2010 (8) TMI 693 - HC - Income Tax

Search and seizure under section 132(1) - detection by excise authorities - there was no valid explanation in respect of cash of Rs. 10,25,000 which was found from the possession of the assessee and was seized after intimation having been received from the Central Excise Authorities. - Held that - the issue regarding challenging of validity or otherwise of search and seizure under section 132(1) of the Act is no longer in dispute as a Division Bench of this Court in CIT v. Paras Rice Mills (2008 -TMI - 33840 - PUNJAB AND HARYANA HIGH COURT) has decided the issue against the assessee and in favour of the revenue. - validity of search and seizure operation could not be gone into by the Tribunal in the appeal proceedings. Concealed income - cash seizure - held that - Tribunal while arriving at the conclusion that Rs. 10,25,000 cash seized was on account of concealed income of the assessee has merely relied upon the order of the Assessing Officer and has not given any basis or reasons for reversing the finding recorded by the CIT (A). Further, the plausibility of the explanation submitted by the assessee on the basis of sales bill No. 46 to 56 produced by him also requires to be considered by the Tribunal. - case remanded back to tribunal.

Summary

Issues:
1. Validity of search and seizure under the Income-tax Act.
2. Exclusion of oral statements in the presence of documentary evidence.
3. Upsetting findings based on documentary evidence with oral evidence.
4. Application of case laws in favor of the petitioner.
5. Setting aside judgment without formulating substantial questions of law.
6. Violation of rights to freedom and privacy in search and seizure.
7. Ownership of the seized amount.
8. Non-impleading of a party in seizure proceedings.
9. Possession of seized currency by the petitioner.

Issue 1: Validity of search and seizure under the Income-tax Act
The appeal challenged the Tribunal's order regarding the initiation of search and seizure powers by the Income-tax Department. The Tribunal held that the validity of search and seizure operations could not be questioned during appeal proceedings, citing a relevant judgment.

Issue 2: Exclusion of oral statements in the presence of documentary evidence
The appellant argued that the Tribunal erred in not excluding oral statements in the presence of documentary evidence, as per the Indian Evidence Act. The Commissioner of Income-tax (Appeals) had based the decision on documentary evidence, which the Tribunal set aside without proper consideration.

Issue 3: Upsetting findings based on documentary evidence with oral evidence
The Tribunal's decision to overturn the findings of the Commissioner of Income-tax (Appeals) based on oral evidence instead of documentary evidence was contested. The appellant claimed that the Tribunal did not adequately address the grounds referred to by the Commissioner of Income-tax (Appeals) while deleting the addition.

Issue 4: Application of case laws in favor of the petitioner
The appellant argued that the Tribunal erred in rejecting the plea based on specific case laws favoring the petitioner. The Tribunal's failure to consider the precedents cited by the appellant was a point of contention in the appeal.

Issue 5: Setting aside judgment without formulating substantial questions of law
The appellant challenged the Tribunal's decision to set aside the judgment of the Commissioner of Income-tax (Appeals) without formulating and deciding any substantial question of law. The lack of proper legal reasoning in setting aside the judgment was a key issue raised in the appeal.

Issue 6: Violation of rights to freedom and privacy in search and seizure
The appellant contended that the orders passed by the Income-tax Department in invoking search and seizure powers amounted to a violation of rights to freedom and privacy. The legality of the search and seizure operation was questioned on the grounds of fundamental rights infringement.

Issue 7: Ownership of the seized amount
The ownership of the seized amount of Rs. 10,25,000 was disputed, with the appellant claiming that the cash belonged to a firm, not the petitioner. The Tribunal's decision regarding the ownership and subsequent refund of the amount was a focal point in the appeal.

Issue 8: Non-impleading of a party in seizure proceedings
The initiation of proceedings without impleading the firm whose money was seized raised concerns about the procedural fairness of the seizure. The appellant argued that all proceedings regarding the seizure should be set aside due to the non-inclusion of the relevant party.

Issue 9: Possession of seized currency by the petitioner
The appellant argued that since the currency in question was seized by the Central Excise Department, it was not in the possession of the petitioner. The initiation of search and seizure proceedings by the Income-tax Department against the petitioner was contested based on the possession of the seized currency.