Dr.p.g.viswanathan v. The Director Of Income Tax (Investigation)

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 4-1-2013 CORAM THE HONOURABLE MR.JUSTICE M.JAICHANDREN Writ Petition Nos.20073 and 20074 of 2003 andW.P.M.P.Nos.25070 and 25071 of 2003 and W.P.M.P.No.3362 and 3363 of 2005 and W.P.M.P.No.24563 and 24564 of 2005 andW.P.Nos.1279 to 1282 of 2005 W.P.No.20073 of 2003 Dr.P.G.Viswanathan.. Petitioner. Versus 1. The Director of Income Tax (Investigation)121, Mahatma Gandhi Road,Nungambakkam, Chennai-34. 2. The Assistant Commissioner of Income TaxCentral Circle IV,67A, Race Course Road, Coimbatore... Respondents. Prayer: Petition filed under Article 226 of the Constitution ofIndia, seeking for a Writ of Declaration, declaring the said searchand seizure conducted by the department commenced on 12.9.2002 andconcluded on 13.9.2002 against the petitioner in the premises of thepetitioner as arbitrary, illegal, void and without jurisdiction. W.P.No.20074 of 2003 V.Muthulakshmi.. Petitioner. Versus 1. The Director of Income Tax (Investigation)121, Mahatma Gandhi Road,Nungambakkam, Chennai-34.https://hcservices.ecourts.gov.in/hcservices/ 2. The Assistant Commissioner of Income TaxCentral Circle IV,67A, Race Course Road, Coimbatore. .. Respondents. Prayer: Petition filed under Article 226 of the Constitution ofIndia, seeking for a Writ of Declaration, declaring the said searchand seizure conducted by the department commenced on 12.9.2002 andconcluded on 8.11.2002 against the petitioner in the premises of thepetitioner as arbitrary, illegal, void and without jurisdiction. For Petitioner : Mr.AR.L.Sundaresan Senior Advocate for M/s.A.L.Gandhimathi For Respondents : Mr.Pramod Kumar ChopraW.P.No.1279 of 2005K.Viswanathan @ Kumar .. Petitioner.Versus 1. The Director of Income Tax (Investigation)121, Mahatma Gandhi Road,Nungambakkam, Chennai-34.2. The Assistant Commissioner of Income TaxCentral Circle IV,67A, Race Course Road, Coimbatore-641018. .. Respondents. Prayer: Petition filed under Article 226 of the Constitution ofIndia, seeking for a Writ of Declaration, declaring the proceedingsof the second respondent herein pursuant to the notice under Section158-BC/Sec.158-BD of the Income Tax Act, 1961, in PAN/GIRNo.V.704/AC/CCIV/CBE, dated 11.2.2003, as arbitrary, illegal, whollywithout jurisdiction and ultra vires the provisions of the Income TaxAct 1961. For Petitioner : Mr.AR.L.Sundaresan Senior Advocate for M/s.A.L.Gandhimathi For Respondents : Mr.Pramod Kumar Chopra https://hcservices.ecourts.gov.in/hcservices/ W.P.No.1280 of 2005 Dr.Aruna Viswanathan .. Petitioner. Versus 1. The Director of Income Tax (Investigation)121, Mahatma Gandhi Road,Nungambakkam, Chennai-34. 2. The Assistant Commissioner of Income TaxCentral Circle IV,67A, Race Course Road, Coimbatore-641018. .. Respondents. Prayer: Petition filed under Article 226 of the Constitution ofIndia, seeking for a Writ of Declaration, declaring the proceedingsof the second respondent herein pursuant to the notice under Section158-BC/SEc.158-BD of the Income Tax Act, 1961, in PAN/GIR No.AB2PA 8357-L, dated 11.2.2003, as arbitrary, illegal, wholly withoutjurisdiction and ultra vires the provisions of the Income Tax Act. For Petitioner : Mr.AR.L.Sundaresan Senior Advocate for M/s.A.L.Gandhimathi For Respondents : Mr.Pramod Kumar Chopra W.P.No.1281 of 2005 Dr.Anjana Viswanathan .. Petitioner. Versus 1. The Director of Income Tax (Investigation)121, Mahatma Gandhi Road,Nungambakkam, Chennai-34. 2. The Assistant Commissioner of Income TaxCentral Circle IV,67A, Race Course Road, Coimbatore-641018. .. Respondents. 8357-L, dated 11.2.2003, as arbitrary, illegal, wholly withoutjurisdiction and ultra vires the provisions of the Income Tax Act. For Petitioner : Mr.AR.L.Sundaresan Senior Advocate for M/s.A.L.Gandhimathi For Respondents : Mr.Pramod Kumar Chopra W.P.No.1281 of 2005 Dr.Anjana Viswanathan .. Petitioner. Versus 1. The Director of Income Tax (Investigation)121, Mahatma Gandhi Road,Nungambakkam, Chennai-34. 2. The Assistant Commissioner of Income TaxCentral Circle IV,67A, Race Course Road, Coimbatore-641018. .. Respondents. Prayer: Petition filed under Article 226 of the Constitution ofIndia, seeking for a Writ of Declaration, declaring the proceedingsof the second respondent herein pursuant to the notice under Section158-BC/SEc.158-BD of the Income Tax Act, 1961, in PAN/GIR No.ACBPA4653-N, dated 11.2.2003, as arbitrary, illegal, wholly withoutjurisdiction and ultra vires the provisions of the Income Tax Act. https://hcservices.ecourts.gov.in/hcservices/ For Petitioner : Mr.AR.L.Sundaresan Senior Advocate for M/s.A.L.Gandhimathi For Respondents : Mr.Pramod Kumar Chopra W.P.No.1282 of 2005 Dr.Vikram Viswanathan.. Petitioner. Versus 1. The Director of Income Tax (Investigation)121, Mahatma Gandhi Road,Nungambakkam, Chennai-34. 2. The Assistant Commissioner of Income TaxCentral Circle IV,67A, Race Course Road, Coimbatore-641018. .. Respondents. Prayer: Petition filed under Article 226 of the Constitution ofIndia, seeking for a Writ of Declaration, declaring the proceedingsof the second respondent herein pursuant to the notice under Section158-BC/SEc.158-BD of the Income Tax Act, 1961, in PAN/GIR No.AEFPV4787 K dated 11.2.2003, as arbitrary, illegal, wholly withoutjurisdiction and ultra vires the provisions of the Income Tax Act1961. For Petitioner : Mr.AR.L.Sundaresan Senior Advocate for M/s.A.L.Gandhimathi For Respondents : Mr.Pramod Kumar Chopra COMMON ORDER Since, the issues involved in all the writ petitions are similarin nature, they have been taken up together and a common order isbeing passed. 