Search u/s 132 has been invalidated as satisfaction note being general in nature
The foundation to exercise the power under Section 132 of the said Act is that the Authority must have information in his possession on the basis of which a reasonable belief can be founded that
1. the person concerned has omitted or failed to produce the books of accounts or other documents for production of which summons or notice has been issued or
2. such person will not produce such books of accounts or other documents even if summons of notice is issued to him, or
3. such person is in possession of any money, bullion or other valuable articles which represents either wholly or partly income or property which has not been or would not be disclosed
Bom HC recently in the case of Echjay Industries Pvt Ltd. upon scrutinizing contents of satisfaction note for authorizing search u/s 132 of the Act observed that
1. No notice or summons have ever been issued to assessee before search u/s 132 which could give rise to an apprehension that assessee will not produce such books of accounts or documents evenif summons of notice is issued to him.
2. the contents of satisfaction note are extremely general in nature and does not disclose any information which would lead the authorities to have a reason to believe that any requirements as per Section 132(1) are satisfied.
3. the material considered by officer to form reasons is irrelevant and unrelated and reasons recorded indicates a mere pretence
4.the satisfaction note also does not indicate the process of formation of reasonable belief and does not satisfy judicial conscience.
Based on the above, the action of search conducted by the department was quashed and all consequent actions and notices were also quashed. However, the revenue was allowed to rely on the information gathered during the course of search in other proceedings.
This decision is delivered after elaborately discussing decision of SC in PDIT (Investigation) Vs. Laljibhai Kanjibhai Mandalia (2022) which laid down that though adequacy or sufficiency of reasons recorded can not be looked into but the court will be entitled to examine the reasons for belief which should pass judicial conscience.
The Copy of the order is as under:
