Sufficiency of reasons to believe cannot be looked into for considering the validity of the search proceedings:
LALJIBHAI KANJIBHAI MANDALIA (CIVIL APPEAL NO. 4081 OF 2022)
Facts:
- The assessee during FY 2016-17 transferred a sum of Rs. 6 crores on 01.06.2016 and Rs. 4 crores on 21.06.2016 to M/s Goan Recreation Clubs Private Ltd. The assessee secured the loan by way of a mortgage of the property at Goa.
- The search and seizure action U/S 132 of the Income Tax Act was initiated of the assessee’s premises after a detailed analysis of information, duly recording of reasons in the Satisfaction Note and approval of the same by the competent authorities
- The court was considering an appeal against the judgment of High Court of Gujarat whereby the warrant of authorization issued by Principal Director Of Income Tax (Investigation) under Section 132 of the Income Tax Act,1961 was quashed.
- The assessee’s stand was that it is fishing enquiry and not fit for a search U/S 132. He also contended that the High Court has rightly held that none of the pre-requisite conditions for search and seizure under Section 132.
- The Revenue contended that though it is open to the Court to examine the question whether “reasons to believe” have any relevant bearing to the formation of the belief and that such reasons are not irrelevant as the officer has to produce relevant evidence to sustain his belief in case the reasons to believe are questioned in court, however, the jurisdiction of the High Court is to examine the existence of reasons not the legality of the same.
Hon SC held as below:
- The test to consider the justiciability of belief is whether such reasons are totally irrelevant or whimsical. The reply in the counter affidavit shows that the intention of the Revenue was to un-layer the layering of money which is suspected to be done by the assessee.
- The investment of Rs.10 crores for a short period was not for earning interest income as the same was repaid in the same assessment year. The Revenue intends to investigate the fund trail of the money paid by the assessee. Such belief is not out of hat or whimsical.
- The sufficiency or inadequacy of the reasons to believe recorded cannot be gone into while considering the validity of an act of authorization to conduct search and seizure. So the High Court was not justified in setting aside the authorization of search.
