• May
  • 29
  • 2009

IT dept. can raid if income likely to escape tax in absence of prompt action

The income-tax department has the right to carry out a raid and attach property, if it has reason to suspect that income is likely to escape tax net in absence of prompt action, a division bench of the Bombay High Court has ruled.

The division bench, comprising Justice Ranajana Desai and Justice JP Deodhar, passed the order on May 7, 2009, on a writ filed by Mumbai-based Genom Biotech, which is run by a non-resident Indian, Binod Kumar.

The company had challenged the search carried out by the department on its premises in May 2008, and the subsequent attachment order. It argued that there was no clear reason for the I-T department to carry out the raid because the three conditions that justify a tax raid did not exist in this case.

The I-T Act lists three conditions for such a search: failure of the person to produce the required information even after summon was issued, likelihood of a person failing in furnishing the required details, or a person, who is in possession of money, jewellery or any valuable articles, which represent the income not disclosed to the department.

The division bench dismissed the company’s contention saying that the department has furnished to the court the confidential information it had received before the raid and the `satisfaction note’ it received before sanctioning the raid. Satisfaction note is a document prepared by the investigation wing of the I-T department, which contains the reasons that justify a raid.

The division bench also dismissed the argument that failure of the department to furnish a copy of the satisfaction note is a reason to hold the search invalid.

The bench observed that the information received by the department was that a sum of Rs 170 crore paid by Genom Biotech to the UK/Cyprus-based companies purportedly for marketing expenses had actually been deposited in the private accounts of Mr Kumar.

The department also had information on fake bills and invoices fabricated by the company to facilitate the transfer of this amount. On the basis of this information, the department was right in presuming that the tax payer would not divulge the details of the undisclosed income. The division bench accepted the department’s view that satisfaction note contains confidential information including the name of the informer, and disclosing the name would seriously prejudice the investigation.

The court also pointed out that the I-T laws do not provide for disclosing the reasons recorded by the designated authority be disclosed to the tax payer.


3 Responses to “IT dept. can raid if income likely to escape tax in absence of prompt action”

  1. K.MEGAMSARAVANAN says:

    Respected Sir, may I want to know how to inform about those person who not paying income taxi for their earnings, and they are doing business of mangoes getting from formers sold too much profit about corres . Therefore please give on brief about where to inform as doing an informer with safely and getting rewards without any problem.

    Thanking you.

  2. K.MEGANNATHAN says:

    Respected Sir,
    One person want to give information about non tax payer blocking more money, then where can he report it and how will he get 10% of commission for giving information safely. Please give the above details to my e-mail address.

    Thanking you!

  3. SURAJMAL JAIN says:

    PAN-AABAA4514B TIN-PNEA12938C ALMEL CHS LTD

    NOT DEDUCTED TDS ON CONTRACT AND NOT MAINTAIN ACCOUNTING RECORDS AND NOT FILE IT RETURN FROM LAST 5 YEARS

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