TMI Blog1973 (11) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ections (3) and (5) of section 132 of the Income-tax Act, 1961 (hereinafter referred to as the Act), and the order of the Income-tax Officer dated June 5, 1972, under section 132(5) of the said Act and pray for the issue of a writ of mandamus directing the respondents to restore to the petitioners the 114 silver bars retained by the Income-tax Officer by his said order dated June 5, 1972. The facts which give rise to this writ petition may be briefly stated. In pursuance of an authorisation issued by the Director of Inspection (Investigation), New Delhi, under section 132(1) of the Act, searches were carried out on October 15, 1971, at the following places, namely:-- 1. Residence of Shri Pooran Mal, 12-K, Kamala Nagar, New Delhi-7, 2. Office premises of the firms where Shri Pooran Mal was stated to be a partner at A-14/3, Jamuna Bhavan, Asaf Ali Road, New Delhi, and 3. Office premises of M/s. Udey Chand Pooran Mal and M/s. Pooran Mal and Sons, 14/16, Popatwadi, Bombay-2, in which Shri Pooran Mal was stated to be a partner. Jewellery, cash and account books and other documents were seized from these premises. In addition, it was stated that 84 silver bars had been pledged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other material gathered by the Income-tax Officer during the said inquiry, he passed an order dated June 5, 1972, under section 132(5) of the Act again holding that the 114 silver bars belonged to Shri Pooran Mal, the individual, and not to the first petitioner-firm and estimating the undisclosed income of Shri Pooran Mal at Rs. 45,72,867 and calculating the tax liability of Shri Pooran Mal at Rs. 41,90,482. By the same order, he retained the 114 silver bars in his custody to meet the tax liability of Shri Pooran Mal, the individual. It is against this order of the Income-tax Officer that the petitioners have filed the present writ petition. The averments in the writ petition are to the following effect: The first petitioner is a firm carrying on, inter alia, the business of purchase and sale of silver bars in Bombay and in Delhi. It was constituted under an instrument of partnership dated October 19, 1970, and commenced its business with effect from October 1, 1970. The firm was registered with the Registrar of Firms, Bombay, and also with the sales tax department, Bombay. The firm had also applied for registration under the Act, but orders thereon had not yet been communicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the 114 silver bars pledged by these two firms with the banks were the property of the petitioner-firm and that these two firms had no interest or title in the said silver bars. Evidence was also produced before the Income-tax Officer to prove the purchase of these silver bars by the petitioner-firm from various parties. The 114 silver bars, therefore, were the property of the first petitioner-firm and not that of Shri Pooran Mal, the individual, and the order of the Income-tax Officer holding that these silver bars represented the undisclosed income of Shri Pooran Mal, the individual, and retaining the silver bars in his custody to meet the tax liability of Shri Pooran Mal, the individual, was, therefore, illegal. The several grounds on which the order of the Income-tax Officer was challenged by the petitioners will be referred to at the appropriate stage. In the reply filed by the respondents, certain preliminary objections were raised, namely, that the petitioners had an effective alternative remedy under section 132(11) of the. Act which they had not exhausted and further that disputed questions of fact were involved regarding the ownership of the 114 silver bars which coul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not that of Shri Pooran Mal, the individual. It was further stated that even if some of the facts were disputed, it was open to this court to decide those facts. It was denied that the order of this court dated April 6, 1972, authorised the Income-tax Officer to pass a fresh order under section 132(5) of the Act or that it conferred jurisdiction on him to pass such an order beyond the period prescribed under sub-section (5). With regard to the ownership of the 114 silver bars, the facts mentioned in the writ petition were reiterated and it was asserted that these silver bars were the property of the petitioner-firm. We shall first consider the preliminary objections raised on behalf of the respondents against the maintainability of this writ petition. The first objection was that the Act itself provided an effective remedy to the petitioners and that without exhausting such a remedy, the petitioners could not seek any relief under article 226 of the Constitution. Reference in this connection was made to sub-section (11) of section 132 of the Act under which any person objecting for any reason to an order made under sub-section (5), may make an application to such authority as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isputed questions of fact will not be decided by courts in proceedings under article 226 of the Constitution and it is only in exceptional cases that the court would decide such questions either on the evidence already on record or on the basis of fresh evidence recorded by it. In the present case, it may not be necessary for us to decide disputed questions of fact as the