# Dr. (Mrs.) Anita Sahai v. Director of Income Tax (Investigation), Kanpur and others

- **Citation:** (2004) 1 ILRA 194
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2004-02-06
- **Case number:** Civil Misc. Writ Petition No. 3004 of 2002
- **Bench:** M. Katju, Poonam Srivastava
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/dr-mrs-anita-sahai-v-director-of-income-tax-investigation-kanpur-and-others-40322
- **Pages:** 11

## Headnote

Income Tax Act-Ss.132 read with S.281
B-Search and seizure-Warrant-Legality-
'Reason to believe' even if existed prior
to issuance of warrant of authorization,
held-an illegal warrant of authorization,
since
relevant
material
taken
into
consideration by Director/Commissionssubsequent to issuance of warrant of
authorization-Hence search and seizure,
held, illegal-Moreover prohibitory orders
under S. 132 (3) read with S.281-B of
the Act expired on 27.2.2003 and no
extension is on record-Hence entire
seizure and restraint order relating to
Bank accounts in question, become
infructuous-direction issued to release
forthwith.

Held: Paras 27, 43 & 45

It is well settled that before taking any
action under section 132 of the Act the
condition precedent which must exist
should be information in possession of
Director of Income Tax which gives him
reason to believe that a person is in
possession of some article, jewellery,
http://www.allahabadhighcourt.nic.in
1 All] Dr. (Mrs.) Anita Sahai V. Director of Income Tax (Investigation), Kanpur and others 195
bullion money which represents wholly
or partly his income which was not
disclosed or would not be disclosed. If
the aforesaid condition is missing the
Commissioner
or
Director
of
Investigation will have no jurisdiction to
issue the warrant of authorization under
section 132(1).

In our opinion the reason to believe
must exist and must be taken into
consideration
by
the
Director/
Commissioner at the time of issuing of
warrant of authorization. If the reason to
believe comes into existence later i.e.
after
issuance
of
warrant
of
authorization, then in our opinion the
warrant of authorization and entire
search and seizure will be illegal even if
the material on the basis of which the
Director formed his opinion that there
was reason to believe existed prior to
issuance of warrant of authorization. In
the present case even assuming that
there existed relevant material prior to
issuance of warrant of authorization
which could have led the Commissioner
to form his reason to believe under
Section 132, it is an illegal warrant of
authorization
since
the
aforesaid
material was taken into consideration by
the Director/Commissioner, subsequent
to the issuance of the warrant of
authorization.

In view of the above facts the search and
seizure in question is illegal and is liable
to be quashed. We also find that the
prohibitory orders under section 132 (3)
read with section 281 B of the Act
expired on 27.2.2003 and no extension is
on the record. Hence the entire seizure
and restraint order relating to the Bank
accounts
in
question
have
become
infructuous and they are directed to be
released forthwith.
Case law discussed:
(1956) 29 ITR 390
(1976) 3 SCC 757
(1983) 139 ITR 1043
(1988) 170 ITR 592
(2003) 260 ITR 249
(2003) 264 ITR 28
(2003) 264 ITR 472
(1976) 104 ITR 389
(1969) 71 ITR 550 (566)
(1978) 1 SCC 405
(1997) 224 ITR 614
(1988) 170 ITR 592
(1988) 171 (St) 47
(1992) 194 ITR 32
(2000) 242 ITR 302 (Delhi)

## Text

194 INDIAN LAW REPORTS ALLAHABAD SERIES [2004
the notification was published are no
newspapers at all. They do not have wide
circulation. Hence the publication in these
newspapers is no information to the
public at all. It is denied that the
substance
of
the
notification
was
published in the locality either by beat of
drums or by pasting it on the notice board.
The
document
showing
the
local
publication has been manufactured for the
purpose of this notification. Notification
under Section 6 was also not published in
wider
circulated
newspapers.
The
possession of the land was not legally
taken
either
on
28.6.1999
or
on
29.6.1999. In paragraph 4 it is stated that
the petitioners are still in the possession
of the land in dispute and the land has not
vested in NOIDA. Till now the award has
not been made and hence proceedings
have lapsed under Section 11-A. The
notification under Section 4 was last
published on 31.10.1994 whereas the
notification
under
Section
6
was
published on 10.11.1995 i.e. after one
year of the notification under Section 4.
Hence it is invalid.

