Surprise Searches Can Be Conducted On Family's Lockers U/S 132 Of Income Tax Act Over Suspicion Of Undisclosed Assets: Delhi High Court

The family claimed that failure to notify them was a flagrant violation of Section 132 of the Income Tax Act, 1961 which relates to 'Search and seizure'.

Section 132(1)(c) stipulates that when the Department has 'reason to believe' that any person is in possession of undisclosed money, bullion, jewellery or other valuable articles, then the officer authorised may open the locker, safe, etc. and seize such articles.

The Petitioners however stressed on sub-sections (a) of the provision which stipulates issuance of summons or notice to such persons, asking them to produce books of account explaining the articles.

Petitioners contended that the search and seizure was invalid inasmuch as no summons or notice was issued to them, which is a pre-condition.

It was further argued that the Department had no information in its possession which can be termed as 'reasons to believe', as mandated under Section 132.

The High Court however observed that the Department had conducted a discreet enquiry reflecting a trend of benami lockers. During this enquiry, it came across the lockers held by Petitioners, which did not fit their financial profiles.

“This raised suspicion that the petitioners would potentially have wealth, which is unexplained or unaccounted…The same also was the “reason to believe” that in view of the nature of the activities, it is likely that these persons would be found in possession of money, jewellery or other valuables not commensurate with their known sources of income and as such a need was felt to carry out searches,” said a division bench of Justices V. Kameswar Rao and Saurabh Banerjee.

So far as issuance of summons under Section 132(1)(a) is concerned, the High Court observed,

"We find that the three clauses of Section 132(1) of the Act are mutually exclusive and every clause is followed by the word "or" and therefore, a search can be conducted on fulfillment of any of the three clauses."

In the case at hand since sub-section (c) stood satisfied, the Court refused to interfere in the matter.

As such, the petition was dismissed.

Appearance: For the Petitioners : Mr. Arvind Kumar, Advocate. For the Respondent : Mr. Sanjay Kumar, SSC, Ms. Monica Benjamin and Ms. Easha Kadian, JSCs.

Case title: Raj Krishan Gupta And Ors v. Principal Director Of Income Tax (Investigation) -1 New Delhi

Citation: 2025 LiveLaw (Del) 1114

Case no.: W.P.(C) 11005/2024

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