2019 (7) TMI 1502 - HC - Income Tax

Disclosure of reasons to belief for conducting search u/s 132 - impact of insertion of Explanation to Section 132(1) by the FA, 2017 with retrospective effect - assessment u/s 153A - Revenue points out that while discussing the satisfaction note in the judgment 2018 (12) TMI 292 - DELHI HIGH COURT and that the reproduction of the said reason to believe recorded in the satisfaction note, may not be consistent with the above Explanation - HELD THAT - It appears that the purport of the said Explanation is against a disclosure of what may be contained in a file to any person, authority or Appellate Tribunal. However, the High Court is precluded from seeing the note or discussing it in a judgment where there is a challenge to the search itself. It is clarified that although in paragraph 16 of the judgment, a portion of the note may have been reproduced, this will not be treated as a precedent for a Petitioner in a future case challenging a search to insist that the contents of the note should be reproduced in the order/judgment.

Summary

Issues:
1. Interpretation of the Explanation to Section 132(1) of the Income Tax Act, 1961 regarding disclosure of 'reason to believe'.
2. Whether the High Court can discuss the contents of a note related to a search when there is a challenge to the search itself.

Analysis:

Issue 1: Interpretation of Explanation to Section 132(1) of the Income Tax Act
The Revenue filed applications based on the Explanation to Section 132(1) of the Income Tax Act, 1961, introduced by the Finance Act, 2017 with retrospective effect from 1st April, 1962. The Explanation prohibits the disclosure of the 'reason to believe' recorded by the income-tax authority. The Revenue contended that the reproduction of the 'reason to believe' in a judgment dated 30th November, 2018, may not align with this Explanation. The High Court noted that the Explanation aims to prevent the disclosure of such information to any person, authority, or Appellate Tribunal. The court clarified that while a portion of the note may have been reproduced in a previous judgment, it should not set a precedent for future cases where Petitioners challenge a search and insist on reproducing the note's contents in the order or judgment.

Issue 2: High Court's Authority to Discuss Note Contents in Search Challenges
The High Court addressed the issue of its authority to review and discuss the contents of a note related to a search when there is a challenge to the search itself. The court emphasized that it is precluded from examining or discussing the note in a judgment concerning a search challenge. The court clarified that even if a portion of the note had been reproduced in a previous judgment, it does not grant Petitioners the right to demand the reproduction of note contents in future cases challenging searches. The court's decision in this case signifies that discussing the contents of such notes in judgments is not permissible when the search is under challenge.

In conclusion, the High Court disposed of the applications filed by the Revenue, emphasizing the importance of upholding the Explanation to Section 132(1) of the Income Tax Act, 1961 and clarifying the limitations on discussing note contents in judgments related to search challenges.