R.M. Doshit, J.
1. The matter at dispute in this group of petitions is seizure of gold weighing 50 kgs brought in this country by these 10 Writ Petitioners from a foreign country [hereinafter referred to as 'the gold'].
2. Since the matter centres around the gold, an object of universal avarice, searched and seized by the IT authorities we shall first discuss the law pertaining to search and seizure under the IT Act. Section 132 of the IT Act, 1961 (hereinafter referred to as 'the Act') empowers the Director General or Director or the Chief CIT or the Dy. CIT as may be empowered in this behalf by the Board, inter alia where he has reason to believe that any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Act, to enter any building or place where he has reason to suspect that such money, bullion, jewellery or other valuable article or thing are kept and to seize any such money, bullion, jewellery or other valuable article or thing found as a result of such search. As prerequisite for exercise of power of search and seizure under s. 132 of the Act, the authorised officer shall have an information in his possession and that in consequence of such information, shall have reason to believe that the bullion, jewellery or other valuable, article or thing represents either wholly or partly income or property which has not been or would not be disclosed for the purposes of the Act. The powers of the IT authorities of search and seizure under s. 132 of the Act has been a matter of examination by various High Courts in the country and by the Hon'ble Supreme Court time and again. Learned advocate Mr. J. P. Shah has relied upon the judgments in the matters of N. K. Textiles Mills & Anr. vs . CIT , Commr. of Commercial Taxes & Ors. vs . Ramkishan Shrikishan Jhaver & Ors. : [1967]66ITR664(SC) , H. L. Sibal vs . CIT & Ors. , Ganga Prasad Maheshwari & Ors. vs. CIT (1981) 139 ITR 1043, Vindya Metal Corpn. vs . CIT & Ors. : [1985]156ITR233(All) , Dr. Nandlal Tahiliani vs . CIT & Ors. : [1988]170ITR592(All) ; L. R. Gupta & Ors. vs . Union of India & Ors. : [1992]194ITR32(Delhi) ; Hemal Singh & Anr. vs . Union of India & Ors. ; Janak Raj Sharma vs . Director of Inspection (Investigation) & Ors. ; Chhugamal Rajpal vs . S. P. Chaliha & Ors. : [1971]79ITR603(SC) .
Learned advocate Mr. Thakore has relied on the judgment in the matter of Southern Herbals Ltd. vs . Director of Income-tax (Investigation) & Ors. : [1994]207ITR55(KAR) ; and Rugmini Ram Raghav Spinners (P) Ltd. & Ors. vs . Union of India & Ors. : [1992]196ITR674(Mad) .
3. The Courts have, thus, time and again examined the purpose and scope of powers conferred upon the authorised officer under s. 132 of the Act as well as the constitutionality of the provisions contained therein. The Courts have held that the exercise of power of search and seizure infringes upon the privacy of a citizen and causes social stigma. It is, therefore, mandatory that the condition precedent must be satisfied. The condition precedent is the possession of information and the reason to believe that the bullion, jewellery or other valuable article or thing represents wholly or partly income or property which has not been or would not be disclosed for the purpose of the Act. On perusal of all the above referred judgments, the principles that emerge can be summarized as under :
(a) The authority must be in possession of the information and must form an opinion that there is reason to believe that the article or property has not been or would not be disclosed for the purposes of the Act.
(b) The information must be something more than mere rumour or gossip or hunch.
(c) The information must exist before the opinion is formed.
(d) The authorised person must actively apply his mind to the information in his possession and shall form opinion whether there is reason to believe or not. The opinion must be formed on the basis of the material available at that time.
(e) The opinion must be based on the material which is available and it should not be formed on the basis of extraneous or irrelevant material.
(f) That the formation of opinion shall have rational connection and bearing to the reasons for such opinion. The formation of opinion should be based on active application of mind and be bona fide and not be accentuated by mala fide, bias or based on extraneous or irrelevant material. The belief must be bona fide and cogently supported. The Courts have further held that the existence or otherwise of the condition precedent is open to the judicial scrutiny.