writ petition may have to be disposed of on some of the other legal questions raised by the petitioners. Yet another preliminary objection raised by the learned counsel for the revenue against the maintainability of this writ petition is that necessary and proper parties have not been impleaded. According to the learned counsel, Shri Pooran Mal, the individual, against whom the impugned order of the Income-tax Officer was passed, is a necessary party and failure to implead him is a fatal defect justifying the rejection of the writ petition on that ground alone. We are unable to accept this contention. Shri Pooran Mal is a partner of the petitioner-firm and even though the writ petition has been filed by the firm and one of the other partners, it must be deemed to have been filed on behalf of all the partners inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmissioner ; (ii) that the Income-tax Officer had no jurisdiction to pass the impugned order beyond the period prescribed under sub-section (5); (iii) that the material on record proved that the silver bars were the property of the petitioner-firm and not that of Shri Pooran Mal, the individual ; (iv) that even if the petitioner-firm was unable to explain the source of the funds for the purchase of the silver bars, such funds could be treated as the undisclosed income of the petitioner-firm ; and (v) that even on the basis of the finding that the funds for the purchase of the silver bars were provided by Shri Pooran Mal and Shri Pooran Mal was unable to explain the source of these funds, such funds could be treated as the undisclosed income of Shri Pooran Mal. But the silver bars which were purchased by the petitioner-firm with the funds provided by Shri Pooran Mal could not be treated as the property of Shri Pooran Mal ; they should be treated as the property of the petitioner-firm itself. With regard to the first ground on which the validity of the proceedings under section 132(5) of the Act is challenged, reference is made by the learned counsel for the petitioners, Mr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central Board of Revenue to issue any such directions, the Supreme Court held that the proceedings of the Collector of Central Excise were vitiated for that reason. The Supreme Court observed thus: " If the power exercised by the Collector was a quasi-judicial power as we hold it to be--that power cannot be controlled by the directions issued by the Board. No authority, however high placed, can control the decision of a judicial or a quasi-judicial authority. That is the essence of our judicial system ...... It is true that the assessing authorities as well as the appellate authorities are judges in their own cause ; yet when they are called upon to decide disputes arising under the Act they must act independently and impartially. They cannot be said to act independently if their judgment is controlled by the directions given by others. Then it is a misnomer to call their orders as their judgments; they would essentially be the judgments of the authority that gave the directions and which authority had given those judgments without hearing the aggrieved party. " In Sirpur Paper Mills Ltd. v. Commissioner of Wealth-tax it was found that the Commissioner of Wealth-tax while exer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer is satisfied that the assets which have been seized did not represent the concealed income of any person, it is open to him not to pass an order under sub-section (5) against any such person and his decision in this regard is unfettered. It is only when he comes to his own conclusion that the seized assets are not properly explained and that they represent the undisclosed income of any person that he has to seek the approval of the Commissioner for passing an order under sub-section (5) against such person. The provision regarding the previous approval of the Commissioner does not imply that the Commissioner can direct the Income-tax Officer to pass an order under sub-section (5) even if the Income-tax Officer is satisfied with the explanation offered by the person concerned. Any such direction if given by the Commissioner would not be under the provisions of sub-section (5) and such directions would be clearly illegal. In the present case, there is no allegation by the petitioners that the Commissioner gave any such directions to the Income-tax Officer. We may also notice the second proviso to sub-section (5) which requires that the Income-tax Officer should obtain the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seizure of the silver bars was made on October 15, 1971, and the impugned order was passed on June 5, 1972, i.e., more than 90 days after the seizure. But we have to take note of certain events which occurred between the date of the seizure and the date of the impugned order. There was an earlier inquiry by the Income-tax Officer under sub-section (5) and an order was passed on January 12, 1972, by the Income-tax Officer under sub-section (5). This order was challenged by the petitioners in this court in C.W. No. 82/72 and that writ petition was disposed of by Prithvi Raj J. by his order dated April 6, 1972. It would be necessary at this stage to reproduce that order: "After the writ petition was argued for some time, it was noticed that full opportunity was not given to the petitioner to substantiate his