Aryan Goyal v. Assistant Commissioner Of Income Tax, Central Circle 1, Chandigarhand Others

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. (PROCEEDINGS THROUGH V.C.) 1034216. 1,Civil Writ Petition No22812 of 2021Date of Decision: February 10[th], 2022 Aryan Goyal — Petitioner Versus Assistant Commissioner of Income Tax, Central Circle 1, Chandigarhand others ...Respondents 2.Civil Writ Petition No. 23329 of 202 Saurabh Goyal Versus. __Petitioner Assistant Commissioner of Income Tax, Central Circle 1, Chandigarhand others ...Respondents 3) Civil Writ Petition No. 24093 of 202 Smita Goyal Versus. — Petitioner Assistant Commissioner of Income Tax, Central Circle 1, Chandigarhand others ...Respondents 4 Civil Writ Petition No. 24095 of 202 Payal Goyal Versus — Petitioner Assistant Commissioner of Income Tax, Central Circle 1, Chandigarhand others ...Respondents CORAM:HON'BLE MR. JUSTICE AUGUSTINE GEORGE MASITHHON'BLE MR. JUSTICE SANDEEP MOUDGIL Present:Mr. Deepak Chopra, Mr. Deepak Aggarwal and Ms. Pratishtha Singh, Advocates CWP Nos.22812, 23329, 24093 and 24095 of 2021 for the petitioner(s), Mr. Tejender K. Joshi, Advocatefor the respondents, AUGUSTINE GEORGE MASIH, J. CM19536J2OZLin CWPZIS§[ZO1 Prayer in these applications is for permission to place on record Annexure P-33| Application is allowed subject to just exceptions. Annexure P-33 is taken on record. CM,19548FZOALin CWP,23327,POAT Prayer in these applications is for permission to place on record Annexures P-2? to P-23. Application is allowed subject to just exceptions. Annexures P-22 to P-23 are taken on record. CM,19547FZOALin CWP,24093,POT Prayer in these applications is for permission to place on record Annexures P-15 to P-16| Application is allowed subject to just exceptions. Annexures P-15 to P-16 are taken on record. CM,19540FJ2OZLin CWP,24095,ZO1 Prayer in these applications is for permission to place on record Annexures P-15 to P-16. Application is allowed subject to just exceptions. Annexures P-15 to P-16 are taken on record. CWP Nos.22812, 23329, 24093 and 24095 of 2021 By this order, we propose to decide four writ petitions 1.e, CWP Nos.22812, 23329, 24093 and 24095 of 2021 as the challenge in these CWP Nos.22812, 23329, 24093 and 24095 of 2021 writ petitions is to the search conducted of petitioner in CWP No.22812 of2021 under Section 132 of the Income Tax Act, 1961 (hereinafter referred to as‘1961 Act’) on 13.12.2020, notices dated 30.07.2021 issued underSection 153-A of the 1961 Act, notice dated 21.10.2021 under Section 142 (1)of the 1961 Act and rejection order dated 02.11.2021 passed by the AssistantCommissioner of Income Tax, Central Circle 1, Chandigarh-respondent No.1(hereinafter referred to as ‘respondent No.1’) for the assessment period 2015-16to 2020-21, search conducted of petitioner in CWP No.23329 of 2021 underSection 132 of the 1961 Act on 13.12.2020, notices dated 30.07.2021 issuedunder Section 153-A of the 1961 Act, rejection order dated 02.11.2021 andnotices dated 11.11.2021 issued under Section 142 (1) of the 1961 Act byrespondent No.l for the assessment period 2015-16 to 2020-21, searchconducted of petitioner in CWP No.24093 of 2021 under Section 132 of the1961 Act, on 13.12.2020, notices dated 20.07.2021 issued under Section 153-Aof the 1961 Act, and notices dated 11.11.2021 issued under Section 142 (1) ofthe 1961 Act, by respondent No.1 for the assessment period 2015-16 to 2020-21, search conducted of petitioner in CWP No.24095 of 2021 under Section132 of the 1961 Act, on 13.12.2020, notices dated 30.07.2021 issued underSection 153-A of the 1961 Act, and notices dated 11.11.2021 issued undersection 142 (1) of the 1961 Act, by respondent No.1 for the assessment period2015-16 to 2020-21. 2 Petitioners have stated that they are individual assessees residing 2 Petitioners have stated that they are individual assessees residing in House No.309, Sector 9, Chandigarh and are being regularly assessed to tax.They have been regularly filing their tax returns. Petitioner in CWP No.22812of 2021 is engaged full time with M/s. Nureca Ltd. as the Chief ExecutiveOfficer and petitioner in CWP No.23329 of 2021 is engaged in full time with CWP Nos.22812, 23329, 24093 and 24095 of 2021 M/s. Nureca Ltd. as the Managing Director, which is engaged in the business oftrading of healthcare products, petitioner in CWP No.24093 of 2021 is engagedin full time with M/s. Nectar Biopharma Ltd. as the Vice President andpetitioner in CWP No.24095 of 2021 is engaged in full time with M/s. NurecaLtd. as the Vice President, Administrative Advisory, which is engaged in thebusiness of trading of healthcare products. 