2. It had been stated that the petitioner, in W.P.No.20073 of2003, namely, Dr.P.G.Viswanathan, is an assessee, as per theprovisions of the Income Tax Act, 1961. The returns filed by him hadbeen assessed by the Assistant Commissioner of Income Tax, CentralCircle IV, Coimbatore. It had been further stated that the saidhttps://hcservices.ecourts.gov.in/hcservices/ petitioner is an E.N.T Surgeon. He is employed as a doctor in VikramHospital, Coimbatore, owned by his wife, V.Muthulakshmi. Hisdaughters, Aruna and Anjana, are also employed in the said hospitaland they are also having their private practice. His son, Vikram, isthe owner of Vikram Audio Centre and he is also involved in textilebusiness. Further, the petitioner had established a charitableinstitution, bearing the name `Dr.P.G.Viswanathan Charitable Trust',wherein rehabilitation and treatment for hearing impaired childrenare done. petitioner is an E.N.T Surgeon. He is employed as a doctor in VikramHospital, Coimbatore, owned by his wife, V.Muthulakshmi. Hisdaughters, Aruna and Anjana, are also employed in the said hospitaland they are also having their private practice. His son, Vikram, isthe owner of Vikram Audio Centre and he is also involved in textilebusiness. Further, the petitioner had established a charitableinstitution, bearing the name `Dr.P.G.Viswanathan Charitable Trust',wherein rehabilitation and treatment for hearing impaired childrenare done. 3. It had been further stated that, on 12.9.2002, raidoperations had were commenced in the case of Dr.P.G.Viswanathan, thewrit petitioner in W.P.No.20073 of 2003, and his wife,V.Muthulakshmi, the writ petitioner in W.P.No.20074 of 2003, in theirresidential premises, at Door No.20, Govind Singh Road, R.S.Puram,Coimbatore and in the premises of Vikram Hospital at No.69, WestVenkatasamy Road, R.S.Puram, Coimbatore, under Section 132 of theIncome Tax Act, 1961. During the search proceedings, the respondentdepartment had seized a number of documents. They had also found asum of Rs.10,82,850/-, in cash, in the premises ofDr.P.G.Viswanathan. They had seized a sum of Rs.10,00,000/- from thesaid premises. On 8.11.2002, the department had found a sum ofRs.2,20,560/- in the premises of Vikram Hospital. However, they hadnot seized the same. The respondent had also found 4303 grams ofjewelry in the premises of Dr.P.G.Viswanathan and in the lockersmaintained by his family members. The search conducted by therespondent department is arbitrary, illegal and invalid in the eye oflaw as none. None of the conditions specified in Section 132(1) ofthe Income Tax Act, 1961, had existed, for the issuance of thewarrants, for taking action under Section 132 of the said Act. 4. The writ petition, in W.P.No.1279 of 2005, had been filed byone K.Viswanathan @ Kumar, an employee of Vikram Hospital, situatedat No.69, West Venkatasamy Road, R.S.Puram, Coimbatore.V.Muthulakshmi, the writ petitioner, in W.P.No.20074 of 2003, is theproprietrix of the said hospital. 5. The writ petitions, in W.P.Nos.1280 and 1281 of 2005, hadbeen filed by Dr.Aruna Viswanathan and Dr.Anjana Viswanathan, who arethe daughters of Dr.P.G.Viswanathan and V.Muthulakshmi. W.P.No.1282of 2005 had been filed by Dr.Vikram Viswanathan, who is the son ofDr.P.G.Viswanathan and V.Muthulakshmi. 6. The main contention raised on behalf of the said petitionersis that the searches and seizures made by the respondent departmentin the residential premises, at Door No.20, Govind Singh Road,R.S.Puram, Coimbatore, and in the premises of Vikram Hospital, atNo.69, West Venkatasamy Road, R.S.Puram, Coimbatore, on 12.9.2002 and13.9.2002, are illegal and ultra vires the provisions of Section 132of the Income Tax Act, 1961, as they had been done without https://hcservices.ecourts.gov.in/hcservices/ 6. The main contention raised on behalf of the said petitionersis that the searches and seizures made by the respondent departmentin the residential premises, at Door No.20, Govind Singh Road,R.S.Puram, Coimbatore, and in the premises of Vikram Hospital, atNo.69, West Venkatasamy Road, R.S.Puram, Coimbatore, on 12.9.2002 and13.9.2002, are illegal and ultra vires the provisions of Section 132of the Income Tax Act, 1961, as they had been done without https://hcservices.ecourts.gov.in/hcservices/ jurisdiction. There were no materials available before theauthorities concerned to believe that there were certain documentsand other materials secreted at the premises concerned. Thus, themandatory requirements of Section 132 of the Income Tax Act, 1961,had not been followed by the authorities concerned before issuing theorders for the searches and seizures. While so, notices, dated11.2.2003, had been issued by the Assistant Commissioner of IncomeTax, Central Circle-IV, Coimbatore, under Section 158-BD, read with158-BC of the Income Tax Act, 1961, calling upon the petitioners tofile their returns disclosing the undisclosed income for the blockperiod 1.4.1996 to 12.9.2002. In spite of the fact that thepetitioners had filed their returns they had been asked to appearbefore the said authority to give certain clarifications and details,in respect of the returns filed by them. It had been learnt, by thepetitioners in the said writ petitioners, that the second respondenthad issued the notices