2015 (7) TMI 126 - HC - Income Tax

Legality of search and seizure operations under Section 132 - Held that - We see no reason to entertain this writ petition mainly for the following facts and reasons (i) This petitioner has close connection with Ex. Chief Minister of the State. (ii) There was ample materials with the Income Tax Authorities that this petitioner has not disclosed huge income. On the basis of information with the Income Tax Authorities they found need of carrying out search and seizure at the premises of the petitioner. Before issuance of warrant of authorization by the Director of Income Tax to carry out search and seizure under Section 132 of the Act, in detail the procedure prescribed under Section 132 of the Act has been followed. To carry out any search and seizure activity u/s 132 of the Income Tax Act, 1961, the concerned ADIT or DDIT has to write a satisfaction note along with supporting documents proposing an action u/s 132 if he has reasons to believe that such an action is justified. The said satisfaction note is then forwarded by JDIT(Inv.)/Addl DIT(Inv) to the DIT(Inv.) and both these officers should independently have reason to believe on the basis of information in possession that a search and seizure activity u/s 132 of Income Tax Act, 1961 is justified.The satisfaction note is administratively approved by the Director General of Income Tax (Investigation) who independently should also have reason to believe that the provisions of Section 132 of the Income Tax Act, 1961 are complied for issue of warrant of authorization to carry out a search and seizure action. Thus no illegality has been committed by the respondents in issuing the summons under sub Section (1A) of Section 131 of the Act, 1961. See Neesa Leisure Ltd. & Anr Vs. Union of India & Ors reported in 2011 (3) TMI 706 - Gujarat High Court - Decided against assessee.

Summary

Issues Involved:
1. Legality of the search and seizure operations under Section 132 of the Income Tax Act, 1961.
2. Legality and validity of the summons issued under Section 131(1A) of the Income Tax Act, 1961.
3. Legality of the notice issued under Section 153A of the Income Tax Act, 1961.
4. Request for prohibition of further proceedings based on the search and seizure.
5. Request for the release of seized documents.

Detailed Analysis:

1. Legality of the Search and Seizure Operations under Section 132 of the Income Tax Act, 1961:

The petitioner challenged the legality of the search and seizure operations conducted by the Income Tax Authorities from 31st October 2009 to 4th November 2009, arguing that the satisfaction required under Section 132(1) was not reduced in writing and lacked credible information. The petitioner relied on decisions from the Supreme Court and Delhi High Court emphasizing the necessity of credible information and a nexus between the information and the belief.

The respondents countered that the search and seizure were based on ample material indicating undisclosed income. The procedure involved multiple levels of satisfaction notes and approvals, which constituted "reason to believe." The court found that the procedure prescribed under Section 132 was duly followed, and the satisfaction note with supporting documents was approved by the Director General of Income Tax (Investigation). The court emphasized that it could not sit in appeal against the subjective satisfaction of the Income Tax Authorities and that the presence of supporting documents sufficed to justify the search and seizure.

2. Legality and Validity of the Summons Issued under Section 131(1A) of the Income Tax Act, 1961:

The petitioner argued that the summons issued under Section 131(1A) on 4th May 2010 was invalid as it was subsequent to the search and seizure. The court rejected this argument, stating that the powers under Section 131(1A) can be exercised both before and after the search and seizure. The court cited multiple judicial precedents, including decisions from the Gujarat High Court, which affirmed that issuing summons under Section 131(1A) after the search is legal and helps in obtaining better particulars or understanding the seized material.

3. Legality of the Notice Issued under Section 153A of the Income Tax Act, 1961:

The petitioner also challenged the notice issued under Section 153A, arguing that it lacked credible information and a nexus with the belief. The court did not find merit in this argument, as the notice was a consequence of the valid search and seizure operations. The court emphasized that the satisfaction of the Income Tax Authorities was based on sufficient material, and the issuance of the notice under Section 153A was a procedural requirement following the search.

4. Request for Prohibition of Further Proceedings Based on the Search and Seizure:

The petitioner sought to prohibit further proceedings based on the search and seizure. The court found no reason to entertain this request, as the search and seizure were conducted following due process, and the petitioner had already approached the Settlement Commission, which indicated undisclosed income. The court noted that the petition appeared to be an attempt to delay the payment of due taxes.

5. Request for the Release of Seized Documents:

The petitioner requested the release of seized documents. The court did not find any illegality in the retention of the documents, as the Income Tax Authorities followed the prescribed procedure, and the retention was necessary for completing the assessment and investigation.

Conclusion:

The court dismissed the writ petition, finding no illegality in the search and seizure operations, the issuance of summons under Section 131(1A), or the notice under Section 153A. The court emphasized that the satisfaction of the Income Tax Authorities was based on sufficient material and that the petitioner had not provided a full and true disclosure of income. The petition was deemed an attempt to delay the payment of taxes, and the court upheld the actions of the Income Tax Authorities.