. Syali, learned Senior counsel for the Petitioner, he did not contest it. In fact the legal position in this regard stands settled in Income Tax Officer v. Seth Brothers (supra). However, the issue here is not what happened during or after the search but the absence of the jurisdictional precondition justifying it. In the absence of any credible information that could lead to the reasonable belief that the Petitioner was in possession of money, jewellery etc that constituted income that she has not or would not have disclosed, no search warrant qua her locker could have been issued. Further, the Satisfaction Note had to reflect the basis on which the reasonable belief was entertained. The one shown to the Court fails on this score.
23. The Respondent's search of the Petitioner was a classic case of a „false start‟. It was without legal basis. What were the options available to the Respondents when they came across the locker key when they searched Mr Suresh Nanda? The first step was to seal the locker. In fact they did so by issuing an order under Section 132 (3) of the Act. However, instead of immediately jumping to conclusions against the Petitioner, and before actually searching the locker by lifting the restraint order, the Respondents ought to have investigated further and gathered some credible information that could lead them to form a reasonable belief that (i) she was linked to the activities of the Nanda Group and (ii) her locker might contain money, jewellery etc that constituted undisclosed income. Only then was a search warrant qua her justified. Alternatively, they may have opted to proceed against her under Section 153 C of the Act. That too would have required two Satisfaction Notes: one by the AO of the searched person followed by one by her own AO. However, in the present case, the Respondents did not opt for the alternative.”
20. This judgment refers to an earlier decision of Allahabad High Court in the case of Smt.Kavita Agarwal & Anr. v. Director of Income Tax (Investigation) & Ors. (2003) 264 ITR 472 (All). This again was a case in which during the course of search, keys of three lockers were found and seized. Thereafter, search warrants were issued simply on the ground that the keys of the lockers have been found during the course of search. The warrants of authorization were struck down observing that the respondent authorities had failed to disclose the material and information on the basis of which they had entertained the belief recorded that the lockers contained money, jewellery, valuables and other articles representing disclosed income. Formation of belief by the authorities justifying the search must be based upon relevant information or material to satisfy the mandate of Section 132 (1) of the Act. This decision clearly holds that the law requires existence of “reasons to believe” and not “reasons to suspect”. This was despite use of the expression “reasons to suspect” in clause (i) to Section 132 (1) of the Act.
21. Notwithstanding use of the expression “reason to suspect” in clause (i) to Section 132 (1) of the Act, the Supreme Court in its earlier judgments in Seth Brothers, Pooran Mal and Spacewood Furnishers Private Limited(supra) has consciously emended to the effect that satisfaction in the form of “reasons to believe” is required and mandated by law. Decision of a Division Bench of this court in Madhu Gupta (supra) had rejected a similar argument that “reasons to suspect” and not “reason to believe” are sufficient. In the present case like in the case of Madhu Gupta, warrants of authorization was issued in respect of three lockers in the name of petitioners and Nagina Judge. These warrants of authorization were not issued and executed against Karamjit Singh Jaiswal.
