(Delivered by Prakash Krishna, J)
1. These two writ petitions were heard together and are being disposed of by a common judgement. The learned counsel for the parties advanced the arguments with reference to the writ petition no.378 of 2004 and submitted that the same shall hold good with the connected writ petition. Therefore, the facts from the file of writ petition no.378 of 2004 are noted for consideration.
2. The petitioner nos.1 and 2 are medical doctors by profession and are husband and wife. The petitioner no.1 is a qualified orthopaedic surgeon and is also Chairman-cum-Managing Director of Prakash Hospital at D-12, 12-A and 12-B, Sector - 33, NOIDA. He is also running his clinic from his residence besides the fact that he is operating the patients in the said Hospital. Both the petitioners claim that they are regular income tax assessee and have been filing regular income tax return under the Act.
3. The officials of the Income Tax Department on March 19, 2002 made a search under the search warrant issued under section 132(1) of the Income Tax Act (hereinafter referred to as the Act) at the residence of the petitioners. Questioning the legality and validity of warrant of authorisation authorising the respondents to conduct a search in the premises of the petitioners, the present writ petition has been filed. The main thrust of challenge in the present petition is that there was no material in possession of the officials (as described under section 132(1) of the Act) to have reason to believe that the petitioners are in possession of any money, bullion, jewellery or other valuable articles or things as undisclosed income or property.
4. A Panchnama dated 20th of March, 2002 enlisting the documents found and seized during the search operation was prepared. The petitioner's locker in the Bank of India was searched on 30th of March, 2002 when it was found empty. During the search operation, cash amounting to Rs.8,150/- was found at the residence and Rs.13,151/-, at Prakash Hospital, which were not seized. Jewellery worth Rs.1,84,104/- was found but was not seized as it was within the permissible limit as per the CBDT guidelines.
5. By means of the present petition, a writ in the nature of certiorari has been claimed for quashing the search and seizure operation and the Panchnama dated 20th of March, 2002 besides the other usual reliefs including a writ of mandamus directing the respondents to release all the documents and the material seized as mentioned in the Panchnama dated 20th of March, 2002.
6. In reply, counter affidavit has been filed by the Assistant Director of Income (Investigation) wherein besides disputing the claim of the petitioners on merits, certain preliminary objections have been raised. It has been stated that Dr. V.S. Chauhan is a renowned orthopaedic surgeon and he has been suppressing his income systematically. He has made substantial investment in acquiring and constructing immovable assets such as Prakash Hospital Pvt. Ltd. which is superclass hospital at NOIDA. The said hospital consists of 75 beds and leading doctors of Appolo Hospital, New Delhi also visit. During the course of search, Dr. V.S. Chauhan admitted the concealed income to the tune of Rs.21,19,898/-, the details whereof have been set out in paragraph 3.2 of the counter affidavit. These assets are in the nature of deposit accounts with the banks in his name and in the name of his wife and other family members. It has been further averred that the petitioners were found maintaining the duplicate sets of account books as is evident from Annexures-A-64 and A-65 to the Panchnama. In other words, incriminating materials were found in the shape of duplicate account books, fixed deposit receipts, investments in the purchase of X-ray machine etc..
7. In addition to the above, it has been stated that in pursuance of the search aforesaid, block assessment proceeding was going on against the petitioner no.1 wherein he was given opportunity to furnish his explanation but he failed to avail the same and sought adjournments one after the other. Shortly before the expiry of the period of limitation for completion of the block assessment proceedings, the petitioners have filed the present writ petition when barely one month time was left and therefore, the petitioners are not entitled to invoke the extraordinary jurisdiction of this Court by filing the present petition.
8. On merits it has been stated that the warrant of authorisation was issued strictly in accordance with law and the contrary allegations that it was in the nature of fishing and roving enquiry has been denied. The further case is that the petitioners have been showing only part of their professional income and concealing its major part.
