Matter No. 238 of 1979

Decided on January 27, 1981

The Judgment of the Court was delivered by

Sabyasachi Mukharji, J.:— In this application under art. 226 of the Constitution of India the petitioner challenges the searches at his place of business as well as at his residence and the seizure of certain jewellery, books, papers, documents and money, etc., and asks for the orders cancelling such searches under s. 132 of the I.T Act, 1961, and certain other consequential orders.

2. The petitioner carries on, according to the petitioner, business since 1957 and states that he had been furnishing his returns regularly and was being assessed to income-tax as such. The petitioner carries on business at No. 6, Karballa Mohammed Street, Calcutta, which falls within the territorial jurisdiction of the Commissioner of Income-tax, West Bengal-X, being the respondent No. 4, and his subordinate Income-tax Officer, D-Ward, District IV(1), Calcutta, respondent No. 5. The petitioner at all material times and even now resides at No. 6, Dr. Rajendra Road,. Calcutta. On the 12th January, 1977, the Director of Inspection, being respondent No. 1, issued a warrant of authorisation under s. 132(1) of the I.T Act, 1961, to search the petitioner's residence and office and seize the books, documents, jewellery, cash, etc. I shall have occasion to refer to the authorisation for search, because arguments have been advanced on the said authorisation. On the 14th January, 1977, the Assistant Director of Inspection, being the respondent No. 2, searched the petitioner's residence No. 6, Dr. Rajendra Road, Calcutta, and seized therefrom cash amount, fixed deposit receipts, jewellery and ornaments, including the jewellery and ornaments of the female members of his family, and Godrej lockers. Also the petitioner's office was searched and the books of account, documents and cash were seized on the same date. On the 29th January, 1977, the Assistant Director of Inspection seized two lockers, being lockers Nos. 17-N and 18-N, at Allahabad Bank, Chowringhee branch. These jewelleries, according to the petitioner, belonged to his daughter-in-law and grand-daughter. On the various dates, viz, on 10th February, 1977, 24th February, 1977, 25th February, 1977, and 5th March, 1977, the petitioner had applied, according to the petitioner, to the ITO, being the ITO, A-Ward, District 1(2), Calcutta, demanding a copy of the reasons recorded by the Director of Inspection to enable the petitioner to understand whether the conditions precedent to the search and seizure were fulfilled or not. On the 19th March, 1977, respondent No. 3 informed the petitioner that the petitioner was not entitled to know the reasons and on 29th March, 1977, according to the petitioner, the petitioner was advised that respondent No. 3 had no jurisdiction to deal with his case and hear objections. Thereupon on 1st April, 1977, the petitioner received a notice under r. 112A(1) of the I.T Rules, 1962, from the ITO, D-Ward, District IV(2), Calcutta, being respondent No. 4, within whose jurisdiction the petitioner carried on his business. But the petitioner alleges that such notice was out of time. On the 13th April, 1977, respondent No. 5 made a summary assessment under s. 132(5) treating the value of all the assets seized as concealed income of the petitioner and computed the purported total income of Rs. 5,82,144 and treated the same as assessable for the financial year 1976-77, and levied tax and penalty thereon of Rs. 7,06,458. I will have occasion to refer to the said order later. On the 16th May, 1977, the petitioner filed various objections before the Commissioner, respondent No. 4, demanding, inter alia, a copy of the reasons recorded by the Director of Inspection. On the 7th April, 1977, the petitioner states, the petitioner having come to know that the Central Board had transferred the case to ‘the ITO, Central Circle-XXIII, the petitioner demanded a copy of the said order. On the 14th October, 1977, the petitioner received a copy of the order of transfer. According to the said order, the said transfer was made from ITO, A-Ward, District 1(2), to the ITO, Central-XXIII/Calcutta. No opportunity, according to the petitioner, was given to the petitioner prior to the transfer. So it was contended that the transfer was not valid. On 24th January, 1978, the petitioner requested the Commissioner, West Bengal-X, being respondent No. 4, to hear and dispose of his objections and release the said cash and jewellery. Respondent No. 4 replied that he had no such jurisdiction