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1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE
DATED THIS THE 20TH DAY OF MARCH 2013 BEFORE THE HON’BLE MR.JUSTICE RAM MOHAN REDDY
WRIT PETITION NO. 8423 OF 2012 (T-IT)
BETWEEN:
PRAKASH V. SANGHVI S/O. LATE SHA.VARJIVANDAS D. SANGHVI AGED ABOUT 45 YEARS R/A. NO.702, ‘DEEPA SUNNY’ GANESH RAO LANE, JAIL ROAD MANGALORE …PETITIONER
(BY SRI. KIRAN KUMAR K., ADV.)
AND:
MR. RAMESH G., MAJOR
DEPUTY DIRECTOR OF INCOME TAX (INV.)
C.R.BUILDING, ATTAVARA
MANGALORE – 575001
DIRECTOR OF INCOME-TAX (INV.)
C.R.BUILDING, ATTAVARA
MANGALORE - 575001 ... RESPONDENTS
(BY SRI. K.V.ARAVIND, ADV.)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE SUMMONS ISSUED BY R1 DT. 19/1/2012 I.T.N.S.25, VIDE
2 ANNEX.A; QUASH THE WARRANT OF AUTHORISATION ISSUED BY R2 TO R1 VIDE ANNEX.B; AND ETC.
THIS WRIT PETITION IS COMING ON FOR PRL.HEARING ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING:
O R D E R
Petitioner aggrieved by the summons dt. 19/1/2012 – Annex.A issued by the 1st respondent followed by the panchanama dt. 19/1/2012 – Annex.B and the proceedings initiated under Sec.132 of the Income Tax Act, 1961, has presented this petition.
Petition is not opposed by filing statement of objections.
It is the case of the petitioner that the 1st respondent claiming to be a salesman, gained entry into the petitioner’s home in the morning hours of 19/1/2012 and illegally opened his camp office inside the house, sans authority, and issued the summons – Annex.A invoking Sec.131 of the Income Tax Act, for
3 short ‘IT Act’, summoning the petitioner to appear before him in the camp office in the petitioner’s home at 10.45 a.m., on 19/1/2012 for giving evidence, producing books of accounts and other documents. It is the further allegation of the petitioner that the 1st respondent checked nook and corner of the petitioner’s home without sensitivity to the privacy of the women present in the house and found one folder containing copies of agreement and other papers and cash of Rs.40,00,000/- and Rs.44,29,250/-. While in the petitioner’s home, it is alleged, 1st respondent obtained a warrant of authorization under Sec.132 of the IT Act – Annex.B. On obtaining the said warrant, the 1st respondent is said to have seized some copies of agreements and other documents as disclosed in the inventory – Annex.C, including cash of Rs.40,00,000/-. According to the petitioner, he had no undisclosed income and that Rs.40,00,000/- was received as sale consideration for the sale of the immovable property
4 bearing R.S.No.1259-A1A, T.S.No.250-II-5-1A1P2, Kasaba Bazar Village, Mangalore City, Navayat Ward, Mangalore City Corporation, which was to be shared with other co-sharers. Petitioner claims that he was ready and willing to offer the said sum of Rs.40,00,000/- towards capital gain in so far as his share is concerned, but did not done so, since the due date for filing advance tax was 15/3/2012 while being entitled to tax exemptions under Sec.54 of the IT Act for having purchased another immovable property from out of the sale consideration.
Learned counsel for the petitioner points to Sec.131 of the IT Act to submit that a notice under Sec.131(1)(a) for discovery and inspection ought to be strictly in accordance with the provisions of Order XI of CPC and therefore the 1st respondent had no authority under law to step into the house of the petitioner and
5 issue him a notice – Annex.A, which in other words tantamounts to trespassing without authority of law.
In opposition, learned counsel for the respondent – Revenue submits that under Sec.131(1)(a), the power of discovery and inspection as is vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), was invoked and the notice – Annex.A issued to the petitioner and therefore it cannot be said that the notice suffers from lack of authority or jurisdiction. Learned counsel submits that there was no trespass, into the house of the petitioner, but that the notice indicating the camping of the officer in the premises of the petitioner was only for the purpose of recording his statement which the IT Act authorizes and places reliance upon the decision of the Apex Court in RAJENDRAN CHINGARAVELU VS. R.K.MISHRA, ADDITIONAL COMMISSIONER OF INCOME TAX & ORS.1. Learned counsel
1 (2010) 320 ITR 1
6 points to paragraphs 8, 9, 10 & 11, in support of his submission.
In order to appreciate the submission of the learned counsel for the parties, it will be useful to extract Sec.131(1)(a) of the I.T. Act, which reads thus: SEC.131(1)(a) DISCOVERY AND INSPECTION: “131(1) The Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner, Commissioner (Appeals), Chief Commissioner or Commissioner and the Dispute Resolution Panel referred to in clause (a) of sub-section
(15) of section 144C shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the following matters, namely : -
(a) discovery and inspection.”
A bare perusal of the provisions discloses investing a jurisdiction in the Assessing Officer, Deputy Commissioner of Appeals, Joint Commissioner,
7 Commissioner (Appeals) and Chief Commissioner or Commissioner and the Dispute Resolution Panel, referred to in Clause (a) of Sub-sec.15 of Sec.144(C) over power regarding discovery, production of evidence, etc., as are powers vested in the court under the Code of Civil Procedure, 1908 (5 of 1908), while trying the suit in matter of discovery and inspection, amongst other matters.
