M. Katju, J.:— This writ petition has been filed for a writ of certiorari quashing the entire search and seizure proceedings in regard to the jewellery found in locker No. B-237 of the Standard Chartered Grindlays Bank, Karol Bagh, New Delhi, on November 3, 2001, and for a mandamus directing the respondents to return the jewellery seized by respondent No. 3, on November 3, 2001, from the aforesaid locker.

2. Heard learned counsel for the parties. Petitioner No. 1 is the wife of petitioner No. 2. They were married in December, 1990, and petitioner No. 2 is one of the partners of the firm, Lallooji and Sons, at 1, Ram Bagh, Allahabad, which is registered under the Partnership Act. The firm has its offices and godowns at several places as mentioned in para. 8 of the writ petition. The names of the partners are mentioned in para. 9 of the petition. It is alleged that petitioner No. 1 is not a partner of the firm. It is alleged in para. 12 of the petition that the family of petitioner No. 2 consists of three units which reside in their respective separate portions in residential house No. 16/309, Gali No. 10, Joshi Road, Karol Bagh, New Delhi. These three units are:

(i) Petitioner No. 2 his wife and their children,

(ii) Father of petitioner No. 2, namely, Ramesh Kumar Agarwal, and his wife, Madhu Agarwal, and

(iii) Mukul Agarwal (brother of petitioner No. 2), his wife Smt. Ritu Agarwal, and their children.

3. On April 27, 2000, a search was made by the income-tax authorities at the business premises of the firm at its head office at No. 1, Ram Bagh, Allahabad, as well as its other offices and godowns under section 132(1) of the Income-tax Act, 1961. Simultaneously, on April 27, 2000, a search was also conducted at all the aforesaid residential premises of house No. 16/309, Gali No. 10, Joshi Road, Karol Bagh, New Delhi, wherein petitioner No. 2, his parents, and his brother were separately residing in their respective portions. It is alleged in para. 15 of the petition that at the time of the search petitioner No. 2 was told that the warrant of authorisation had been signed by respondent No. 1 and was only in the name of petitioner No. 2. It was not told or informed that there was any warrant of authorisation of search in the name of petitioner No. 1. It is alleged in para. 16 of the petition that no copy of the warrant of authorisation was given to any of the petitioners though it was asked for. The warrant of authorisation was hurriedly shown to petitioner No. 2 for a few, moments. It was got signed by petitioner No. 2. In the pressure and panic of the situation it was not possible for the petitioners to make any note of its contents. In para. 18 it is alleged that petitioner No. 2 had been informed that the premises of the other partners at Allahabad and Lucknow were also searched on April 27, 2000. At the time of search of the aforesaid premises house No. 16/309, Gali No. 10, Joshi Road, Karol Bagh, New Delhi, on April 27, 2000, keys of three lockers Nos. A-906, B-237 and A-701 of the Standard Chartered Grindlays Bank, Karol Bagh, New Delhi, were also found. These lockers were in the joint names of three sets of persons as mentioned below:

(i) Locker No. A-906 was in the name of petitioner No. 2 and Smt. Madhu Agarwal, mother of petitioner No. 2, and wife of Ramesh Kumar,

(ii) Locker No. B-237 was in the name of the petitioners,

(iii) Locker No. A-701 was in the name of Smt. Ritu Agarwal and her husband, Mukul Agarwal (brother of petitioner No. 2).

