2005 (11) TMI 33 - HC - Income Tax

In search and seizure operation, evidence of two fixed deposit certificates issued by the then ANZ Grindlays Bank for Rs. 20,000 and Rs. 25,000, respectively, renewed up to date, were found. The said fixed deposits certificates were issued in the name of the petitioner, who had shown his address in the care of one Subodh Misra of M/s. Dolphine Service. On the basis of the said facts a consequential warrant of authorisation under section 132(1A) was issued for search and the premises of the bank and thereafter on January 20, 2000, the respondents converted the value of the certificates into a bankers cheque payable to the Department whereafter the money was deposited in the account of the Commissioner, in accordance with the provisions of rule 112 of the Income-tax Rules. Aggrieved by the said action the instant writ petition has been filed seeking appropriate intervention of the court.

Issues:
1. Correct procedure under section 132 of the Income-tax Act for search and seizure operations.
2. Authorization for search of premises and subsequent actions by the Income-tax Department.
3. Determination of ownership of seized property and legality of conversion into banker's cheque.
4. Judicial intervention and directions for refund with interest.

Analysis:

1. Correct Procedure under Section 132 of the Income-tax Act:
The judgment delves into the correct procedure to be followed by officers of the Income-tax Department under section 132 of the Income-tax Act. It emphasizes that a warrant authorizing a search may be issued upon the satisfaction of the officer, enabling the seizure of income-related items to bring them under the Act's purview. The judgment highlights the provisions of section 132(1) and (3) regarding the search, seizure, and subsequent actions that need to be taken in compliance with the law.

2. Authorization for Search and Subsequent Actions:
The case involves a search and seizure operation conducted at a courier agency's premises based on a warrant of authorization. Subsequently, a consequential warrant was issued for the search of a bank's premises where fixed deposit certificates were found. The judgment scrutinizes the satisfaction note recorded by the authorized officer, emphasizing the necessity of establishing a direct link between the seized property and the subject of the search. It concludes that the actions of converting the seized property into a banker's cheque and depositing it into the Commissioner's account were unauthorized due to the lack of proper authorization under section 132 of the Income-tax Act.

3. Determination of Ownership and Legality of Conversion:
The judgment critically examines the ownership of the seized fixed deposit certificates, emphasizing that they belonged to the petitioner and not the courier agency whose premises were initially searched. It highlights the absence of satisfaction regarding the link between the seized property and the subject of the search, leading to the conclusion that the conversion and subsequent actions by the Income-tax Department were unauthorized. As a result, the court directs the immediate return of the converted amount to the petitioner along with interest at the prevailing rate during the period of illegal retention.

4. Judicial Intervention and Directions for Refund:
In light of the findings and conclusions, the court allows the writ petition and directs the Income-tax Department to refund the converted amount to the petitioner within 30 days along with interest at the rate prevailing during the period of illegal retention. The judgment emphasizes the need for judicial intervention to rectify unauthorized actions by the authorities and ensure compliance with the legal provisions governing search and seizure operations under the Income-tax Act.

In summary, the judgment provides a detailed analysis of the procedural requirements under section 132 of the Income-tax Act, scrutinizes the authorization and subsequent actions by the Income-tax Department, determines the ownership of seized property, and mandates judicial intervention for the refund of the converted amount with interest to the petitioner.

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