2005 (3) TMI 34 - HC - Income Tax

Court dismisses writ petition, finds firm non-genuine, upholds search legality. Procedural requirements met, jurisdiction lacking.

Babu Lal And Others Versus Director Of Income-Tax (Investigation) And Others.

Babu Lal And Others Versus Director Of Income-Tax (Investigation) And Others. - [2006] 281 ITR 70, 198 CTR 274, 147 TAXMANN 318 Issues Involved:1. Validity of the warrant of authorization issued under Section 132 of the Income-tax Act, 1961.2. Legitimacy of the petitioner's claim for refund of Rs. 3,06,00,000.3. Existence and genuineness of the petitioner-partnership firm.4. Compliance with procedural requirements under the Income-tax Act.5. The jurisdiction of the court to quash the warrant of authorization and the panchnama.Issue-wise Detailed Analysis:1. Validity of the Warrant of Authorization:The court examined whether the search and seizure were conducted in accordance with the provisions of the Income-tax Act. Section 132(1) authorizes search and seizure if there is 'reason to believe' that a person possesses undisclosed income. The court cited several precedents, including *M. Ct. Muthiah v. CIT* and *ITO v. Lakhmani Mewal Das*, emphasizing that the belief must be based on definite information. The court found that the Director of Income-tax (Investigation) had sufficient material to form a reasonable belief that warranted the search and seizure under Section 132(1). The court concluded that the search and seizure were conducted lawfully and in compliance with statutory provisions.2. Legitimacy of the Petitioner's Claim for Refund:The petitioner sought a refund of Rs. 3,06,00,000, claiming that the amount belonged to the firm. However, the court noted discrepancies in the petitioner's claims. The court found that the CDRs/banker cheques were deposited by individuals who were not genuine partners of the firm. The court also observed that the actual investors were different individuals who had been assessed under Chapter XIV-B of the Act. Since the petitioner's firm was found to be non-existent, the claim for a refund was deemed illegitimate.3. Existence and Genuineness of the Petitioner-Partnership Firm:The court scrutinized the partnership deed, which stated that the firm would come into existence only upon obtaining a liquor license. Since no such license was granted, the court concluded that the firm never came into existence. The court further noted that the alleged partners were not genuine, as they could not be located or identified in government records. The court held that the petitioner-firm was not a genuine entity and thus could not maintain the writ petition.4. Compliance with Procedural Requirements:The court examined whether the procedural requirements under the Income-tax Act were followed. The court found that the warrant of authorization was issued based on sufficient material and in compliance with the statutory provisions. The court also noted that the petitioner did not file the copy of the authorization dated March 15, 1999, and instead sought quashing of the panchnama, which is not permissible in law. The court held that the procedural requirements were met, and the petitioner's claims of procedural defects were unfounded.5. Jurisdiction of the Court to Quash the Warrant of Authorization and the Panchnama:The court emphasized that it could not quash an order that was not produced before it. Since the petitioner did not file the warrant of authorization along with the pleadings, the court could not quash it. The court also noted that the panchnama, which the petitioner sought to quash, is not subject to writ jurisdiction. The court concluded that it had no jurisdiction to quash the warrant of authorization or the panchnama in the absence of the impugned order.Conclusion:The court dismissed the writ petition, holding that the petitioner-firm was not a genuine entity and that the search and seizure were conducted lawfully. The court found no grounds to grant the reliefs sought by the petitioner and directed that the amount involved be refunded to the Revenue. The interim order directing the amount to be kept in a fixed deposit was vacated.