4. All the aforesaid three keys were seized by the income-tax authorities during the aforesaid search. During the aforesaid search, the income-tax authorities found jewellery, cash and papers in the aforesaid three separate portions of house No. 16/309. The income-tax authorities however did not seize the jewellery and cash found in any of the three portions. Only papers and keys were seized. A copy of the panchanama dated April 27, 2000, along with its various annexures of the inventories as well as seizure of three keys made by the income-tax authorities is annexure 1. Apart from the seizure of the aforesaid keys, a restraint order under section 132(3) of the Act was also passed by the authorised officer of the raiding party against the aforesaid three sets of persons and the manager of the bank in respect of the operation of the aforesaid three lockers. A copy of the restraint order is annexure 2. In para. 25 of the petition it is alleged that it was only from the contents of the panchanama and the restraint order that the petitioners learnt that the warrant of authorisation was only in the name of petitioner No. 2 and it was dated March 28, 2000. On June 22, 2000, a representation was made to respondent No. 2 wherein a complaint was made to respondent No. 1 regarding the infirmities and illegalities of the aforesaid search dated April 27, 2000. A copy of the representation dated June 22, 2000, is annexure 3. An oral request praying for certain papers was made but the same were not supplied. It is alleged in para. 28 of the petition that the restraint order had ceased to be in force after the expiry of a period of 60 days from April 27, 2000, in view of the provisions of section 132(8A) of the Act. On October 11, 2001, petitioner No. 2 applied to respondent No. 3 in writing for the revocation of the restraint order and for release of the keys of the locker vide annexure 4. The application was sent to all the three authorities mentioned in it. Respondent No. 3 issued three letters dated October 16, 2001, asking them to be present in the bank on November 3, 2001, at 10 a.m for the opening of the locker in their presence. A copy of the letter issued to the petitioners is annexure 6. On November 3, 2001, the petitioners, Smt. Madhu Agarwal and Smt. Ritu Agarwal, reached the bank. In the bank there were income-tax authorities headed by respondent No. 3. Prior to the opening of the lockers, for which the petitioner and the other persons had been called, respondent No. 3, told them that he was in possession of a warrant of authorisation to search and seize the contents of the lockers. The petitioners were informed that the search warrant in respect of locker No. B-237 was in the names of the petitioners. However, no copy of the search warrant was given to the petitioners. It was hurriedly shown for a few moments. In the pressure and panic of the situation as had been created by the income-tax authorities in the bank petitioner No. 2 was asked to put his signatures on it. It is alleged in para. 36 that the warrant in the name of the petitioner was not in their capacity as partners of the firm. In fact, petitioner No. 1 is not a partner of the firm. In para. 37 of the petition it is alleged that on November 3, 2001, the three lockers including B-237 were opened. The valuer of the Department was called. The jewellery of petitioner No. 1 found in the locker No. B-237, was valued at Rs. 6,28,861. The entire jewellery was seized. The description of the jewellery was made in annexure J to that panchanama. A copy of that panchanama including its annexures was given to the petitioners. A copy of that panchanama is annexure 7. It is alleged in para. 38 of the petition that locker No. A-906 in the name of Madhu Agarwal and Vipul Agarwal was also opened and inventory of the jewellery was prepared but the same was not seized as per the panchanama. However, the jewellery of locker No. A-701 in the name of Ritu Agarwal and Mukul Agarwal after opening the locker, was inventorised and seized as per the panchanama. Subsequently, respondent No. 3 wrote a letter whereby it has been informed that the restraint order dated April 27, 2000, has been vacated vide annexure 8. It is alleged in para. 43 of the petition that seizure is wholly without jurisdiction and void. It is alleged in para. 44 of the petition that the seizure of the aforesaid jewellery found in locker No. B-237 is a fraud in law in view of the provisions of section 132(8A) of the Act. After the expiry of a period of 60 days the restraint order was wholly illegal and without jurisdiction.

5. A counter affidavit has been filed and we have carefully perused the same.

6. On the facts of the case we are of the opinion that this writ petition deserves to be allowed. The law is well settled that a warrant of search and seizure under section 132(1) can only be issued on the basis of some material or information on which the Commissioner/Director has reason to believe that any person is in possession of money, jewellery or other valuable articles representing wholly, or partly income or property which has not been or would not be disclosed, under the Income-tax Act. In the present case, the respondents have not disclosed what was the material or information on the basis of which the Director/Commissioner entertained the belief that the lockers contained valuable jewellery or other articles representing undisclosed income. It is well settled that the satisfaction of the authorities under section 132 must be on the basis of relevant material or information. The words used in section 132(1) are “reason to believe” and not “reason to suspect”. In the counter affidavit it has been specifically stated in para. 18 that the authorised officer has reason to suspect and not reason to believe.

7. This court in a very recent decision in Dr. Sushil Rastogi v. Director of Investigation, Income-tax Department, [2003] 260 ITR 249, considered the legal position on this point, and has discussed the case law.

8. 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.”

9. 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 a rational relation between the information and the material and the reasonable belief. Mere rumour of roaring practice and charging of high rate of fee and living in a posh 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.

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

11. 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 authorising officer can have reason to believe that action under section 132 is called for. It was also observed (headnote): “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).”

12. In Ajit Jain. v. Union Of India., [2000] 242 ITR 302 (Delhi), it was observed that (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 simpliciter by the Central Bureau of Investigation, that the money was found in the possession of the petitioner, which, according to the Central Bureau of Investigation, 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.

13. 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 had 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.”

