2019 (6) TMI 52 - HC - Income Tax

Validity of Search and seizure proceedings - petitioner has contended that powers u/s 131(1) can be invoked only if the proceedings are pending which is countered by the respondents with reference to Section 131(1A) - HELD THAT - If power u/s 131(1) is held to be exercisable at any time and at any stage proceeding or no proceeding pending or not pending instituted or not instituted and regardless of whether there is or there is not reason to believe it may as well result in mischief and/or likely abuse and/or arbitrariness. A completed assessment is a valuable right. It cannot be lightly ignored nor can it at the mere whim of the officer be put into jeopardy. To permit such a course would be akin to permitting entry into the penumbra so speculative uncertainty. For reopening an assessment the Act sets down stringent conditions. The same must first be fulfilled before issuing summons to the assessee. A request simpliciter to the assessee to assist without anything more and without any consequence in default may stand upon an altogether different footing than a summons u/s 131(1) with penalty in default of compliance therewith. Such however is not the case here. Similarly we are in agreement with the argument of the learned counsel for the petitioner that provisions of Section 131(1) could be invoked only if some proceedings were pending. In the instant case there was only a survey operation and no proceedings were pending at that point of time. But the income-tax authority exercised the powers of a court in the absence of any pending proceedings. This issue was determined by a Division Bench of Patna High Court in Rina Sen v. Commissioner of Income-Tax and others 1998 (8) TMI 76 - PATNA HIGH COURT To our minds the income-tax authority violated the procedure completely. Nowhere was any satisfaction recorded either of noncooperation of the petitioner or a suspicion that income has been concealed by the petitioner warranting resort to the process of search and seizure. No hesitation to conclude that the present petition deserves to succeed. The impugned action of the respondents is quashed.

Issues Involved:
1. Legality of the search and seizure process.
2. Compliance with Section 131 and Section 133A of the Income Tax Act, 1961.
3. Validity of the summons issued.
4. Alleged non-cooperation by the petitioner.
5. Requirement of recording satisfaction for converting survey into search and seizure.

Issue-Wise Detailed Analysis:

1. Legality of the Search and Seizure Process:
The petitioner challenged the search and seizure conducted by the respondents from 06.09.2016 to 08.09.2016, arguing it was impermissible by law. The petitioner claimed that the search and seizure were conducted under the guise of a survey operation as indicated by the summons under Section 131 of the Income Tax Act, 1961. The petitioner alleged that the procedure was converted into search and seizure without legal basis, violating Sections 133A (3) and (4) of the Act. The court noted that the respondents failed to provide any material evidence indicating non-cooperation from the petitioner or his employees, which would justify such conversion.

2. Compliance with Section 131 and Section 133A of the Income Tax Act, 1961:
Section 131(1) confers certain powers on income tax authorities, akin to those of a court under the Code of Civil Procedure, including discovery, inspection, enforcing attendance, and compelling production of documents. The respondents also relied on Section 131(1A), which allows the exercise of these powers if there is a reason to suspect concealed income. However, the court emphasized that the officials must record their reasons for suspicion to invoke these powers. The court found no such recorded reasons in the respondents' actions, thus deeming the conversion from survey to search and seizure unjustified.

3. Validity of the Summons Issued:
The court scrutinized the summons issued under Section 131 of the Act, which was vague and did not specify the information required from the petitioner. The language of the summons failed to apprise the petitioner of what was required at the time of attending the office. The court found this ambiguity problematic, as the summons did not meet the necessary legal standards. The court cited precedents where similar summonses were quashed due to their vague nature.

4. Alleged Non-Cooperation by the Petitioner:
The petitioner asserted complete cooperation with the respondents, including disclosing cash of ?2,09,89,090/- and providing necessary documents and keys. The respondents failed to disprove this claim or provide evidence of non-cooperation. The court highlighted that the respondents' mere denial without substantive proof was insufficient to justify their actions.

5. Requirement of Recording Satisfaction for Converting Survey into Search and Seizure:
The court emphasized the necessity of recording satisfaction when converting a survey into a search and seizure operation, as mandated by Section 133A. The income tax authority must record reasons for impounding documents or converting the survey into a seizure, especially in cases of non-cooperation or suspicion of concealed income. The court found no such recorded satisfaction in the respondents' actions, deeming it a fatal flaw in their procedure.

Conclusion:
The court concluded that the respondents' actions were legally unsustainable due to non-compliance with procedural requirements and the absence of recorded reasons for converting the survey into a search and seizure. The summons issued was vague, and there was no evidence of non-cooperation from the petitioner. Consequently, the court quashed the impugned actions of the respondents, granting consequential benefits to the petitioner.

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