Kaveri Seed Company Limited and another vs. Principal Director of Income Tax and 3 others

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WP/28120/2019HC TelanganaHBHC01052204201907 April 2026Bench: P.SAM KOSHY,NARSING RAO NANDIKONDA6 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court noted that the learned counsel for the petitioners prayed for withdrawal of the writ petition. The ground for withdrawal was that the petitioners intended to appear before the concerned authority and ventilate their grievance on its own merits. The petitioners reserved their right to approach the court again if the situation warranted at a later stage. Consequently, the writ petition was dismissed as withdrawn with the liberty granted. The court also stated that there would be no order as to costs and that any pending miscellaneous petitions would stand closed. The court did not decide on the merits of the issues raised regarding the validity of the search and seizure proceedings or the assessment notice.

What were the facts?

The petitioners, Kaveri Seed Company Limited and its Managing Director, Mr. C. Mithun Chand, filed a writ petition before the High Court of Telangana. They challenged the "reasons to believe" recorded by the Principal Director of Income Tax (Investigation) and Additional Director of Income Tax (Investigation) under Section 132(1) of the Income Tax Act, 1961. They also challenged the search warrants issued on January 3, 2018, and January 8, 2018, and the subsequent searches conducted on their premises. The petitioners sought to quash a notice dated December 12, 2019, issued under Section 142(1) for assessment year 2018-19, and to restrain the respondents from using material collected during the search for assessment purposes. An interim order was passed on December 18, 2019, staying proceedings.

What were the issues?

1. Whether the "reasons to believe" recorded by the revenue authorities under Section 132(1) of the Income Tax Act, 1961, were arbitrary, illegal, without jurisdiction, mala fide, and for collateral purposes. 2. Whether the warrants of authorization dated January 3, 2018, and January 8, 2018, issued by the revenue authorities were arbitrary, without jurisdiction, and illegal, and if the consequent searches were also arbitrary, without jurisdiction, and illegal. 3. Whether the notice dated December 12, 2019, issued under Section 142(1) of the Income Tax Act, 1961, for assessment year 2018-19, should be quashed and assessment proceedings stayed. Assessee's Contentions: The petitioners argued that the "reasons to believe," warrants, and searches were illegal and arbitrary. They sought to quash the Section 142(1) notice and prevent the use of seized material in the assessment for AY 2018-19. Revenue's Contentions: The revenue authorities sought to vacate the interim order and proceed with the assessment. The judgment does not explicitly detail the revenue's arguments on the merits of the "reasons to believe" or the validity of the search warrants.

Which sections of the Income-tax Act were involved?

Section 132(1),Section 142(1)

AI-generated summary — verify with the full judgment below

134/-7 | IN THE HIGH COURT FOR THE STATE OF TELI\NGANA AT HYDERABAD (Special Original Jurisdiction) TUESDAY, THE SEVENTH DAY OF APRIL TWO THOUSAND AND TWENW SIX PRESENT THE HONOURABLE SRI JUSTICE P.SAft/I KOSHY AND THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA WRIT PETITION NO= 28120 OF 2019 Between: 1. Kaveri Seed Company Limited and another, No.513B,sth Floor, Minerva Complex S.D.Road, Secunderabad, 500003 Rep.by its Director Mr. C. Mithun Chand 2. Mr. C.Mithun Chand, S/o Late C.Bhaskar Rao Aged about 42 Years, Occ. Managing Director Kaveri Seed Company Limited No.513B, sth Floor, Minerva Complex S.D.Road, Secunderabad, 500003 ...PETITIONERS AND 1. Principal Director of lncome Tax, (lnvestigation) lncome Tax Department Aayakar Bhavan, Basheerbagh Hyderabad 500004. 2. Additional Director of lncome Tax, (lnvestigation) lncome Tax Department Aayakar Bhavan, Basheerbagh Hyderabad 500004. 3. Assistant Commissioner of lncome Tax, Central Circle-1 (1), Hyderabad Aayakar Bhavan, Basheerbagh Hyderabad 500004 4. Union of lndia Union of lndia, Department of Revenue, Represented by its Secretary (Revenue), North Block, New Delhi ...RESPONDENTS Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ, order or direction in nature of Writ of Mandamus calling for the relevant records from the respondents and (i) declaring the reason to believe purportedly recorded by 1st and 2nd Respondents u/ s.132 (1) of the lncome Tax Act, 1961 as being arbitrary, illegal, without jurisdiction, mala fide and for collateral purpose

