AI Drafter 
TaxTMI 
TaxTMI 
2016 (12) TMI 1195
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....er within the State of Orissa, due to sharp decline in the iron ore export market, the turnover of Liberty Marine has gradually decreased over time and accordingly the tax paid by the Liberty Marine has also drastically reduced. The Income Tax Department conducted a survey U/s.133-A of the Income Tax Act at the registered office premises of the Liberty Marine on 11.09.2014 at Paradip and taking the Law in their own hands the survey and search was conducted on 12.09.2014, no undisclosed assets or income have been found in course of search and seizure, but in spite of these aspects of the matter a notice U/s.153-A of the Income Tax Act for the Assessment years 2009-10 to 2014-15 (Annexure-4) has been issued against the petitioner - company which is impugned in this writ petition on the ground that the notice impugned has been issued without following the pre-conditions of Section 132(1)(a), (b) or (c) of the Income Tax Act, no notice has been issued U/s.131(1)(a) of the Income Tax Act, 1961 (herein after referred to as the Act, 1961) before proceeding with search authorization U/s.132 of the Act, 1961, the authorities have conducted the search U/s.132 without any rhyme and reason ....
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.... being quoted hereunder as:- "132 Search and seizure.. (1) Where the [Principal Director General or] Director General or [Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or r....
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....rised officer the necessary facility to inspect such books of account or other documents; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business; (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing : [Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, but such [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner has no jurisdiction over the person referred to in clause (a) or clause....
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....missioner may, notwithstanding anything contained in section 120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.] (2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (1) or sub-section (1A) and it shall be the duty of every such officer to comply with such requisition. (3) The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned in the second proviso to sub-section (1), serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub-section. Explanation.-For the removal of doubts, it is hereby declared that serving of an order as....
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....etaining the same are recorded by him in writing and the approval of the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or Director General or [Principal Director or] Director for such retention is obtained : Provided that the [Principal Chief Commissioner or] Chief Commissioner, [Principal Commissioner or] Commissioner, [Principal Director General or] Director General or [Principal Director or] Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed. (8A) An order under sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order. (9) The person from whose custody any books of account or other documents are seized under sub-section (1) or sub-section (1A) may make copies thereof, or take extracts therefrom, in the presence of the authorised officer or any other person empowered by him in t....
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....e same meaning as assigned to it in Explanation 2 to section 158BE. Explanation 2.-In this section, the word "proceeding" means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year." Section 132 confers power upon the authorities for search and seizure. The provision stipulates power upon the authorities who must have information in his possession and it is he who must have reasons to believe, it is, however, not the commissioner who does the actual search and seizure. This is left to the person whom he authorizes to carry out the search. It follows, therefore, that the seizure of books of account, documents, money, bullion, jewellery or other valuable articles would be dependent on the person so authorized being of the opinion that the same would be useful in any income tax proceeding. Therefore, the inspecting officers cannot seize documents, etc, by themselves bu....
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....Deputy Director, or the authorised officer referred to in sub-section (1) of section 132 before he takes action under clauses (i) to (v) of that subsection,] has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons, within his jurisdiction, then, for the purposes of making any enquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-section (1) on the income-tax authorities referred to in that sub-section, notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other income-tax authority." This provision confers power upon the competent authority that if there is reason to suspect that any income has been concealed, or is likely to be concealed by any person or class of persons within his jurisdiction, then, for the purposes for making any inquiry or investigation relating thereto, it shall be competent to exercise powers conferred under sub-section (1) on the income tax authorities referred to in that sub-section, notwithstanding that no proceeding with respect to such person or class of persons are....
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....unrise and before sunset. [(2A) Without prejudice to the provisions of sub-section (1), an income-tax authority acting under this sub-section may for the purpose of verifying that tax has been deducted or collected at source in accordance with the provisions under sub-heading B of Chapter XVII or under sub-heading BB of Chapter XVII, as the case may be, enter, after sunrise and before sunset, any office, or any other place where business or profession is carried on, within the limits of the area assigned to him, or any place in respect of which he is authorised for the purposes of this section by such income-tax authority who is assigned the area within which such place is situated, where books of account or documents are kept and require the deductor or the collector or any other person who may at that time and place be attending in any manner to such work,- (i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place, and (ii) to furnish such information as he may require in relation to such matter.] (3) An income-tax authority acting under this section m....
