Search and seizure—Authorisation under s. 132(1)—Reason to believe vis-a-vis search of locker—Satisfaction note dismally ignores the statutory mandate and requirements of cls. (a), (b) and (c) of s. 132(1)—Note begins by referring to the factum that residential premise of KS was subjected to search on 10th June, 2014—Thereafter, it states that information had been received that three bank lockers were being maintained in DS Co. Ltd.—Satisfaction note woefully forms the negative conclusion and finding without referring to material and evidence that had led and prompted the author to reach the denouncement—Use of the word “may” to presume presence of undisclosed assets in the locker, given the absence of reference to even a single shred of evidence and material to justify the inference, reflect and establishes supine indifference to the statute and constitutional guarantee that “right to privacy” should not be impinged and violated on mere posturing and pretentiousness—Note does not refer to the statement of KS recorded on 10th June, 2014 in respect of locker No. 7325-A—No attempt was made to verify and ascertain when and who had operated the said locker and who was paying rent for the said locker—Keys of locker No. 7712-D and locker No. 7637-A were not found during the course of search at the residential premises of KS—Details with regard to operation of these lockers had not been ascertained on 10th June, 2014, when the search team had visited DS Co. Ltd.—Satisfaction note is precipitously silent on any business connection, link and association between the assessees and the J Group or KS, who had been subject to search and seizure operations—Lockers were not subjected to search to unearth undisclosed and concealed assets of J Group or KS—Accordingly, there is no hesitation in holding that the three “consequential” warrants of authorization issued in the name of persons and lockers for search/seizure, therefore, do not meet the mandate and requirement of cls. (a), (b) and (c) of s. 132—There could be a good ground and reason why the legislature has used expression “reasons to suspect” in cl. (i) or even for that matter in sub-s. (1A) to s. 132, while the expression “reasons to believe” is used in sub-s. (1) to s. 132

HAH E NAAZ JUDGE vs. ADDITIONAL DIRECTOR OF INCOME TAX (INV.) & ANR.*HIGH COURT OF DELHI

Judge(s) : Sanjiv Khanna & Chander Shekhar, JJ.

This common judgment would dispose of the afore-captioned writ petitions preferred by Shah-E-Naaz Judge, her husband Sandeep Kohli and her daughter Sahyr Kohli, who have challenged notices under Section 153A of the Income Tax Act, 1961 (Act, for short) dated 3rd May, 2016, 8th November, 2016 and 8th November, 2016, respectively. They have also challenged warrant of authorization dated 27th June, 2014 under Section 132 of the Act for search of locker No.7325-A in the joint names of Nagina Judge and Shah-E-Naaz Judge, locker No.7637-A in the joint names of Shah-E-Naaz Judge and Sahyr Kohli and locker No. 7712-D in the joint names of Sandeep Kohli and Shah-E-Naaz Judge in Delhi Safe Deposit Company Ltd. as illegal, bad in law and without jurisdiction. Other prayers made in the writ petition include quashing of proceedings initiated pursuant to notice under Section 153A of the Act. The notices under Section 153A and the proceedings initiated under Section 153A of the Act relate to Assessment Years 2009-10 to 2014-2015.

2. Nagina Judge is sister of Shah-E-Naaz Judge and is a Non-Resident Indian. Nagina Judge has not filed any writ petition. Nagina Judge, it was stated, has filed a statutory appeal challenging the assessment order dated 10th March, 2017 under Section 153A of the Act.

3. Precursor to the search warrants noted in paragraph 1 above, were search and seizure operations under Section 132 of the Act at the residential and business premises of Karamjit Singh Jaiswal on 10th June, 2014. Karamjit Singh Jaiswal is the first cousin (Bua‟s son) of Shah-E-Naaz Judge. During the course of search at the residential premises of Karamjit W.P. (C) No. 5937/2016+connected matters Pag e 2 of 36 Singh Jaiswal, key of locker No. 7325-A in the Delhi Safe Deposit Company in the joint names of Nagina Judge and Shah-E-Naaz Judge was found and seized. The panchnama/seizure memo specifically records that the locker was in the name of Nagina J. Water and Shah-E-Naaz J. Kohli. We are not concerned with the search and seizure operations and consequent proceedings against Karamjit Singh Jaiswal.

