2005 (5) TMI 25 - HC - Income Tax

Search and seizure - survey under section 133A - notices under section 131(1A) held that there is reason to believe to conduct search and seizure invoking the provisions of sections 131 and 132 and the power of search and seizure has been exercised after taking due care of the provisions and on the basis of credible information and after applying mind and there was reason to believe to conduct search operation. In view of the aforesaid discussions, search operation and panchnama have rightly been conducted/prepared and no interference whatsoever is required by this court while exercising extraordinary jurisdiction under article 226 of the Constitution of India. Consequently, this writ petition fails and is hereby dismissed

Issues Involved:
1. Legality of the search and seizure operations conducted on January 8, 2004.
2. Validity of the search warrant and the requirement of "reason to believe."
3. Compliance with Section 132 and Section 131(1A) of the Income-tax Act.
4. Allegations of suppression of sales/production and inflation of expenses by the petitioner-company.
5. Petitioner's challenge based on precedents and legal principles.

Detailed Analysis:

1. Legality of the Search and Seizure Operations:
The petitioner, M/s. Harvest Gold Foods (India) Private Limited, challenged the search and seizure operations conducted on January 8, 2004, at their premises. The petitioner argued that the search warrant was issued without proper information, application of mind, and reason to believe, as mandated by the statute. The respondents, however, contended that the operations were duly authorized by the Director-General of Income-tax (Investigation), New Delhi, after careful examination of information, evidence, and material.

2. Validity of the Search Warrant and the Requirement of "Reason to Believe":
The petitioner argued that the search warrant was issued without "reason to believe," which is a critical requirement under Section 132 of the Income-tax Act. The petitioner cited various precedents, including Kusum Lata v. CIT, L.R. Gupta v. Union of India, and ITO v. Seth Brothers, to support their claim that the search and seizure were conducted without credible information. The court, however, found that the respondents had reasonable and credible information and ample reason to believe that the petitioner had not produced material relating to the assessment of income unless a search was carried out.

3. Compliance with Section 132 and Section 131(1A) of the Income-tax Act:
The petitioner contended that the respondents did not comply with the provisions of Section 132 and Section 131(1A) of the Income-tax Act. The court examined the relevant provisions and concluded that the search and seizure operations were conducted in compliance with the law. The court noted that the respondents had credible information and reason to believe that the petitioner was in possession of undisclosed income or property.

4. Allegations of Suppression of Sales/Production and Inflation of Expenses:
The allegations against the petitioner-company included suppression of sales/production and inflation of expenses, which were not reflected in the regular books of account. The court found that the main ingredients in the manufacture of bread, such as maida, yeast, sugar, vegetable oil, salt, and water, were not subjected to scrutiny by local or central revenue or excise departments. The major part of the sales was in cash, collected by salesmen from retailers/distributors. The search resulted in the seizure of unaccounted cash and jewelry, as well as incriminating documents and books of account, which supported the allegations of unaccounted income.

5. Petitioner's Challenge Based on Precedents and Legal Principles:
The petitioner relied on various judgments, including Kusum Lata v. CIT, L.R. Gupta v. Union of India, and Ganga Prasad Maheshwari v. CIT, to argue that the search and seizure were conducted without proper information and reason to believe. The court, however, found that the respondents had credible information and reason to believe that justified the search and seizure. The court also referred to the judgments cited by the respondents, including Pooran Mal v. Director of Inspection (Investigation) and Dr. Partap Singh v. Director of Enforcement, which supported the legality of the search and seizure operations.

Conclusion:
The court concluded that the search and seizure operations conducted on January 8, 2004, and the panchnama dated January 9, 2004, were conducted in compliance with the law and based on credible information and reason to believe. The petitioner's challenge was dismissed, and the court found no reason to interfere with the search and seizure operations. The writ petition was dismissed with no order as to costs.

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