Search and seizure under Section 132 - Court has no power to review "reasons to believe"
Delhi High Court Upholds Validity of Income Tax Search on South Delhi Vaults. Court dismisses petition challenging search and seizure conducted under Section 132 of the Income Tax Act, 1961.
In a significant ruling, the Delhi High Court has dismissed the petition filed by Raj Krishan Gupta and others challenging the validity of the search and seizure conducted by the Principal Director of Income Tax (Investigation), New Delhi, on their lockers at South Delhi Vaults under Section 132 of the Income Tax Act, 1961. The court upheld the legality of the search, stating that the "reasons to believe" for conducting the search were duly recorded and satisfied the legal requirements.
The case revolved around the petitioners' lockers at South Delhi Vaults, which were subjected to a search operation on May 11, 2024. The petitioners contended that the search was conducted without valid reasons and amounted to a "fishing and roving" expedition. They argued that the valuables seized were either disclosed incomes or ancestral properties, and some belonged to family members residing abroad.
In his submissions, Mr. Arvind Kumar, representing the petitioners, emphasized non-compliance with the guidelines laid out in the CBDT Instruction No. 1916 regarding the seizure of jewellery. He asserted that the search authorization was issued without proper information or "reasons to believe," as mandated by Section 132(1) of the Act.
On behalf of the respondent, Mr. Sanjay Kumar argued that the search was conducted based on bona fide "reasons to believe" that the petitioners possessed undisclosed income or valuables. He highlighted that the petitioners failed to produce supporting documents for the seized items during the proceedings. Furthermore, he contended that the search was conducted in accordance with the statutory powers under Section 132, and the CBDT circular could not override these powers.
The court, presided by Justices V. Kameswar Rao and Saurabh Banerjee, examined the official records and satisfaction note related to the search. It found that the search was triggered by credible information about benami lockers and discrepancies in financial profiles, warranting further investigation. The court reiterated the principle that the sufficiency of reasons to believe is not justiciable, and judicial review is limited to examining the bona fide nature of these reasons.
The court concluded that the search was neither arbitrary nor malicious and was conducted in accordance with the law. It dismissed the petition, affirming the legality of the search and seizure operation.
Bottom Line:
Search and seizure under Section 132 - Formation of "reasons to believe" - Held, formation of reasons to believe is an administrative function, not a judicial or quasi-judicial one - Court's jurisdiction is limited to reviewing whether the reasons to believe are bona fide and not based on vague or irrelevant facts.
Statutory provision(s): Income Tax Act, 1961 Section 132
