Shilpa Chowdhary Vs Principal Director of Income Tax (Investigation) (Delhi High Court);
It is it is revealed that Mr. Vikas Chowdhary denied having any bank locker. Shilpa Chowdhary, while admitting the existence of the locker, did not give any information relating to its contents. Therefore, there was indeed material with the concerned authority to form reasons to believe that the locker contained any articles/cash/jewellery/other materials which represented the undisclosed income of the Petitioner. The satisfaction arrived at by the authority meets the conditions stipulated in Clauses (b) / (c) of Section 132(1) of the Act. The factual background noted above demonstrates that the impugned WoA against the Petitioners has been issued not merely on the ground of recovery of locker key, as Mr. Srivastava has sought to project. The formation of belief by the authorities is also based on the statements of the Petitioners. The officers made an attempt to ascertain and verify the facts, post the discovery of the locker key. The satisfaction note also records that Petitioners were asked to furnish details of the contents of the locker, but did not provide satisfactory explanation. In these circumstances, we believe that the Revenue was well within its right to proceed to search the Petitioner’s locker under section 132(1) of the Act.
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
1. The petitioners, wife and husband, by way of separate writ petitions under Article 226 and 227 of the Constitution, impugn the validity and legality of the search action initiated by the Respondents. They seek, inter alia, (i) quashing of the impugned Warrant of Authorization [hereinafter referred to as “WoA”]; (ii) declaration that the search and seizure, conducted on them is illegal, void and without authority of law, and the exercise is without jurisdiction; (iii) direction to the Respondents to release the entire material and valuables seized under the search action; and (iv) quashing of the notices issued under Sections 153A/143(3) of the Income Tax Act, 1961 [hereinafter referred to as the “Act”]. Considering that in both the petitions the factual narrative, nature of reliefs sought and the grounds of challenge are nearly identical, the same are being decided by way of this common judgment.
Facts in W.P.(C) 5213/2020
2. The facts of the case, shorn off unnecessary detail, are as follows:-
2.1. On 05.02.2019, WoA were issued under Section 132(1) of the Act in the case of the ‘Kochar Group’, comprising of Sh. Avtar Singh Kochar, Sh. Gyandeep Singh Kochar, Sh. Hari Singh Kochar and M/s HL Impex (P.) Ltd. [hereinafter collectively referred to as “Primary Persons”]. Of the above WoAs, one in relation to Sh. Avtar Singh Kochar pertained to the residence-cum-office of the Petitioner – Shri Vikas Chowdhary at E-12/3, Vasant Vihar, New Delhi [hereinafter referred to as “Petitioner’s Premises”].
2.2. On 06.02.2019, a search and seizure operation was carried out at Petitioner’s Premises pursuant to the above WoA dated 05.02.2019.
The said search commenced at 12:30 PM and was temporarily concluded after a period of four days i.e. on 09.02.2019, at 09:00 PM, as revealed by one panchnama dated 09.02.2019. The said panchnama, prepared under the said WoA issued against the Primary Persons, inventorise the items found at the Petitioner’s Premises, which comprised of: (a) Some loose papers; (b) One hard disk (a working copy of which was seized); (c) One Digital Video Recorder (“DVR”); (d) cash (which was released at the time of search), (e) one Godrej-branded key to Locker No. 150F, Bank of India, Punjabi Bagh, New Delhi, (f) three keys belonging to cylindrical containers, and (g) two keys belonging to a wooden cupboard in the bedroom of the Petitioner’s daughter. Statements of both the Petitioners were also recorded on oath on 06.02.2019.
2.3. On 12.02.2019, Respondent No.2 issued the impugned WoA u/s 132(1) of the Act against the Petitioner and his wife (Mrs. Shilpa Chowdhary) to search Locker No. 150F–maintained with the Bank of India, Punjabi Bagh, New Delhi– key to which was found and seized on 09.02.2019.
2.4. On 19.02.2019, Petitioner requested Respondent No.3 to provide a copy of statements recorded during the search. He also represented that he was not connected to any of the Primary Persons in any manner, and sought information that had led the authorities to believe or suspect that something connected or relevant to the Primary Persons was likely to be found at the Petitioner’s Premises.
2.5. Then on 03.04.2019 at 5:30 PM, pursuant to the impugned WoA dated 12.02.2019, search was conducted at Locker No. 150F, Bank of India, Punjabi Bagh, New Delhi. Jewellery valued at Rs. 1,00,67,181/- was found and seized. It is reiterated that the above search is not to be confused with the search carried out on Petitioner’s Premises in respect of a WoA dated 05.02.2019 issued against the Primary Persons referred to hereinabove.
2.6. On 04.04.2019, search at Petitioner’s Premises resumed under the WoA dated 05.02.2019 issued against the Primary Persons.
2.7. On 05.04.2019, a Final Panchnama was drawn. Statement of the Petitioner was also recorded.
2.8. Ultimately on 20.04.2019, notice for assessment proceedings under Section 153A/143(3) of the Act was issued to the Petitioner. Aggrieved with the search and seizure proceedings, Petitioner has approached this court.