3The challenge primarily is based upon the grounds that in thecomplete absence of any ‘reason to believe’ for the respondents to conduct anysearch on the petitioner(s) under Section 132 of the 1961 Act and in theabsence of any incriminating material, Assistant Commissioner of Income Tax,Central Cuircle-I, Chandigarh-respondent No.l had no jurisdiction to issuenotices under Section 153-A of the 1961 Act for the block period.Being apparently a wrongful assumption of jurisdiction in the absence offulfilling the statutory requirements, such search wasvoid ab initioqua thepetitioner(s). To assert further, it has been pleaded that the requisite of Section132 of the 1961 Act is ‘reason to believe’, which is integral to ‘information’ inpossession of the concerned authority before any action can be taken under thisSection. Absence of any of these two ingredients would render the search of thepetitioner(s) conducted on them illegal and, thus, liable to be struck down.Challenge has also been posed to the order disposing of the objections of thepetitioner(s) on the ground of non-application of mind and requisites ofspeaking order. 4It has been stated that the genesis of the search which has beenconducted upon the petitioner(s) lay in a land deed undertaken by M/s. AvensisExports Private Limited (hereinafter referred to as ‘company’) in which none ofthe petitioner(s) or their family member(s) is/are shareholders/directors and, CWP Nos.22812, 23329, 24093 and 24095 of 2021 therefore, there is no relationship, business or otherwise, with the company.In the search which has been carried out, no incriminating document was foundfrom the petitioner(s). After the search having been conducted, respondentNo.1 has assumed jurisdiction under Section 153 of the 1961 Act and issuedimpugned notices for the block period 2015-16 to 2020-21 on 30.07.2021requiring the petitioner(s) to file tax returns for the block period within 15 daysof the receipt of notices. Objections were filed by the petitioner(s) beforerespondent No.l and a request was also made to drop the said proceedingsbeing totally unwarranted and not in accordance with the statutory mandate.Respondent No.1 without giving any opportunity or addressing any of thefactual/legal objections raised by the petitioner(s), proceeded to reject the filedobjections by way of a cryptic and non-speaking order directing thepetitioner(s) to participate in the assessment proceedings. In the light of thisfactual background and at the stage of calling upon the petitioner(s) toparticipate in the assessment proceedings on issuance of notice under Section142 (1) of the 1961 Act, petitioners(s) have approached this Court by way ofthe above writ petitions, 5 Learned counsel for the petitioner(s), with reference to Section 132of the 1961 Act, has laid emphasis upon the aspect of the ‘information inpossession’ of the competent authority as has been laid down on which basis‘reason to believe’ that there would be non-production of the documents calledfor or where such notice has been issued had omitted or failed to produce orcause to produce such books of accounts or other documents as required by thesummons or notice or where money, bullion, jewellery and other valuablearticles or things etc. either wholly or partly income or property which has notbeen and would not be disclosed for the purposes of Income Tax Act, 1922 or CWP Nos.22812, 23329, 24093 and 24095 of 2021 the 1961 Act, then and then only further steps are required to be taken by theofficer(S) aS mentioned therein who may authorize an authorized officer toenter and carry out search and seize documents and valuables as detailedtherein. Learned counsel for the petitioner has emphasized upon the aspect thatbefore taking any action or even initiating proceedings under Section 132 ofthe 1961 Act, there must be prior information relating to the person to besearched on the basis of which the prescribed authority forms a reason tobelieve that any of the conditions prescribed in Clauses A to C of Section 132(i) are satistied. In the absence of such Satisfaction of such conditions, noaction can be warranted under this Section. Meaning thereby that no person orpremises can be searched on the basis of information which is not relatable tothe person concerned. Counsel for the petitioner for this has placed relianceupon the judgments passed by the Hon’ble Supreme Court in the case ofDGIT (Investigation) Versus Spacewood Furnishers P. Ltd. (2015) 374 ITR 595(SOC); ITO Versus Seth Brothers 1969 (74) ITR 836 (SOC) and Pratap SinVersus Director ofEnforcement (1985) 155 ITR 166 (SC) onLearned counsel for the respondent had produced the originalrecords for perusal of this Court, which had been retained by us. Counsel forthe respondent has submitted that the requirement of the statute stands fulfilledand, therefore, no interference is called for by this Court in exercise of its writjurisdiction. He acknowledges that the judgments passed by the Hon’bleSupreme Court, which have been referred to by learned counsel for thepetitioner, would be applicable to the case in hand for testing the validity of thechallenged notices. 