NARAYAN R BANDEKAR Vs. INCOME TAX OFFICER SECOND

JUDGEMENT

(1.) WRIT Petition No. 88 of 1986 is filed by Narayan R. Bandekar, while Writ Petition No. 89 of 1986 is filed by his wife, Mrs. Manda Bandekar, and both the petitions can be conveniently disposed of by a common judgment as the controversy raised in both the petitions is identical and arises out of the same set of facts.

(2.) NARAYAN Bandekar and his wife are permanent residents of Goa and are assessed to income tax and wealth tax for several years. Bandekar and his wife had floated several private limited companies like Harwan Investment & Trading (P) Ltd. Gulmarg Investment & Trading (P) Ltd. Bandekar Speciality Valve Corporation, Super Prints, Vasco, and Rashmi Enterprises, Vasco, Harwan Investment & Trading (P) Ltd. and Gulmarg Investment & Trading (P) Ltd. are registered in the State of Jammu and Kashmir and the registered offices of these two companies are situated at Srinagar, while it is not in dispute that the entire business carried on by these companies is in Goa. All these private companies are exclusively held by Bandekar, his wife and his children. The residential as well as the business premises of the Bandekars were searched between 3th Dec., 1985, and 2nd Jan., 1986, by the IT authorities in consequence of an order passed by the CIT, respondent No. 3. During the search, fixed deposit receipts in the names of private companies held by the Bandekars and in the names of some other persons to the tune of Rs. 30,01,504 were recovered. Out of these, fixed deposit receipts for Rs. 10,15,000 were standing in the name of Harwan Investment & Trading (P) Ltd., while of Rs. 16,01,000 in the name of Gulmarg Investment & Trading (P) Ltd. In addition to the fixed deposit receipts, cash of Rs. 60,000 and jewellery valued approximately at Rs. 12,00,000 was recovered. After search and seizure, the Second ITO, Panjim, respondent No. 1 to the petitions, issued notice dt. 16th Jan., 1986, in exercise of the power under r. 112A of the IT Rules. 1962, to Bandekar and his wife calling upon them to show cause why an order contemplated under S. 132(5) of the IT Act, 1961 (hereinafter referred to as "the Act"), should not be passed, After the Bandekars showed cause and were heard the order dt. 29th April, 1986, came to be passed. The second ITO held that the total undisclosed income for the asst. yrs. 1977 78 to 1986 87 amounts to Rs. 73,73,357 and penalty leviable under S. 271(1)(c) of the Act would be Rs. 1,47,46,714. The ITO directed that as the assets seized are valued at less than the penalty and tax leviable, the same are required to be retained for the purpose of appropriation under S. 132B of the Act. The order was passed after securing the previous approval of the IAC, Goa Range, Panaji. An order was also passed by the ITO against Mrs. Bandekar, though for a different amount. These orders are under challenge in these petitions filed under Art. 226 of the Constitution of India.

(3.) IT was observed that the reason for the formation of the belief must be held in good faith and should not be a mere pretence. Reference was also made to the decision of the Supreme Court in Madnani Engineering Works Ltd. (1979) 12 CTR (SC) 144 : (1979) 118 ITR 1 (SC) : TC51R.725 to urge that it is not enough for the ITO to claim that material was available on the basis of which a reasonable belief could be reached. The Court must be satisfied, if a contention is raised that such material was available and from which a reasonable belief could have been reached. Shri Sathe very fairly stated that in view of the catena of decisions, it was not incumbent upon respondent No. 3 to furnish the material or the information available on which respondent No. 3 proceeded to direct search of the premises. Shri Sathe submitted that this Court should ascertain whether there was material on which a reasonable belief could have been reached that search was necessary in exercise of powers under S. 132 of the Act. We called upon learned counsel appearing for the Department to produce the file to ascertain whether exercise of power was just and proper, and on perusal of the file, we have no hesitation in concluding that exercise of power by respondent No. 3 could not be faulted. The Asstt.Director of Inspection III had submitted a note on 24th Feb., 1985, to respondent No. 3 drawing attention to three anonymous petitions dt. 26th Oct., 1984, 15h Nov., 1984, and 22nd Feb., 1985. The petitions set out the allegation against Bandekar and his wife and the manner in which the income was made and not disclosed to the IT authorities. The Asstt.Director of Inspection, in his note to respondent No. 3, opined that the contents of the anonymous petitions require investigation and unless powers are exercised under S. 132, there is every likelihood that the account books or the undisclosed assets would not be traced. On the strength of the note prepared by the Asstt.Director of Inspection, respondent No. 3 perused the three petitions received and also held conference with the Asstt.Director of Inspection and thereafter came to the conclusion that exercise of powers under S. 132 is necessary. We are unable to find any infirmity in the conclusion reached by respondent No. 3. Considering the extensive information and detailed scrutiny and analysis undertaken, the conclusion is inescapable that the belief formed by respondent No. 3 was genuine and authentic. It must be remembered that exercise of power under S. 132 of the Act is not a judicial or quasi judicial exercise and it is not possible to sit in appeal over that exercise while exercising power under Art. 226 of the Constitution. It must be borne in mind that resort to power under S. 132 is required when the CIT, who is a senior officer, comes to the conclusion that but for directing search of the premises, the undisclosed income or accounts in respect of that income would not be available to the IT authorities. In our judgment on that facts and circumstances of the case, it is impossible to conclude that the exercise of power was in any manner defective.