for the block assessment under Sections 158-BDread with 158-BC of the Income Tax Act, 1961, for intiating therelevant proceedings for the block assessment, for the period inquestion, based on the searches and seizures conducted, illegally, inthe residential premises, at Door No.20, Govind Singh Road,R.S.Puram, Coimbatore, and in the premises of Vikram Hospital, atNo.69, West Venkatasamy Road, R.S.Puram, Coimbatore. Therefore, ithad been prayed that this Court may be pleased to delcare theproceedings of the second respondent, pursuant to the notices issuedunder Section 158-BD, read with 158-BC of the Income Tax Act, 1961,as they had been issued by the said authority, without having thejurisdiction to do so. 4. In the counter affidavit filed on behalf of the respondents,in W.P.No.20073 of 2003, it has been stated that the petitioner hadbeen filing the income tax returns, from the assessment year, 1990-91, onwards. It has been further stated that, during the course ofthe search, at the premises of the petitioner, a sum ofRs.10,82,850/- had been found out of which a sum of Rs.10,00,000 hadbeen seized. 5. It had been further stated that the petitioner, being amedical practitioner, was required to maintain certain books ofaccounts and documents, as specified in sub-Rule 2 of 6F of theIncome Tax Rules, 1962, including a cash book, a journal. If theaccounts had been maintained according to the merchantile system ofaccounting, a ledger, carbon copies of bills, serially numbered andthe original bills and receipts in respect of the expenditures,should have been maintained. The cash book should have a record ofall cash receipts and payments kept and maintained, on a day-to-daybasis. During the search, it was found that the prescribed registershad not been maintained, manually, and even the computerized accountshad been found to be incomplete in nature. Since, the books ofaccounts did not reflect the cash balance, it was believed that thecash found at the residence of Dr.P.G.Viswanathan and V.Muthulakshmi,had not been accounted for in the books of accounts.https://hcservices.ecourts.gov.in/hcservices/ Dr.P.G.Viswanthan and the other members of his family had stated thatit is only V.Muthulakshmi, who could give a proper explanation forthe cash found at the residence. However, V.Muthulakshmi, in turn,had stated that the amounts found during the search are professionalreceipts relating to Vikram Hospital for which she was theproprietrix. She had also admitted in her sworn statement,recorded inthe course of the search, that the claim regarding the receipt ofagricultural income was not genuine in nature. She had furtheradmitted that the agricultural income shown in the income tax returnsare not true and that a part of the undisclosed income from thehospital have been introduced, as agricultural income. She had alsosubmitted that, out of the cash found in the residence, a sum ofRs.10,00,000/- may be seized and adjusted against the tax liability.In such circumstances, the seizure had been made by the authoritiesof the respondent department. 6. It has also been stated that the correctness of the seizureeffected by the authorities of the respondent department isvindicated by the fact that, even under the proceedings initiatedunder section 132(b) of the Income Tax Act, 1961, V.Muthulakshmicould not explain before the assessing officer concerned the sourceof cash found at the time of the search. Even though she had statedthat the cash found during the search had been received from a singlepatient, she could not furnish the details of the said patient,including the patient’s name and address. 7. It had also been stated that the search conducted by theauthorities concerned was not a mala fide attempt to adversely affectthe petitioner, in any way. The seizure had been ordered, based onthe information gathered during the pre search enquiries and on theevidence available in the income tax records relating to thepetitioner. The enquiries made at the field level had also been takeninto account for having the reason to believe that the petitioner wasindulging in the suppression of professional receipts and in theinflation of the claims, by showing the agricultural income, in orderto evade the payment of tax. 8. It had also been stated that the warrant issuing authorityhad applied its mind, fully, before issuing the warrants for thesearches and seizures. It is a matter of record that the authorityconcerned had formed its belief, based on the materials collected inthe course of its pre-search enquiry and after due application ofmind, as per the requirements of Section 132 of the Act. 9. It has been further stated that, under Section 132(b)(1) ofthe Act the petitioner had the right to explain before the concernedassessing officer, the nature of the possession of the sources ofacquisition of cash seized during the search. If the explanationsubmitted by the petitioner shows sufficient reasons for thehttps://hcservices.ecourts.gov.in/hcservices/ availability of the cash, the assessing officer has the power torelease the seized amount, with the prior approval of the ChiefCommissioner. Further, the petitioner would also have the opportunityof explaining the sources of cash in the course of the blockassessment proceedings, under chapter XIV–B of the Act. Thepetitioner would also have the right of appeal to the Commissioner ofIncome Tax (Appeals), the Income Tax Appellate Tribunal, if it isfound to be necessary. In