Principal Director of Income Tax (Investigation) & Ors. Vs Laljibhai Kanjibhai Mandalia (Supreme Court of India)
SC Clarifies Limited Scope of Judicial Review in Tax Search and Seizure Cases
New Delhi – The Supreme Court of India, in the case of Principal Director of Income Tax (Investigation) & Ors. Vs Laljibhai Kanjibhai Mandalia, has restated and clarified the principles guiding the exercise of power for search and seizure under Section 132 of the Income Tax Act, 1961. The judgment emphasizes that the decision to authorize a search is an administrative function, and the judiciary’s power to review it is limited.
The Court overturned a High Court order that had set aside a search authorization, thereby allowing the Income Tax Department to proceed with its action against the assessee. In its ruling, the Supreme Court laid down nine key principles to govern the writ jurisdiction of courts in matters concerning tax raids.
The primary principle established is that the formation of an opinion and the recording of “reasons to believe” by an authorized official is an administrative, not a judicial or quasi-judicial, act. This belief must be formed honestly and in good faith, based on material information in possession of the authority, and cannot be a mere pretence. Any consideration of irrelevant material would invalidate the satisfaction recorded.
