2011 (5) TMI 585 - HC - Income Tax

Search and seizure - appeal against the warrant of authorization - Held that - It is a settled law that in exercise of powers under writ jurisdiction, High Court has inherent powers to enter into question of existence of information, which would provide a basis to form a reason to believe that the amount seized has not been or would not have been disclosed for the purpose of IT Act - In the case of Jai Bhagwan Om Prakash vs. Director of Inspection 1992 (3) TMI 8 - PUNJAB AND HARYANA HIGH COURT it has been observed that in case there is information with the authorities and the department had satisfied itself with regard to the authenticity of the information available and bonafide belief was found, it is not for the Court to make interference - The amount in question was arranged and sent to Indore by Head Office by effecting withdrawals from the firms bank account, no particulars of the bank account are described in the writ petition, Aslo the statement of account of the petitioner firm s bank account is also not annexed to the writ petition to substantiate that money in question was withdrawn from any known sources. Madhav Bhai Patel from whose possession the money was seized in his statement under section 131 did not state that the money in question belonged to petitioner s firm or it was handed over to him on behalf of the said firm & it is nowhere said in his statement that the money in question was to be delivered to the petitioner s firm. On the contrary, he has clearly stated that the person to whom the money was to be delivered, was to be disclosed on telephone, after he reaches Ahmedabad office of the firm. Thus, the explanation furnished by Madhav Bhai Patel was not found satisfactory by the department and the aforesaid material was in possession of the authority when on 11-6-2007 the warrant of authorization was issued - Writ petition is dismissed - Writ petition is dismissed

Summary

Issues Involved:
1. Legality and jurisdiction of the warrant of authorization issued under section 132A(1) of the Income-tax Act, 1961.
2. Validity of the information and reason to believe for issuing the warrant of authorization.
3. Scope and ambit of writ jurisdiction in challenging the authorization under section 132A of the Income-tax Act.

Detailed Analysis:

1. Legality and Jurisdiction of the Warrant of Authorization:
The petitioner challenged the warrant of authorization dated 11-6-2007 issued under section 132A(1) of the Income-tax Act, 1961, requisitioning Rs. 36,00,000 seized by the police from petitioner No. 2. The petitioners argued that the authority had no information in possession to form a reason to believe that the money seized was undisclosed income under the IT Act. The respondents contended that the powers to issue the warrant were properly and rightly exercised.

2. Validity of the Information and Reason to Believe:
Section 132A of the IT Act allows the Director General or Commissioner to requisition assets if they have reason to believe, based on information, that the assets represent undisclosed income. The Supreme Court in Pooran Mal v. Director of Inspection (Investigation) upheld the constitutional validity of section 132A, stating it does not impose unreasonable restrictions under Article 19(1)(f) & (g). The High Court has the power to examine the existence of information that forms the basis of the belief that the assets are undisclosed.

The petitioners argued that the authorization was issued solely based on the seizure without any substantial material. The respondents provided the statement of Madhav Bhai Patel, who stated he was an employee of M/s. M. Manoj Kumar & Company and was carrying the money to Ahmedabad. He had no documents related to the money and the person who handed it over to him was untraceable. The court found this information sufficient for the authority to form a reason to believe that the money was undisclosed income.

3. Scope and Ambit of Writ Jurisdiction:
The court referred to several precedents to explain the scope of writ jurisdiction in such cases. In Suman Singhal v. Director of Income-tax (Investigation), it was clarified that the court can examine the existence of information but cannot substitute its opinion for that of the Commissioner. The Rajasthan High Court in Sohanlal Mundra v. Union of India stated that the court's jurisdiction is limited to checking whether the act of issuing the authorization was arbitrary, mala fide, or lacked application of mind.

The court also referred to the case of CIT v. Vindhya Metal Corpn., where the Supreme Court held that mere seizure without documents does not justify the belief that the money is undisclosed income. However, in the present case, the court found that the statement of Madhav Bhai Patel and the inability to trace the person who handed over the money provided sufficient grounds for the belief that the money was undisclosed income.

Conclusion:
The court concluded that there was sufficient information in possession of the authority to form a reason to believe that the money seized was undisclosed income. The petitioners' arguments were found to be unsubstantiated, and the writ petition was dismissed. The court observed that the authority acted within its jurisdiction and there was no lack of application of mind in issuing the warrant of authorization. The petition was dismissed with no order as to costs.