1966 (5) TMI 70 - HC - Indian Laws

Summary

Issues Involved:
1. Constitutionality of Section 132 of the Income-tax Act, 1961, under Article 14.
2. Jurisdiction of Income-tax authorities in light of the gold-bond scheme.
3. Territorial jurisdiction of the Commissioner of Income-tax (Central), Bombay.
4. Validity of searches and seizures under Section 132 and the Code of Criminal Procedure.
5. Authorization for transferring primary gold to Central Excise authorities.
6. Approval of searches by the Commissioner of Income-tax (Central), Bombay.
7. Seizure of debts and their valuation in estimating seized assets.
8. Disclosure of grounds or materials by the Income-tax Officer before making the impugned order.
9. Jurisdiction of Excise authorities under the Defence of India Rules.
10. Validity of seizure by Excise authorities.
11. Petitioner's right to tender gold under the Gold Bonds Scheme.

Detailed Analysis:

1. Constitutionality of Section 132 of the Income-tax Act, 1961, under Article 14:
The court held that Section 132 of the Income-tax Act, 1961, is not violative of Article 14 of the Constitution. The section provides specific guidance to Income-tax authorities for exercising their powers, particularly when a senior officer like the Director of Inspection or the Commissioner has reason to believe that the process under Section 131 would not yield the desired results. The court referenced similar judgments from the Calcutta and Punjab High Courts to support this view.

2. Jurisdiction of Income-tax authorities in light of the gold-bond scheme:
The petitioner claimed immunity from proceedings under the Income-tax Act due to an application made under the gold-bond scheme. However, the court found no credible evidence supporting the claim that the application was made on 18-11-1965, prior to the searches and seizures. The court noted inconsistencies and suspicious circumstances surrounding the application and concluded that the petitioner failed to establish a valid tender of gold.

3. Territorial jurisdiction of the Commissioner of Income-tax (Central), Bombay:
The court held that the Commissioner of Income-tax (Central), Bombay, had jurisdiction to issue authorization for searches at Ramgarh. The case of the petitioner was assigned to the Commissioner by the Central Board of Revenue, and this assignment included all proceedings under the Act. The court rejected the argument that the Commissioner's jurisdiction was limited to a specific territory.

4. Validity of searches and seizures under Section 132 and the Code of Criminal Procedure:
The court found that the searches and seizures were conducted in accordance with the law. The Commissioner had issued a proper authorization based on information in his possession, and the Income-tax Officer conducted the searches and seizures as per the authorization. The court dismissed the argument that the searches were invalid due to non-compliance with procedural requirements.

5. Authorization for transferring primary gold to Central Excise authorities:
The court held that the Income-tax Officer was not barred from transferring custody of the seized gold to the Excise authorities if required by law. The transfer did not affect the validity of the initial seizure or the subsequent proceedings under the Income-tax Act.

6. Approval of searches by the Commissioner of Income-tax (Central), Bombay:
The court found that the searches conducted by the Income-tax Officer were valid and did not require additional approval from the Commissioner beyond the initial authorization. The searches were conducted under proper authorization, and the procedures followed were in compliance with the law.

7. Seizure of debts and their valuation in estimating seized assets:
The court held that documents evidencing debts could be seized as they represent valuable articles or things. The Income-tax Officer was within his rights to consider these debts in estimating the undisclosed income. The court noted that the proceedings under Section 132 are preliminary and do not determine tax liability, which will be assessed in subsequent proceedings.

8. Disclosure of grounds or materials by the Income-tax Officer before making the impugned order:
The court found that the petitioner was aware of the grounds and materials on which the Income-tax Officer based the impugned order. The petitioner had been given multiple opportunities to respond to notices, and the order was not rendered invalid due to non-disclosure of specific grounds or materials.

9. Jurisdiction of Excise authorities under the Defence of India Rules:
The court held that the Superintendent of Central Excise, Jaipur, had the authority to seize the gold under the Defence of India Rules. The seizure was conducted in accordance with the rules, and the Excise authorities were within their rights to take possession of the gold.

10. Validity of seizure by Excise authorities:
The court found that the seizure by the Excise authorities was valid and conducted under proper authorization. The court dismissed the argument that the seizure was illegal due to non-compliance with procedural requirements.

11. Petitioner's right to tender gold under the Gold Bonds Scheme:
The court held that the petitioner was not entitled to tender the seized gold under the Gold Bonds Scheme. The gold had already been seized by the Excise authorities, and the seizure was valid. The court noted that the petitioner could not claim immunity under the scheme for gold that was no longer in his possession.

Conclusion:
The court dismissed both writ petitions, holding that the actions of the Income-tax and Excise authorities were valid and in accordance with the law. The petitioner was ordered to pay costs to the respondents.