If a tax payer has kept his concealed assets in a bank safe deposit vault, can the bank premises be searched where there is a valid authorisation of search? This issue has been raised time and again before courts. Section 131 (1) of the Income Tax Act, 1961, gives power to the income tax authorities similar to the powers of a civil court under the Code of Civil Procedure when trying a suit, namely, for discovery, inspection, enforcing the attendance of any person, including any officer of a banking company, examining him on oath and compelling the production of books of account and other documents, and issuing summons. Section 131(1) relates to proceedings pending and continuing before the income tax authorities.
Sub-section (1-A) confers power upon the officers named therein to make an enquiry or investigation, if he has reason to suspect that any income has been concealed or is likely to be concealed by any person or class of persons, before he takes action under clauses (i) to (v) of sub-section (1) of section 132. This sub-section vests powers upon the income tax authority to make enquiry and investigation, even though no proceedings with respect to such person are pending before him or any other income tax authority.
Section 133(6) also confers power upon specified officers to call for information from any person, including a bank or any officer thereof to furnish information in relation to such points or matters or to furnish statements of accounts duly verified in the manner specified, if in the opinion of the income-tax authority, it would be useful for, or relevant to, any enquiry or proceedings under the Act.
The term “to search any person”, in sub-para (b) of Form 45 of the Income Tax Rules, 1962, means any person other than the person who is named in the warrant of authorisation and who is said to be possessed of undisclosed income or property, whether in the form money, bullion, jewellery or other valuable article or thing. The authority to search any person other than the person who is in possession of undisclosed income thus cannot be limited or confined to such person but would extend to any building, place, vessel, vehicle or aircraft and to any other person, as defined in sub-para (b).
Thus, banks can be searched for unearthing money, bullion, jewellery or other valuable article or thing, belonging to a person against whom the warrant of authorisation has been issued. When an officer is authorised to enter and search any premises including a bank, he makes search of money, bullion, jewellery or other valuable articles or thing in respect of the person who is said to be possessed of such money, bullion, jewellery or other valuable article or thing.
The premises searched are the bank and the person who is said to be possessed of such money, bullion, jewellery or other valuable article or thing is the person who has been named in the warrant of authorisation to whom not only the concealed wealth belongs but who also possesses the same within the meaning of section 132(1)(c). Therefore, if the warrant of authorisation has been issued, authorising the officer to conduct search in the bank or the premises of the bank, it would not be a search upon the bank and the undisclosed income and the property in that case would not be of the bank but can be taken to be the income and property of the person against whom the warrant is issued.
Where the Taxpayers’ Charter sets out the duties of the person searched, it also outlines the duties of the person who is in charge of the place, namely, building, vessel, vehicle or aircraft, where the search is to be made. The duties include the duty to allow free and unhindered ingress into the premises and to see the warrant of authorisation and put signature on the same, etc.
If the interpretation seeks to confine the meaning of the word “person” used in section 132(1)(a), (b) and (c) only to the person who is alleged to be possessed of the undisclosed income or wealth, the provision regarding authorisation to enter any building, place, vessel, vehicle or aircraft and make a search therein or search any other person, would be rendered nugatory.
When a search is conducted in a bank, the officer-in-charge of the bank is the person who would exercise the right, which is given in the Taxpayers’ Charter before allowing the authorised officer to enter the premises. The charter nowhere contemplates or directs that the person who owns any money, bullion, jewellery or other valuable article or thing has necessarily to be shown the warrant before entering into the building, place, vessel, vehicle or aircraft for the purpose of the search.
When power is conferred on a particular statutory authority, it has to be exercised by the same authority and the scope of such power cannot be reduced or enhanced by giving a wider interpretation to the definition clause. An interpretation clause, having regard to its limited operation, must be given due effect.
It is only the relevancy of the material and not the sufficiency of the same, which can be scrutinised by a court. The fact that after making the search on reasonable belief no incriminating documents or undisclosed income could be unearthed would not make the search illegal. Detection of assets as expected by the director of inspection on the information received by him would support the view that the authority concerned had reliable information on which he could entertain the necessary belief.
The documents produced before the court may show that not only there was relevant material or information with the director but he had also applied his mind and assessed the material and after secret enquires relevant for the purpose and after recording the relevant reasons, he has issued the warrant of authorisation.
This would establish that there was not only relevant material but also sufficient material/information with the Director and that he had taken all necessary steps before authorising the search since he had reason to believe that undisclosed income or property was kept in the banks of the persons, who were named in the warrant of authorisation.
The formation of such reasonable belief on these grounds cannot be said to be invalid or in any way be considered to be a roving or fishing enquiry.
In conclusion, it may be pointed out that a comprehensive decision on this subject is given by the Allahabad High Court in Raghu Raj Pratap Singh v CIT (307 ITR 450). This decision has considered several issues, which are relevant to the subject.
The author is advocate, Supreme Court