Search authorisation and disclosure: prima facie challenge can trigger reasons to believe, excluding source, before relevancy is decided.

Section 120 jurisdiction could extend search authorisation under section 132 throughout India, so the Kanpur Director's authorisation was not invalid merely for territorial reasons. Prior approval under section 22 of the Special Economic Zones Act, 2005 could not vitiate the search because that provision was not in force on the search date. On disclosure, where a prima facie case is shown, the affected party may seek the material or reasons to believe supporting the search, excluding the source of information, and relevancy must be considered only after hearing both sides unless valid privilege is established.

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Issues: (i) Whether the Director of Income-tax (Investigation), Kanpur had jurisdiction to authorise the search; (ii) whether the search could be invalidated for want of prior approval under section 22 of the Special Economic Zones Act, 2005; (iii) whether, where a prima facie case is made out, the petitioner is entitled to be informed of the information or reasons to believe for authorising the search and have the question of relevancy decided after hearing it.

Issue (i): Whether the Director of Income-tax (Investigation), Kanpur had jurisdiction to authorise the search.

Analysis: The jurisdictional directions issued under section 120 of the Income-tax Act, 1961 empowered the concerned Director to exercise search powers under section 132 throughout India, even though his ordinary territorial functions were otherwise limited. The petitioner also had a warehouse and business activity at Noida, within the relevant territorial area. The authorisation could not be faulted merely because it was issued by the Kanpur authority.

Conclusion: The issue was answered against the petitioner and in favour of the Revenue.

Issue (ii): Whether the search could be invalidated for want of prior approval under section 22 of the Special Economic Zones Act, 2005.

Analysis: Section 22 places restrictions on search and seizure in an SEZ, but it was not in force on the date of the search. Since the provision had not yet been enforced, its requirements could not govern the legality of the search in question.

Conclusion: The issue was answered against the petitioner and in favour of the Revenue.

Issue (iii): Whether, where a prima facie case is made out, the petitioner is entitled to be informed of the information or reasons to believe for authorising the search and have the question of relevancy decided after hearing it.

Analysis: The search power under section 132 must rest on information leading to a relevant belief, and the validity of that basis cannot be assessed in the abstract. The Right to Information Act did not apply to the investigation organisation, and the source of information was protected; however, the content or nature of the information and the reasons to believe, excluding the source, were not barred from disclosure in an appropriate case. Applying principles of fairness and natural justice, the Court held that if a prima facie case is shown, the petitioner must be told the material or reasons to believe, and the question of relevancy must be decided only after hearing the petitioner.

Conclusion: The issue was answered in favour of the petitioner.

Final Conclusion: The search was not invalidated at this stage, but the petitioner succeeded on the disclosure question and was entitled, upon making out a prima facie case, to know the material or reasons to believe excluding the source, so that relevancy could be adjudicated after hearing both sides.

Ratio Decidendi: Where a search under section 132 is challenged and the petitioner makes out a prima facie case, the Court may require disclosure of the contents or nature of the information and the reasons to believe, excluding the source, and decide relevancy only after hearing the affected party, unless valid privilege is established.

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