Many cases are coming to the courts where the legitimacy of the search and seizure is challenged. It is being continuously held in cases coming to the courts that before a search, conditions mentioned in section 132 of the Income Tax Act, 1961(for short ‘the Act’) should be fulfilled.
Recently, in the appeal before Hon’ble Delhi High Court, Ameeta Mehra vs. ADIT (INV) [W.P.(C) 1471/2013, decided on 16.05.2017], on 24.02.2012, a search and seizure operation under section 132 of the Act was undertaken on the residential and business premises of Mr. Suresh Nanda, his family members and business associates. Mr. Suresh Nanda was the maternal uncle of the Petitioner (brother of Petitioner’s deceased mother). The Petitioner claimed that except for the said relation, the Petitioner had no other commercial/business or financial relation with Mr. Suresh Nanda or his family members and/or his business associates (referred to hereafter collectively as the ‘Nanda group’).
During the search on Mr. Suresh Nanda, keys of locker No.4979 with Delhi Safe Deposit Co. Limited, New Delhi were found. This locker was initially in the joint names of late Mrs. Sumitra Nanda and late Mr. S.M. Nanda, parents of Mr. Suresh Nanda. Mrs. Sumitra Nanda, the Petitioner’s maternal grandmother, added the Petitioner’s name in 2003 to help her in operating the said locker No. 4979. The Petitioner stated that the key of the said locker always used to be with Mrs. Sumitra Nanda. After the demise of Mrs. Sumitra Nanda in February 2011, the key remained with Mr. Suresh Nanda. The Petitioner claimed to have never used the locker for her benefit.
On finding the key of locker No. 4979 from the premises of Mr. Suresh Nanda, Respondent No.1 issued a warrant of search authorization dated 27.02.2012 in the name of the Petitioner to search the said locker. On 29.02.2012, an order under section 132 (3) of the Act restraining the operation of locker No.4979 with Delhi Safe Deposit Co. Limited, New Delhi was passed. This order was revoked on 11.04.2012 to effect the search. On opening the said locker, nothing was found.
A notice under section 153A of the Act was issued requiring the Petitioner to furnish returns of total income and undisclosed income for AYs 2006-07 to 2011-12 in the prescribed format.
The specific stand taken by Revenue was that the warrant of authorization was drawn in the name of the Petitioner, based on information in possession of the authorizing officer in respect of the Petitioner. It was stated that “the reasons to believe were framed with respect to the Petitioner as she was the only owner of the locker.” Further it was stated that since the locker key during the search was found on the premises of Mr. Suresh Nanda, the warrant of authorization was issued to the Petitioner “after the satisfaction of the authorizing officer that there existed sufficient reasons to conduct search on the abovementioned locker of the Petitioner.”
Two questions arose for consideration in light of the facts of the case:
(a) Was the search conducted on the Locker No. 4979 by issuing an authorization dated 27.02.2012 under section 132 of the Act valid?Online GST Certification Course by TaxGuru & MSME- Click here to Join
(b) Was there any justification for issuance of the impugned notice dated 22.10.2012 to the Petitioner under section 153 A of the Act for the AYs 2006-2007 to 2011-2012?
The learned judges of the Delhi High Court observed that in one sense both the above questions were interrelated. This was because once a search is conducted under Section 132 of the Act the person in whose name the search authorisation is issued should be served with a notice under section 153A of the Act. This is a well settled legal position as explained in a large number of cases including CIT vs. Kabul Chawla (2016) 380 ITR 573(Del). Therefore, if question (a) is answered in the negative, then question (b) has to be also answered in then negative. On the other hand, if the answer to question (a) is in the affirmative, the answer to question (b) would be likewise.
The Satisfaction Note preceding the issuance of the search authorisation has been summarized earlier. The law in relation to searches under section 132 of the Act has been explained in a large number of decisions of the Supreme Court and the High Courts. The jurisdictional facts that have to be established before a search under section 132 (1) of the Act can be authorised are that (i) the authority issuing the authorisation is in possession of some credible information, other than surmises and conjectures (ii) that the authority has reason to believe that the conditions stipulated in clauses (a), (b) and (c) of section 132 (1) qua the person searched exist; and (iii) the said information has nexus to such belief.
The Delhi High Court took into consideration the following cases regarding the issue:
In the light of the above mentioned cases, the learned Judges observed that there was nothing in the Satisfaction Note of the case in hand 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 was 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.
The learned Judges of the Delhi High Court further observed that 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.
The Delhi High Court gave answer to the question (a) in negative. It was held that search conducted on Locker No. 4979 by issuing an authorization dated 27.02.2012 under section 132 of the Act against the Petitioner was invalid. The said authorisation was quashed.
Consequently, question (b) was also answered in the negative by holding that there was no legal justification for the issuance of the impugned notice dated 22.10.2012 to the Petitioner under section 153 A of the Act for the AYs 2006-2007 to 2011-2012. The said notice was also hereby quashed. All consequential actions of the Respondents were declared invalid.
Privacy is an important right to a person and fishing enquiry through a search is invalid.
In Dr. Nand Lal Tahiliani vs. CIT (1988) 69 CTR (All) 91 : (1988) 170 ITR 592 (All) it was held:
“…………The vital question is as to what is the source of information…….Estimate being made by an informer cannot tantamount to “information” within the meaning of section 132(1) of the Act. If estimate alone can constitute information, then why should one act upon the estimate of an informer because that sort of estimate can be made by the Departmental authorities themselves, looking to the standard of living, reputation of the person in the society and the assets being ostensibly possessed by him. “Information” within the meaning of section 132(1) should be as accurate as possible having reference to the precise assets of a person and not of general nature.”