1964 (3) TMI 2 - HC - Income Tax

Search - extent of the seizure was far beyond the limits of section 132 - action was mala fide in the sense that there was abuse of power conferred on the ITO by s. 132 of the Act - since the act being mala fide, the proceedings should be quashed by court by issuing a writ of mandamus

Issues Involved:
1. Constitutionality of Section 132 of the Income-tax Act, 1961.
2. Abuse of power under Section 132 of the Income-tax Act, 1961.
3. Relevance and legality of seized documents.
4. Procedural irregularities during the search and seizure.
5. Detention of documents and its impact on the petitioners.
6. Bona fides of the search operation.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 132 of the Income-tax Act, 1961:
The petitioners contended that Section 132 of the Act violates Articles 14 and 19 of the Constitution. However, the court did not delve into the constitutionality of Section 132 since the petitions succeeded on the ground of abuse of power.

2. Abuse of power under Section 132 of the Income-tax Act, 1961:
The court found that the search and seizure were not bona fide. The extent of the seizure was far beyond the limits of Section 132 of the Act, indicating an abuse of power. The court noted that the Income-tax Officer did not apply his mind to the relevancy or usefulness of the documents seized, which is a requirement under the Act.

3. Relevance and legality of seized documents:
The court observed that many of the documents seized were irrelevant for the purpose of any proceeding under the Act. For instance, vouchers for medicine, advertisement files, temperature reports, and maps of Cold Storage were deemed irrelevant. Additionally, documents belonging to other firms and companies were seized, which was not justified under the authority granted.

4. Procedural irregularities during the search and seizure:
The court highlighted several procedural irregularities:
- More than 500 documents were seized, many of which were irrelevant.
- Identification marks were not placed on several documents, contrary to the instructions in the letters of authorization.
- The police force employed during the raid was excessive, consisting of 12 officials, which was deemed unnecessary and excessive.

5. Detention of documents and its impact on the petitioners:
The documents were seized on 7th and 8th June 1963 and detained for over two months before the writ petitions were filed. This prolonged detention of current books of account seriously prejudiced the petitioners in their business activities. The court noted that the respondents did not make a timely effort to return the documents, further exacerbating the situation.

6. Bona fides of the search operation:
The court concluded that the search was not bona fide. It pointed out several factors indicating mala fide actions:
- Instructions from the Directorate of Inspection, New Delhi, for a general raid and seizure of all account books and papers.
- Seizure of more than 500 documents, many of which were irrelevant.
- Seizure of documents belonging to other firms and companies.
- Failure to place identification marks on several documents.
- Excessive police force employed during the raid.
The court held that the action was mala fide in the sense that there was an abuse of power conferred on the Income-tax Officers by Section 132 of the Act. Consequently, the proceedings were quashed, and a writ of mandamus was issued directing the respondents to return the documents to the petitioners.

Conclusion:
The court allowed the four connected petitions with costs, quashing the search and seizure proceedings dated 7th and 8th June 1963. The respondents were directed to return the documents to the petitioners. The court also noted that it would be open to the new Income-tax Commissioner to initiate fresh proceedings under Section 132 of the Act, if so advised, but any future search would have to be conducted in accordance with the law as explained in the judgment.

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