9. In the rejoinder affidavit the allegations made in the writ petition have been reiterated. The petitioners have come out with the case that the entire search and seizure operation was a nullity and there was no material before the respondent no.1 to form reason to believe that the petitioners have concealed the income or asset. With regard to the surrender of certain income during search operation as stated in the counter affidavit mentioned above, the explanation given is that the statement of the petitioner no.1 was recorded in the early morning hours at about 4:30 A.M. and by that time he was completely exhausted and made the statement under duress, pressure, influence and terror. The allegation of maintaining duplicate books of account has been denied and it has been stated that the petitioners has been organising camps for charitable purposes on no profit no loss basis to extend medical facilities to economical weaker sections of the society at nominal costs. These camps are being organised twice a year and the registers etc. found at the time of search were with regard to the such camps and was duly explained to the search party. Similarly, explanation with regard to the other incriminating material found at the time of search has been given with which presently we are not concerned.
10. Thereafter, a supplementary affidavit was filed by the petitioners annexing the copies of income tax returns for the earlier assessment years, duly audited copy of balance sheet, profit and loss account and copy of satisfaction note dated 20.2.2002 as well as the approval granted on 21st of February, 2002 to which a supplementary counter affidavit has been filed by the department.
11. Heard Sri Dhruv Agrawal, learned senior counsel assisted by Sri Nikhil Agrawal for the petitioners and Sri Shambhu Chopra, learned standing counsel for the department.
12. The learned counsel for the petitioners submits that there was no material before the concerned officer to reason to believe that the petitioners have unaccounted income or asset. Submission is that looking to the contents of the satisfaction note of the ADIT dated 20th of February, 2002 the JDIT could not have reason to believe that in order to ascertain the true and correct income of Dr. V.S. Chauhan and also to unearth his explained, undisclosed assets in the form of money, bullion, jewellery or any other valuable article or things, it is necessary to take action under section 132(1) of the Act. The crux of the argument of the learned senior counsel is that the petitioners had already disclosed more annual income in the earlier assessment years than what was estimated in the satisfaction note by the officer concerned. The Court was taken through the certain annexures filed along with the supplementary affidavit in support thereof.
13. The second limb of the argument is that after the close of search operation notice was given under section 131 (1A) of the Act to the petitioners which vitiates the search operation. "The reason to suspect" as contemplated under section 131(1A) is on a much lower footing as compared to "reason to believe" under section 132 (A) (1) of the Act. Elaborating the argument it was submitted that the post operational conduct or any surrender, without admitting the surrender of income as valid, is of no consequence to justify the search operation. Reference to certain paragraphs of rejoinder affidavit was made to support his argument that the surrender of income is not valid as it was done under coercion, threat, pressure etc.. The petitioner was not in a fit mental state to depose at the end of long drawn search operation. He was completely exhausted by that time.
14. In reply, the learned counsel for the department submits that the writ petition is liable to be dismissed on the ground of laches. By means of the present writ petition, the validity of search warrant of the search operation done on 20th of March, 2002 has been questioned with considerable delay of about more than two years. The block assessment proceedings were on and were likely to be concluded soon and when barely a month was left to complete the proceedings within the prescribed period, the petitioners without any rhyme and reason, rushed to this Court. Had there been any grievance against the search operation, they should have approached the Court immediately or shortly, after the search. On merits, it was submitted that sufficiency of reasons to believe cannot be gone into in the present writ petition. Taking an over all picture coupled with the fact that substantial amount of income was surrendered at the time of search, the Court should not interfere in the exercise of its discretionary jurisdiction, submits the learned counsel for the department.
15. Considered the respective submissions of the counsel for the parties. The following two points fall for consideration before us:
Whether the writ petition is liable to be dismissed on the ground of laches;
Whether on the facts of the case it can be said that the concerned officer had no material or information in his possession to have reason to believe that the petitioners did not disclose the true income or property.
16. Taking the first point first, it may be noted that the search was conducted by the officials of the Income Tax Department on 20th of March, 2002 at the residential place of the petitioners. A Panchnama was drawn on that date. The locker of the petitioners was searched on 30th of March, 2002. Notice under section 131 (1A) was given on 4th of April, 2002. Thereafter, notice under section 158 BC for block assessment calling upon the petitioners to file their return was given on 9th of May, 2002. The block assessment file of the petitioners was transferred to Deputy Commissioner Income Tax, New Delhi under section 127(2) of the Act on 3rd of June, 2003. The proceedings for block assessment were going on before the said authority without there being any objection or demur.