8. On the facts of the case we find
no merit in this petition. In Kaloo Ram
Vs. State of U.P. and others, Civil Misc.
Writ Petition No. 27317 of 2001 decided
on 5.3.2004 the points which have been
pressed in this petition have all been
considered in great detail and have been
rejected. The entire case law on all the
points is mentioned in Kaloo Ram's case
(supra). The effect of U.P. Act No. 8 of
1974 amending the Land Acquisition Act
as interpreted by the Supreme Court and
this Court has also been considered
therein. Hence in view of the judgment in
Kaloo Ram's case (Supra) this petition is
dismissed. Interim order if any is vacated.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 06.02.2004

BEFORE
THE HON'BLE M. KATJU, J.
THE HON'BLE POONAM SRIVASTAVA, J.

Civil Misc. Writ Petition No. 3004 of 2002

Dr. (Mrs.) Anita Sahai

...Petitioner
Versus
Director of Income Tax (Investigation)
Kanpur and others
 ...Respondents

Counsel for the Petitioner:
Sri S.K. Garg
Sri R.S. Agarwal
Sri Siddharth Pathak
Sri Dhruv Agarwal

Counsel for the Respondents:
C.S.C.

Income Tax Act-Ss.132 read with S.281
B-Search and seizure-Warrant-Legality-
'Reason to believe' even if existed prior
to issuance of warrant of authorization,
held-an illegal warrant of authorization,
since
relevant
material
taken
into
consideration by Director/Commissionssubsequent to issuance of warrant of
authorization-Hence search and seizure,
held, illegal-Moreover prohibitory orders
under S. 132 (3) read with S.281-B of
the Act expired on 27.2.2003 and no
extension is on record-Hence entire
seizure and restraint order relating to
Bank accounts in question, become
infructuous-direction issued to release
forthwith.

Held: Paras 27, 43 & 45

It is well settled that before taking any
action under section 132 of the Act the
condition precedent which must exist
should be information in possession of
Director of Income Tax which gives him
reason to believe that a person is in
possession of some article, jewellery,
http://www.allahabadhighcourt.nic.in
1 All] Dr. (Mrs.) Anita Sahai V. Director of Income Tax (Investigation), Kanpur and others 195
bullion money which represents wholly
or partly his income which was not
disclosed or would not be disclosed. If
the aforesaid condition is missing the
Commissioner
or
Director
of
Investigation will have no jurisdiction to
issue the warrant of authorization under
section 132(1).

In our opinion the reason to believe
must exist and must be taken into
consideration
by
the
Director/
Commissioner at the time of issuing of
warrant of authorization. If the reason to
believe comes into existence later i.e.
after
issuance
of
warrant
of
authorization, then in our opinion the
warrant of authorization and entire
search and seizure will be illegal even if
the material on the basis of which the
Director formed his opinion that there
was reason to believe existed prior to
issuance of warrant of authorization. In
the present case even assuming that
there existed relevant material prior to
issuance of warrant of authorization
which could have led the Commissioner
to form his reason to believe under
Section 132, it is an illegal warrant of
authorization
since
the
aforesaid
material was taken into consideration by
the Director/Commissioner, subsequent
to the issuance of the warrant of
authorization.

In view of the above facts the search and
seizure in question is illegal and is liable
to be quashed. We also find that the
prohibitory orders under section 132 (3)
read with section 281 B of the Act
expired on 27.2.2003 and no extension is
on the record. Hence the entire seizure
and restraint order relating to the Bank
accounts
in
question
have
become
infructuous and they are directed to be
released forthwith.
Case law discussed:
(1956) 29 ITR 390
(1976) 3 SCC 757
(1983) 139 ITR 1043
(1988) 170 ITR 592
(2003) 260 ITR 249
(2003) 264 ITR 28
(2003) 264 ITR 472
(1976) 104 ITR 389
(1969) 71 ITR 550 (566)
(1978) 1 SCC 405
(1997) 224 ITR 614
(1988) 170 ITR 592
(1988) 171 (St) 47
(1992) 194 ITR 32
(2000) 242 ITR 302 (Delhi)

(Delivered by Hon'ble M. Katju, J.)

Heard learned counsel for the parties.

1. The petitioners in both the
aforesaid petitions are husband and wife
and are both Doctors. Dr. Mrs. Anita
Sahai is a Gynecologist running a
maternity center by the name of Manavi
Women Clinic and Maternity Centre at B237, Sector 19, NOIDA. Dr. Sharad B.
Sahai her husband is qualified Radiologist
and is running a diagnostic center in the
name and style of Transmed Diagnostics
at A-769, Sector 19, NOIDA, which is
also the residence of both the petitioners.

