The Commissioner Of Income Tax ... vs Pawan Kumar Garg
2009 Latest Caselaw 104 Del

           THE HIGH COURT OF DELHI AT NEW DELHI

%                                  Judgment delivered on: 16.01.2009

+            ITA 881/2008

THE COMMISSIONER OF INCOME
TAX DELHI(CENTRAL) -II                                     ... Appellant


                                  - versus -


PAWAN KUMAR GARG                                           ... Respondent

Advocates who appeared in this case:

For the Appellant     : Mr R. D. Jolly
For the Respondent    : Dr Rakesh Gupta with Ms Poonam Ahuja and Ms Aarti Saini

CORAM:-
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE RAJIV SHAKDHER

1. Whether Reporters of local papers may be allowed to see the judgment ? YES

2. To be referred to the Reporter or not ? YES

3. Whether the judgment should be reported in Digest ? YES

BADAR DURREZ AHMED, J

1. Mr Jolly, who appears on behalf of the appellant, has

produced the record pertaining to the issuance of warrants of

authorization as well as their execution and the panchnamas which

have been drawn in this case.

2. The record indicates that the Director Income Tax

(Investigation) issued a warrant of authorization in Form 45 under

Section 132 of the Income Tax Act, 1961 (hereinafter referred to as the

‗said Act') and Rule 112 (2) (a) of the Income Tax Rules, 1962

(hereinafter referred to as the ‗said Rules') to, inter alia, the Additional

Director of Income Tax (Investigation) (Mr A. K. Singh) as also to

Assistant Directors of Income Tax (Investigation) [Mr L. K. Aggarwal,

Mr Ajay, Mr Anil Kumar, Mr S. Bose, Mr K. C. Badhang,

Mr P. K. Mishra (DCIT) and Mr Rajiv Kumar]. This warrant of

authorization was issued on 25.05.2000 and was in respect of the

premises at B-256, Suraj Mal Vihar, Delhi-92. A panchnama was

drawn upon on 25.05.2000 itself and a restraint order under Section

132 (3) of the said Act in respect of locker No. 11-PNB, Preet Vihar,

Delhi under the names of Sh. P. K. Garg and Smt. Shashi Garg was

also served on Mr P. K. Garg.

3. Thereafter, a second warrant of authorization in Form 45

under Section 132 of the said Act read with Rule 112 (2)(a) of the said

rules was issued on 25.05.2000 by Mr A. K. Singh, Additional Director

of Income Tax (Investigation) authorizing some Deputy Directors of

Income Tax, Assistant Directors of Income Tax and Income Tax

Officers to conduct a search in respect of the said locker No. 11

standing in the names of Mr P. K. Garg and Smt. Shashi Garg in

Punjab National Bank, Preet Vihar, Delhi. The panchnama drawn on

26.05.2000 indicated that the search in respect of the said locker

commenced on 26.05.2000 at 12.05 p.m and the same was closed on

26.05.2000 at 1.15 p.m temporarily, to be commenced subsequently

and for which purpose seals were placed on the said locker.

4. Thereafter, further search was conducted on 02.06.2000 as

indicated by the panchnama of that date. The said panchnama

indicated that the search commenced on 02.06.2000 at 12.35 pm and

was closed on that very date at 1.45 pm as finally concluded. The

restraint order under Section 132(3) was also lifted.

5. According to the revenue this panchnama is the last of the

panchnamas relating to the search and seizure operations conducted at

the premises relating to the assessee. Consequently, the period of

limitation has to be reckoned from the end of this month, that is, from

30.06.2000. On the other hand, the contention of the assessee, which

was accepted by the Tribunal, is that the last panchnama was the one

drawn on 25.05.2000 pursuant to the warrant of authorization issued by

the Director of Income Tax (Investigation) and, therefore, the limitation

has to be reckoned from 31.05.2000. The Tribunal took this view

because in its opinion the warrant of authorization issued by the

Additional Director of Income Tax (Investigation) on 25.05.2000 in

respect of the said locker was invalid as he had no power to do so.