to hear the said objections. On the 14th February, 1978, the petitioner applied to the Director of Inspection to supply him with a copy of the reasons recorded for the search and seizure. The petitioner thereupon moved an application under art. 32 of the Constitution before the Supreme Court of India, inter alia, challenging the proviso to s. 127 of the Act. It has been alleged by the petitioner in para. 32 of the present petition before me that the said petition came up on 18th April, 1978, for a preliminary hearing before the Supreme Court of India before a Bench consisting of Fazal Ali J. and Kailasam J. The petitioner further asserts that the petitioner's counsel, with the leave of the court, withdrew the petition, in the words of the, petitioner, “in view of (as pointed out by the hon'ble court) that your petitioner did not move this hon'ble court under article 226 and that the objections had not been disposed of by the Commissioner of Income-tax under section 132(11) of the Income-tax Act, 1961”. The petitioner, on 29th July, 1978, applied to respondent No. 4 to dispose of the objections and release the jewellery. On the 30th July, 1978, the petitioner received the letter from the Director of Inspection that he was not entitled to the copies of the reasons recorded by him. On the 1st August, 1978, the Commissioner, Central, being the respondent No. 6, extended the period of retention of the seized assets till 30th June, 1979. On 1st and 8th December, 1978, the Commissioner, West Bengal-X, being respondent No. 4, at the instance of respondent No. 8, heard the petitioner's objection under s. 132(11) of the I.T Act, 1961. The petitioner, inter alia, demanded a copy of the reasons recorded by the Director of Inspection for the search and seizure. Respondent No. 4 overruled all the objections and retained the jewellery on 28th December, 1978. On the same date, respondent No. 7 viz., the ITO, Central Circle-XXIII, assessed wealth-tax on the value of the seized jewellery for the assessment years 1971-72, 1972-73, 1973-74 and 1974-75, and on 29th January, 1979, the respondent No. 7 assessed the petitioner for the assessment year 1976-77 to income-tax, but he did not include the purported value of the seized jewellery in the total income in the regular assessment. On 26th February, 1979, the petitioner demanded release of the said jewellery and on 2nd March, 1979, the ITO informed that the value of the jewellery related to the financial year 1976-77, by which he meant the accounting year. On the 28th March, 1979, this application was moved in this court and a rule nisi was obtained. There were several contentions urged in support of this application. But before I deal with these, one contention may be disposed of first, viz., according to the petitioner by the purported order dated 30th May, 1977, under s. 127 of the I.T Act, 1961, the Central Board had transferred the case of the petitioner from the ITO, A-Ward, District I(2), to the ITO, Central Circle-XXIII. But the petitioner states that at that time the ITO, D-Ward, District IV(1), the respondent No. 4, was not in seisin of the case and the petitioner's objection made under s. 132(8) was pending before the ITO, West Bengal X, who disposed of the same by his order dated 27th December, 1978. The transfer order was thus, according to the petitioner, invalid and that is the point urged before me that the ITO, Central Circle-XXIII, was not competent to make the assessment or to make the counter-affidavit. In the premises, the assessment order made by respondent No. 5, the ITO, D-Ward, District IV(1), and the confirmation thereof made by the Commissioner, West Bengal-X, is totally misconceived and without jurisdiction. In view of the order annexed to the affidavit-in-opposition being the order transferring the case under sub-s. (1) of s. 127 of the I.T Act, 1961, and the corrigendum issued on the 9th September, 1977, and the communication dated 21st June, 1979, and the corrigendum dated 27th August, 1977, and the further corrigendum dated 31st August, 1977, read with the order dated 30th May, 1977, in my opinion, this contention that when the order of transfer was made from an officer over whom the petitioner had no jurisdiction can no longer be sustained. The said orders of transfer and the corrigendum issued thereunder were all produced before me and certified copies had been filed in this proceeding and I direct that the certified copies of such bundle of corrigendum which I am marking annex. “A” be filed and kept on record of this matter.