2. The petitioners have challenged
the validity of the warrant of authorization
under section 132(1) of the Income Tax
Act and the initiation of block assessment
proceedings, by issue of notice under
section 158 BC of the Act by respondent
No. 5, and continuation thereof by the
respondent no.6 by issue of notice dated
26.10.2002 under section 142(1) of the
Act.

3. The facts of the case are that on
19th March, 2002 at about 8.00 a.m. the
respondents authorities their officers,
servants and agents in purported exercise
of the powers under section 132(1) of the
Income Tax Act started search at the
aforesaid premises of the petitioners as
stated in paragraph 7 of the petition. It is
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196 INDIAN LAW REPORTS ALLAHABAD SERIES [2004
alleged in paragraph 7 of the petition that
the
aforesaid
premises
have
been
disclosed in the returns of the petitioners
year after year.

4. In paragraph 8 of the petition it is
mentioned that during the course of
simultaneous search operation at the
aforesaid
premises
the
following
valuables were found: -
a)
Household jewellery valued at
 Rs.1.15 lakhs
b)
Cash amounting to Rs.2.19 lakhs

5. Panchnama was prepared for the
same by the authorized officers at the
conclusion of the search on 20th March,
2002 at 3.00 a.m. In terms of the
Panchnama cash of Rs.1.50 lakhs was
seized. No valuable were seized from the
premises B-237, Sector 19, NOIDA as
nothing was found there except certain
documents and patients records which
were seized, in terms of the second
Panchnama.
True
copies
of
the
Panchnama
are
Annexure-4
and
Annexure-5 respectively.

6. It is alleged in paragraph 4 of the
petition that the petitioner Dr. Mrs. Anita
Sahai has been carrying on her profession
in the Clinic namely Manvi Women
Clinic & Maternity Centre at B-237,
Sector 19, NOIDA and has been regularly
assessed to tax. She filed her latest return
for assessment year 2001-02 with ITO
Ward-1, NOIDA. For assessment year
2002-03 she made payment of advance
tax in three installments prior to the date
of the search. She had purchased property
No. 759, Sector 19, NOIDA on 9.7.99 and
the investment in the purchase of the
property was disclosed in the relevant
balance sheets accompanying her Income
Tax Return for assessment years 20002001 and 2001-2002 vide Annexure-I and
II to the writ petition.

7. The petitioner's husband Dr.
Sharad B. Sahai who is petitioner in writ
petition No. 3005 of 2002 is also a
medical practitioner who resigned from
CGHS in the year 1996 where he was
working as Professor at that time. He has
been assessed to tax regularly and his
returns for assessment year 2001-2002
had been filed before the commencement
of the search operation. For assessment
year 2002-2003 he had paid three
installments of advance tax. As his
professional receipts were within the
purview of section 44 AB of the Income
Tax Act his return for that year was duly
accompanied by the audited balance sheet
and profit and loss account and the tax
audit report under section 44 AB vide
Annexure-III to the writ petition.

8. It is alleged in paragraph 9 of the
petition that the cash found at the time of
search was fully explainable being: -
a)
Rs.1,84,000/= cash balance available
with the petitioner and her husband out of
professional receipts and
b)
Rs.35,000/= belonging to Ms. Sharda
Saxena aged aunt of the petitioner's
husband who has been living there for
quite sometime.
Despite this cash of Rs. 1.50 lakhs was
seized.

9. In paragraph 10 of the petition it
is alleged that from the Panchnama it
appears that the warrant of authorization
under section 132 to carry out the search
was issued by the Joint Director of
Income Tax (Investigation), Meerut who
was present at the time of the search.
Locker No.18 with Oriental Bank of
Commerce, Sector 27, NOIDA standing
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1 All] Dr. (Mrs.) Anita Sahai V. Director of Income Tax (Investigation), Kanpur and others 197
in the joint names of the petitioners was
subjected to prohibitory under section 132
(3) of the Act on 19.3.2002. The said
Locker was opened on 23.3.2002 and cash
amounting to Rs. 5 lakhs and some house
hold
jewellery
was
seized
vide
Panchnama dated 23.3.2002 Annexure-VI
to the writ petition. It is alleged in
paragraph 12 of the petition that the cash
found in the locker was part of the
withdrawals made by the petitioner Dr.
Mrs. Anita Sahai to the extent of Rs. 1.50
lakhs and of Dr. Sharad B. Sahai to the
extent of Rs. 3.50 lakhs from their
professional receipts. It is alleged that the
same being disclosed assets no seizure
could have been done in respect of them.