6. Section 132(1) of the said Act indicates the persons who are

authorized to issue warrants of authorization for searches. There are

two classes of persons mentioned in Section 132 (1). The first class

includes the Director General, Director, the Chief Commissioner and

Commissioner. This group of persons can authorize other persons

specified in Clause (A) of Section 132 (1) to conduct the search. The

second group of persons includes the Joint Director and Joint

Commissioner. However, the Joint Director and Joint Commissioner

who fall in this category are those who are empowered in this behalf by

the Central Board of Direct Taxes (in short the ‗board') to issue

warrants of authorization to other persons indicated in Clause (B) of

Section 132(1) of the said Act. In the present case what has happened

is that the second warrant of authorization in respect of the said locker

was issued by the Additional Director Income Tax (Investigation). The

Additional Director does not find mention in the provisions of Section

132(1). However, it was contended by the learned counsel for the

revenue that the Additional Director would be covered in the

expression ―Joint Director‖ in view of the provisions of Section 2

(28D) of the said Act. Even assuming that the expression ―Joint

Director‖ as used in Section 132(1) includes an Additional Director,

such Additional Director or Joint Director would have to have initial

empowerment by the Board to issue warrants of authorization in view

of the provisions of Section 132(1)(B). This, of course, is de hors the

argument that the definition given in Section 2(28D) has to be read in

the light of the opening words of Section 2 which clearly stipulates that

the definitions given in that provision are subject to the expression --

―unless the context otherwise requires‖.

7. The learned counsel for the revenue also contended that there

was authority granted to the Additional Director of Income-tax by the

Board to issue warrants of authorisation of search and seizure

operations under Section 132(1) of the said Act. A reference was

made, first of all, to a notification dated 06.11.1979 issued by the

Board in exercise of powers conferred under Section 132(1) of the said

Act. By virtue of the notification, the Board empowered the following

Deputy Directors of Inspection and Inspecting Assistant

Commissioners to authorize action under Section 132(1) of the said

Act:-

1. The Deputy Directors of Inspection posted in the

Directorate of Inspection (Investigation) and working

under the Director of Inspection (Investigation);

2. The Deputy Directors of Inspection posted in the

Intelligence Wings; and

3. The Inspecting Assistant Commissioners of Income-tax.

8. It is clear from the above notification that only Deputy

Directors of Inspection posted in a particular wing had been authorized

by the Board to issue warrants of authorisation in respect of search and

seizure operations under Section 132(1) of the said Act. Such an

authorisation by the Board was imperative before any Deputy Director

of Inspection or any Inspecting Assistant Commissioner could

authorise an action under Section 132(1) of the said Act. It is also clear

that only those Deputy Directors of Inspection and Inspecting Assistant

Commissioners who have been specifically authorised by virtue of the

said notification dated 06.11.1979, had the authority to act under

Section 132(1) of the said Act.

9. The learned counsel for the revenue then referred to the

notification dated 11.10.1990 issued by the Board empowering the

following Deputy Directors and Deputy Commissioners to authorise

action under Section 132(1) of the said Act:-

1) All Deputy Directors of Income-tax (Investigation)

posted under the Directors General of Income-tax

(Investigation);

            2)      All Deputy Directors of Income-tax (Investigation)

                   posted    under        the   Directors     of   Income-tax

                   (Investigation); and

           3)      All Deputy Commissioners of Income-tax in-charge of

                   Income-tax Ranges, including Special Ranges.

10. This notification of 11.10.1990 was necessitated because of

the amendment brought about in Section 132(1) of the said Act in

1988. At this juncture, it would be relevant to point out the legislative

history of Section 132(1). Initially, under Section 132(1), it was only

the Commissioner who was empowered to authorise any action under

Section 132 of the said Act. This position continued till 1965 when, by

virtue of the amendments brought about in 1965, the Director of

Inspection, alongwith the Commissioner, was empowered to take

action under Section 132 of the said Act. By the amendment

introduced in 1975, an additional class or category of persons was

created in Section 132(1). That class or category included Deputy

Directors of Inspection and Inspecting Assistant Commissioners.