3. While on this aspect, however, there was another aspect urged on behalf of the petitioner, viz., that the proviso to s. 127(1) which permitted certain transfers without giving an opportunity of hearing to the parties concerned in certain circumstances was ultra vires. Section 127, proviso, states that the requirements of sub-s. (1) of the said section, which enjoined the giving of a notice in certain cases, was not required to be fulfilled if the transfer was made from “any Income-tax Officer or Income-tax Officers (with or without concurrent jurisdiction with the Inspecting Assistant Commissioner) to any other Income-tax Officer or Income-tax Officers (whether with or without concurrent jurisdiction with the Inspecting Assistant Commissioner) and the offices of such officers are situated in the same city, locality or place”. On this point, two aspects were argued before me.

4. It was further urged that read properly the expressions “place” or “locality” should be read in conjunction and not in contradistinction to the city or locality. In other words, it was sought to be argued that it should be read in such a manner as to mean that a notice would also be required to be given even if the transfer took place within the same city or locality or place. Otherwise, it was submitted, there would be discrimination between the other kinds of transfer contemplated by the main provision of sub-s. (1) of s. 127 and the proviso, and the proviso would, therefore, become discriminatory. On that basis it was urged that it is a proper canon of construction that the proviso should be so construed as to be consistent with the constitutional requirement and not to lead to unconstitutionality. In this connection the main purpose of introducing this proviso as well as introducing the requirements of sub-s. (1) of s. 127 was stressed before me. Attention was drawn to the decision of the Supreme Court in the case of Bidi Supply Co. v. Union of India, [1956] 29 ITR 717. This was under s. 5(7A) of the Indian I.T Act, 1922, where at p. 722 of the report the purpose of introducing sub-s. (7A) in s. 5 was mentioned and it was further stressed that before making an order of transfer the authority was required to apply his mind.

5. Reliance was also placed on the decision of the Supreme Court in the case of Pannalal Binjraj v. Union of India, [1957] 31 ITR 565. Learned advocate for the petitioner drew my attention to the observation of the court at p. 580 of the report where the court noted that primarily an assessee was entitled to be assessed by the ITO of the particular area where he resided or carried on business. There might be exceptions but the power of transfer should be exercised within the four corners of the statute. At p. 589 of the report, the court held that s. 5(7A) of the Indian I.T Act, 1922, was not violative of art. 14 of the Constitution and also did not impose any unreasonable restriction on the fundamental right to carry on trade or business enshrined in art. 19(1)(g) of the Constitution. The court further stressed that if there was any abuse of power it could be remedied by appropriate action and struck down. The court also cautioned that when any question arose under s. 64 as to the place of assessment was to be determined by the Commissioner or Commissioners or by the CBR, as the case may be, the assessee should be given an opportunity under s. 64(3) of representing his views before any such question was determined. The court noted that if an opportunity was given to the assessee in such cases it was all the more surprising to find that, when an order of transfer under s. 5(7A) was made transferring the case of the assessee from one ITO to another irrespective of the area or locality where he resided or carried on business, he should not be given such an opportunity. There was no presumption against the bona fides or the honesty of an assessee and normally the I.T authorities would not be justified in refusing to an assessee a reasonable opportunity of representing his views when any order to the prejudice of the normal procedure laid down in s. 64(1) and (2) of the Act was sought to be made against him.

6. Reliance was also placed on the observation of the Supreme Court in the case of Kashiram Aggarwalla v. Union of India, [1965] 56 ITR 14. The Supreme Court noted that in exercise of its powers under s. 127(1) of the I.T Act, 1961, the CBR passed orders directing that the income-tax proceedings pending against the assessee be transferred from the ITO of one ward to the ITO of another ward in the same city without recording any reason therefor. The orders were purely administrative in nature, passed in consideration of convenience of the department and no possible prejudice could be involved in the transfer. Under the proviso to s. 127(1), it was not necessary to give the assessee an opportunity to be heard and there was consequently no need to record reasons for the transfer. The orders for the transfer were, therefore, not invalid on the ground that the Board had not recorded its reasons in directing the transfer of the case.

7. Reliance was, however, placed on the observations of the court at p. 19 of the report. The ground stated for the transfer was “intensive investigation”. In this connection reliance was placed on the decision of the Madhya Pradesh High Court in the case of Sagarmal Spinning and Weaving Mills Ltd. v. CBDT, [1972] 83 ITR 130. There the explanation was given: “transfer was made for facility of investigation” and the court was of the view that facility of investigation should not be a sufficient reason for transfer. With great respect I am unable to accept this conclusion. In appropriate cases facility of investigation or the requirement of investigation could be a valid and substantial ground for transferring the case from one officer to another.