10. It is alleged in paragraph 13 of
the petition that with the commencement
of search operation on 19.3.2002 the
authorized officer
issued
prohibitory
orders under section 132 (3) in relation to
various bank accounts belonging to Dr.
Mrs. Anita Sahai as mentioned in
paragraph 13 of the petition.

11. It is alleged in paragraph 14.01
that at the conclusion of the search the
authorized officers in a most unusual
behaviour called some person purporting
to be the Valuation Officer who made a
wild estimate of Rs.25 lakhs in relation to
the property at A-759, Sector 19, NOIDA.
It is alleged that the petitioners were
exhausted after a gruesome strain of
nearly 19 hours of search and seizure
action during which they were even not
allowed to sleep. Dr.Sharad B.Sahai was
made to surrender a sum of Rs.10 lakhs as
his undisclosed income and the petitioner
was made to agree to such surrender. True
copies of the statements are Annexure-VII
and VIII to the writ petition. It is alleged
in paragraph 15 of the writ petition that
the entire search and seizure operation
was illegal. The warrant of authorization
stated to have been issued by the Director
of Income Tax, Kanpur was dated
19.3.2002. It is alleged that the said
authority while sitting at Kanpur could
not possibly have issued the aforesaid
warrant of authorization, as the search
operation commenced at 8 a.m. the same
day.

12. Moreover it is alleged in
paragraph 16 of the petition that none of
the three conditions mentioned in section
132 (1) of the Act have been fulfilled. It is
alleged in paragraph 17 of the writ
petition that there existed no material
which could lead to the formation of
reason to believe that any of the three
conditions mentioned in section 132(1) of
the Act had been fulfilled. It is alleged
that there did not exist any material which
could lead to formation of reason to
believe that any asset owned and
possessed by the petitioner was not, or
would not be disclosed in due course.

13. In paragraph 23 of the petition it
is alleged that the Joint Director of
Income Tax (Investigation), respondent
no.3 who is the authority stated to have
issued the warrant of authorization did not
have any power to issue such warrant. It
is alleged that the Joint Director had not
been empowered by the Central Board of
Direct Taxes for this purpose vide
paragraph 24 of the writ petition. Hence it
is alleged that the entire search and
seizure was illegal.

14.

The
petitioner
made
a
representation
dated
6.7.2002
vide
Annexure-14 to the writ petition to the
Director of Income Tax (Investigation),
Kanpur objecting to the validity of the
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198 INDIAN LAW REPORTS ALLAHABAD SERIES [2004
search and requesting that the satisfaction
note recorded prior to the issue of warrant
of authorization be supplied to the
petitioner so that the petitioner can
examine the alleged material on the basis
of which the warrant under section 132
was issued.

15. In paragraph 33 of the petition
the petitioner that stated that she had
objected to the transfer of jurisdiction
from NOIDA to Meerut. The petitioners
have also challenged the continuation of
the block assessment proceedings and the
notice dated 26.10.2002 issued by the
respondent no.5 under section 142(1) of
the Act.

The respondents have filed a counter
affidavit.

In paragraph 3 of the same it has
been
stated
that
valid
warrant
of
authorization under section 132 (1) were
issued by the respondent no.1 and 3 and
block
assessment
proceedings
were
validly initiated. In paragraph 5 of the
same it is stated that the petitioner had not
fully disclosed her income from the
medical profession. In this connection a
letter of the Joint Director of Income Tax,
Meerut to the Director of Income Tax,
Kanpur dated 11.6.2002 is Annexure-1 to
the counter affidavit. It is alleged that the
statement on oath of the petitioner was
recorded at the time of the search and she
admitted that two OPD registers are being
maintained in respect of the patients for
the same period. In one register on the
same date the numbers of patients are
more while on the same date in the other
register the number of patients has been
shown less. On 2.4.2001 the receipts of
OPD patients in one register was shown
as Rs.2,350/= while the receipts on the
same date in the other register was shown
only as Rs. 680/=. True copy of the
statement of the petitioner Dr.Smt. Anita
Sahai is Annexure-IA to the counter
affidavit.

