Search u/s 132 must be on the Basis of Credible Information, says Delhi HC [Read Judgment]

Finance Act - Delhi High Court - taxscan

The Delhi High Court recently held that a search under section 132 of the Income Tax Act must be based on the basis of credible information against the assessee which would help the department to form a reasonable belief that the assessee is in the possession of any such valuables or materials as prescribed in the provision.

The Court quashed an assessment order passed under section 153C of the Income Tax Act on the ground that the above conditions were not satisfied.

In the instant case, search proceedings were initiated against the assessee, in consequent to a search conducted on the residence of her maternal uncle, and his business premises collectively called as “Nanda Group”. During the course of search, the authorities found a key of the locker in the possession of the uncle which was actually in the name of the assessee. Following this, search warrant was issued in the name of the assessee by stating that the proceedings are based on information in possession of the authorizing officer in respect of the Petitioner. It was also stated that “the reasons to believe were framed with respect to the Petitioner as she was the only owner of the locker.” It was further stated in the warrant that “after the satisfaction of the authorizing officer that there existed sufficient reasons to conduct search on the abovementioned locker of the Petitioner.” Later, assessment proceedings u/s 153C were completed against the assessee. Against the order, the assessee approached the High Court.

Allowing the petition, the division bench comprising of Justice S.Muralidhar and Justice Chander Shekhar observed that there is nothing in the Satisfaction Note to indicate that there was any credible information available with the Department that the Petitioner belonged to the “Nanda Group‟ who was searched. It was also noted that the Petitioner is a regular Assessee and the information needed to trigger the search action against the Petitioner had to be such that would show that she is linked in some manner to the business or other activities of the “Nanda Group‟.

The bench further noted that such information had to have a nexus to the belief that could be reasonably formed that she is in possession of any money, jewellery or valuable representing her income which has not been or would not be disclosed by her. “The mere fact that the key to the locker which she was operating was found during the search of her uncle Mr Suresh Nanda would not constitute ‘information’ leading to the reasonable belief that the locker would contain jewellery, or other valuable articles which she would not have disclosed in her returns. There obviously had to be something more. Therefore the jurisdictional pre-condition justifying the invocation of the power of search under Section 132 (1) of the Act against the Petitioner, was not fulfilled in the present case.

Read the full text of the Judgment below.

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