17. In para 7 of the counter affidavit it has been stated specifically that the search was concluded in the case of the petitioners on April 5, 2002 when the last locker was operated, while the present writ petition has been filed on 15th of March, 2004. In para 4.2 of the counter affidavit it has been stated that the petitioners were given opportunity by the Assessing officer to furnish his explanation before whom block assessment proceedings are pending on various dates, such as 28.7.2003, 23.12.2003, 9.1.2004, 12.2.2004, 16.2.2004, 5.3.2004, 8.3.2004, 15.3.2004, 16.3.2004 and 17.3.2004. The petitioners availed of all the opportunities. The reply of the aforesaid paragraph has been given in para 15 of the rejoinder affidavit by not controverting the above facts. Thus, evidently, the petitioners are very much associated with the block assessment proceedings but never objected. Thus they presumably accepted the search operation as valid during all this period over a span of two years. Had they ever felt aggrieved, they should have challenged the search warrant shortly or immediately after the close of the search which according to the department concluded on 5th of April, 2002. It is true that no period of limitation for filing a writ petition is prescribed but it is also equally true that an aggrieved person should approach the Court for redressal of his grievances with promptitude. The facts of the case do disclose that the petitioner was not serious in challenging the search operation and on smelling out that the block assessment proceedings may go against him sought to stall the proceedings by filing the present writ petition and obtained the stay order. The writ petition was presented before the stamp reporter on 15th of March, 2004 and the stay order providing that the block assessment proceedings may go on but no formal order shall be passed was granted on 17th of March, 2004, without formally admitting the writ petition. This being so, we are of the considered view that the argument of the department that the writ petition is liable to be dismissed on the ground of laches has got force. The petitioners have not come to this Court within reasonable period of time. Notwithstanding the fact that no limitation is prescribed for, the Court may in such cases decline to interfere under Article 226 of the Constitution of India. The writ petition is therefore liable to be dismissed on the ground of laches.
18. We have examined the case of the petitioners on merits also, but find no substance in it.
19. Now, coming to the second point, the contention of the petitioners is that the department had no material to have reason to believe that the petitioners have undisclosed income or assets. The attention of the Court was drawn towards the balance sheet for the period ending as on 31st of March, 2000. In the said balance sheet, the petitioner no.1 has shown receipt of Rs.31,36,427/-as professional receipt. Similarly, for the year ending as on 31st of March, 2001, the said receipt has been shown at Rs.31,64,551/-. Elaborating the argument, it was submitted that in the satisfaction note dated 20.2.2002 the annual receipt of Dr. Chauhan including consultation fee and from operation charges is estimated around Rs.30 Lakhs, while he had disclosed more than that amount in the returns of his income. We have perused the satisfaction note dated 20.2.2010. In the said note, the professional income of Dr. Chauhan as consultation fee has been estimated at Rs.15 Lakhs and operation charges around Rs.15 Lakhs, total income around Rs.30 Lakhs. In the other part of the satisfaction note, it has been mentioned that:
(1) Dr. Chauhan has maintained the very high standard of living and has made substantial investment in his clinic-cum-residence at C-1, Sector-12, NOIDA, he has got constructed superclass three storeyed clinic-cum-residence on a plot of 200 Sq. Metres wherein total investment is estimated at Rs.50 Lakhs;
(2) Seventy five bedded hospital known as Prakash Hospital has recently been developed on a plot of 200 Sq. Metres, it is a four storeyed hospital including basement, it has own pathology, X-ray machine etc., the building is first class structure supported with RCC pillars, flooring and stair cases are covered with marble and the estimated cost of construction is around Rs.2 crores;
(3) Substantial investment on installation of generators, plant and machineries and other accessories for running of superclass hospital, has been made. The disclosed income of Dr. Chauhan is highly insufficient to enable him to make such huge investment; and (4) The disclosed nursing and operation charges of Prakash Hospital are plenty low. It has been gathered that receipts against only part of payments are issued by the Hospital and major amount of payment in the name of operation charges and fee for visits of the doctors is taken outside the books of account and remain unaccounted.