16. In paragraph 6 of the counter
affidavit it is stated that the petitioner
filed a reply dated 29.4.2002 before the
Additional
Director
(Investigation),
Ghaziabad stating that the property at A759 Sector-19, NOIDA was purchased on
9.7.99 in the joint names of the petitioners
for Rs.21, 40,000/= and later on further
construction was done. The source of the
investment in this property was stated to
be taxable income/past saving/loans. It is
alleged that the petitioner has not filed the
copy of the purchase deed, not given the
details of the amounts and sources of
investment. Thus the petitioner failed to
substantiate
the
investment
in
this
property by documentary evidence. Dr.
Mrs. Anita Sahai has declared investment
of Rs.16, 79,300/= vide Annexure-2 to the
counter affidavit. It is alleged that total
investment on the purchase of the
property is admitted to be Rs.21, 15,000/=
while the disclosed investment is only
Rs.16, 79,300/=. On 19.3.2002 Dr. Sharad
B. Sahai in his preliminary statement
alleged that the third floor of the house
was constructed upto April, 2000 and
investment of Rs.9 lakhs had been made
thereon. It is alleged that the property at
A.759, Sector -19, NOIDA was not fully
disclosed in the return of Dr. Mrs. Anita
Sahai.

17. Regarding the property No.B237, Sector-19, NOIDA Dr. Sharad B.
Sahai has declared the value of the house
to be Rs.6, 21,667/= as on 1.4.97 in his
income
tax
return.
However,
the
petitioner has not supplied copy of the
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1 All] Dr. (Mrs.) Anita Sahai V. Director of Income Tax (Investigation), Kanpur and others 199
purchase deed and details of year wise
investment made on the constructions. It
is alleged that the building at B-237
Sector-19, NOIDA is a three storeyed
building with basement and this property
exclusively belongs to Dr. Sharad B.
Sahai for the use of his wife running her
Clinic. Hence the fair market value of rent
is assessable in the hand of Dr. Sharad
B.Sahai. Hence it is alleged that his
income has not been fully or truly
declared.

18. In paragraph 11 it is denied that
the petitioner has explained the source of
cash of Rs.5 lakhs kept in the locker.

In paragraph 14 of the counter
affidavit it is alleged that the petitioner
has
made
surrender
of
his
income/investment of his own free will
without any force or compulsion by the
search party. The search and seizure
operation was
legal and valid. In
paragraph 16 it is denied that there existed
no information on the basis of which the
warrant could be issued.

19. In paragraph 20 of the counter
affidavit it is stated that the original
warrants of authorization were issued by
the
Director
of
Income
Tax
(Investigation), Kanpur in respect of
premises No. 1-759, Sector-19, NOIDA
and B-237, Sector-19, NOIDA. The Joint
Director of Income Tax (Investigation),
Meerut has issued consequential warrant
of authorization only in respect of two
lockers as per law. It is settled that the
CBDT vide Notification dated 11.10.90
has empowered all the Dy. Director of
Income Tax (Investigation) to perform the
function of the Director. The Dy. Director
of Income Tax (Investigation) have been
designated as Joint Director of Income
Tax (Investigation) w.e.f. 1.10.98. Hence
the Joint Director has power to issue the
warrant of authorization.

20. It is alleged by the respondents
that as per his preliminary statement Dr.
Sharad B.Sahai in reply to question No.8
stated that only cash of Rs.40, 000/= to
50,000/= was available at the residence at
the time of the search. This statement was
found to be incorrect as cash amounting
to Rs.2.19 lakhs was found at the
residence. In paragraph 20 of the counter
affidavit it is stated that the petitioner had
deliberately not mentioned in the writ
petition that surrender of Rs. 10 lakhs was
made at the time of search.

21. A rejoinder affidavit has also
been filed and we have perused the same.

22. Learned counsel for the
petitioner
Sri
Dhruv
Agarwal
had
submitted that there was no reason to
believe for initiating action under section
132(1) of the Act. This is evident from the
fact that after the search and seizure
operation was over the respondents in
exercise of powers under section 131(1) A
issued
summons
on
4.4.2002
and
6.5.2002 to the petitioner.

23. Section 131(1A) states: -

"(1A) If the Director General or
Director or Joint Director or Assistant
Director or Deputy Director, or the
authorized officer referred to in subsection (1) of section 132 before he takes
action under clauses (i) to (v) of that subsection, has reason to suspect that any
income has been concealed, or is likely to
be concealed, by any person or class of
persons, within his jurisdiction, then, for
the purposes of making any enquiry or
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200 INDIAN LAW REPORTS ALLAHABAD SERIES [2004
investigation relating thereto, it shall be
competent for him to exercise the powers
conferred under sub-section (1) on the
income tax authorities referred to in that
sub-section,
notwithstanding
that
no
proceedings with respect to such person
or class of persons are pending before him
or any other income tax authority."