such circumstances, the writ petitionsfiled by the petitioners are pre-mature in nature. They are alsodevoid of merits and therefore, the writ petitions are liable to bedismissed. availability of the cash, the assessing officer has the power torelease the seized amount, with the prior approval of the ChiefCommissioner. Further, the petitioner would also have the opportunityof explaining the sources of cash in the course of the blockassessment proceedings, under chapter XIV–B of the Act. Thepetitioner would also have the right of appeal to the Commissioner ofIncome Tax (Appeals), the Income Tax Appellate Tribunal, if it isfound to be necessary. In such circumstances, the writ petitionsfiled by the petitioners are pre-mature in nature. They are alsodevoid of merits and therefore, the writ petitions are liable to bedismissed. 10. The learned counsels appearing on behalf of the petitionershad submitted that the search conducted, under Section 132 of theIncome Tax Act, 1961, is a serious invasion on the privacy of acitizen. Section 132(1) of the Act has to be strictly construed andthe formation of an opinion or a reason to believe, by the authorizedofficer, must be apparent from the notes recorded by the income taxdepartment. The opinion or belief so recorded must clearly show thespecific sub-clause or clauses of Section 132(1) of the Act. Nosearch or seizure can be ordered except for the reasons contained inthe said provisions. The note, based on which the satisfaction hadbeen arrived at, should, in itself, show the application of mind andthe resultant formation of opinion, by the officer ordering thesearch and seizure. If the reasons which are recorded do not fallunder any one of the clauses in Section 132(1), then it would have tobe quashed. 11. From a reading of clauses (a) to (c) of section 132(1) ofthe Income Tax Act, 1961, it clear that the basis of exercise ofjurisdiction, under Section 132(1) of the said Act, has to be theformation of a belief and such a belief is to be formed on the basisof the receipt of information, by the authorizing officer. Theexpression `information’ must be something more than a mere rumour, agossip or a hunch. There must be some material which can be regardedas `information' and it must exist on the file of the authorityconcerned, based on which he should have the reason to believe thataction under Section 132 of the Act is called for. The reason tobelieve must be tangible in law and it should have a rational nexuswith the belief. Otherwise, an order issued for the searches andseizures, by the authority concerned, would be arbitrary and illegal. 12. The learned counsel appearing on behalf of the petitionershad relied on the following decisions in support of his contentions. 12.1. In Calcutta Discount Co. Ltd. Vs. Income-tax Officer,Companies District I, AIR 1961 SC 372, it has been held that if theconditions precedent for the exercise of the powers of the authorityconcerned do not exist the high court may exercise its jurisdiction,under Article 226 of the Constitution of India, to prohibit the https://hcservices.ecourts.gov.in/hcservices/ action initiated by the authority concerned. The existence of analternative remedy is not always a sufficient reason for refusing therelief sought by the petitioner to prohibit an authority actingwithout jurisdiction from continuing such action. The expressionreason to believe, in section 34(1)(a) of the Income Tax Act, 1922,postulates belief and the existence of reasons for such belief. Thebelief must be held in good faith and it cannot be merely a pretence.The expression does not mean a purely subjective satisfaction of theofficer concerned. https://hcservices.ecourts.gov.in/hcservices/ action initiated by the authority concerned. The existence of analternative remedy is not always a sufficient reason for refusing therelief sought by the petitioner to prohibit an authority actingwithout jurisdiction from continuing such action. The expressionreason to believe, in section 34(1)(a) of the Income Tax Act, 1922,postulates belief and the existence of reasons for such belief. Thebelief must be held in good faith and it cannot be merely a pretence.The expression does not mean a purely subjective satisfaction of theofficer concerned. 12.2 In S.Narayanappa and others Vs. the Commissioner of Income-tax, Bangalore, AIR 1967 SC 523, it has been held that the expression`reason to believe’, in Section 34 of the Income Tax, 1922, does notmean a purely subjective satisfaction of the officer concerned. Itwould be open to the court to examine the question as to whether thereasons for the belief has a rational connection or a relevantbearing to the information available and that the formation of thebelief is not based on extraneous or irrelevant information. 