TaxTMI 
TaxTMI 
2026 (3) TMI 1235
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....nding counsel for Income Tax, appearing for respondent No. 6 and Sri Anup Koushik Karavadi, learned standing counsel for Income Tax, appearing for respondent No.7. 2. The present writ petition has been filed under Article 226 of the Constitution of India, challenging the summons to the petitioner/assessee under Section 131(1A) of the Income Tax Act, 1961 (in short 'IT Act'), dated 14.11.2025 issued by the 5th respondent-the Income Tax Officer (Investigation), Income Tax Department, Vijayawada. 3. By the said summons, the petitioner has been directed to give evidence and / or to produce either personally or through an authorized representative the books of account or other documents as specified in the said summons, which are reproduced herein below, on 18.11.2025 and in case of intentional omission to attend and give evidence or produce the books of account or documents, to impose the penalty under Section 272 A (1) (c) of the IT Act. "a) Nature of activity and sources for income. b) Books of accounts for the period from 01.04.2019 to till date. c) Statement of all the bank accounts in your name for the period from 01.04.2019 to till date. ....
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....provision conferred to statutory authority, upon the investigation wing, to call for information and enforce attendance during the course of investigation. 6. The Income Tax Officer (Investigation) further clarified that the details of reasons, source of information, line of inquiry and scope of ongoing investigation were confidential in nature and were not required to be disclosed to the assessee or any other person while the investigation was in progress. Even under the Right to Information Act, vide Section 8(1)(h) the Investigation Directorate of Income Tax was exempted to disclose any information relating to ongoing investigation and the disclosure of any such information at that stage would defeat the very purpose of investigation and might prejudice the proceedings. It was further clarified that the scope, methodology and source of investigation fell exclusively within the domain of the investigation Directorate and were governed by internal procedures and confidentiality norms. The assessee was legally bound to comply with the summons by furnishing the information / documents and by attending as directed. By the said reply dated 16.12.2025, the petitioner / assessee was ....
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....ining the permission to issue summons. He also deposed that the petitioner submitted copy of acknowledgment of Income Tax Returns for FY 2019-20 to 2024-25 via e-mail dated 27.11.2025 and the same were duly recorded. He submitted that request of the investigating officer for submission of the documents is part of enquiry as it pertains to the verification of declared income against the assets, within the scope of Section 131(1A) of IT Act and so, the allegation of misuse of statutory powers, the arbitrariness in issuance of the summons is baseless. The 7th respondent submitted that he was not aware of regarding any property dispute between the petitioner and the defendants in the suit and any such dispute has no relevance or connection for the issuance of summons which were issued as per the procedure under the Income Tax Act. 10. The petitioner filed replies to the counters of the respondents 4, 5, 6 & 7, reiterating the contents of the writ petition. 11. The challenge to the summons / notice under Section 131(1A) of the Income Tax Act dated 14.11.2025 is mainly on the ground of mala fide. 12. Sri K. S. Murthy, learned senior counsel, advanced the arguments before us that....
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....s, learned counsel for the petitioner submitted that the summons deserved to be quashed and no proceedings pursuant thereto could be carried forward any further. He submitted that the issuance of the summons is vitiated for colorable exercise of power by the statutory authorities. 17. Sri K. S. Murthy, learned senior counsel placed reliance in the following judgments: 1) Pankaj Bansal v. Union of India 2023 SCC OnLine SC 1244. 2) Naseem Bano (Smt) v. State of U.P. 1994 SCC (L&S) 31. 3) Ishverlal J.Naik v. Sri S. C. Arya 1983 SCC OnLine Bom 163. 4) Skyview Consultants Pvt. Ltd. v. Income Tax Officer Ward 23(4), New Delhi 2018 SCC OnLine Del 10212. 5) Pawan Kumar Garg v. Union of India 2024 SCC OnLine Gau 852. 18. Sri Challa Dhanunjay, learned Assistant Solicitor General submitted that the respondents have filed counter affidavit and in paragraph - 4 of the counter affidavit of the 5th respondent, it has clearly been mentioned that an anonymous Tax Evasion Petition (TEP) against the petitioner and his family members was received in the office of the Principal Director of Income Tax (Investigation), Hyderabad on 12.11.2025 and a....
