2004 (9) TMI 13 - HC - Income Tax

Court upholds search legality under Income-tax Act sections 132(1) and 133A(1)

Takshila Educational Society Versus Director Of Income-Tax (Investigation) And Others.

The court dismissed the writ application, upholding the legality of the search and seizure operations conducted under sections 132(1) and 133A(1) of the ... Applicability of section 132(1)(a),(b) and (c) - Writ application under article 226 of Constitution of India challenging the actions of the respondents in issuing warrants as bad and mala fide and seeking relief for quashing the search and seizure - Justifying the action taken under section 132(1)(a) and issuing warrants of authorisation, it is submitted by revenue that after receiving certain informations, the respondents proposed to conduct a preliminary inquiry, therefore, they issued a notice 132(1) and 133A(1) - held that the present case falls within the purview of clauses (b) and (c). We have already observed that non-recovery of articles would not unjustify the search. The order of authorisation and the search is to be justified on the material available with the Department and the reasons which led to the belief of the authority. We are of the opinion that the petitioner has failed to make out a case for interference under article 226 of the Constitution of India rather the respondents-revenue have proved to hold that they had sufficient reasons to proceed in the matter. Issues Involved:1. Legality of the search and seizure operations under sections 132(1) and 133A(1) of the Income-tax Act, 1961.2. Allegations of malice and mala fides in the issuance of warrants.3. Compliance with the procedural requirements under section 132 of the Act.4. Sufficiency and disclosure of the reasons to believe for the search.5. Allegations of personal bias against respondent No. 2.Detailed Analysis:1. Legality of the Search and Seizure Operations:The petitioner, M/s. Takshila Educational Society, challenged the search and seizure operations conducted on May 8, 2003, at various locations, arguing that the actions were illegal and motivated by malice. The respondents justified the actions under section 132(1)(a) of the Act, stating that they had received certain information warranting a preliminary inquiry. The court noted that the Director of Income-tax (Investigation), Patna, had recorded his satisfaction and issued the warrants based on detailed investigations and reports from the Deputy Director and Additional Director of Income-tax (Investigation).2. Allegations of Malice and Mala Fides:The petitioner alleged that the search was motivated by personal vendetta from respondent No. 2, who had previously sought admission for his son in the petitioner's school and was denied. The court examined the procedural steps and found that the satisfaction for issuing the warrants was recorded by the Director (Investigation) after reviewing reports from the Deputy Director and Additional Director, thus negating the claim of personal vendetta. The court held that the actions were not actuated by malice or mala fides.3. Compliance with Procedural Requirements:The court emphasized that the power to search and seize under section 132 must be exercised strictly in accordance with the law. The respondents produced the original records and reports, which showed that the satisfaction for the search was recorded based on substantial material collected during the investigation. The court found that the procedural requirements under section 132 were met, and the actions were justified.4. Sufficiency and Disclosure of Reasons to Believe:The petitioner argued that the reasons to believe were not disclosed to them, and the search was based on insufficient information. The court held that the reasons to believe are to be recorded on the administrative side and need not be disclosed to the petitioner. The court reviewed the confidential documents and found that the reasons recorded by the authorities were sufficient and justified the search. The court stated that disclosing such information could hamper the investigation.5. Allegations of Personal Bias:The petitioner alleged personal bias against respondent No. 2, claiming that the search was conducted to settle a personal score. The court found no evidence of bias, noting that the principal of the school did not report any threats or intimidation from respondent No. 2 until much later. The court held that the allegations of bias were not substantiated and dismissed them.Conclusion:The court dismissed the writ application, holding that the respondents had sufficient reasons to believe that the petitioner was not disclosing their income and were justified in issuing the search warrants. The actions were found to be in compliance with the procedural requirements of the Income-tax Act, and the allegations of malice and bias were not substantiated. The court emphasized that the reasons to believe need not be disclosed to the petitioner, and the search was conducted in good faith based on substantial material.