In a recent decision, the Rajasthan High Court held that a search under section 132(1) of the Income Tax Act, 1961 cannot be carried out against the family members of the person against whom the search warrant is issued.
The division bench comprising of Justice Ajay Rastogi and Justice J K Ranka further clarified that section 132(1) is meant for “specific persons” and the extending the search to the family members would amount to curtailment of the fundamental rights of such members who are separate assessable legal entities under the Act.
Search under section 132(1) was carried out in the residence of the Mr. O.P. Goyal and his sons, Anant Goyal and Sumant Goyal. Certain material were found during the search and therefore, the Department initiated assessment proceedings against the assessee. During the course of assessment, it was revealed that the the present assessees happen to be the wife and daughter of Anant Goyal. It was contended on behalf of the assessee that the notice issued against the assessees are not sustainable for the reason that the provisions of Section 158-BC of the Act are inapplicable as there was no warrant of authorization against the present assessee under Section 132(1). However, the Assessing Officer observed that the warrant states O.P. Goyal,
Anant Goyal and family members and since the assessees are members of the family (wife and daughter), they are automatically covered by the authorisation and thus the AO was well justified in proceeding ahead in issuing the notice and to proceed ahead for assessment.Accordingly, assessment orders were passed against the assessees.
On appeal, the Commissioner of Income Tax (Appeals) concluded the matter in favour of the assessees and set aside the impugned order on ground that held that since the search warrant itself did not indicate names of the assessees specifically, the AO was precluded from proceeding ahead with the assessment of the assessees under Section 158-BC. Though the Revenue has challenged the decision of CIT(A) before the Tribunal, couldn’t secure any relief.Therefore, the matter was brought before the High Court.
The Court found that section 132(1) read with sections 158-BC and 158-BD, authorises to carry out search and seizure operation where the Revenue comes into possession of information that an assessee may be evading tax or has reason to suspect that a person has money, bullion and jewellery and other valuable articles or things, books of account etc. which does not depict true income, then a search is necessitated or got conducted.
The Court in this regard, opined that “Search and seizure are drastic provisions and does not confer unbridled power to the Revenue Officer. The Revenue must have in consequence of information reason to believe that statutory conditions for the exercise of power to order search exist. The Competent Authority, namely the Commissioner or the Director of Inspection, is supposed to record reason for the belief. Search and seizure under Section 132 of the Act, have a serious invasion upon the right, privacy and freedom of tax payer, it presupposes that powers have to be exercised strictly in accordance with law and in fulfillment of the object & purport of the Act.”
“The right of privacy has been held to be fundamental rights of citizens being integral part of Art. 21 of the Constitution of India, and that citizen’s right of privacy is not likely to bedisturbed. The power of search and seizure under theprovisions of the Act should be exercised only when there is sufficient material in possession of the competent authority on the basis of which it can have reasons to believe that there had been assets which could not be disclosed for the purposes of assessment under the Act.”
The bench further observed that “Provision of Section 158-BC is attracted “where any search has been conducted under Section 132 in the case of any person”. In our view from these words it should statutorily mandate that search should have been carried out under Section 132(1) in the name of a person before invoking the provision of Section 158-BC. “Person” should normally mean name depicted in the warrant of authorisation, and the Authority authorising a search has to have information in his possession in respect of a person and such a person should be specifically named in the search warrant. Though “family” is not defined under the Income Tax Act but could not be stretched to cover all the family members, namely wife, daughter, children etc.”
The Court further analyzed the definition of the term “person” under section 2(31) and held that “All the family members are separate assessable legal entities under the Act and in a case where search warrant has been issued in the name of O.P. Goyal and family, in our view it cannot bestretched to cover all the family members, namely spouse and children. It has to be in the name of specific person to initiate proceedings.”
While confirming the orders of both the Tribunal and CIT(A), the division bench pointed out that “Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with law and only for the purposes for which the law authorises it to be exercised. If the action of the officer issuing the authorisation or of the designated officer is challenged, the officer concerned must satisfy the court about the correctness of his action. Therefore, in our considered view a search under Section 132(1) has to be “person specific”. The Authority authorizing search has to have information in his possession in respect of a person and such a person should be specifically named in search warrant and since names of the assessees having not figured in the authorization of warrant as having been proved on the basis of Form 45 which has been reproduced by us in para 16 hereinbefore, the AO has exceeded its jurisdiction in issuing the notice under Section 158-BC and initiation of the proceedings being invalid, all subsequent action of A.O. including order of assessment is not sustainable in law”.
Read the full text of the Judgment below.
