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Petitioner: BALWANT SINGH AND OTHERS VS Respondent: R. D. SHAH, DIRECTOR OF INSPECTION, JUDGMENT
Court Name: Delhi High Court Judge(s): S. K. Kapur, S. N. Andley Title:BALWANT SINGH AND OTHERS vs R. D. SHAH, DIRECTOR OF INSPECTION,
JUDGMENT
Reported As: 1972 PTD 8 Result: Petition dismissed Judgment JUDGMENT KUPUR, J. ---It will not be an unfaithful summary of the history to say that for ages searches and seizure of documents and objects alleged to be incriminating have been responsible for many a battle at the bar. The safeguards of liberty of the subjects in this behalf have been forged out of conflicts between over-zealous prosecutors on the on hand and not very nice people on the other. In preserving this liberty of the subjects, the Courts always bear in mind that tinder our Constitution the concept of liberty is wider and the prisoner's dream of freedom froze custody alone is not liberty. The present writ petition is directed against searches conducted on 10th August 1966, at the residence of the petitioners at No. 35, Rajpur Road, Delhi, and other places occupied by the petitioners in connection with their business by a group of officers headed by Shri Rajendra Mohan, Income-tax Officer, respondent No. 2. The search was held in pursuance of the various authorisations issued by the Director of Inspection (Investigation) under section 132 of the Income- tax Act, 1961, and rule 112(1) of the Income-tax Rules, 1962. It is sufficient to reproduce one of the authorisation forms signed by the Director of Inspection (Investigation) as all other forms are exactly in the same language: "(See rule 112) Warrant of authorisation under section 132 of the Income tax Act, 1961, and rule 112(1) of the Income- tax Rules, 1962. The Income-tax Officers,
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S/Shri R. P. Gautam, P. K. Sharan, Rajendra Mohan, Govind Ram, S. N. Tandon. P. L. Madan, P. Ranganathan, R. R. Gupta, Miss S. Ghosh and Miss M. Sehgal, I. T. Os., Delhi. Whereas information has been laid before me and on the consideration thereof, I have reason to believe that : If a summons under subsection (1) of section 37 of the Indian Income-tax Act, 1922, or under subsection (1) of section 131 of the Income-tax Act, 1961, or a notice under subsection (4) of section 22 of the Indian Income-tax Act, 1922, or under subsection (1) of section 142 of the Income-tax Asia, 1961, is issued to S. Balwant Singh to produce, or cause to be produced, boos 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; S. Balwant Singh is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been disclosed for the purposes of the Indian Income-tax Act, 1922, or the Income-tax Act, 1961; And whereas I have reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing have been kept and are to be found at the premises of S. Balwant Singh at Bawa House, No. 35, Rajpur Road, Delhi, including outhouses, garages and other appurtenances thereto ; This is to authorise and require you as overleaf (name of the Inspecting Assistant Commissioner of Income-tax or the income-tax Officer)- (a) to enter and search the said premises; (b) to place identification marks ore such books of account and documents as may be found in the course of the search and as you may consider relevant to or useful for the proceed--ings aforesaid and to make, a list thereof together with particulars of the identification marks ; (c) 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; (d) 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; (e) to make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing; (f) to convey such books of account, documents, money, bullion, jewellery or other valuable article or thing to the office of the Inspecting Assistant Commissioner of Income-tax or any other authority not below the rank of the Income-tax Officer employed in the execution of the Income-tax Act, 1961; and (g) to exercise all other powers and perform all other functions under section 132 of the Income-tax Act, 1961, and the riles 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. (Sd.) R. D. Shah, 22-7-66. SealDirector of Inspection (Investigation).' In pursuance of the said authorisation a number of Income-- tax Officers went to the various premises set out in the authorisa--tion forms, searched the said premises and seized a large number of documents. There has been some controversy at the bar as to how many people were comprised in the raiding party and that controversy will be dealt with later. There has however, been no dispute about the documents seized.
