NAND LAL TAHILIANI Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) The petitioner, Professor and Head of the Department of Surgery in Allahabad Medical College and an eminent surgeon, has approached this court for quashing the warrant of authorisation issued under Section 132 of the Income-tax Act and the follow up actions including the search held on May 26, 1987, and to withdraw the restraint order passed under Sub-section (3) of Section 132.

(2.) That May 26, 1987, must have been an ill-omen day in the life of the petitioner, cannot be doubted as, while being busy in preparations for the marriage of his daughter, which was to be solemnised on June 3, 1987, he, to his misfortune, must have found his house raided by as many as twenty-five officials of the Department who carried on the search from 8.30 a.m. to 8.15 p.m. followed by a restraint order sealing lockers and bank accounts and forcing the petitioner to the ignominy of borrowing for the marriage. Whether the proceedings were warranted by law is another matter, but the outcome of the search must have been disappointing to the Department even, as what was found was a mere Rs. 19,000 in cash from the premises of a person who, according to nothings of the Department in consequence of which authorisation was issued, was " known for his roaring practice in this field of medical profession and also for high rate of fee for operations ". Even the jewellery found were 21 pieces of gold ornaments consisting of chains, bangles, rings, a modest possession in a house with three female members. National Saving Certificates of Rs, 1,49,000 included purchases of Rs. 1,03,000 in 1983. Deposits in Unit Trust of India in the name of different members of the family amounted to Rs. 40,000. Two National Saving Certificates of Rs. 10,000 each in the name of two daughters were also found. And the household goods mentioned in the inventory can normally be found in any average family. All this in a family of four doctors, petitioner, his father, wife and son.

(3.) Search and seizure are a common feature of fiscal statutes. Its utility cannot be undermined in a civilised society. But it is capable of being abused as well. That is why the legislation always provides inbuilt safeguards. For instance, the condition precedent for action under Section 132 is the information in the possession of the authority in consequence of which he may have reason to believe that any person was in possession of any money, bullion or jewellery or other valuable articles which represented undisclosed income. How each of them should be understood and what they mean has been explained by courts from time to time, If either of these conditions is missing or have not been adhered to, then the authority is precluded from invoking the powers under this section (see Ganga Prasad Maheshwari v. CIT [1983] 139 ITR 1043 (All)). Information in consequence of which the Director or the Commissioner has reason to believe is the foundation for action. It sets the machinery in motion. Therefore, it has not only to be authentic but capable of giving rise to the inference that the person was in possession of undisclosed income which has not been or would not be disclosed. Reason to believe has been explained in many decisions both under Sections 132 and 148 of the Income-tax Act (see Chhugamal Rajpal v. S.P. Chaliha [1971] 79 ITR 603 (SC), ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC), Ganga Prasad Maheshwari v. CIT [1983] 139 ITR 1043 (All) and Vindhya Metal Corporation v. CIT [1985] 156 ITR 233 (All)). In order that the formation of opinion must be in good faith and not a mere pretence, it is necessary that the information in consequence of which it is formed must be valid and linked with the ingredients mentioned in the section. That is, there must be rational connection between the information or material and the belief about undisclosed income.