2021 (12) TMI 104 - HC - Income Tax

Court quashes FIR against government officers protected under Income Tax Act, citing statutory violations

The Court allowed the writ petition, quashing the FIR dated 28.02.2017 in Crime No.52 of 2017 and all further proceedings. The petitioners, government ... Search and seizure proceedings initiated u/s 132 - a diary that was found during the search were seized recordings of various transactions with abbreviations and amounts against each of the abbreviations - disclosure of information in respect of an assessee as per sec 138 - Police Notice issued by the 3rd respondent directing the 1st petitioner [Director General of Income-Tax (Investigation)] to hand over the diary that was seized during the raid conducted on the residence of the complainant - proceedings in FIR in Crime notice issued under Section 91 of the Cr.P.C - police want to secure from the petitioners is the diary for investigation of the allegations of offences by invoking Section 91 of the Cr.P.C., thereby summoning the diary - HELD THAT:- As on a conjoint reading of Sections 132 and 138(2) of the Act, would lead to an unmistakable conclusion that once such seizure proceedings are undertaken by the officials of the Department under authorisation, they are not obliged to furnish any document to any public servant in respect of such matters relating to the assessee against whom search and seizure is taken up. Section 293 of the Act mandates a bar of institution of suits in civil Courts. The entire lis that is now generated between the parties is required to be considered on the touchstone of the aforesaid provisions of the Act. Search and seizure proceedings were initiated against the 2nd respondent/complainant, who is a Member of the Legislative Assembly of the State of Karnataka. The search and seizure proceedings led to seizing of several documents, incriminating materials and a particular diary. The petitioners were empowered to conduct search and seizure of the said documents under Section 132(4) of the Act. Section 132(4-A) also deals with, where any books of accounts, other documents, money, bullion, jewellery or other valuable articles are found in the possession or control of any person in the course of search it is presumed that they belong to the assessee. Therefore, those incriminating documents including the diary were seized by the respondents during search. Section 138 of the Act, deals with disclosure of information in respect of assesses. What the Police wanted was also the diary, which was allegedly seized during the raid. This notice under Section 91 of Cr.P.C., was replied by one of the petitioners on 20-04-2017, clearly indicating that no proceedings can be instituted against the petitioners and not even a notice seeking documents can be issued as confidentiality of such documents is provided under Section 138 of the Act. The Police did not stop at this, but issued another communication on 20-06-2017, directing one of the petitioners to disclose the names and addresses of persons of the Department, who had accompanied the petitioners during search and seizure. Since the communication referred to the FIR for the aforesaid offences, the petitioners immediately replied seeking a copy of the FIR and thereafter, have filed this writ petition challenging the aforesaid action. Admittedly, search and seizure is performed by the petitioners under the Act. The bar of divulging any information or any document taken into custody during the seizure is available under Section 138(2) of the Act. In the teeth of the said provision in the Act, the notice issued by the Police, on the face of it, would be contrary to law. The notice that the Police issued on 13.04.2017, is on the strength of the FIR for the alleged offences as aforesaid. Since the notice emanates pursuant to registration of the FIR, the registration of the FIR itself was bad in law, as recording of FIR against the petitioners, who are officers of Government and have performed certain acts of search and seizure under Section 132 of the Act, cannot be brought to prosecution particularly, for the offences alleged in the FIR. The complaint ought not to have been entertained by the 3rd respondent/Police and registration of FIR ought not to have been done in the light of the aforesaid provisions of the Act. What the complainant wants in the complaint is, the diary and what the Police want to secure from the petitioners is the diary and no other document is required by the Police for investigation of the allegations of offences, which run into 15 in number, but only the diary. It cannot but be held that the 3rd respondent was acting at the behest of the complainant to secure the diary by invoking Section 91 of the Cr.P.C., thereby summoning the diary. Since the FIR could not have been