7We have considered the submissions made by the learned counselfor the parties and with their assistance, have gone through the pleadings as CWP Nos.22812, 23329, 24093 and 24095 of 2021 also the records which have been produced by the respondent. onLearned counsel for the respondent had produced the originalrecords for perusal of this Court, which had been retained by us. Counsel forthe respondent has submitted that the requirement of the statute stands fulfilledand, therefore, no interference is called for by this Court in exercise of its writjurisdiction. He acknowledges that the judgments passed by the Hon’bleSupreme Court, which have been referred to by learned counsel for thepetitioner, would be applicable to the case in hand for testing the validity of thechallenged notices. 7We have considered the submissions made by the learned counselfor the parties and with their assistance, have gone through the pleadings as CWP Nos.22812, 23329, 24093 and 24095 of 2021 also the records which have been produced by the respondent. 8.The principles as have been laid down by the Hon’ble SupremeCourt with reference to the interpretation and the principles to be followed bythe Income Tax Authorities as also the Courts for assessing the requirement ofthe statute having been fulfilled have been culled out and encapsuled by theSupreme Court inDGIT (Investigation) Versus Spacewood Furnishers P. Ltd.(2015) 374 ITR 595 (SO). In the said judgment, the Hon’ble Supreme Courthas referred to and relied upon its earlier judgments rendered in relation to theexercise of powers under Section 132 of the 1961 Act. The powers of theHigh Court which are to be exercised under Article 226 of the Constitution andthe ambit of such powers has also been dealt with by making reference to twoearlier judgments 1.e. ITO Versus Seth Brothers 1969 (74) ITR 836 (SQ).andPooran Mal Versus Director ofInspection (Investigation), Income Tax 1974(93) ITR 505 (SO). In paras 6 and 7 of the said judgment, the Hon’ble SupremeCourt has in extenso reproduced the relevant portions thereof. Reference hasalso been made to the judgment of the Hon’ble Supreme Court in Dr. PratapSingh Versus Directorate ofEnforcement 1985 (155) ITR 166 (SC), wherepari materia provisions in the Foreign Exchange Regulation Act wereconsidered by emphasizing upon the necessity of recording of reasons inSupport of term ‘reason to believe’ contemplated under Section 132 of theIncome Tax Act. It may be mentioned here that the Hon’ble Supreme Courtproceeded to hold that nowhere in this Section, reasons recorded prior toauthorizing the search needs to be disclosed or communicated to the personagainst whom warrants of authorization is issued. In para 9 of the judgment, six principles have been culled out andit is on the touchstone of these principles that the challenge, if any, posed to the CWP Nos.22812, 23329, 24093 and 24095 of 2021 search ordered on a person is to be tested. The same read as follows:- “9. The principles that can be deduced from the aforesaiddecisions of this Court which continue to hold the field withoutany departure may be summarized asfollows: (i) The authority must have information in its possession on thebasis ofwhich a reasonable belief can befounded that-(a)the concerned person has omitted or failed to produce booksof account or other documents for production of which summonsor notice had been issued !" such person will not produce such books of account or otherdocuments even ifsummons or notice 1s issued to him. !" (b) such person is in possession of any money, bullion jewelleryor other valuable article which represents either wholly or partlyincome or property which has not been or would not bedisclosed. (it) Such information must be in possession of the authorizedofficial before the opinion 1sformed. (ili) There must be application of mind to the material and theformation of opinion must be honest and bonafide. Considerationof any extraneous or irrelevant material will vitiate thebelief/satisfaction. (iv) Though Rule 112(2) of the Income Tax Rules whichspecifically prescribed the necessity of recording of reasonsbefore issuing a warrant of authorization had been repealed onand from I[Si]October, 1975 the reasons for the belief foundshould be recorded. !" (b) such person is in possession of any money, bullion jewelleryor other valuable article which represents either wholly or partlyincome or property which has not been or would not bedisclosed. (it) Such information must be in possession of the authorizedofficial before the opinion 1sformed. (ili) There must be application of mind to the material and theformation of opinion must be honest and bonafide. Considerationof any extraneous or irrelevant material will vitiate thebelief/satisfaction. (iv) Though Rule 112(2) of the Income Tax Rules whichspecifically prescribed the necessity of recording of reasonsbefore issuing a warrant of authorization had been repealed onand from I[Si]October, 1975 the reasons for the belief foundshould be recorded. (v) The reasons, however, need not be communicated to theperson against whom the warrant is issued at that stage.