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Gujarat High Court Validates Income Tax Department’s Search and Seizure

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Published on: February 11, 2024 at 17:15 IST

In a recent ruling on Tuesday, the Gujarat High Court affirmed the legality of the search and seizure operations carried out by the Income Tax (I-T) department at the residence and office of practicing advocate Maulik Sheth last year, citing allegations of income tax evasion.

Maulik Sheth had filed a petition challenging the search conducted between November 3 and 7, asserting that documents related to his professional activities were seized during the operation. The advocate raised concerns about the violation of his fundamental rights, including privacy infringements.

A division bench comprising Justices Bhargav Karia and Niral Mehta declared that incriminating material confiscated from Sheth’s premises could be employed by the department against third parties, specifically the advocate’s clients, under specified conditions.

The bench emphasized that the initiation of search proceedings, based on material presented in a sealed cover by the department, “does not require any interference by this court.” The petitioner’s challenge to the raid under IT Act section 132 was deemed unsuccessful.

However, the Court condemned the “glaring misconduct” during the search operation, which involved a female colleague of Sheth. It criticized the restriction of free movement for Sheth and his family members, including children, during the search.

The Court deplored the behavior of I-T inspector Amit Kumar, who served summons to Sheth’s associate at her residence.

The Court rejected the explanation for providing police protection as a “feeble excuse” and criticized the coercive actions towards the associate, including impounding mobile phones and restricting information during the search.

The Court underscored that such high-handed actions by the authorities lacked any justifiable explanation. It called for a formal apology to advocate Ms./Mrs. Patel, emphasizing the need to uphold citizen-centric and respectful search procedures.

The Court clarified that in this case, attorney-client privilege as defined in Section 126 of the Evidence Act does not apply. It stated that if a lawyer becomes aware of fraudulent or illegal activities by their clients after engagement, incriminating material can be used against third parties. However, if the lawyer possesses client documents before engagement, the Income Tax department cannot act based on such documents.

The Court concluded by urging officials to issue a formal apology to advocate Ms./Mrs. Patel, condemning the violation of basic human decency.

The ruling emphasizes the importance of maintaining a citizen-centric and respectful approach during search operations. The case was identified as SPECIAL CIVIL APPLICATION – No. 20187 of 2023, titled Maulikkumar Satishbhai Sheth vs Income Tax Officer, Assessment Unit, Ahmedabad.