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Petitioners Nos. 1 to 5 are brothers and petitioner No. 6 is their mother. All the petitioners live at No. 35, Rajput Road, Delhi, Petitioners Nos. 1 to 5 have another brother who is not a petitioner. It is alleged that petitioners Nos. 1 to 4 and 6 carry on business while the fifth petitioner is engaged in cultivating land. There was no authorisation for search and seizure of any documents belonging to the fifth petitioner. It is also not in dispute that assessments of the petitioners were completed in some cases up to the assessm ent year 1962-63, and in some cases up to the assessment year 1963-64, The assessm ents were completed at Calcutta as the petitioners gave a Calcutta address to the revenue and the respondents assert that it was a "ghost address" as fn fact the petitioners neither resided nor had any office in Calcutta and that was done to facilitate the petitioners escaping assessm ent or detection of various activities not disclosed to the revenue. The respondents have to their affidavit dated 24th October 1966, sworn by Shri R. D. Shah, Director of Inspection (Investigation), annexed various charts showing, inter alia, as to which assets and income had been disclosed and which concealed. It has also been asserted by the respondents that the petitioners all along maintained that they had no bank account while according to the information received by the respondents, the petitioners had a large number of accounts with banks. The petitioners have by their writ petition raised several points challenging the search and seizure and even the constitutionality of section 132 of the Income-tax Act. They have also challenged the right of the respondents to retain the books and documents illegally seized or to use any information derived therefrom. I will deal with the various points raised one by one. Mr. Veda Vyasa, the learned counsel for the petitioners, first contended that the search and seizure were bad in law as the condition precedent to the applicability of section 132, namely, the existence of "reason to believe" in the mind of the Director of Inspection was missing. Since admittedly section 132, as amended by Act 1 of 1965, applies to this case, I propose to confine myself to that section, except to the extent it may be necessary to refer to the legislative history in aid of its inter-- pretation. The said section reads :-- "(i) Where the Director of Inspection or the Commissioner, in consequence of information in his possession, has reason to believe that--- (a) any person to whom a summons under subsection (1) of section 37 of the Indian Income-tax Act, 1922 (XI of 1922), or under subsection (1) of section 131 of this Act, or a notice under subsection (4) of section 22 of the Indian Income-tax Act, 1922 (XI of 1922), or under subsection (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account, or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (XI of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been disclosed for the purpose of the Indian Income-tax Act, 1922 (XI of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), he may authorise any Deputy Director of Inspection, Inspect--ing Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer (hereinafter referred to as the authorised officer) to--- (i) enter and search any building or place where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept;
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(ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search; (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing. (2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in subsection (1) and it shall be the duty of every such officer to comply with such requisition. (3) The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, serve an order on the owner or the person who is in immediate posses--sion or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this subsection. (4) The authorized officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examina--tion may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (XI of 1922), or under this Act. (5) Where any money, bullion, jewellery or other valuable article or thing (hereinafter in this section and section 132-A referred to as the assets) is seized under subsection (1), the Income-tax Officer, after affording a reasonable opportunity to the person concerned for being heard and making such enquiry as may be prescribed, shall, within ninety days of the seizure, make an officer, with the previous approval of the Commissioner,-- (i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him ; (ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian Income-tax Act, 1922 (XI of 1922), or this Act; (iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified is clause (a) of subsection (1) of section 230-A in respect of which such person is in default or is deemed to be in default, and retain in big custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in clauses (ii) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized: Provided that if, after taking into account the materials available with him, the Income-tax Officer is of the view that it is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized: Provided further that where a person has paid or made Satisfactory arrangements for payment of all the amounts referred to in clauses (ii) and (iii) or any part thereof, the income-tax Officer may, with the previous approval of the Commissioner, release the assets or such part thereof as he may deem fit in the circumstances of the case. (6) The assets retained under subsection (5) may be dealt with in accordance with the provisions of section 132-A.