While the persons belonging to the original category, i.e., of Director of

Inspection or Commissioner of Income-tax were empowered by the

statute itself to authorise any action under Section 132 of the said Act,

the persons falling in the second category, i.e., Deputy Directors of

Inspection and Inspecting Assistant Commissioners had to be

specifically empowered by the Board to issue warrants of authorisation

of search and seizure operations under Section 132 of the said Act.

After the 1975 amendment, even Deputy Directors of Inspection and

Inspecting Assistant Commissioners could initiate action under Section

132 provided they were specifically empowered to do so by the Board.

It is pursuant to this amendment in 1975 that the Board issued the

notification dated 06.11.1979 empowering specific Deputy Directors of

Inspection and Inspecting Assistant Commissioners to take action

under Section 132 of the said Act. This position continued till 1988

when, by virtue of an amendment, the first category of persons

comprised of (1) the Director General; (2) Director; (3) Chief

Commissioner and (4) Commissioner. These persons, without

requiring any further authorisation from the Board, could issue

warrants of authorisation of search and seizure operations under

Section 132. The second category of persons was also amended. It

comprised of the Deputy Director of Income-tax and the Deputy

Commissioner of Income-tax. These persons, however, required

specific empowerment by the Board before they could authorise action

under Section 132(1) of the said Act. It is apparent that because of this

amendment brought about in 1988, the Board issued the second

notification dated 11.10.1990 authorising the specified Deputy

Directors of Income-tax and Deputy Commissioners who were

empowered to authorise action under Section 132(1) of the said Act. It

is apparent that not all the Deputy Directors and not all the Deputy

Commissioners were empowered to authorize action under Section

132(1) of the said Act. Only those officers who found specific mention

under the notification dated 11.10.1990 were empowered to authorize

action under Section 132 (1) of the said Act.

11. To continue the historical development of Section 132 of the

said Act, we note that the position as obtaining after the 1988

amendment continued upto 1998 when, w.e.f. 01.10.1998, the second

category of persons was amended. The first category of persons

remained the same. It comprised of Director General, Director, Chief

Commissioner and Commissioner. As pointed out above, these persons

were empowered by the statue itself to authorize action under Section

132 (1) of the said Act. The second category of persons, however, was

altered to comprise of Joint Director and Joint Commissioner in place

of the erstwhile category which comprised of Deputy Director and

Deputy Commissioner. However, unlike the past, the Board did not

issue any notification after the amendment of 1998 specifically

empowering any Joint Director or Joint Commissioner to authorize

action under Section 132(1) of the said Act.

12. The learned counsel for the revenue sought to get over this

hurdle by drawing our attention to a notification dated 23.10.1998

issued by the Central Government under Section 117(1) of the said Act.

The said notification merely re-designated certain officers of the Indian

Revenue Service w.e.f. 01.10.1998. The re-designation, inter alia,

entailed that Deputy Directors of Income-tax and Deputy

Commissioners of Income-tax in the pay scale of Rs 12,000-375-

16,500/- would be re-designated as Joint Director or Income-tax and

Joint Commissioner of Income-tax in the pay scale of Rs 12,000-375-

16,500/-. The learned counsel for the revenue contended that the

empowerment as per notification dated 11.10.1990, would

automatically apply, in view of the above re-designation, to Joint

Directors of Income-tax as also Joint Commissioners of Income-tax.

This argument does not advance the case of the revenue. First of all,

the officer who issued the warrant of authorisation on 25.05.2000 was

not a Joint Director of Income-tax, but was the Additional Director of

Income-tax (Investigation). Secondly, the notification that was

necessary in the present case, was a notification by the Board in

exercise of powers under Section 132(1) of the said Act. There is no

such notification authorizing any Joint Director or Joint Commissioner.