4. On 10th June, 2014 itself, a search team had visited Delhi Safe Deposit Company Ltd. and on inquiry had learnt about locker No.7712-D in the joint names of Sandeep Kohli and Shah-E-Naaz Judge and locker No. 7637-A in joint names of Shah-E-Naaz Judge and Sahyr Kohli. On 10th June, 2014, a restraint order under Section 132 (3) in respect of locker Nos.7325-A, 7712- D and 7637-A was passed based upon search warrants under Section 132(1) of the Act in the case of Karamjit Singh Jaiswal.

5. For the purpose of present decision, we have gone through and examined the satisfaction note in the case of Karamjit Singh Jaiswal or Jaiswal Group. Three petitioners are not mentioned and their involvement is not alluded to and alleged. The petitioners have stated that they do not have any commercial, business or financial relation with Karamjit Singh Jaiswal, Jaiswal Group or business entities managed by them. This factual position is not denied by the respondents in the counter affidavit. The respondents, however, rely on seizure of the key of locker No.7325-A from the residential premises of Karamjit Singh Jaiswal on 10th June, 2014, which locker was in the names of Nagina Judge and Shah-E-Naaz Judge.

6. On 10th June, 2014, statement of Karamjit Singh Jaiswal was recorded on oath under Section 132(4) of the Act. Second and third question posed W.P. (C) No. 5937/2016+connected matters Pag e 3 of 36 and the answer given by Karamjit Singh Jaiswal, which relate to locker No.7325-A read as under:-

“Q No.2 During the search at your residence i.e. The Green Rajokari a loker (sic) key mentioning locker No.7325 A with The Delhi Safe Deposit Co. Ltd was found. Please state to whom it belong?

Ans. The locker belongs to Ms. Nagina J. Water & Ms. Shah-e-naaz J. Kohli.

Q. No.3 What is the relationship with Ms Nagina J. Water & Ms. Sheh-E-naaz J. Kohli and why there keys are kept here?

Ans. Ms. Nagina J. Water is my first cusion (sic) & Ms. Sheh-e-naaz J. Kohli is Nagina J. Water‟s sister. she (sic) was staying here till April 15, 2014. she (sic) is the resident of London and British Passport holder.”

No other question or suggestion was put to Karamjit Singh Jaiswal.

7. On 27th June, 2014, search warrant was issued in the names of Nagina Judge, Shah-E-Naaz Judge, her husband Sandeep Kohli and her daughter Sahyr Kohli in respect of three lockers. For the sake of convenience, we would reproduce the relevant portions of the search warrant in the names of Nagina Judge and Shah-E-Naaz Judge Kohli, which reads as under:-

“Whereas information has been laid before me and on the consideration thereof I have reason to believe that:-

x x x x xx ……….It 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 W.P. (C) No. 5937/2016+connected matters Pag e 4 of 36 Income-tax Act, 1922, or under sub-section (1) of section 142 of the Income-tax Act, 1961, is issued to Ms. Nagina Judge and Ms. Shah Naaz J. Kohli [name of the person] 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. Sarvashri/Shri/Shrimati Ms. Nagina Judge and Ms. Hah Naaz J. Kohli possession of money, bullion, jewellery or other valuables articles 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, or the Income-tax, 1961; And whereas I have reasons to suspect that such books of account, other documents, money, bullion, jewellery or other valuable articles or thing have been kept and are to be found in Locker No.7325-A, The Delhi Safe Deposit Co. Ltd., 86, Janpath, New Delhi (Specify particular of the building/place/vessel/vehicle/aircraft); This to authorise and require you as mentioned over leaf [Name of the Deputy Director or of the Deputy Commissioner or of the Assistant Director or of the Asistant Commissioner or the Income-tax Officer]

(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 W.P. (C) No. 5937/2016+connected matters Pag e 5 of 36 documents, money bullion, jewellery or other valuable article or think;

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

(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 Deputy 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.

You may requisition the services of any police officer or any officer of the Central Government, or of both, to assist you for all or any of the purposes specified in sub- section (1) of section 132 of the Income-tax Act, 1961. ” [We have omitted the portion which has been scored off in the warrant of authorization dated 27th June, 2014 issued by the Additional Director of Income-tax (Inv.)].

