Search and Seizure in case of doctor

Decision of Allahabad High Court delivered on 2-03-2012 in case of Dr. Roop

Facts of the case:

Search conducted on doctor couple

Pleadings on behalf of doctor:

1. AO called for returns of doctor after conducting search. It means returns were not checked before conducting search. So, there was no reason to believe, at most there can be reason to suspect but that does not justify search u/s 132.

As per SC in Seth Brothers 74 ITR 836, PR Metreni  157 Taxmann 325,

- Search is a serious invasion on privacy and freedom of tax payer

-powers u/s 132 must be exercised strictly according to law .

2. Further as per Instruction no. 7 of 2003 : Search should be authorisedby DGIT (Inv.) only and should be conducted only where credible evidence to indicate substantial un accounted income/assets or expected concealment of 1 crore or more. the  text of instruction is as under

Matters relating to search and seizure

 With a view to focus on high revenue yielding cases and to make the optimum use of manpower, the Board has decided that officers deployed in the Investigation Wing should restructure their activities. They should henceforth strictly adhere to the following guidelines :

     (i)  Searches should be carried out only in cases where there is credible evidence to indicate substantial unaccounted income/assets in relation to the tax normally paid by the assessee or where the expected concealment is more than Rs. 1 crore;

    (ii)  Search operation will also be mounted when there is evidence of hidden unaccounted assets arising out of a conspiracy to cause public harm, terrorism, smuggling, narcotics, fraud, gangsterism, fake currency, fake stamp papers and such other manifestations;

   (iii)  Taxpayers who are professionals of excellence should not be searched without there being compelling evidence and confirmation of substantial tax evasion.

 Henceforth, search operations shall be authorised only by the concerned DGIT (Inv.), who will be accountable for the action initiated by the officers working under him. He should also ensure that all the work relating to search & seizure, like post-search inquiries, preparation of appraisal report and handing over of seized books of account, etc., should be completed by the Investigation Wing within a period of 60 days from the date on which the last of the authorisations for search was executed.

 DGs IT (Inv.) are requested to ensure that officers of competence and proven integrity are taken in the Investigation Wing. The officers posted in the Investigation Wing will be trained at NADT in a special course for which arrangements will be separately made.

 DGs IT (Inv.) are required to ensure strict compliance of the above guidelines /instructions.

However  in present case no monetary limit was considered and also the search was authorised by Director of Income tax and not by DGIT.

As per SC in Paper Products Ltd 247 ITR 128, these instructions are binding on the assessee.

3. Held in following judgements that conditions specified in 132 must be fulfilled for invoking 132:

i)                    Ganga Prasad Maheshwari 139 ITR 1043

ii)                  Dr. Nand lal Tahiliani  170 ITR 592

iii)                Dr. Sushil Rastogi 260 ITR 249

iv)                Ravi Iron Industries 264 ITR 28

v)                  Smt kavita Aggarwal 264 ITR 472

vi)                Dr. Anita Sahai 136 Taxmann 247

2. Held in following cases that If the Director considers the material after issuance of warrant of authorization , it will be illegal even if material existed earlier:

i)                    Suresh Chand Aggarwal 130 Taxmann 363

ii)                  Shyam Jewellers 196 ITR 343

iii)                Dr. D.C. Shrivastva 162 Taxmann 290

iv)                Giridhar Gopal Gulati 269 ITR 45

3. Where satisfaction note, did not show any date, time and place when discreet enquiries were made and did not mention the name of persons from whom enquiries were made, the note was rejected. Loose satisfaction note is not sustainable and must contain contemporary information .

-          Held in Space wood Furnishers(Bom) 246 CTR 313

Held by Court

We have considered the submissions and carefully perused the records of the authorisation. We do not find any error of law in the recording of satisfaction note, the authorisation or in the process of search and seizure operations carried out by the Income Tax Department under Section 132 (1) of the Act, on the clinic-cum-residence of Dr. Roop and Dr. Sangeeta. There was credible and reliable evidence before the competent authority on which the satisfaction was recorded by DIT (Inv.), Kanpur and on which the administrative approval was given by DGIT (Inv.), Lucknow. The Addl. Director had visited the clinic on four occasions. On the last three occasions he visited along with decoy patient, and obtained receipt of consultation and laser treatment. He perused the registers and took details of the number of patients, payments received by the doctors from their patients, who were not issuing receipts to all the patients. The

Income Tax Department based on the records of the year 2002 and the report of the Addl. Director after visiting the clinic in 2005 on four occasions along with decoy patients, and having examined the income tax returns and balance sheets in which negligible income was returned, authorised the search. There was no illegality in recording the satisfaction note by the competent authorities based on relevant and credible evidence collected by the department. The satisfaction that the doctor couple was disclosing only the part of their income and that they had amassed huge wealth by receipts of crores of rupees every year, does not suffer from any error of law.The exercise of powers under 131(1A) is contemplated in a situation anterior to exercise of power u/s 132. Before authorizing an officer, the officer referred to in 132(1) would exercise power u/s 131(1A) of the Act.