8. Reliance was also placed on the observations in the case of Ajantha Industries v. CBDT, [1976] 102 ITR 281, where the Supreme Court noted that the requirement of recording reasons under s. 127(1) of the I.T Act, 1961, for the transfer of a case from one ITO to another, was a mandatory direction under the law and non-communication thereof to the assessee was not saved by showing that the treasons existed in the file although not communicated to the assessee. Recording of reasons and disclosure thereof were not a mere idle formality. When law required reasons to be recorded in a particular order affecting prejudicially the interests of any person, who could challenge the order in court, it ceased to be a mere administrative order and the vice of violation of the principles of natural justice on account of omission to communicate the reasons was not expiated. Where, after giving an opportunity to the assessee for a proposed transfer of their case for “facility of investigation” from the ITO at Nellore to an ITO at Hyderabad, the Central Board passed an order under s. 127(1) of the I.T Act, 1961, transferring the case, but in the order served on the assessee no reasons were recorded or communicated, it was held that the order was infirm and bad.

9. It may be mentioned, the facts of this case fall within the main part of sub-s. (1) of s. 127. There was no scope for the application of the proviso. In view of the ratio of the Supreme Court in the previously noted decisions, which I have mentioned hereinbefore, in the case of a transfer within the same city, the ratio of the said judgments cannot, therefore, be applied in full force. In this connection reference may be made to a decision given by me in the case of Cachar Plywood Ltd. v. ITO, [1977] 109 ITR 470 (Cal), where an assessee-company had challenged the order of the CBDT transferring its case from the ITO, Karimganj, to the ITO, Central Circle, Calcutta, by an application under art. 226 of the Constitution on the ground that no opportunity was given to the petitioner, and, secondly, no reason was recorded for the transfer, and thirdly, that the order was mala fide. It was held that the reasons for the transfer of the case were to facilitate the investigation as the petitioner belonged to a group of companies and the reasons were recorded and notice was issued to the petitioner-company. After the reply of the petitioner-company was received, it was effected. In those circumstances, it was held that it could not be suggested that the conditions precedent for the transfer were not complied with. There, the conditions precedent were the recording of the reasons, the giving of the notice and, furthermore, there, the court found that the assessee had contended that it had no objection. In that view of the matter I am unable to accept the contentions challenging the transfer under s. 127(1) of the Act and the impugned order of assessment passed on that ground.

10. It is now necessary for me to consider the other aspect of the matter. But before I do so it is necessary, in view of the arguments advanced before me, to set out the authorisation and the relevant portions of the assessment order. The authorisation under s. 132 of the I.T Act, 1961, and r. 112(11) of the I.T Rules, 1962, read as follows:

“if a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 131 of the income-tax Act, 1961, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of the income-tax Act, 1961, is issued to Dwarka Prasad Agarwalla, 6, Dr. Rajendra Road, Calcutta, to produce, or cause to be produced, books of account or other documents, which will be useful for or relevant to, proceedings, under the Indian Income-tax Act, 1922, or under the income-tax Act, 1961, he would not produce or cause to be produced such books of account or other documents as required by such summons or notice;

Sarbsree/Shri/Shrimati—Dwarka Prasad Agarwalla—are/is in possession of any money, jewellery, bullion, or other valuable articles or things and such money, bullion, jewellery, or other valuable articles or things represent either wholly or partly income or property which has not been disclosed or would not be disclosed for the purpose of the Indian Income-tax Act, 1922, or the Income-tax Act, 1961;

And whereas I have reason to suspect that such books of accounts other documents, bullion, jewellery, money or other valuable article or thing have been kept and are to be found in the premises at 5 & 6, Karbala Mohammad St., Calcutta,

(Specific particulars of the building/place/vessel/vehicle/aircraft.)

