Section 132(1)

Section 132(1) — the law in short

What the courts have decided on section 132(1), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• PDIT (Investigation) v Laljibhai Mandalia Supreme CourtHelps department
  Can I get a search warrant quashed by showing the department's material was too thin?
  No. Forming the reason to believe under s.132 is an administrative act, and a writ court will not weigh whether the material was adequate. It will only ask whether the belief was mala fide, a pretence, or built on extraneous or irrelevant material.
• DGIT (Investigation) v Spacewood Furnishers P Ltd Supreme CourtHelps department
  Can I demand the satisfaction note and the reasons recorded before a search warrant was issued against me, and get the search quashed if they look thin?
  No, not at that stage. The Supreme Court held that reasons for the belief under section 132 must be recorded, but need not be communicated to the person searched when the authorisation is issued; the material is disclosed only when assessment proceedings begin after the search. On a writ challenge the reasons may be placed before the court, and the court may examine their relevance to the formation of belief, but not their sufficiency or adequacy. The Delhi High Court had gone into sufficiency, reproduced the satisfaction notes in detail and suspected the file was manipulated; its order was set aside and the search restored.
• Pooran Mal v Director of Inspection Supreme CourtHelps department
  The search on me was illegal. Can I stop the department using what it took?
  No. Indian tax law has no exclusionary rule. The Supreme Court upheld s.132 and rule 112 and held that even if a search contravened the section, the material seized was liable to be used, subject to law, before the income-tax authorities against the person from whose custody it was taken. Illegality in the search goes to relief against the search, not to the admissibility of what it produced.
• Pramod Swarup Agarwal v PDIT (Inv) High CourtHelps taxpayerUnder appeal
  The authorised officer who searched us has now summoned us under s.131(1A). Can he?
  No, not after the search is over. The officer who issued the notice was the authorised officer for the s.132 search, and s.131(1A) lets the authorised officer use that power only before he takes action under clauses (i) to (v) of s.132(1). The action having already been taken, the notice was quashed; and the department could not save it by pointing to the same person's substantive designation as Deputy Director.
• ACIT v Satish Kumar Keshri High CourtHelps taxpayerNo later treatment found
  The search on me turned up nothing but the AO still made additions for an old year. Can he?
  Where the assessment for a year stood completed before the search and nothing was pending to abate, an order under s.153A cannot simply reopen it. A completed assessment can be reassessed under s.153A only on incriminating material found in the search having some nexus to undisclosed income - and the Court left that route open, upholding a remand to the Assessing Officer to reassess if such material exists.
• PCIT v Jai Maa Jagdamba Flour Private Limited High CourtHelps taxpayer
  After a search on or after 1 July 2012, can the officer levy penalty under s.271(1)(c) instead of s.271AAB?
  No, not for the specified previous year. The Jharkhand High Court held that s.271AAB opens with a non obstante clause and excludes s.271(1)(c) where the undisclosed income relates to the specified previous year. Where the search was on 3 September 2014 the penalty, if any, had to be levied under s.271AAB, and because the assessee had admitted nothing in a s.132(4) statement and paid no tax on admitted income, the case fell under clause (c) of s.271AAB(1). The penalty actually levied under s.271(1)(c) could not stand. The Court also held it immaterial that no incriminating document had been found, because the statute keys the choice of section to the date of the search.
• Pawan Kumar Goel v Union of India High CourtHelps taxpayer
  The officers came in on a survey, I cooperated and showed them everything, and then they turned it into a search and took away the cash. Can they do that?
  No, not on this record. The Punjab and Haryana High Court quashed the action. Section 133A(4) forbids an income-tax authority acting under that section from removing any cash, stock or valuable article from the premises, and it is only where the person refuses or evades cooperation that section 133A(6) lets the authority fall back on the powers in section 131(1). Here the assessee had voluntarily disclosed and handed over Rs 2,09,89,090, the department produced no material to show non-cooperation, and no satisfaction was ever recorded for converting the survey into a search. The summons under section 131 was also vague, specifying nothing that was required of him. The action was quashed with consequential benefits.
• L.R. Gupta v Union of India High CourtHelps taxpayer
  I did not return a receipt because I believe it is not taxable yet. Can the Department search me on the footing that I have undisclosed income?
  No, not on that basis alone. The Delhi High Court quashed a search authorisation and everything done under it. Undisclosed income means income liable to tax which the assessee has kept back in an effort to escape assessment, knowing it to be taxable. A failure to file a return or to disclose what the Department believes is taxable is not enough. The satisfaction note said only that the family had not been disclosing their true income and wealth, which answers neither clause (b) nor clause (c) of section 132(1). The cash, jewellery and documents seized were ordered returned within two weeks.
• Seo Lehenga House v DCIT ITATHelps taxpayerNo later treatment found
  I have already offered the profit on the disputed transactions. Can the officer add the broker's commission on top under s.69C?
  Not where the commission is already inside the profit you offered. The Tribunal deleted a s.69C addition for cash commission paid to a broker for arranging bogus purchases and sales, in each of six consolidated appeals covering two assessees and five assessment years, because in every year the gross profit the assessee had already declared on those transactions exceeded the commission the Assessing Officer himself had determined. For the leading year the gross profit was Rs. 14,57,154 at 1.60 per cent against a determined commission of Rs. 5,31,795, and the Rs. 3,32,371 the first appellate authority had sustained was deleted. The rates differ year by year.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.