claim that the property does not belong to him as an individual but belongs to the firm, M/s Pooran Mal and Sons, Bombay. Mr. G. C. Sharma, learned counsel appearing for the respondents, fairly and frankly conceded that such an opportunity was not afforded to the petitioner. The parties are agreed that the impugned order be quashed and that the department be permitted to look ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld not confer jurisdiction on the Income-tax Officer to pass an order under sub-section (5) beyond the prescribed period even if the petitioners had consented to such an order being passed. It is no doubt true that there is no specific direction by this court in the order dated April 6, 1972, to pass a fresh order under sub-section (5) of section 132 of the Act. The court advisedly did not give any such direction but merely permitted the department "to look into the matter afresh", because the only order that the Income-tax Officer could pass under sub-section (5) would be to estimate the undisclosed income of the person concerned, to calculate the amount of tax on the income so estimated and to specify the amount that would be required to satisfy the existing tax liability and to retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the total tax liability of such person. If, on the other hand, the person concerned satisfies the Income-tax Officer that the seized assets do not represent his concealed income, then no order under sub-section (5) need be passed by the Income-tax Officer. Therefore, the court merely permitted the Income-tax O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... slature to extend the period prescribed in sub-section (5) of section 132 of the Act excepting in cases covered by Explanation 1. The period prescribed in sub-section (5) is not merely a period of limitation as is generally understood under the Limitation Act and to which section 5 of the Limitation Act could be applied. The period prescribed under sub-section (5) is more in the nature of the limits placed upon the jurisdiction of the Income-tax Officer to pass an order under sub-section (5). just as the Income-tax Officer has no jurisdiction to make an assessment under section 143 or 147 beyond the period prescribed under section 149 except in cases covered by sub-section (3) of section 153, the Income-tax Officer has no jurisdiction to pass an order under sub-section (5) of section 132 of the Act after the expiry of the period prescribed under that sub-section. Shri B. N. Kirpal, learned counsel for the revenue, contends that the order of this court dated 6th April, 1972, is in the nature of a mandamus issued by the court directing the Income-tax Officer to pass a fresh order under sub-section (5) of section 132 of the Act within a period of two months from the date of the orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f mandamus to a public authority to pass an order to the detriment of the subject even though such authority had omitted to pass such an order within the prescribed time. Further, we cannot construe the order of this court dated April 6, 1972, as a writ of mandamus issued to the Income-tax Officer to pass an order under sub-section (5) of section 132 of the Act against the petitioner-firm or against Pooran Mal, the individual. This order only permitted the Income-tax Officer to make a further inquiry under sub-section (5) in which he should give an opportunity to the petitioner-firm to place its case and to arrive at a decision within two months. It was left open to the Income-tax Officer to accept the evidence placed before him by the petitioner-firm in support of its case. It was also left open to the Income-tax Officer to pass an order under sub-section (5) against the petitioner-firm if he was not satisfied with the evidence placed before him by the petitioner-firm. But this would not amount to a writ of mandamus directing the Income-tax Officer to pass an order under sub-section (5) to the detriment of the petitioner-firm. Such a writ cannot be issued by this court. Therefor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Officer may be quashed and sought the permission of the court to pass a fresh order after giving an opportunity to the petitioners to place their case before the Income-tax Officer. It cannot be said that the learned counsel for the revenue was not aware of the period of limitation prescribed under sub-section (5). If it could be said that the revenue did not realise the implications of the concession made by their learned counsel, the same can be equally said about the petitioners. In any case, in the absence of clear indication about the petitioners' responsibility in inducing the court to pass an order which in law could not have the effect of extending the period of limitation prescribed under sub-section (5), it cannot be said that the petitioners have not approached this court with clean hands. As a result of the above discussion, it must be held that the Income-tax Officer did not have the jurisdiction to pass the impugned order dated June 5, 1972, beyond the period prescribed under sub-section (5) of section 132 of the Act and, as such, it is not a valid order and that order has to be set aside on this ground alone. In view of our above finding, it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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