22. There could be a good ground and reason why the legislature has used expression “reasons to suspect” in clause (i) or even for that matter in subsection (1A) to Section 132 of the Act, while the expression “reasons to believe” is used in sub-section (1) to Section 132 of the Act. Clause (i) to Section 132 (1) refers to search of any building, place, vessel, vehicle or aircraft where it is suspected that „such‟ books of account, other documents, money, bullion, jewellery or other valuable articles or things are kept. The word „such‟ is with reference to books of account, documents, money, bullion, jewellery or other valuable articles or things etc. referred to in clauses (a), (b) and (c) to Section 132 (1) of the Act. The legislature felt it appropriate to state and clarify that the same quality or material and information was not required to justify when consequential search of a building, place, vessel, vehicle or aircraft under clause (i) of the Section 132 (1) of the Act is undertaken, for search would be in continuation of the authorized search recording the “reasons to believe”. Consequential warrants would be justified in cases where the exact location of the offending articles, books of accounts etc. for which search had been initiated by recording reasons to believe is unknown or had been shifted and re located to avoid detection and seizure. In such circumstances, the “reasons to believe” must meet the requirements of clauses (a), (b) or (c) of Section 132(1) of the Act, albeit the authorized officer directing consequential search must record and state the reason why another place, building, vehicle etc. was being subjected to search. Some latitude and stringent requirements in comparison may not be required when the satisfaction note records the reason for issue of warrants of authorization under clause (i) of Section 132(1) of the Act. However, the satisfaction note in such cases must evince and bespeak this reason. Confluence and connection between the justification and reasons to believe recorded earlier meeting the mandate of clause (a), (b) and (c) of Section 132(1) and the consequential warrant of authorization under clause (i) of Section 132(1) of the Act should be indicated and so stated. Clause (i) of Section 132(1) of the Act is not a substitute and an independent provision to authorize search and seizure operations against third persons not included and subjected to the search after recording “reasons to believe”. Connection and link between “such” assets, articles etc. of the person subjected to search and the place, building etc. to be intruded and subjected to search must be elucidated by setting out “reasons to suspect” why “such” infringing articles could be found in the place, building, vehicle etc. mentioned in the authorization under clause (i) to Section 132(1) of the Act. Appropriate in this regard would be the following observations of the Allahabad High Court in Motilal and Ors. Vs. Preventive Intelligence Officer, Central Excise and Customs, Agra & Ors. (1971) 80 ITR 418 (All), wherein it was observed as under:-
“ It is clear that the articles or things referred to in Subsection (3) of Section 132 are those which the authorised officer was empowered to search for and seize and no other. That is plain from the language of subsection (3), which refers to "such books of account, other document, money, bullion, jewellery...", that is, those articles or things which are the subject of authorisation under Section 132(1)(c). They must be articles or things which may be necessary to search for before they can be seized. That is clear from the nature of the powers conferred upon the authorised officer under Clauses (i) to (v) contained in Section 132(1). Clause (i) empowers him to enter and search a building or place where he has reason to suspect that the article or thing is kept. Obviously, that would not include a case where it is already known that the article or thing is kept in a certain building or place and will ordinarily be yielded up by the person holding custody of such article or thing. That conclusion is reinforced when we refer to the further power conferred by Clause (ii) which enables the authorised officer to break open the lock of any door, box, locker, safe, almirah or other receptacle when the keys thereof are not available. The power to seize, it is clear from Clause (iii), is contemplated in the case of those articles or things found as a result of such search. In my opinion, the power conferred under Section 132(1) is contemplated in relation to those cases where the precise location of the article or thing is not known to the income-tax department and, therefore, a search must be made for it, and where it will not be ordinarily yielded over by the person having possession of it and, therefore, it is necessary to seize it. If it is only such article or thing which is contemplated by Section 132(1), then it is such article or thing alone which can be the subject of an order under Section 132(3), I am unable to accept the contention on behalf of the income-tax department that Section 132(3) will include a case where the location of the article or thing is known and where ordinarily the person holding custody of it will readily deliver it up to the income-tax department. Such article or thing, I think, requires neither search nor seizure.”