20. The aforesaid satisfaction note was drawn by ADIT which was approved by the competent authority.
21. In the above factual scenario the question of formation of belief within the meaning of section 132 authorising the search, arises. The Court is not concerned at this stage to examine the sufficiency of the material. The formation of believe within the meaning of section 132(1) is an important step and the condition precedent to the authorisation of search and seizure. It is one essentially making up one's mind as to whether on the information presented he had or had not formed the reason to believe. At this stage, the learned counsel has placed reliance upon the well known judgment of the Apex Court in the case of ITO Vs. M/s. Seth Brothers and others, 1969 (2) SCC 324, paragraph 8 in particular. The said paragraph is reproduced below:
"The section does not confer any arbitrary authority upon the Revenue Officer. The Commissioner or the Director of Inspection must have, in consequence of information, reason to believe that the statutory conditions for the exercise of the power to order search exist. He must record reasons for the belief and he must issue an authorization in favour of a designated officer to search the premises and exercise the powers set out therein. The condition for entry into and making search of any building or place is the reason to believe that any books of account or other documents which will be useful for, or relevant to, any proceeding under the. Act may be found. ' If the Officer has reason to believe that any books of account or other documents would be useful for, or relevant to, any proceedings under the Act, he is authorised by law to seize those books of account or other documents, and to. Place marks of identification therein, to make extracts or copies therefrom and also to make a note or an inventory of any articles or other things found in the course of the search. Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the tax-payer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorizes it to. be exercised. If the action of the Officer issuing the authorization, or of the designated Officer is challenged the Officer concerned must satisfy the Court about the regularity of his action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the Court. If the conditions for exercise of the power are' not satisfied the proceeding is liable to be quashed. But where power is exercised bona fide, and in furtherance of the statutory duties of the tax officers any error of judgment on the part of the Officers will not vitiate the exercise of the power. Where the Commissioner entertains the requisite belief and for reasons recorded by him authorises a designated Officer to enter and search premises for books of account and documents relevant to or useful for any proceeding under the Act, the Court in a petition by an aggrieved person cannot be asked to substitute its own opinion whether an order authorising search should have been issued. Again, any irregularity in the course of entry, search and seizure committed by the Officer acting in pursuance of the authorisation will not be sufficient to vitiate the action taken, provided the Officer has in executing the authorisation acted bona fide."
22. In the light of above pronouncement of the Apex Court, we have to see whether the conditions for exercise of power are satisfied or not in the case on hand. The gist of the satisfaction note has been referred to above. It, in no uncertain terms shows that the petitioner no.1 has made investments in constructions of clinic and in establishing Prakash Hospital as well. The tax authority opined that the nature of constructions prima facie do show that these constructions could not have been raised by the petitioner no.1 from his disclosed income. This by itself is sufficient to exercise the power as conferred under section 132 of the Act. To put it differently, it cannot be said that the power was not exercised in accordance with law. On the facts of the case, it can be said that the power was exercised for the purpose for which the law authorises. Here is the case where before carrying out the search operation, information was gathered by visiting the spot i.e. the Prakash Hospital. The nature of construction, the facilities attached to the hospital and the attending and surrounding circumstances were investigated and examined before hand and therefore, on being satisfied, satisfaction note was drawn. From the satisfaction note, it is evident that the concerned Officer also gathered information from the petitioner no.2, the wife of the petitioner no.1. It is not an argument nor it could be argued that the petitioner no.1 has no connection with Prakash Hospital. The material thus collected showed that officer concerned could have reason to believe that the petitioners were in possession of money, bullion etc. wholly or partly undisclosed income or asset.
23. The other decision relied upon by the petitioner is Ganga Prasad Maheshwari and others Vs. CIT : (1983) 139 ITR 1043. After noticing the legislative history of search and seizure under section 132, this Court has laid down that for action under section 132 or 132 A the following conditions precedent must exist:
1. information in possession of Director of Inspection or Commissioner;
2. in consequence of which he should have reason to believe;
3. That any person is in possession of any money, bullion, jewellery or other valuable article or thing;
4. and such jewellery or bullion, etc., must represent either wholly or partly the undisclosed income.
24. It has been laid down that if any of above such conditions is missing the officer concerned would have no jurisdiction to proceed.
