2020 (3) TMI 690 - HC - Income Tax

Notice u/s 131 - action of respondent under Sections 132 - ground taken is that there were no reasons to believe that the income has been concealed and that in any case, the money could not have been seized - HELD THAT - Revenue has placed before us, the reasons which were recorded at the time of converting the survey into search. It seems to us at this stage that the reasons disclosed cannot said to be non-existent and arbitrary. Faced with this, learned Senior counsel sought to argue that the action subsequent to the search show the arbitrariness of the search operation. We are afraid it would not be possible for us to comment on anything which is foreign to the writ petition. Next contention that the money which was seized was not in the form of cash but in the form of bank deposit and there was no requirement to seize it, we put it to him that money could be returned to the petitioner subject to the petitioner providing adequate surety in case any liability is created. Petitioner states that he has no objection. He has further argued that even till date no demand is pending. Learned counsel for the revenue has objected to point out that this is not an entirely correct factual situation because this Court granted stay of final order. We deem it appropriate to direct the petitioner to furnish the Bank guarantee for the amount seized (along with whatever the interest has accrued in this interregnum) and once that is done, the revenue shall refund the amount to the petitioner.

Summary

Issues:
Challenge to notice under Section 131 of the Income Tax Act and legality of action under Sections 132 of the Act.

Analysis:
The petitioner, a cooperative society of bank employees, challenged a notice issued under Section 131 of the Income Tax Act and the legality of the respondent's action under Sections 132 of the Act. The petitioner contended that as a cooperative society, its income falls under Section 80 (P) (2) of the Act, and hence, it had not filed returns. However, a survey was conducted, and the Authorised Officer issued the impugned notice under Section 131 and proceeded to seize the accounts of the petitioner. The petitioner argued that there were no reasons to believe that income was concealed, and the money could not have been seized. The counsel was referred to a Supreme Court judgment emphasizing the necessity of recording reasons to ensure accountability and responsibility in decision-making processes. The High Court was criticized for detailing the satisfaction note containing reasons prematurely, potentially giving an undue advantage to the assessee. The reasons recorded at the time of converting the survey into a search were found to be existent and not arbitrary.

The Senior Counsel for the petitioner argued that the action subsequent to the search operation showed arbitrariness. However, the Court noted that the prayers in the writ petition did not include this argument and thus rejected it. Another contention raised was regarding the form of the seized money, which was in the form of a bank deposit rather than cash. The Court suggested that the money could be returned to the petitioner upon providing adequate surety for any potential liability. The petitioner agreed to furnish a bank guarantee for the seized amount, and upon doing so, the revenue was directed to refund the amount along with accrued interest.

In conclusion, the Court directed the petitioner to provide a bank guarantee for the seized amount, and upon compliance, the revenue was ordered to refund the money to the petitioner.