(g) The Courts would examine whether the authorised person had material before it on which he could form the opinion whether there is rational connection between the information possessed and the opinion formed. However, the Court would not sit in appeal over the opinion formed by the authorised person if the authorised person had information in his possession and the opinion formed is on the basis of such material. The Court would not examine whether the material possessed was sufficient to form an opinion.
(h) The Court cannot go into the question of aptness or sufficiency of the grounds upon which the subjective satisfaction in based.
(i) If the belief is bona fide and is cogently supported, the Court will not interfere with or sit in appeal over it.
4. We shall now examine the facts of the present case. On 7th Nov., 1995, these ten writ petitioners arrived in India at the International Airport, Ahmedabad from Sharjah and each of them brought approximately 5 kg. of gold with him. Said writ petitioners disclosed the gold brought by them to the customs authority at the airport and paid due customs duty. Each of the writ petitioners paid more than 1 lakh of rupees by way of custom duty for which a receipt was issued by the custom authority. Said writ petitioners rented rooms at the Agarwal Hotel and were accompanied by two other Indian residents. The police visited the hotel and examined the gold imported by the petitioners and after perusing the receipts of the customs duty paid by the writ petitioners, left the hotel. The customs officers also visited the hotel and being satisfied about the payment of custom duty paid on the gold, they too left. On 8th Nov., 1995, the respondents Nos. 1 and 2 visited the petitioners and respondents Nos. 5 and 6 and served warrants issued under s. 132(1A) of the Act. Said officers also recorded statements of the petitioners and respondents Nos. 5 and 6 and seized the gold. It is the case of respondents Nos. 1 and 2 that they had under s. 132 of the Act upon receiving information from respondent No. 4 Police Sub-Inspector and having considered the information received by them, an opinion was formed that they had reason to believe that the gold brought in by the writ petitioners was brought from unaccounted income or was likely to escape assessment under the Act. One Mr. K. C. Bawa, Police Inspector, Crime Branch has made an affidavit and has stated that after the writ petitioners rented the rooms at the hotel, the Police Sub-Inspector Shri V. K. Ajara, upon information received by him, carried out the raid. Four of the writ petitioners viz. Gopalan Rajendra, Janardhan Vijaya Kumar, Varikapal Somaiya, Ravi Kumar, Kanumatra were found to be in possession of the foreign liquor for which they did not possess valid permit and, therefore, offence was registered against said four persons under the Bombay Prohibition Act being CR No. 415 of 1995. In course of search carried out by Police Sub-Inspector Shri Ajara under the Bombay Prohibition Act, he found the gold in possession of two persons, who were Indian residents, accompanying the writ petitioners. The petitioners informed that they had carried the gold which belonged to one Noorbhai of Dubai and the gold was handed over to one Mohammad Rafiq NCV Konkani who was an employee of New Robinson Tours & Travels, Bombay. The gold was found from room No. 206 which was rented by six persons including Mohammad Rafiq Konkani. It was confirmed by the said six persons that the gold was sent by Noorbhai from Dubai and that the same was to be handed over to one Ahmed Bashir. Said six persons were the residents of India and, therefore, he thought it fit to inform the IT authorities about the gold. He, therefore, informed the Dy. Director of the Income-tax Shri Meena at about 4.00 o'clock in the morning on 8th Nov., 1995. After the arrival of Shri Meena and his staff at the hotel, Police Inspector Shri Bawa apprised them of the situation and gave report in writing. Mr. R. P. Meena, Asstt. Director has filed an affidavit and has stated that upon receiving the information from Shri K. C. Bawa, Police Inspector, he visited the hotel and waited at around 1.30 O'clock in the morning and contacted Shri Bawa who was there interrogating persons occupying room No. 206. After Shri Bawa drew a report, he handed over copies of the report and the statements recorded by him to Shri Meena. It was learnt that the gold belonged to one Noorbhai of Dubai and was carried by the writ petitioners as carriers. The gold was