2005 (9) TMI 37 - HC - Income Tax

Search and Seizure - By filing this writ under article 226/227 of the Constitution of India the petitioner seeks to challenge the retention order passed by respondent No. 1 as also authorisation order issued under Section 132A - stand taken by the Revenue by pointing out some inconsistency in the statement of witnesses and different dates in the currency notes do not in any way give rise for forming a belief for invocation of powers conferred under section 132A ibid by the Revenue against an assessee - petition succeeds and is hereby allowed. Impugned letter followed by the impugned authorisation issued by respondent No. 2 is quashed by a writ of certiorari

Summary

Issues Involved:
1. Legality of the retention order dated April 2, 2003.
2. Legality of the authorization order dated April 7, 2003, under Section 132A of the Income-tax Act.
3. Justification for invoking Section 132A of the Income-tax Act.
4. Adequacy of the petitioner's documentation to explain the source of the seized money.
5. Judicial review of the conditions precedent for invoking Section 132A.

Detailed Analysis:

1. Legality of the retention order dated April 2, 2003:
The petitioner challenged the retention order dated April 2, 2003, wherein the police intercepted a car and seized Rs. 30 lakhs in currency notes. The police informed the Income-tax Department, which directed the Station House Officer not to return the seized amount. The petitioner contended that the money was accounted for and belonged to their company, as evidenced by their books of account and bank certificates.

2. Legality of the authorization order dated April 7, 2003, under Section 132A of the Income-tax Act:
The petitioner also challenged the authorization order dated April 7, 2003, issued under Section 132A, which required the police to hand over the seized amount to the Income-tax Department. The petitioner argued that the conditions for invoking Section 132A were not met, as the money was duly accounted for in their records.

3. Justification for invoking Section 132A of the Income-tax Act:
The respondents justified their actions, claiming they had information and reason to believe that the seized money was not disclosed for tax purposes. They pointed to inconsistencies in the petitioner's statements and the different dates on the currency notes as grounds for their belief.

4. Adequacy of the petitioner's documentation to explain the source of the seized money:
The petitioner provided extensive documentation, including account books, bank certificates, and statements from employees, to demonstrate that the money was withdrawn from their bank account and was needed for business purposes. The court found that these documents sufficiently explained the source of the money and its legitimate purpose.

5. Judicial review of the conditions precedent for invoking Section 132A:
The court reviewed whether the conditions for invoking Section 132A were met. Citing precedents, the court emphasized that while the sufficiency of the information could not be examined, the existence and relevance of the information for forming the belief could be scrutinized. The court concluded that the petitioner had provided adequate material to show the legality of the money, and there was no valid basis for invoking Section 132A.

Conclusion:
The court allowed the writ petition and quashed the retention and authorization orders (annexures P-3 and P-10). It directed the respondents to return the seized amount of Rs. 30 lakhs to the petitioner. The court held that the petitioner had adequately explained the source of the money and that the conditions for invoking Section 132A were not met. The petition was allowed with no costs.