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2011 Supreme(All) 328
[2011(3) ADJ 141 (DB)]
ALLAHABAD HIGH COURT
BEFORE : YATINDRA SINGH AND PRAKASH KRISHNA, JJ.
M/s. M.D. OVERSEAS LIMITED ...Petitioner
Versus
DIRECTOR GENERAL OF INCOME-TAX AND OTHERS ...Respondents
(Civil Misc. Writ Petition (Tax) No. 75 of 2010, decided on 4th February, 2011)
Counsel :
Ashish Bansal for the Petitioner; C.S.C. (IT.-Dept), Govind Krishna for the Respondents.
Headnote:Income Tax Act, 1961—Sections 132,127 and 147—Special Economic Zone Act, 2005—Section 22—Evidence Act, 1872—Sections 123 and 124—Authorisation for search—Power and jurisdiction as such—Implication of—If a search under Section 132 is challenged on the ground that information leading to reasons to believe for authorising search war irrelevant whether the Court should look into records and decide it alone, or, disclose the information to the aggrieved person and then adjudicate upon it, after hearing the parties ?—Search cannot be invalidated merely for the reason that it was authorised by DIT (I)—Validity of search is not required to be adjudicated as Section 22 of SEZ Act was not in force—Information that led to belief must be relevant though it may or may not be correct—Even if it is not correct but is bona fide acted upon, then search cannot be invalidated—Petitioner has made out a prima facie case against the search—It is an appropriate case where Department should be asked to indicate the information as well as reasons to believe then after hearing the parties the question of its relevancy should be adjudged—Petitioner has made out a prima facie case for disclosure of information in possession of Department—Petitioner held entitled to know the information in possession of Department or reasons to believe for authorising the search except the source of information—Director of Income Tax (Investigation) had jurisdiction to authorise the search—No necessity to adjudge the validity of search, then subject to privilege under Section 123 or 124 of Evidence Act—Petitioner is entitled to know information in possession of Department or reasons to believe for authorising the search except the source of information. [Paras 21 to 131]
Hon’ble Yatindra Singh, J.—The main question involved at this stage of the case is, if a search under Section 132 of the Income Tax Act, 1961 (the IT Act) is challenged on the ground that information leading to reasons to believe for authorising search was irrelevant then how should this question be resolved? Should the Court,
Look into the records and decide it alone; or
Disclose the information to the aggrieved person and then adjudicate upon it, after hearing the parties?
THE FACTS
2. M/s MD Overseas Limited (the Petitioner) was incorporated as a private company under the Companies Act, 1956 (the Companies Act) on 5.12.1980. It was converted into public limited company on 16.5.1997.
3. The Petitioner carries on business of precious metals namely gold, silver, and platinum. It imports these metals and also purchases them in the domestic market. The metals are then processed and sold abroad as well as in the domestic market.
4. The registered office of the company is at New Delhi. It has 8 branches, situate in seven different states of the country and atleast one warehouse situate at Noida, UP and the other is said to be at Surat, Gujrat though there is no pleading in respect of the same.
5. The warehouse at Noida is situated within special economic zone (SEZ) created under the Special Economic Zone Act (the SEZ Act). In this warehouse imported precious metals are stored and then dispatched for export or domestic sales.
6. Sri Satish Bansal, Sri Vinod Bansal, and Sri Anil Bansal are real brothers. They are directors of the Petitioner company.
7. A search was conducted by the Income Tax Department (the Department) on 15th and 16th September 2009 not only in the offices, branches, and the bonded warehouse of the Petitioner at Noida but also at residences of its directors as well as on some other persons. In all, the search was conducted in ten companies, one firm, and fifteen individuals.
8. According to the Department, the Petitioner is a flagship company; whereas, the firm and the other companies are connected with it. Two individuals are employees in the companies; the rest of them are the directors in the companies or their relations.
9. According to the Department, the search was conducted on the satisfaction note of the Director of the Income-tax (Investigation), Kanpur {the DIT(I)-Kanpur} after getting approval of the Director General of Income-tax (Investigation), North, Lucknow {the DGIT(I)-Lucknow}.
10. The Petitioner filed an application on 7.11.2009 before the DGIT(I)-Lucknow and the DIT(I)-Kanpur requesting them to provide, apart from other papers, the copy of satisfaction note to the petitioner. Neither the satisfaction note was provided nor, any order on the application has been intimated to the petitioner.
11. The petitioner filed the present writ petition challenging the search. It was entertained and time was granted to the parties to exchange the affidavits. The affidavits have been exchanged.
12. Subsequently, the Departmental authorities passed orders centralising the assessment cases of the persons under search at Noida. The Petitioner has filed an amendment application challenging the same.
13. Essentially, the WP and the amendment application,
(i) Challenge the search and seizure action;
(ii) Question the centralisation of assessment case at Noida; and
(iii) Seek a direction for conducting the assessment proceeding at Delhi, in case the answer to the aforesaid questions is in negative.
14. The remaining nine companies, the firm, and the nine individuals (out of fifteen) have also filed writ petitions raising similar points. These petitions are connected with the present one.
15. The search by the Department, is being challenged on the number of grounds. The main ground of challenge is that there was no relevant information that could lead to reasonable belief to authorise the search.
16. The case was taken up on 8.12.2010. On that date, the officials from the Department were present alongwith the
