1993 (1) TMI 12 - HC - Income Tax

Summary

Issues Involved:
1. Legality of action taken u/s 132 of the Income-tax Act, 1961.
2. Requirement of material evidence for action u/s 132.
3. Judicial review of the authority's decision to conduct a raid.
4. Violation of Article 14 of the Constitution of India.

Summary:

1. Legality of action taken u/s 132 of the Income-tax Act, 1961:
The primary challenge in the writ petitions was based on the ground that there was no material before the concerned authority for taking action u/s 132 of the Act. The petitioners argued that the action was arbitrary, unreasonable, and capricious. The respondents justified the action, claiming it was in conformity with the power conferred under section 132 of the Act.

2. Requirement of material evidence for action u/s 132:
The court emphasized that although broad powers are conferred on income tax authorities u/s 132 to conduct raids, these powers must be exercised in accordance with the provisions of the Act. The opinion must be formed based on information regarding the matters specified in the section, and relevant material should be considered before forming any opinion. The court found that there was no material before the authorities to justify the action, as the complaint was vague and lacked specifics.

3. Judicial review of the authority's decision to conduct a raid:
The court held that if it is challenged that there was no material before the competent authority to form an opinion, the authority must disclose the material to the court. The court is entitled to scrutinize whether relevant material existed at the time of issuing the search warrant. The court is not entitled to go into the sufficiency of the material but can interfere if there was no relevant material before the authority.

4. Violation of Article 14 of the Constitution of India:
The court concluded that the action of the income-tax authorities was arbitrary, unreasonable, and capricious, thus violating Article 14 of the Constitution. The tankers were not concealed and were usually parked at the petrol pump, making the action u/s 132 unjustified. The court quashed the warrants and consequential proceedings, ordering the return of the seized documents/goods within fifteen days.

Conclusion:
Civil Writ Petitions Nos. 2734, 2736, 2743, and 2735 of 1992 were allowed with costs, and a writ of mandamus was issued. The warrants issued by the respondents u/s 132 of the Act were quashed, and the consequential proceedings were also quashed. The respondents were directed to return the seized documents/goods within fifteen days. Counsel's fee was set at Rs. 500 in each case.