JUDGMENT M. Katju, J.
1. This writ petition has been filed for a writ of certiorari for an appropriate direction declaring as illegal the search and seizure operation conducted on November 23, 2001, by the Income-tax Department and for a mandamus restraining the respondents from proceeding in any manner in pursuance of the said search and seizure and to release the cash of Rs. 6,33,300 and other documents, money and jewellery seized by the Department.
2. Heard learned counsel for the parties.
3. The petitioner is a dental surgeon and a regular income-tax assessee and has been filing income-tax returns for the last twenty years regularly. The details of the previous six years of his gross receipts from profession, taxable income and tax paid are given in paragraph 2 to the Writ petition. A perusal of the same shows that for the financial year 2000-2001 the gross receipts were of Rs. 45,37,139. The income before depreciation was Rs. 10,46,372, the tax paid was Rs. 2,12,647. True copies of the audited balance-sheets and the income-tax returns filed for the assessment years 1999-2000, 2000-2001 and 2001-2002 have been annexed as annexure I to the writ petition. These figures show a great increase in the gross receipts, as well as taxable income on which the petitioner has paid income-tax. Even for the current financial year, the petitioner has paid advance tax on the basis of gross receipt from profession estimated at around Rs. 50 lakhs.
4. It has been stated in paragraph 2 of the petition that for the assessment year 1998-99 the petitioner's case was taken up for scrutiny by the Department and except for disallowance of certain expenditure on account of personal use no concealment or undisclosed income was found by the Department. The true copy of the assessment order dated February 2, 2001, passed by the Deputy Commissioner of Income-tax, Allahabad, is annexed as annexure II to the petition.
5. It is stated in paragraph 3 of the petition that the entire search and seizure was illegal and there was mala fide attempt to harass the petitioner who is a renowned dental surgeon of Allahabad city and is an honest taxpayer and a regular assessee. It is submitted that none of the conditions mentioned in Section 132(1) of the Act existed which warranted the respondents to take any action under Section 132 of the Act.
6. In paragraph 8 of the petition it is alleged that there was no reason justifying the action under Section 132 and there could be no reason since no money, bullion, jewellery or other valuable article or thing as contemplated under Clause (c) of Sub-section (1) of Section 132 of the Act was found during the search and seizure. No such recorded reasons have been communicated to the petitioner. In paragraph 12 of the writ petition it is stated that whatever was seized in the search operations was totally accounted for and was also duly explained to the officers conducting the search and seizure. Copies of the panchnamas have been annexed as annexure III to the petition.
7. In paragraph 13 it is stated that before the search started the petitioner disclosed that cash was kept at two places, one in his bed room which was the professional receipts and duly accountable towards the day-to-day expenditure and receipts of the hospital, and the other in the only safe vault mounted in his father's bed room which belonged to the Prayag Dant Vigyan Anusan-dhan Sansthan, a charitable society. It was explained to the officers conducting the search that the month was nearing the end and regular payments had to be made to the staff towards their salary as well as the suppliers for the materials supplied by them and also for payment of the second instalment of the advance tax which was due shortly thereafter. All the relevant papers, documents and books of the account were made available to the raiding party for verification. However, respondent No. 2 did not bother to verify the same from the books of account and seized the money, which was duly explained. In paragraph 14 of the writ petition it is stated that as regards the sum of Rs. 6,33,300 which was kept in the vault in the father's bed room, it belonged to a charitable society and did not belong to the petitioner. The books of account and other relevant papers with regard to the Sansthan were also shown to respondent No. 2 and his team during the search but respondent No. 2 did not bother to look at the same and seized the money. The society has been demanding the said money from the petitioner as well and has written to respondent No. 2 for the release of the said amount. Copies of the letters written by respondent No. 4 to the petitioner as well as to respondent No. 2 demanding the said money are annexed as annexures IV and V to the writ petition respectively. In paragraph 15 details have been given about the jewellery seized. In the house there are three male adults and three married ladies and two male children and two female children. According to the Instruction No. 1916 dated May 11, 1994, of the Central Board of Direct Taxes the search party could seize jewellery only if it was in excess of 2,300 gms. In this case the search party found only 1,283 gms. which was much below the limit, but despite this respondent No. 2 seized 402 gms. of jewellery. The petitioner was not shown the warrant of authorisation by the search party. Hence, the petitioner has filed this writ petition.
