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TMI Blog2024 (10) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... appreciation' which are filed by the petitioners. 3. In order to run the cotton ginning mills smoothly, the petitioners are required to frequently purchase cotton produce from the farmers. In procuring the cotton from the farmers, the petitioners make payments in cash which is due to the area or location in which the petitioners operate. Such rural areas are lacking necessary infrastructure including fully developed banking and internet facilities. In particular, the areas in which the petitioners operate are located in proximity to Maharashtra and in these areas, transactions are predominantly made through cash mode of payment. The reliance is placed on document provided by bank management which shows limits have been placed on the quantum of cash which can be kept in the bank chest i.e., upto Rs. 13,00,000/-. In this event, the petitioners are often required to make request in advance for withdrawal of large cash amount to enable the bank to arrange for the disbursal and transport of cash. If the cash which is beyond the limit of amount available in the concerned bank is required, the said branch needs to get the cash transported via van services of the bank from Mancherial bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and seizure exercise. The respondents had no reasons to believe that the cash amounts were unaccounted and the petitioners will not deposit tax in due course. 8. The antecedents of the petitioners were evinced from various returns filed over last several years and that background nowhere suggests that the petitioners would not disclose either whole or partly about the income. The exercise of seizure is based on mere suspicion and there is no direct correlation between the existence of information or material and the opinion formed by the authorities before authorising any seizure under the Act. The emphasis is laid on words "reasons to believe" used under Section 132 (1) of the Act to bolster the submission that this expression has a definite meaning and cannot be used based on mere suspicion. In absence of any incriminating material available prior to the seizure of the cash amount shows complete non-application of mind by the respondents. 9. The next limb of argument is that the alleged inability to provide explanation regarding the cash amount does not satisfy the condition precedent under Section 132 (1) authorising search and seizure. The respondents have illegally conducte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xures P.15 and P.16) prayed for returning the cash, but the respondents failed to complete their exercise within the statutory time limit. Thus, they are bound to return the said amount. The petitioners are even ready to furnish appropriate bank guarantee so that interest of the Department will be protected, and at the same time, the petitioners will be able to run their business. Stand of the Revenue:- 14. Ms. K. Mamatha, learned counsel for the Revenue, supported the impugned action and by taking this Court to sub-sections of Section 132 of the Act submitted that the Revenue has ample power to undertake search and seizure. The seizure has taken place inconsonance with statutory mandate. It is submitted that the respondents in the counter are not expected to spell out the actual reasons which formed basis for search, instead, the respondents are obliged to give that confidential information in a sealed cover to this Court. Confidentiality and sensitivity are hallmarks of proceedings under Sections 132 and 132-A of the Act. To buttress, this contention, reliance is placed on the Finance Bill, 2017, which ultimately became part of statute book. As per the amendment which took plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosed income or property)," (Emphasis Supplied) 17. The plain language of the Sub-section (1) of Section 132 shows that the competent authority must be equipped with information or in other words, the information must be in his possession on the strength of which he had reason to believe that the conditions mentioned in clauses a, b and c of Sub-section (1) may exist. The language of statute is plain and unambiguous. Thus, it must be given effect to irrespective of consequences {see Nelson Motis vs. Union of India AIR 1992 SC 1981}. 18. Learned counsel for both sides relied on various judgments wherein the expression 'reason to believe' has been considered and also the requirement and character of information which became subject-matter of judicial pronouncements. 19. The Apex Court, way back in Vindhya Metal Corpn. (supra), held that the scrutiny should be on the information in possession of the Commissioner in order to see whether a reasonable person could have entertained a belief that amount in possession of the assessee would not have been disclosed by him for the purposes of the Act. 20. In the case of Spacewood Furnishers (P) Ltd. (supra), the Apex Court culled out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation must be in possession of the Authorized official on the basis of the material and that the formation of opinion must be honest and bona fide. It cannot be merely pretence. Consideration of any extraneous or irrelevant material would vitiate the belief/satisfaction; iii) The authority must have information in its possession on the basis of which a reasonable belief can be founded that the person concerned has omitted or failed to produce books of accounts or other documents for production of which summons or notice had been issued, or such person will not produce such books of accounts or other documents even if summons or notice is issued to him; or iv) Such person is in possession of any money, bullion, jewellery or other valuable article which represents either wholly or partly income or property which has not been or would not be disclosed; v) Such reasons may have to be placed before the High Court in the event of a challenge to formation of the belief of the competent authority in which event the Court would be entitled to examine the reasons for the formation of the belief, though not the sufficiency or adequacy thereof. In other words, the Court will examine w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... never be revealed unless search seizure operation is carried out. 25. In catena of judgments, the Apex Court opined that "reasons to believe" cannot be equated with "reasons to suspect". Thus, the competent authority must be equipped with some cogent incriminating material prior to the seizure on the strength of which a satisfaction can be recorded. The said satisfaction neither can be tested on suspicion nor can be justified on the basis of unexplained possession of amount. In the instant case, we are constrained to observe that satisfaction note is based on suspicion and is not pregnant with any cogent incriminating material which can form basis for an action under Section 132 of the Act {see Indian Oil Corpn. v. ITO (1986) 3 SCC 409, Pasari Casting & Rolling Mills (P) Ltd. v. ITD 2024 SCC OnLine Jhar 451, Anita Sahai v. Director of Income-Tax (Investigation) 2004 SCC OnlLine All 1769 and M/S Coronation Agro Industries Ltd. v. Deputy Commissioner of Income Tax Circle 2016 SCC OnLine Bom 15175}. 26. We will be failing in our duty if the Division Bench judgment cited by the learned counsel for the respondents is not considered. In W.P. No. 11667 of 2021, the interference was decl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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