2011 (3) TMI 706 - HC - Income Tax

Petition under Article 226 to quash and set aside the warrant of authorization issued u/s 132(1) on the basis of the petitioners filed all returns & provided full cooperation with department in all proceeding. - to quash and set aside notices issued u/s 133(6) on the basis of the petitioners filed all returns & provided full cooperation with department in all proceeding. - to restrain the income-tax authorities from issuing the notices u/s 153A(1)on the basis of the petitioners filed all returns & provided full cooperation with department in all proceeding. The court is of the view that the condition precedent for the exercise of powers u/s 132(1) has been duly satisfied prior to issuance of authorization u/s 132 and that there is sufficient reason for the concerned officer to call for the information as stated in notices u/s 133(6). decided against Assessee.

Issues Involved:
1. Validity of the warrant of authorization issued under section 132(1) of the Income-tax Act, 1961.
2. Legality of the subsequent action of search and seizure.
3. Issuance of notices under section 133(6) of the Income-tax Act.
4. Issuance of notices under section 131(1A) of the Income-tax Act post-search.

Detailed Analysis:

1. Validity of the Warrant of Authorization Issued Under Section 132(1) of the Income-tax Act, 1961:
The petitioners challenged the validity of the authorization issued under section 132(1) of the Income-tax Act, arguing that there was no concrete material or credible information justifying the action. They contended that the authorization was issued without proper application of mind and based on suspicion rather than solid evidence. The court examined the satisfaction note and the material on record, concluding that the satisfaction recorded by the Director General of Income-tax (Investigation) was based on sufficient and relevant material. The court noted that the power to authorize search and seizure must be exercised strictly in accordance with the law and for the purposes for which the law authorizes it. The court found that the conditions precedent for the exercise of powers under section 132(1) had been duly satisfied.

2. Legality of the Subsequent Action of Search and Seizure:
The petitioners argued that the search and seizure action was conducted with ulterior motives and was intended to harm their business interests. They also claimed that the action was based on old, irrelevant information and that the subsequent inquiry was a cover-up operation. The court held that the search and seizure were conducted following the proper procedure and that the satisfaction recorded before the search was valid. The court emphasized that the search was based on credible information and that the material collected during the search justified the action.

3. Issuance of Notices Under Section 133(6) of the Income-tax Act:
The petitioners contended that the notices issued under section 133(6) were for collateral purposes and constituted a fishing inquiry. They argued that the information sought was irrelevant for the purposes of the Income-tax Act. The court rejected this contention, stating that the information called for was relevant to the inquiry and that the notices were issued with a view to scrutinize financial transactions and correlate them with the seized documents. The court found no evidence of mala fides or collateral purposes behind the issuance of the notices.

4. Issuance of Notices Under Section 131(1A) of the Income-tax Act Post-Search:
The petitioners argued that the issuance of notices under section 131(1A) after the search was indicative of the premature nature of the action under section 132. They claimed that such notices could only be issued before the search and seizure. The court referred to its earlier decision in Arti Gases v. Director of Income-tax (Investigation), which held that notices under section 131(1A) could be issued even after the completion of the search. The court concluded that the issuance of such notices post-search did not render the search proceedings invalid, as the authorization for search was based on sufficient and tangible material.

Conclusion:
The court dismissed the petition, holding that the conditions precedent for the exercise of powers under section 132(1) had been satisfied and that the subsequent actions, including the issuance of notices under sections 133(6) and 131(1A), were valid and legal. The court found no evidence of mala fides or collateral purposes and upheld the actions taken by the income-tax authorities. The petition was dismissed with no order as to costs, and the rule was discharged.

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