The Jodhpur Bench of Rajasthan High Court has clarified that under Section 75 of the Rajasthan Value Added Tax Act, 2003 read with Rule 51 of the Rajasthan Value Added Tax Rules, 2006, search of residential premises is legally permissible where there exists material giving rise to a reasonable belief that business is being carried on there, accounts are being kept there, or concealment of business-related facts is suspected there; the statute does not create any absolute bar between business premises and residential premises.
The Court held that a common authorization/order for search of business and residential premises is not invalid merely because it is common, provided reasons are recorded in writing as required by Rule 51; a separate order for the residential premises is not mandatory.
The High Court laid down that while reasons may not be reflected in the face of the search order itself, the action will not be vitiated if the record produced before the Court demonstrates the existence of tangible material on the basis of which the authority could form the requisite suspicion or belief. In the present case, the anonymous complaint, the inquiry reports, the common family control of multiple firms in similar business, prior proceedings alleging tax evasion, and the recovery of business-related documents from the residential premises were held sufficient to sustain the search and seizure action.
Accordingly, the respondent authorities were directed to conclude the assessment proceedings for the year 2012–13 on the basis of the survey and search conducted on Nov 03, 2012 at the business premises and residential premises of the proprietors, and before concluding the assessment proceedings, to provide copies of the seized documents to the petitioners and afford them an opportunity of hearing.
The Division Bench comprising Justice Arun Monga and Justice Sunil Beniwal accepted the proposition that the assessing authority cannot undertake a roving and fishing inquiry or resort to search and seizure unless it has reason to suspect tax evasion or avoidance of tax liability. It further observed that search and seizure require a high degree of confidentiality, and therefore the real question is whether there was some supporting material to justify formation of suspicion or belief.
On the material before the authority, the Bench found that the complaint, the fact that multiple firms were registered by one family, the similarity of business activities, and the earlier proceedings alleging tax evasion together constituted sufficient material to raise suspicion and furnish reason to believe that there was a strong possibility of tax evasion or avoidance of tax liability by the petitioner-firms.
As to residential premises, the Bench observed that Section 75 does not prohibit search of residential premises as such, but the statutory requirements must be strictly fulfilled. It specifically held that Section 75(1)(a), (d), and (e) permit action not merely at the business premises but also at “any other place” where business is believed to be conducted, accounts kept, or concealment of business facts suspected.
The Bench further observed that Rule 51 requires reasons to be recorded before conducting search and seizure, but does not require a separate order specifically for residential premises. Therefore, a common order for business and residential premises is permissible so long as reasons are recorded in writing.
Applying that standard, the Bench found that the residential premises were not unconnected third-party locations; they belonged to the proprietors or their family members, who operated multiple firms engaged in similar businesses. In that factual setting, prior proceedings for tax evasion and interrelationship between the firms and proprietors constituted relevant material for a reasonable belief that business records could be kept or concealed there. The subsequent recovery of business-related documents further substantiated the formation of such belief.
Briefly, the petitioner-firm was a proprietorship engaged in manufacture and sale of sugar candy, sugar rewari, etc. An anonymous complaint alleged that six firms were engaged in tax evasion running into crores of rupees. After an internal inquiry, the impugned order was passed and, on the same day, search was carried out at both the business premises and the residence of the proprietor, with documents seized from the residential premises.
The petitioners contended, in substance, that under Section 75(1)(a) of the Rajasthan Value Added Tax Act, 2003, inspection or survey could be conducted at the place of business or any other place only where the authority believed that business was being carried on or books of account were being kept there; therefore, in the absence of material showing business activity or books at the residence, search of the residential premises was without jurisdiction. They also argued that Rule 51(1)(a) of the Rajasthan Value Added Tax Rules, 2006 required reasons to be recorded, but neither the search memo nor the seizure memo disclosed the requisite reasons, and that the entire action rested only on suspicion generated by an anonymous complaint.
The respondents relied on the anonymous complaint, and the fact that the residential premises stood disclosed in the registration materials as the residences of the proprietors. They contended that Section 75(1) permits inspection not only at the place of business but also at any other place where there is reasonable belief that business is being conducted or books are kept, and that reasons for seizure were recorded in the seizure memo. They further stated that when the officers reached the premises, they saw a packet containing documents in the name of “Nagad Narain” through a glass window, and due to non-cooperation of the petitioner, the search and seizure proceeded.
Appearances:
Lokesh Mathur and Prakash Kumar, for Petitioner/ Taxpayer
AAG Mahaveer Bihsnoi, Harshwardhan Singh and Anirudh Singh Shekhawat, for Respondent/ Revenue
