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2017 (6) TMI 23 - HC - Income TaxValidity of Search proceedings - whether no action could have been initiated u/s 132(3) without there being any action initiated u/s 132 - no tax demand was pending - recovery of amount by debiting the bank account of the petitioners - bank accounts were put under restraint - Held that - In the present case both Petitioners not only suppressed material facts in their petitions in the first place but after this was pointed out in the Department s counter-affidavit the Petitioners were most casual in their response thereto making no attempt to justify the suppression of such material facts. In fact the length of the respective rejoinders in both petitions only serves to demonstrate the extent to which material facts within the knowledge of the Petitioners were not placed before the Court in the first instance. Whether without a search warrant in the petitioners names and without there being a demand raised and finalised there is no power under Section 132 read with Section 132B to require RBL to issue a DD favouring the Department for the balance sum lying in the account that has been frozen? - Held that - The assertion by both sets of Petitioners that this is realization of the debt owed by the bank to the Petitioners and that the amount therein cannot be transferred to the Department is based on an incorrect understanding of the legal position under Section 281B of the Act. The said provision states that in order to protect the interests of the Revenue it may be necessary to go in for a provisional attachment. Therefore the direction issued to RBL by the Department does not mean that the money is finally taken over by the Revenue. It will undoubtedly be kept in a suspense account like a PD Account to await the final orders in the assessment proceedings and the issues raised as a consequence thereof. For this purpose as already observed the argument that this does not constitute assets or money within the meaning of Section 132(1) read with Section 133 of the Act has not merit. The decisions citied by learned counsel for the Petitioners do not appear to have discussed the purport of Section 281B of the Act which has a direct bearing in this case. The Department has been able to demonstrate at this stage that the monies in these bank accounts were essentially the undisclosed income of the key person i.e. Mr. Mukkar. The restraint order under Section 132(3) of the Act passed in this case was but a logical corollary of the search action and permissible under the Act. Consequently even on merits not even a prima facie case has been made out by either of the Petitioners. Petitioners have made deliberate false statements on oath and have also suppressed material facts in the pleadings before this Court with a clear attempt to mislead the Court. Having regard to the impact this has on the administration of justice the Court is satisfied that a prima facie case is made out for a complaint being filed against the above persons to be prosecuted under Section 193 IPC.
Issues Involved:
1. Suppression of material facts by the Petitioners. 2. Validity of the impugned orders under Sections 132 and 132B of the Income Tax Act. 3. Powers of the Department to require the bank to issue demand drafts (DDs) for the amounts in the accounts frozen. 4. Initiation of proceedings under Section 340 of the Code of Criminal Procedure, 1973 (Cr PC) for filing false affidavits. Detailed Analysis: 1. Suppression of Material Facts by the Petitioners: The Court found that the Petitioners in W.P. (C) No. 1180 of 2017 and Ms. Veena Singh in W.P. (C) No. 2375 of 2017 deliberately suppressed material facts. The 8 Petitioner companies claimed no relation to Mr. Mohnish Mohan Mukkar in their personal capacity, while the records from Ratnakar Bank Ltd. (RBL) showed Mr. Mukkar as the Beneficial Owner No.1 in eight accounts and his mother in the ninth account. The Petitioners did not deny the information provided by RBL and failed to respond to the Department's counter-affidavit, which highlighted the falsity of their claims. Ms. Veena Singh also did not disclose her role as authorized signatory No.1 of the bank accounts of the 8 companies, with Mr. Mukkar as Beneficial Owner No.1. The Court concluded that the Petitioners did not come to Court with clean hands, thereby disqualifying them from obtaining any relief. 2. Validity of the Impugned Orders: The Court analyzed whether the Department could direct RBL to prepare DDs for the sums lying in the bank accounts without a search warrant in the names of the 8 companies and Ms. Veena Singh. The Court noted that Section 132(1) of the Income Tax Act allows the Department to search and seize money in bank accounts if there is reason to believe it represents undisclosed income. The Department's actions were justified as they were satisfied that the money in the accounts was Mr. Mukkar's undisclosed income. The Court found no merit in the Petitioners' argument that money in a bank account cannot be seized under Sections 132 and 132B. 3. Powers of the Department to Require the Bank to Issue DDs: The Court rejected the Petitioners' contention that the Department could not direct RBL to issue DDs without a finalized tax demand. The Court clarified that the direction to RBL was not a final realization of the debt but a provisional attachment to protect the interests of the Revenue. The Department's actions were in line with Section 281B of the Income Tax Act, which allows provisional attachment to safeguard revenue interests. The Court concluded that the Department's actions were permissible under the Act and that the Petitioners had not made a prima facie case on merits. 4. Initiation of Proceedings under Section 340 Cr PC: The Court found that both sets of Petitioners had made deliberate false statements on oath and suppressed material facts, thereby misleading the Court. The Court directed the Registrar General to file a written complaint against the Petitioners under Section 340 read with Section 195(1)(b) Cr PC for prosecution under Section 193 IPC. The Court emphasized the need to maintain the integrity of the judicial process and deter litigants from abusing the Court's process. Conclusion: The Court vacated the interim orders dated 9th February 2017 and 14th March 2017, dismissing both writ petitions with costs of ?1 lakh each to be paid to the Department within four weeks. The Court also initiated proceedings under Section 340 Cr PC against the Petitioners for filing false affidavits and suppressing material facts.
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