2010 (12) TMI 1218 - HC - Income Tax

Summary

Issues Involved:
1. Legality and validity of the search warrant issued u/s 132 of the Income Tax Act, 1961.
2. Allegations of malafide intention and violation of the right to privacy.
3. Sufficiency of information to form "reason to believe" for the search.
4. Claim of immunity due to professional excellence.
5. Procedural aspects and judicial review of the search process.

Summary:

1. Legality and Validity of the Search Warrant:
The petitioner sought to quash the search warrant issued by the DGIT(Inv.), Bhopal, claiming it was unauthorized and lacked material to form reasons to believe that the petitioner possessed undisclosed income or property. The court examined the original papers and found sufficient materials were in possession of the DGIT(Inv.), Bhopal, justifying the issuance of the search warrant u/s 132 of the Income Tax Act, 1961. The contention that there was no sufficient material to form reason to believe was rejected.

2. Allegations of Malafide Intention and Violation of Right to Privacy:
The petitioner alleged that the search was conducted with malafide intention to deprive the firm of carrying out a Special Audit and to tarnish the petitioner's image, causing mental torture and social stigma. The court did not find merit in these allegations, as the search was based on sufficient material indicating substantial tax evasion.

3. Sufficiency of Information to Form "Reason to Believe":
The petitioner argued that the DGIT(Inv.) did not have sufficient information to form reason to believe that the petitioner possessed undisclosed income or property. The court referred to various judgments, including Ganga Prasad Maheshwari and Income Tax Officer v. Seth Brothers, emphasizing that the belief must be based on objective information and not mere rumor or hunch. The court found that the DGIT(Inv.) had sufficient material and rational nexus to form the belief required u/s 132(1) of the Act.

4. Claim of Immunity Due to Professional Excellence:
The petitioner claimed immunity from search due to being a professional of excellence, as per CBDT instruction No. 7/2003. The court rejected this claim, stating that sufficient materials indicated compelling evidence and confirmation of substantial tax evasion, justifying the search.

5. Procedural Aspects and Judicial Review of the Search Process:
The petitioner raised a new issue regarding the inspection of original papers, which was not permissible as it was not raised during the argument. The court, after examining the original documents, found no reason to permit inspection by the petitioner. The court reiterated that the sufficiency of reasons to believe is a matter of subjective satisfaction of the officer concerned and is not open to scrutiny unless it lacks any material basis.

Conclusion:
The petition was dismissed, with the court concluding that sufficient materials were present to justify the search warrant issued u/s 132 of the Income Tax Act, 1961. No order as to costs was made.