Section 132A review is confined to relevant material, and seized cash cannot be retained beyond statutory tax consequences.
Judicial review of a section 132A authorisation is limited to checking whether the record shows relevant material and a rational nexus for the belief recorded; it does not permit reassessment of the sufficiency of information as on appeal. On the facts, the authority had material supporting the warrant, so the authorisation stood. The court also held that seized cash could not be retained indefinitely beyond the statutory tax consequence attached to undisclosed income under the block assessment scheme. Since the respondents could not justify holding the entire amount, partial release of the balance was directed, while taxability remained open before the income-tax authorities.
Issues: (i) Whether the warrant of authorisation issued under section 132A of the Income-tax Act, 1961 was without jurisdiction for want of material and reason to believe. (ii) Whether the authorities could retain the entire seized cash when the statutory scheme treated undisclosed income as chargeable only to the extent contemplated by section 113 and the related block assessment provisions.
Issue (i): Whether the warrant of authorisation issued under section 132A of the Income-tax Act, 1961 was without jurisdiction for want of material and reason to believe.
Analysis: The expression "reason to believe" requires definable material and cannot rest on mere rumour or suspicion. At the same time, the court's review under article 226 is limited to examining whether the authorisation was arbitrary, mala fide, or unsupported by relevant material, and not to reassess the sufficiency of the information like an appellate forum. On scrutiny of the original record, the authority had before it material having a rational nexus with the belief required for action under section 132A.
Conclusion: The warrant of authorisation was held to be within jurisdiction and was not struck down.
Issue (ii): Whether the authorities could retain the entire seized cash when the statutory scheme treated undisclosed income as chargeable only to the extent contemplated by section 113 and the related block assessment provisions.
Analysis: The court noticed the statutory framework introduced for block assessment and the charging provision making the undisclosed income of the block period taxable at sixty per cent. In the peculiar facts, the respondents failed to justify retention of the full amount of Rs. 9,80,000/- when, at the highest, only a tax consequence to the extent contemplated by the statute could arise. The balance amount, therefore, could not be withheld indefinitely against the petitioners' entitlement to have the amount released subject to their rights to contest taxability before the income-tax authorities.
Conclusion: The petitioners were entitled to release of Rs. 3,92,000/-, being the balance forty per cent of the seized cash.
Final Conclusion: The challenge to the section 132A authorisation failed, but the court granted partial relief by directing release of the balance amount, leaving the tax authorities free to proceed in accordance with law on the question of undisclosed income.
Ratio Decidendi: Judicial review of an authorisation under section 132A is confined to the existence of relevant material and a rational nexus to the belief recorded, and seized cash cannot be retained beyond the statutory tax consequence without lawful justification.
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