12.3. In The Income-tax Officer, Calcutta and others Vs.Lakhmani Mewal Das, AIR 1976 SC 1753(1), it had been held as follows:"The reasons for the formation of the belief must havea rational connection with or relevant bearing on theformation of the belief. Rational connection postulatesthat there must be a direct nexus or live link between thematerial coming to the notice of the Income-tax Officer andthe formation of his belief that there has been escapementof the income of the assessee from assesment in theparticular year because of his failure to disclose fullyand truly all material facts. It is no doubt true that thecourt cannot go into the sufficiency or adequacy of thematerial and substitute its own opinion for that of theIncome-tax Officer on the point as to whether action shouldbe initiated for reopening assessment. At the same time itmust be remembered that it is not any and every material,howsoever vague and indefinite or distant, remote and far-fetched, which would arrant the formation of the beliefrelating to escapement of the income of the assessee fromassessment. The fact that the words "definite information"which were there in Section 34 of the Act of 1922 at onetime before its amendment in 1948 are not there in Section147 of the Act of 1961 would not lead to the conclusionthat action can now be taken for reopening assessment evenif the information is wholly vague, indefinite, far-fetchedand remote. The reason for the formation of the belief mustbe held in good faith and should not be a mere pretence." 12.4. In V.S.Kuttan Pillai Vs. Ramakrishanan, AIR 1980 SC 185,it had been held as follows:https://hcservices.ecourts.gov.in/hcservices/ "Issuance of a search warrant is a serious matter andit would be advisable not to dispose of an application forsearch warrant in a mechanical way by a laconic order.Issue of search warrant being in the discretion of theMagistrate it would be reasonable to expect of theMagistrate to give reasons which swayed his discretion infavour of granting the request. A clear application of mindby the learned Magistrate must be discernible in the ordergranting the search warrant." 12.5. In Balwant Singh Vs. R.D.Shah, Director of Inspection,[1969] 71 ITR 550 (Delhi), it had been held as follows: 12.4. In V.S.Kuttan Pillai Vs. Ramakrishanan, AIR 1980 SC 185,it had been held as follows:https://hcservices.ecourts.gov.in/hcservices/ "Issuance of a search warrant is a serious matter andit would be advisable not to dispose of an application forsearch warrant in a mechanical way by a laconic order.Issue of search warrant being in the discretion of theMagistrate it would be reasonable to expect of theMagistrate to give reasons which swayed his discretion infavour of granting the request. A clear application of mindby the learned Magistrate must be discernible in the ordergranting the search warrant." 12.5. In Balwant Singh Vs. R.D.Shah, Director of Inspection,[1969] 71 ITR 550 (Delhi), it had been held as follows: " Search and seizure is a serious invasion on therights of the subjects. The search and seizure was reallynot known at earlier stages to common law. When it was forthe first time introduced, it was confined only to stolengoods, but its usefulness soon forced its recognition andwas, from time to time, extended to such like searches andseizures. It is true that sometimes the over-zealousness ofthe authorities led to its abuse and it appears that forthis reason the Fourth Amendment was introduced in theAmerican Constitution in recognition of the fact that aman's house is his castle not to be invaded by any generalauthority to search and seize his goods and papers. Theonly legal means that can be applied to search a person'sabode is a search warrant and, in the absence thereof,neither any private person nor any officer can invade theprivacy of a home and subject its occupants to indignity.It is, therefore, imperative that seizure should not beallowed to exceed the limits of absolute necessity and theover-zealousness of the searching officers is not permittedto cross the permissible limits. Such provisions must,therefore, be necessarily construed in the light of thisbackground and when two alternatives, namely, to seize thebooks or place marks of identification and leave them withthe persons concerned are available, the seizure will bestruck down on the ground that it is arbitrary and not inthe public interest. Every provision of the Act has to beconstrued in the light of Article 19 of the Constitution." 12.6. In Vindhya Metal Corporation Vs. Commissioner of Income-tax 919850 156 ITR 233 (ALL.) it had been held as follows: "Mere unexplained possession of the amount, withoutanything more, could hardly be said to constituteinformation which could be treated as sufficient by areasonable person, leading to an interference that it wasincome which would not have been disclosed by the person inpossession for purposes of the Acts. After all, the belief,for purposes of Section 132A, is to be belief entertainableby a reasonable man and is not the belief arbitrarilyhttps://hcservices.ecourts.gov.in/hcservices/ entertained on material or grounds which will not lead areasonable man to that belief. There is no doubt, in ourmind, that on the information in possession of theCommissioner in the present case, no reasonable personcould have entertained a belief that the amount inpossession of Vinod Kumar represented income which wouldnot have been disclosed by him for purposes of the Acts.Thus, the condition precedent for the exercise of powerunder Section 132 A was utterly lacking in the present caseand the requisition made by the Commissioner was withoutjurisdiction. entertained on material or grounds which will not lead areasonable man to that belief. There is no doubt, in ourmind, that on the information in possession of theCommissioner in the present case, no reasonable personcould have entertained a belief that the amount inpossession of Vinod Kumar represented income which wouldnot have been disclosed by him for purposes of the Acts.Thus, the condition precedent for the exercise of powerunder Section 132 A was