1988 (11) TMI 362 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the search under Section 132(1) of the Income Tax Act.
2. Compliance with Section 132(9A) of the Income Tax Act.
3. Violation of principles of natural justice under Section 132(5) of the Income Tax Act.
4. Validity of simultaneous orders under Section 132(5) against both the Bandekars and their companies.

Detailed Analysis:

1. Legality of the Search under Section 132(1) of the Income Tax Act:
The petitioners contended that the search was illegal as there was no material or information justifying the belief that conditions for a search existed. They argued that the power under Section 132(1) is drastic and should be exercised only after serious application of mind. The court examined the relevant provisions and found that the Commissioner had acted on detailed information, including anonymous petitions and a note from the Assistant Director of Inspection. The court concluded that the exercise of power by the Commissioner was genuine and authentic, and the belief formed was reasonable. The court stated that the exercise of power under Section 132 is not judicial or quasi-judicial and cannot be easily challenged under Article 226 of the Constitution. Therefore, the court rejected the contention that the search was illegal.

2. Compliance with Section 132(9A) of the Income Tax Act:
The petitioners argued that the authorised officer did not hand over the seized assets to the Income Tax Officer having jurisdiction within the stipulated 15 days, as required by Section 132(9A). The court noted that the assets were handed over to the Commissioner, who is a superior officer to the Income Tax Officer, Panjim. The court held that this was sufficient compliance with Section 132(9A) and rejected the contention that the Income Tax Officer lacked jurisdiction to pass the order under Section 132(5).

3. Violation of Principles of Natural Justice under Section 132(5) of the Income Tax Act:
The petitioners claimed that they were not given an opportunity to cross-examine witnesses whose statements were relied upon by the Income Tax Officer. The court acknowledged that the order under Section 132(5) is of a summary nature and does not conclude the rights of the petitioners. It also noted that the order is appealable, and any breach in the exercise of power can be addressed in an appeal. The court found no merit in the argument that the order should be quashed due to alleged violations of natural justice, especially since the order merely retains the assets until the assessment is completed.

4. Validity of Simultaneous Orders under Section 132(5) Against Both the Bandekars and Their Companies:
The petitioners argued that once an order was passed against the private limited companies, no order should be passed against the Bandekars for the same assets. The court explained that the fixed deposit receipts were claimed by both the Bandekars and the companies. The Income Tax Officer did not accept the claims and retained the assets in protective custody. The court cited the Supreme Court's observation that protective orders can be passed when there is doubt about the ownership of assets. The court concluded that the Income Tax Officer had the authority to pass the order under Section 132(5) against the Bandekars and rejected the contention that such orders were invalid.

Conclusion:
The court found no merit in the contentions raised by the petitioners. It held that the search was legal, the compliance with Section 132(9A) was adequate, there was no violation of natural justice, and the simultaneous orders under Section 132(5) were valid. Consequently, the petitions were dismissed with costs.