25. Thereafter, the phrase "reason to believe" has been explained in the following manner:-
"Reason to believe" is a common feature in taxing statutes. It has been considered to be the most salutary safeguard on the exercise of power by the officer concerned. It is made of two words "reason" and "to believe". The word "reason" means cause or justification and the word "believe" means to accept as true or to have faith in it. Before the officer has faith or accepts a fact to exist there must be a justification for it. The belief may not be open to scrutiny as it is the final conclusion arrived at by the officer concerned, as a result of mental exercise made by him on the information received. But, the reason due to which the decision is reached can always be examined. When it is said that reason to believe is not open to scrutiny what is meant is that the satisfaction arrived at by the officer concerned is immune from challenge but where the satisfaction is not based on any material or it cannot withstand the test of reason, which is an integral part of it, then it falls through and the court is empowered to strike it down. Belief may be subjective but reason is objective. In ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC), the Supreme Court, while interpreting a similar expression used in s. 147 of the Act, held (at p. 446) :
"The expression 'reason to believe' does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The reason must be held in good faith. It cannot be merely a pretence."
26. Coming to the facts of the present case, we are of the opinion that on the facts of the present case, it can be said that there was material with the concerned official to have reason to believe that the petitioners have got undisclosed income or asset. On the basis of the satisfaction note prepared by the ADIT, it is but evident that the investment in the construction of hospital estimated is around two crores, investment on installation of generator, plant machineries etc. is not possible at the income on which Dr. Chauhan has been paying the tax.
27. The object of section 132 is two folds--(1) to get hold of the evidence bearing on the part liability of a person on which the said person is seeking to hold from the assessing authority; (2) to get hold of assets representing the income believed to be undisclosed income. It is well settled, as observed by the division bench of this Court in Lit light & Co. Vs. CIT (1982) 136 ITR 513 that the issue of search warrant by the officer concerned is not a judicial or quasi judicial act and even if the officer is enjoined to issue a warrant only when, in fact, there is an information in his possession in consequence of which he may form necessary belief, the matter is not thereby subjected to scrutiny by the Court. In this regard reliance has been placed upon its earlier judgment in the case of ITO Vs.Firm Madan Mohan Dammamal (1968) 70 ITR 293.
28. In Lit light & Co. (supra) the search warrant was under challenge. The Court found that the statement of the informant who had intimate knowledge of the business dealings of the petitioners, was recorded on oath. The nature of information furnished by him could reasonably be accepted as reliable. In this background, the argument of the petitioners therein that the action was malafide or that there was no reliable information in possession of the department to justify the action under 132 of the Act was rejected as untenable.
29. The argument of the petitioners that the returned income of the petitioners is more than one estimated in the satisfaction note and therefore, the search is illegal, ignores the other part of the satisfaction note wherein it has been set out that the construction of Prakash Hospital and the investment made therein in the building appliances etc. is not possible from the disclosed income of the petitioners.
30. The other limb of the argument is that after the search and seizure operation was over the respondents in exercise of power under section 131(1A) issued summons requiring the petitioners to present information pursuant to the search and seizure dated 20th of March, 2002 and 30th of March, 2002. The power under section 131 (1A) can be exercised when the officer mentioned in the said section has reason to suspect that an income has been concealed or likely to be concealed. In contrast to the phrase "reason to suspect" as mentioned in section 131 (1A), section 132 of the Act uses the phrase "reason to believe." Reliance has been placed upon a Division Bench decision of this Court in the case of Dr. Mrs. Anita Sahai Vs. Director of Income Tax (Investigation) and others, (2004) 265 ITR 597 wherein it has been held that after taking any action under section 132 of the Act, the issuance of notice under section 131 (1A) goes to show that there was neither reason to believe nor material before the authorising officer on the basis of which he could issue a warrant under section 132 of the Act.
31. On a careful consideration of the matter, we are of the opinion that section 131(1A) confers powers on the authorities mentioned therein to exercise the powers as mentioned in section 131 (1) if he has reason to suspect that any income has been concealed or is likely to be concealed, notwithstanding that no proceeding with respect to such person or a class of persons are pending before him. This is only an enabling section and it does not in any manner affect the search and seizure operation carried on under section 132 of the Act. For the purposes of judging the action of the concerned authority with respect to search and seizure, section 132 alone has to be considered. Section 132 of the Act is an independent code itself. It concerns with the search and seizure and also provides a machinery as well as procedure in its provisions for estimating the undisclosed income, determining the tax etc., liability, or other ancillary power, when seizures are affected. The proceedings under section 132(5) are of a quasi judicial nature. Section 132 (11) provides the forum to an aggrieved person against an order made under sub section (5). Section 132 exists in complete isolation of other provisions of the Act and the general provisions of the Act can neither creep from under beneath under these fortifications nor can overlook with favour or disfavour over these to influence the procedure or judgment in the preceding section 132 of the Act (See Joginder Singh Vs. CIT, (1981) 128 ITR 14.
