2022 (4) TMI 181 - HC - Income Tax

Validity of search u/s 132 - Complete absence of any reason to believe for the respondents to conduct any search on the petitioner(s) under Section 132 - HELD THAT - While exercising jurisdiction under Article 226 of the Constitution, the High Court does not act as an Appellate Authority nor can mere suspicion be the basis conferring jurisdiction to interfere in judicial proceedings. Care and caution needs to be taken while addressing the possibility and potential of conferring an undue advantage to the assessee which may have the effect of frustrating the endeavour of the revenue depending upon the stage the Court is approached with the challenge. It would, therefore, in itself, be not sufficient to vitiate the action taken with a rider that the officer exercising the authorization had acted bona fide. With these parameters in mind, we had gone through the records and the satisfaction notes of the revenue authorities and are of the view that the mandate of the statute stands fulfilled. The competent authority while taking the decision has taken into consideration the relevant facts and the other material based upon the information in its possession on the basis of which reasonable belief has been reached fulfilling the requirement of the mandate of Section 132 of the 1961 Act. In view of the above referred to legal position, we refrain from stating any further keeping in view the stage of the proceedings.

Issues Involved:
1. Legality of the search conducted under Section 132 of the Income Tax Act, 1961.
2. Validity of notices issued under Section 153-A of the Income Tax Act, 1961.
3. Validity of notices issued under Section 142 (1) of the Income Tax Act, 1961.
4. Legality of the rejection order passed by the Assistant Commissioner of Income Tax.

Detailed Analysis:

1. Legality of the search conducted under Section 132 of the Income Tax Act, 1961:

The petitioners challenged the search conducted on them under Section 132 of the Income Tax Act, 1961, on the grounds of the absence of any "reason to believe" and lack of incriminating material. The petitioners argued that the search was void ab initio as the statutory requirements were not fulfilled. They emphasized that the "reason to believe" must be based on "information in possession" of the concerned authority, and the absence of these ingredients would render the search illegal. The genesis of the search was linked to a land deed by M/s. Avensis Exports Private Limited, with which the petitioners had no relationship. The court referred to the Supreme Court judgments in DGIT (Investigation) Versus Spacewood Furnishers P. Ltd. (2015) 374 ITR 595 (SC), ITO Versus Seth Brothers 1969 (74) ITR 836 (SC), and Pratap Singh Versus Director of Enforcement (1985) 155 ITR 166 (SC), which laid down the principles for the exercise of powers under Section 132.

2. Validity of notices issued under Section 153-A of the Income Tax Act, 1961:

The petitioners contended that the notices issued under Section 153-A of the Income Tax Act for the block period 2015-16 to 2020-21 were based on an unlawful search and, therefore, the Assistant Commissioner of Income Tax had no jurisdiction to issue these notices. The court examined whether the statutory requirements for issuing these notices were met, including the presence of "reason to believe" and the possession of relevant information by the competent authority.

3. Validity of notices issued under Section 142 (1) of the Income Tax Act, 1961:

The petitioners also challenged the notices issued under Section 142 (1) of the Income Tax Act, arguing that these notices were a continuation of the unlawful search and subsequent proceedings. They claimed that their objections were rejected without proper consideration, and the rejection order was non-speaking and cryptic. The court assessed whether the rejection order and the notices under Section 142 (1) complied with the statutory requirements and principles laid down by the Supreme Court.

4. Legality of the rejection order passed by the Assistant Commissioner of Income Tax:

The petitioners argued that the rejection order passed by the Assistant Commissioner of Income Tax was issued without addressing their factual and legal objections and without giving them an opportunity to be heard. The court examined the principles laid down by the Supreme Court regarding the necessity of recording reasons and ensuring accountability in the decision-making process. The court emphasized that the reasons for the belief should be recorded and may be placed before the court in the event of a challenge.

Conclusion:

The court, after considering the submissions and examining the records, concluded that the statutory requirements for conducting the search and issuing the notices were fulfilled. The competent authority had taken into consideration the relevant facts and material based on the information in its possession, forming a reasonable belief as required under Section 132 of the Income Tax Act. The court found no grounds to interfere with the impugned notices/orders in its extraordinary jurisdiction under Article 226 of the Constitution. The writ petitions were dismissed, and any pending applications were disposed of as infructuous. The court clarified that its opinion should not be construed as an opinion on the merits of the case, except for the fulfillment of the requirement of issuance of notice under Section 132 of the Income Tax Act.

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