W.P. (C) No. 5937/2016+connected matters Pag e 6 of 36

8. On opening, locker Nos. 7712-D and 7637-A were found to be empty. Accordingly, nothing was seized and recovered. In locker No.7325-A in the name of Nagina Judge and Shah-E-Naaz Judge, jewellery worth Rs.49,73,295/- was found. Nagina Judge was questioned and her statement on oath under Section 132 (4) of the Act was recorded on 27th June, 2014. Nagina Judge had confirmed that she was a Non-Resident Indian residing in the United Kingdom. For the last 2-3 years, she had been filing her wealth tax and income tax returns in India. She would frequently visit India and mostly reside with her cousin Karamjit Singh Jaiswal. With reference to the locker key and jewellery found, the following questions and answers were put to and given by Nagina Judge:-

Q. No.9 Where do you keep your locker key usually?

Ans Generally, I keep my locker key in my sister house S-137, Panchsheel Park, New Delhi or in London or in Chandigarh or in Rajokari.

Q. No.10 When you have operated your locker last time?

Ans. 27th March, 2014 or in last week of March, 2014.

Q. No.11 Please explain how your locker key has gone at 6, The Green Rajokari, New Delhi in Karamjit Singh Jaiswal Houses.

Ans. I was staying with him before I left for London in first week of April, 2014 and I was due to return shortly after. So I left the key alongwith other personal affect in his residence.

Q. 12. As per the valuation of your jewellery total Net weight is 1868.900 gms whereas W.P. (C) No. 5937/2016+connected matters Pag e 7 of 36 no wealth tax return is filed by you. So you are entitled only 500 gms of jewellery. Please explain why rest of the jewellery may be seized?

Ans. It was not filed previously as I only acquired the jewellery in March, 2014.

Q. No.13. Please explain from where you have acquired the jewellery in March, 2014?

Ans. My sister & I divided my late mother jewellery in March 2014. Although she had passed away in November 2011.

Q. No.14. Do you have any proof that you and your sister have divided the jewellery in the m/o March 2014 which pertain to your deceased mother?

Ans. We have no return (sic) proof but we have a witness and we both can swear an affidavit to that affect.

Q. No.15 How much jewellery you have received from the said distribution of your mother jewellery? Ans. As of today it was evaluated at Rs.49 lacs. Out of this most of it pertains to my mother.

Q. No.16. Please explain did your mother was filing wealth tax return before expire as most of the share of jewellery as stated by you pertains to your mother? Ans. I am not sure.

Q. No.17. Do you want to say anything else?

Ans. No. Thanks. “

Nagina Judge had subsequently filed an affidavit dated 18th November, 2016 accepting that the jewellery found belonged to her and not her sister.

W.P. (C) No. 5937/2016+connected matters Pag e 8 of 36

9. Pertinently, Shah-E-Naaz Judge was not examined on oath under Section 132 (4) of the Act, though she was present when the three lockers were forced open on 27th June, 2014.

10. We, however, would notice the contention of the Revenue that Nagina Judge had subsequently oscillated as in her subsequent letter dated 27th February, 2017, she had stated:-

“As per the last Wealth Tax Return the jewellery of Mrs. Surinder Ajeet Judge (mother) was 740 gms. Thus the balance jewellery owned by both sisters is 1128.90 gms. as computed below:-

Jewellery accounted by M/s Swastic 1868.90 gms Jewellers, 1668, Dariba Kalan, Delhi-110006 Less Jewellery declared by Mrs. Surinder Ajeet Judge 740.00 gms Balance jewellery jointly owned by Mrs.Nagina Judge and Mrs. Shah Naaj. J. Kohli 1129.90 gms The Jewellery in the hands of Mrs. Nagina Judge is 1 ½ of the aforesaid quantity i.e. 564.45 gms”

We shall subsequently deal with the said contention and the argument of the respondent that “statements of the petitioners and Nagina Judge were not credible and ex-facie untruthful and designed to pervert the cause of justice.”