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(7) If the Income-tax Officer is satisfied that the seized assets or any part thereof were held by such person for or on behalf of any other person, the Income-tax Officer may proceed under subsection (5) against such other person and all the provisions of this section shall apply accordingly. (8) The books of account or other documents seized under subsection (1) shall not be retained by the authorised officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same are recorded by him in writing and the approval of the Commis--sioner for such retention is obtained: Provided that the Commissioner shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income- tax Act, 1922 (XI of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed. (9) The person from whose custody any books of account or other documents are seized under subsection (1) may make copies thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in this behalf, at such place and tithe as the authorised officer may appoint in this behalf. (10) If a person legally entitled to the books of account or other documents seized under subsection (1) objects for any reason to the approval given by the Commissioner under subsection (8), he may make an application to the Board stating: therein the reasons for such objection and requesting for Or return of the books of account or other documents. (11) If any person objects for any reason to an order made under subsection (5), he may, within thirty days of the date of such order, make an application to such authority, as may be notified in this behalf by the Central Government in the official Gazette (hereinafter in this section referred to as the notified authority), stating therein the reasons for such objection and requesting for appropriate relief in the matter. (12) On receipt of the application under subsection (10) the Board, or on receipt of the application under subsection (11) the notified authority, may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit. (13) The provisions of the Code of Criminal Procedure, 1898 (V of 1828), relating to searches and seizure shall apply, so far as may be, to searches and seizure under subsection (1). (14) The Board may make rules in relation to any search or seizure under this section in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer- (i) for obtaining ingress into such building or place to be searched where free ingress thereto is not available ; (ii) for ensuring safe custody of any books of account or other documents or assets seized. Explanation 1.-In computing the period of ninety days for the purposes of subsection (5), any period during which any proceeding under this section is stayed by an order or injunction of any Court shall be excluded. Explanation 2.-In this section, the word "proceeding" means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922 (XI of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any yeah:" Section 131, which had section 37(1) as its predecessor in the Indian Income-tax Act, 1922, gives power to the Income-tax Officer, Appellate Assistant Commissioner and Commissioner of Income- tax, regarding discovery and production of evidence, etc. Section 132-A prescribes the mode of application of the assets retained by the revenue under section 132(5). Section 135 provides that the Director of Inspection, the Commissioner and the Inspecting Assistant Commissioner shall be
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competent to make any enquiry under this Act, and for this purpose shall have all the powers that an Income-tax Officer has under this Act in relation to the making of enquiries. Section 37(2) of the Indian Income-tax Act, 1922, conferred powers on the Income-tax Officers specially authorised by the Commissioner to search any building or place and seize any books of account or documents. Section 37(2) was as under: "(2) Subject to any rules made in this behalf, any Income-tax Officer specially authorised by the Commissioner in this behalf may,-- (i) enter and search any building. Or play where he has reason to believe that any books of account or other documents which in his opinion will be useful for, or relevant to, any proceeding under this Act may be found and examine them, if found; (ii) seize any such books of account or other documents or place marks of identification thereon or make extracts or copies therefrom. (iii) make a note or an inventory of any other article or thing found in the course of any search under this section which in his opinion will be useful for, or relevant to, any proceeding under this Act; and the provisions of the Code of Criminal Procedure, 1898, relating to searches shall apply so far as may be, to searches under this section." Mr. Veda Vyasa, the learned counsel for the petitioners, presented two alternative arguments regarding the scope of the expression "has reason to believe" in section 132. He said:- (1) In view of the fact that the provisions of the Criminal Procedure Code relating to searches and seizures apply "so far as may be" to searches and seizures under subsection (1) of section 132, even the sufficiency of the grounds leading to the reason to believe are justiciable ; and (2) in any case, even if the scrutiny by Courts as to the existence of reason to believe is limited in any manner, the Courts can still strike