utterly lacking in the present caseand the requisition made by the Commissioner was withoutjurisdiction. It was urged for the Revenue that this court shouldleave the matter to be determined in proceedings under theAct itself, where the petitioners could, on proof of thefact, that the amount taken into possession from VinodKumar Jaiswal belonged to them and did not represent whollyor in part income which woul not hae beet: revealed for thepurpose of the Act, get redress and more so, when,proceeded the submission, they hae laid claimed to theamount on the footing that they had secured it by way ofloan from various traders and had deputed Vinod KumarJaiswal to proceed wth it to Calcutta to participate in anauction in connection with their business. We are notinclined to accept the submission, or, we feel that in acase like the present when the action is wholly withoutjurisdiction and is, consequently, not backed by anyauthority of law, denial of relief would encouragearbitrary action on the part of the authorities. Asconsistently held by this Court, noticeably in the case ofManju Tandon [1978] 115 ITR 473 (All), the plea ofalternative remedy is of no avail where the action iswholly without jurisdiction and results in infringement ofany fundamental right of the petitioners." 12.7. In Dr.Nand Lal Tahiliani Vs. Commissioner of Income-Tax[1988] 39 Taxmann 127 (ALL), it had been held as follows: "In the instant case, the information given by thecomplainant was of a very general nature. What could haveresulted in action against the petitioner under section 132was a reasonable belief that he was in possession of anymoney, bullion or jewellery or any other valuable articlerepresenting wholly or partly income or property which hadnot been disclosed or would not be disclosed, and not theprima facie satisfaction tha the petitioner was having aroaring practice and charging a high rate of operationfees. Further, this prima facie satisfaction had beenarrived at on no material apart from the general complaintreceived as far back as 1985. Living in posh house orhaving a high standard of living alone cannot constitute abase for `reasonable belief. Reasonable belief exists ifthe information is not only trustworthy but reasonable andhttps://hcservices.ecourts.gov.in/hcservices/ sufficient in itself to warrant the conclusion thatprovisions of section 132 are being violated. Any complaintmade by a person interested or disinterested should not bejumped upon and made an excuse to initiate proceedingsunless it is thoroughly examined and the authorities aresatisfied not only about its veracity and authenticity butit must be an information in consequence of which theauthority must have reason to believe that income had notbeen disclosed as action under section 132 transgresses theliberty of a citizen. Such an adventure should be avoidedas it not only frustrates the objectives sought to beachieved by such salutary provisions but spoils thereputation of the department and causes incalculable harmto the person concerned. Thus, the writ petition was to beallowed. Sahai,J Sahai,J 3. Search and seizure are a common feature of fiscalstatues. Its utility cannot be undermined in a civilisedsociety. But it is capable of feeing abused as well. Thatis why the Legislation always provides inbuilt safeguards.For instance, the condition precedent for action undersection 132 is the information in possession of theauthority in consequence of which he may have reason tobelieve that any person was in possession of any money,bullion or jewellery or other valuable articles whichrepresented undisclosed income. How each of them should beunderstood and what they mean has been explained by Courtsfrom time to time. If either of these conditions aremissing or have not been adhered to, then the authority isprecluded from invoking the poewrs under this section – seeGanga Prasad Maheshwari v. CIT [1983] 139 ITR 1043 (All.).Information in consequence of which the Director or theCommissioner has reason to believe is the foundation foraction. It sets the machinery in motion. Therefore, it hasnot only to be authentic but capable of giving rise toinference that the person was in possession of undisclosedincome, which has not been or would not be disclosed. GangaPrasad Maheshwari's case (supra), Vindhya Metal Corpn. v.CIT [1985] 156 ITR 233 (All.). In order that formation ofopinion must be in good faith and not mere pretence it isnecessary that information in consequence of which it isformed must be valid and linked with the ingredientsmentioned in the section, that is, there must be rationalconnection between the information or material and thebelief about undisclosed income. 4. Unfortunately the record produced by the learnedstanding counsel left us not only dazed but shocked.......Prakash,J Privacy is a very valuable right of a civilisedsociety and violation thereof is not permissible except byhttps://hcservices.ecourts.gov.in/hcservices/ authority of law and, therefore, the department should notonly be slow but slowest in acting upon the informationbeing given by an informer. Before acting upon theinformation, source of knowledge of an informer should befully tested and unless the departmental authority makethemselves doubly sure of the correctness of theinformation and the creditworthiness of informer, theyshould be loath to act upon information. A word of informershould not be taken for granted. How, in what manner andfrom whom information has been gathered, all this should bemade clear beyond an iota of doubt by thorough examinationof the informer. No action should be taken on informationbased on surmises or guess. 