1997 (2) TMI 88 - HC - Income Tax

Legality of gold seizure upheld under Income-tax Act Section 132

The court upheld the legality of the search and seizure of gold under Section 132 of the Income-tax Act, finding that the authorities had sufficient and ... Income Tax Authorities Issues Involved:1. Legality of the search and seizure of gold under Section 132 of the Income-tax Act, 1961.2. Adequacy and relevance of the information leading to the formation of the opinion for search and seizure.3. Compliance with the conditions precedent for the exercise of power under Section 132 of the Income-tax Act.4. Validity of the subsequent material gathered post-seizure.Detailed Analysis:1. Legality of the Search and Seizure of Gold under Section 132 of the Income-tax Act, 1961:The court examined the law pertaining to search and seizure under the Income-tax Act, specifically Section 132. This section empowers authorized officers to search and seize money, bullion, jewelry, or other valuable articles if they have reason to believe that such items represent income or property that has not been disclosed for tax purposes. The court reiterated the principles established by various High Courts and the Supreme Court, emphasizing that the exercise of this power infringes upon the privacy of a citizen and can cause social stigma. Therefore, it is mandatory that the condition precedent-possession of information and reason to believe that the article represents undisclosed income-must be satisfied.2. Adequacy and Relevance of the Information Leading to the Formation of the Opinion for Search and Seizure:The court outlined the necessary conditions for the exercise of power under Section 132, including that the information must be more than mere rumor or gossip, must exist before forming the opinion, and must be actively considered by the authorized person. The opinion must be based on relevant material and formed bona fide without being influenced by extraneous or irrelevant material. The court found that in this case, the authorities had received information from the Police Sub-Inspector, which was corroborated by further inquiries and reports from the Income-tax Authorities (Investigation), Bombay. This information led the authorities to form the opinion that the gold brought in by the petitioners was likely from unaccounted income or would escape assessment under the Act.3. Compliance with the Conditions Precedent for the Exercise of Power under Section 132 of the Income-tax Act:The court scrutinized whether the conditions precedent for invoking Section 132 were met. It was established that the authorities had material before them, including the report by the Police Inspector and statements recorded by the income-tax authorities, which justified the formation of the opinion. The court emphasized that it would not interfere with the opinion formed by the authorities if it was based on relevant material and formed bona fide. The court concluded that the authorities had sufficient material and had properly exercised their powers under Section 132.4. Validity of the Subsequent Material Gathered Post-Seizure:The court clarified that the material gathered after the issuance of the order under Section 132 is not relevant for determining the validity of the initial order. The focus should be on the material available at the time the order was made. In this case, the court found that the authorities had sufficient material before them when they formed the opinion and issued the order for search and seizure. The court dismissed the petitions, ruling that the authorities had acted within their powers and the search and seizure were justified.Conclusion:The court upheld the legality of the search and seizure of gold, finding that the income-tax authorities had sufficient and relevant information to form the opinion required under Section 132 of the Income-tax Act. The conditions precedent for the exercise of power were met, and the subsequent material gathered post-seizure was deemed irrelevant for the initial order's validity. The petitions were dismissed, and the petitioners were ordered to pay costs to the respondents.