This is to authorise and require you (as on reverse)

(a) to enter and search the said building/place/vessel/vehicle/aircraft;

(b) to search any person who has got out of, or is about to get into, or is in the building/place/vessel/vehicle/aircraft, if you have reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery, or other valuable article or thing;

(c) to place identification marks on such books of account and documents as may be found in the course of the search and as you may consider relevant to be useful for the proceedings aforesaid and to make a list thereof together with particulars of the identification marks;

(d) to examine such books of account and documents and make or cause to be made, copies or extracts from such books of account and documents;

(e) to seize any such books of account, documents, money, bullion, jewellery or other valuable article or thing found as a result of such search and take possession thereof;

(f) to make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing;

(g) to convey such books of account, documents, money, bullion, jewellery or other valuable article or thing to the office of the Inspecting Assistant Commissioner of Income-tax or any other authority not below the rank of Income-tax Officer employed in the execution of the Income-tax Act, 1961; and

(h) to exercise all other powers and perform all other functions under section 132 of the income-tax Act, 1961, and the Rules relating thereto.

(Sd.) Illegible,

14-1-77.”

11. Similar authorisations were issued in respect of the other partners as well as in respect of the other searches which are the subject-matters of challenge in the two subsequent rules. A contention was urged relying on the authorisation annexed to the affidavit-in-opposition that the authorisation was only in respect of premises No. 6, Karbala Mohammad Street, Calcutta, and not in respect of premises No. 6, Dr. Rajendra Road, Calcutta. The other authorisations in respect of other premises were produced before me and having looked at the said authorisation and having looked to the averments made in the petition it appears to me that there is no dispute that authorisations for searches in respect of both the premises at 6, Karbala Mohammad Street, as well as premises No. 6, Dr. Rajendra Road, Calcutta, were issued. Therefore, the contention that the search of No. 6, Dr. Rajendra Road, was illegal and without authority cannot be accepted.

12. It is, however, necessary to consider the other contentions of the petitioner on this aspect. It was contended on behalf of the petitioner that three conditions must be satisfied before the Director of Inspection could take action under s. 132(1), and the conditions were as follows: (i) There must be a proceeding pending or completed concerning the assessee under the Act, (ii) there must be information in the possession of the Director of Inspection and in consequence of such information he had reason to believe that the assessee was in possession of money, jewellery, valuable thing, etc., which represented either wholly or partly his income and such income was not disclosed by him or would not be disclosed by him and such thing is necessary for the purpose of assessment, and (iii) the Director of Inspection must record the reasons for his belief and specify the things noted. Unless these conditions were fulfilled, there could not be a valid exercise of the power under s. 132(1) of the I.T Act, 1961, and if the conditions precedent for the said exercise of power were not fulfilled, the exercise of the power was not valid.

13. In this connection, it appears that the reasons recorded were not supplied to the petitioner. When the matter came before the court, I had directed that the copy of the reasons should be supplied to the petitioner. Such reasons have been annexed to the affidavit of Narayan Prasad Agarwalla which has been affirmed on 12th June; 1980, and such reasons were supplied by a letter dated 9th April, 1980, written on behalf of the Central Govt. to the advocate-on-record of the petitioner. It is material to set out the said reasons:

“There is specific information that Shri Dwarkaprasad Agarwalla and his two sons, N.P Agarwalla and B.P Agarwalla, of 6, Dr. Rajendra Road, Calcutta, who are carrying on business in chemicals, fertilisers and mineral powders, have accumulated huge unaccounted money by manipulation of their books of a/c and are keeping the same in the form of cash, jewellery and concealed stock of raw materials and finished goods at their godowns and factory. The above mentioned persons are partners in the following concerns:

1. M/s. Ashok Chemical Industries.

2. M/s. Bharat Export & Import Co.

3. M/s. Minerals, Metals Fertilisers & Chemical Corpn.

4. M/s. Bihar Paints & Chemical Corpn.

The offices of all these concerns are located at 6, Karbala Mohammad Street (1st floor), Calcutta. The factory of M/s. Ashok Chemical Industries is situated at Uttarpara. Several godowns have also been found out at 8 & 11, Nather Bagar Street, Ahiritolla, Calcutta, and 5, Karbala Mohammad Street, Calcutta.

I have made discreet enquiries in this case, and I am of the opinion that a substantial amount of unaccounted cash and jewellery can be recovered from the residence and office of the above persons/concerns, if action u/s. 132 is taken in this case. Huge discrepancy in stock is also likely to be found out at the godowns and factory of the concerns.”