24. Learned counsel for the
petitioner has submitted that a perusal of
section 131(IA) shows that notice can be
issued
thereunder
only
before
the
authorized officer takes action under
section 132(1) of the Act. He submits that
section
131(1A)
consists
of
two
conditions which are required to be
fulfilled before any action is taken under
section 132 (1). These conditions are: -
a)
the Assessing officer has reason to
suspect that any income has been
concealed or is likely to be concealed and
b)
he can make the enquiry before he
takes action under clauses (i to v) of
section 132(1).

25. Learned counsel for the
petitioner has submitted that while section
131 (1A) uses the expression 'reason to
suspect',
section
132(1)
uses
the
expression 'reason to believe'. Reason
to believe stands on a higher footing than
reason to suspect, as held by the
Constitution bench of the Supreme Court
in M.C.T. Muthiath and others v. The
Commissioner of Income Tax, Madras
and others (1956) 29 ITR 390. Similarly
in ITO v. Lakhmani Mewal Das (1976)
3 SCC 757 (vide paragraph 12) the
Supreme Court held that the words used
in section 147/148 of the Income Tax Act
are reason to believe and not reason to
suspect.

26. We are of the opinion that the
submission of the learned counsel for the
petitioner is correct. The respondents in
their counter affidavit have stated that it
was the respondent no.4 who had sent the
material to respondent no.1 on the basis of
which respondent no.1 had recorded his
satisfaction under section 132(1). It is
respondent no.4 himself who had issued
summons under section 131(1A) of the
Act after the search. As such there could
not possibly be any material, which can
be the basis of having reason to believe in
respondent no.1. The very fact that
respondents issued notices under section
131 (1A) after the search and seizure
operation under section 132 of the Act
goes to show that there was neither reason
to believe nor material before the
Authorizing officer on the basis of which
he could issue a warrant under section
132 of the Act.

27. It is well settled that before
taking any action under section 132 of the
Act the condition precedent which must
exist should be information in possession
of Director of Income Tax which gives
him reason to believe that a person is in
possession of some article, jewellery,
bullion money which represents wholly or
partly his income which was not disclosed
or would not be disclosed. If the aforesaid
condition is missing the Commissioner or
Director of Investigation will have no
jurisdiction to issue the warrant of
authorization under section 132 (1) vide
Ganga Prasad Maheshwari v. CIT
Allahabad (1983) 139 ITR 1043; Nand
Lal Tahiliani v. CIT (1988) 170 ITR
592; Dr. Sushil Rastogi v. Director of
Income Tax Investigations (2003) 260
ITR 249; Ravi Iron Industries v.
Director of Investigation (2003) 264
ITR 28 and Smt. Kavita Agrawal v.
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1 All] Dr. (Mrs.) Anita Sahai V. Director of Income Tax (Investigation), Kanpur and others 201
Director of Investigation (2003) 264
ITR 472.

28. It is submitted by learned
counsel for the petitioner that a perusal of
Section 132(1) would show that the
scheme of section 132 of the Act
postulates that the mind has to be applied
by two officers at two different stages i.e.
i)
firstly
by
the
Director
of
Investigation or the Commissioner while
issuing a warrant of search on the basis of
his reason to believe that any person is in
possession of any jewellery, ornaments or
money etc. which are believed to be an
undisclosed property; and
ii)
Secondly by the authorized officer
when during the search any particular
jewellery, ornaments or money is found
can be reasonably believed to be an
undisclosed property.

29. Since the authorized officer has
to form an opinion before seizing the
particular ornaments he will necessarily
have to investigate the matter. In the
present case it appears that no such
investigation has been done by the
authorized officer at the time of seizure
and indiscriminate seizure has been made
by it contrary to the guidelines of the
CBDT etc.

30. Learned counsel for the
petitioner has relied on the decisions in
Om Prakash Jindal v. Union of India
(1976) 104 ITR 389; Balwant Singh &
others v. R.D. Shah, Director of
Inspection (1969) 71 ITR 550 (566).

31. In the present case it appears that
there has been an indiscriminate seizure
without any application of mind in as
much as all the books of accounts which
were duly reflected in the balance sheet,
income tax returns, patient case records
which are required for medico legal cases
purposes,
computers
and
other
professionally related documents and
articles
have
been
seized
by
the
department.

32. The respondents are trying to
justify the seizure on the basis of post
search materials, which in our opinion
cannot be legally done. It is a wellestablished law as laid down by the
Supreme Court of India that the order
originally passed cannot be improved by
way of affidavits vide Mohinder Singh
Gill
v.
The
Chief
Election
Commissioner (1978) 1 SCC 405.