handed over to Mohammed Rafiq Konkani at the airport after the petitioners paid customs duty. Immediately an inquiry was made through the Asstt. Director of Income-tax (Investigation), Bombay. The information received from the Bombay authorities disclosed that no person in the name of Ahmed Bashir stayed at the given address. It was learnt that the office of M/s New Robinson Tours & Travels was not situated at the given address. Considering this material, i.e. the information received from Shri Bawa and the report made by him, the statements recorded by Shri Meena in the early hours of 8th Nov., 1995 and the information received from the IT authorities at Bombay, it was clear that the identity of the person to whom the gold was to be delivered in India and the identity of the person who was the real owner of the gold was in doubt. Thus, considering the information received as above, a note of satisfaction was put up at around 9.15 hours in the morning of 8th Nov., 1995. Said note of satisfaction was examined by the Director (Investigation) and after examining the note placed before him and the report made by the Inspector Shri Bawa and the information received from the IT authorities at Bombay, the Director (Investigation) issued a warrant of authorisation under s. 132 of the Act in the name of Mohammed Rafiq Konkani occupant of room No. 206 of Hotel Agarwal. Accordingly, a search was carried out on 8th Nov., 1995 at around 11 o'clock in the morning in presence of two independent witnesses. The search was concluded at around 8.00 p.m. The gold found was seized from room No. 206 and was sealed.
5. The question that arises for our consideration is whether there was valid reason for respondents Nos. 1 to 3 to invoke powers vested upto them under s. 132 of the Act and whether said powers have been properly exercised. On perusal of the material produced on records of the matter, the facts which cannot be disputed are as under :
The writ petitioners are the non-resident Indians and they travelled from Sharjah to Ahmedabad. Petitioners carried gold weighing 5 kg each on their person. The gold belonged to one Noorbhai of Dubai. The name of the persons given by the respondents No. 5 and 6 to whom they were supposed to hand over the gold was found to be incorrect. The gold was seized from Mohammad Rafiq Konkani and Bashir Ahmed Patel and not from the writ petitioners.
6. Learned advocate Mr. Shah has contended that the gold was brought in the country in lawful manner and proper customs duty as assessed by the customs authority was paid for the same. He has vehemently argued that the Government of India, in its Ministry of Finance, has permitted the import of gold by an Indian from a foreign country who has stayed abroad continuously for a period of six months and who pays customs duty in foreign exchange. The maximum quantity of gold that can be brought under the said scheme is 5 kgs. He has relied upon communication dt. 2nd March, 1994 (Annexure 'E' to the petition) and has submitted that the gold as aforesaid can also be brought as a carrier. It is hardly relevant whether the gold belonged to the passenger or not. According to him, the action of the IT authorities is contrary to the above referred gold import scheme. Once the gold has been brought in accordance with the aforesaid scheme, and proper customs duty has been paid as provided in the said scheme, there is no earthly reason why the IT authorities should pursue the gold after it has been brought in the country. He has further submitted that undisputedly, the gold belonged to one Noorbhai of Dubai who resides and carries on business at Dubai. The income earned by said Noorbhai at Dubai from which the gold was purchased was not amenable for the assessment under the Act and, therefore also, the action on the part of the respondent authorities was not sustainable.
Mr. Shah has also submitted that even otherwise, there was no material in possession of the authorities on which the opinion could be formed as envisaged under s. 132 of the Act and the search could have been ordered. He has submitted that it is well settled proposition of law that unless the authorities possessed the information on which opinion could be formed and unless the person/authorities form such opinion, no search could be ordered under s. 132 of the Act. He has further submitted that in the present case, there was no material before the IT authorities to order search of the hotel premises and seize the gold lawfully brought by the writ petitioners.