14. In Dr. Nand Lal Tahiliani v. CIT, [1988] 170 ITR 592, this court observed (page 597):

“The statement that the Director of Inspection has sufficient material in his possession to believe that the person to whom summons or notice was issued was in possession of money, bullion or jewellery or other valuable articles or things, is a mere reproduction of the section. That is hardly sufficient. If the authorities can be permitted to claim that on ‘consequent inquiries’, they are empowered to take action without keeping on record anything to support it, then it shall be empowering them with naked powers. Inquiries should have been reduced to writing in black and white to enable the Director to discharge the statutory responsibility of issuing an authorisation or warrant after being satisfied that the action suggested was justified and made available to the court to infer that the exercise of power was reasonable, at least. In fact, the Director appears to have mechanically endorsed the report. If the report extracted earlier was sufficient for action under section 132, then the Director could order a search against any doctor of a metropolitan town. Being known for ‘roaring practice’ and for, ‘high rate of fee for operations’ 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. Living in a posh house or posh locality by itself were not material which could result in initiation of proceedings under section 132 of the Act specially when the petitioner is an old assessee. The standard of living maintained by him (petitioner) appears to have been added in the report more, as a recital to add gloss to the recommendation than with any sense of responsibility. What led to this inference is not stated. Not a word has been mentioned in the report, nor could any record, be shown to demonstrate that the standard of living was out of proportion so as to warrant the conclusion that the petitioner was concealing income. Even if the recommending authority had some notions of his own either on personal knowledge or on any inquiry, it should have been made, available to the Director to draw the inference, as the action was to be taken by him. The requirement of ‘reason to believe’ is not an empty formality. The Director and the Commissioner have been authorised to take action as they, being the senior officers of the Department, are expected to project their experience while invoking power under this section. The Director failed to live up to this expectation. He appears to have surrendered his reason to the report made by his Deputy/Assistant Director, which was an attempt to initiate a fishing and roving inquiry for reasons best known to him as he did not consider it proper to place the result of ‘local inquiry’ before the Director.”

15. In Lajpat Rai v. CIT, [1995] 215 ITR 608, a Division Bench of this court held that where the income-tax authorities had no information or material that any valuable asset or documents relating to the company was stored in the locker, they had no justification to proceed with the search and seizure, and the warrant of authorisation in question was passed on irrelevant considerations.

16. In Manju Tandon v. T.N Kapoor, Deputy Superintendent of Police, [1978] 115 ITR 473, a Division Bench of this court held that the expression “reasons to believe” does not mean a purely subjective satisfaction on the part of the authority concerned. The reasons must be held in good faith and they cannot be merely a pretence.

17. In CIT v. Vindhya Metal Corporation, [1997] 224 ITR 614 (SC), the facts were that a resident of Mirzapur was detained while travelling to Calcutta by train, and cash of Rs. 4,63,000 was seized from him by the police on the suspicion that the money was stolen property or had been obtained through some other offence. The Commissioner issued a warrant of authorisation under section 132A(1) of the Income-tax Act. A search was conducted under section 132 of the Act on the premises of the respondent firm. The respondent firm filed a writ petition questioning the validity of the warrant of authorisation issued by the Commissioner under section 132A(1) of the Act. The High Court held that on the information in the possession of the Commissioner, no reasonable person could have entertained a belief that the amount in his possession represented undisclosed income.

18. In L.R Gupta v. Union of India, [1992] 194 ITR 32, the Delhi High Court held that the information under section 132 must be more than gossip, rumour or hunch. The existence of tangible material is the pre-requisite to warrant satisfaction under section 132. This view was followed in Ajit Jain. v. Union Of India., [2000] 242 ITR 302 (Delhi). In the present case averments have been made in paras. 45 to 48 of the writ petition that there was no material on the basis of which there could be a reason to believe that the valuables in locker No. B-237 in the Standard Chartered Grindlays Bank, Karol Bagh, New Delhi, represented undisclosed income. These averments have not been replied to at all in paras. 34 to 36 of the counter affidavit. It may be mentioned that the material on the basis of satisfaction under section 132 has to exist must be material brought to the knowledge of the Commissioner/Director prior to the search, and the authorities cannot rely on material found during the search.

19. For the reasons given above the writ petition is allowed. The entire search and seizure proceedings in regard to the jewellery found in locker No. B-237 of the Standard Chartered Grindlays Bank, Karol Bagh, New Delhi, are quashed and the respondents are directed to return the jewellery forthwith to the petitioners.