1978 (4) TMI 6 - HC - Income Tax

Summary

Issues Involved:
1. Jurisdiction of the Commissioner under Section 132A of the Income Tax Act.
2. Sufficiency and validity of the information leading to the issuance of authorisation.
3. Application of mind by the Commissioner to relevant facts.
4. Retention and return of seized documents and assets.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner under Section 132A of the Income Tax Act:
The petition challenged the authorisation issued by the Commissioner under Section 132A of the Income Tax Act, 1961, read with Rule 112D of the Income Tax Rules, 1962. The petitioner argued that the Commissioner had no jurisdiction to issue the authorisation as he did not have information that could lead him to believe that the petitioner had undisclosed assets. The court examined the scheme of the Act, particularly Sections 132 and 132A, which empower the Commissioner to authorise the Income Tax Officer (ITO) to search and seize assets if there is reason to believe that the assets represent undisclosed income. The court concluded that the Commissioner had the jurisdiction to issue the authorisation, provided there was reasonable belief based on information in his possession.

2. Sufficiency and Validity of the Information Leading to the Issuance of Authorisation:
The petitioner contended that there was no material justifying the Commissioner's belief that the petitioner had undisclosed assets. The court reviewed the information provided by the ITO to the Commissioner, including details of the gold and silver ornaments and cash seized from the petitioner's premises, and the income returns filed by the petitioner. The court noted that the Commissioner had recorded his satisfaction based on this information, which was sufficient to justify the issuance of the authorisation. The court emphasized that the sufficiency of the grounds for the belief is not a justiciable issue, and what can be challenged is the existence of the belief, not its adequacy.

3. Application of Mind by the Commissioner to Relevant Facts:
The petitioner argued that the Commissioner had not applied his mind to the relevant facts, particularly the claim that some of the seized ornaments were pawned and did not belong to the petitioner. The court held that this was a controversial issue that would be investigated in subsequent proceedings under the Act. The court found that the Commissioner had applied his mind to the facts of the case and had issued the authorisation after considering the relevant information. The court concluded that the Commissioner's action was in accordance with the law and could not be set aside on this ground.

4. Retention and Return of Seized Documents and Assets:
The petitioner claimed that the documents seized should be returned as the ITO is authorized to retain them for only 180 days from the date of seizure. The court noted that the petitioner had obtained a stay order, preventing the ITO from obtaining the documents or assets. Furthermore, the counter-affidavit indicated that no documents had been seized by the police. Consequently, the court found no basis for the return of documents. However, the court directed that the respondents should not take possession of the ornaments and other articles from the Treasury Officer until the provisional assessment under Section 132(5) of the Act is made. If the provisional inquiry is not completed within the time provided by law, the articles and ornaments would be returned to the petitioner.

Conclusion:
The writ petition was dismissed with costs, subject to the direction that the respondents should not take possession of the seized articles until the provisional assessment is completed, and the articles should be returned if the inquiry is not completed within the legal timeframe.