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Judgment
D.A. Mehta, J.—This petition challenges notice dt. 4th Aug., 2000 (Annex. ''B''), issued to one M/s Jalaram Theatre, Maharshi Arvind Marg, Junagadh, u/s 158BC of the IT Act, 1961 (''the Act''). Six petitioners have challenged the action of the respondent authority of issuing the impugned notice on the basis of the fact that the petitioners are the co-owners who owned a building named Jalaram Theatre (building). It is the say of the petitioners that the building had been rented out on a monthly rent of Rs. 6,000 in 1971 (subsequently raised to Rs. 8,000) to a firm named M/s Jayshree Talkies (Jayshree). It is further averred by the petitioners that the petitioners and /or relatives of the petitioners are in no way related to the partners of Jayshree which is carrying on business of exhibition of films in the building.
It appears that search action u/s 132 of the Act took place on 3rd Sept., 1998, at the premises where Jayshree is running the business of exhibiting the films. Admittedly the warrant of authorisation for conducting the search has been issued in the name of "partners of Jalaram Theatre/Jayshree Talkies". Based on the aforesaid action the impugned notice has been issued in the name of M/s Jalaram Theatre.
The case of the respondent authority is that there was unaccounted transaction between partners of Jayshree and/or persons connected with Jayshree on the one hand and partners of M/s Jalaram Theatre, a partnership firm. This averment is based on the fact that initially action was initiated at the building u/s 133A on 3rd Sept., 1998, and according to the respondent the survey led to discovery of evidence which establishes suppression of receipts from cinema and unaccounted payments.
Heard Mr. Varun Patel for Mr. S.N. Soparkar, learned senior advocate appearing on behalf of the petitioners. The learned advocate, after reiterating the facts, contended that Section 158BC of the Act entitled an AO to issue notice for filing a return in the prescribed form in case of a person who had been searched u/s 132 of the Act but as there was no entity in the name and style of M/s Jalaram Theatre the petitioners could not be called upon to furnish such return of income for the block period by treating the petitioners as partners of M/s Jalaram Theatre.
On behalf of the respondent authorities it was submitted by Mr. M.R. Bhatt. learned senior standing counsel, that the petitioners had at no point of time, challenged the warrant of authorisation and the only challenge was to the notice issued u/s 158BC of the Act; therefore, even if the search was an invalid search, subsequent notice u/s 158BC of the Act could not be struck down. Elaborate submissions were made on the basis of the averments made in affidavits in reply dt. 6th Oct., 2000, 9th Oct., 2000, 10th Dec, 2000, and 11th Dec, 2000, to submit that the annexures to the said affidavits went to show that the respondent authorities were justified in calling upon M/s Jalaram Theatre to file a return of income pursuant to search proceedings u/s 132 of the Act which took place on 3rd Sept., 1998. More particularly, account opening form procured from Union Bank of India was relied upon which is annexed to the affidavit dt. 10th Dec, 2000.
After hearing the learned advocates appearing for both the sides the Court called upon the learned standing counsel to place before the Court the original satisfaction note recorded before issuance of warrant of authorisation only for the purpose of ascertaining whether there was any material with the respondent authority to even prima facie come to the conclusion that an entity by the name of M/s Jalaram Theatre existed as a partnership firm.
On going through the file which has been placed before the Court for perusal it is found that the file contains one satisfaction note dt. 25th Aug., 1998, by Asstt. Director of IT (Inv.)-2, Rajkot, whereunder additional satisfaction in relation to activities of one Ramchandani Group which have come on record after the original note dt. 17th March, 1998, have been recorded. In the said satisfaction note in para No. 2 a proposal is mooted for initiating search proceedings at the residential premises mentioned in Annex. ''A'' to the original satisfaction note dt. 17th March, 1998 and the residential premises of one Mr. Kirit H. Kakkad, manager of Jayshree Cinema. On going through the said two annexures, viz., Annexures. ''A'' and ''C'', it becomes apparent that neither the name of M/s Jalaram Theatre or any of its so-called partners appears in either Annex. ''A'' or ''C'' nor does the name of any of the petitioners figure in any of the two annexures. Insofar as the business premises mentioned in Annex. ''B'' are concerned, the proposal is to initially take action u/s 133A of the Act, i.e., survey operation and not a search operation. Annex. ''B'' refers to five different premises, at Sr. No. 3 Jayshree Cinema and Guest House, Junagadh, appears. Suffice it to state that none of the premises mentioned in Annex. ''B'' even refer to the premises of M/s Jalaram Theatre. Therefore, on the day the said note was approved by Dy. Director of IT (Inv.), Rajkot, viz., 26th Aug., 1998, and further approved by Director of IT (Inv.), Ahmedabad on 26th Aug., 1998, there was no proposal and no approval in relation to either the petitioners in their individual capacity, or as partners of M/s Jalaram Theatre as an entity.
Subsequently on 3rd Sept., 1998, Asstt. Director of IT(Inv.)-2, Rajkot, proposed conversion of Section 133A proceedings into proceedings u/s 132 of the Act by recording the following satisfaction note:
Satisfaction note.
