The Karnataka High Court has clarified that the power of tax authorities to conduct search and seizure operations under Section 132 of the Income-tax Act is person-centric and not premises-centric. This ruling came in a recent judgment by a division bench comprising Justices SG Pandit and KV Aravind.
Background of the Case
The case originated from a search conducted on September 14, 2017, at the premises of CR Ram Mohan Raju. The search was based on suspicion that books of account, documents, and other valuable articles belonging to one K Narayan Raju were kept there. Following the search, the assessing officer of Narayan Raju initiated proceedings and recorded that the seized documents actually belonged to Mohan Raju. Consequently, the material was handed over to Mohan Raju's assessing officer.
Notices Under Section 153C
The assessing officer of Mohan Raju issued a notice under Section 153C of the Income-tax Act for the assessment years 2011-12 to 2018-19. This section empowers tax authorities to assess or reassess the income of a person other than the searched person. Mohan Raju challenged the notice in a writ petition, arguing that since his premises were searched, he should be treated as a "searched person" and thus not subject to Section 153C proceedings.
High Court's Ruling
The division bench rejected Mohan Raju's argument, holding that the warrant of authorization is fundamentally person-specific, while the place of search is merely incidental. The court emphasized that Section 132 is designed to target individuals, not locations. Therefore, the fact that Mohan Raju's premises were searched does not automatically make him a searched person; the focus remains on the person against whom the authorization is issued.
Based on this interpretation, the court allowed the writ appeal filed by the income-tax department and restored the notices issued under Section 153C. The ruling clarifies that third-party assessments can proceed even if the premises of the third party were searched, as long as the authorization was directed at another individual.
Implications
This judgment has significant implications for tax proceedings. It reinforces the principle that search and seizure operations are person-centric, meaning that the identity of the person under investigation determines the applicability of various provisions. Tax authorities can now more effectively pursue assessments against individuals whose documents are found during searches of third-party premises.
