2008 (7) TMI 241 - HC - Income Tax

Petitioner prays for quashing of warrant of requisition issued u/s 132A - respondent was in possession of the information from which he had reason to believe that the money & silver seized from the petitioner represent wholly or partly assets which have not or would not have been disclosed for the purposes of income-tax - It cannot be held that the belief of respondent was either unreasonable or based on irrelevant information - hold that the warrant of requisition is valid petition dismissed

Summary

Issues:
1. Validity of the warrant of requisition issued under section 132A of the Income-tax Act, 1961.

Detailed Analysis:
The petitioner filed a petition under Article 226 of the Constitution seeking to quash a warrant of requisition dated August 24, 2007, issued by respondent No. 1 under section 132A of the Income-tax Act, 1961. The petitioner, engaged in the business of raw silver and silver ornaments, was found in possession of such items and cash by the police during routine checking. The police seized the assets suspecting a connection to criminal activities and informed the Income-tax Department. The respondent issued the warrant of requisition under section 132A, but the assets were in judicial custody. The petitioner contended that the conditions precedent for exercising powers under section 132A were not met, as the seized assets were accounted for in his business records.

The court issued an interim order maintaining the status quo regarding the seized assets. The respondents justified the issuance of the warrant by stating that the conditions for its issuance were satisfied, as per the relevant provisions of section 132A of the Act. The court analyzed section 132A(1) and emphasized that the authority must have valid reasons to believe that the assets in question were undisclosed for tax purposes. Referring to precedents, the court highlighted that the "reason to believe" must be based on tangible information and not mere speculation. The court also noted that the terms "information" and "reason to believe" in sections 132 and 132A have a similar legal interpretation.

The court reviewed the conclusions drawn by the Income-tax Investigation officer regarding the undisclosed nature of the seized assets. The Director General, after examining the case, expressed satisfaction that the assets were undisclosed for taxation purposes, leading to the issuance of the requisition warrant. The court observed that there was no allegation of malice against the respondent and found that the warrant was issued based on valid information and reasons to believe that the assets were undisclosed. Citing relevant legal precedents, the court emphasized that the subjective belief required under section 132A is not subject to an objective test.

In conclusion, the court held that the warrant of requisition issued under section 132A was valid, dismissing the petition without costs. The judgment highlighted the importance of the authority's belief being supported by tangible information and not being subject to judicial review if exercised in good faith.