11. The primary contention and submission of the respondents is that on discovery of key of locker No.7325-A, consequential search warrants dated 27th June, 2014 were issued under Section 132 (1A) for search of the three lockers. These consequential warrants of authorization under sub-section (1A) to Section 132 were issued against the searched person i.e. Karamjit W.P. (C) No. 5937/2016+connected matters Pag e 9 of 36 Singh Jaiswal and not the petitioners. Validity of these search warrants should meet the parameter and the test of “reasons to suspect” and not on the legal requirement of “reason to believe”. A lower test and requirement of “reason to suspect” is sufficient. This plea and reference to Section 132 (1A) of the Act was specifically taken and made in the written submissions dated 6 th December, 2017, described as written statement, filed before us by the respondents. The submission asserts that the petitioners have misinterpreted the search and seizure actions as the search was in respect of the lockers and not against the petitioners in person. However, in the counter affidavit dated 27th March, 2018 filed to the amended W.P. (C) No.5937/2016 in the case of Shah- E-Naaz Judge, the respondents had taken a different stand and stance. They have stated that warrants of authorization dated 27th June, 2014 in the present case were issued under clause (i) to sub-section (1) to Section 132in respect of the place i.e. locker, on the basis of “reasons to suspect” as key of locker No.7325-A was discovered and seized during the course of search under Section 132(1) in the case of Karamjit Singh Jaiswal and it was learnt subsequently that Shah-E-Naaz Judge, who was joint holder of locker No.7325- A with Nagina Judge, was also joint holder with her husband Sandeep Kohli and daughter Sahyr Kohli of locker Nos.7712-D and 7637-A respectively, in Delhi Safe Deposit Company Ltd. “Reasons to believe” with reference to sub-sections

(a) (b) and (c) to Section 132(1) was against or qua the person, whereas warrant of authorization qua place or location under clause (i) to Section 132 (1) do not require recording of “reasons to believe”. Warrants of authorization qua the place/location i.e. the lockers, was issued on the basis of “reasons to suspect”. For clarity, we would like to reproduce the stand taken by the respondents in W.P. (C) No. 5937/2016+connected matters Pag e 10 of 36 response to ground V and paragraph 29 of the counter affidavit, which reads:-

“V. During the search and seizure operation under section 132(1) of the Act on 10.06.2014 in the case of Mr. Karamjit Singh Jaiswal (the “searched person”) at 6, The Green Rajokari, New Delhi which was duly authorized by the Director of Income-tax (Investigation)-II, Delhi after recording the ‘reason to believe’ with respect to conditions of section 132(1)(b) and 132(1)(c) of the Act qua person, key of the subject locker no. 7325-A maintained with The Delhi Safe Deposit Co. Limited, New Delhi was unearthed. The petitioner was the joint holder of the said locker No. 7325-A with her sister Ms. Nagina Judge. Following discovery of the key of the Locker No. 7325-A, a restraint order under section 132(3) of the Act was issued in respect of the locker on 10.06.2014. Subsequently, the locker was searched by the warrant issued under section 132(1) of the Act.”

xxx “29. That before issuing the warrant of authorization under section 132(1) of the Act, reason to believe with respect to conditions mentioned under section 132(1)(a) or 132(1)(b) or 132(1)(e) of the Act is qua person. Under section 132(1)(i) of the Act, the warrant of authorization qua place is on the basis of reason to suspect. In the present case, as mentioned above, pursuant to discovery of the key of the locker no. 7325-A during the search under section 132(1) of the Act in the case of Shri Karamjit Singh Jaiswal from his residential premise on 10.06.2014 which was duly authorized by the Director of Income-tax (Investigation)-II, Delhi after recording the ‘reason to believe/satisfaction note with respect to conditions of section 132(1)(b) and 132(1)(c) of the Act qua person and detection of the other two lockers during subsequent investigation, consequential warrants of W.P. (C) No. 5937/2016+connected matters Pag e 11 of 36 authorization dated 27.06.2014 were issued as per the provisions of section 132(1)(i) of the Act to search the above-mentioned three lockers. The consequential warrants of authorization under section 132(1) of the Act were issued to search these lockers after recording the satisfaction note with respect to the requisite conditions including under section 132(1)(b) and 132(1)(c) of the Act. Once a warrant of authorization under section 132 of the Act is issued and executed, the Assessing officer is required to issue notice under section 153A of the Act.”