23. In Motilal and Ors. (supra), it was held that where an article, money or bullion is already seized, search under clause (i) to Section 132(1) of the Act cannot be authorized. Ratio of this decision was upheld by the Supreme Court in Commissioners of Income Tax Haryana, Himachal Pradesh and Delhi & Ors. Vs. Tarsem Kumar and Anr. (1986) 161 ITR 505 (SC). The aforesaid ratio exposits the object and purpose behind using the expression “reasons to suspect” with reference to “such” books of account, bullion, articles etc. The expression “reasons to suspect” used in clause (i) and subsection (1A) to Section 132 is not to dilute the requirement of “reasons to believe” but to only clarify that on occasions authorities will not know the exact location or the place where the offending books of account, money, bullion etc., may be kept for which consequential warrant of authorization can be issued. We are conscious and aware that “such” documents, articles etc. can be hidden off and kept with third parties and clandestinely concealed at different places and locations to prevent seizure and hamper investigation. It is in this context that a Division Bench of this Court in Strategic Credit Capital Pvt. Ltd. & Ors. Vs. Ratnakar Bank Ltd. & Anr. (2017) 395 ITR 391 (Del) had observed that Section 132 (1) of the Act envisages that a person could be in possession of undisclosed income not only in his or her own bank account but in the bank account of someone else. Thus, the legislature had deliberately used the word “any” to preface safe, locker, place, books of accounts and not “his” “her” or “its”. Therefore, in a given case, the satisfaction note which records reasons to believe could also record the reasons why a third person is being searched not for his own income, books of account etc. but because he has in his custody the books of account, money, bullion etc. belonging to a third person, who is subjected to search.
24. We would, therefore, not re-write the decisions of the Supreme Court and Delhi High Court and hold that “reasons to suspect” and not “reasons to believe” were sufficient to conduct a search of the lockers in question. The need and requirement to record “reasons to believe”, which is the statutory mandate was required and necessary in the present case, in the absence of the satisfaction of the condition and requirements of clause (i) to Section 132(1) of the Act in the satisfaction note.
25. Having recorded the aforesaid findings, we would now deal with supplementary or ancillary arguments raised by the respondents in the counter affidavit. Shah-E-Naaz Judge in the original writ petition had not specifically challenged the search in her locker No.7325-A. Her stand and stance was that she was a second account holder and had not operated the locker in question from 2007. Therefore, Section 153A was not attracted and she should not be subjected to the procedure prescribed under the said section. The respondents do not deny and have not controverted the fact that she had not operated the locker since 2007. The respondents had pleaded and asserted that in the absence of challenge to the warrant of authorization to the search of lockers amounts to admission accepting validity of search in respect of locker No.7325-A. Shah-E-Naaz Judge had in light of the objection amended the writ petition to challenge validity of search of locker No.7325-A. The aforesaid “defect” or lapse was noticed during the course of hearing as recorded in the order dated 15th January, 2018. We would observe that this was a legal flaw and defect in the writ petition, consequences whereof were not understood by the counsel for Shah-E-Naaz Judge till arguments by the Revenue were made. Amendment application, C.M. No. 3504/2018 was filed and allowed by order dated 29th January, 2018 permitting Shah-E-Naaz Judge to challenge the warrant of authorization. This order also records that merits were not required to be gone into at that stage and that all issues were left open. The respondents have filed reply to the amended writ petition.
26. Shah-E-Naaz Judge, we state at the risk of repetition, had not accepted validity of search of locker No.7325-A as is apparent from the pleadings even in the original writ petition. She had challenged proceedings under Section 153A of the Act, which proceedings were initiated in view of the search of the locker. The original writ petition had proceeded on the basis that the respondents had assessed and taxed the jewellery found in the said locker in the hands of Nagina Judge. We have also quoted the statement of Nagina Judge recorded on 27th June, 2014 on the said aspect. Given the background we would not apply the principle of estoppel to dismiss the writ petition filed by Shah-E-Naaz Judge.
27. We also do not agree with the respondents that the amendment application should not have been allowed as trial had commenced. This is not the correct way to interpret the power of the writ court to permit amendment to the writ petition. The amendment made and permitted was to meet the technical objection raised by the respondents as the legal impact was not at first understood.
