Tax Authorities Acting On Tax Evasion Petition Cannot Be Accused Of Malice When Due Procedure Is Followed: Andhra Pradesh High Court

The Court was hearing a writ petition challenging a summons issued under Section 131(1A) of the Income Tax Act, 1961, by the Investigation Wing.

A Division Bench of Justice Ravi Nath Tilhari and Justice Balaji Medamalli observed: “The authorities have acted on receipt of Tax Evasion Petition and as per the counter of respondent the procedure was followed i.e., allotting the Unique Identification Number and referring the matter to the competent authorities and the Income Tax Officer (Investigation) issued the summons after seeking approval of the competent authority. The authorities, when are acting under the Income Tax Act and based on the material in the form of Tax Evasion Petition received, there is no question of malice in law as well or of any colourable exercise of power by the Income Tax authorities”.

K. S. Murthy, Senior Advocate, appeared for the petitioner, while Challa Dhanunjay, Assistant Solicitor General, appeared for the respondents.

Background

The petitioner challenged the summons dated 14.11.2025 issued under Section 131(1A) of the Income Tax Act by the Income Tax Officer (Investigation), requiring production of documents, including books of accounts, bank statements and details of assets.

The petitioner sought clarification regarding the reasons and scope of the investigation, and contended that the summons was vague and arbitrary.

The primary challenge was founded on allegations of mala fide, with the petitioner asserting that the summons was issued at the instance of private parties involved in a pending civil dispute, and that certain Income Tax officials acted in concert with such parties to exert pressure.

It was also contended that the Income Tax Officer lacked jurisdiction to issue the summons.

The respondents, on the other hand, submitted that the summons were issued pursuant to an anonymous Tax Evasion Petition received by the Department, and that the procedure prescribed under the Standard Operating Procedure was duly followed, including allotment of a Unique Identification Number and approval from the competent authority.

Court’s Observation

The Court first examined the plea of mala fide and held that the burden of establishing mala fide is heavy and must be supported by clear and cogent material. It found that the petitioner had failed to establish any foundational facts to substantiate the allegation.

The Court noted that neither the petitioner nor the respondents were parties to the civil suit relied upon by the petitioner, and that the alleged connection between the proceedings under the Income Tax Act and the civil dispute was not borne out from the record.

The Court further observed that the plea of mala fide was raised for the first time in the writ petition and was not taken in the replies submitted before the Income Tax authorities, thereby rendering the plea an afterthought.

It emphasised that: “the burden of establishing mala fides is very heavy on the person who alleges it.”

The Court also examined the nature of the proceedings and held that the summons was issued pursuant to a Tax Evasion Petition received by the Department, and that the authorities had acted in accordance with the statutory procedure.

It found that the issuance of summons under Section 131(1A) is part of the investigative process and is aimed at verification of possible tax evasion.

On the question of malice in law, the Court held that the exercise of statutory power for a lawful purpose cannot be termed as mala fide merely based on conjectures or allegations.

In this context, the Court held that the tax authorities, when they are acting under the Income Tax Act and based on the material in the form of a Tax Evasion Petition received, there is no question of malice in law.

The Court further clarified the distinction between malice in fact and malice in law, holding that malice in law refers to an act done “without lawful excuse” and that no such circumstance was made out in the present case. It held that the mere existence of a civil dispute or remote relationship between parties cannot give rise to an inference of mala fide in the absence of substantive material.

On the issue of jurisdiction, the Court held that the Income Tax Officer (Investigation) is competent to issue a summons under Section 131(1A), when read with Section 132 of the Act, provided such officer is duly authorised.

The Court also observed that no specific plea regarding lack of jurisdiction was raised in the writ petition and that such contention cannot be entertained for the first time during arguments without a factual foundation.

The Court further noted that accepting the petitioner’s contention would result in frustrating statutory proceedings under the Income Tax Act, as proceedings could be indefinitely stalled on unfounded allegations.

Conclusion

The Court held that the summons issued under Section 131(1A) of the Income Tax Act was valid and did not suffer from mala fide or jurisdictional error. Accordingly, the writ petition was dismissed.

Cause Title: Koduru Picheswara Rao v. Union of India & Ors.

Appearances

Petitioner: K. S. Murthy, Senior Advocate with K. Guru Raj, Advocate

Respondents: Challa Dhanunjay, Assistant Solicitor General with Y. N. Vivekananda, Standing Counsel; Praveen Kumar Reddy, Standing Counsel for Income Tax; Anup Koushik Karavadi, Standing Counsel for Income Tax

Click here to read/download Judgment