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1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 11TH DAY OF FEBRUARY, 2022
BEFORE
THE HON'BLE MR. JUSTICE S. SUNIL DUTT YADAV
WRIT PETITION NO.23254 OF 2021 (T - IT)
BETWEEN:
Durgappa Lakkanna S/o.Durgappa, Aged about 78 years, R/at No.25, 1st Avenue 5th Main, Shubh Enclave, Harlur Road, Off Sarjapur Road, Bengaluru - 560 102. … Petitioner (By Sri. Sandeep Huilgol, Senior Advocate A/w Sri A.Mahesh Chowdhary, Advocate)
AND:
Assistant Commissioner of Income Tax
Central Circle 2(4) Blr
Central Revenue Building,
Queens Road,
Bengaluru - 560 001.
Deputy Director of Income Tax (Inv)-Unit 3(4)
Central Revenue Building,
Queens Road,
Bengaluru - 560 001. ...Respondents (By Sri. K.V.Aravind, Advocate)
2 This Writ Petition is filed under Articles 226 and 227 of the Constitution of India praying to declare the search initiated on the petitioner and warrant of authorisation under Section 132 is illegal and without jurisdiction and etc.
This Writ Petition coming on for Preliminary Hearing, this day, the Court made the following: O R D E R
The Petitioner has sought for issuance of writ of certiorari to declare the search initiated on the petitioner and warrant of authorisation under Section 132 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act' for short) is illegal and without jurisdiction and has further sought for striking down the panchnama dated 19.02.2020 at Annexure-A, sought for striking down the impugned Assessment Order at Annexure-B and Notice at Annexure-C. The petitioner has also sought for setting aside of the Assessment Orders at Annexure-B series and the Demand Notices at Annexure-C series.
The Learned Senior Counsel appearing on behalf of the petitioner would submit that the action undertaken by the Authority pursuant to Section 132 of the Act unless fulfills the legal requirement of 'reasons to believe' by the appropriate Authority is liable to be set aside.
It is further submitted that the power under Section 132 of the IT Act being a drastic power, same has to be exercised sparingly and accordingly, the Court has to scrutinize the material and arrive at a conclusion while balancing the individual interest of the petitioner as well as power of the Department under Section 132 of the Act. It is further contended that the material available should have nexus to the conclusion arrived at, that such conclusion should result in the authority entertaining 'reasons to believe' and mere 'reasons to suspect' may not be sufficient enough as the words used under Section 132 of the Act is 'reasons to believe'. It is further submitted that the petitioner in response to the summons issued by the
4 department under Section 131 of the Act has made out a detailed reply regarding the immovable properties held by him and his family members and has declared the movable assets held by him and has declared the immovable properties sold during the past six years and has explained the transactions with various entities as is revealed from 'answers to questions' recorded, copy of which is enclosed at Annexure-D.
Accordingly, it is pointed that in light of the said co-operation by the petitioner whether there was any warrant for exercise of power under Section 132 of the Act also needs to be looked into. Reliance is placed on the judgment of the Allahabad High Court in the case of Smt. Kavita Agarwal And Another Vs. Directorate of Income Tax (Investigation) and Others Civil Misc.Writ Petition No.1205/2001 reported in 2003 SCC online All 1932 (2003) 264 ITR 472 (2203) 185 CTR 129. By placing reliance on the said authority, it is contended that
5 the information and the material relied upon must have rational nexus to 'reasons to believe' entertained by the Authority and mere rumour may not be sufficient to arrive at a conclusion justifying exercising power under Section 132. It is also contended that the Authority could have initiated proceedings for re-opening of the proceedings under Section 148 instead of taking recourse to Section 132 and subsequently invoking Section 153(a).
Learned counsel Sri. K.V. Aravind appearing for the Revenue on the other hand would contend that it is a settled position that the Court cannot enter into the sufficiency of, reasoning and the material available including satisfaction note which would legally justify invocation of power under Section 132. Reliance is placed on the judgment of the Patna High Court in the case of Ajay Kumar Singh Vs. Director General of Investigation, Bihar (2021) 434 ITR 352 (Patna). By placing reliance on the said judgment it is contended that the Court cannot
6 enter into sufficiency or adequacy of reasoning and that unless any ground of malice/malafides/arbitrariness is made out, the Court should not interfere in such proceedings.
Heard both sides.
Perused the material submitted by Sri K.V. Aravind relating to 132 proceedings.
The material indicates name of the petitioner as a person with respect to whom proceedings under Section 132 are sought to be exercised. Details of the premises are also mentioned. The satisfaction note records that the information has been gathered through telephone enquiry to the effect that the assessee is in possession of undisclosed properties. The Note refers to the information that the assessee has been receiving unaccounted cash and making cash payment for the land being alienated/sold/purchased.
The information refers to specific transaction and that there is suppression of income as the profit declared is
7 contrary to the actual profit received. Details of analysis of income on the project has been detailed and tabulated with mentioning of specific figures. It is also noted that the assessee was a non-filer of income tax for the Assessment Year 2019-20. The Note also reveals that the assessee had five rental yielding properties and that investment for construction of properties is not reflected in the books of accounts of the assessee.
It is specifically observed that the field enquiries revealed that the assessee had collected cash against sale agreements and uses the amount as unaccounted investment in the form of advance for property purchase. There are specific details relating to the amount paid. It is specifically concluded that in light of the facts stated including the details of the project that the assessee would be in possession of money/bullion/ jewellery/other valuable article or thing which represents partly or wholly the income of the assessee mentioned in Table-1 and accordingly,
8 search and seizure action requires to be carried out. Though the use of the words 'reason to suspect' is found in the said Confidential Note produced before the Court, a perusal of the Note and taking note of the reference to particular transactions, the discrepancy between the income declared and the profits from the projects which is detailed in the material would clearly amount to material being available which would be sufficient for constituting 'reasons to believe' leading to exercise of power under Section 132. It cannot be stated that the exercise of power invoking Section 132 in the present case in light of the material produced before the Court is one that would call for interference in exercise of power under Article 226 of the Constitution of India.
The power for re-assessment is no doubt a remedy available to the Authority but in light of the information as detailed in the note, grounds have been made out for exercise of power under Section 132(c) in the
9 present case and it cannot be said that the said action is either malafide/arbitrary/capricious.
Accordingly, the Court finds no reason for interfering with the action taken under Section 132. Liberty is however kept open for the petitioner to challenge the impugned orders in appropriate proceedings. Other contentions of the petitioner are kept open.
It is clarified that the scope of enquiry is only as to the grounds made out for exercising power under Section 132 and the Court has not expressed any opinion as regards quality of the material referred to in such proceedings.
Accordingly contention of the parties are kept open and the Authorities are also free to take independent decision without any reference to the observations made in this order.
In light of the matter having been pending before this court, if the petitioner were to file an appeal against the
10 impugned orders, same would be taken and considered on merits if filed within a period of two weeks from the date of release of the order without seeking any objections as regards point of limitation.
The papers on behalf of the Department presented by Smt. A.Manju, Deputy Director of Income Tax have been returned.
Sd/- JUDGE