2011 (8) TMI 801 - HC - Income Tax

Search and seizure - Validity of search - Disclosure of documents to the assessee - after the search and seizure was carried out, the assessment orders were passed by ACIT under Section 153 on 28th December, 2007, making some additions - The application claiming privilege filed under Section 123 of the Evidence Act, 1872 was rejected by us on 17.5.2011 - The claim of the department, that the authorisation is highly confidential and its revelation to the assessee or to general public may prove detrimental to the potential information given as well as the department, by itself cannot be a ground to claim privilege of the documents - the petitioner along with his counsel will be permitted inspection these documents produced in the Court and kept in the sealed cover in the custody of the Registrar General.. AO and CIT(A) had adjudicated on the material seized during the search operations and that after the order of ITAT only a question of the validity of the gift of Rs. 15 lacs survives - the proceedings pending before CIT (A) as well as the right of the petitioner to file appeal against the order of the ITAT, we direct that in case the petitioner furnishes security of Rs. 15 lacs, which will be other than cash and bank guarantee, the entire articles including hard disc, documents, jewelery, cash and FDRs seized and lying in the custody of the Income Tax Department shall be released within 15 days from the date the security is furnished, to the satisfaction of the A.O

Issues Involved:
1. Validity of the search and seizure operation.
2. Disclosure of the satisfaction note.
3. Return of seized articles.
4. Finality of assessment proceedings and interest of revenue.

Issue-wise Detailed Analysis:

1. Validity of the Search and Seizure Operation:
The primary concern in this writ petition was the validity of the search and seizure operation conducted by the Income Tax Department. The court noted that the assessment orders were passed under Section 153 on 28th December 2007, making some additions, but none of the assets seized were considered undisclosed. The CIT (Appeals) had deleted all the additions made by the Assessing Officer, accepting the returned income. The court directed that the department must return all seized articles immediately, as the assessments had become final, and refunds were allowed to the petitioners. The court further directed that the seized articles, including hard discs, documents, jewelry, cash, and FDRs, be released to the petitioner upon furnishing security of Rs. 15 lacs.

2. Disclosure of the Satisfaction Note:
The department claimed privilege to disclose the satisfaction note, arguing that it was a confidential document. However, the court rejected this application, stating that the confidentiality of the information alone could not be a ground for claiming privilege. The court emphasized that the satisfaction note must be disclosed unless it falls within the grounds mentioned in Section 123 of the Evidence Act. The court allowed the petitioner and his counsel to inspect the satisfaction note and warrant of authorization, kept in a sealed cover with the Registrar General, in the presence of the department's counsel.

3. Return of Seized Articles:
The court directed the department to return all seized articles, including the hard disc, documents, jewelry, cash, and FDRs, to the petitioner. The court noted that the department had already committed a gross default of the provisions of Section 132-B (1) (i) by not returning the articles within 120 days from the date of authorization for search. The court modified its earlier order, directing that the seized articles be returned within a week of the decision of the ITAT appeal, unless otherwise provided by the ITAT orders.

4. Finality of Assessment Proceedings and Interest of Revenue:
The department argued that returning the seized articles would affect the finality of the assessment proceedings and the interest of revenue, as appeals were pending in the ITAT. The court found that the ITAT had already decided the appeals for the assessment years 2003-04 and 2004-05, with only a sum of Rs. 15 lacs remaining in contention. The court held that the release of seized assets would not prejudice the revenue's interest if the petitioner provided security for Rs. 15 lacs. The court directed the ITAT to decide the pending appeals within a month and ordered the release of seized articles upon furnishing the required security.

Conclusion:
The court addressed the validity of the search and seizure operation, the disclosure of the satisfaction note, the return of seized articles, and the finality of assessment proceedings. The court directed the return of seized articles upon furnishing security and allowed the petitioner to inspect the satisfaction note, ensuring that the department's actions adhered to legal provisions while protecting the petitioner's rights.

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