( ii) (iii) declare the warrants of authorisation dated 03rd January,2018 and 08th January, 2O1B issued by the 1st and 2nd Respondents respectively as arbitrarl,, without jurisdiction and illegal and declare the consequent searches on the Petitioners premises as arbitrary, without jurisdiction and illeglal consequently, quash the notice dated 12-12-2019 issued under Section 142(1) of the lncome Tax Act, 1961 by the 3rd Respondent for the assessnlent year 2018-19 and stay the assessment proceedings for the assessnrent year 2O1B-19 during pendency of writ petition no. 2641 of 2019 before this High Court direct tlre Respondents to eschew from considering the material collecte<l during the search, including statements recorded, from consideration for the purposes of assessment for the assessment year 2018-19 and restrain the Respondents from initiating any further related action or proceedings pursuant to the said search. (iv) (v) l.A. NO: 1 OF 2019 Petition under Sr-'ction 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay all further iroceedings for AY.2018-19 Pursuant to notice dated.12-12-2o19 issued under section 142(1) of the lncome Tax Act 1961 and pursuant to search and seizure proceedings.

l.A. NO: 1 OF 2020 Between: 1. Assistant Commissioner of lncome Tax, Central Circle-1 (1), Hyderabad Aayakar Bhavan, Basheerbagh Hyderabad 500004 2. Union of lndia Union of lndia, Department of Revenue, Represented by its Secretary (Revenue), North Block, New Delhi ...PETITIONERS/ RESPONDENT Nos.3 & 4 AND 1. Kaveri Seed Company Limited and another, No.5138, 5th Floor, Minerva Complex S.D.Road, Secunderabad, 500003 Rep.by its Director Mr. C. Mithun Chand 2. Mr. C.Mithun Chand, S/o Late C.Bhaskar Rao Aged about 42 Years, Occ. Managing Director Kaveri Seed Company Limited No.5138, sth Floor, Minerva Complex S.D.Road, Secunderabad, 500003 ...RESPONDENTS/ PETITIONER Nos.1 & 2 3. Principal Director of lncome Tax, (lnvestigation) lncome Tax Department Aayakar Bhavan, Basheerbagh Hyderabad 500004. 4. Additional Director of lncome Tax, (lnvestigation) lncome Tax Department Aayakar Bhavan, Basheerbagh Hyderabad 500004. (RR3 & 4 not necessary parties) ...RESPONDENTS/ RESPONDENT Nos.1 &2 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to vacate the interim order dated 1811212019 passed in l.A.No.1 of 2O19 in W.P.No.2812O ot 2019 in the interest of justice. Counsel for the Petitioners: SRI C.V.NARASIMHAM Counsel for the Respondent Nos.l TO 3: SRI N.PRAVEEN REDDY' SC FOR ITD Counsel for the Respondent No.4: DEPUW SOLICITOR GENERAL OF INDIA The Court made the following: ORDER I t

I IN THE HIGH COURT FORTHE STATE OFTELANGANA AT HYDERABAD THE HONOURABLE SRI JUSTICE P.SAM KOSHY ANI) THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA W.P.No.28l20 OF 2019 07.04.2026 Between: Kaveri Seed Company Limited, Rep. by its Director Mr. C.Mithun Chand and another . . . Petitioners AND Principal Director of Income Tax (Investigation), Income Tax l)epartment, Aayakar Bhavan, Basheerbagh, Hyderabad - 500 004 and 3 others ...Respondents B' (per Hon'ble Sri Justice P.Sam Koshy) Mr. C.V.Narasimham, learned counsel for the petitioners prays for withdrawal of the writ petition on the ground that the petitioners intend to appear before the authority concemed and \ \ ventilate their grievance on its own merits, reserving the right of

2 the petitioners to approach this court in the event if the situation so warrants at a later stage. 2. The writ petition, accordingry, stan$s dismissed as withdrawn with the aforesaid liberty. There shall be no order as to costs. consequently, miscellaneous petitions pending, if any, shall stand closed. //TRUE COPY/ SD/- K.BHAVANI SWAMY. ASSISTANT REGISTRAR 6 SECTION OFFICER I To 1. One CC to SRI C.V.NARASIMHAM, Advocate [OPUC] 2. one CC to SRI N.PRAVEEN REDDY, Sc FoR ITD toPuc] 3. ene CC to DEpUTY SOLICITOR GENERAL OF INDIA [OPUC] 4. Two CD CoPies PSK. TKS dF :;trtr

,,a l.a I i i i I I i I i HIGH COUR DATE i 0710412026 ORDER WP.No.2812ll of 2019 _ _--:_::_::----- ... 1-i-: ;1 -1- l--. ()f\ t;:s i,,.i,l "i.1. 'i - ''i' /t,J's ;il) iL, \ 2 s Apfr nz6 r9 t. * IClr t-D * DISMISSING THE WRIT PETITION AS WITHDRI\WN WITHOUT COSTS j( AJ/ D

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