2014 (7) TMI 608 - HC - Income Tax

Validity of warrant of authorization of search and seizure Retention of articles u/s 132(9A) of the Act Held that - Search and seizure carried out in that case was on 16th October, 2001, after the introduction of Chapter XIV-B in respect of block search and seizure with effect from 1st June, 2001 - the limited challenge of the assessee succeeds revenue is directed to return the seized articles as detailed in the Panchanama dated 21st August, 1998 being annexure E to the writ petition to the assessee Decided in favour of Assessee.

Summary

Issues: Challenge to warrants of authorization, retention of seized articles based on Section 132(9A) of the Income Tax Act, 1961.

Analysis:
The petitioners, as assessees having income chargeable to tax, challenged warrants of authorization issued under Section 132(1) of the Income Tax Act, 1961, along with the retention of seized articles based on Section 132(9A). The search and seizure conducted on 21st August, 1998, resulted in the seizure of articles by an authorized officer lacking jurisdiction over the petitioners. The law then required the seized articles to be handed over to the Income Tax Officer having jurisdiction within 15 days of seizure. The articles were eventually handed over to the Assessing Officer by 25th September, 1998. The petitioners argued that the subsequent handing over of seized articles was illegal, relying on a precedent case, and contended that the articles should be returned to them immediately.

The Revenue, represented by learned counsel, relied on a decision of the court to argue that the legal position under Section 132(9A) was altered with the introduction of Chapter XIV-B of the Income Tax Act from 1st June, 2001. The court considered the Madras High Court decision in K.V. Krishnaswamy Naidu & Co., which held that retention of seized articles beyond 15 days from seizure was illegal under Section 132(9A). The Supreme Court's dismissal of the appeal from this decision bound the court to accept the interpretation provided by the Madras case. The Revenue's argument regarding the introduction of Chapter XIV-B was deemed distinguishable as it pertained to a search conducted after the introduction of the new chapter.

Ultimately, the court ruled in favor of the petitioners, directing the Revenue to return the seized articles detailed in the Panchanama dated 21st August, 1998, to the petitioners. The limited challenge of the petitioners was successful, and the writ petition was allowed accordingly.