3.......... Estimate being made by an informer cannottantamount to `information' within the meaning of section132(1). If estimate alone can constitute information, thenwhy to act upon the estimate of an informer, because thatsort of estimate can be made by the departmentalauthorities themselves, looking to the standard of living,reputation of the person in the society and the asset beingostensibly possessed by him. Information within the meaningof section 132(1) should be as accurate as possible havingreference to the precise assets of a person and not generalnature and that should in all probabilities lead to theauthorities to have unmistaken belief that money, bullion,jewellery or other valuablel articles or things pointed outby the informer, would be found in possession of the personnamed by the informer. No doubt, it is difficult to have adirect evidence or a fool proof case before making asearch, but all efforts must be made by the authorities toensure the correctness of the information and they shouldassure and reassure the truthfulness and correctness ofinformation before taking any action violating privacy of acitizen." 12.8. In L.R.Gupta Vs. Union of India, [1991] 59 Taxman 305, ithad been held as follows: 12.8. In L.R.Gupta Vs. Union of India, [1991] 59 Taxman 305, ithad been held as follows: 38. Under Section 132(1) merely because a person doesnot file a return or does not disclose true income andwealth, an authorisation under section 132(1) cannot beissued. As already noted, according to the respondentsaction has been taken under section 132(1)(b) and ©. Thesatisfaction ote of respondent No.2 does not, in ouropinion, comply with any of the said two provisions. Anauthorisation under section 132(1)(b) can be issued if thesatisfaction is that the person to whome summons or noticehas been issued or will be issued will not produce or causeto be produced any books of account, documents, etc. Nosuch satisfaction is indicted in the aforesaid note ofrespondent No.2 with regard to the documents, the otestates that action under section 132(1) isbeing taken tohttps://hcservices.ecourts.gov.in/hcservices/ discover and take possession of the relevant documents ofincriminating nature. The power of discovery is containedin section 31 of the Act and not under Section 132. Thatapart, there must be material on which the mind has to beapplied and opinion formed that the person concerned willnot produce documents if asked to do so. The satisfactionnote of respondent No.2 is completely silent on thisaspect....... 39. A search which is conducted under section 132 is aserious invasion into the privacy of a citizen. Section 132(1) has to be strictly construed and the formation of theopinion or reason to believe by the authorising officermust be apparent from the note recorded by him. The opinionor the belief so recorded must clearly show whether thebelief falls under sub-clause (a), (b) or (c) of section132(1). No search can be ordered except for any of thereasons contained in sub-clause(a), (b) or (c) . Thesatisfaction note should itself show the application ofmind and the formation of the opinion by the officerordering the search. If the reasons which are recorded donot fall under clause (a),(b) or © then an authorizationunder section 132(1) will have to be quashed. As observedby the Supreme Court in ITO V. Seth Bros.[1969] 74 ITR 836: "Since by the exercise of the power a serious invasionis made upon the rights, privacy and freedom of thetaxpayer, the power must be exercised strictly inaccordance with the law and only for the purposes for whichthe law authorises it to be exercised. If the action of theofficer issuing the authorisation or of the designatedofficer is challenged, the officer concerned must satisfythe Court about the regularity of his action. If the actionis maliciously taken or power under the section isexercised for a collateral purpose, it is liable to bestruck down by the Court. If the conditions for theexercise of the power are not satisfied the proceeding isliable to be quashed...." ........ 46....... There must be a rational connection betweenthe information or material and the belief aboutundisclosed income..... The satisfaction of the authoritiesunder Section 132 of the Act may be subjective but it mustbe arrived at objectively and on material which isavailable." 12.9. In Janak Raj Sharma Vs. Director of Inspection, (1995) 215TR 234, it had been held as follows:"Section 132 infringes upon the privacy of a citizen.It even carries a social stigma. To a sensitive man, theconsequences can be serious. The Legislature has https://hcservices.ecourts.gov.in/hcservices/ consequently provided the in-built safeguards. These haveto be satisfied before any order for search, etc., can bepassed. ........ 46....... There must be a rational connection betweenthe information or material and the belief aboutundisclosed income..... The satisfaction of the authoritiesunder Section 132 of the Act may be subjective but it mustbe arrived at objectively and on material which isavailable." 