14. Thereafter it was stated that if the D.I was satisfied he might issue warrants of authorisation in the names of the persons mentioned therein. These reasons, it appears to me from the order-sheet produced before me, were signed by the A.D.I (Inspection) and the Commissioner who is the Director of Inspection issued the authorisations on the basis of these reasons. Therefore, on behalf of the Revenue, these were the reasons which were recorded in compliance with the provisions of s. 132. Subsection (1) of s. 132 enjoins that before a search could take place the Director of Inspection in consequence of information in his possession (underlined* by me) has reason to believe the factors mentioned in the different clauses of s. 132(1) of the Act. Now, therefore, there must be reason to believe and that reason to believe must be in consequence of information in his possession. In the reasons which were placed before the Commissioner which were supposed to be the grounds there is a mention in the first paragraph that there was “specific information” that the petitioner and his two sons had accumulated huge unaccounted money by manipulation of their books of account and were keeping the same in cash, jewellery, concealed stock of raw materials and finished products at their godowns or factory. There is no mention as to what was the specific information, neither the source nor the credibility nor the content of the information. Thereafter, the reasons proceed to point out that the offices of these concerns are located at the addresses given. Thereafter, the officer proceeds to note: *I have made discreet enquiries in the case, and I am of the opinion that a substantial amount of unaccounted cash and jewellery can be recovered from the residence and office of the above persons if action under s. 132 was taken in this case. The nature of the enquiry, discreet or otherwise, the source from which such enquiries were made were not in the reasons recorded. The A.D.I has expressed the view that he was of the opinion that a substantial amount of unaccounted money and cash and jewellery could be recovered from the above persons. The section, however, enjoins that the opinion and the reasons must be found by the Director of Inspection. He may, however, do so from the information supplied by the subordinate authority. But he cannot, in my opinion, delegate the function of formation of the opinion to his subordinate authority. In this background could it be said that these reasons, if without anything being placed before the appropriate authority, could be said to be such information which could lead him to form a belief as to these matters contemplated under the different clauses of sub-s. (1) of s. 132.

15. Learned advocate for the Revenue has stressed that the subsequent search indicated that there were reasons. In this connection, reliance was placed on the decision of the Supreme Court in the case of Pooran Mal v. Director of Inspection (Investigation), Income-tax, [1974] 93 ITR 505, where the Supreme Court held that the provisions relating to search and seizure in s. 132 of the I.T Act and r. 112 of the I.T Rules, 1962, did not violate the fundamental rights under art. 19(1)(f) and (g) of the Constitution of India: the restrictions placed by any of the provisions of s. 132, s. 132A or r. 112A were reasonable restrictions on the freedom under art. 19(1)(f) and (g). The Supreme Court further reiterated that the provisions of s. 132(1) and (5) of the I.T Act, 1961, were not discriminatory and did not violate the provisions of art. 14 of the Constitution of India. The Supreme Court further reiterated that in India, as in England, where the test of admissibility of evidence lay in relevancy, unless there was an express or necessarily implied prohibition in the Constitution or in other law, evidence obtained as a result of illegal search or seizure was not liable to be shut out. Even though a search and seizure might be in contravention of s. 132 of the I.T Act, 1961, still the material obtained thereby was liable to be used subject to law before the I.T authorities against the person from whose custody it was seized and, therefore, no writ of prohibition in restraint of such use could be granted. The Supreme Court further reiterated that the accident that undisclosed property was found in a search might not be justification for the authorisation of a search if, in fact, there were no grounds for entertaining a reasonable belief as required by sub-cls. (a), (b) and (c) of s. 132(1) of the I.T Act, 1961. In this connection, the Supreme Court at p. 533 noted that the grounds for the belief recorded by the Director of Inspection before the authorisation were shown to the Supreme Court. There, the Supreme Court found from the grounds that a big godown had been newly constructed by the petitioner in that case, but his books of account did not reflect the expenditure on account of this construction. In this background, that is to say, in the background of one objective factor that the information that a godown had in fact been constructed which was not reflected in the expenses incurred, the Supreme Court noted that the department had placed before the court that on search certain documents in the nature of maps, etc., were seized which showed that the petitioner had constructed the building in the month preceding the date of search and the money with which the said building was constructed was unaccounted money. If there was some ground for entertaining the reasonable belief, then the subsequent recovery of materials may be a relevant factor to corroborate that ground. But if the grounds by themselves do not constitute any ground at all then the existence or gathering of the material subsequently obtained cannot fulfil the conditions precedent required to be fulfilled under the requirement of sub-s. (1) of s. 132 of the Act.

