INCOME TAX ACT, 1961

Search and seizure- Validility-Issuance of search warrant in joint name

Search warrant was issued under section 132(1)(c) in the joint name of assessee and her husband to enter and search their residence. During the search operation, seizure operation was also carried out, seizing books of account, documents, papers and diaries including loose papers and other materials of all entities. Subsequently, proceedings were initiated under Chapter XIV-B, which prescribed special procedure for assessment of search cases. Notice under section 158BC was issued for computation of undisclosed income of the block period and the same was duly served on assessee, AO did not consider the reply of assessee and he issued notice of demand. The first appellate authority, however, deleted certain additions made for ineligible expenditure. Assessee raised first time a preliminary objection with regard to the framing of assessment in individual capacity as the search warrant was in the joint name and this fact was not disputed by the revenue. The said objection was upheld by the Tribunal and, accordingly, the assessees appeal was allowed on the preliminary point itself. Further, the Tribunal opined that there was no necessity to deal with the revenues appeal on merit and, accordingly, dismissed the appeal of the revenue.Held:As per provisions of section 132(1)(c), it reflects that if the officer empowered by the board has reason to believe that any person who is in possession of any money, bullion, jewellery or other valuable article or thing and such money bullion, jewellery or other valuable article or thing representing wholly or partly income or property, which had not been or would not be disclosed under the Act, then, authorities referred to in clause A of section 132(1)(c), authorize the authorities referred to in clause B of section 132(1)(c) to enter the premises and search any building, place, vessel, vehicle or aircraft and also seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, etc., after making a note or an inventory of any such money, bullion, jewellery or other valuable article or thing. [Para 10]

Thus, for authorizing an action under section 132, the conditions precedent are:(i) the information in the possession of the named authority; and (ii) in consequence of which he may have reason to believe that the person concerned is in possession of money, bullion, etc., which represents, either wholly or partly, income which has not been or would not be disclosed for the purpose of the Act. If either of these conditions are missing or have not been adhered to, then power under section 132 cannot be invoked. Thus, the basis of exercise of power under section 132(1) has to be formation of belief on the basis of receipt of information by the authorising officer that the person is in possession of money, etc., which represents undisclosed income. Information, in consequence of which the Director General or the Chief Commissioner, etc., as the case may be, has to form his belief has not only to be authentic but capable of giving rise to the inference that a person is in possession of money, etc., which has not been or would not be disclosed for the purpose of the Act. In other words, it must necessarily be linked with the ingredients mentioned in the section. [Para 11]

By considering totality of the facts and circumstances of the case, the impugned order passed by the Tribunal was to be upheld as it had rightly set-aside the assessment orders which were passed in individual capacity of the assessee. However, it would be open to the assessing authority to proceed and pass fresh assessment order in accordance with law, if it was so desired. [Para 39]

The instant appeal was to be, dismissed. [Para 40]