33. Learned counsel for the
petitioner has relied on several decisions
of the Supreme Court and this court in
support of his submission that the action
of the respondents was illegal.

In
CIT
v.
Vindhya
Metal
Corporation (1997) 224 ITR 614, the
Supreme Court observed (page 618) :
"Mere unexplained possession of the
amount, without anything more, could
hardly be said to constitute information
which could be treated as sufficient by a
reasonable person, leading to an inference
that it was income which would not have
been
disclosed
by
the
person
in
possession for purposes of the Acts."

34. In Dr. Nand Lal Tahiliani v.
CIT (1988) 170 ITR 592, the Allahabad
High Court held that the averments of
information under section 132 must be in
good faith and there must be rational
relation between the information and the
material and reasonable belief. Mere
rumour of roaring practice and charging
of high rate of fee and living in a posh
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202 INDIAN LAW REPORTS ALLAHABAD SERIES [2004
house, in the absence of any other
material, could not be construed as
constituting information in consequence
of which the director could have reason to
believe that the petitioner had not
disclosed his income or would not
disclose it.

35. The search and consequent
actions of the Department were therefore
held to be illegal. The Supreme Court
dismissed the S.L.P. against this judgment
(see (1988) 171 (St.) 47).

36. In L.R. Gupta v. Union of
India (1992) 194 ITR 32, it was held by
the Delhi High Court that the expression
"information" must be something more
than a mere rumour or a gossip or a
hunch. There must be some material,
which can be regarded as information,
which must exist on the file on the basis
of which the authorizing officer can have
reason to believe that action under section
132 is called for. It was also observed
(therein) : "......an assessee is under no
obligation to disclose in his return of
income all the moneys which are received
by him which do not partake of the
character of income or income liable to
tax. If an assessee receives, admittedly, a
gift from a relation or earns agricultural
income, which is not subject to tax, then
he would not be liable to show the receipt
of that money in his income tax return.
Non-disclosure of the same would not
attract the provisions of Section 132
(1)(c). It may be that the opinion of the
assessee that the receipt of such amount is
not taxable may be incorrect and, in law,
the same may be taxable, but where the
Department is aware of the existence of
such an asset or the receipt of such an
income
by
the
assessee,
then
the
Department may be fully justified in
issuing a notice under Section 148 of the
Act, but no action can be taken under
Section 132 (1)(c)....."

37. In Ajit Jain vs. Union of India
(2000) 242 ITR 302 (Delhi), it was
observed (vide page 311): "the mere fact
that the petitioner was in possession of the
said amount could not straightaway lead
to the inference that it was his undisclosed
income..... The intimation simplicitor by
the CBI that the money was found in the
possession of the petitioner, which,
according to the CBI, was undisclosed, in
our view, without something more, did
not constitute information within the
meaning of Section 132 so as to induce a
belief that the cash represented the
petitioner's income which has not been or
would not be disclosed. A bare intimation
by the police or for that matter by any
person, without something more, cannot
be considered sufficient for action under
Section 132 of the Act, for it would be
giving naked powers to the authorities to
order search against any person and prone
to be abused. This cannot be permitted in
a society governed by rule of law. Even
assuming that the said amount was not
reflected in the books of account of the
company as claimed by the petitioner, the
mere possession of the said amount by the
petitioner could hardly be said to
constitute information which could be
treated as sufficient by a reasonable
person, leading to an inference that it was
income which has not been or would not
have been disclosed by him for the
purposes of the Act, particularly when the
petitioner as well as the company, of
which he was claiming to be the
managing director, were regular assessees
with the Income Tax Department."

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1 All] Dr. (Mrs.) Anita Sahai V. Director of Income Tax (Investigation), Kanpur and others 203
38. In our opinion these decisions
squarely apply to the facts of the present
case. It seems to us that the Department
has
only
acted
on
rumours.
The
petitioners are admittedly leading doctors
in Noida having a huge practice as is
evident from Annexures I, II and III to the
petition. They were regularly assessed to
tax and had filed income tax returns upto
date (vide para 17 to the petition).

39. In paras 17 and 18 of the writ
petition it has been clearly stated that
there existed no material before the
Director
which
could
lead
to
the
formation of reason to believe under
Section 132 (1) for issuance of the
warrant of authorization.

