Search warrant in the name of assessee and family members. The word ‘family members’ can not be stretched to include wife, spouse, daughter or children, a person should be specifically named in the search warrant – Rajasthan High Court.
ABCAUS Case Law Citation:
1016 (2016) (09) HC
Brief Facts of the Case:
A search and seizure operation under Section 132(1) of the Income Tax Act, 1961 was carried out at the residential premises of a person and his two sons. During the course of search proceedings, incriminating documents; cash, gold ornaments, FDRs, shares & debentures were found and seized.
The searched person approached the Settlement Commission u/s 245C. However, the AO issued notice under section 158-BC requiring the wife and daughter of one of the searched person to file their return of income for the block period. However both filed returns at nil income but under protest contending that the provisions of section 158BC were inapplicable as there was no warrant of authorisation against them u/s 132(1) and therefore the notice itself was bad.
However, the Assessing Officer was of the opinion that when the warrant named assessees and ‘family members’ and since the assessees (wife and daughter) were the members of the family, they are automatically covered by the authorisation. Accordingly the AO passed the assessment order for undisclosed income of the wife and the daughter.
CIT(Appeals) noted that in the Form-45 (the warrant) the word ‘and family’ was simply mentioned after the names of the searched persons. He held that since the search warrant itself did not indicate names of the wife and the daughter specifically, the AO was precluded from proceeding ahead with their assessment u/s 158BC, and quashed the assessment made by the AO.
The Tribunal upheld the order of the CIT(A). Aggrieved by the order, the Rvenue went in appeal before the High Court.
Contentions of the Revenue:
The revenue contended that when the warrant did mention to cover family members this included their spouse and children.
Contentions of the Assessee(s):
It was contended that search and seizure operation invades privacy of individuals and unless there is a specific warrant of authorisation, the Revenue could not have proceeded to issue notice under section 158-BC which was ab initio void. It was submitted that in the Income Tax Act, 1961, the term “family” has not been defined but that does not mean that in search proceedings “family” would cover the wife and daughter.
Observations of the High Court:
The High Court, on a combined reading of the provisions of section 132(1) read with section 158-BC and 158-BD observed that:
Search and seizure are drastic provisions and does not confer unbridled power to the Revenue and have a serious invasion upon the right, privacy and freedom of the 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.
This power 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 Court noted that provision of Section 158-BC are attracted “where any search has been conducted under section 132 in the case of any person”. The Court opined that it statutorily mandates that search should be carried out under Section 132(1) in the name of a person before invoking the provision of Section 158-BC. According to the Court “Person” should normally mean a name mentioned 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. It further stated that though the ‘family’ has not been defined under the Income Tax Act but it could not be stretched to cover all the family members, namely wife, daughter, children etc as all the family members are separate assessable legal entities.
It was held that a search action under Section 132 (1) has to be “person specific” and when the names of the present assessees did not figure in the warrant, the AO had committed an apparent error to assess the assessees.