32. Copy of information purported to be called in exercise of power under section 131(1A) from the petitioner through the letter dated 4th of April, 2002 has been annexed as Annexure-4 to the writ petition. By the said letter, certain informations in connection with the inquiries relating to search and seizure operation carried out on 19th of March, 2002 has been called for. The desired informations which have been called for are (1) in the nature of details of family members and the dependants, their names, age, relationship etc.; (2) nature of source of income of assessee and his family members/dependants, (3) details of Firms, companies etc. wherein the assessee or any member of his family have interest, indicating the names and addresses of the concerns, (4) details of bank account of assessee and in the name of his family members, dependants, (5) details of movable and immovable assets owned by him and his family members and (6) particulars with regard to the assessee and his family members relating to assessment for the assessment year 1995-1996 onward till 2001-2002 have been called for. The informations sought through the aforesaid letter are in the nature of inquiry for the purposes of assessing the concealed income and asset, if any. Although, it is mentioned that information has been called for under section 133(1A) of the Act but it appears that the aforesaid section has been wrongly mentioned as there is no such section. In the corresponding paragraph relating to said document, the petitioner in paragraph-6 of the writ petition has mentioned that the correct section is 131(1A) of the Act. On that basis, the learned senior counsel for the petitioners has sought to build up a legal argument which we will deal with a little later in this judgment.
33. It may noted that the mentioning of a wrong section in an order will not vitiate it if the authority of the order can be traced to a statutory provision. After going through the contents of the said document dated 4th of April, 2002 we are of the opinion that the information sought for through the said letter can be justified with reference to section 133(6) read with section 135 of the Act. It provides that the Director General or Director or the Chief Commissioner etc. shall be competent to make any inquiry under this Act, and for this purposes shall have all the powers that Assessing Officer has under the Act in relation to making of inquiries. Definition of Director General or Director is inclusive definition which includes Assistant Director as well vide section 2(21) of the Act. Therefore, the argument of the petitioners' counsel is not well founded. No doubt, as noticed herein above section 133(1A) has been mentioned in the aforesaid document, but the reference of section is wrong as there is no such section as 133(1A). But it is now well settled that omission to refer the provision of law which is source of power, or mentioning of a wrong provision will not by itself render an order invalid or illegal if the authority had the power under an appropriate provision of law vide K.K. Parmar Vs. High Court of Gujrat, JT 2006(6)SC 509 and Amiya Bala Dutta and others Vs. Mukut Adhikari and others JT 2011(3) SC 84.
34. The scope of section 133(6), second proviso was considered by the Apex Court in the case of Karnataka Bank Ltd. Vs. Secretary Govt. of India and others, (2002) 255 ITR 508, it has been held that with a view to collect information power is given under section 133(6) to issue notice, inter alia, requiring any person to furnish information in respect of such points or matters as may be useful or relevant. The second proviso makes it clear that such information can be sought for even when no proceeding under the Act is pending, the only safeguard being that before this power can be invoked the approval of the Director or the Commissioner, as the case may be, has to be obtained.
35. Sections 131 to 138 relating to powers of Income Tax Authorities have been grouped together under Chapter XIII, part C. Section 131 gives certain powers of a Court of law to Income Tax Authorities. The Authorities under the Income Tax Act strictly speaking do not act as Courts of law. Therefore, necessity to cloth them with specific powers arose. Depending upon the magnitude and object ought to be achieved, various kinds of powers have been conferred upon the Income Tax Officials in order of hierarchy. A brief survey of these provisions would show that following powers have been conferred on the Income Tax Authorities:
1. Discovery and Inspection;
2. Enforcing the attendance of any person, including any officer of banking company and examining him on oath;
3. Compelling production of books of accounts and other documents;
4. Issuing Commission;
Vide section 131 of the Act;
5. Power to impound and retain the custody of any books of accounts or other documents produced before it vide section 131(5);
