Meaning of ‘Search’ and ‘Seizure’
Search means “not looking for something which is produced or Open but which is hidden, concealed or not obvious”. The word has varied meanings and it should be given the general meanings ‘to look for’ or ‘to seek’ which are well known meaning attributable to the word in the context of section 132 as has judicially been held in Assainar Vs ITO reported in 101 ITR 854. It also means taking possession of the record etc. for the purpose of inspection. It includes a thorough inspection of the building, place, vessel, and aircraft and of the person.
‘Seizure” means the authority to take possession of records etc outside the possession of the person. It is thus an expression which implies a forcible exaction or taking possession from either the owner or one who has possession and who is unwilling to part with possession.
These provisions introduced originally with a view to prevent large scale evasion have been amended later in order to plug the loopholes which were brought to light by actual working and consequent to judicial scrutiny and review It is only thus desirable to have a look at the legislative developments in this regard.
The authorities under the I.T. Act’ 1922 did not originally possess any powers of search and seizure. It was only after the Second World War, necessity of this provision was felt to tax the vast profits made by war profiteers. Section 37(2) was thus introduced by Finance Act 1956 to grant powers of search & seizure to the Income tax Authorities. The same powers and provisions as listed in section 37(2) of the I. T. Act 1922 were originally embodied in section 132 of the I.T. Act’ 1961.
The introduced provision continued, till section 30 of the Finance Act 1964 replaced section 132 by a completely new elaborately provision. This became necessary as the then existing provisions in section 37 sub-section (2) of the Income Tax Act 1922 were struck down by Assam High Court being violative of Articles 14 and 19(1 )(g) of the Constitution. “The substitution of the section resulted into enlargement of powers of CIT and authorized officers whereby for the first time an order u/s 132 (1) could be issued only if “reason to believe” existed that books of account or documents were not produced by the person concerned in response to statutory notices issued or are not be produced even if summons were to be issued.
The powers under section 132 were further enlarged by an amendment brought about in 1965. Among other changes made, it enabled the authorities to make a seizure of money, bullion jewellery or other valuable article or thing if the authorized officer considered it necessary to satisfy the liability estimated by him but the officer had to pass an order u/s 132(5) within 90 days of the seizure. This power to retain the seized assets has now been diluted as sub-section (5) of section 132 of the I T. Act retrains no more applicable.
The powers of search and seizure were further extended by Taxation Laws Amendment Act, 1975 inter alia to authorize search if the officer issuing a warrant had, ‘reason to believe’ that money, bullion, jewellery would not be disclosed by the person concerned for income tax purposes in future. Also, Commissioners were empowered to permit entry into any building, place vessel, vehicle or aircraft not within his territorial jurisdiction.
Subsequent amendments were made by Amendment Act’ 1 984 and Finance Act’ 1988 extending time limit to 120 days u/s 132(5) and granting the power to take constructive possession of the assets seized respectively.
Current Statutory Position
Section 132(1) of the Income Tax Act can be invoked by the Commissioner of Income Tax or Chief Commissioner or Director General or Director or any other authorized Additional or Joint Director or Commissioner if he has “in consequence of information in his possession” “has reason to believe…”. Generally the specified authorities proceed to search a person etc. not on mere whims & fancies but only on the basis of some valid and just information and after duly satisfying itself that the conditions precedent prescribed under sub-section (1) of section 132 are satisfied. None-the-less, there are good number of cases wherein an action to search is taken not in accordance with law, may be on the basis of mere rumor or suspicion.
Then the next question, which arises, is what is a ‘information’? ‘Information’ is not defined in the Act. Therefore, it will be relevant lo consider first, the dictionary meaning of ‘information’ and later to see how this word has been considered by the courts. In Shorter Oxford Dictionary, “information” is defined as a statement of fact employed as an argument to justify or condemn some act. In Chambers Twentieth Century Dictionary, “information” has been defined as “intelligence given, knowledge, an accusation given to a Magistrate or a court”. Courts have considered the meaning and scope of “information” in the context of different taxing statutes.
A few Judicial pronouncement will be helpful in examining the meaning of information:
a) The Supreme Court while considering information as occurring in section 147(b) observed in Commissioner of Income Tax vs. A. Raman & Co. (1968) 67 ITR 11 (SC), that it must mean instruction or knowledge derived from an external source concerning facts or particulars.
b) If the information was already available to the Income Tax Officer when he first made the original assessment, it is not possible to say that the subsequent discovery of escapement of income from assessment is the result of receipt of the same information at the later stage. A mere possibility that the information had escaped his notice when the original assessment was made does not justify a proceeding under section 34 of the Indian income Tax Act, 1 922-(Priyanand Prasad v. Income Tax Officer AIR 1957 All 760).
c) In L.R. Gupta v. Union of India (1992) 194 ITR 32 (Del), relevant to section 132 it is held that the expression “information” must be something more than a mere rumour or gossip or a hunch.
d) In Om Prakash Jindal v Union of India (1976) 104 ITR 389 (P&H), it is observed by the Punjab and Haryana High Court that there are various sources of information and different modes of its collection, collation and processing. It may be writing or oral; but if it is derived from oral communication, it must be placed on record to justify the formation of reasonable belief on its basis.
e) Any information received subsequently without any supporting objective fact in the earlier stages would render the warrant and search invalid- Vide Thanthi Trust v. Income fax Officer (1973) 91 ITR 261 (Mad.).
Similarly the next important limb which has to be satisfied is ‘Reason to Believe’, as in order to invoke the provisions of section 132(1) of the Act the Commissioner or Director etc. must have “Reasons to Believe” that the fact of the case justify the basic conditions stipulated in clause (a),(b) (c) of the subsection. The word ‘reason’ means cause or justification and the word ‘believe’ means to accept as true or to have faith in it. The belief must be genuine and not a mere pretence and has to be held in ‘good faith’ and not a ‘reason to suspect’. It should be framed after an application of mind and the same should be apparent from the note recorded.
Belief may be subjective but reason is objective To further explain. belief may not be open to scrutiny, as it is a final conclusion arrived at on the basis of information received. But reasons due to which the decision is taken can always be examined.
The close scrutiny of sub-section (1) of section 132 shows that the authorities specified therein have been empowered to issue a warrant of authorization of search in respect of any person on the basis of Information in their possession they have reason to believe that any such person,
– has failed to comply, or
– a person to whom such of notice, if issued would fail to comply; or
– any person who is in possession of any money bullion, jewellery or other valuable article or thing and such money bullion jewellery etc. represents either wholly or partly income or property which has either not been or would not be disclosed for the purpose of the Income Tax Act referred to in the section as undisclosed income or property.
The warrant of authorisation can only be issued to certain specified authorities who alone for the purpose of making search and seizure can enter and search any building etc where he has reason to suspect that such books of accounts money jewellery etc. etc. are kept, or break open the lock of any door etc where the keys thereof are not available; or search any person, who has got out of or is about to get into or is in the building, place etc. if the authorised officer has reason to suspect that such a person has secreted about his person or any such books of accounts etc. etc. or seize any such books of accounts etc. etc. place mark of identification etc. and make a note or any inventory of such money
The code laid down in the Income Tax Act for search and seizure confers vast and Draconian Powers to the authorities. However, the powers have been judicially approved and held to be constitutionally valid on grounds of flagrant tax evasion and huge flow of unaccounted money in the system. While these are valid points one cannot equally deny the fact that these activities of search and seizure are infringement on persons liberty, that being so it desirable that such powers be sparingly used and when used every possible regulation adhered to.