Search without satisfaction of ingredients of S. 132(1) is illegal and consequently Notice action U/s. 153A of the Act is also bad in law

Spacewood Furnishers Pvt. Ltd. Vs. DGIT (Investigation)- Bombay HC – 

The mode and manner in which all these notes are prepared,  show the absence of any relevant material with authorities which would have enabled them to have “a reason to believe” that action under Section 132(1) of the Act was essential. No new material as such has been disclosed anywhere. No document or report of alleged discreet inquiry forms part of these notes.

It is apparent that the entire exercise has been undertaken only because of the high growth noted by the respondents. The material like high growth, high profit margins, the contention in respect of or doubt about international brand and details thereof is available with the authorities. It is not their case that they had obtained any other information which was suppressed by the petitioners from them. The effort, therefore, was to find out some material to support the doubt entertained by the department. Whether such doubt entertained can be said to be bonafide is itself a moot question. The fact that authorities competent under Section 132(1) of the Act have avoided to shoulder the responsibility of taking decision , have unnecessarily placed the note before the higher authorities, clearly show that the exercise has not been undertaken as required by Section 132(1) of the Act in transparent mode. The satisfaction note contemplated therein must be based upon contemporaneous material, information becoming available to the competent authorities prescribed in that Section. Its availability and nature as also time factor must also be ascertainable from relevant records containing such satisfaction note. Loose satisfaction notes as produced before us, placed by authorities before each other cannot meet these requirements & said provision. The necessary live link and availability of relevant material for considering it, has not been brought before this Court. We, therefore, find substance in the contention of the petitioners that it was a roving exercise.

In view of this The authorisation issued under Section 132(1) of the Income Tax Act, 1961, is found bad and unsustainable. Consequently, exercise of search undertaken in pursuance thereof from 19.06.2009 to 21.07.2009 is illegal. Notice action under Section 153A of the Act, issued on 16.02.2010 is also, therefore, bad in law.

HIGH COURT OF JUDICATURE AT BOMBAY, NAGPUR BENCH
WRIT PETITION NO. 2150 OF 2010

M/s. Space wood Furnishers Pvt. Ltd.,

Versus

The Director General of Income tax (Investigation), Pune.

Date of Pronouncing Judgement: December 09, 2011.

JUDGEMENT:

(Per B.P. DHARMADHIKARI, J.)