1967 (2) TMI 27 - HC - Income Tax

Search and seizure - validity - arguments of counsel for the petitioners have failed, all these petitions are dismissed

Summary

Issues Involved:
1. Validity of searches under section 132 of the Income-tax Act, 1961.
2. Constitutionality of section 132 with respect to Articles 14 and 19(1)(f) of the Constitution.
3. Validity of section 6 of the Income-tax (Amendment) Act, 1965.
4. Allegations of mala fide actions by the Income-tax authorities.
5. Compliance with procedural requirements under Rule 112A of the Income-tax Rules.

Detailed Analysis:

1. Validity of Searches Under Section 132 of the Income-tax Act, 1961:
The petitions challenged the searches conducted by the Income-tax authorities under section 132, claiming they were arbitrary and indiscriminate. The court examined the historical context of section 132, noting its similarity to section 37(2) of the Income-tax Act, 1922. The court found that the searches were conducted with proper authorization from the Commissioner of Income-tax, who had recorded reasons for the searches based on reports and information received. The court held that the searches were valid as the Commissioner had a reasonable belief that documents relevant to the proceedings would be found.

2. Constitutionality of Section 132 with Respect to Articles 14 and 19(1)(f) of the Constitution:
The petitioners argued that section 132 violated Articles 14 and 19(1)(f) of the Constitution. The court noted that the validity of section 37(2) (similar to section 132) had been upheld by the Calcutta High Court in Surajmull Nagarmull v. Commissioner of Income-tax, while the Assam High Court had found it violative in Senairam Doongarmal Agency (P.) Ltd. v. K. E. Johnson. The court assumed, for argument's sake, that section 132 was inconsistent with Articles 14 and 19(1)(f) but concluded that section 6 of the Income-tax (Amendment) Act, 1965, validated the searches retrospectively, rendering the constitutional challenge moot during the period of emergency.

3. Validity of Section 6 of the Income-tax (Amendment) Act, 1965:
The petitioners contended that section 6 violated Article 14 as it did not protect past searches and seizures held illegal by courts. The court clarified that section 6's wording was broad enough to cover all past searches, including those deemed illegal or unconstitutional. The court found that section 6 did not infringe Article 14 and was immune from challenges based on Article 19(1)(f) during the emergency.

4. Allegations of Mala Fide Actions by the Income-tax Authorities:
The petitioners alleged malice in fact and law, claiming the searches were motivated by personal vendetta and conducted without proper authorization. The court found no credible evidence to support these claims. The affidavits from the Income-tax authorities, including the Commissioner, provided a reasonable basis for the searches. The court noted the petitioners' previous tax record and pending assessments, which justified the authorities' suspicion. The court held that the searches were neither motivated by malice in fact nor in law.

5. Compliance with Procedural Requirements Under Rule 112A of the Income-tax Rules:
The petitioners argued that notices under Rule 112A were issued after the prescribed period, rendering the proceedings illegal. The court interpreted Rule 112A as directory rather than mandatory, emphasizing the legislative intent to ensure timely assessment of tax on seized assets. The court concluded that the notice issued after the 15-day period was not illegal, as the primary objective was to complete the assessment within the 90-day period stipulated by section 132(1B).

Conclusion:
The court dismissed all petitions, upholding the validity of the searches and the constitutionality of section 132 and section 6 of the Income-tax (Amendment) Act, 1965. The allegations of mala fide actions were found unsubstantiated, and procedural compliance under Rule 112A was deemed sufficient. The searches and seizures were declared lawful, and the petitions were dismissed with costs.