2002 (5) TMI 17 - HC - Income Tax

The prayers in the petition are (a) that the search and seizure proceedings initiated under section 132 of the Act may be declared as illegal and invalid; (b) that the entire seized material including the cash of Rs. 1,40,000 may be ordered to be released forthwith; (c) that the cash amounting to Rs. 2,80,000 extorted by the search party may be ordered to be returned to the petitioners forthwith; (d) that the restraint order under section 132(3) in respect of the premises at 605, Hemkunt Tower, 6, Rajendra Place, New Delhi, may be directed to be withdrawn by the respondents forthwith and the seals be removed to enable the petitioners to resume their business; (e) that due cost and compensation may be suitably awarded to the petitioners for all the harassment and hardships caused to them by the respondents; and (f) that any other order or direction may be passed in favour of the petitioners as it may deem fit and proper. - At this stage, it is not possible for this court to arrive at the conclusion that the stand adopted by the petitioners is unimpeachable. It is thus not possible at this stage to grant the relief claimed for by exercising the extraordinary powers under article 226 of the Constitution of India. - Normally, we would have preferred not to enter into details to the extent that we have done so as not to prejudice the case of the petitioners. This has, however, been necessitated because of the specific request made by counsel for the petitioner.

Summary

Issues:
1. Legality of search and seizure proceedings under section 132 of the Income-tax Act.
2. Release of seized material and cash.
3. Allegations against Central Bureau of Investigation.
4. Connection of petitioners with the business of other parties.
5. Seizure of cash not concealed income.
6. Adequacy of evidence regarding the accounted sum.
7. Dismissal of the writ petition.

Analysis:

1. The main issue in this judgment was the legality of the search and seizure proceedings initiated under section 132 of the Income-tax Act. The petitioners sought to declare these proceedings as illegal and invalid. However, the court found no justification for such a declaration as the petitioners were inherently within the contemplation of the respondents even prior to the search, as their activities were considered connected with the business of other parties.

2. The petitioners requested the release of the seized material, including cash amounts. The court examined the evidence presented and concluded that the seized cash of Rs. 1,40,000 was not concealed income and was reflected in the books of account. The petitioners failed to provide adequate evidence to prove the legitimacy of this sum, and hence, the court dismissed this request.

3. Additional prayers were made to involve the Central Bureau of Investigation (CBI) in the investigation and to monitor their activities. The court rejected these requests, stating that there were no allegations against the CBI in the petition. The CBI was left to conduct its investigation without interference from the court.

4. The argument was raised regarding the connection of the petitioners with the business of other parties involved in the search and seizure operation. The court found that the petitioners were indeed connected with the business activities of the other parties, as evidenced by the original files presented during the proceedings.

5. Another issue raised was the alleged bribe of Rs. 2,80,000 demanded by inspectors during the search. The court noted that even if these events were true, they would not directly affect the legality of the search and seizure proceedings under section 132 of the Income-tax Act. The allegations of bribery were considered an attempt to prejudice the search operation.

6. The adequacy of evidence regarding the accounted sum of Rs. 1,40,000 was also contested. The court examined the evidence presented by both parties, including statements and accounts, and found that the petitioners failed to conclusively prove the legitimacy of the sum. The court could not grant the relief claimed by the petitioners at that stage.

7. Ultimately, the court found the writ petition to be without merit and dismissed it. The detailed analysis of each issue led to the conclusion that the petitioners' claims were not substantiated, and the legality of the search and seizure proceedings was upheld.