2005 (3) TMI 62 - HC - Income Tax

Challenge to search and seizure - no material could be shown by the writ-appellants to show that the respondent/authorities issued warrants of authorization mala fide or maliciously Thus, we do hold, that the learned single judge s conclusion is wholly correct, reasonable and that even after keeping the CAG s report at bay, any man of ordinary prudence, even if not reasonably instructed in law, would have, on the face of the information available, come to the conclusion that there had been non-disclosure of huge property/income resulting in tax evasion - Besides the CAG s report, other informations were also available on record for the respondents/authorities concerned to initiate action under section 132(1) hence we have no hesitation in holding that the respondents/authorities concerned had, in their possession, information enabling them, legally and constitutionally, to act upon the same and issue warrants of authorisation for search and seizure.

Issues Involved:
1. Territorial jurisdiction of the High Court to entertain the writ petitions.
2. Legality of using the CAG report for initiating action under section 132(1) of the Income-tax Act before its disposal by the State Legislature.
3. Existence of other information besides the CAG report in possession of the authorities to form the requisite belief under section 132(1).
4. Legality and constitutionality of the information in possession of the authorities for issuing warrants of authorisation for search and seizure.
5. Reliefs entitled to the parties.

Issue-wise Detailed Analysis:

1. Territorial Jurisdiction:
The court examined whether it had territorial jurisdiction to entertain the writ petitions. The expression "cause of action" was defined as a bundle of facts that entitle a plaintiff to a judgment in his favor. The court must consider all facts pleaded in support of the cause of action without verifying their correctness. The court concluded that it had jurisdiction to entertain the writ petitions because the warrants of authorisation were issued by the DIT (Investigation), Guwahati, based on shared information with other authorities, thus part of the cause of action arose within the court's territorial limits.

2. Legality of Using the CAG Report:
The court analyzed whether the CAG report, which had not been discussed by the State Legislature, could be used as a basis for forming a belief under section 132(1). It was concluded that the CAG report is initially meant for the Legislature, but there is no express constitutional bar preventing its use by executive authorities. The court held that the legislative intent was to allow authorities to act upon any information, including the CAG report, to prevent tax evasion. The court found that the authorities could legally act on the information derived from the CAG report.

3. Existence of Other Information:
The court examined whether there was any other information besides the CAG report that could form the basis for the belief required under section 132(1). It was found that the authorities had various pieces of information from different sources, including discreet inquiries, which were sufficient to form the requisite belief. The court noted that the satisfaction notes contained detailed information about undisclosed properties and tax evasion, which justified the issuance of warrants of authorisation.

4. Legality and Constitutionality of Information:
The court considered whether the information in possession of the authorities was legally and constitutionally sufficient to issue warrants of authorisation. It was concluded that the authorities had credible information, and the belief formed was neither arbitrary nor irrational. The court emphasized that the sufficiency of the information is not for the court to judge, but the existence and relevance of the information can be examined. The court found that the materials available in the office files were capable of leading the authorities to conclude that the writ petitioners were in possession of undisclosed property/income.

5. Reliefs:
The court allowed Writ Appeal No. 306 of 2004, which was filed by the Revenue challenging the finding that the CAG report could not be used for forming the belief under section 132(1). The remaining writ appeals filed by the petitioners were dismissed, as the court found no illegality in the issuance of the warrants of authorisation for search and seizure.

Conclusion:
The court upheld the legality and constitutionality of the actions taken by the authorities under section 132(1) of the Income-tax Act, based on the information in their possession, including the CAG report. The court emphasized the importance of preventing tax evasion and found that the authorities had acted within their powers.

← Previous Next →