2023 (11) TMI 654 - HC - Income Tax

IT authorities wrongly invoked Section 132(3) instead of Section 132(1) for prohibiting liquor bottle removal from residence

Dilip Mehta, S/O Dhiraj Lal Mehta, Priyank Mehta, S/O Dilip Mehta Versus Income Tax Department, Deputy Director, Income Tax Department (Investigation), Bhopal (M. P.).

Dilip Mehta, S/O Dhiraj Lal Mehta, Priyank Mehta, S/O Dilip Mehta Versus Income Tax Department, Deputy Director, Income Tax Department (Investigation), ... Issues Involved:1. Whether the invocation of Section 132(3) of the Income Tax Act by the authorities was justified.2. Whether liquor can be considered a 'valuable article' under Section 132 of the Income Tax Act.3. Whether the Revenue authorities' actions constituted a colorable exercise of power.Summary:Issue 1: Invocation of Section 132(3) of the Income Tax ActThe petitioners challenged the order dated 29.09.2023, which prohibited them from removing liquor bottles from a cupboard without prior permission from IT Authorities, arguing that Section 132(3) was improperly invoked. They contended that the situation warranted action under Section 132(1) instead. The Revenue justified the order by stating that the liquor bottles could not be seized without Excise Authorities' permission, thus necessitating the use of Section 132(3).Issue 2: Liquor as a 'Valuable Article'The court examined whether liquor qualifies as a 'valuable article' under Section 132. The term 'valuable article' is not explicitly defined in the Income Tax Act but is understood to include items with market value. The court concluded that liquor, having market value, falls within the definition of a 'valuable article.'Issue 3: Colorable Exercise of PowerThe court found that the Revenue's invocation of Section 132(3) was a colorable exercise of power. The circumstances were suitable for applying Section 132(1), which includes comprehensive provisions for search and seizure. The court cited the case of B.K. Nowlakha, emphasizing that restraint orders should not circumvent the provisions of Section 132(1) and that practical difficulties must exist to justify using Section 132(3).Conclusion:The court set aside the impugned order dated 29.09.2023, allowing the petitioners' challenge. The Revenue was granted liberty to invoke the appropriate provisions if advised. Additionally, the court imposed a cost of Rs. 10,000 on the Revenue, with Rs. 5,000 to be paid to the petitioners and the remaining Rs. 5,000 to the Madhya Pradesh State Legal Services Authority, to be forwarded to the Permanent Artificial Organ Transplantation Centre, Jabalpur. Compliance was required within 60 days, failing which the matter would be listed for execution of the cost order.