We have heard Shri Ashish Bansal, learned counsel appearing for the petitioner-assessee. Shri Bharat Ji Agarwal, Senior Counsel assisted by Shri Ashok Kumar appear for the Income Tax department.
2. The petitioner has challenged the search and seizure operations under Section 132 of Income Tax Act and prayed for following reliefs:—
"(a) |
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to issue writ, order or direction in the nature of certiorari quashing the search & seizure action under Section 132 (1) as has taken place in the case of the petitioner, as evidenced by the various Panchnamas drawn by the Authorised Officers (so to say), being Annexures - IV (a), IV (b), IV (c), IV (d), IV (e), IV (f), IV(g), IV (h), IV (i) & IV (j); |
(b) |
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to issue writ, order or direction in the nature of certiorari quashing the summon under Section 13 (1A) dated 06.10.2009 being Annexure - VI as issued by the respondent no.4. |
(c) |
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to issue writ, order or direction in the nature of mandamus directing the respondents not to proceed further and/or take up any proceedings in consequence of warrant of authorization (where under seizure has taken place on 15/16.9.2009) by way of centralization of its case, issuing summons, notices, assessment, etc.; |
(d) |
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to issue writ, order or direction in the nature of mandamus directing the respondents to restore the possession of cash amounting to Rs.4,90,000/- as belonging to it and as had been seized during the course of search and seizure action that had commenced on 15.9.2009; |
(e) |
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to issue writ, order or direction in the nature of mandamus directing the respondents to restore the possession of jewellery weighing 251.360 gms valued at Rs.2,96,082/-, as had been seized during the course of search and seizure action that had commenced on 15.9.2009; |
(f) |
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to grant exemplary damages to the petitioner for arbitrary and illegal action of search & seizure to which it has been subjected to; |
(g) |
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to award cost of the petition to the petitioner; and |
(h) |
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grant such other relief as is deemed fit under law and equity." |
3. After exchange of affidavits the writ petition was heard by a Division Bench of this court. The conclusions drawn by the Court in the judgment dated 04.2.2011 on the points for determination are as follows:—
| "Points for determination by the Court |
Conclusions |
The following points arise for determination at this stage: |
130. Our conclusions are as follows: |
(i) Whether it is mandatory to record the reasons to believe for authorising the search; |
(a) The Director of Income-tax (Investigation) Kanpur had jurisdiction to authorise the search; |
(ii) Whether the DIT(I)- Kanpur had jurisdiction to authorise the search; |
(b) There is no necessity to adjudge the validity of search on the parameters of section 22 of the Special Economic Zone Act, 2005, as the section was not enforced on the date of search; |
(iii) Whether the search was invalid as no prior approval of the Development Commissioner was taken under section 22 of the SEZ Act; |
(c) In case the petitioner makes out a prima facie case against the validity of the search then (subject to privilege under section 123 or 124 of the Evidence Act), the Petitioner is entitled to know the information in possession of the Department or the reasons to believe for authorising the search except the source of the information; |
(iv) Whether the Petitioner is entitled to be informed about the information/material or reasons to believe for authorising search before the question of their relevancy is decided by the court; |
(d) In the present case the Petitioner has made out a prima facie case. |
(v) Whether the court can examine the records to adjudge the relevancy of the information/material or the reasons to believe for authorising search without assistance of the Petitioner; |
131. In view of our conclusions, the Department may produce the record after showing it to the counsel for the Petitioner or file a supplementary counter affidavit indicating therein the information or material and reasons to believe for authorising the search. In case record is shown to the Petitioner or a supplementary counter affidavit is filed then, it will be open to the Department not to show or state that part of information that might indicate source of the information. |
(vi) Whether the Petitioner has made out a prima facie case against the search. |
132. We also clarify that: |
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The Department has not claimed privilege under the Evidence Act as yet. It will also be open to the Department to claim privilege under section 123 or 124 of the Evidence Act;
There are other points in the writ petition that we have not considered at this stage. They may be considered subsequently." |
4. The Income Tax department has filed a Civil Appeal No.7840 of 2011 M.D. Overseas Ltd. [2011] 333 ITR 407/198 Taxman 136/10 taxmann.com 30 (All.) against the findings recorded by the Court in the judgment dated 4.2.2011.
