TMI Blog1974 (1) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... 4, to search and seize the money of Messrs. Bafna Textiles, C. S. Street, Bangalore, which represents the income which has not been disclosed for the purpose of the Income-tax Act and which he has reason to suspect is to be found at the office of the Assistant Collector of Central Excise, Salem. In response to the aforesaid warrant of authorisation, the authorised officer seized Rs. 1 lakh from the office of the Assistant Collector of Central Excise, Salem. It is not disputed that, though the cash of Rs. 1 lakh was seized by the excise authorities from the person of Shri Mahendra Kumar, the said amount belongs to the petitioner. The petitioner's advocate, Shri J. Jeshtmal, was addressed a letter by the Assistant Collector of Central Excise, Salem Division, Salem-7, on the 14th of December, 1972, whereby he was informed that Rs. 1 lakh seized from Shri Mahendra Kumar, Bangalore, by the Central Excise Officers of Salem, has since been transferred to the Commissioner of Income-tax, Bangalore, on a warrant issued by him and that, therefore, further correspondence in that behalf should be made with the income-tax department, Bangalore. The Income-tax Officer, Assessment-5, Circle II, Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), he may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer (hereinafter referred to as the authorised officer) to-- (i) enter and search any building or place where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search ; (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in clauses (ii) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized : Provided that if, after taking into account the materials available with him, the Income-tax Officer is of the view that it is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized: Provided further that where a person has paid or made satisfactory arrangements for payment of all the amounts referred to in clauses (ii) and (iii) or any part thereof, the Income-tax Officer may, with the previous approval of the Commissioner, release the assets or such part thereof as he may deem fit in the circumstances of the case." The warrant of authorisation was issued in this case by the Commissioner of Income-tax, Mysore at Bangalore, on 8th December, 1972, under section 132(1)(i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have reason to believe on the information in his possession, that the person is in possession of money, etc. (2) That the said money, etc., represents wholly or partly income or property which has not been disclosed for the purpose of the Indian Income-tax Act, 1922, or the Act. It is, therefore, clear that the seizure contemplated is of that money which represents either wholly or partly income which has not been disclosed for the purpose of the Income-tax Act. It is also clear that the money sought to be seized must be in the possession of the person who has committed a default by not disclosing the same for the purpose of the Act. It is only against such person that an order under section 132(5) of the Act can be made. If, therefore, a person who has not disclosed particular income or property for the purpose of the Act, is not in possession of such undisclosed money, the Commissioner cannot issue a warrant of authorisation under section 132(1)(c) of the Act. It is, therefore, necessary for the Commissioner, before issuing a warrant of authorisation, to be satisfied on the basis of the information he has, that the defaulting person is in possession of the money in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontrol the use and possession of the money seized. During the subsistence of the seizure, the petitioner lost the right to control the use and possession of the said money. As long as the money stood seized by the excise authorities, the petitioner could not command the said money or use or possess the same. Hence, it is impossible to take the view that even after the seizure of the money by the excise authorities, the possession of the money still continued with the petitioner. I am fortified in this view of mine by the observations of the Supreme Court in Durga Prasad v. H. R. Gomes, Superintendent (Prevention), Central Excise, Nagpur. Though that was a case in which the Supreme Court was construing the provisions regarding seizure under the Customs Act, the said decision is of valuable assistance for understanding the effect of seizure. In paragraph 8 of the judgment, the Supreme Court has observed that the legal effect of the order of seizure was the transfer of the legal possession to the person effecting the seizure. It is further laid down that such a change of possession need not necessarily involve a physical transfer of possession and that as a matter of law on and from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r conferred by section 132 is not an overriding power which can be exercised notwithstanding anything contained to the contrary in any other law. The exercise of power under section 132 cannot, therefore, come in the way of exercise of powers by another authority under another set of laws under which the money had already been seized. Similar situations may arise when the money or articles are attached and produced before courts in criminal cases. If before the criminal case is disposed of, the authorities under the Act invoke their powers under section 132 of the Act and seize the money or articles attached and produced in the court and pass orders under section 132(1) and (5) of the Act, the same will have the effect of interfering with the course of administration of criminal justice. A construction which results in such an absurd situation must, at all events, be avoided. This is another reason which compels me to take the view that money or articles already seized by another authority under another law cannot be seized under section 132(1) of the Act, inasmuch as during the subsistence of such seizure the legal possession vests with the authority which had seized the same and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Magistrate under section 523 of the Code. In that case, currency notes were seized by the police on suspicion that he had committed a cognizable offence. He was arrested and produced before the Magistrate of Madras along with the amount seized. The Inspector of Police having found on investigation that no cognizable offence has been made out, dropped the proceedings after intimating the income-tax department. The Income-tax Commissioner empowered the authorised officer to search and seize the amount under section 132(1) of the Act. In pursuance of the said authorisation, the Income-tax Officer filed a petition in the Court of the Magistrate claiming to be the person entitled to the amount in court deposit and requesting the court to hand over the same to him. The Magistrate passed an order under section 523 directing the delivery of the amount to the Income-tax Officer. It is the said order that was challenged in revision before the High Court. The High Court of Madras came to the conclusion that if the Income-tax Officer is clothed by statute with the power to seize the amount in court deposit, he would be a person entitleed to possession of the amount because seizure is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Collector of Customs must be held to be for and on behalf of the assessee so as to attract section 132 of the Act. The facts of that case are clearly distinguishable. That was a case where the notes seized under the Gold Control Act were ordered to be released as it was found that there was no contravention of the Gold Control Act. It is after such an order releasing the seized notes from seizure that the provisions of section 132(1)(c) of the Act were invoked. It is in these circumstances that it was held that though the notes were in the immediate possession of the Collector of Customs and Central Excise, they were held for and on behalf of the petitioner. But, in the present case, it is not the case of the revenue that any order releasing any money seized by the excise authorities was passed on the ground that there has not been any contravention of law justifying further retention of the money seized. For the reasons stated above, I hold that the seizure of the cash of Rs. 1 lakh by the income-tax department under section 132(1)(c) of the Act is illegal and invalid, as the said amount was not in the possession of the petitioner, it being in the legal possession of the exc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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