8. In the counter affidavit of the Department it has been stated that the search and seizure were conducted by the officials of the Income-tax Department at the residential and other premises of the petitioner at 14/20, T. B. Sapru Road, Allahabad, on November 23, 2001. The residential premises of the petitioner's father at 98-A, Gariwan Tola, Allahabad, was also searched on the same date. The bank lockers in the joint names of petitioner and his wife, and of the petitioner and his father were also searched. In paragraph 1.3 of the counter affidavit it is stated that as a result of the searches cash amounting to Rs. 11,49,330 was found and in the bank lockers, gold jewellery and articles weighing 1,596.7 gms. were found apart from other articles. It is alleged that the petitioner has not given convincing explanation regarding these assets. Copy of the statement of the petitioner and his accountant has been annexed as annexure I to the affidavit. In paragraph 4 of the counter affidavit details about the cash and other articles seized have been given. In paragraph 7 of the counter affidavit it is stated that as regards the jewellery found in bank locker No. 1430, State Bank of India, Main Branch, Allahabad, the petitioner's wife stated that some of the jewellery items belonged to her sister and some to her mother-in-law. However, neither the petitioner nor his wife has given any convincing evidence in support of their claim. In paragraph 26 of the counter affidavit it is stated that the petitioner did not produce any books of account in support of his claim that the cash of Rs. 6,33,300 belonged to Prayag Dant Vigyan Anusandhan Sansthan.
9. In the rejoinder affidavit in paragraph 5 of the same the petitioner has given explanation regarding the cash, which has been seized. It is stated therein that a sum of Rs. 5,04,730 was found which consisted of Rs. 2 lakhs received towards advance against the agreement to sell property No. E-2, Civil Station, Allahabad, and the balance amount was from regular professional receipts. The jewellery and articles found were duly explained as they were received on marriage and other occasions. Some articles were also seized which were received by way of gift from various companies, which is a normal feature in the medical profession. The total quantity of gold ornaments, silver articles, etc., are within reasonable limits, which can be possessed by a person, of status like the petitioner. In paragraph 7 of the affidavit it is stated that the petitioner has been maintaining complete prescribed books of account and other prescribed registers on a regular basis up to the assessment year 2001-2002 which have been under audit. Regarding the jewellery found in the lockers, details have been given in paragraph 19 of the rejoinder affidavit and it is stated that the jewellery was within the permissible limits prescribed by the Central Board of Direct Taxes in its circular. It is also stated that the petitioner belongs to a "Vaishya" family in which there is a custom and practice to offer jewellery and ornaments to the newly wedded couple at the time of marriage and even thereafter on many occasions.
10. From the facts disclosed it appears that the petitioner is a leading dental surgeon of Allahabad city and he has his clinic and residence at 14/20, T. B. Sapru Road, Allahabad, where he resides with his wife, Smt. Santa Rastogi, two sons of 18 and 14 years, his father and mother, as well as his brother, Rajesh Rastogi, and the latter's wife and two minor daughters. The petitioner and his father and brother and their wives are all regular assessees under the Income-tax Act. During the search and seizure on November 23, 2001, cash and jewellery were seized. During the search three keys of lockers of banks were also found. One of the keys of locker No. 1430 in the State Bank of India, Main Branch, Allahabad, is in the name of the petitioner and his wife. In this locker the entire jewellery found was seized and the net weight of gold and jewellery found in the locker was about 835.90 gms. From the said locker cash of Rs. 1,14,000 was also found. Apart from the above locker, another locker No. 436 in the State Bank of India, Jonstonganj Branch, Allahabad, in the name of the father of the petitioner was also opened on December 27, 2001. In this locker articles of the value of Rs. 26,963 were found. As regards the cash seized details have also been given above.
11. Learned counsel for the petitioner has relied on several decisions of the Supreme Court and this court in support of his submission that the action of the respondents was illegal.
12. In CIT v. Vindhya Metal Corporation [1997] 224 ITR 614, the Supreme Court observed (page 618) :
"Mere unexplained possession of the amount, without anything more, could hardly be said to constitute information which could be treated as sufficient by a reasonable person, leading to an inference that it was income which would not have been disclosed by the person in possession for purposes of the Acts."
13. In Dr. Nand Lal Tahiliani v. CIT [1988] 170 ITR 592, the Allahabad High Court held that the averments of information under Section 132 must be in good faith and there must be rational relation between the information and the material and reasonable belief. Mere rumour of roaring practice and charging of high rate of fee and living in a posh house, in the absence of any other material, could not be construed as constituting information in consequence of which the director could have reason to believe that the petitioner had not disclosed his income or would not disclose it.