12. Search and seizure provisions in the Act introduced by Finance Act, 1964 have undergone a number of amendments including substantial amendments made by the Taxation Laws (Amendment) Act, 1975 and Direct Tax Laws (Amendment) Act, 1987. Sections 132(1) and 132(1A) of the Act as they exist read as under:-

“132. (1) Where the Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner 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 W.P. (C) No. 5937/2016+connected matters Pag e 12 of 36 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 Principal Director General or Director General or Principal Director or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or (B) such Additional Director or Additional Commissioner or Joint Director, or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income- tax Officer, W.P. (C) No. 5937/2016+connected matters Pag e 13 of 36 (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to–

(i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept;

(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;

(iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has 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; (iib) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents;

(iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search:

Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business;

W.P. (C) No. 5937/2016+connected matters Pag e 14 of 36

(iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom;

(v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing : Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, but such Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in section 120, it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner having jurisdiction over such person may be prejudicial to the interests of the revenue :

Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii):

W.P. (C) No. 5937/2016+connected matters Pag e 15 of 36 Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stock-in-trade of the business:

Provided also that no authorisation shall be issued by the Additional Director or Additional Commissioner or Joint Director or Joint Commissioner on or after the 1st day of October, 2009 unless he has been empowered by the Board to do so.

37[Explanation.–For the removal of doubts, it is hereby declared that the reason to believe, as recorded by the income-tax authority under this sub-section, shall not be disclosed to any person or any authority or the Appellate Tribunal.] (1A) Where any Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or 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 Principal Director General or Director General or Principal Director or Director or any other Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner 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 sub-section (1), such Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner may, notwithstanding anything contained in section 120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.

W.P. (C) No. 5937/2016+connected matters Pag e 16 of 36 [Explanation.–For the removal of doubts, it is hereby declared that the reason to suspect, as recorded by the income-tax authority under this sub-section, shall not be disclosed to any person or any authority or the Appellate Tribunal.]”

13. In Pooran Mal Vs. the Director of Inspection (Investigation), New Delhi and Ors. (1974) 1 SCC 345, constitutional and legal validity of Section 132 was upheld relying on the inbuilt safeguards in the section itself including the condition that exercise of this power of search and seizure can follow only on a reasonable belief being entertained by an officer that any of the three conditions mentioned in clauses (a), (b) and (c) to Section 132(1) are satisfied. These reasons have to be recorded in writing before authorization is issued to the officer to conduct search and seizure. The Supreme Court observed that the provisions were evidently directed against persons who are believed on good grounds to have illegally evaded the payment of tax on their income and property. Drastic measure to get at such income and property for recovery of government dues were justified and required. The search and seizure provisions were reasonable restrictions and curbs on the freedoms mentioned under Article 19 (1)(f) and (g) of the Constitution.

14. The aforesaid legal position, viz., on the statutory mandate to record “reasons to believe” and their nexus with the three pre-conditions in clauses

(a), (b) and (c) to Section 132 was thereafter emphasized and elucidated by the Supreme Court in Director General of Income Tax (Investigation), Pune and Ors. Vs. Spacewood Furnishers Private Limited and Ors. (2015) 12 SCC 179, which also refers to an earlier decision of the Supreme Court in ITO Special Investigation Circle-B, Meerut Vs. Seth Brothers & Ors.etc.

W.P. (C) No. 5937/2016+connected matters Pag e 17 of 36 (1969) 2 SCC 324 and Partap Singh Vs. Director of Enforcement Foreign Exchange Regulation Act & Ors. (1985) 3 SCC 72. Spacewood Furnishers Private Limited (supra) has laid down the following principles:-

“8. The principles that can be deduced from the aforesaid decisions of this Court which continue to hold the field without any departure may be summarised as follows:

8.1. The authority must have information in its possession on the basis of which a reasonable belief can be founded that–

(a) the person concerned has omitted or failed to produce books of account or other documents for production of which summons or notice had been issued Or such person will not produce such books of account or other documents even if summons or notice is issued to him Or

(b) such person is in possession of any money, bullion, jewellery or other valuable article which represents either wholly or partly income or property which has not been or would not be disclosed.

8.2. Such information must be in possession of the authorised official before the opinion is formed. 8.3. There must be application of mind to the material and the formation of opinion must be honest and bona fide. Consideration of any extraneous or irrelevant material will vitiate the belief/satisfaction.

