2008 (4) TMI 75 - HC - Income Tax

Appeal by assessee against assessment search during pendency of appeal - article found in possession of petitioner during search - respondents were wholly justified in raising the presumption u/s 132(4A)(i) & in treating the KVPs and NSCs, in question, recovered from the possession & control of the petitioner, as the undisclosed assets of the petitioner dept. is entitled to retain the same to complete assessment of tax, which the petitioner may be held liable to pay petition is dismissed

Summary

Issues involved:
1. Seizure of assets during a search operation by income-tax authorities.
2. Legal challenge against the refusal to release seized assets.
3. Interpretation of section 132(4A)(i) of the Income-tax Act, 1961.
4. Validity of conducting a search operation during pending appeal against assessed income.
5. Comparison with legal precedent regarding seizure of assets in another case.

Analysis:
1. The petitioner, engaged in money-lending, faced a search operation by income-tax authorities resulting in the seizure of assets, including KVPs and NSCs, from various locations associated with her and her husband. The authorities justified the seizure based on the presumption under section 132(4A)(i) that assets found in possession belong to the person. The petitioner claimed some assets were pledged articles for loans advanced by her proprietary concern.
2. The petitioner challenged the refusal to release the seized KVPs and NSCs through a writ application under Article 226 of the Constitution, arguing they belonged to individuals who had taken loans and repaid them. The authorities contended that until a complete assessment is done, they are authorized to retain the seized materials for verification.
3. Section 132(4A)(i) allows for a presumption that assets found in possession during a search belong to the person. The court upheld the authorities' actions in seizing the assets based on this provision, emphasizing the need for proper examination to determine ownership conclusively.
4. The court rejected the argument that conducting a search operation during a pending appeal against assessed income was illegal, especially when undisclosed income was revealed. The completion date for assessment was set for December 31, 2008.
5. The petitioner cited a legal precedent to challenge the seizure of assets in names other than hers. However, the court distinguished the present case by noting that the authorities did not admit the assets belonged to others, asserting that the seized assets were rightfully retained for assessment purposes.

In conclusion, the court dismissed the writ petition, finding no fault in the seizure or the refusal to release the assets, as the authorities were justified in their actions under the Income-tax Act.