Kerala High Court Upholds Search & Seizure U/S 132 Income Tax Act Against CPI(M)’s Office Bearer In Wake Of Election Expenditure Monitoring

The Court dismissed a Writ Petition challenging the search and seizure proceedings initiated by the Income Tax Department (Department) against the Petitioner, an office bearer of the Communist Party of India [CPI(M)]. The search and seizure was conducted by the Department following a cash withdrawal of One Crore Rupees from a bank account held by the CPI(M) District Committee in Thrissur.

A Single Bench of Justice Bechu Kurian Thomas held, “There were thus materials available with the respondents to prima facie assume that petitioner is in possession of money, which has not been disclosed to the income tax department. Hence, the satisfaction arrived at by the respondents to initiate a search and seizure under section 132 of the Act cannot be held to be perverse or legally untenable. Considering the scope of interference under Article 226 of the Constitution of India with a proceeding under section 132 of the Act, this Court is of the view that the search and seizure proceedings initiated by the respondents do not warrant any interference at this juncture.”

Senior Advocate A Kumar appeared for the Petitioner, while Senior Standing Counsel Jose Joseph represented the Respondents.

Brief Facts

A prohibitory Order was issued against the Petitioner, freezing operations in the bank account, as it was noticed that the account was not linked to a PAN. Subsequently, summons were issued, directing production of documents, at which point the Petitioner stated that the PAN was not linked due to a typographical error, an omission on the part of the bank.

The Petitioner was again summoned, and the money he had withdrawn was seized. He was further questioned regarding the withdrawal.

Court’s Reasoning

The High Court noted, “Invocation of the power under section 132 of the Act is a drastic step and is resorted to when money, income or assets are hidden or are not disclosed to the income tax department. In the instant case, the specific stand of the department is that the account in question maintained by the CPI(M) at the Bank of India, Thrissur, had not been linked with the PAN.”

The Bench remarked, “The department had later obtained information that on 02.02.2024, an amount of one crore rupees was even withdrawn from the said account which has a current balance of Rs.4.81 Crores, all of which indicate existence of undisclosed money and require an investigation.”

The Court also clarified, “Sub-section (3) of Section 132 of the Act empowers the authorised officer to serve an order on the owner or a person who is in immediate control of a valuable article or thing or money, jewellery etc. if it is not practicable to seize it and direct not to remove or part with or otherwise deal with the said article or thing or money, or jewellery etc, without the previous permission of the officer. However, sub-section (8A) of Section 132 of the Act states that such an order shall not be in force for a period exceeding 60 days from the date of the order.”

“On a perusal of the satisfaction notes and the order of approval, it is evident that an elaborate note containing several reasons, pointing out the need to conduct a search was prepared and submitted for approval and the Designated Officer had granted his approval after recording reasons. The detailed reasons mentioned in the satisfaction note as well as the order of approval for search and seizure is in tune with the principles laid down by the Supreme Court,” the Court held.

Accordingly, the High Court dismissed the Petition.

Cause Title: M.M. Varghese v. Assistant Director Of Income Tax (Inv.) & Ors. (Neutral Citation: 2025:KER:33449)

Appearance:

Petitioner: Senior Advocate A Kumar; Advocates G. Mini, P.J. Anilkumar, P.S. Sree Prasad and Balasubramaniam R.

Respondents: Senior Standing Counsel Jose Joseph; CGC Navaneeth N Nath; Advocate Susie B Varghese

Click here to read/download the Judgment