2016 (7) TMI 939 - HC - Income Tax

Court dismisses writ petition challenging tax survey legality, summons validity, and natural justice violations.

M/s. Advantage Strategic Consulting Pvt. Ltd. Versus Union of India, The Joint Director of Income Tax (Inv), The Deputy Director of Income Tax (Inv)

The court dismissed the petitioner's writ petition challenging the legality of a survey conducted under Section 133A of the Income Tax Act, the validity ... Non-furnishing of the statements - whether survey conducted by the officers under Section 133A of the Act in the business premises of the petitioner and the residences of the Director is illegal ? - Held that:- It is not in dispute that none of the persons, who have given statements as mentioned above, have approached this Court for furnishing the copies of the statements. The petitioner, the company represented by one of its Directors, who has not given a statements, now seeks for copies of the statements given by the other persons. In such factual scenario, the petitioner has no vested right at this juncture to insist upon copies of such statements. The plea that all those individuals are connected with the company and the company is being targeted, is hardly a ground to accede to the prayer made by the petitioner. Further, the plea that even if the other persons, who have given the statements, are not entitled to look into the statements given by others, but the petitioner is entitled to look into those statements is a flawed submission, especially when, investigation is going on and each individual has given statements. Therefore, acceding to the prayer sought for by the petitioner would definitely hamper the investigation. The survey was conducted in various places and the residences of the other Directors/Employees/Consultant etc., and those persons have not joined the petitioner in seeking such a prayer. That apart, if the prayer sought for is to be considered, it would result in interdicting an investigation process. What the petitioner seeks to indirectly achieved is to injunct a summon, which cannot be done, that too in exercise of jurisdiction under Article 226 of the Constitution. The plea of malafides has not been specifically pleaded or established, mere use of the expression is not sufficient. It is evident that till date the investigation is yet to be completed and their statements are yet to be used against any persons much less the company. In the light of the above, this Court is of the view that the prayer sought for cannot be granted for the reasons set out in the preceding paragraphs, as it would amount to interference of an investigation and injuncting a summon procedure. Issues Involved:1. Legality of the survey conducted under Section 133A of the Income Tax Act.2. Validity of summons issued under Section 131 of the Income Tax Act.3. Violation of principles of natural justice due to non-provision of sworn statements.4. Jurisdiction of the officers issuing the summons.5. Interference with ongoing investigation.Issue-wise Detailed Analysis:1. Legality of the survey conducted under Section 133A of the Income Tax Act:The petitioner, a private limited company, sought a writ of declaration to declare the survey conducted by the Income Tax Department on 01.12.2015 and 02.12.2015 at its business premises and the residences of its Directors as illegal, malafide, and ultra vires the Income Tax Act. The petitioner contended that the survey was not bona fide and amounted to an abuse of power. However, the court found that the petitioner did not provide sufficient evidence to support the claim of malafides, and mere use of the expression was not sufficient. The court concluded that the prayer sought by the petitioner could not be granted as it would interfere with an ongoing investigation.2. Validity of summons issued under Section 131 of the Income Tax Act:The petitioner challenged the summons issued under Section 131 of the Income Tax Act, arguing that the officers issuing the summons were not the Assessing Officers of the Directors and Consultant, and hence, the summons were without jurisdiction. The court, however, did not find merit in this argument, noting that the investigation was ongoing and the summons were part of the procedural steps in the investigation. The court emphasized that interfering with the summons procedure would amount to obstructing the investigation process.3. Violation of principles of natural justice due to non-provision of sworn statements:The petitioner argued that the refusal to provide copies of the sworn statements made by its Directors and Consultant violated the principles of natural justice. The court noted that the petitioner and the individuals who made the statements had requested copies of these statements. The respondent department indicated that the statements would be provided when they were proposed to be used as evidence against the company or its Directors or employees. The court found that the petitioner had no vested right at this stage to insist upon copies of such statements, especially since the investigation was still in process. The court concluded that providing the statements at this juncture would hamper the investigation.4. Jurisdiction of the officers issuing the summons:The petitioner contended that the officers issuing the summons were not the Assessing Officers of the Directors and Consultant, and there were no assessment proceedings pending before these officers. The court found that the investigation was against individuals connected with the company, and all notices issued contained the same file number, indicating that the company was the target. The court held that the petitioner’s argument regarding jurisdiction was not sufficient to invalidate the summons, as it would interfere with the investigation process.5. Interference with ongoing investigation:The court emphasized that granting the petitioner’s prayer would result in interfering with the ongoing investigation. The court cited that the relief sought would effectively injunct a summon, which is not permissible under Article 226 of the Constitution. The court also referred to the decision in Dr.K.Nedunchezhian vs. The Deputy Commissioner of Income-Tax, where it was held that courts should be slow to interfere in taxation matters and that the remedy under Article 226 cannot be invoked to impede an investigation.Conclusion:The court concluded that the petitioner’s writ petition could not be granted as it would amount to interference with an ongoing investigation and injuncting a summon procedure. The court dismissed the writ petition and the connected miscellaneous petition, with no costs.