Facts of the Case

The petitioners, Shilpa Chowdhary and Vikas Chowdhary (wife and husband), filed writ petitions under Articles 226 and 227 of the Constitution challenging the legality of search and seizure actions conducted by the Income Tax Department.

  • A Warrant of Authorization (WoA) dated 05.02.2019 under Section 132(1) of the Income Tax Act, 1961 was issued against the Kochar Group.
  • The petitioners’ premises were searched as authorities suspected that incriminating material relating to the Kochar Group was located there.
  • During the search, certain items including locker keys were found.
  • Subsequently, a fresh WoA dated 12.02.2019 was issued against the petitioners for searching a bank locker.
  • Jewellery worth approximately ₹1 crore was seized from the locker.
  • Notices under Sections 153A/143(3) were issued initiating assessment proceedings.

The petitioners challenged the legality of:

  • The search conducted at their premises
  • The subsequent locker search
  • The assessment proceedings

 

Issues Involved

  1. Whether the writ petitions were barred by delay and laches.
  2. Whether the search was conducted under Section 132(1) or Section 132(1A) of the Income Tax Act.
  3. Whether the Warrant of Authorization (WoA) was validly issued against the petitioners.
  4. Whether search of a third-party premises is permissible under Section 132.
  5. Whether the “reason to believe” requirement was satisfied.
  6. Validity of subsequent search and seizure of locker and assessment notices.

 Petitioner’s Arguments

  • The search action was arbitrary, mala fide, and without jurisdiction.
  • No material existed linking the petitioners with the Kochar Group.
  • Authorities exceeded their jurisdiction by conducting a full-fledged search, instead of limiting it to third-party material.
  • The WoA was allegedly issued under Section 132(1A) without fulfilling statutory conditions.
  • There was no “reason to believe”, only suspicion and conjecture.
  • Locker search was invalid since:
    • Locker existence was discovered only during search
    • No prior information existed
  • Reliance was placed on judicial precedents emphasizing good faith and proper application of mind.

 Respondent’s Arguments 


  • The petition was barred due to delay and laches (filed after ~18 months).
  • The search was conducted strictly under Section 132(1), not 132(1A).
  • Two separate searches occurred:
    • First: Against Kochar Group (including petitioner’s premises)
    • Second: Against petitioners (locker search)
  • “Reason to believe” was based on:
    • Intelligence inputs
    • Surveillance evidence
    • Link between petitioners and hawala activities
  • Court should not examine adequacy of material, only existence of belief.

 Court Findings / Order


1. Delay and Laches

  • Although there was delay, the Court decided the matter on merits.

2. Nature of Search (Section 132(1) vs 132(1A))

  • The Court held:
    • Search was conducted under Section 132(1)
    • Petitioners’ claim of Section 132(1A) was incorrect

3. Validity of Search of Third-Party Premises

  • The Court clarified:
    • Authorities can search any premises (even third-party)
    • Provided there is reason to suspect relevant material exists

4. “Reason to Believe” Requirement

  • Satisfied based on:
    • Surveillance
    • Intelligence inputs
    • Link with Kochar Group’s illegal activities
  • Court emphasized:
    • “Reason to believe” need not be proved beyond doubt
    • Sufficiency of material is not subject to judicial review

5. Validity of Locker Search

  • Valid because:
    • Locker key was recovered during search
    • Petitioners failed to give satisfactory explanation
    • Statements recorded under Section 132(4) supported action

6. Legality of Search and Seizure

  • Entire search action was held:
    • Legal and within jurisdiction
    • Not arbitrary or mala fide

 Important Clarifications by Court


  • Third-party premises can be searched under Section 132 if suspicion exists.
  • Distinction between Section 132(1) and 132(1A) clarified:
    • 132(1): Based on “reason to believe”
    • 132(1A): Based on “reason to suspect” for additional premises
  • Courts will not evaluate adequacy of evidence, only existence of belief.
  • Discovery during search can justify fresh WoA.
  • Statements under Section 132(4) play crucial evidentiary role.

 

Sections Involved

  • Section 132(1) – Search and Seizure
  • Section 132(1A) – Extended search powers
  • Section 132(4) – Recording of statements
  • Section 153A – Assessment in case of search
  • Section 143(3) – Regular assessment
  • Articles 226 & 227 – Constitutional remedies


Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2020:DHC:3498-DB/SVN07122020CW52072020_170121.pdf

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