Whether notice u/s 131(1A) can be issued after search under u/s 132?

Respected Members

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Short note of today's case law for quick reference:

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[2024] 465 ITR 80 (Gau)

[IN THE GAUHATI HIGH COURT]

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PAWAN KUMAR GARG

v.

UNION OF INDIA AND OTHERS

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KAUSHIK GOSWAMI J.

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May 8, 2024.

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1. On a strict interpretation of section 131(1A), it is clear that before conducting a search and seizure operation u/s 132, a notice u/s 131(1A) is mandatorily required to be issued.

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2. When the legislature in clear words u/s 131(1A) has provided that notice has to be issued thereunder prior to the search, such notice cannot be issued after conducting of the search.

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3. Section 131(1A) places two conditions which are required to be fulfilled before any action is taken thereunder, that (a) Officer has reasons to suspect any income that is concealed or likely to be concealed, and (b) upon existence of such reasons, issues notice for the purpose of making enquiry or investigation relating thereto.

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4. Both conditions have to co-exist before any action of search and seizure u/s 132 is undertaken.

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5. After fulfilment of these conditions, the officer is empowered to take action under (i) to (v) of 132(1) and conduct a search and seizure operation.

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6. On writ petition, High Court held that:

The issuance of the notice u/s 131(1A) after conducting of the search operation u/s 132 was illegal and without jurisdiction and contrary to the provision which was very clear and there was no ambiguity.

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7. Even if there was an ambiguity the benefit of it must go the assessee.

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8. The Legislature having clearly laid down the manner in which the notice u/s 131(1A) was to be issued, it had to be mandatorily followed.

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9. Any manner other than what was provided in the provision was necessarily forbidden.

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10. That since the Principal Director (Investigation) and the Deputy Director (Investigation) had stated that the search and seizure action u/s 132 was conducted on the basis of the authorization issued by the Principal Director (Investigation), Guwahati and that during the post search investigation, the Deputy Director (Investigation), Dibrugarh had issued the notices u/s 131(1A), it was evident that the search operation u/s 132 had been carried out without issuance of notice u/s 131(1A) but merely on the basis of the authorization.

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11. Therefore, the search conducted u/s 132 and the subsequent notices u/s 131(1A) were illegal and without jurisdiction.

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12. The Department had not placed any materials whatsoever to indicate that the assessing authority had any materials on the basis of which he had reasons to suspect that the assessee had concealed or was likely to conceal any income.

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13. The very fact that the Department had issued notices u/s 131(1A) after the search and seizure operation u/s 132 was conducted, showed that there was neither any reasons to suspect nor materials before the officer on the basis of which search operations could have been conducted u/s 132.

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14. Hence, the two essential conditions being absent before the search was conducted, it was without jurisdiction.

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15. The authorization issued for the search, the consequent search & seizure and the notices issued u/s 131(1A) were quashed and set aside.

Case relied on: Dr. Mrs. Anita Sahai v. DIT [2004] 136 Taxman 247 (All.)