2017 (11) TMI 1009 - HC - Income Tax

Validity of requisition under section 132A(1) - sufficiency to order requisition of the seized cash - requisition made under section 132A(1) to the S.S.P. Muzaffar Nagar for producing the cash which was recovered from one of the accused Held that - The submission that there was sufficient information and material for forming an opinion in sending the requisition under section 132A(1) as is reflected from the order-sheet is of no substance inasmuch as the information and the reason to believe has to be contained in the letter of requisition itself. Even otherwise, the order-sheet only contains that the local Hindi newspaper contains the news item that Smt. Rewati Singh was murdered and looted and the looted amount of about ₹ 51 lakhs was seized by the Muzaffar Nagar Police from the accused persons. A further order dated August 13, 2010 states that the seizure of the aforesaid amount is a strong reason to believe that Hukum Singh is having income which is not being disclosed. Therefore, the newspaper information is sought to be made the basis for issuing the above requisition letter but the availability of such information by itself without there being any other material or information which would justify that the person in possession was having income over and above that disclosed and that he had concealed the real income is not sufficient to order requisition of the seized cash. Requisitioning of books of accounts and their documents under section 132A(1)(b) without recording satisfaction or reason to believe is not sustainable in law and is therefore liable to be quashed. In view of the above decisions no requisition could have been made under section 132A(1) to the S.S.P. Muzaffar Nagar for producing the cash which was recovered from one of the accused. The documents or the books of account in respect whereof the requisition is said to have been issued have not been disclosed either in the requisition or in any other supportive material which means that the requisitioning authority had no intimation whatsoever as to the documents or the books of account which he proposes to be requisitioned. In such a situation, the only inference which can be drawn is that no satisfaction or any reason to believe was validly recorded by the requisitioning authority for issuing the requisition. In view of the above, the conclusion drawn by the Assistant Commissioner of Income-tax for requisition under section 132A(1) is not legally tenable in law and cannot be sustained.

Summary

Issues Involved:
1. Validity of the requisition under section 132A of the Income-tax Act, 1961.
2. Compliance with procedural requirements for issuing requisition.
3. Legal tenability of the Assistant Commissioner's order dated July 25, 2012.
4. Impact on subsequent notices issued under section 153A read with section 153C.

Detailed Analysis:

1. Validity of the requisition under section 132A of the Income-tax Act, 1961:
The petitioner challenged the validity of the requisition issued under section 132A of the Act, arguing that it lacked the necessary material or information to justify the formation of a "reason to believe" as required by the statute. The court examined the requisition notice and found that it did not contain any averment or material indicating that the authority had a reason to believe that the assets were undisclosed income. The requisition merely stated that the assets taken into custody by the police represented undisclosed income but did not specify any books of account or documents, nor did it record any satisfaction for issuing such a requisition.

2. Compliance with procedural requirements for issuing requisition:
The court emphasized that Rule 122(d) of the Income-tax Rules mandates that the requisition under section 132A(1) should be in writing, signed by the issuing officer, and in Form 45C. The requisition must include the information on which the authority's belief is based. In this case, the requisition notice failed to comply with these procedural requirements. It did not specify the books of account or documents sought, nor did it mention the information or material that led to the formation of the belief. The court held that the requisition notice did not fulfill the requirements of section 132A(1) and Rule 112D(2).

3. Legal tenability of the Assistant Commissioner's order dated July 25, 2012:
The court scrutinized the Assistant Commissioner's order and found it legally untenable. The order was based on a requisition that did not comply with the statutory requirements. The court referred to previous judgments, including Vindhya Metal Corporation v. CIT and Manju Tandon v. T. N. Kapoor, which established that mere possession of unexplained cash without additional material is insufficient to form a belief of undisclosed income. The court reiterated that the belief must be reasonable and based on relevant material available at the time of issuing the requisition.

4. Impact on subsequent notices issued under section 153A read with section 153C:
Given the invalidity of the requisition under section 132A, the court concluded that the subsequent notices issued under section 153A read with section 153C were rendered meaningless. The court quashed the Assistant Commissioner's order dated July 25, 2012, and all consequential notices issued on May 10, 2012. However, the court clarified that this decision would not affect any regular assessment proceedings regarding the income of the petitioner's husband, which may be pending before the authorities.

Conclusion:
The court allowed the writ petition, quashing the order dated July 25, 2012, and the consequential notices issued under section 153A read with section 153C. The judgment emphasized the necessity of adhering to the procedural requirements and having a reasonable basis for issuing requisitions under section 132A of the Income-tax Act, 1961.