2018 (10) TMI 934 - HC - Income Tax

Validity of proceedings initiated u/s 132A - search and seizure - non-disclosing the reason to believe or reason to suspect - Held that - The proceedings were initiated under Section 132A of the Income Tax Act, 1961 and the authorities came to the conclusion that person who was going in train, had cash/sale proceeds with him and the Income Tax Authorities came to the conclusion that it was concealed income. Apex Court in the case of N.K. Jewellers & Anr. Vs. Commissioner of Income Tax, New Delhi 2017 (9) TMI 1299 - SUPREME COURT found that in view of amendment in Section 132A of the Income Tax Act, 1961 by the Finance Act, 2017 reason to believe or reason to suspect was not to be disclosed to any person or authority or Appellate Tribunal. Considering the law laid down by the Apex Court, the claim of the present petitioners is not justified at all. This Court finds that the ACJM, Mandal while deciding the application of the petitioner has clearly recorded a finding, after considering the case law, that the money which has been seized by the police can always be claimed by the petitioner, after the Income Tax Department concludes its proceedings, which have been initiated by issuing notice to the petitioner. This Court finds that in case summon to the petitioner was issued under Section 131 of the Income Tax Act and petitioner has been asked to explain the amount so seized, the authorities are bound to conclude the proceedings as per law and the petitioner has all the liberty to avail remedy provided against such order being passed.

Issues Involved:
1. Legality of the action under Section 132A(1) of the Income Tax Act, 1961.
2. Requirement to disclose the "reason to believe" under Section 132A of the Income Tax Act, 1961.
3. Legitimacy of the seizure and retention of ?14,00,000/-.
4. Application of precedents and case law cited by the petitioners.

Detailed Analysis:

1. Legality of the action under Section 132A(1) of the Income Tax Act, 1961:
The petitioners sought a direction to produce satisfaction note/reasons recorded under Section 132A(1) of the Income Tax Act, 1961, and to declare the impugned action and warrant of authorization dated 24.05.2018 as without jurisdiction. They also requested the release of ?14,00,000/- along with interest. The court examined the provisions of Section 132A, which empowers certain officers to requisition assets if they have "reason to believe" based on information in their possession. The court found that the initial steps taken by gathering information are within the exclusive possession of the authority and are not required to be disclosed to the person whose assets are seized.

2. Requirement to disclose the "reason to believe" under Section 132A of the Income Tax Act, 1961:
The petitioners argued that the "reason to believe" should be disclosed. However, the court referred to the explanation added to Section 132A by the Finance Act, 2017, which explicitly states that the "reason to believe" shall not be disclosed to any person or any authority or the Appellate Tribunal. The court cited the Supreme Court judgment in N.K. Jewellers & Anr. Vs. Commissioner of Income Tax, which upheld this provision, stating that the "reason to believe" or "reason to suspect" is not to be disclosed.

3. Legitimacy of the seizure and retention of ?14,00,000/-:
The petitioners contended that the seized amount was explained and backed by affidavits and certificates. The court noted that the petitioners' application for the release of the amount was dismissed by the Additional Chief Judicial Magistrate (ACJM), Mandal, District Bhilwara. The court found that the ACJM had rightly concluded that the money could be claimed by the petitioners after the Income Tax Department concludes its proceedings. The court also found that the authorities are bound to conclude the proceedings as per law, and the petitioners have the liberty to avail remedies against any order passed.

4. Application of precedents and case law cited by the petitioners:
The petitioners relied on several judgments, including Commissioner of Income-tax Vs. Vindhya Metal Corporation, Surinder Kaur Vs. Union of India, and Pratap K. Pothen Vs. Circle Inspector of Police. The court distinguished these cases, noting that they did not address the non-disclosure of the "reason to believe" under Section 132A. The court emphasized that the Supreme Court in N.K. Jewellers & Anr. had upheld the amendment to Section 132A, which prevents the disclosure of the "reason to believe."

Conclusion:
The court dismissed the writ petition, finding it devoid of merit. The court upheld the provisions of Section 132A, including the non-disclosure of the "reason to believe," and found that the petitioners' claims were not justified. The court also affirmed that the Income Tax Department's proceedings must be concluded as per law, and the petitioners have the liberty to challenge any adverse orders.

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