Facts in W.P.(C) 5207/2020
3. Shilpa Chowdhary, the other Petitioner, is similarly aggrieved with the WoA u/s. 132(1) of the Act issued against her and her husband in respect of the Locker referred to above. She also faces the assessment proceedings pursuant to notice issued u/S. 153A/143(3) of the Act. The facts are identical to what has been stated above in W.P.(C) 5213/2020, except that the search and seizure operation carried out on 06.02.2019 at the Petitioner’s Premises was in pursuance to the WoA addressed as “residence-cum-office of Sh. Vikas Chowdhary bearing No.E-12/3, Vasant Vihar, New Delhi” dated 05.02.2019 issued under Section 132(1) of the Act in the case of Primary Persons.
Contentions of the Petitioners
4. Mr. Srivastava learned counsel for the Petitioners raised several contentions to assail the WoA. The same are summarized as follows:-
4.1. The search and seizure action is entirely arbitrary and mala fide. The Competent Authority did not apply its mind while issuing the impugned WoA against the Petitioners or in conducting the search. The sequence of events and the actions of the search party reveal that Respondents conducted a general search on the Petitioner without any evidence that the Petitioners were in possession of any documents or valuable articles representing undisclosed income of the Primary Persons. The action is thus abuse of power of search conferred by the Act and is completely illegal.
4.2. Search carried out under WoA dated 05.02.2019 is beyond the scope of statute. The Petitioners were neither related to the Primary Persons, nor was any material available with the Competent Authorities to even raise a suspicion on any books of account, documents or valuables of the Primary Persons were kept at the Petitioner’s Premises. Regardless, the authorisation was only to the extent of search and seizure of material relevant to the Primary Persons, at Petitioner’s Premises. Therefore, the authorised officers conducting the search should have restricted their search to the extent of material or valuables pertained to the Primary Persons. However, from the Panchnama, it is amply clear, the officers went beyond their mandate, by conducting a full-fledged search against the Petitioners and their family members, as apparent from the seizure/ restraint upon Petitioner’s jewellery. Thus, the search and seizure action of the search party qua the Petitioner’s belongings was void ab initio, conducted without any ground, based purely on surmises and assumption of Respondent No.1. The law does not allow or give unbridled powers to encroach upon the privacy of a person.
4.3. Impugned WoA seemingly issued under Section 132(1A) is illegal. As the original WoA dated 05.02.2019 was issued in the case of the Primary Persons, it can undoubtedly be inferred from the sequence of events, that the search action at the Petitioner’s Premises between 06.02.2009 to 09.02.2009 was conducted under Section 132(1A) of the Act, on the suspicion that it housed incriminating evidence against the Primary Persons.
4.4. Arguendo, if the impugned WoA is issued Section 132(1), it is nonetheless illegal for the following reasons:
(i) If the stand of the Revenue is that the action in the case of the Petitioners was taken under Section 132(1) and not under Section 132(1A), then the obvious inference would be that the said action was illegal and unauthorised for the reason that none of the conditions stipulated in Clauses (a), (b) or (c) were either examined or found to have been satisfied in the case of the Petitioners. The conditions provided under these clauses of Section 132(1) were examined in respect of the Primary Persons and not qua the Petitioner.
(ii) An authorization u/s 132(1) must fulfil a higher threshold of the test of “reason to believe”, and such reasoning has to be based on, and “in consequence of” information, which is already “in possession” of the competent authority.
(iii) The existence of locker, its key or its contents was not known prior to search conducted on 06.02.2019, and came to be recorded only in the Panchnama dated 09.02.2019 drawn during search. Thus, the competent authority had no material in its possession to harbour any reasons to believe that the locker contains any jewellery or undisclosed income belonging to the Petitioner.
(iv) During the entire search action conducted on 06.02.2019, the Petitioners were not questioned about the locker’s key, contents, or the source of acquisition of the contents, until the issuance of the impugned WoA dated 12.02.2019.
(v) The process of questioning or recording statements of persons covered u/s 132(1A) must be restricted to the extent the same pertains to the material found/seized in relation to the Primary Persons.
(vi) No adverse cognizance can be derived merely on the basis of so-called suspicion, surmises and conjectures. The Courts in several decisions have held that the formation of opinion as to belief must be in “good faith and not mere pretence and subterfuge on the part of the authorities.” Respondent No. 2 could not have formed a ‘reason to believe’ that the conditions set forth in subsections (a), (b) or (c) of Section 132(1) of the Act would be fulfilled in the case of the Petitioner. No evidence linking the Petitioner’s premises to the activities of the Primary Persons or evidence against Petitioners, or information pertaining to the above-mentioned locker was retrieved during the search at Petitioner’s premises. In support of his submissions. Mr. Srivastava has also heavily relied upon the decision of this Court in the case of Shah-E-Naaz Judge v. Additional Director of Income Tax, (INV)–Unit VI & Anr., (2019) 306 CTR (Del) 42, specifically paragraphs 15, 17, 18, 19, 22, 23 and 24. The same are not being reproduced herein for the sake of prolixity.
