Law:

Section:

Section 132 of the Income-tax Act, 1961 - Search and seizure - General - Whether in regard to notice under section 132(1) for search and seizure Court cannot adjudge sufficiency or adequacy of materials and it is only existence of materials that is to be examined and it is to be seen whether on such materials a reasonable man can form an opinion that there are reasons to believe for purpose of issuance of notice under section 132(1) - Held, yes - Whether merely on basis of rumour, gossip, suspicion, hunch or news items, revenue cannot form an opinion that there are reasons to believe for issue of such notice, but information must exist before opinion is formed and materials must have rational nexus or bearing to reasons for formation of belief - Held, yes - Whether simply because lifestyle of a person has undergone a change towards improvement, it could not be a material for purpose of formation of opinion that there are 'reasons to believe' - Held, yes - Whether question of investment in share scam in benami may not be acceptable as reasonable ground for formation of opinion that there exists reasonable ground for belief - Held, yes - Whether there was no infirmity in exercise of power of authorisation of search and seizure in instant case since it had been noted in report that huge profits were shown, investments were being made, but returns did not disclose net profit or taxable income, books of account had not been shown with regard to cash sales when, admittedly, there were huge cash sales and these were definite materials, which hinted at existence of reason to believe - Held, yes Words and phrases - 'reason to believe' as occurring in section 132(1) of the Income-tax Act, 1961. FACTS Notice under section 132(1) was issued by the department after processing the information, inter alia, that the family of the assessee had improved their lifestyle, there was expansion of business and books of account had not been shown with regard to cash sales when, admittedly, there were huge cash sales. On writ petition, the Single Judge quashed the notice. On appeal by the revenue, it was contended on behalf of the appellant that it satisfies the pre-conditions provided…

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