1966 (2) TMI 2 - HC - Income Tax

Search - indiscriminate seizure of all articles books and accounts without consideration - search and the seizure, in the circumstances, must be held to be illegal as being arbitrary and an abuse of power

Issues Involved:
1. Constitutionality of Section 132 and Rule 112 of the Income-tax Act.
2. Legality and jurisdiction of the authorisation warrant under Section 132 of the Income-tax Act.
3. Allegations of mala fide actions and abuse of power in the search and seizure process.
4. Compliance with the Code of Criminal Procedure, 1898, in the search and seizure.

Issue-wise Detailed Analysis:

1. Constitutionality of Section 132 and Rule 112 of the Income-tax Act:

The petitioner challenged the constitutionality of Section 132 and Rule 112, arguing that they violated Articles 14, 19(1)(f) and (g), and 31 of the Constitution. The court, however, followed the precedent set by the Bench decision in *Roshan Lal and Co. v. Commissioner of Income-tax*, which upheld the constitutionality of these provisions. The court noted that the petitioner's counsel did not make a serious attempt to contest this precedent or show any infirmities in the reasoning of the previous Bench decision.

2. Legality and Jurisdiction of the Authorisation Warrant under Section 132:

The petitioner argued that the mandatory provisions of Section 132 were not followed, rendering the authorisation warrant illegal and without jurisdiction. The court examined the relevant part of Section 132, which requires the Commissioner to have "reason to believe" based on information that the petitioner would not produce relevant documents or was in possession of undisclosed income or property.

The court scrutinized the report submitted by the Inspecting Assistant Commissioner, which was based on information from an informant about manipulated accounts. The court referred to the judgment in *Calcutta Discount Co. v. Income-tax Officer*, which emphasized that the belief must be held in good faith and based on information, not mere suspicion. The court found that the Commissioner's affidavit did not adequately establish that he had applied his mind independently to form the belief required by Section 132. Consequently, the essential requirement of Section 132 was not satisfied, rendering the warrant of authorisation invalid.

3. Allegations of Mala Fide Actions and Abuse of Power:

The petitioner alleged that the search and seizure were conducted in bad faith, with excessive seizure of books and documents beyond the scope of the authorisation. The court reviewed the sequence of events and the nature of the documents seized, noting that many of them were not relevant to the assessment years in question. The court highlighted that the officers were required to seize only those documents considered relevant and useful for the proceedings, but they indiscriminately seized all documents found on the premises.

The court cited the decision in *Seth Brothers v. Commissioner of Income-tax*, where excessive seizure and the presence of police officers during the raid were considered indicative of mala fide actions. The court concluded that the seizure in this case was excessive and an abuse of power, as the officers did not make any effort to determine the relevancy of the documents at the time of seizure.

4. Compliance with the Code of Criminal Procedure, 1898:

Although this point was not seriously pressed by the petitioner, the court's decision on the second and third points rendered it unnecessary to delve deeply into this issue. The court's finding that the search and seizure were illegal and arbitrary sufficed to quash the actions taken by the respondents.

Conclusion:

The court allowed the writ petition, quashing the search and seizure of the books of account. The respondents were directed to restore all books and documents not yet returned to the petitioner. Each party was ordered to bear its own costs.

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