5. The writ petition was kept pending with liberty to the department to claim privilege for disclosing the source of information under Section 123 or Section 124 of the Evidence Act. In paragraph 132 the Division Bench stated that there are other points in the writ petition and that the Bench has not considered at this stage. They may be considered subsequently.
6. An application no.115800 dated 13.4.2011 was filed by Shri S.K. Garg and Shri Ashish Bansal appearing for the petitioners with prayers to all the issues raised in the writ petitions, except the right of the petitioners to look into the records related to authorisation of search on the ground that there were other points, which were not argued and were not decided by the Court. The application was heard by the Division Bench presided by Hon'ble Mr. Justice Prakash Krishna (as he then was) and Hon'ble Mr. Justice Vipin Sinha. By an order dated 31.7.2013 the Bench dismissed the review petition. The last four paragraphs of the order dated 31.7.2013, relevant for the purpose of the case, are quoted as below:—
"Viewed as above, we are of the view that no case for reviewing the judgment dated 4.2.2011 has been made out.
Before parting with the case, we may note that the above review application was filed on 15th of April, 2011 and the writ petition was listed before the different Benches of this Court from time to time. The case was adjourned for one reason or the other on account of the non-availability of Sri S.K. Garg, Advocate, as is apparent from the order sheet. At no point of time, Sri S.K. Garg, Advocate, who had argued the matter originally, invited attention of the Court to decide the review application. In the meantime, Hon'ble Mr. Justice Yatindra Singh who delivered the judgment of the Division Bench has been transferred as Chief Justice to Chhattisgarh High Court and after his Lordship's transfer, it appears that the present application is being pressed. Why the attention of the court towards the present application was not drawn, when the said Bench, which passed the order in question, was available and it is now being pressed at this distance of time, by the petitioner, could not be answered by the petitioner. It is not necessary for us to say anything as to why the matter was not pressed earlier as the intention of the petitioner is writ large. Suffice it to say that the application is not bona fide one.
We are of the opinion that the filing of the present application is nothing but an abuse of the process of Court and we cannot sit like a mute spectator.
The application is dismissed with cost of Rs.10,000/- (Rupees Ten Thousand)."
7. From the order dated 31.2.2013, quoted as above it is now clear that no other point, except the liberty given to the Income Tax department to file an application claiming privilege under Sections 123 or 124 of the Evidence Act from disclosing the information on the basis of which the authorisation was prepared, is pending for consideration of the Court.
8. An application has been filed by the Income Tax department on 4.8.2011, supported by the affidavit of Ms. Balvinder Kaur, Deputy Director of Income Tax (Investigation), NOIDA claiming privilege for the unpublished material in public interest under Sections 123, 124 and 125 of the Evidence Act, 1872.
9. In order to meet the objections, that the affidavit has not been filed by the Head of Department, who has formed the opinion for claiming privilege, a supplementary affidavit of Shri Sada Shiv Bajpai, Director General of Income-tax (Investigation) UP & Uttrakhand at Lucknow has been filed, reiterating the averments in the affidavit of Ms. Balvinder Kaur on which the privilege has been claimed.
10. The Income Tax department has claimed privilege of disclosing the satisfaction note to the petitioner on the facts and grounds quoted as below:—
"6. That in view of the aforesaid observations of this Hon'ble Court in the judgment and order dated 4th February, 2011, it is clear that in case the petitioner makes out a prima facie case against the validity of the search only then, subject to the privilege u/s 123 or 124 of the Evidence Act, the petitioner shall be entitled to know the information in possession of the department or the reasons for authorizing search except the source of information.
9. That M.D. Overseas Ltd is a leading importer and exporter of bullion, Platinum bars and other precious metals. The satisfaction note gives the details of the modus operandi adopted by the aforesaid importer and exporter in respect of which the necessary information were received from Financial Intelligence Unit (FIU), Ministry of Finance, Govt. of India, which is a Central National Agency for receiving, processing, analyzing and disseminating information relating to suspected financial transactions and it is also responsible for coordinating and strengthening the efforts of national and international agencies, investigation in pursuing the global efforts against money laundering, terrorist financing and related crimes.