16. In this case, in view of the nature of the grounds indicated, it is difficult to believe that, before there was the authorisation, the Director of Inspection had information as contemplated under s. 132(1) which could have lead to a reasonable belief as contemplated. It is true that the subsequent discovery has confirmed the suspicion which could have been entertained previously by the authority concerned, but the ground for the existence of a suspicion cannot be equated to a ground for the existence of the belief in consequence of any information by subsequent discovery or gathering of certain information.

17. Apart from that it has been held by the Supreme Court that a search warrant should not be issued in a laconic manner but general search warrants in several cases were permitted. Reliance in this connection may be placed on the observations of the Supreme Court in the case of V.S Kuttan Piliai v. Ramakrishnan, (1980) 1 SCC 264 : AIR 1980 SC 185, where at p. 191 and at p. 192, the Supreme Court reiterated this proposition.

18. Reference, in this connection, may be made to the decision in the case of CCT v. Ramkishan Shrikishan Jhaver, [1967] 66 ITR 664; [1967] 20 STC 453, where the Supreme Court noted at p. 668 that the relevant portions which were required to be struck out in the authorisation forms were not struck out and further the gaps in the printed form which too should have been filled in before the warrant was issued had not been filled in and that would indicate non-application of mind.

19. Another argument was made on behalf of the petitioner that the materials procured by search and seizure was inadmissible as it amounted to a testamentary compulsion which would be violative of art. 20(3) of the Constitution. In this connection, reliance was placed on the observations of the Supreme Court in the case of State Of Bombay . v. Kathi Kalu Oghad , AIR 1961 SC 1808, as also on the observations of the Supreme Court in the case of M.P Sharma v. Satish Chandra, District Magistrate, Delhi, AIR 1954 SC 300. Now, this question need not be considered, in my opinion, in detail because the examination of information involves the person whose house is searched under s. 132 who is not an accused as contemplated under art. 20(3) of the Constitution and, secondly, whether the papers, books and documents or jewellery and cash are things which can be said to be evidence collected or received from the person concerned is doubtful. Now, in the first aspect, if he is not an accused, then this question does not apply. In view of the decision of the Supreme Court in the case of Ramesh Chandra Mehta v. State of West Bengal, AIR 1970 SC 940, and the observations of the court at p. 946, it is clear that a person whose house is being searched for gathering the materials as contemplated under sub-s. (1) of s. 132 is not an accused and, therefore, no question of testamentary compulsion arises.

20. The result, therefore, that follows is that, here, there has been no striking out of the material portion whether the books of account as required under the Act of 1922 would not have been complied with or whether the summons or notices under the Act of 1961 would not have been complied with, had any notice or requisition been issued to the petitioner, had not been adverted to. Therefore, the authorisation in so far as it did not strike out the irrelevant portions thus indicate non-application of mind and stereotype authorisation of search which should not be encouraged. The assessment order which was passed under s. 132(5) observed as follows;

“In pursuance of a warrant of authorisation in the name of Sri D.P Agarwalla a search was conducted at the residence of the assessee at 6, Dr. Rajendra Road, Calcutta, and also at the business premises of the assessee at 6, Karballa Mohd. Street, Calcutta. Subsequently some bank lockers were also opened. The following valuables were seized in consequence of the above search:

SI No. Description of assets seized Value Rs. 1. Cash (from residence) 30,360 2. Cash (from office) 16,516 3. Jewellery and ornaments (from residence) 2,93,222 4. Jewellery and ornaments (seized from Locker No. 17N of Allahabad Bank), Chowringhee Branch, standing in the name of Sm. Geeta Devi Satnalika and Sm. Manju Devi Agarwalla) 26,895 5. Ornaments and jewellery (seized from locker No. 18N of Allahabad Bank, Chowringhee Branch) 21,791 6. Fixed deposit receipts 38,360 Value of total assets seized 4,27,144

The assessee was being assessed by the ITO, A-Ward, Dist. I(2), Calcutta, who duly served notices u/s. 132(5) of the I.T Act, 1961, read with rule 112A of I.T Rules, on 21-1-77, 9-2-77 and 21-3-77. The case was received by me on transfer on 1-4-77. A further notice was also issued by me and served on the assessee on 1-4-77.