A perusal of Order XI CPC under the nomenclature ‘discovery and inspection’, and Rules 1 to 23 there under, do not indicate that the court can issue notice to a party and open a court in the house of the party and call upon that party to give statement in his house. If that is so, then the IT Act does not invest in the 1st respondent, the power to have a camp office at the residence of the petitioner and call the petitioner’s attendance in connection with proceedings under the IT Act. Thus the notice – Annex.A issued by the 1st
8 respondent requiring the attendance of the petitioner in connection with the proceedings under the IT Act in a case, at the camp office in the residence of the petitioner at “Deepa Sunny” on 19/1/2012 at 10.45 a.m. to give evidence or to produce either personally or through authorized representative, the books of accounts and other documents, is one without authority of law. It is not the case of the 1st respondent that such a notice was issued on the basis of any other provisions under the IT Act empowering the authority to open his camp office in the residence of the petitioner. It will be too incongruous to accept the submission of the learned counsel for the respondent – Revenue that the 1st respondent had the authority and jurisdiction to open his camp office in the residence of the petitioner on 19/1/2012.
The decision of the Apex Court in Rajendran Chingarvelu’s case, supra, is inapplicable to the facts of
9 this case for the simple reason that the facts obtaining therein are that a Computer Engineer who was lucratively employed in the United States of America for more than 10 years, returned to India with his earnings and took up employment in Hyderabad in the year 2006 and wanted to buy a property at Chennai which attempts were not fruitful and when advised that he wanted to buy a good plot, he must be ready to pay the sale consideration in cash as advance to the prospective seller and wanted to go to Chennai with large sum of money and finalize the deal. Having contacted the RBI, ICICI Bank and Airport authorities to find out whether he can carry large sum of money, in cash, while travelling, was informed that there was no prohibition and therefore he withdrew Rs.65,00,000/- in cash travelled by air from Hyderabad to Chennai on 15/6/2007 carrying the cash. At the Hyderabad airport, he disclosed to the security personnel who checked his bag and found cash of Rs.65,00,000/-
10 along with bank certificates certifying the source and withdrawals, whereafter he was allowed to board the aircraft without any objection. But when the flight reached Chennai, some police officials and others (who later identified themselves as Income Tax Investigating Wing) rushed in, loudly called out his name and when he identified himself, was virtually pulled out from the aircraft and taken to an office in the first floor of the airport and questioned about the money he was carrying. It is in this backdrop of facts, a question arose as to whether the Andhra Pradesh High Court was justified in holding that a seizure that took place at Chennai (Tamil Nadu), the writ petition was maintainable before it. In addition, certain other contentions having been put forth, the Apex Court having noticed the circular dt. 18/11/2009 issued by the CBDT, Minister of Finance, setting out guidelines to be followed by Air Intelligence Units or Investigation Units while dealing with air passengers with valuables
11 at the airports of embarkation or destination, to avoid any undue inconvenience to them, recorded findings. In the facts of this case, the petitioner was not an air traveler and had not boarded any aero plane and was not proceeding to any other destination and therefore, on facts, that judgment is inapplicable.
There is yet another dimension to the notice – Annex.A. The allegation that the 1st respondent trespassed into the house of the petitioner and thereafter issued the notice Annexure – A to him, is not controverted. There is no reason to disbelieve the statement of the petitioner, more so, when the allegation is not countered. If that is so, then the 1st respondent, without authority of law, having trespassed into the house of the petitioner on 19/1/2012, deserves to be prosecuted before a competent criminal court, if so advised.
There is force in the submission of the learned counsel for the respondent – Revenue that it was only after surveillance that a detection was made of the unaccounted cash in possession of the petitioner and therefore proceedings under the IT Act was initiated. The question is, whether such proceedings did have the authority of law. A perusal of Sec.131 indicates that a notice must be issued calling upon the petitioner to furnish all relevant material particulars and documents in the matter of allegation of being in possession of unaccounted cash and if the petitioner fails to respond to that notice, then Sec.132(1) comes in to play by which the Commissioner, Director General or Director or the Chief Commissioner or the Commissioner or Additional Director or Deputy Commissioner or Joint Director or Joint Commissioner may issue warrant for search and seizure. The record made available by the respondent-Revenue discloses, the Director of Income Tax (Investigation) on perusal of the information
13 received approved the issue of warrant for search and seizure on 19/1/2012, though the time is not mentioned therein. It is not known as to what time of the day that order was issued. Indeed, the first respondent armed with a warrant for search and seizure, entered the house of the petitioner on 19.01.2012 at 6:25 p.m. along with panchas and conducted a search, whence, documents and cash of Rs.40,00,000/- were seized from the premises of the petitioner, as indicated in the panchanama Annexure `B`. Therefore, the submission of the learned counsel for the petitioner that the search and seizure was not preceded by a warrant under Section 132 of the IT Act is prima facie unacceptable.
It may be that the petitioner had time up to 15.03.2012 to pay the advance tax and thereafter, time to file his return for the previous year 2011-12 assessment year 2012-13, but that by itself does not
14 mean that the respondent authorities did not have the jurisdiction to issue a warrant and effect search and seizure under Section 132 of the IT Act. However, without going into the merit or demerit of the claim of the petitioner over accounting of the said Rs.40,00,000/- since a return filed is pending consideration, and reserving liberty to the petitioner to question the order of assessment that may be passed over the return for the aforesaid year, if aggrieved, this petition is limited, to the validity of the notice Annexure ‘A’.
In the view taken supra, the answer to the first relief is that the first respondent did neither have the authority nor the jurisdiction to enter into the house of the petitioner on 19.01.2012 and set up a camp office therein for recording the statement of the petitioner by invoking Section 131(1) of the I.T.Act.
In the result, petition is allowed in part. Notice dated 19.01.2012 Annexure `A` is quashed. The reliefs of quashing the panchanama and the warrant of search and seizure are kept open for consideration in an appropriate proceeding. I.A Nos.1 to 4 of 2013 are rejected.
Sd/-
JUDGE
RD/sma