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....thority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income-tax authority shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement made : Provided that no action under sub-section (1) shall be taken by an Assistant Director or a Deputy Director or an Assessing Officer or a Tax Recovery Officer or an Inspector of Income-tax without obtaining the approval of the Joint Director or the Joint Commissioner, as the case may be. Explanation.-In this section,- (a) "income-tax authority" means a [Principal Commissioner or] Commissioner, a Joint Commissioner, a [Principal Director or] Director, a Joint Director, an Assistant Director or a Deputy Director or an Assessing Officer, or a Tax Recovery Officer, and for the purposes of clause (i) of sub-section (1), clause (i) of sub-section (3) and sub-section (5), includes an Inspector of Income-tax; (b) "proceeding" means any proceeding under this Act in respect of any year which may b....
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....bate: Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to subsection (1), shall stand revived with effect from the date of receipt of the order of such annulment by the [Principal Commissioner or] Commissioner: Provided that such revival shall cease to have effect, if such order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared tha....
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....ed in 1985(155) ITR 166 (SC). We, after going through the statutory provisions as well as the authoritative pronouncements as referred herein above, have found that before taking decision for search and seizure as contemplated under the provision of Sec.132 or 133-A of the I.T. Act, 1961 it is the bounden duty of the competent authority to be satisfied before invoking the said jurisdiction and its is also the cardinal principle of Law that no action be taken without any justified reason and if the action is without any reason, the said action will be said to be unjustified and an arbitrary exercise of authority in complete mis-utilization of the official position. The grounds or reasons which lead to the formation of the belief must have a material bearing on the question of concealment of income by the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income Tax Officer to form the above belief, that would be sufficient to clothe him to invoke the jurisdiction of section 132 of the Act. Whether the grounds are adequate or not is not a matter for the court to investigate. The....
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.... loss or has not under-paid the tax in any manner, shall serve on the assessee a notice requiring him, on a date to be specified therein. While section 142(1) contains provision of making an assessment after the return having been filed U/s.139. It is evident from the notice dtd.30.9.2016 that after filing of return the authorities have exercised their power conferred U/s.142(1) and 143(2) of the Act by issuing a notice for compliance of the provision contained therein, but not responded by the assessee. It further transpires that an exercise has been taken by the authorities as contemplated U/s.132 of the Income Tax Act, 1961 and accordingly search and seizure was conducted on 11.09.2014 and on subsequent dates in the residential as well as business premises of the petitioner - company, survey operation U/s.133-A of the Income Tax Act, 1961 were also carried out at various places of Kolkata and Paradip, in view of the decision taken by the authorities U/s.127 of the Income Tax Act, 1961. The main thrust of argument of learned counsel for the petitioner that there should not be any exercise in routine manner by the authorities by exercising jurisdiction U/s.132 since it....
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....an Income Tax Act, 1922, or the Act, 1961, the authorities can initiate proceeding U/s.132 of the Act, 1961. In the instant case notice U/s.142(1) of the Act, 1961 has been given and thereafter U/s.143(2) but the assessee - petitioner has failed to comply the same which led the competent authority to invoke the jurisdiction of Section 132 of the Act, 1961. Learned counsel for the petitioners submits that in absence of any reason which led the authority to resort to the provision of Section 132 of the Act, 1961, the notices U/s.153-A is not tenable in the eye of law. We have examined this argument in the light of the statutory provision as well as the authoritative pronouncements in this regard by the Hon'ble Apex Court as referred to above and have found that the competent authority can resort to, if he is of the opinion that the assessee is flouting the provision of the Income Tax Act and if in that situation he comes to conclusion that it is necessary to resort to the provision of Section 132, then it cannot be said that there was no reason behind resorting to the provision of Section 132 of the Act, 1961, moreover, the initiation of proceeding U/s.132 has never been que....
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....ion 132 of the Act and as such, the assessee will be prejudiced but we are of the considered view that if an authority is taking recourse on the basis of the material come in consequence of the result of the provision of Section 132, the Assessing Officer is required to assess the income on the basis of facts as found and the requirement of allowing the assessee an opportunity of explaining the material is necessary and the same has been provided to the assess by issuing notice under Section 153(A) of the Act and as such it cannot be said that the Assessing Officer while exercising the jurisdiction U/s.153-A will act with ulterior motive. In this regard reference may be made to the judgment rendered by Hon'ble Apex Court in the case of H.C. Narayanappa Vrs. State of Mysore, reported in AIR 1960 SC 1073 wherein the Hon'ble Apex Court has been pleased to observe as follows:- "It is also true that the Government on whom the duty to decide the dispute rests, is substantially a party to the dispute but if the Government or the authority to whom the power is delegated acts judicially in approving or modifying the scheme, the approval or modification is not open to challenge on a....