14. The search and consequent actions of the Department were therefore held to be illegal. The Supreme Court dismissed the S. L. P, against this judgment (see [1988] 171 ITR (St.) 47).
15. In L. R. Gupta v. Union of India [1992] 194 ITR 32, it was held by the Delhi High Court that the expression "information" must be something more than a mere rumour or a gossip or a hunch. There must be some material, which can be regarded as information, which must exist on the file on the basis of which the authorising officer can have reason to believe that action under Section 132 is called for- It was also observed (headnote) : ". . . an assessee is under no obligation to disclose in his return of income all the moneys which are received by him which do not partake of the character of income or income liable to tax. If an assessee receives, admittedly, a gift from a relation or earns agricultural income, which is not subject to tax, then he would not be liable to show the receipt of that money in his income-tax return. Non-disclosure of the same would not attract the provisions of Section 132(1)(c). It may be that the opinion of the assessee that the receipt of such amount is not taxable may be incorrect and, in law, the same may be taxable, but where the Department is aware of the existence of such an asset or the receipt of such an income by the assessee, then the Department may be fully justified in issuing a notice under Section 148 of the Act, but no action can be taken under Section 132(1)(c). . ."
16. In Ajit Jain v. Union of India [2000] 242 ITR 302 (Delhi), it was observed that (page 311) : "the mere fact that the petitioner was in possession of the said amount could not straightaway lead to the inference that it was his undisclosed income ... The intimation simpliciter by the CBI, that the money was found in the possession of the petitioner, which, according to the CBI, was undisclosed, in our view, without something more, did not constitute information within the meaning of Section 132 so as to induce a belief that the cash represented the petitioner's income which has not been or would not be disclosed. A bare intimation by the police or for that matter by any person, without something more, cannot be considered sufficient for action under Section 132 of the Act, for it would be giving naked powers to the authorities to order search against any person and prone to be abused. This cannot be permitted in a society governed by rule of law. Even assuming that the said amount was not reflected in the books of account of the company, as claimed by the petitioner, the mere possession of the said amount by the petitioner could hardly be said to constitute information which could be treated as sufficient by a reasonable person, leading to an inference that it was income which has not been or would not have been disclosed by him for the purposes of the Act, particularly when the petitioner as well as the company, of which he was claiming to be the managing director, were regular assessees with the Income-tax Department".
17. In our opinion these decisions squarely apply to the facts of the present case. It seems to us that the Department has only acted on rumours. The petitioner is admittedly a leading dentist of Allahabad who has a huge practice. We have seen the reasons recorded under Section 132 (which were produced before us by learned departmental counsel) and we find that they are only generalities based on rumours. The decision of this court in Dr. Nand Lal Tahiliani v. CIT [1988] 170 ITR 592, squarely applies to the facts of the present case.
18. In Dr. Nand Lal Tahiliani's case [1988] 170 ITR 592 (All), the report on the basis of which the Commissioner of Income-tax formed his opinion under Section 132 reads as follows (page 596) :
" 'Enquiries with regard to the abovementioned allegations were made by the Investigation Wing at Allahabad. Mr. N. L. Tahiliani has been the most leading surgeon in the town. He is known for his roaring practice in this field of medical profession and also for his high rate of fee for operations. He stays in a posh house owned by him, which is situated in a posh locality of Allahabad. The allegations made above appear to be prima facie correct on the basis of the local enquiries made.
On the basis of the allegations and consequent enquiries made and also on the basis of the standard of living maintained by him and the reputation and number of patients he attracts, there is every reason to believe that in the case of Sri Nand Lal Tahiliani, action under Section 132 of the Income-tax Act is required. This is so because there is also reason to believe that in the normal course provided under the Act, he will not disclose to the Department his correct income and wealth which is much more than what he has been declaring to the Department'."
