Search and seizure: Section 132 and section 153A of Income-tax Act, 1961: A.Ys. 2004-05 to 2009-10: Warrant of authorisation: Satisfaction must be based on information coming into possession of Department: Absence of new material with authorities: Search and consequent notice unsustainable.

Search operations u/s.132 of the Income-tax Act, 1961 were carried out in the case of the petitionercompany and its two directors. The petitioner filed writ petition and challenged the validity of the search action and the consequent notice u/s.153A of the Act. The Bombay High Court allowed the petition and held as under:

“(i) When the satisfaction recorded is justiciable, the documents pertaining to such satisfaction may not be immune and if appropriate prayer is made, inspection of such documents may be required to be allowed.

(ii) The mode and the manner in which all the satisfaction notes were prepared showed the absence of any relevant material with the authorities which would have enabled them to have ‘reason to believe’ that action u/s.132 was essential. No new material as such had been disclosed anywhere. No document or report of alleged discreet inquiry formed part of these notes. The entire exercise had been undertaken only because of the high growth noted by the authorities.

(iii) The material like high growth, high profit margins, the contention in respect of or doubt about international brand and details thereof was available with the authorities. It was not their case that they had obtained any other information which was suppressed by the petitioners.

(iv) The effort, therefore, was to find out some material to support the doubt entertained by the Department. The exercise had not been undertaken as required by section 132(1) in transparent mode. The satisfaction note contemplated therein must be based upon contemporaneous material, information becoming available to the competent authorities prescribed in that section. Its availability and the nature and also the time factor must also be ascertainable from relevant records containing such satisfaction note.

(v) Loose satisfaction notes placed by the authorities before each other could not meet the requirements and the provision. The necessary live link and availability of relevant material for considering it had not been brought before the Court. Therefore, the authorisation issued u/s.132(1) was bad and unsustainable. Consequently, the exercise of search undertaken in consequence thereof was illegal. Notice action u/s.153A was also bad in law. The same were accordingly stand quashed and set aside.”