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....ity to issue the summons but it has been orally argued that he is not authorized under Section 131(1A) of IT Act, for the first time during arguments, though the procedure was followed in issuing the summons. 20. Sri Challa Dhanunjay, learned Assistant Solicitor General, further submitted that the place of mala fide and colourable exercise of power if unsustainable and is not established. The same is being raised without any factual foundation and for the first time in the writ petition without making any such averment in the petitioner's reply submitted before the Income Tax Authorities. The same is afterthought and only for the purposes of the present writ petition. 21. Sri Y. N. Vivekananda and Sri Praveen Kumar Reddy, learned standing counsels for the Income Tax have adopted the submissions advanced by the learned Additional Solicitor General. 22. Learned counsel for the respondents placed reliance in the following judgments: 1) Principal Director of Income Tax (Investigation) v. Laljibhai Kanjibhai Mandalia 2022 SCC OnLine SC 872. 2) N. K. Jewellers v. Commissioner of Income Tax, New Delhi 2017 SCC OnLine SC 1251. 23. We have considered the afores....
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.... no mention of even the letter sent to the Chairperson of Central Board of Direct Taxes. Further, the summons / notice is dated 14.11.2025 and the TEP is dated 12.11.2025 whereas the ad interim temporary injunction was granted in the suit on 22.04.2025. So the notice has been issued after many months of the suit and the interim order, which has neither any proximity nor any connection to the suit proceedings. We are of the view that there is force in the submission of the learned Assistant Solicitor General and the argument/plea of the learned counsel for the petitioner of mala fide has no legs to stand, based on the material annexed with the writ petition. 25. As per the counter affidavit of the respondents the action has been taken as per the procedure on receipt of anonymous Tax Evasion Petition (TEP) against the petitioner. It was received on 12.11.2025. At this stage, we may mention that in the counter, the 5th respondent mentioned about TEP and the SOP. But did not annex the copy thereof. The petitioner filed I.A. No. 3 of 2026 to direct the respondent authorities to produce the documents i.e., anonymous Tax Evasion Petition (TEP) and the Standard Operating Procedure (SOP)....
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....r order must establish the charge of bad faith, an abuse or a misuse by the authority of its powers. While the indirect motive or purpose, or bad faith or personal ill will is not to be held established except on clear proof thereof, it is obviously difficult to establish the state of a man's mind, for that is what the employee has to establish in this case, though this may sometimes be done. The difficulty is not lessened when one has to establish that a person apparently acting on the legitimate exercise of power has, in fact, been acting mala fide in the sense of pursuing an illegitimate aim. It is not the law that mala fides in the sense of improper motive should be established only by direct evidence. But it must be discernible from the order impugned or must be shown from the established surrounding factors which preceded the order. If bad faith would vitiate the order, the same can, in our opinion, be deduced as a reasonable and inescapable inference from proved facts. (S. Pratap Singh v. State of Punjab [(1964) 4 SCR 733 : AIR 1964 SC 72].) It cannot be overlooked that the burden of establishing mala fides is very heavy on the person who alleges it. The allegations of m....
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....aterials placed on record to conclude that the action has been taken mala fide or for a collateral purpose or in colourable exercise of power. But, in our opinion, issuance of preliminary notification after a decree by a court of law would not ipso facto make it vulnerable and exercise of power mala fide. To us, therefore, the authorities were right in raising a preliminary objection that the petition was premature as by issuance of notification under sub-section (1) of Section 28 of the Act, an intention was declared by the State to acquire the land for public purpose i.e. for developing industry." 30. In Mudappa (supra), the Hon'ble Apex Court observed and held that the High Court was not right in coming to the conclusion that since a decree was passed by a competent court, no notification under the Act could have been issued by the State. The power exercised by the State was statutory in nature and irrespective of a decree in favour of the owners, such notification could be issued. The Hon'ble Apex Court referring to its previous judgments explained the concept of legal mala fide and observed that 'legal malice' or 'malice in law' means something done without lawful excuse. I....
