2013 (2) TMI 124 - HC - Income Tax

Validity of search and seizure proceedings - Jurisdiction - Block assessment - one of the main issues raised on behalf of the petitioners is that the searches and seizures conducted by the respondents, in the premises in question, are arbitrary and illegal, due to lack of jurisdiction. As such, all the proceedings of the respondents, based on the illegal searches and seizures, would be void. - It is also noted that the petitioners had claimed that the respondents had not followed the procedures contemplated under the relevant provisions of law for ordering such searches and seizures, including the provisions contained in section 132 of the Income-tax Act, 1961. Held that - It is not for this court to indulge in the exercise of finding out the sufficiency or the relevance of the materials, which were available with the authority concerned, for arriving at his conclusion. If the authority had some materials for his belief that certain documents and other relevant materials were secreted, it would be sufficient for giving him a reason to order the search and seizure. Department was justified in having the reasons to believe that certain documents and other things had been secreted in the premises in question and that they would be relevant, in respect of the alleged evasion of payment of income-tax, said to be payable by the petitioners. Further, the authority concerned had also the reason to believe that such documents and things would not be produced by the persons concerned, in the normal course, to enable the respondent-Department to conduct necessary inquiries in the matter. It is also noted that the authority concerned, who had issued the search warrants, had the necessary information from the pre-search enquiries and from the available income-tax records. Further, it is not in dispute that it would be open to the petitioners to raise all the grounds available to them in defending themselves during the enquiry and in the subsequent proceedings that may be initiated against them, based on the materials seized during the search. It would also be open to them to prove, by way of sufficient evidence, that there was no evasion of payment of income-tax, as alleged by the respondents. There is no doubt that the acts of search and seizure cannot be justified by the availability of incriminating materials in the premises in question, during such search, to support the decision made by the authority concerned, once it is found that the issuance of the warrants to search was invalid in the eye of law. However, in the present cases, the petitioners have not been in a position to show that the authority concerned had issued the warrants of search, arbitrarily, without following the procedures established by law or with a mala fide motive. Writ petition dismissed - decided against the assessee.

Summary

Issues Involved:
1. Legality of search and seizure operations under Section 132 of the Income Tax Act, 1961.
2. Jurisdiction of the authorities to issue search warrants.
3. Compliance with procedural requirements under Section 132.
4. Validity of notices issued under Sections 158-BD read with 158-BC for block assessment.

Detailed Analysis:

1. Legality of Search and Seizure Operations:
The petitioners contended that the searches and seizures conducted by the respondent department in their residential and hospital premises were illegal and ultra vires the provisions of Section 132 of the Income Tax Act, 1961. They argued that there were no materials available before the authorities to believe that documents and other materials were secreted at the premises, thus the mandatory requirements of Section 132 were not followed.

The court noted that the respondent department had reasons to believe, based on available information, that there was a necessity to issue an order for search and seizure. The court emphasized that the materials available for the belief need not be scrutinized for sufficiency by the court, as long as there were some materials prompting the belief that certain documents and other relevant materials were secreted.

2. Jurisdiction of Authorities to Issue Search Warrants:
The petitioners argued that the respondent department lacked jurisdiction to issue the search warrants, making the searches and seizures arbitrary and illegal. They claimed that the conditions prescribed in Section 132(1) were not met at the time of passing the order for search and seizure.

The court held that the authority concerned had the jurisdiction to issue the search warrants based on the information and materials available. The court reiterated that it is not within its purview to delve into the adequacy of the materials that led to the formation of the belief. The belief must have a rational nexus with the information, and if such materials existed, the issuance of the search warrants could not be deemed arbitrary or illegal.

3. Compliance with Procedural Requirements under Section 132:
The petitioners contended that the respondent department did not follow the procedures outlined in Section 132 of the Income Tax Act, 1961, for ordering searches and seizures. They emphasized that the search and seizure operations are a serious invasion of privacy and must be conducted with strict adherence to the law.

The court found that the respondent department had complied with the procedural requirements, and the formation of the opinion to issue search warrants was based on the materials available before the authority. The court noted that the satisfaction of the authority is a subjective matter and cannot be questioned unless it is shown to be mala fide or based on extraneous factors.

4. Validity of Notices Issued under Sections 158-BD read with 158-BC for Block Assessment:
The petitioners challenged the validity of the notices issued under Sections 158-BD read with 158-BC, calling upon them to file returns disclosing undisclosed income for the block period. They argued that these notices were based on illegal searches and seizures.

The court held that the notices issued under Sections 158-BD read with 158-BC were valid as they were based on the searches and seizures conducted in accordance with the law. The court dismissed the contention that the searches were illegal, thereby upholding the validity of the notices for block assessment.

Conclusion:
The court dismissed the writ petitions, holding that the searches and seizures conducted by the respondent department were legal and within jurisdiction. The court emphasized that the materials available before the authority were sufficient to form a belief that warranted the search and seizure operations. The petitioners were granted the right to obtain copies of the documents and records seized and to contest the claims of income tax liability before the appropriate authorities.