8.4. Though Rule 112(2) of the Income Tax Rules which specifically prescribed the necessity of recording of reasons before issuing a warrant of authorisation had W.P. (C) No. 5937/2016+connected matters Pag e 18 of 36 been repealed on and from 1-10-1975 the reasons for the belief found should be recorded.

8.5. The reasons, however, need not be communicated to the person against whom the warrant is issued at that stage.”

15. The Supreme Court in H.L. Sibal Vs. CIT (1975) 101 ITR 112 (P&H), Dr. Nand Lal Tahiliani Vs. CIT & Ors. (1988) 170 ITR 592 (All), L.R. Gupta & Ors. Vs. UOI & Ors. (1992) 194 ITR 32 (Del), Ajit Jain Vs. UOI (2000) 242 ITR 302 (Del) and Madhu Gupta Vs. DIT (Inv.) & Ors. (2013) 350 ITR 598 (Del.), elucidate on compliance and satisfaction of the conditions of sub-clauses (a), (b) and (c) to Section 132 of the Act as recorded in the “reasons to believe”, which formation of opinion must be in good faith and not mere pretence and subterfuge on the part of the authorities. The Court while examining the said reasons would not adjudge or test adequacy and sufficiency of the grounds, but could go into the question and examine rational connection between the information or material recorded and formation of the belief as to satisfaction of conditions specified in clauses (a), (b) and (c) to Section 132 (1) of the Act. The “reasons to believe” as recorded should have relevant bearing on formation of the belief, for the search warrants cannot be issued for making a fishing and roving inquiry. The test and parameters of reasonable man is applied. We would to avoid prolixity not quote from the aforesaid decisions, except the decision in the case of Madhu Gupta (supra) as in the said case, an identical plea relying upon the language of clause (i) to Section 132(1) of the Act was raised to submit that “reasons to suspect” and not “reasons to believe” were suffice in cases of consequential search. In the said case widow of the ex-Director, who had died, had been subjected to search on the W.P. (C) No. 5937/2016+connected matters Pag e 19 of 36 ground that there was evidence and material that the assessee as a group was in possession of unaccounted income in the form of money, bullion, jewellery and other valuable articles or things or papers relating to the undisclosed or benami properties as “these are likely to be found at the residence and business premises of the group members, their associates and family members”. The reasons recorded to justify the search had stated there was a close relationship between the widow of the ex-Director and the group and it was likely that accounts relating to undisclosed income, sales etc. would be kept at her premises. The search was held to be illegal and violating Section 132 (1), as the provisions permit and authorize search on the basis of credible information and not mere suspicion. There must be nexus between the information and the “reasons to believe”. Information, which is relied upon must not be in the nature of surmise or conjecture but must have tangible backing and some basis. It should not be mere ipse dixit but based upon reason. Simple “believe” was not sufficient, albeit satisfaction note must itself indicate and show whether the belief falls under clause (a), (b) and (c) to Section 132 (1) of the Act. “Likelihood and predisposition” in the “reasons to believe” for authorizing search at the residence of Madhu Gupta, widow of the ex-Director were held to be in nature of surmise and conjecture. Hence, the authorization was not predicated on information. Another reason given for accepting the writ filed by Madhu Gupta was that warrant of authorization under Section 132(1) had been issued in the name of Madhu Gupta. Therefore, there was need and requirement that “reasons to believe” should have recorded the connection between her and the group subjected to search. The “reasons to believe” thus W.P. (C) No. 5937/2016+connected matters Pag e 20 of 36 did not satisfy the requirement of clauses (a), (b) and (c) to Section 132(1) of the Act.

16. Before we delve on some other decisions striking down searches in cases of bank lockers, it would be appropriate and proper to quote the satisfaction note recorded in the present cases dated 27th June, 2014 on the basis of which warrants of authorization quoted above have been issued. The satisfaction note reads as under:-

“During the course of search on 10.06.2014 at the residential premise of Shri Karamjit Singh Jaiswal, 6, The green Rajokar, New Delhi in the case of Jaiwal Group of cases, information has been received that following persons are maintaining lockers in banks/Vaults mentioned against each of them:

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