JULY 07, 2009

Income tax: Retrospective empowerment to issue Warrant to Search u/s 132

By Kapil Goel, CA

IN the Income Tax Law, hitherto, section 132 which deals with power to issue search warrants, limitedly empowers DGIT/DIT and CCIT/CIT to authorise the search.

In aforesaid connection, on basis of Notification Dated 11 October 1990 which empowered specified Deputy Directors and Deputy Commissioners to issue search warrant under subject provision, it has been the case of revenue authorities that after re designation of authorities (from Deputy Directors to Joint Directors) under the Act, Joint Director and Additional Director were automatically empowered to issue search warrant u/s 132 of the Act. This stand of revenue was rejected by Delhi High Court in next mentioned rulings, holding that Joint Director & Additional Director are not automatically empowered to issue warrant u/s 132 by virtue of subject notification in favor of DDIT/DCIT:

a) Nalini Mahajan (2003-TIOL-184-HC-DEL-IT)

b) Pawan Garg (2007-TIOL-454-HC-P-H-IT)

c) Chand Chaurasia and Vinita Chaurasia ITA 248 & 522 of 2008 (on revenue's SLP notice has been issued by Supreme Court on question "Issue notice limited to the question as to why the material found during the search, even if the search is assumed to be illegal, cannot be used for computation of undisclosed income under Chapter XIV-B of the Income Tax Act, 1961" and matter is already sub-judice) etc.

Further, Allahabad High Court in Raghu Partap 307 ITR 450 has latestly followed views of Delhi High Court in Nalini Mahajan to hold Additional DIT has no power to issue search warrant u/s 132 of the Act. However, there has been one Punjab & haryana High Court ruling in Vinod Goel 252 ITR 29 which hold Additional Director has power to issue search warrant.

Since the aforesaid issue, has been latestly deliberated by Delhi High Court at length in Pawan garg case (supra) wherein after examining the law in its entirety, High Court concluded that:


“….However, unlike the past, the Board did not issue any notification after the amendment of 1998 specifically empowering any Joint Director or Joint Commissioner to authorize action under Section 132(1) of the said Act. …..

There is no specific empowerment in favour of any Joint Director or Joint Commissioner under Section 132(1) of the said Act. Mere re-designation of a class of officers does not translate to the specific empowerment which is required under Section 132(1) of the said Act. …”

Conclusion

In view of above, the present amendment retrospectively validating from June 1994& 1998, the issuance of search warrant by Jt DIT/Add DIT, where in contrast, Delhi High Court has concluded on law that there has never been any empowerment from CBDT by way of notification, as required under section 132 of the Act in favour of Jt DIT/Add DIT, in humble opinion of author, constitutional validity of same can be contested under Writ Jurisdiction.