1988 (11) TMI 88 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the search warrant issued u/s 132(1).
2. Retention of assets under section 132(5) and section 132(3).
3. Legality of the restraint order u/s 132(3).
4. Return of books of account seized u/s 132(1).

Summary:

1. Validity of the Search Warrant Issued u/s 132(1):
The petitioner contended that the authority who issued the search warrant had no valid information to believe that the petitioner possessed undisclosed assets. The court held that the petitioner failed to provide any cogent material to support his denial of valid information. The court emphasized that the power to issue a search warrant should not be exercised casually and must be based on substantial information. The court declined to call upon the respondents to disclose the information received before acting u/s 132(1), as mere denial by the petitioner was insufficient.

2. Retention of Assets under Section 132(5) and Section 132(3):
The petitioner argued that the Income-tax Officer could only retain assets seized u/s 132(1) and not those attached u/s 132(3). The court clarified that an order u/s 132(3) does not amount to "seizure" but to "attachment," and thus, the question of retaining such assets does not arise. The court noted that the possession of attached assets remains with the owner, and the issue of retention by the Income-tax Officer after passing an order u/s 132(5) does not arise.

3. Legality of the Restraint Order u/s 132(3):
The petitioner contended that an order u/s 132(3) could not be passed merely to ascertain whether an asset is disclosed or undisclosed. The court held that the condition precedent for making an attachment u/s 132(3) is the discovery of undisclosed assets during the search. The court found the order u/s 132(3) attaching woollen yarn and carpets for want of verification to be illegal. However, the court directed the Income-tax Officer to conclude the enquiry within ten days to ascertain whether the woollen yarn and carpets represent disclosed or undisclosed assets and to release them immediately after the conclusion of the enquiry.

4. Return of Books of Account Seized u/s 132(1):
The petitioner sought a mandamus for the return of books of account seized u/s 132(1), arguing that they could not be retained beyond 180 days without valid approval from the Commissioner u/s 132(8). The court noted that the petitioner did not raise this issue in the grounds of the petition and that the approval to retain the books was obtained from the Commissioner within time. The court declined to go into this factual dispute and denied the writ of mandamus for the return of the books of account.

Conclusion:
The writ petition was partly allowed. The Income-tax Officer, Bhadohi, was directed to conclude the enquiry within ten days regarding the stock of woollen yarn and carpets and to release them immediately after the enquiry. The petitioner was not entitled to the writ of mandamus for the return of books of account. No order as to costs was made.