1989 (7) TMI 75 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the search and seizure u/s 132 of the Income-tax Act.
2. Validity of the retention of seized account books and valuables.
3. Use of evidence obtained from an allegedly illegal search.

Summary:

1. Legality of the search and seizure u/s 132 of the Income-tax Act:
The petitioner, Smt. Kusum Lata Singhal, challenged the search and seizure conducted at her residence on November 25-26, 1987, under section 132 of the Income-tax Act, claiming it was illegal due to lack of credible information. The court examined the files and concluded that there was no reasonable information for the Director of Inspection to have a bona fide belief to issue the authorisation u/s 132(1). The court stated that the expression "has reason to believe" means a bona fide belief based on reasonable or credible information, not imaginary or invalid information.

2. Validity of the retention of seized account books and valuables:
The petitioner sought the return of the seized account books and valuables, arguing that their retention beyond 180 days was illegal. The court noted that the proceedings against the petitioner were dropped, but continued against her husband, Shri R. K. Singhal, under section 132(7). The court held that the seized assets could be retained and used in proceedings against the real owner, in this case, Shri R. K. Singhal, as per the provisions of section 132(7).

3. Use of evidence obtained from an allegedly illegal search:
Despite finding the authorisation for the search invalid, the court ruled that the evidence obtained could still be used in proceedings under the Income-tax Act. Citing precedents, the court stated that even if a search is illegal, the material seized can be used as evidence, provided the court or authority is cautious and circumspect in dealing with such material.

Conclusion:
The court dismissed the writ petition, holding that although the search and seizure were not in accordance with law, the proceedings against the petitioner were dropped, and valid proceedings were initiated against her husband. Therefore, the valuables and documents could not be returned to the petitioner. The writ petition was dismissed with no order as to costs.