40. In para 16 of the counter
affidavit it is stated that the Additional
Director of Income-tax (investigation),
Ghaziabad and the Joint Director of
Income-tax (investigation), Meerut have
brought material on record and they are
made an analysis which shows that the
petitioner and his wife have been
concealing their income in the income-tax
returns and were in possession of
undisclosed assets. We are of the opinion
that the aforesaid averment is very vague.
When a positive everment is made in the
writ petition that there were no material
which could lead to formation of reason
to believe in the Director for issuance of
warrant of authorization under Section
132 the respondents must in their counter
affidavit give specific details as to what
particular facts and material were taken
into consideration by the Director which
led to formation of reason to believe
under Section 132. This material must be
taken into consideration by the Director at
the time when he issues warrant of
authorization under Section 132. If the
Director considers this material after
issuance of warrant of authorization it will
be illegal, even if the material existed
earlier. In the present case there is nothing
to show that any relevant material was
considered by the Director at the time of
issuing
the
impugned
warrant
of
authorization which led to formation of
reason to believe that petitioners had
undisclosed assets or undisclosed income.

41. No doubt para 16 of the counter
affidavit has mentioned that the Director
has
recorded
satisfaction
note
on
26.2.2002 but the said note has not been
annexed to the counter affidavit, and we
are unaware of its contents. The case was
heard on many dates but yet the
respondents have not filed copy of the
alleged satisfaction note dated 26.2.2002
and hence no reliance can be placed on
the same.

42. It may be mentioned that search
and
seizure
cannot
be
a
fishing
expedition. Before search is authorized
the Director must on the relevant material
have reason to believe that the assessee
has not or would not disclose his income.

43. In our opinion the reason to
believe must exist and must be taken into
consideration
by
the
Director/Commissioner at the time of
issuing of warrant of authorization. If the
reason to believe comes into existence
later i.e. after issuance of warrant of
authorization, then in our opinion the
warrant of authorization and entire search
and seizure will be illegal even if the
material on the basis of which the
Director formed his opinion that there was
reason to believe existed prior to issuance
of warrant of authorization. In the present
case even assuming that there existed
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204 INDIAN LAW REPORTS ALLAHABAD SERIES [2004
relevant material prior to issuance of
warrant of authorization which could
have led the Commissioner to form his
reason to believe under Section 132, it is
an illegal warrant of authorization since
the aforesaid material was taken into
consideration
by
the
Director/Commissioner, subsequent to the
issuance of the warrant of authorization.

44. The decision of this Court in Dr.
Nand Lal Tahiliani vs. CIT (1988) 170
ITR 592, squarely applies to the facts of
the present case.

The aforesaid decision has been
affirmed by the Supreme Court.

45. In view of the above facts the
search and seizure in question is illegal
and is liable to be quashed. We also find
that the prohibitory orders under section
132 (3) read with section 281 B of the Act
expired on 27.2.2003 and no extension is
on the record. Hence the entire seizure
and restraint order relating to the Bank
accounts
in
question
have
become
infructuous and they are directed to be
released forthwith.

46. It is not necessary for us in the
circumstances to decide the additional
point raised by the petitioners challenging
the transfer of the case from NOIDA to
Meerut.

Both these petitions are therefore
allowed.

47. The warrants of authorization
and all proceedings subsequent thereto are
quashed. The cash and other articles and
books seized from the petitioners shall be
returned to them forthwith. Respondents
are directed not to proceed with the notice
dated 9.5.2002 and 26.10.2002.
---------
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 4.3.2004

BEFORE
THE HON'BLE M. KATJU, J.
THE HON'BLE R.S. TRIPATHI, J.

Civil Misc. Writ Petition No. 52305 of 2000

Laxmi Narain Jagdish Saran Kanya Inter
College, Moradabad

...Petitioner
Versus
State of U.P. and others ...Respondents

Counsel for the Petitioner:
Sri Shashi Nandan

Counsel for the Respondents:
Sri N.C. Rajvanshi
Sri Ajit Kumar
Sri R.D. Gupta
Sri M.K. Rajvanshi

Land Acquisition Act- Ss.41 and 48(1)-
Notifications under Ss. 4 and 6 State
government
satisfied
that
petitioner
institution required a play ground for its
students-Thereafter petitioner company
entered into an agreement under S. 41cost while issuing impugned order not
afforded opportunity of hearing held
illegal-petitioner is beneficiaries hence
before withdrawal of acquisition-held,
arbitrary and illegal-Acquisition for a
public
purpose-Possession
for
play
ground given by forthwith.

Held- Paras 11 &16

Admittedly the State Government on
being
satisfied
that
the
petitioner
institution required a playground for its
students issued a notification under
Section 4 of the Act and thereafter after
consideration of the objections issued a
declaration
dated
22.3.1983
under
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