Dr. Gautam Sen vs. CCIT (Bombay High Court)

(i) The revenue has field an affidavit-in-reply of one Shri Dinesh Singh, Deputy Director of Income Tax dated 29 August 2000. However, in the affidavit-in-reply there is no averment made with regard to any incriminating material found during the course of search linking the Petitioner to any undisclosed income. In fact, the averment of the Petitioner that nothing incriminating was found during the course of the search is not challenged. Thus in the absence of the same, there is no basis to infer that the Petitioner was in possession of undisclosed income. This is not disputed by the revenue at the hearing of the Petition.

(ii) It may be pointed out (although not strictly necessary) that the affidavit in reply does not mention a word about satisfaction note being recorded before carrying out the search. This alone would have been evidence of reasonable belief for carrying out the search operation (See Director General of Income Tax (Investigation) & Ors. Vs. Speacewood Furnishes (P) Ltd. 374 ITR 595). We specifically asked the revenue to produce the record maintained by it including the appraisal report, consequent to search, before taking a decision to issue the impugned show cause notice. At this stage, Mr. Suresh Kumar, learned Counsel for the revenue has produced an appraisal report dated 16 April 2000, i.e. prior to issuing the impugned show cause notice dated 16 May 2000.

(iii) It is clear as daylight from the appraisal report that no incriminating documents were found during the course of search nor was it found that he was in any manner involved in the bank account with his name in the said Bank. Thus it appears that the revenue took search and seizure proceedings in respect of the Petitioner on account of mistaken identity. In any case the appraisal report would indicate that no notice under Section 158BC of the Act could be issued to the Petitioner as the condition precedent to issue notice under Section 158BC of the Act, viz. undisclosed income found during the search proceedings, is not satisfied.

(iv) In the above facts, the impugned notice is quashed and set aside.

(v) We note that this action on the part of the revenue to issue the impugned notice ignoring the appraisal report is highly deplorable. We live in a Country governed by laws. The Officers of the Income Tax Department are obliged to proceed in accordance with the statutory provisions and not on their whim and fancy. The Officers hold power in trust and must ensure that no citizen is harassed by sending him notices, when on the basis on its own record, such notices are not sustainable. We trust that the Income Tax Department would adopt a standard operating procedure which would provide for appropriate safeguards before issuing notices under Chapter XIVB of the Act. This alone would ensure that Officers of the Revenue act in terms of the mandate provided in the Act. In fact, at the very outset, after a preliminary hearing, we had asked the learned Counsel for the Revenue whether the Revenue would still want to persist with the impugned notice under Section 158BC of the Act. On instructions, Mr. Suresh Kumar, learned Counsel for the revenue informed us that the revenue seeks to press the impugned notice and seek dismissal of the present Petition. In the above view, this is the fit case where costs should be awarded to the Petitioner. The revenue i.e the jurisdictional Chief Commissioner of Income Tax (Respondent No.1) is directed to pay the costs of Rs.20,000/to the Petitioner within four weeks from today.