The notification dated 23.10.1998 on which the revenue seeks to place

reliance is one which has been issued not by the Board, but by the

Central Government and that too in exercise of powers under Section

117 (1) of the Act. There is no specific empowerment in favour of any

Joint Director or Joint Commissioner under Section 132(1) of the said

Act. Mere re-designation of a class of officers does not translate to the

specific empowerment which is required under Section 132(1) of the

said Act.

13. At this juncture, we may take note of the decision of this

court in the case of Dr Nalini Mahajan v. Director of Income-tax

(Investigation): 257 ITR 123 which had been heavily relied upon by

the respondent / assessee and also by the tribunal in passing the

impugned order. At the outset, we would also like to mention that the

revenue had preferred an appeal before the Supreme Court against the

order passed by this court in Dr Nalini Mahajan (supra). By virtue of

a judgment dated 30.09.2008, the Supreme Court in Civil Appeal

No.6410-6411/2003 (Director of Income-tax v. Dr Nalini Mahajan)

observed that the principal question which arose for consideration in

the appeals before it was whether the Additional Director

(Investigation) had the requisite jurisdiction to authorize any officer to

effect search and seizure in purported exercise of his power conferred

upon him under Section 132(1) of the said Act as it stood at the

relevant time. The Supreme Court observed that the said question had

become academic inasmuch as the Commissioner of Income-tax had

issued orders under Section 132B for release of cash, for release of

jewellery and for release of books of accounts that were seized during

the search and seizure conducted under Section 132(1) of the said Act.

The Supreme Court observed that as the said question had become

academic, it was not required to examine the issue raised in the appeals

before it. The Supreme Court, however, made it clear that the

questions of law raised in the said appeals were expressly kept open.

No opinion was expressed by the Supreme Court in that regard.

Subject to this, the said civil appeals were dismissed as infructuous.

The position in law, therefore, is that the question of law decided by a

Division Bench of this court in the case of Dr Nalini Mahajan (supra),

insofar as this court is concerned, stands concluded. The issue before

the Supreme Court, however, is open. The Supreme Court has not

expressed any opinion either way in its said judgment dated

30.09.2008.

14. With these prefatory remarks in respect of the Division

Bench decision of this court in Dr Nalini Mahajan (supra), it would be

appropriate to now examine what was actually held in that decision.

One of the issues raised was whether the Additional Director

(Investigation) had the requisite jurisdiction to authorize any officer to

effect search and seizure in purported exercise of the power conferred

upon him under Section 132 of the said Act. The Division Bench

concluded that the Additional Commissioner (Investigation) did not

have the power to issue any authorisation or warrant to the Joint

Director, New Delhi. While doing so, the Division Bench considered,

inter alia, the provisions of Section 2(21) which defined Director

General and Director; Section 2(28D) which defined Joint Director and

Section 132(1) of the said Act. The definition of Director General or

Director given in Section 2(21) after the amendment of 01.10.1998

indicated that the Director General or Director meant a person

appointed to be a Director General of Income-tax or, as the case may

be, a Director of Income-tax, under sub-section (1) of Section 117, and

included a person appointed under that sub-section to be an Additional

Director of Income-tax or a Joint Director of Income-tax or an

Assistant Director or Deputy Director of Income-tax. An argument

was advanced on behalf of the revenue that since the definition of

Director includes an Additional Director of Income-tax, the warrant of

autorisation issued by the Additional Director of Income-tax would be

valid. This argument was repelled by the Division Bench after noting

that the interpretation clause as contained in Section 2 begins with the

words ―unless the context otherwise requires‖ and that the definitions

of Director General or Director are exhaustive ones. The court

observed that it was a well-settled principle of law that although a

definition would govern the statute whenever the defined word is used

in the body thereof, where the context makes the definition given in an

interpretation clause inapplicable, a defined word may have to be given

a meaning different from that contained in the interpretation clause.