(v1) Such reasons, however, may have to be placed before theCourt in the event of a challenge to formation of the belief of theauthorized official in which event the court (exercisingjurisdiction under Article 226) would be entitled to examine therelevance of the reasons for the formation of the belief thoughnot the sufficiency or adequacy thereof.” Q The Hon’ble Supreme Court had further stated that it is necessary for recording of reasons to ensure accountability and responsibility in thedecision making process. It also acts as a caution in the event of legal challengebeing made to the satisfaction reached which enable proper judicial assessmentof the decision taken by the revenue. Court goes to the extent of saying that thiswould not confer in an assessee a right of inspection of documents or to acommunication of reasons for the believe at the stage of issuing ofauthorization. Any such view would be counterproductive to the entire exercise CWP Nos.22812, 23329, 24093 and 24095 of 2021 commencement of assessment proceedings after the completion of search andseizure, if any, that the requisite material may have to be disclosed to theasse@SSee€ 10.In the light of the above settled proposition of law, the Court has toexercise its extraordinary jurisdiction under Article 226 of the Constitution toSatisfy itself if the action is maliciously taken or the power under this Section isexercised for a collateral purpose or not. If the condition of exercise of power isnot satisfied, the proceeding is liable to be quashed. That does not mean thatwhere the power is exercisedbona fideand in furtherance of the statutoryduties of the Tax Officers, any error ofjudgment on the part of the officers willvitiate the exercise of power. The Court cannot substitute its own opinion in thematter nor can the Court comment upon the irregularity in the course of entry,search and seizure committed by the officer acting in pursuance to theauthorization. While exercising jurisdiction under Article 226 of theConstitution, the High Court does not act as an Appellate Authority nor canmere suspicion be the basis conferring jurisdiction to interfere in judicialproceedings. Care and caution needs to be taken while addressing thepossibility and potential of conferring an undue advantage to the assesseewhich may have the effect of frustrating the endeavour of the revenuedepending upon the stage the Court is approached with the challenge. It would,therefore, in itself, be not sufficient to vitiate the action taken with a rider thatthe officer exercising the authorization had actedbonafide ll.With these parameters in mind, we had gone through the recordsand the satisfaction notes of the revenue authorities and are of the view that themandate of the statute stands fulfilled. The competent authority while takingthe decision has taken into consideration the relevant facts and the other CWP Nos.22812, 23329, 24093 and 24095 of 2021 10 ll.With these parameters in mind, we had gone through the recordsand the satisfaction notes of the revenue authorities and are of the view that themandate of the statute stands fulfilled. The competent authority while takingthe decision has taken into consideration the relevant facts and the other CWP Nos.22812, 23329, 24093 and 24095 of 2021 10 material based upon the information in its possession on the basis of whichreasonable belief has been reached fulfilling the requirement of the mandate ofSection 132 of the 1961 Act. In view of the above referred to legal position,we refrain from stating any further keeping in view the stage of theproceedings. 12.In the light of the above, we do not find it a fit case to interfere inthe impugned notices/orders passed by respondent No.1 in exercise of ourextraordinary jurisdiction. 13.Any opinion expressed by us shall not be construed as an opinionon the merits of the case except for the fulfillment of the requirement of1ssuance of notice under Section 132 of the 1961 Act. 14.The writ petitions stand dismissed with above observations.15.In the light of the dismissal of the writ petitions, pending!applications, if any, stand disposed of as infructuous. 16.Records be returned under proper receipt. (AUGUSTINE GEORGE MASIH)JUDGE February 10[()], 2022Puneet (SANDEEP MOUDGIL)JUDGE Whether speaking/reasoned:YesWhether Reportable:Yes