7. Learned advocate Mr. M. J. Thakore has appeared for the IT authorities and has submitted that the respondent authorities did have the material in the form of report submitted by Police Inspector Shri Bawa and the statements of the petitioners and the respondents Nos. 5 and 6 which were recorded by Shri Bawa. The respondent authorities had further material received in the form of information sent by the IT authorities (Investigation), Bombay. Considering the fact that none of the petitioners had means to purchase the gold in the quantity which they had brought, that the gold was handed over by the agent of Noorbhai to the petitioners at the airport at Sharjah; that the agent of Noorbhai had accompanied the petitioners on flight and had paid the amount of customs duty payable by each of the petitioners; that the respondent No. 5 had collected the gold from the petitioners at the International Airport at Ahmedabad and that the petitioners had to accompany respondent No. 5 to Bombay and that in consideration, each of the petitioners had received free ticket from Sharjah was enough to rouse suspicion of the respondent authorities. If the gold were not seized, it would have been sold in the open market in India and the income thereof would not be disclosed for the purposes of the Act. Thus, in the submission of Mr. Thakore, there was material before the authorities and the same was scrutinized and after active application of mind, opinion was formed by respondent No. 3 and on the basis of such opinion, a warrant was issued under s. 132 of the Act. He has submitted that the sufficiency of the material on which the opinion is formed is not the subject in which the Court should interfere. Suffice if the authorities had the material on which an opinion could be formed and that the opinion is formed on the basis of the said material and no other extraneous or irrelevant material. He has also relied upon the statements recorded during the course of search and the material subsequently gathered by the authorities. He has also tried to justify the action of the respondent authorities indicating that respondents Nos. 5 and 6 have repeatedly changed their stand (sic) names and addresses given by them at various stages of investigation are changed from time to time. The names given by the said respondents to whom the gold was supposed to be delivered have also been found to be fictitious. Thus, in the submission of Mr. Thakore, powers under s. 132 of the Act have been properly invoked and the action taken pursuant to the order issued under s. 132 of the Act shall not be interfered with by this Court. He has also submitted that the gold was seized from respondent No. 5 and the writ petitioners have admitted that they had handed over the gold to respondent Nos. 5 at the International Airport at Ahmedabad. Therefore, writ petitioners have no locus standi to challenge the action of the IT authorities.
8. It is disputed by Mr. Shah that the gold was seized from respondent No. 5. He maintains that the gold was seized from the writ petitioners. However, on perusal of the statements recorded by Police Inspector Shri Bawa, in course of investigation by him and the statements recorded by the IT authorities, in course of search carried out by them, it is evident that the gold was handed over to respondent No. 5 at Ahmedabad airport and that it was seized from respondent No. 5 at Agarwal Hotel. We, therefore, do not believe the contention of the petitioners that the gold was seized from them.
9. We are afraid we cannot accept the contention raised by Mr. Shah that once the gold was lawfully brought in and proper customs duty was paid, the same should not have been pursued by the IT authorities. Buying gold in foreign country and bringing it in this country after paying customs duty in foreign exchange does not absolve the person, bringing gold from abroad from his liability to satisfy that the gold was purchased from the income lawfully earned by him and the income earned out of sale of such gold would be disclosed for the purpose of the Act. The clandestine manner in which the gold was brought in was sufficient to rouse suspicion of the IT authorities that the income earned from the sale of the gold would not be disclosed for the purposes of the Act. Thus, in our view, the IT authority had sufficient material before it to form the opinion as envisaged under s. 132 of the Act. We are also satisfied that the opinion was formed on the basis of the material available and on no other extraneous or irrelevant material. We shall not examine the sufficiency of such material or aptness of the opinion formed by the concerned authorities. We do believe that the material and the information gathered by the concerned authorities in course of the search and thereafter is not relevant for the purpose of dispute raised in this petition. We have to examine the validity of the order made under s. 132 of the Act for search and seizure. Thus, the material which was before the authority at the time of making of the order is the only relevant material which can be examined. The authorities cannot be permitted to rely on the material which is gathered after the order was made under s. 132 of the Act to justify their action. However, in this case, we have held that the authorities had sufficient material before it to form the opinion and to make order under s. 132 of the Act. We, therefore, see no merit in the contentions raised by Mr. Shah, learned advocate for the petitioners. The petitions are, therefore, dismissed. Rule is discharged. The petitioners and respondents Nos. 5 and 6 shall pay costs of these petitions to the respondents Nos. 1 to 4.