This agency FIU-IND is an independent body reporting to Economic Intelligence Council headed by Finance Minister, Govt. of India. The FIU-IND collects the information of cash transaction reports and suspicious transaction reports and it analyses the information received to uncover the patterns of transactions, suggesting suspicion of money laundering and related crimes, mentioned above. These information are also shared with the National Intelligence, Law Enforcement Agencies, Regulatory Authority and Foreign Financial Intelligence Units.
The various information which led to search were the information received from Financial Intelligence Unit, Ministry of Finance, Govt. of India that heavy cash amounts are being deposited in the Bank Accounts of M/s M.D. Overseas Ltd and its sister concern M/s Kanak Exports on regular basis. As mentioned above, FIU-IND act as the central reception point for receiving Cash Transaction Reports (CTRs) and Suspicious Transaction Reports (STRs) from various reporting entries. FIU-IND is the Central National Agency for receiving, processing, analyzing and disseminating information relating to suspect financial transaction.
FIU-IND is also responsible for coordinating and strengthening efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against money laundering, terrorist financial the related crime.
All these actions are taken and information are shared in public interest by FIU-IND and the actions are taken against money laundering terrorist financing and other related crimes, which cannot be divulged to any person except with the National Intelligence.
Law Enforcement Agencies and various Financial Intelligence Units, as mentioned about the functions of FIU-IND which was set up by the Govt. of India Office Memorandum dated 18th November, 2004.
10. That the aforesaid information received from the Financial Intelligence Unit are unpublished official records and the same cannot be disclosed to any individual including the petitioner and his counsel inasmuch as it shall be against the public interest.
11. That the information has also been received from the Ministry of Corporate Affairs website and also discreet enquiries. The information was received from FIU-IND that the petitioner-company has imported Platinum bars worth several thousand crores of rupees and similarly imported gold valued about thousands crore of rupees, while the sale proceeds in domestic sales appears to be in cash. In these circumstances, the information received from Financial Intelligence Unit which is responsible for national and international intelligence, enforcement and investigation agencies against money laundering, terrorist financing etc. cannot be disclosed to the petitioner or his counsel and the petitioner-company is engaged in the sham transactions of purchase and sale of precious metals with cash which generates heavy unaccounted income. Photostat copy of the functions, collection of information and analysis of information and sharing of information by FIU-IND is enclosed herewith as Annexure SA-1.
12. That it is only due to search carried out at the different premises of the petitioner on 15.9.2009 that, incriminating documents have been recovered and on the basis of these incriminating documents substantial additions are likely to be made by the Assessing Officer during the assessment proceedings.
13. That, moreover, the Department has least objection in showing the Satisfaction Note to the Hon'ble Court, rather it has already been produced before the Hon'ble Court, rather it has already been produced before the Hon'ble Court in a sealed envelope and can be produced again before the Hon'ble Court if so desired."
11. Shri Bharat Ji Agarwal, appearing for the Income Tax department, has relied upon judgments of Supreme Court in State of Punjab v. Sodhi Sukhdev Singh AIR 1961 SC 493 (paras 41, 84); People's Union for Civil Liberties v. Union of India [2004] 2 SCC 476 (paras 68 and 71) and Dagi Ram Pindi Lall v. Trilok Chand Jain [1992] 194 ITR 228/60 Taxman 551 (SC) (para 25). He submits that the disclosure of information, on the basis of which satisfaction note was prepared, would be against larger public interest as the method of collection of information by the Financial Intelligence Unit (FIU), Ministry of Finance, Govt. of India, which is a Central National Agency for receiving, processing, analyzing and disseminating information relating to suspected financial transactions, and it is also responsible for coordinating and strengthening the efforts of national and international agencies, investigation in pursuing the global efforts against money laundering, terrorist financing and related crimes, would jeopardize the public interest. He submits that large amount of cash was deposited in the bank account of the petitioner company and its sister concern M/s Kanak Exports on regular basis. The Financial Intelligence Unit-IND acts as the central reception point for receiving Cash Transaction Reports (CTRs) and Suspicious Transaction Reports (STRs) from various reporting entries. It is a Central National Agency for receiving, processing, analyzing and disseminating information relating to suspect financial transaction. The disclosure of the information received from the Financial Intelligence Unit are unpublished records, and the same could not be disclosed to any individual including the petitioner and his counsel inasmuch as it is against the public interest. Shri Bharat Ji Agarwal submits that the department has least objection in showing the satisfaction note to the Hon'ble Court, rather it has already been produced before the Hon'ble Court in a sealed envelop and can be produced again before the Hon'ble Court, if so desired.
