Where the Petitioner fails to acknowledge the complete details during the search procedure of “Primary Persons”, the same can be the basis for “reason to suspect” for issuance of new WOA for carrying on the Search on Petitioner – Delhi High Court

Shilpa Chowdhary vs. Principal Director of Income Tax (Investigation)

W.P.(C) 5207/2020 & CM Appl 18787/2020 dated 07.12.2020

In short

In a recent judgment by the High Court of Delhi, it was held that a search can be conducted merely on the basis of “reason to suspect” and no higher threshold for reason to believe is required to be met.

In this judgment, the search was conducted on the basis of Warrant of Authorization in relation to “Kochar Group” wherein one residence-cum-office is to be searched which belongs to Shri Vikas Chowdhary and his wife Smt. Shilpa Chowdhary. During the Search, key to locker is found by the team. On questioning about the same from the Petitioners, none of them give proper explanation to what is inside the locker and in fact Mr. Vikas Chowdhary even deny having any bank locker.

On this basis, a fresh Warrant of Authorization was issued in the name of petitioners, and the said locker was searched.

Before the Hon’ble court, the petitioner questioned the validity of the search warrant and declares that the search and seizure, conducted on them is illegal, void and without authority of law, and the exercise is without jurisdiction.

It was held, “The officers made an attempt to ascertain and verify the facts, post the discovery of the locker key. The satisfaction note also records that Petitioners were asked to furnish details of the contents of the locker, but did not provide satisfactory explanation. In these circumstances, we believe that the Revenue was well within its right to proceed to search the Petitioner’s locker under section 132(1) of the Act.”

Brief facts of the case:

1. On 05.02.2019, Warrant of Authorization were issued under Section 132(1) of the Act in the case of the ‘Kochar Group’, comprising of Sh. Avtar Singh Kochar, Sh. Gyandeep Singh Kochar, Sh. Hari Singh Kochar and M/s HL Impex (P.) Ltd. [hereinafter collectively referred to as “Primary Persons”]. Of the above Warrant of Authorizations, one in relation to Sh. Avtar Singh Kochar pertained to the residence-cum-office of the Petitioner – Shri Vikas Chowdhary at E-12/3, Vasant Vihar, New Delhi [hereinafter referred to as “Petitioner’s Premises”].

2. On 06.02.2019, a search and seizure operation was carried out at Petitioner’s Premises pursuant to the above Warrant of Authorization dated 05.02.2019. (a) Some loose papers; (b) One hard disk (a working copy of which was seized); (c) One Digital Video Recorder (“DVR”); (d) cash (which was released at the time of search), (e) one Godrej-branded key to Locker No. 150F, Bank of India, Punjabi Bagh, New Delhi, (f) three keys belonging to cylindrical containers, and (g) two keys belonging to a wooden cupboard in the bedroom of the Petitioner’s daughter.

3. On 12.02.2019, Respondent No.2 issued the impugned Warrant of Authorization u/s 132(1) of the Act against the Petitioner and his wife (Mrs. Shilpa Chowdhary) to search Locker No. 150F–maintained with the Bank of India, Punjabi Bagh, New Delhi– key to which was found and seized on 09.02.2019.

4. Then on 03.04.2019 at 5:30 PM, pursuant to the impugned Warrant of Authorization dated 12.02.2019, search was conducted at Locker No. 150F, Bank of India, Punjabi Bagh, New Delhi. Jewellery valued at Rs. 1,00,67,181/- was found and seized. It is reiterated that the above search is not to be confused with the search carried out on Petitioner’s Premises in respect of a Warrant of Authorization dated 05.02.2019 issued against the Primary Persons referred to hereinabove.

5. On 05.04.2019, a Final Panchnama was drawn. Statement of the Petitioner was also recorded.

6. Ultimately on 20.04.2019, notice for assessment proceedings under Section 153A/143(3) of the Act was issued to the Petitioner. Aggrieved with the search and seizure proceedings, Petitioner has approached this court.

Contentions of the Petitioner

1. The search and seizure action is entirely arbitrary and mala fide.
2. Search carried out under Warrant of Authorization dated 05.02.2019 is beyond the scope of statute.
3. Impugned Warrant of Authorization seemingly issued under Section 132(1A) is illegal.

Relevant Section:

Before going into analysis, let’s take note of the relevant statutory provisions :

132. (1) Where the Director of Inspection or the Commissioner or any such Deputy Director of Inspection or Inspecting Assistant Commissioner as may be empowered in this behalf by the Board, in consequence of information in his possession, has reason to believe

that —

(a) any person to whom a summons under sub-Section (1) of Section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-Section (1) of Section 131 of this Act, 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 this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account, or other documents as required by such summons or notice, or

(b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or

(c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or

would not be, disclosed for the purposes of the Indian Income Tax Act, 1922 (11 of 1922), or this Act (hereinafter in this Section referred to as the undisclosed income or property),

then,—

(A) the Director of Inspection or the Commissioner, as the case may be, may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer, or

(B) such Deputy Director of Inspection or Inspecting Assistant Commissioner, as the case may be, may authorise any Assistant Director of Inspection or Income-tax Officer, (the officer so authorised in all cases being hereinafter referred to as

the authorised officer) to—

(i)…….

(ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available;

(1A) Where any Commissioner, in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the Director of Inspection or any other Commissioner or any such Deputy Director of Inspection or Inspecting Assistant Commissioner as may be empowered in this behalf by the Board to take action under clauses (i) to (v) of sub- Section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under subsection (1), such Commissioner may, notwithstanding anything contained in Section 121, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.

Finding & Analysis

• Whether the petition is barred by delay and laches?

There is no convincing explanation for the delay, nevertheless, since the hon’ble Court have extensively heard the arguments on the merits of the case, they are not inclined accept the preliminary objection raised by the Revenue and would instead like to decide the petitions on merits.

• Whether the impugned warrant is issued under section 132(1) or 132(1a) of the act?

The assumption and contention that, since Vikas Chowdhary was not the searched person under the Warrant of Authorization dated 05.02.2019, his premises could only be searched under Section 132(1A) of the Act, is entirely misconceived and is rejected.

• Validity Of Search Carried Out On 06.09.2019 On Petitioner’s Premises

There is no credible foundation laid out by the Petitioners to challenge such an action. Even otherwise, this action of search and the consequences thereof are qua the Primary Persons i.e. the Kochar Group. Petitioners have no locus to challenge the same and they are not concerned with this search and consequent proceedings against the Kochar Group.

• Validity Of Search Action Under Warrant of Authorization Dated 12.02.2019

From the above extracts, it is it is revealed that Mr. Vikas Chowdhary denied having any bank locker. Shilpa Chowdhary, while admitting the existence of the locker, did not give any information relating to its contents. Therefore, there was indeed material with the concerned authority to form reasons to believe that the locker contained any articles/cash/jewellery/other materials which represented the undisclosed income of the Petitioner.

• Court to not evaluate the adequacy of “Reason To Believe”

The Court clarify that they have only examined the legal validity of the Warrant of Authorization. As they find that the exercise of power was authorised on the basis of requisite belief as per the mandate of the Act, they cannot go into the question of whether the same should have been issued, or substitute it with the opinion.

To Read complete Judgment , Delhi High Court Judgement – W.P.(C) 5207/2020 dated 07.12.2020