2017 (2) TMI 645 - HC - Income Tax

Search and seizure u/s 132 - Held that - There is no dispute about the contention raised by the petitioner that at the time of search and seizure no bullion or jewellery has been recovered, but there is also no dispute about the fact that certain documents have been seized as would be evident from the inventory list and when the authorities have gone through the seized documents, they have found that the income having been undisclosed by the petitioner reason being in spite of specific direction given to the petitioner to produce his documents, the documents have not been produced. After going through the explanation given by the Assistant Commissioner of Income Tax, Central Circle-2, Bhubaneswar that although at the initial stage, no bullion or jewellery has been recovered, since it was in permissible limit, documents have been seized and in course of their examination, the authorities have come to a definite conclusion that certain income has not been disclosed and as such, for being satisfied, a notice under Section 153-A of the Act, 1961 has been issued and in terms thereof, the petitioner has given his detailed reply as would be evident from Annexure-6 annexed to the writ petition and after scrutiny of the reply, the authorities came to the conclusion that the books of account pertaining to M/s.Vasumati Builders Pvt. Ltd. has not been produced in spite of the direction having been given to him by the Income Tax authorities, as a result, the authorities have no other alternative than to conduct search and seizure in the premises of the petitioner. The competent authority can resort to the provisions of the Act, 1961, if it is opinion that the assessee is flouting the provisions of the Act and if in that situation, it comes to the conclusion that it is necessary to resort to the provisions under Section 132, then it cannot be said that there was no reason behind resorting to the provisions of the Act, 132 of the Act, 1961. Moreover, initiation of the proceeding under Section 132 has never been questioned by the petitioner immediately thereafter before any Court of law save and except challenging the same after lapse of two years by way of writ petition. There is no dispute about the contention raised by the petitioner that if the root will go, nothing remains. But as we have discussed hereinabove, we found that the submission made by the learned counsel for the petitioner has got no substance. We are of the further considered view that since the assessment order has been passed by the competent authority, it will not be proper for this Court to enter into the merit of the assessment order since this is not questioned in this writ petition.

Summary

Issues Involved:
1. Legality of the search and seizure under Section 132 of the Income Tax Act.
2. Validity of the notices issued under Sections 153-A, 143(2), and 142(1) of the Income Tax Act.
3. Release of seized documents as per the Panchanama dated 02.12.2014.

Detailed Analysis:

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

The petitioner challenged the search and seizure conducted on 02.12.2014, arguing that it was not in consonance with the procedures under the Income Tax Act. The petitioner contended that the authorities must have "definite reasons to believe" based on material information, and any action taken without such information is deemed illegal and arbitrary. The petitioner further argued that no incriminating materials were found during the search, which questions the legitimacy of the search and seizure.

The court examined the statutory provisions under Section 132, which confer powers to the authorities for search and seizure if they have information leading to a "reason to believe" that a person is in possession of undisclosed income or property. The court noted that the authorities had found undisclosed income during the scrutiny of documents, justifying the search and seizure. The court also referred to precedents, such as the Supreme Court's decisions in Pooran Mal v. Director of Inspector and Dr. Pratap Singh v. Director of Enforcement, which upheld the constitutional validity of Section 132 and emphasized that the reasons for the search need not be disclosed to the person against whom the warrant is issued.

The court concluded that the search and seizure were conducted based on valid reasons and were in accordance with the law.

2. Validity of the Notices Issued under Sections 153-A, 143(2), and 142(1) of the Income Tax Act:

The petitioner received a notice under Section 153-A on 06.08.2015, requiring them to file a true and correct return for the assessment year 2009-10. The petitioner responded by stating that the return filed under Section 139 should be treated as compliance. Subsequently, notices under Sections 143(2) and 142(1) were issued, asking the petitioner to explain discrepancies and produce records for the last six assessment years.

The court examined the statutory provisions under Sections 153-A, 143(2), and 142(1), which allow the authorities to issue notices for reassessment and to call for additional information and records. The court found that the petitioner had not responded adequately to these notices and had failed to produce relevant documents, such as the books of account for M/s. Vasumati Builders Pvt. Ltd., despite multiple requests from the authorities.

The court held that the notices were validly issued and that the petitioner had failed to comply with the requirements, justifying the actions taken by the authorities.

3. Release of Seized Documents as per the Panchanama dated 02.12.2014:

The petitioner requested the release of seized documents, arguing that no incriminating materials were found during the search. The court noted that although no bullion or jewelry was seized, certain documents were found and seized, which indicated undisclosed income. The authorities had requested the petitioner to produce additional documents to clarify the transactions, but the petitioner failed to do so.

The court found that the authorities had acted within their powers to retain the documents for further investigation and assessment. The request for the release of documents was therefore denied.

Conclusion:

The court dismissed the writ petition, holding that the search and seizure were conducted based on valid reasons, the notices issued under Sections 153-A, 143(2), and 142(1) were valid, and the retention of seized documents was justified. The petitioner was advised to seek alternative remedies available under the Income Tax Act if they were aggrieved by the assessment order.