2019 (4) TMI 818 - HC - Income Tax

Search and seizure u/s 132 - sufficiency and insufficiency of reasons to belief for warrant of authorization for search and seizure - HELD THAT - The scope of interference at this stage is very limited and the Income Tax Act, 1961 provides a complete mechanism, which has been followed after the search and seizure operation has been carried out. Even if it is presumed for a moment that warrant relating to search and seizure was not proper and there was some defect in it, the material collected during the search and seizure cannot be brushed aside on this count alone. The Income Tax Act, 1961 provides for a detailed procedure that has to be followed and this Court, in the present writ petition, does not find any reason to quash the entire search and seizure operation as prayed by the petitioners in the relief clause - writ petition is dismissed.

Summary

Issues:
1. Validity of search and seizure operation under Section 132 of the Income Tax Act, 1961.
2. Alleged violation of law laid down by the Apex Court in ITO v/s Lakhmani Mewal Das.
3. Relief sought by petitioners including quashing of search operation, release of seized jewellery, and compensation.
4. Respondent's defense of following proper procedure for search and seizure.
5. Dispute over the address discrepancy and seizure of jewellery from a locker.
6. Respondent's justification for the search and seizure operation based on association with a company.
7. Examination of the legality and authorization of the search warrant.
8. Acceptance of jewellery ownership by Shri Kovid Dutta's father.
9. Reference to the scope of interference by the High Court in matters of search and seizure as per relevant case laws.

Analysis:
The petitioners challenged the search and seizure operation conducted by the Income Tax Department, alleging a violation of Section 132 of the Income Tax Act, 1961. They contended that there was no proper warrant or reasonable belief for seizing undisclosed income from their locker. Additionally, they cited the case of ITO v/s Lakhmani Mewal Das to support their claim of illegality in the operation. The relief sought by the petitioners included quashing the operation, releasing the seized jewellery, and claiming compensation with interest.

In response, the Income Tax Department defended its actions, stating that the search and seizure were conducted in accordance with the prescribed procedure under the Income Tax Act, 1961. They justified the operation based on the issuance of a search warrant for the premises where Shri Kovid Dutta resided, linking it to a company investigation. The respondent highlighted the address inconsistency and the seizure of jewellery from a specific locker associated with Shri Kovid Dutta's family members.

The Court examined the legality of the search warrant and found it duly authorized under Section 132 of the Income Tax Act, 1961. It noted the admission of jewellery ownership by Shri Kovid Dutta's father, reinforcing the validity of the operation. The Court referenced relevant case laws, such as Director General of Income Tax (Investigation) v/s Spacewood Furnishers Pvt. Ltd, to emphasize the limited scope of interference in matters of search and seizure by the High Court. It reiterated that even if there were procedural defects, the evidence collected during the operation could not be disregarded solely on that basis.

Ultimately, the Court dismissed the writ petition, ruling that the search and seizure operation was conducted within the bounds of the law and the petitioners failed to establish grounds for quashing the operation. The judgment underscored the comprehensive mechanism provided by the Income Tax Act, 1961, which was followed in this case, thereby upholding the legality of the operation despite procedural challenges raised by the petitioners.