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January 11, 2021

Can IT department be restrained from using information gathered from the documents which were seized during a search?

by CA Shivam Jaiswal in Income Tax

Can the IT department be restrained from using the information gathered from the documents which were seized during a search?

The term ‘search’, in simple language, denotes an action of a government machinery to go, look through or examine carefully a place, area, person, object etc. in order to find something concealed or for the purpose of discovering evidence of a crime.

Search provisions are covered under Section 132 of the Income Tax Act. According to Section 132(1), where the Director of Inspection or the Commissioner (or any such Deputy Director of Inspection or Inspecting Assistant Commissioner as may be empowered in this behalf by the Board) in consequence of information in his possession, has reason to believe that:

  • any person to whom a summons or a notice was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account, or other documents as required by such summons or notice, or
  • any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or
  • any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property [which has not been, or would not be, disclosed]

then:

  • the Director of Inspection or the Commissioner, as the case may be, may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer, or
  • such Deputy Director of Inspection or Inspecting Assistant Commissioner, as the case may be,

may authorize any Assistant Director of Inspection or Income-tax Officer, to:

  • enter and search any [building, place, vessel, vehicle or aircraft] where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept
  • break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available
  • search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing
  • seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search
  • place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom
  • make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing

Let us refer to the case of Poran Mal v. Director of Inspection (1974), where the issue under consideration was whether the IT department could be restrained from using the information gathered from the documents which were seized during a search which was held to be illegal?

Facts of the Case:

  • A search operation under section 132 was conducted at Assessee’s business as well as residential premises and articles consisting of account books and documents, cash, jewellery were seized by income-tax authorities.
  • The Assessee filed a petition in the High Court challenging that search and seizure in residential premises of the Assessee as mala fide, oppressive, indiscriminate and vexatious and illegal.
  • The Assessee also challenged the use of the material gathered during the search on the basis that the material/evidences were collected based on an illegal search.
  • The High Court dismissed the petition and held the search proceedings to be valid.
  • The High Court also held that even if the search was held to be illegal, it would not prevent the income-tax authorities from relying on material gathered in the course of the such a search.

Observations of the Supreme Court (SC)

  • The Evidence Act, 1871, which was a law consolidating, defining and amending the law of evidence, permitted relevancy as the only test of admissibility of evidence.
  • Neither the Evidence Act, nor any other similar law in force excluded relevant evidence on the ground that it was obtained under an illegal search or seizure.
  • The power of search and seizure, was in any system of jurisprudence an overriding power of the State for the protection of social security and that power was necessarily regulated by law.
  • When the Constitution makers had not subjected such regulations to constitutional limitations by recognition of a fundamental right to privacy, there was no justification to import it into a totally different fundamental right, by some process of strained construction.
  • The test to be applied, both in civil and in criminal cases, in considering whether evidence was admissible was whether it was relevant to the matters in issue.
  • If it was relevant and therefore admissible, the court would not be concerned with how such evidence was obtained.
  • Even assuming, the search and seizure were in contravention of the provisions of section 132 of the Income-tax Act, still the material seized was liable to be used subject to law before the income-tax authorities against the person from whose custody it was seized.

In simple words, the IT department could not be restrained from using the information gathered from the documents which were seized during a search, even if the same was held to be illegal.

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