2006 (12) TMI 111 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the survey conducted u/s 133A of the Income-tax Act.
2. Validity of the impounding and retention of documents.
3. Jurisdiction and authorization of the officers involved.
4. Allegations of mala fide exercise of power by the Income-tax authorities.

Summary:

1. Legality of the Survey Conducted u/s 133A of the Income-tax Act:
The petitioner, a partnership firm, challenged the survey conducted on June 22, 2006, by the Income-tax Officer, Ward I(1), Mysore, authorized by the Joint Commissioner of Income-tax, Range-II, Mysore, u/s 133A(i) of the Income-tax Act, 1961. The petitioner argued that the survey was not duly authorized and not in accordance with law.

2. Validity of the Impounding and Retention of Documents:
During the survey, the authorities impounded voluminous documents, books of account, and other incriminating material. The petitioner contended that the impounding of valuable items such as title deeds and other stamped documents was not permitted u/s 133A(4) of the Act. Despite several requests, the documents were not returned even after five months. The petitioner sought quashing of the impugned order and the return of the documents.

3. Jurisdiction and Authorization of the Officers Involved:
The respondents defended the action, asserting that the officer conducting the survey was duly authorized and the continued retention of documents was properly permitted by the Chief Commissioner of Income-tax, Karnataka. They claimed that the documents contained incriminating material requiring further investigation and that the retention was justified due to the non-cooperation of the petitioner.

4. Allegations of Mala Fide Exercise of Power by the Income-tax Authorities:
The court scrutinized the legality of the action, noting that the provisions of section 133A were intended for gathering information and not for trespassing into the privacy of citizens. The court found that the justification for continued retention of documents was not forthcoming and that the action was arbitrary and akin to mala fide exercise of power. The court emphasized that the exercise of power should be least obtrusive and commensurate with the requirement of the situation, applying the doctrine of proportionality.

Judgment:
The court quashed the authorization and the continued retention of documents, directing the respondents to return the impounded documents within two weeks. The respondents were allowed to retain copies of the documents, which the petitioner was to authenticate. The court also imposed costs of Rs. 5,000 on the respondents for their lack of bona fides and arbitrary action. The writ petition was allowed, and the rule was made absolute.