The Delhi High Court recently confirmed the uninformed search & seizure conducted by the Revenue Department under Section 132 of the Income Tax Act on Vault Lockers containing jewellery & bullion jewellery, owned by the petitioners and their family members, after finding that the Department had sufficient “reasons to believe” that benami and undisclosed income & assets, chargeable to tax, had escaped assessment.
The Division Bench comprising Justice V. Kameswar Rao and Justice Saurabh Banerjee observed that the formation of opinion and the “reasons to believe” recorded in the case of search under Section 132(1) of the Income Tax Act are not a judicial or quasi-judicial function but an administrative function. As such, the sufficiency of the information for forming the reasons to believe is not for a Writ Court to examine, and the only scope for judicial review in such matters is to examine if, in fact, there exist reasons to believe or not.
The Bench found that a discreet enquiry revealed that there is a general tendency observed in private lockers inasmuch as though the lockers would appear to be in the name of a person, but the actual beneficiary or owners would be different. In terms of this discreet enquiry, many lockers of a benami nature were revealed, which were owned by ‘persons of low means or no means. Out of these, some of the petitioners having no substantial financial assets or any substantial income, raised suspicion that the petitioners would potentially have wealth, which is unexplained or unaccounted.
Speaking for the Bench, Justice Rao pointed out that the submission that the petitioners are regular filers of income tax, and no authorisation was obtained to search the residential or business premises, or the searches were done with a predetermined mind and were fishing enquiries, shall have no bearing and will not save the petitioners, when the record clearly establishes benami lockers owned by persons having low income. The Bench therefore dismissed the petition in favour of the Revenue Department.
Briefly, in this case, a search & seizure was conducted under Section 132 of the Income Tax Act on Vault Lockers owned by the petitioners and their family members, based on the Warrant of Authorisation. It was claimed that although most of the valuables seized were disclosed incomes or are ancestral property, and part of the jewellery belonged to the minor daughter, and some belonged to the elder daughter, who had given it for safekeeping to her parents, as she is residing out of India, no compliance was made with clauses (ii) and (iii) of the CBDT Instruction No. 1916 issued on May 11, 1994.
Cases Distinguished:
Income-Tax Officer v. Seth Brothers and Ors. (74 ITR 836)
Echjay Industries Pvt. Ltd. Vs Director of Income Tax-II, Writ Petition No. 122/2009
Appearances:
Advocate Arvind Kumar, for the Petitioner/ Taxpayer
Advocate Sanjay Kumar, for the Respondent/ Revenue
