2020 (3) TMI 690 - HC - Income Tax

Court upholds legality of notice & actions under Income Tax Act for bank employees' cooperative society. Valid search reasons.

The I.N.B.E.C. Cooperative Urban (S.E.) Thrift And Credit Society Ltd. Versus Union of India And Others

The I.N.B.E.C. Cooperative Urban (S.E.) Thrift And Credit Society Ltd. Versus Union of India And Others - TMI Issues:Challenge to notice under Section 131 of the Income Tax Act and legality of action under Sections 132 of the Act.Analysis:The petitioner, a cooperative society of bank employees, challenged a notice issued under Section 131 of the Income Tax Act and the legality of the respondent's action under Sections 132 of the Act. The petitioner contended that as a cooperative society, its income falls under Section 80 (P) (2) of the Act, and hence, it had not filed returns. However, a survey was conducted, and the Authorised Officer issued the impugned notice under Section 131 and proceeded to seize the accounts of the petitioner. The petitioner argued that there were no reasons to believe that income was concealed, and the money could not have been seized. The counsel was referred to a Supreme Court judgment emphasizing the necessity of recording reasons to ensure accountability and responsibility in decision-making processes. The High Court was criticized for detailing the satisfaction note containing reasons prematurely, potentially giving an undue advantage to the assessee. The reasons recorded at the time of converting the survey into a search were found to be existent and not arbitrary.The Senior Counsel for the petitioner argued that the action subsequent to the search operation showed arbitrariness. However, the Court noted that the prayers in the writ petition did not include this argument and thus rejected it. Another contention raised was regarding the form of the seized money, which was in the form of a bank deposit rather than cash. The Court suggested that the money could be returned to the petitioner upon providing adequate surety for any potential liability. The petitioner agreed to furnish a bank guarantee for the seized amount, and upon doing so, the revenue was directed to refund the amount along with accrued interest.In conclusion, the Court directed the petitioner to provide a bank guarantee for the seized amount, and upon compliance, the revenue was ordered to refund the money to the petitioner.