1980 (10) TMI 7 - HC - Income Tax

Summary

Issues Involved:
1. Validity of proceedings u/s 132A of the I.T. Act.
2. Sufficiency of material for the Commissioner to have "reason to believe."
3. Interpretation of "reason to believe" in the context of s. 132A.
4. Application of s. 69A in the context of issuing an authorisation warrant.

Summary:

1. Validity of Proceedings u/s 132A of the I.T. Act:
The petitioner challenged the validity of proceedings initiated u/s 132A of the I.T. Act. The court examined whether the Commissioner had sufficient material to have "reason to believe" that the jewellery in the custody of the Chief Judicial Magistrate represented undisclosed income of the petitioner.

2. Sufficiency of Material for the Commissioner to Have "Reason to Believe":
The court scrutinized the material on record, including the statement of the petitioner and the complaint by Sahu. It was found that there was no substantial evidence indicating that the jewellery represented undisclosed income. The court emphasized that mere possession of jewellery was insufficient; the information must lead the Commissioner to believe it was undisclosed income.

3. Interpretation of "Reason to Believe" in the Context of s. 132A:
The court elaborated on the term "reason to believe," stating it involves both subjective satisfaction and objective justification. The belief must be based on tangible material and withstand the test of reason. The court cited the Supreme Court's interpretation in ITO v. Lakhmani Mewal Das, emphasizing that the belief must be held in good faith and not be a mere pretense.

4. Application of s. 69A in the Context of Issuing an Authorisation Warrant:
The court rejected the Department's argument that the presumption under s. 69A could be invoked at the stage of issuing an authorisation warrant. It clarified that s. 69A applies during assessment proceedings and not at the stage of issuing a requisition. The court held that invoking s. 69A at this stage would negate the safeguard provided by "reason to believe."

Conclusion:
The court concluded that the Commissioner issued the authorisation warrant without sufficient reason to believe that the jewellery represented undisclosed income. The action was deemed without jurisdiction and contrary to s. 132A. The petition was allowed, and the authorisation warrant was quashed. The petitioner was entitled to costs.