2025 (3) TMI 1002 - HC - Income Tax

Petition to Compel Income Tax Investigation Denied; No Legal Basis Found Without Formal Process

Mr. Dhamodaran Versus The Principal Chief Commissioner of Income Tax, The Commissioner of Income Tax, The Principal Director of Income Tax (Investigation Wind), The Additional Director of Income Tax (Investigation Wing), The Inspector of Police and Mr. Srinivasan

The HC dismissed the petitioner's request for a Writ of Mandamus to compel the Income Tax Department to investigate a third party's financial status based ... Writ of Mandamus directing the respondents/Income Tax Department to invoke a detailed investigation based on representation made - one Srinivasan, (who was an ex-employee of the petitioner) has lodged a complaint alleging that the petitioner owes a sum of Rs.5 crores to him, which, according to the petitioner, is utter fallacious, as the said Srinivasan does not even had a source of income to pay such huge amount to the petitioner HELD THAT:- The said Srinivasan does not even had a source of income to pay such huge amount to the petitioner, therefore, in this regard, he made a representation to the respondent-Income Tax Department to find out the source of income of the said Srinivasan, whether he is an income tax assessee; whether he is filing any return of income; whether he is capable of having such huge amount with him, such other informations. Thus, this Writ Petition is nothing but an attempt made by the petitioner to collect information from the respondent-Income Tax Department as regards the source of income of the sixth respondent, which, cannot be considered by this Court. If it is the grievance of the petitioner that the said Srinivasan had lodged a false complaint against the petitioner and that, the said Srinivasan cannot afford to give such huge sum of money to the petitioner, it is for the respondent-Police Department to act upon based on such complaint made by the sixth respondent and if the respondent-Police finds such complaint to be genuine and files any chargesheet and passes any final orders, only in such case, the respondent-Income Tax Department may come to the rescue of the petitioner to find out the source of income of the sixth respondent. Thus, as rightly pointed out respondent-Income Tax Department, unless and until any chargesheet is filed and final orders is passed based on the complaint lodged by the sixth respondent, the respondent-Income Tax Department would not come to the rescue of the petitioner to find out the source of income of the sixth respondent, in the absence of the same, the respondent-Income Tax Department cannot be expected to act upon based on such complaint. WP dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal issue considered by the Court was whether a Writ of Mandamus should be issued directing the respondents, particularly the Income Tax Department, to investigate the source of income of a third party based on the petitioner's representation. The petitioner sought this direction following a complaint lodged against him by a third party, alleging a financial claim.ISSUE-WISE DETAILED ANALYSISRelevant legal framework and precedents: The petitioner sought relief through a Writ of Mandamus, which is a judicial remedy in the form of an order from a court to any government, subordinate court, corporation, or public authority to do some specific act which that body is obliged under law to do. The Court considered whether the circumstances warranted such an order.Court's interpretation and reasoning: The Court interpreted the petitioner's request as an attempt to compel the Income Tax Department to undertake an investigation into the financial affairs of a third party based solely on the petitioner's representation. The Court noted that the petitioner's grievance stemmed from a complaint lodged by a former employee, Srinivasan, who claimed a financial debt from the petitioner. The petitioner questioned Srinivasan's financial capacity to lend such a sum and sought the Income Tax Department's intervention to verify Srinivasan's financial status.Key evidence and findings: The Court reviewed the petitioner's representation and the submissions from both parties. The petitioner alleged that the complaint against him was baseless and that Srinivasan lacked the financial capacity to lend the claimed amount. The respondents argued that the Income Tax Department could not act on such representations without a formal process, such as a police investigation resulting in a charge sheet.Application of law to facts: The Court applied the principles governing the issuance of a Writ of Mandamus, emphasizing that such a writ is not issued merely on the basis of allegations or representations without substantial legal grounds or procedural prerequisites, such as a formal complaint or charge sheet by the police.Treatment of competing arguments: The Court considered the petitioner's argument that the Income Tax Department should investigate Srinivasan's financial status. However, it found the respondents' position more compelling, noting that the Income Tax Department requires a formal basis, such as a charge sheet, to initiate such investigations. The Court agreed with the respondents that the petitioner's request was premature and lacked merit.Conclusions: The Court concluded that in the absence of a charge sheet or formal legal proceedings initiated by the police, the Income Tax Department could not be compelled to investigate Srinivasan's financial affairs based on the petitioner's representation. The Court found no legal basis to issue the Writ of Mandamus as requested by the petitioner.SIGNIFICANT HOLDINGSThe Court held that the issuance of a Writ of Mandamus requires a clear legal duty and a corresponding failure to perform such duty, which was not demonstrated in this case. The Court emphasized that the Income Tax Department's role is not to act on individual representations without a formal legal basis. The Court stated, 'unless and until any chargesheet is filed and final orders are passed based on the complaint lodged by the sixth respondent, the respondent-Income Tax Department would not come to the rescue of the petitioner to find out the source of income of the sixth respondent.' This holding underscores the principle that administrative bodies require formal procedural triggers to initiate investigations.The final determination was the dismissal of the Writ Petition as devoid of merit, with the Court declining to issue any direction to the respondents. The Court did not award costs, reflecting its view that the petition lacked substantive legal grounds.