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2004 (5) TMI 34 - HC - Income TaxLegality and validity of the search and seizure operations The details of the information available in the relevant files received from various sources other than the report of the CAG were voluminous, and the same were capable of leading the authorities to conclude that the writ petitioners were in possession of undisclosed property/income which they would never divulge even after service of a notice under section 131 - Held that there was no illegality in issuing the warrants of authorisation of search and seizure under section 132 - The documents/materials recovered and seized during the course of search are evidence of non-disclosure of property/income. Therefore, the petitioners contention that the respondent authorities acted illegally in issuing the warrants of authorisation of search and seizure has no leg to stand. - the materials seized during the course of search have their own evidentiary value for the purpose of consequential action under the Income-tax Act and no writ of prohibition in restraint of such use could be granted
Issues Involved:
1. Maintainability of the writ petitions within the territorial jurisdiction of the court. 2. Legality of considering the draft report of the Comptroller and Auditor General (CAG) for issuing search and seizure warrants. 3. Existence of additional information apart from the CAG report to form "reasons to believe" under Section 132(1) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Maintainability of the Writ Petitions: The court examined whether the writ petitions were maintainable within its territorial jurisdiction. It was determined that: - In W.P. (C) No. 1552 of 2000, the petitioner firm did not have its premises searched within the jurisdiction of the court. The warrants were issued by authorities in New Delhi and Calcutta, not Guwahati. Thus, the petition was not maintainable. - W.P. (C) No. 137 of 2000 was also found to be unmaintainable as the petitioner, an assessee in New Delhi, had his premises searched there, not within the jurisdiction of the court. - Similarly, W.P. (C) No. 6965 of 2000 and W.P. (C) No. 2889 of 2001 were not maintainable as the searches were conducted outside the court's jurisdiction. - W.P. (C) No. 7008 of 2000 was found maintainable as the searches were conducted within the court's jurisdiction. - W.P. (C) No. 2890 of 2001, W.P. (C) No. 3729 of 2001, W.P. (C) No. 8647 of 2001, and W.P. (C) No. 8648 of 2001 were also dismissed for lack of jurisdiction as the searches were conducted outside the court's territorial limits. 2. Legality of Considering the Draft Report of the CAG: The court addressed whether the draft report of the CAG could be considered as "information" under Section 132(1) of the Income-tax Act: - It was established that the report of the CAG, being a property of the State Legislature, could not be treated as information within the meaning of Section 132(1) until it was disposed of by the Legislature. - The court concluded that any action taken based on the draft report of the CAG while it was under consideration by the Legislature was not legally permissible. The report could not form the legal basis for the formation of the "belief" required under Section 132(1). 3. Existence of Additional Information: The court examined whether there was other information in the possession of the authorities apart from the CAG report to justify the issuance of search and seizure warrants: - The court scrutinized the office files and satisfaction notes from the authorities in Delhi, Kolkata, and Guwahati. It was found that the authorities had multiple sources of information, including discreet inquiries and field reports, which indicated tax evasion and undisclosed income or property. - The court determined that the information gathered from various sources was sufficient to form the "reason to believe" as required under Section 132(1). The presence of the CAG report did not vitiate the decision-making process as it was not the sole basis for the belief. Conclusion: The court dismissed all the writ petitions except W.P. (C) No. 7008 of 2000 on the grounds of lack of jurisdiction. It was concluded that the authorities had sufficient and valid information to issue the warrants of authorisation for search and seizure under Section 132 of the Income-tax Act, 1961. The materials seized during the searches were deemed to have evidentiary value for further proceedings under the Act.
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