Facts of the Case

The petitioners, Shah-E-Naaz Judge, Sandeep Kohli, and Sahyr Kohli, challenged the legality of search warrants issued under Section 132 and consequential notices under Section 153A of the Income Tax Act.

The case arose from a prior search conducted on one Karamjit Singh Jaiswal, during which a locker key belonging jointly to Nagina Judge and Shah-E-Naaz Judge was found. Based solely on this discovery, the authorities issued warrants to search three lockers held by the petitioners.

Upon execution, two lockers were found empty, while one contained jewellery valued at approximately ₹49.73 lakhs. The authorities proceeded to initiate assessment proceedings under Section 153A for multiple assessment years.

The petitioners contended that the search authorization lacked legal basis, as there was no credible material linking them to undisclosed income or to the person originally searched.

Issues Involved

  1. Whether the issuance of search warrants under Section 132 was valid without “reason to believe” based on credible material.
  2. Whether mere discovery of a locker key during a third-party search justifies search of lockers belonging to others.
  3. Whether proceedings under Section 153A can survive when the underlying search is invalid.
  4. Whether “reason to suspect” is sufficient for authorizing search of lockers under Section 132(1)(i).

Petitioner’s Arguments

  • The petitioners argued that there was no material or evidence connecting them with undisclosed income.
  • The satisfaction note was vague and based on conjecture, merely stating that lockers “may contain” valuables.
  • There was no nexus between the petitioners and the person searched (Karamjit Singh Jaiswal).
  • The statutory requirement of “reason to believe” under Section 132 was not satisfied.
  • Consequently, all proceedings initiated under Section 153A were liable to be quashed. 

Respondent’s Arguments

  • The Revenue contended that the search was valid based on “reason to suspect” under Section 132(1)(i) for searching a place (locker).
  • The discovery of the locker key during a valid search justified further investigation and search of lockers.
  • It was argued that the warrants were issued in relation to the lockers (place), not directly against the petitioners.
  • Once a valid search is conducted, issuance of notice under Section 153A becomes mandatory. 

Court’s Findings / Judgment

  • The Court held that “reason to believe” is a mandatory requirement for issuing search warrants under Section 132.
  • The satisfaction note failed to disclose any material or evidence linking the petitioners to undisclosed income.
  • The use of the expression “may contain valuables” indicated mere suspicion and not a legally sustainable belief.
  • There was no investigation or verification conducted after discovery of the locker key.
  • The Court emphasized that search powers cannot be exercised for fishing or roving inquiries.
  • It was held that the warrants of authorization did not satisfy statutory conditions under Section 132.
  • Consequently, the search was declared illegal, and proceedings under Section 153A were quashed.

 

Important Clarifications by Court

  • “Reason to suspect” cannot substitute “reason to believe” when rights of individuals are affected.
  • Mere possession of a locker or key does not establish undisclosed income.
  • Satisfaction note must clearly demonstrate:
    • Existence of credible information, and
    • Application of mind by the authority.
  • The Court reaffirmed that right to privacy cannot be violated on mere conjecture. 

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2018:DHC:7568-DB/SKN30112018CW59372016.pdf 

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