registered against the petitioners in view of the specific bar under Section 293 of the Act, the aftermath of such registration would be rendered without authority of law. What the Police want to investigate is the act of search and seizure done by the petitioners, communication and police notice that are sent to the petitioners. Therefore, it cannot be urged by the learned senior counsel that the FIR names nobody and the writ petition would not be maintainable. This submission deserves to be rejected and is rejected. As per PARMESHWARI DEVI SULTANIA AND OTHERS [1998 (3) TMI 3 - SUPREME COURT] held that the trial Court and the High Court were not correct in rejecting the contention of the revenue and holding that the suit was not barred under Section 293 of the Act. The purport of Section 293 of the Act, is considered in its affirmation. Therefore, the proceedings initiated is rendered unsustainable in view of Section 293 of the Act and the subsequent Police Notice seeking the diary alone is rendered flawed and any further proceedings taken thereto by the 3rd respondent against the petitioners are all rendered unsustainable. Issues Involved:1. Legality of the FIR registration against the petitioners.2. Validity of the Police Notice under Section 91 of the Cr.P.C.3. Applicability of Section 293 of the Income Tax Act.4. Confidentiality of documents under Section 138 of the Income Tax Act.Detailed Analysis:1. Legality of the FIR Registration Against the Petitioners:The petitioners challenged the proceedings in FIR dated 28.02.2017 in Crime No.52 of 2017. The FIR was registered based on a complaint alleging gross violation of procedure during a search and seizure operation conducted by the Income Tax Department. The complainant accused the petitioners of several offences under the IPC, including Sections 218, 193, 199, 182, 341, 406, 409, 457, 380, 466, 471, 472, 166-A read with Sections 34, 109, and 120-B. The Court noted that the FIR was against unknown persons and unknown Government officials. The petitioners contended that the FIR could not have been registered against them as they were performing official duties under Section 132 of the Income Tax Act and were protected under Section 293 of the Act. The Court held that the registration of the FIR itself was bad in law since the petitioners, as government officers performing their duties under Section 132, could not be prosecuted for the alleged offences.2. Validity of the Police Notice Under Section 91 of the Cr.P.C.:The Police Notice dated 13.04.2017, issued under Section 91 of the Cr.P.C., directed the petitioners to hand over the diary seized during the raid. The petitioners argued that Section 91 of the Cr.P.C. could not override the provisions of Sections 132, 138, or 293 of the Income Tax Act. The Court found that the notice was issued on the strength of the FIR, which was itself unsustainable. Therefore, the notice under Section 91 of the Cr.P.C. was also rendered contrary to law. The Court emphasized that the police's demand for the diary alone, without any other documents, indicated an ulterior motive.3. Applicability of Section 293 of the Income Tax Act:Section 293 of the Income Tax Act bars the institution of suits in civil courts and prosecutions against government officers for acts done in good faith under the Act. The Court noted that the petitioners conducted the search and seizure under Section 132 of the Act and were protected by Section 293. The Court referred to the Supreme Court's judgment in CIT v. Parmeshwari Devi Sultania, which affirmed the broad scope of Section 293, barring suits that indirectly seek to set aside or modify proceedings under the Act. Consequently, the Court held that the FIR and subsequent police actions were unsustainable under Section 293.4. Confidentiality of Documents Under Section 138 of the Income Tax Act:Section 138 of the Income Tax Act deals with the disclosure of information respecting assessees. Subsection (2) begins with a non-obstante clause, stating that no information or document shall be furnished or produced by a public servant except to specified authorities. The Court concluded that the petitioners were not obliged to furnish the diary or any other documents seized during the search, as confidentiality was mandated under Section 138(2). The police's demand for the diary was, therefore, in violation of this provision.Conclusion:The Court allowed the writ petition, quashing the FIR dated 28.02.2017 in Crime No.52 of 2017 and all further proceedings pursuant thereto. The petitioners were entitled to all consequential benefits from the order. The judgment emphasized the protection afforded to government officers under Sections 132, 138, and 293 of the Income Tax Act, and the illegality of police actions that contravened these provisions.