From the various letters filed by the assessee in response to the above notices it appears that the assessee instead of trying to explain the source of acquisition of the valuables seized, chose to challenge the search and also the notices issued by the ITO on technical grounds. In response to the notice issued by me, Sri C.P Saxena, F.C.A, A/r., appeared along with Sri N.P Agarwalla, son of the assessee, and sought adjournment till 6-4-77. On 6-4-77 Sri N.K Mukherjee, A/r., appeared along with Sri B.P Agarwalla and Sri N.P Agarwalla, sons of the assessee, and stated that the assessee had nothing more to add to what was stated in the letter dated 4-4-77. In the letter dated 4-4-77, filed before me the assessee again raised only technical objections to the notice issued by me. So far, the assessee did not make any positive approach in explaining the source of acquisition of the valuables seized. In the above circumstances, in the absence of any acceptable explanations furnished by the assessee, I have come to the conclusion that the value of the whole of the assets seized should be treated as concealed income of the assessee earned during financial year 1976-77 from undisclosed sources. The objections raised by the assessee are not tenable and are rejected.

Total income of the assessee is computed below:

Rs. “Estimated income for the financial year 1976-77 45,000 On the basis of past records, concealed income as discussed above 4,27,144 Estimated income from secret money-lending business as appears from books of accounts seized 50,000 Total income 5,22,144 Tax payable on concealed income: 2,35,486 Penalty imposable 4,70,972 Existing tax liabilities 52,122 7,58,580

The entire valuables seized are to be retained.

This order is passed with the previous approval of IAC, Range-XIV, Calcutta.”

21. Now, it was contended that simply because the assessee did not or could not give any explanation, an automatic assessment adding up the entire value would not be a best judgment assessment. Even in the case of a best judgment assessment, it would require the officer concerned to apply his judgment. In this connection, reliance was placed on the observations of the Supreme Court in the case of State Of Kerala v. C. Velukutty, [1966] 60 ITR 239, and reference may be made to the observations appearing at p. 244 of the report. Reliance may also be placed on the observations of the Supreme Court in the case of State Of Orissa v. Maharaja Shri B.P Singh Deo, [1970] 76 ITR 690 at p. 691. Here, as I have found, the authorisation was not by a proper application of the mind. Secondly, there were no materials before the search. Still, it is apparent that a large amount of money and cash and jewellery, which per se remain and require investigation, were found as a result of the search. Now as to these materials, as the Supreme Court has noted, even the materials gathered from an illegal search do not become non-existent, and therefore, the search, though it is not legal, because it was not obtained on a proper material, the materials gathered do not cease to be evidence, if these were, otherwise, relevant evidence. Having regard to these factors, in my opinion, the appropriate order would be to set aside the orders under ss. 132(5) and 132(12) and direct the officer concerned to make a fresh assessment. Now, after the reasons having been disclosed to the assessee and after having given him an opportunity of explaining these amounts, the officer concerned will make an assessment to the best of his judgment, giving his reasons and not merely by adding these amounts on the ground that the assessee has not been able to explain the source. For this purpose the ITO will complete the proceedings within a period of six months from this date after giving reasonable and proper opportunity to the assessee and for this period the ITO will retain these assets. After six months, if the assessment, is not completed, the assets are not to be retained, and the assets should be returned to the assessee. If, after the assessments, the assets are liable to be retained under any appropriate order under section 132(5), then these would be retained, otherwise these will be returned to the assessee. A writ of mandamus to the extent mentioned above is issued accordingly. The rule is disposed of accordingly. There will be no order as to costs.

22. All parties to act on a signed copy of the minutes of the order on the usual undertaking to have the order drawn up, completed and filed.