down search and seizure carried out in pursuance of an authorisation if the Court finds that --- (a) the reason to believe was not bona fide ; (b) there are no grounds justifying the existence of the reason to believe ; (c) the grounds given in support of such existence of the reason to be believe are extraneous to the, cause; and (d) at least some of such grounds are irrelevant or extraneous to the matter in issue. The arguments on the justiciability of the sufficiency of grounds mere put by Mr. Veda Vyasa thus: Under subsection (13) of section 132 of the Income-tax Act, 7961, the provisions of the Code of Criminal Procedure relating to searches and seizure apply, so far as .May be, to searches arid seizure under section 132(1). Subsection (2) of section 4 of the Criminal Procedure Code provides that "all words and expressions used herein and defined in the Indian Penal Code, and not hereinbefore defined, shall be deemed to have the meanings respectively attributed to them by that Code." The expression "reason to believe" has been defined in section 26 of the Indian Penal Code, which section reads. "A person is said to have reason to believe a thing if 6e has sufficient cause to believe that thing but not otherwise." Whether or not a person has reason to believe is fully justiciable and even the sufficiency of grounds can be gone into by the Court where such question arises under the Indian Penal Code, and consequently the same meaning should be attributed to the said ex expression in section 132(1). This argument of Mr. Veda Vyasa suffers from several fallacies: (1) "Reason to believe" in section 26 of the Indian Penal Code and the various provisions thereof, such as sections 202, 411, 412, 413 and 414, has been used in the Penal Code in a different context; Oat is to say, in the context of mens rea for the purpose of finding out whether or not a person has committed an offence, while in section 132 of tire Income-tax Act, 1961, power has been given to an authority to authorise the search and seizure subject to certain conditions if he has reason to believe that it is necessary so to do under section 132.
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(2) Under section 26 of the Indian Penal Code a person is said to have reason to believe a thing if "he" has sufficient cause to believe that tiring. In this context, therefore, the Courts have to see whether tire person concerned had sufficient cause to believe. Take a case where grounds exist on which two views may reasonably be possible. The Court will not hold a person guilty if it comes to the conclusion that, though the grounds may provide to the offender sufficient cause to believe, the Court holds a different opinion. This section, therefore, is confined to finding out whether an alleged offender could have sufficient cause to believe and, therefore, could be said to have "reason to believe". Such a provision cannot obviously be equated with a provision like section 132(1) ; and (3) The search and seizure provisions of the Criminal Pro--cedure Code apply only "so far as may be", which means that those provisions should be applied only consistently with the scheme and the purpose of section 132 and the said Act. When so applied, the power to issue search warrants has been, subject to fulfilment of certain conditions, made dependent on the reason to believe of the specified authorities. Mr. Veda Vyasa referred to K. Hoshide v. Emperor (AIR 1940 Cal, 97) and said that even the adequacy of the grounds on which Courts issue search warrants under section 96 of the Criminal Procedure Code is justiciable. I prefer not to express any opinion on the question whether the adequacy of grounds on which the Court issues search warrants under the Code of Criminal Procedure is open to scrutiny by Courts particularly in such collateral proceedings and I would rather decide this question assuming that it is so. For the purposes of this case, it is sufficient to say that the language of section 132 does not permit the interpretation suggested by Mr. Veda Vyasa. I cannot also lose sight of the fact that we are not sitting in appeal over the decision of the Director of Inspection regarding the existence of the reason to believe, for none has been provided, and when exercising writ jurisdiction, the Courts cannot, in my opinion, test the adequacy of grounds as a Court of appeal. The existence of "reason to believe" in section 132 is subject only to a limited scrutiny and the Courts cannot substitute their own opinion for that of the Director of Inspection. Of course, the Director of Inspection must not lightly or arbitrarily invade the privacy of a subject. Before be acts, he must be reasonably satisfied that it is necessary to do so but the decision must still remain his and not that of the Courts. If the grounds on which reason to believe is founded are non-existent or are irrelevant or are such on which no reasonable person can come to that belief, the exercise of power would be bad; but short of that, the Courts cannot interfere with the reason to believe bona fide arrived at by the Director of Inspection. It is also open to the Courts to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief. In that sense the expression "reason to believe" is both subjective and objective but the area of objectivity is limited. In…
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