KAMLESHBHAI RAJNIKANT SHAH vs. DEPUTY DIRECTOR OF INCOME TAX, SURAT

Facts

The writ applicant, Kamleshbhai Rajnikant Shah, challenged a Warrant of Authorization dated 30/10/2018 issued under Section 132A(1) of the Income Tax Act, 1961. This warrant requisitioned Rs. 2,45,50,000/- seized by the Songadh Police from two persons of Angadiya Courier Service. The applicant claimed the cash was his business earnings from selling agricultural products, collected between April 1, 2018, and August 28, 2018, and was being sent from Nagpur to Ahmedabad via courier. The police seized the cash during a routine check. The applicant applied for its release before the Magistrate, and subsequently, the Income Tax Department filed an application to have the cash handed over to them, citing the Section 132A warrant. The Magistrate allowed the IT department's application and rejected the applicant's. The applicant's revision application before the Sessions Court was pending with a stay.

Held

The High Court held that it should not interfere in the matter and found no palpable error or gross illegality in the issuance of the Warrant of Authorization under Section 132A(1) of the Income Tax Act. The Court noted the principles deducible from various Supreme Court decisions regarding the formation of belief by an authorized official, emphasizing that the authority must have information leading to a reasonable belief that the person is in possession of undisclosed income or property, and there must be an application of mind to the material. The Court found the respondent's affidavit-in-reply convincing, highlighting the writ applicant's inconsistent statements and failure to provide satisfactory documentation regarding the cash. The applicant's counsel emphasized the need to pay farmers and the applicant's goodwill, but the Court was not inclined to delve into goodwill. The Court inquired about the applicant's willingness to furnish a bank guarantee for the seized amount, which the applicant found difficult. Consequently, the Court rejected the writ application.

Key Issues

1. Whether the Warrant of Authorization dated 30/10/2018 issued by the respondent Income Tax Department under Section 132A(1) of the Income Tax Act, 1961, is liable to be quashed and set aside. Assessee's Contention: The applicant argued that the warrant was illegal and arbitrary. He contended that he had provided satisfactory explanations and documents, including a cash book certified by a Chartered Accountant, to the Income Tax Department regarding the cash amount. He also pointed out that the warrant was issued two months after the seizure and his initial application for release, suggesting a delay and potential arbitrariness. He relied on his business dealings and past cash balances shown in his balance sheets to establish the legitimacy of the funds. Revenue's Contention: The respondent Income Tax Department, through its affidavit-in-reply, indicated that the writ applicant's initial declarations were inconsistent. The applicant allegedly withdrew amounts from his and his wife's bank accounts and from his cash book. However, he declined to submit details for his wife's account and requested more time for other documents. The department found the information provided unconvincing and the applicant's statements contradictory. The department's satisfaction for issuing the warrant was based on this lack of convincing evidence and inconsistencies.