Telangana high court quashes 20-year-old I-T search & seizure case against liquor contractor

Hyderabad: Bringing an end to a 20-year-old financial dispute, the Telangana high court has quashed the search and seizure proceedings initiated by the income tax (I-T) department in April and June 2005 against a liquor contractor.Finding that the department’s actions were riddled with contradictions and legally untenable, the court highlighted numerous discrepancies and conflicting statements, and granted the petitioner consequential relief.The petitioner, a liquor contractor, had secured five demand drafts (DDs) worth Rs 16.4 lakh to apply for a liquor licence for the excise year 2005–06. Following the cancellation of the excise policy by the Andhra Pradesh high court, the drafts were returned to his account.

However, in April 2005, the I-T department restrained the petitioner’s bank account, and in June 2005, it conducted a search and seizure operation on his account at Andhra Bank’s Uppal branch.Challenging the restraining order and the subsequent search, the petitioner approached the court in 2006.During the hearing, which concluded recently, the court noted that while the DDs issued by the petitioner amounted to Rs 16.4 lakh, the I-T authorities recorded a seizure of only Rs 12 lakh, leaving the remaining Rs 4.4 lakh unexplained.

Despite acknowledging a seizure of Rs 12 lakh from the bank, the authorities issued a notice directing the petitioner to remit the same amount and further threatened to impose a penalty for non-compliance, an action the court described as ‘illogical’.The court also questioned the delay of one-and-a-half months between the authorisation of the search (April 12) and its execution (June 8) on the petitioner’s account, stating that it lacked justification.It held that the I-T department had failed to provide any credible or plausible explanation for these inconsistencies and ruled that the proceedings do not give confidence to accept them at face value and declared them illegal and bad in law. Additionally, the court said that the alleged recovery and contradictions in the documentation issued by the authorities themselves rendered the entire search and seizure proceedings suspicious.