28. Similarly, the contention of the respondents that jewellery was found in locker No.7325-A and Nagina Judge has taken contradictory stands is of no avail. Validity or invalidity of search is not to be judged and decided on the basis whether or not anything was found in the locker including locker Nos. 7712-D and 7637-A, which were empty. Validity of search has to be decided and adjudicated on the basis of satisfaction note; whether satisfaction note satisfies the statutory requirements and the respondents have acted in accordance with law. In fact, there is contradiction in the plea raised by the respondents for nothing was found in locker Nos.7712-D and 7637-A. In Seth Brothers (supra), the Supreme Court had distinguished between bona fide exercise of power in furtherance of statutory duty, which it was observed would not vitiate exercise of power when the authority that had granted the sanction had the requisite belief and reason to authorize the officer to enter and search the premises, for the Court does not substitute its opinion with that of the order authorizing search and decide whether they should have been issued. Similarly, an irregularity in exercise of search and seizure would not affect the authorization or search. It could in a given case vitiate the action taken when the officer executing the search and seizure has acted malafidely. Clearly, therefore, legal validity of issue of warrant of authorization is distinguished from the manner and method in which it has been executed.
29. The respondents have also placed reliance on Section 292CC of the Act. The said section is of no relevance to the present case. It was inserted by Finance Act, 2012 with retrospective effect from 1st April, 1996 in view of some judgments holding that authorization for search must be separately issued in the name of each person and when warrant of authorization is issued in the name of more than one person, the assessment is to be made against all of them as Association of Persons and not as separate individuals. We fail to understand relevance of the said provision in the factual matrix of the present case.
30. In view of the aforesaid discussion, the supplementary or secondary contentions raised by the respondents have to be rejected.
31. Authority and power to conduct search and seizure operations is strident and caustic power authorized by law to be taken recourse to when the conditions mentioned under different clauses of Section 132 (1) of the Act are satisfied. Constitutional validity of the said provision has been upheld due to the safeguards provided by the section itself, to prevent and check cases of abuse and misuse. Investigation and detection of economic offences is onerous and a difficult task, for often evidence and material is concealed and subterfuge is adopted to prevent and deflect detection. This, however, does not give liberty to the authorities to disregard and authorize search and seizure operations without formation of requisite belief. Power and authority given to the authorities must be exercised in terms of the statute and not contrary to and in violation of jurisdictional requirements. Power, as given, also imposes an obligation on the authorities to satisfy jurisdictional pre-conditions for the exercise of power to be held to be valid and not bad and contrary to law.
32. In view of the aforesaid discussion, we find merit in the present writ petitions and hold that the warrants of authorization for search and seizure operations in respect of the three lockers in the case of three petitioners are vitiated and illegal. Warrants of authorization against the petitioners are quashed and set aside. Consequently, proceedings under Section 153A of the Act are also set aside and quashed. We, however, clarify that we have not commented on evidence, if any, collected during the course of search and whether the said evidence or material can be used in any proceedings initiated by the income-tax authorities in accordance with law. Writ petitions are allowed in the aforesaid terms. In the facts of the present case, there would be no order as to costs.
Cases Referred to
1. Pooran Mal Vs. the Director of Inspection (Investigation), New Delhi and Ors. (1974) 1 SCC 345
2. Director General of Income Tax (Investigation), Pune and Ors. Vs. Spacewood Furnishers Private Limited and Ors. (2015) 12 SCC 179
3. ITO Special Investigation Circle-B, Meerut Vs. Seth Brothers & Ors.etc (1969) 2 SCC 324
4. Partap Singh Vs. Director of Enforcement Foreign Exchange Regulation Act & Ors. (1985) 3 SCC 72
5. H.L. Sibal Vs. CIT (1975) 101 ITR 112 (P&H)
6. Dr. Nand Lal Tahiliani Vs. CIT & Ors. (1988) 170 ITR 592 (All)
7. L.R. Gupta & Ors. Vs. UOI & Ors. (1992) 194 ITR 32 (Del)
8. Ajit Jain Vs. UOI (2000) 242 ITR 302 (Del)
9. Madhu Gupta Vs. DIT (Inv.) & Ors. (2013) 350 ITR 598 (Del.)
10. Lajpat Rai v. Commissioner of Income Tax (1995) 215 ITR 608 (All)
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