Candour in writ jurisdiction and bank-account restraint for undisclosed income upheld under income-tax search powers.

A writ petitioner who suppresses material facts and gives inconsistent disclosure is not entitled to discretionary relief under Article 226. The Delhi HC found that the petitioners failed to disclose their links with the searched person and the beneficial ownership pattern in bank records, which defeated their claim to equitable relief. The Court also held that Section 132 of the Income-tax Act is wide enough to cover money in bank accounts, including third-party accounts, where there is reason to believe it represents undisclosed income; restraint and remittance directions under Sections 132(3) and 132B were therefore upheld, and the writ challenge failed.

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Issues: (i) Whether the petitioners suppressed material facts and were therefore disentitled to discretionary relief under Article 226 of the Constitution of India; (ii) Whether the Department could, in the course of search and restraint proceedings under the Income-tax Act, 1961, freeze the bank accounts and direct remittance of the balances on the footing that they represented undisclosed income.

Issue (i): Whether the petitioners suppressed material facts and were therefore disentitled to discretionary relief under Article 226 of the Constitution of India.

Analysis: The writ petitions were filed without full disclosure of the petitioners' links with the searched person and the beneficial ownership pattern reflected in the bank records. The Court found that the petitioners had taken inconsistent stands, omitted material facts, and failed to answer serious assertions made in the counter-affidavits. Such conduct was held to be incompatible with the obligation of candour expected from a litigant invoking writ jurisdiction.

Conclusion: The petitioners were held to have suppressed material facts and were not entitled to equitable relief.

Issue (ii): Whether the Department could, in the course of search and restraint proceedings under the Income-tax Act, 1961, freeze the bank accounts and direct remittance of the balances on the footing that they represented undisclosed income.

Analysis: The Court held that Section 132(1) of the Income-tax Act, 1961 is wide enough to cover money lying in bank accounts where there is reason to believe that it represents undisclosed income, even if parked in the accounts of third parties. The restraint under Section 132(3) and the consequential directions under Section 132B were treated as permissible in the facts of the case, with the bank balances being regarded as subject to search and seizure and not immune merely because they stood in bank accounts. The Court also noted that the Department had, at least prima facie, shown that the balances were linked to the searched person and that the petitioners had not made out a prima facie case.

Conclusion: The Department's action was upheld and the challenge to the restraint and remittance directions failed.

Final Conclusion: The writ petitions were dismissed, interim protection was vacated, costs were imposed, and the Court directed initiation of proceedings for false affidavits and suppression of material facts.

Ratio Decidendi: Money lying in bank accounts may be searched and restrained under Section 132 of the Income-tax Act, 1961 where there is reason to believe it represents undisclosed income, and a writ petitioner who suppresses material facts and approaches the Court without candour is not entitled to discretionary relief.

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