2018 (8) TMI 989 - HC - Income Tax

Search and seizure u/s 132 - reason to believe - whether the search and seizer is arbitrary, illegal and violative of fundamental rights of the petitioner - the petitioner society is one of the largest Multi State Cooperative Societies in the field of the Credit. - an order was passed u/s 133A(3)(ia) of the Act, by which, the documents as well as electronic media in the form of hard disk/CD/ Pen Drive etc. seized during the course of survey proceedings have been ordered to be impounded Held that - Since the proceedings consequent to search and seizer operations are going on, at this stage, it would not be appropriate on our part to divulge in detail about the satisfaction note. Suffice it to record, in our opinion, there were sufficient grounds enabling the authorities to hold belief that case of the petitioner is covered under subclause (c)of subsection( 1) of Section 132 which permits the authorizing officer to issue authorization of search if he has reason to believe. We further find that satisfaction note place by the Principal Director of Income Tax (Investigation), Rajasthan was placed before the Director of Joint Income Tax Office, Rajasthan who has considered and scrutinized satisfaction minutely. All the authorities offered their own comments and thereafter authorization be issued. We find that necessary care has been taken and the case properly scrutinized before issuance of the authorization. It is not a case of either hurriedly or perfunctorily issuing search authorization. Therefore, in the facts and circumstances of the case, we see no reason to interfere with the impugned authorization / search and seizer proceedings under Section 132 of the Act as well as impounding document etc. under Section 133 A(3)(ia) of the Act. Merely because, in the past for earlier transaction, the department might have given clean chit, there does not mean that on fresh cause of action and / or fresh material and / or evidence, search and seizer cannot be undertaken. - Decided against the assessee.

Summary

Issues Involved:

1. Legality of the search and seizure conducted from 14.06.2018 to 19.06.2018.
2. Return of the original seized items.
3. Validity of the order dated 19.06.2018 under Section 133A(3)(ia) of the Income Tax Act.
4. Alleged violation of fundamental rights.
5. Repeated search and seizure on similar grounds.
6. Right to access reasons for the search and seizure.
7. Slow provision of xerox copies of seized documents.

Issue-wise Detailed Analysis:

1. Legality of the Search and Seizure Conducted from 14.06.2018 to 19.06.2018:

The petitioner challenged the search and seizure conducted under Section 132 of the Income Tax Act, claiming it was arbitrary, illegal, and violated fundamental rights. The respondent argued that the search and seizure were conducted following due procedure and based on a reasonable belief that the petitioner was involved in tax evasion. The court referred to the Supreme Court's observations in *Spacewood Furnishers Private Limited and Ors* and *N.K. Jewellers and Another*, which upheld the legality of such actions if based on reasonable belief and proper authorization. The court found that the satisfaction note recorded by the Principal Director of Income Tax (Investigation), Rajasthan, was detailed and based on definite information, thus justifying the search and seizure.

2. Return of the Original Seized Items:

The petitioner requested the return of the original seized items, arguing that their retention caused undue hardship. The respondent contended that the items were retained following the law and that the authorities were trying their best to provide xerox copies. The court did not find sufficient grounds to challenge the retention of the seized items, noting that the provision of xerox copies was being handled as efficiently as possible given the volume of records.

3. Validity of the Order Dated 19.06.2018 under Section 133A(3)(ia) of the Income Tax Act:

The petitioner sought to quash the order dated 19.06.2018, which impounded documents and electronic media. The court held that the order was in consonance with Section 133A(3)(ia) of the Act, which allows for the impounding of documents during survey proceedings. The court found no reason to interfere with the order.

4. Alleged Violation of Fundamental Rights:

The petitioner argued that the search and seizure violated their fundamental rights. The court, however, found that the actions were justified and legal, based on the detailed satisfaction note and reasonable belief of tax evasion. The court emphasized that the reasons for the belief need not be communicated to the petitioner, aligning with the Supreme Court's rulings.

5. Repeated Search and Seizure on Similar Grounds:

The petitioner contended that a similar search and seizure in 2010 resulted in no findings against them, and thus the current actions were unwarranted. The court dismissed this argument, stating that new information and fresh cause of action justified the current search and seizure. The court noted that past clean chits do not preclude future investigations based on new evidence.

6. Right to Access Reasons for the Search and Seizure:

The petitioner claimed they were entitled to know the reasons for the search and seizure. The respondent, supported by the court, argued that the reasons need not be disclosed to the petitioner, as per the amendment to Section 132 by the Finance Act, 2017. The court upheld this position, referencing the Supreme Court's decisions that reasons for belief are not required to be communicated to the person against whom the warrant is issued.

7. Slow Provision of Xerox Copies of Seized Documents:

The petitioner complained about the slow provision of xerox copies of seized documents, causing hardship. The court acknowledged the issue but stated that it could not fix a time limit for providing copies without material evidence regarding the available resources. The court found this complaint insufficient to challenge the authorization under Section 132 of the Act.

Conclusion:

The court dismissed the petition, finding the search and seizure actions, the retention of seized items, and the impounding order to be legal and justified. The court emphasized that the actions were based on a detailed and reasonable belief of tax evasion, and the petitioner was not entitled to the reasons for the belief. The court upheld the legality of the actions under the relevant sections of the Income Tax Act and dismissed the petitioner's claims of fundamental rights violations and undue hardship.