2006 (1) TMI 49 - HC - Income Tax

If search & seizure was from Delhi premises then Delhi HC has jurisdiction to entertain the suit even if warrant of authorization was issued at Chandigarh maintainability of suit u/s 293 can not be decided at this preliminary stage but can be decided only when question of good faith is decided

Issues Involved:
1. Whether the suit is barred by the provisions of Section 293 of the Income-tax Act?
2. Whether this court has territorial jurisdiction?
3. Whether the action of the Director of Income Tax (Chandigarh) under Section 132 of the Income Tax Act on the plaintiff was illegal and without jurisdiction and hence bad in law?

Issue-wise Detailed Analysis:

Issue No. 2: Whether this court has territorial jurisdiction?
The defendants argued that the court lacked territorial jurisdiction because the warrant of authorization for the search and seizure was issued by the Director of Income-tax (Investigations), Chandigarh, and the jurisdiction for assessment purposes was with the Collectorate at Ludhiana. They contended that the suit pertains to the conduct of Income-tax officials, thus should not be filed in this court. However, the plaintiff's counsel countered that the objection was untenable as the search included premises in Delhi, and part of the seizure occurred in Delhi. Thus, part of the cause of action arose in Delhi, giving this court territorial jurisdiction.

The court agreed with the plaintiff, emphasizing that the suit is based on the search and seizure conducted under Section 132(1)(c) of the Income-tax Act, which included properties in Delhi. Therefore, part of the cause of action arose in Delhi, granting this court territorial jurisdiction. This issue was decided in favor of the plaintiff.

Issue No. 1: Whether the suit is barred by the provisions of Section 293 of the Income-tax Act, 1961?
The defendants argued that the suit was barred by Section 293 of the Income-tax Act, which precludes suits in civil courts against proceedings or orders made under the Act. They maintained that the Act is a complete code providing all necessary remedies, and the plaintiff had not challenged the search and seizure through a writ petition. They also highlighted that Section 132(B) outlines the application of seized assets, and any grievances could be addressed through revision petitions under Section 264(1).

The plaintiff's counsel argued that the bar under Section 293 applies only if the officials acted in "good faith." The plaintiff alleged that the Income-tax officials acted mala fide, instigated by the plaintiff's brother, and provided false information to the Customs Department, leading to harassment and financial losses. The counsel contended that such actions were beyond legitimate duties and not in good faith, thus not protected by Section 293.

The court examined the provisions of Section 293, which bars suits to set aside or modify proceedings or orders under the Act and grants immunity to government officers for actions done in good faith. The court noted that the immunity is conditional on the actions being in good faith, involving honest intent free from fraud. The court reviewed several precedents, including the Supreme Court's interpretation of "good faith" and concluded that the question of good faith involves factual determinations requiring evidence.

Given the allegations of mala fide actions and the need to assess good faith, the court decided that this issue could not be resolved at the preliminary stage and must be determined after evidence is presented. Thus, the issue was kept alive for further consideration.

Conclusion:
The court concluded that it had territorial jurisdiction to entertain the suit, and the question of whether the suit is barred by Section 293 of the Income-tax Act requires examination of evidence regarding the good faith of the officials' actions. Therefore, the suit was allowed to proceed, with the issue of good faith to be determined during the trial.

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