The court also observed that had ―Additional Director‖ been covered

within the purview of the definition of Director General or Director,

there would have been no necessity of defining ―Joint Director‖ again

as has been done in Section 2 (28D) of the said Act, in terms whereof

also a Joint Director would be an Additional Director. The Division

Bench also observed that an interpretation clause is not a positive

enactment and that it was well-settled that an interpretation clause,

having regard to its limited operation, must be given a limited effect.

While giving effect thereto, the court must not forget that the scope and

object of such a provision is subject to its applicability and it is used

having relation to the context only. The Division Bench further

observed that a statutory power has been conferred under Section 132

upon the board in favour of a particular statutory authority. In this

regard, it was specifically held:-

―The scope and purport of the said definition, thus, cannot be extended to other authorities in whose favour the power has not been delegated.‖

15. The Division Bench also reiterated the well-settled

proposition, after noticing the important cases on this aspect, namely,

Nazir Ahmad v. The King-Emperor: AIR 1936 PC 253; Viteralli v.

Saton: 3 Law Ed. 1012 and Ramana Dayaram Shetty v. International

Airport Authority of India: 1979 (3) SCC 489, that when a power is

given to do a certain thing in a certain manner, the same must be done

in that manner or not at all and that all other proceedings are

necessarily forbidden. In this context, the Division Bench found that

the Additional Director (Investigation) had no jurisdiction to issue a

warrant of authorisation and consequently, the same was liable to be

quashed.

16. We may also note that in CIT v. Jainson: ITA 366/2007

decided on 17.07.2008, we had endorsed and respectfully followed the

view taken by this court in Dr Nalini Mahajan (supra). The main

question sought to be raised in CIT v. Jainson (supra) was with regard

to the power of the Additional Director of Income-tax (Investigation) to

issue a warrant under Section 132(1) of the said Act. The tribunal in

that case had found that the warrant of authorisation by the Additional

Director of Income-tax (Investigation) was without authority and,

therefore, the entire search as well as the assessment proceedings

subsequent upon such warrant were invalid and bad in law. The

tribunal had, like in the present case, followed the decision of this court

in Dr Nalini Mahajan (supra). We had noted that in Dr Nalini

Mahajan (supra) this court had arrived at a conclusion that the

Additional Director or Income-tax (Investigation) did not have any

power to issue any authorisation or warrant under Section 132(1) of the

said Act. We found that the issue sought to be raised by the revenue

was entirely covered by the decision of this court in the case of

Dr Nalini Mahajan (supra) and consequently we dismissed the appeal

as the issue did not call for any further consideration.

17. The learned counsel for the revenue had referred to the

decision of another Division Bench of this court rendered on

30.01.2008 in Sunil Dua v. CIT (ITA 1429/2006). That decision was

referred to in the context of the argument that the expression ―Deputy

Director‖ included an Additional Director and, therefore, since the

notification dated 06.11.1979 had empowered the Deputy Directors to

issue warrants of authorisation, an Additional Director would,

consequently, also have such authority. It may be noted that in Sunil

Dua (supra), the search had concluded on 16.01.1998, i.e., prior to the

amendment of 01.10.1998. The definition of Deputy Director given in

Section 2 (19C) prior to 01.10.1998 included not only a Deputy

Director, but also an Additional Director of Income-tax. Section

2(19C) had been introduced in 1994 w.e.f. 01.06.1994. The said

provision suffered an amendment in 1998 w.e.f. 01.10.1998, whereby

the reference to Additional Director of Income-tax was deleted.

Perhaps, the definition of Deputy Director as it stood prior to

01.10.1998, was what persuaded the court to observe that the

expression ―Deputy Director‖ includes an Additional Director. The

position has altered after the 1998 amendment. Therefore, the decision

in Sunil Dua (supra) would have no application to the present case. In

any event, the said decision did not notice the earlier decision of this

court in the case of Dr Nalini Mahajan (supra). Apart from that, in

Sunil Dua (supra), it was contended that the warrant of authorisation

drawn up ―in favour of‖ the Additional Director of Income-tax was not

valid. Here the question is entirely different. It is not a question of in

whose favour the warrant of authorisation is drawn up, but who has

issued the warrant of authorisation. On this ground also, the decision

in Sunil Dua (supra) is clearly distinguishable.