6. Search and seizure under section 132;
7. Power to requisition the books of accounts under section 132A;
8. Power to retain the assets for payment of tax vide section 132B;
9. Power to call for information under section 133;
10. Survey under section 133A;
11. Power to enter any building or place under section 133B; and
12. To inspect registers of the company under section 134.
36. Presently, we are concerned with the scope and ambit of section 131(1A) vis-à-vis section 132 of the Act. A close reading of sub section (1A) of section 131 would show that if the Director General or the other authorities mentioned therein,
(i) has reason to suspect that any income has been concealed or is likely to be concealed by any person or class of person;
(ii) before he takes an action under sub section (1) of section 132;
then,
(a) for the purposes of making any inquiry or investigation relating thereto,
(b) it shall be competent for him to exercise the powers conferred under sub section (1) of section 131 with respect to such person or class of person, (c ) notwithstanding that no proceeding with respect to such person or class of person are pending before him or any other Income-tax Authority.
37. A fair reading of the aforesaid sub section would show that the power conferred on the Income-tax Authorities mentioned therein can be exercised--before ordering search and seizure under section 132. The exercise of power under section 131(1A) is contemplated in a situation anterior to exercise of power under section 132. In other words, before authorising an officer to carry on search and seizure operation, the Income Tax Authorities i.e. the Director General or Director or Joint Director or Assistant Director or Deputy Director or authorised officer referred to in sub section (1) to section 132 could exercise the power under section 131(1A) of the Act. The Income Tax Authorities are defined under section 116 of the Act. Power has been conferred under the aforesaid section to be exercised before the search and seizure operation with a view to collect the necessary information with regard to the intended search and seizure operation. The striking feature of the provision is that the Income Tax Authorities mentioned in sub section (1A) have been empowered to exercise the power notwithstanding the fact that no proceeding with respect to such person or class of person are pending before him or any other Income Tax Authority. The section is in the nature of enabling provision conferring the power on certain Income Tax Authorities. The section 131(1A) operates in a different field than section 132. Both these sections occupy different fields. Section 131(1A) occupies the field before issuing search and seizure warrant, while section 132 comes into play thereafter. The point which we want to bring home is that after search and seizure operation, the power under section 131(1A) cannot possibly be invoked in view of its plain language and if the power is invoked, it will not in any manner affect the validity of the search and seizure operation.
38. It may be noted that section 131(1A) was inserted in the Statute w.e.f. October 1, 1975. Earlier the judicial view was that the authorities under the Income Tax Act can exercise the power regarding the discovery/production of evidence etc. only in relation to a pending matter. To overcome it, section 131(1A) was enacted giving powers of discovery/production of evidence etc. to Director General, or Director or Joint Director etc. notwithstanding the fact that no proceeding is pending before them. The use of words "it shall be competent for him to exercise the powers confirmed under sub section (1) are indicative of confirmation of power on such officers even for the purposes of making any enquiry or investigation under sub section (1) of section 132. Section 131(1A) and Section 132 should be interpreted harmoniously.
39. The above aspect of the case, it appears, was not brought to the notice of the Division Bench of this Court in the case of Dr. Anita Sahai (supra).
40. In any case, a futile exercise made by the department by issuing a notice under section 131 (1A) of the Act will not in any manner affect the search operation validly carried on within the four corners of section 132 of the Act.
41. Even otherwise also, the decision in the case of Dr. Amita Sahai (supra) is not applicable for the reasons more than one.
Firstly, in the case on hand, the notice dated 4th April, 2002 is not under section 131(1A) of the Act. It is under section 133(1A).
Secondly, the said notice on a fair reading is relateable to section 133(6).
Thirdly, there is no ratio but some observation, in the case of Dr. Amita Sahai (supra). It appears that other relevant part of that sub section that it can be invoked, if at all, prior to stage of authorisation under section 132, was not brought to the notice of the Court.
42. Viewed as above, we find that these petitions lack merit besides the fact that they are belated ones and laches of around two years has not been explained, even remotely.
43. The petitioners are required to appear before the authority concerned along with the certified copy of this order in the week commencing 16th of May, 2011. For the purposes of calculation of limitation for completing the block assessment proceeding, the period w.e.f. the date of stay order till the appearance of the petitioners as directed above shall be excluded.
44. In the result, both the writ petitions are hereby dismissed. But no order as to costs.