12.9. In Janak Raj Sharma Vs. Director of Inspection, (1995) 215TR 234, it had been held as follows:"Section 132 infringes upon the privacy of a citizen.It even carries a social stigma. To a sensitive man, theconsequences can be serious. The Legislature has https://hcservices.ecourts.gov.in/hcservices/ consequently provided the in-built safeguards. These haveto be satisfied before any order for search, etc., can bepassed. In the instant case, the department filed theinspection note and categorically stated that there is noinformation, document or evidence beyond the satisfactionnote and the warrant of authorisation'. On a perusal of theabove note, it was clear that according to the AssistantDirector, information had been received regarding thefactum of search by the CBI and the Income-tax Departmenton the premises of B. It was also observed that `it isinformed that B had invested his ill-gotten funds with hisrelatives'. A further suspicion was expressed that he `isvery likely to have invested monies in the businesses ofhis father-in-law'. Without anything more, the request ofthe Assistant Director for action under Section 132 wasendorsed by the Deputy Director and approved by respondentNo.1. Repeated assertions had been made both, in the filesof the department as well as in the pleadings before theCourt, that information was available `on record', theinformation had been laid before me' and `that theconditions precedent for issuance of a search warrantexisted...'. However, at the time of the hearing of thecase and in spite of repeated opportunities, the departmentcould not produce any record indicating the existence ofany information. In the `satisfaction note produced by thedepartment, it had undoubtedly been stated that B was verylikely to have invested monies in the business of hisfather-in-law. This was, however, a mere guess or asurmise. At best, it was a conjecture. Admittedly, therewas no information. At least none was produced, in spite ofvarious opportunities. Similarly, in the warrant ofauthorisation, it was claimed by the Director of Inspection(Investigation) that `information had been laid before' himand that on the consideration thereof, he had reason tobelieve that 'if a summons under sub-section(1) of section131 or notice under sub-section (4), was issued to theassessee to produce or cause to be produced, books ofaccount or other documents.... he would not produce orcause to be produced, such books of account or otherdocuments'. It was also observed that the `assessee was inpossession of money, bullion, jewellery or other valuablearticles....' Clearly there was no information with thedepartment and the conclusions were wsholly unfounded.Factually, the Director of Inspection (Investigation) hadno information available to him on `record'. There was nomaterial on the basis of which he could have reasons tobelieve that the conditions precedent for proceeding undersection 132(1) were satisfied. The department, in fact,conceded, that there was no information, document orevidence beyond the satisfaction note. Admittedly, the`note' did not constitute `information' as contemplatedhttps://hcservices.ecourts.gov.in/hcservices/ under the law. It only embodied a conclusion. In theabsence of foundation the edifice cannot stand. Withoutinformation, the order for search and seizure cannot besustained." 12.10. In Ajit Jain Vs. Union of India, (2001) 117 Taxman 295,it had been held as follows: under the law. It only embodied a conclusion. In theabsence of foundation the edifice cannot stand. Withoutinformation, the order for search and seizure cannot besustained." 12.10. In Ajit Jain Vs. Union of India, (2001) 117 Taxman 295,it had been held as follows: "12. By now it is well settled that while thesufficiency or otherwise of the information cannot beexamined by the court in writ jurisdiction, the existenceof information and its relevance to the formation of thebelief is open to judicial scrutiny because it is thefoundation of the condition precedent for exercise of aserious power of search of a private property or person, toprevent violation of privacy of a citizen. In Balwant Singh& Ors. Vs. R.D. Shah, Director of Inspection, Income TaxNew Delhi & Ors. (1969) 71 ITR 550, a Division Bench ofthis Court, while reiterating that the High Court cannottest the adequacy of the grounds leading to thesatisfaction recorded, under Section 132 of the Act,observed that if the grounds on which the belief is foundedare non-existent or are irrelevant or are such on which noreasonable person can come to that belief, the exercise ofpower under the said Section would be bad; short of that,the Court cannot interfere with the belief bona fidearrived at by the Director of Inspection. But the Courtcould examine whether the reasons for the belief have arational connection or relevant bearing to the formation ofthe belief and search warrant could not be issued merelywith a view to making a roving or fishing enquiry. 13. The expression 'reason to believe' has beenexplained in various decisions by the Apex Court and HighCourts while dealing with Sections 132 and 148 of the Act.It has been held that the word "reason to believe" meansthat a reasonable man, under the circumstances, would forma belief which will impel him to take action under the law.The formation of opinion has to be in good faith and not onmere presence. For the purpose of Section 132 of the Act,there has to be a rational connection between theinformation or material and the belief about un-disclosedincome, which has not been and is not likely to bedisclosed by the person concerned." 12.11. In Union of India Vs. Ajit Jain, (2003) 129 Taxman 74,