18. It had been argued by the learned counsel for the revenue

that as per Section 2(28D), the Joint Director meant a person appointed

to be a Joint Director of Income-tax or an Additional Director of

Income-tax under Section 117(1) of the said Act. It was, therefore,

contended that since the warrant of authorisation in the present case

had been issued by an Additional Director of Income-tax, it meant that

it was issued by a Joint Director of Income-tax and, therefore, the

warrant of authorisation was valid. This argument cannot be accepted.

As held in Dr Nalini Mahajan (supra), the definition of Joint Director

has to be read contextually. The provisions of Section 132(1) refers to

Director General or Director as well as Joint Director or Joint

Commissioner. While the first two authorities fall within the first

category, which were empowered by the statute itself to authorize

action under Section 132(1), the latter two authorities, namely, the Joint

Director or Joint Commissioner, can only authorize action if they are

specifically empowered by the Board in that behalf. Now, the

definition of Director General or Director as given in Section 2 (21),

includes Additional Director of Income-tax as well as a Joint Director

of Income-tax. If the argument of the learned counsel for the revenue

were to be accepted that the expression ―Joint Director‖ as used in

Section 132(1) would include an Additional Director of Income-tax,

then there would have been no occasion for the legislature to have

separately specified Joint Director under Section 132(1) when it had

already mentioned the Director General or Director. It is obvious that

the legislature was mindful of the definitions given under Section 2

(21) when it gave separate treatment to Director General / Director and

Joint Director / Joint Commissioner. The Director General or Director

did not require any further empowerment from the board, whereas the

Joint Director or the Joint Commissioner required such specific

empowerment. It is clear that the context requires that the words

―Director General‖ or ―Director‖ be construed in the limited sense and

not in the inclusive sense as defined in Section 2(21) of the said Act.

By similar logic, when the legislature has specified the authorities who

may be empowered as being the Joint Director or Joint Commissioner,

we cannot extend the same by employing the definition given in

Section 2 (28D) to extend it to Additional Directors of Investigation.

We may also point out that ‗Additional Director' has also been defined

under Section 2(1D) which was introduced with retrospective effect

from 01.06.1994 by virtue of the Finance Act, 2007. Under that

provision, Additional Director means a person appointed to be an

Additional Director of Income-tax under Section 117(1) of the said

Act. It is pertinent to note that while the definition of Additional

Director has been inserted with retrospective effect from 01.06.1994 by

virtue of the Finance Act, 2007, the definition of Joint Director was

introduced as Section 2 (28D) for the first time in the said Act by virtue

of the Finance No. (2) Act of 1998 w.e.f. 01.10.1998. Thus, there was

no concept of a Joint Director prior to 01.10.1998. Since the definition

of Additional Director has been inserted with retrospective effect from

01.06.1994, the legislature clearly made the distinction between a Joint

Director and an Additional Director. The manner in which the

expression ―Joint Director‖ has been used in Section 132(1) requires

the same to be interpreted in its limited sense as meaning only the Joint

Director and not an Additional Director of Income-tax. This is so

because had the legislature intended to include an Additional Director

of Income-tax, it would have done so specifically in Section 132(1)

itself.

19. For all these reasons, we feel that the tribunal has correctly

applied the law in following the decision of this court in Dr Nalini

Mahajan (supra). The impugned decision of the tribunal does not call

for any interference and the issue is entirely covered by the decision of

this court in the case of Dr Nalini Mahajan (supra).

20. The appeal is dismissed. There shall be no order as to costs.

BADAR DURREZ AHMED, J

RAJIV SHAKDHER, J January 16, 2009 SR/dutt