2005 (7) TMI 42 - HC - Income Tax

Search notices u/s 158BC - invoking of section 147 - Since we find no infirmity in the conduct of the search and that the assessee would fall within Chapter XIV-B notices issued under section 158BC are also valid. The learned single judge has taken the view that once the Division Bench sets aside exhibit P1 judgment there would not be any inhibition in proceeding under section 158BC. In cases where section 158BC proceedings are taken there is no scope for invoking section 147 of the Act in respect of the same matter. held that the search and seizure are valid and there is no illegality in the notices issued under section 158BC of the Act. Consequently as rightly held by the learned single judge there is no scope for invoking section 147 of the Act.

Issues Involved:
1. Legality of the search and seizure operations conducted by the Income-tax Department.
2. Alleged procedural violations during the search and seizure.
3. Validity of the statements and documents obtained during the search.
4. Applicability of notices issued under section 158BC of the Income-tax Act.
5. Allegations of mala fide actions and bias against the second respondent.

Detailed Analysis:

1. Legality of the Search and Seizure Operations:
The petitioners challenged the search and seizure operations conducted on October 27, 1995, and November 10, 1995, claiming they were illegal. The court found that the search was conducted based on a warrant of authorization issued under section 132 of the Income-tax Act by the Director of Income-tax, Bangalore. The search operations were deemed valid as they followed the statutory and procedural guidelines issued by the Central Board of Direct Taxes. The court concluded that the search and seizure operations were legally initiated and executed.

2. Alleged Procedural Violations:
The petitioners alleged several procedural violations, including the unauthorized taking of documents and the improper sealing of an almirah. The court found no irregularity in the action of the Department in keeping the documents in the almirah after issuing an order under section 132(3) of the Income-tax Act. The court held that the procedures followed during the search, including the sealing of documents and the issuance of prohibitory orders, were in compliance with the statutory requirements. The court also rejected the petitioners' claim that the search was prolonged unreasonably, noting that the delay was adequately explained by the Department.

3. Validity of the Statements and Documents:
The petitioners claimed that the statements recorded on October 27, 1995, were extracted under threat and coercion. The court found no evidence to support this claim and noted that the statements were recorded in compliance with section 132(4) of the Income-tax Act. The court also addressed the validity of exhibit P5, a statement allegedly prepared in the presence of the search party. The court concluded that exhibit P5 was not a valid document as it was not proved with reliable evidence and was likely a subsequent creation to support the petitioners' case.

4. Applicability of Notices Issued Under Section 158BC:
The petitioners challenged the notices issued under section 158BC of the Income-tax Act, which directed them to prepare a return of their total income, including undisclosed income for the block period. The court held that the notices were valid as they were issued in compliance with Chapter XIV-B of the Income-tax Act, which came into effect before the search took place. The court noted that the petitioners' case fell within the scope of Chapter XIV-B, and therefore, the notices issued under section 158BC were in order.

5. Allegations of Mala Fide Actions and Bias:
The petitioners raised personal allegations against the second respondent, claiming bias and mala fide actions. The court found no evidence to support these allegations and noted that the second respondent was acting on the directions of superior officers and had no personal malice towards the petitioners. The court rejected the claim that the second respondent had taken away documents without authorization or planted documents during the search. The court also expunged the adverse remarks made by the learned single judge against the second respondent, concluding that the allegations were unwarranted and amounted to character assassination.

Conclusion:
The court allowed the appeal by the Commissioner of Income-tax and the officer, setting aside the judgment of the learned single judge. The court dismissed the writ petitions with costs of Rs. 10,000 to be paid to the second respondent. The search and seizure operations were deemed valid, and the notices issued under section 158BC of the Income-tax Act were upheld.

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