Contentions of the Revenue
5. Per contra, Mr. Raghvendra Singh, learned Senior Standing Counsel for the Revenue, defended the action of the Respondents and submitted that the entire foundation of the writ petitions is misconceived for the following reasons:
5.1. The petition is barred by delay and laches. Had the Petitioners felt aggrieved, the search warrant should have been challenged around the time of search activity, or around the time of receipt of the notice for assessment proceedings under Section 153A/143(3) of the Act. In the said assessment notice, the Petitioner was directed to file his return of income within the statutory time limit of 15 days. Petitioners chose not to file the same, then stayed silent for the next four months, and have now approached the Court after more than eighteen months from the date of the alleged cause of action. In this regard, reliance has been placed upon the judgment of this court in the case of SK Industries v. Director General of Income Tax (Inv), (2007) 290 ITR 359 (Del), wherein, the challenge to a WoA raised after sixteen months was held as time barred. It was thus pleaded by Mr. Singh that the Court should decline to exercise its discretionary jurisdiction under Article 226 of the Constitution of India on the ground of delay and laches.
5.2. The entire premise of the petitions is misconceived. The Petitioners have wrongly perceived that the search and seizure action against them has originated under Section 132(1A) of the Act, whereas search was conducted under Section 132(1) of the Act. This understanding forms the basis of the misguided grounds of challenge raised in the Petition. Elaborating on this aspect, Mr. Singh explained that the scope of Section 132(1) and 132(1A) is entirely different. Further, he elucidated that in the present facts, two separate search proceedings took place. He submitted that amongst the WoA dated 05.02.2019 under Section 132(1) issued in the case of the Kochar Group, one WoA pertained to the Petitioner’s Premises, because the Issuing Authority had reason to believe that undisclosed income/books of accounts/documents of the Kochar Group were to be found there. The said reason to believe, as noted in the Satisfaction Note alongwith the other relevant material, have been placed by Respondents before the Court in a sealed cover. Thus, the initial search and seizure action, initiated at the Petitioner’s Premises on 06.02.2019, was in the case of the Kochar Group. During said search, material and information was discovered which constituted “reason to believe” for WoA in the case of Vikas Chowdhary and Shilpa Chowdhary. Accordingly, a fresh WoA dated 12.02.2019 (impugned) was issued in the case of both the Petitioners under Section 132(1) of the Act. It is the case of the Respondent that until 12.02.2019, the search was being conducted on the basis of WoA dated 05.02.2019 issued against Primary Persons. Thereafter, search was conducted on the basis of impugned WoA dated 12.02.2019 issued against the Petitioners. The Respondent has placed the “reason to believe” in respect of the said WoA in a sealed cover before this Court. No WoA was issued under section 132(1A), instead search was carried out under Section 132(1) of the Act.
5.3. It is well-settled law that this Court would not go into the sufficiency or adequacy of the material that was relied upon by the authorities for forming the reason to believe to initiate the search action. The Respondents have urged grounds that are founded on the subjective satisfaction of the Competent Authority, and therefore, this Court should decline to interfere in the present petition.
Findings and Analysis:
WHETHER THE PETITION IS BARRED BY DELAY AND LACHES?
7. The impugned search action was conducted on 03.04.2019 and the present petitions were filed on 11.08.2020. The Petitioners cite the present pandemic situation and rely upon the notices under Section 153A/143(3) of the Income-tax. Act, 1961 issued on 20.04.2020 to justify the delay. The undisputed fact is that the present petitions are predicated on the search action which served as a cause of action for the Petitioners to file the present petition. There is no convincing explanation for the delay, nevertheless, since we have extensively heard the arguments on the merits of the case, we are not inclined accept the preliminary objection raised by the Revenue and would instead like to decide the petitions on merits.
WHETHER THE IMPUGNED WARRANT IS ISSUED UNDER SECTION 132(1) OR 132(1A) OF THE ACT?
7. Before going further, it will be fruitful to first take note of the relevant statutory provision, which reads as under:
132. (1) Where the Director of Inspection or the Commissioner or any such Deputy Director of Inspection or Inspecting Assistant Commissioner as 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 Income-tax 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 Income-tax Act, 1922, or under sub-Section (1) of Section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account, or other documents as required by such summons or notice, or
(b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (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 Income Tax Act, 1922 (11 of 1922), or this Act (hereinafter in this Section referred to as the undisclosed income or property), then,—
(A) the Director of Inspection or the Commissioner, as the case may be, may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer, or
(B) such Deputy Director of Inspection or Inspecting Assistant Commissioner, as the case may be, may authorise any Assistant Director of Inspection or Income-tax Officer,
(the officer so authorised in all cases being hereinafter 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) 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;
(iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer 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;
(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:
Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any Commissioner, but such Commissioner has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in Section 121, it shall be competent for him to exercise the powers under this sub-Section in all cases where he has reason to believe that any delay in getting the authorisation from the Commissioner having jurisdiction over such person may be prejudicial to the interests of the revenue.
(1A) Where any Commissioner, 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 of Inspection or any other Commissioner or any such Deputy Director of Inspection or Inspecting Assistant Commissioner 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 authorisation under subsection (1), such Commissioner may, notwithstanding anything contained in Section 121, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.
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