12. Shri Ashish Bansal, on the other hand, submits that the information is relevant to the petitioner on which the search and seizure operations were carried out. The confidentiality of information is not a ground on which the privilege can be claimed under Sections 123 and 124 of the Evidence Act. He submits that block assessments have been made after the search operations in which only a small addition were made and in respect of which an appeal is pending. The petitioners may not be concerned with the source and method of collecting the information but they have a right to examine the satisfaction note to assail the validity and bona fides of the search and seizure operations. He submits that the company has been preparing accounts regularly and has been subjected to income tax assessments. The Income Tax department, with an object to unearth undisclosed income or the income which may have escaped assessment, cannot resort to a harsh and punitive action like search and seizure on the basis of information, which is not relevant. Shri Ashish Bansal submits that the disclosure of satisfaction note will demonstrate that the entire action was malafide and that the petitioner was not the target of either collecting the information or the result arising therefrom.
13. We have considered the arguments and find that the grounds, on which the privilege has been claimed under Sections 123 and 124 of the Evidence Act, are relevant for the purpose and object of claiming privilege. It is in public interest not to disclose the satisfaction note to the petitioner. The privilege may not only be claimed for the information collected, gathered or processed but may also be claimed for the method and manner of collecting such information, the disclosure of which will be against the public interest.
14. It cannot be denied that the Finance Intelligence Unit (FIU), Ministry of Finance, Government of India - a Central National Agency reporting directly to the Finance Minister, is responsible for receiving, processing, analyzing and disseminating information related to suspected financial transactions. It is also responsible for coordinating and strengthening the efforts of national and international agencies, investigation in pursuance to global efforts against money laundering, terrorist financing and related crimes. The source, method and manner in collecting the information may be relevant for the security of organisation and the personnel involved and the methods adopted by them for collecting and processing the information. The preparation of the satisfaction note on such information could thus be treated as unpublished documents for which the Head of the Department namely the Director General of Income Tax (Investigation), UP and Uttrakhand has validly claimed privilege under Sections 123 and 124 of the Evidence Act. We do not find that claim of privilege is not for bonafide purpose.
15. The balance sheet of the M.D. Overseas Ltd for financial affairs of the Company dealing in import of bullion including gold and platinum bars discloses Short Term loans from banks of Rs.1066,185,849.00 from overseas branch of Indian Bank, as buyers credit facilities. The entire bullion imported is sold by petitioner Company in cash. With an issued subscribed and paid up capital of Rs.9,66,200/- only and the net profit of only Rs. 13 crores. The information of large amount of cash transactions in foreign bank may have generally raised doubts in bonafide manner on the nature of transactions. A large amount of accounted black money is floating in the market which poses a serious threat to the national economy. The Government of India has adopted several methods to discouraging the parallel economy being run by unscrupulous persons. The Financial Intelligence Unit (FIU), Ministry of Finance, Government of India is engaged in collecting such information against the money laundering, terrorist financing and related crimes. The sources and methods of the organisation collecting and processing such sensitive information cannot be subjected to public scrutiny to jeopardize the interest of the organisation and national interest.
16. For the aforesaid reasons, relying upon well-established principles of claiming privilege under Sections 123 and 124 of the Evidence Act in the judgments cited as above, we allowthe application filed by the Income Tax department.
17. We do not find that anything more requires to be decided in these writ petitions. All other points have been decided and that the complaint of the petitioner that some other points were argued, which were not considered, has also been negatived by the bench presided by one of the Hon'ble Judges, who had passed the order dated 4.2.2011. The review application on such ground was rejected on 31.7.2013.
18. All the writ petitions are accordingly dismissed.