2009 (8) TMI 102 - HC - Income Tax

Proceeding under section 132 - notices issued under section 158BC - there was relevant material before the Director of Income-tax (Investigation) to form the requisite opinion having reason to believe that there had been unaccounted money/assets with the petitioners. It cannot be said that there was no material to initiate proceeding under section 132 of the Act. At the stage of authorisation to search and seizure under section 132 of the Act the consideration is as to whether there is some relevant material so as to warrant proceeding under section 132 of the Act. The question of sufficiency cannot be gone into at the time of initiation of proceeding under section 132 of the Act and consequently the notices issued under section 158BC were valid and were issued in accordance with law.

Issues Involved:

1. Legality of the search conducted on September 14, 2002.
2. Validity of the block assessment notices dated April 29, 2003, and May 21, 2003.
3. Jurisdiction and authority of the Director of Investigation to issue search authorization.
4. Adequacy of the material on record before authorizing the search.
5. Legality of the search under Section 132 of the Income-tax Act, 1961.
6. Powers of income-tax authorities under Sections 131, 133A, and 133B of the Income-tax Act, 1961.
7. Sufficiency and relevance of the information leading to the search.
8. Examination of the adequacy or sufficiency of the information in writ jurisdiction.

Detailed Analysis:

1. Legality of the Search Conducted on September 14, 2002:

The petitioners contended that the search was illegal and in contravention of Section 132 of the Income-tax Act, 1961. They argued that the Director of Investigation issued authorization without "reasons to believe" that the petitioners possessed undisclosed income. The court examined the records and found that there was sufficient material to justify the search. The court noted that detailed secret information was received and verified by the Assistant Director of Income-tax (Investigation) before the search was authorized. The court concluded that the search was conducted in accordance with the provisions of the Act.

2. Validity of the Block Assessment Notices:

The petitioners sought to quash the block assessment notices issued under Section 158BC of the Act, arguing that they were illegal and without jurisdiction. The court held that since the search was valid, the consequential block assessment notices were also valid and issued in accordance with the law.

3. Jurisdiction and Authority of the Director of Investigation:

The petitioners challenged the jurisdiction and authority of the Director of Investigation to issue the search authorization. The court found that the Director of Investigation acted within his powers under Section 132 of the Act. The court noted that the authorization was issued after detailed verification and approval by the higher authorities, including the Joint Director of Investigation and the Director General of Income-tax (Investigation).

4. Adequacy of the Material on Record Before Authorizing the Search:

The petitioners argued that there was no material on record before the competent authority to justify the search. The court examined the records and found that there was sufficient material, including detailed secret information and personal verification by the Assistant Director of Income-tax (Investigation). The court held that the material on record provided a reasonable basis for the belief that the petitioners possessed undisclosed income.

5. Legality of the Search Under Section 132 of the Income-tax Act, 1961:

The court referred to Section 132(1) of the Act, which allows search and seizure if the officer has "reasons to believe" that a person possesses undisclosed income. The court found that the conditions for exercising the power under Section 132 were satisfied in this case. The court noted that the information received was verified and found to be correct, providing a valid basis for the search.

6. Powers of Income-tax Authorities Under Sections 131, 133A, and 133B:

The petitioners argued that the powers of the income-tax authorities were limited to discovery and production of evidence under Section 131, survey under Section 133A, and collection of information under Section 133B. The court held that Section 132 provides additional powers for search and seizure, which were exercised validly in this case.

7. Sufficiency and Relevance of the Information Leading to the Search:

The court emphasized that the information leading to the search must be more than a mere rumor or gossip. It must be concrete and verifiable. The court found that the information in this case was detailed and verified by the Assistant Director of Income-tax (Investigation), providing a sufficient basis for the search.

8. Examination of the Adequacy or Sufficiency of the Information in Writ Jurisdiction:

The court held that the sufficiency or otherwise of the information cannot be examined in writ jurisdiction. The court's role is limited to examining the existence and relevance of the information. The court found that there was relevant material before the Director of Income-tax (Investigation) to form the requisite opinion for the search.

Conclusion:

The court concluded that the search and seizure were conducted in accordance with the statutory provisions and that there was sufficient material before the authority to justify the action. The writ petition was dismissed, and the block assessment notices were upheld as valid. The court clarified that the observations made in the judgment would not influence the independent exercise of the concerned authority in passing an appropriate order in accordance with the law.

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