The actions u/s 133A are going on at the following premises:
(a) M/s Krishna Stores, Maliwada Road.
(b) M/s Jayshree Talkies, Jayshree Road.
It is noticed that unaccounted cash is lying at M/s Krishna Stores. The survey action at M/s Jayshree Talkies has led to discovery of evidences which establish suppression of receipts from cinema and unaccounted payments.
I have reasons to believe that the unaccounted assets have not been and would not be disclosed for the purpose of IT Act. Similarly, the incriminating documents would not be produced in response to summons u/s 131(1A)/131(1) or notices u/s 143(2)/142(1).
Warrant of authorisation u/s 132 may therefore kindly be issued.
Sd/- Illegible 3rd Sept., 1998 Asstt. Director of IT (Inv.)-2, Rajkot. Dy. Director of IT (Inv.), Rajkot.
The aforesaid satisfaction note of Asstt. Director of IT(Inv.) has been approved but while approving, the authority has on its own stated that warrant of authorisation is required to be issued in relation to office premises of M/s Jalaram Theatre/Jayshree Talkies, Junagadh. This subsequent satisfaction note dt. 3rd Sept., 1998, except for repeating the statutory language of Section 132 of the Act does not record any reasons why and how M/s Jalaram Theatre enters the picture.
When one thereafter proceeds to read the warrant of authorization the same has been issued in the name of "partners of Jalaram Theatre/Jayshree Talkies". Thus, the position that emanates from the record of the Revenue is that till the survey proceedings were proposed and sanctioned M/s Jalaram Theatre was never in contemplation. Similarly, even at the point of time, when on 3rd Sept., 1998, Asstt. Director of IT (Inv.) proposed to convert the survey proceedings into search proceedings there was no proposal qua any entity named M/s Jalaram Theatre. The name appears for the first time in the second satisfaction note while issuing the warrant of authorisation. However, as noticed hereinbefore, it is important to note that the authority was not sure even at that point of time, while recording satisfaction for issuance of warrant of authorisation, as to the premises of which persons are required to be searched and hence the description "premises of M/s Jalaram Theatre/Jayshree Talkies". Despite this position in the satisfaction note, when the warrant of authorisation is issued the same is in the name of "partners of M/s Jalaram Theatre/Jayshree Talkies".
In the aforesaid set of facts and circumstances of the case, it becomes apparent that there was no material with the respondent authority to even prima facie come to the conclusion, much less establish from record, that an entity by the name of M/s Jalaram Theatre, a partnership firm, existed at the point of time when the search proceedings were initiated by issuance of warrant of authorisation. If this be the position there can be no basis for the respondent authority to issue notice u/s 158BC of the Act because the record itself reveals that at no point of time an entity named M/s Jalaram Theatre, a partnership firm, was ever subjected to search proceedings u/s 132 of the Act. Section 158BC of the Act stipulates that in a case where any search has been conducted u/s 132 of the Act in the case of any person then the AO is entitled to serve notice to such person, viz., person who is subjected to search proceedings u/s 132 of the Act, requiring such person to furnish within such time as may be specified, but not less than 15 days, a return of income in the prescribed form. The Revenue has, therefore, in the first instance to show that the entity on whom a notice u/s 158BC of the Act is issued is the entity or the person in whose case search proceedings u/s 132 of the Act have been conducted. In the present case, from the record of the respondent authority and the facts which have come on record of this petition it becomes apparent that the prerequisite conditions empowering the AO to exercise the powers for issuing notice u/s 158BC of the Act are not fulfilled.
During course of hearing reliance had been placed on a draft document relating to proposed sale of property known as Jalaram Theatre for a sum of Rs. 27,50,000 to submit that the said document was unearthed during course of survey leading to belief that there was unaccounted transaction in property. The said document, on a bare perusal, cannot assist the case of the respondent. Firstly, the said document is not signed by anybody, neither the sellers nor the purchasers. The document reflects proposed transaction of an immovable property. The law enjoins every person to compulsorily register a document involving transfer of immovable property valued at more than Rs. 100 and hence in absence of any other corroborating evidence that such a transaction took place between the parties the Court is not expected to raise a presumption that a transaction took place in violation of the law of the land. However, apart from the fact that there are eight purchasers and six sellers and none of the parties have appended their signatures to the document, what is most material is the fact that the vendors are the six petitioners who are described to be co-owners of the immovable property. Thus, even if for the sake of argument the document in question is treated as a relevant piece of evidence only for the purpose of initiating proceedings, even then no entity by the name of M/s Jalaram Theatre, a partnership firm, is mentioned in the document belying the claim of the respondent authorities to the contrary. The document supports the stand of the petitioners that the petitioners are co-owners and are deriving rental income from the property which has duly been reflected in their respective returns of income.
In the aforesaid set of facts and circumstances, it is apparent that the action of the respondent authority in issuing impugned notice u/s 158BC of the Act, dt. 4th Aug., 2000 (Annex. ''B''), cannot be sustained. Accordingly, the said notice u/s 158BC of the Act, dt. 4th Aug., 2000, is hereby quashed. The petition is allowed accordingly. Rule made absolute. There shall be no order as to costs.