19. Dealing with this report, the court observed (page 596) :
"What was there in the report which was not known to the Department or is not known to it against any doctor ? If the reputation of roaring practice and rumour for 'charging high rate of fee' can furnish information without any tangible material for formation of a reasonable belief under Section 132, then it would amount to clothing the Department with arbitrary powers to take action against any person even for personal vendetta or through misguided zeal. What could have resulted in an action against the petitioner under Section 132 was a reasonable belief that he was in possession of any money, bullion or jewellery or other valuable article representing wholly or partly income or property which has not been disclosed or would not be disclosed, and not the prima facie satisfaction that the petitioner was having a roaring practice and charging high fee for operations. Further, this prima facie satisfaction was arrived on what ? On no other material apart from the general complaint received as far back as 1985. Impairment of the protection visualised by the Act can be upheld for valid and cogent reasons. Satisfaction of the authorities may be subjective, but it must be arrived at objectively on materials. Not one could be found on record. The expression is 'reason to believe that the income has not been disclosed and not probably it may not have been disclosed'. It is not left to guessing it carries with it the impress of certainty. The dwelling house of a person is his fortress. "Every householder, the good or the bad, the guilty or the innocent, is entitled to the protection designed to secure the common interest against unlawful invasion of the house". Ransacking of the house and the act of taking away the property is an inroad on the citizens' right of privacy' : one of the values of civilization. Any unwarranted intrusion on it cannot be countenanced. Reasonable belief exists if the information is not only trustworthy but reasonable and sufficient in itself to warrant the conclusion that the provisions of Section 132 were being violated. Because if the exercise of power is bad or unlawful in inception, then it is not validated or nor does it change character from its success. It would not, therefore, be asking too much from the authorities to comply with the basic requirements of the section before they are permitted to invade the secrecy of one's home."
20. The court further went on to say (page 597) :
"The statement that the Director of Inspection has sufficient material in his possession to believe that the person to whom summons or notice was issued was in possession of money, bullion or jewellery or other valuable articles or things, is a mere reproduction of the section. That is hardly sufficient. If the authorities can be permitted to claim that on 'consequent inquiries', they are empowered to take action without keeping on record anything to support it, then it shall be empowering them with naked powers. Inquiries should have been reduced to writing in black and white to enable the Director to discharge the statutory responsibility of issuing an authorisation or warrant after being satisfied that the action suggested was justified and made available to the court to infer that the exercise of power was reasonable, at least. In fact, the Director appears to have mechanically endorsed the report. If the report extracted earlier was sufficient for action under Section 132, then the Director could order a search against any doctor of a metropolitan town. Being known for 'roaring practice' and for, 'high rate of fee for operations' in the absence of any other material could not be construed as constituting information in consequence of which the Director could have reason to believe that the petitioner had not disclosed his income or would not disclose it. Living in a posh house or posh locality by itself were not material which could result in initiation of proceedings under Section 132 of the Act specially when the petitioner is an old assessee. The standard of living maintained by him (petitioner) appears to have been added in the report more as a recital to add gloss to the recommendation than with any sense of responsibility. What led to this inference is not stated. Not a word has been mentioned in the report, nor could any record be shown to demonstrate that the standard of living was out of proportion so as to warrant the conclusion that the petitioner was concealing income. Even if the recommending authority had some notions of his own either on personal knowledge or on any inquiry, it should have been made available to the Director to draw the inference, as the action was to be taken by him. The requirement of 'reason to believe' is not an empty formality. The Director and the Commissioner have been authorised to take action as they, being the senior officers of the Department, are expected to project their experience while invoking power under this section. The Director failed to live up to this expectation. He appears to have surrendered his reason to the report made by his Deputy/Assistant Director which was an attempt to initiate a fishing and roving inquiry for reasons best known to him as he did not consider it proper to place the result of 'local inquiry' before the Director. Any complaint made by a person interested or disinterested should not be jumped upon and made an excuse to initiate proceedings unless it is thoroughly examined and the authorities are satisfied not only about its veracity and authenticity but it must be an information in consequence of which the authority must have reason to believe that income had not been disclosed as action under Section 132 transgresses liberty of a citizen. To say the least, such an adventure should be avoided as it not only frustrates the objectives sought to be achieved by such salutary provisions but spoils the reputation of the Department and causes incalculable harm to the person concerned. Therefore, the writ petition deserves to be allowed."
21. Thus, we are of the opinion that in view of the above decisions the action under Section 132 was clearly illegal and it could not be said that the Commissioner of Income-tax had reason to believe that the petitioner was concealing his income. As regards the jewellery seized, according to the Central Board of Direct Taxes guidelines the three units residing in the premises could retain 2,500 gms. of net gold jewellery but the total jewellery found was less than 1,000 gms.
22. The petitioner admittedly has a huge practice in his dental profession and huge income as disclosed in paragraph 2 of the writ petition. In our opinion the cash and articles seized could not be such which could not be due to his income from his profession, and which would not have been disclosed.
23. For the reasons given above, the writ petition is allowed. The entire search and seizure operations conducted on November 23, 2001, are held to be illegal. The respondents are directed to release cash and other articles and books seized forthwith to the petitioner.