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....one wrongfully and wilfully without reasonable or probable cause, and not necessarily an act done from ill feeling and spite. It is a deliberate act in disregard of the rights of others.' " It was observed that where malice was attributed to the State, it could not be a case of malice in fact, or personal ill-will or spite on the part of the State. It could only be malice in law i.e. legal mala fide. The State, if it wishes to acquire land, could exercise its power bona fide for statutory purpose and for none other. It was observed that it was only because of the decree passed in favour of the owner that the proceedings for acquisition were necessary and hence, notification was issued. Such an action could not be held mala fide." 32. Recently, in State of Rajasthan v. Sharwan Kumar Kumawat (2023) 20 SCC 747 on the point of legal malice the Hon'ble Apex Court held that the basis of a judgment can be removed and that a decision of the Court cannot be treated like a statute, particularly, when power is available to act and it is accordingly exercised in public interest, and in view thereof, there was no legal malice in the amendments made in the statute. 33. Paragraph N....
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....ion is issued, opportunity of being heard is afforded to the persons interested in the land and only thereafter final notification can be issued. At the stage of raising objections against acquisition, it is open to the respondents herein to raise all contentions. In spite of such objections, if final notification is issued by the State, it is open to them to take appropriate proceedings or to invoke jurisdiction of the High Court under Article 226 of the Constitution. Unfortunately, however, the High Court entertained the petition and quashed the preliminary notification overruling well-founded objection as to maintainability of petition raised by the State and the appellants herein." 34. In view of the aforesaid judgments and the principles settled on the point of legal malice, mala fide we are of the view that the authority i.e., Income Tax Officer (Investigation) issued summons/notices in the exercise of power under Section 131(1A) of the Income Tax Act. Such exercise is statutory. The facts as pleaded, for the reasons (supra), that the present respondents impleaded by name as also by designation are not party in the suit nor the petitioner is party in the suit, the interim ....
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....e point of colourable exercise of power or mala fides or malice, laying down that when the power is conferred to achieve a purpose that power must be exercised reasonably and in good faith to effectuate the purpose and when the power is exercised for extraneous or irrelevant considerations or reasons, the exercise of power is a colourable exercise of power or fraud on power which vitiate the action. 38. There cannot be any dispute on the proposition of law as in Pankaj Bansal (supra) that the action is bad where the true object is to reach an end different from the one for which the power is entrusted, goaded by extraneous considerations, good or bad. When the custodian of power is influenced in its exercise by considerations outside those for promotion of which the power is vested, it is called a colourable exercise of power. The fraud on power voids the order if it is not exercised bona fide for the end designed, is also not a proposition in dispute. But, in the present case, the question is of the applicability of the principle. We have already observed in the earlier part of this judgment that the power has been exercised under the statutory provisions of the IT Act under Se....
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....diction in the Income Tax Officer (Investigation) to issue summons/notice. It has also not been pleaded that the Income Tax Officer (Investigation) was not authorized under Section 131(1A) r/w. Section 132 of the IT Act. A plea of want of jurisdiction certainly can be raised at any stage but it has to be raised. Such a plea has not been raised in the writ petition and at the time of arguments, the other side cannot be taken by surprise, by raising an argument not born from the record/pleadings on factual aspect. The ground No.2 in the writ petition is not 'lack of jurisdiction' but relates to the exercise of jurisdiction emphasizing the ground of malice / mala fide due to O.S. No. 608 of 2025. 43. So far as the other judgment relied upon by the learned counsels for both the sides is concerned, we consider as follows: i. In Laljibhai Kanjibhai Mandalia (supra) on which the reliance was placed by the learned counsel for the respondents, the Hon'ble Apex Court reiterated the principles in exercising the writ jurisdiction in the matter of search and seizure under Section 132 of the Income Tax Act. However in the present case, the stage of search and seizure under Section 13....