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TMI Blog1972 (5) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... n Ambassador car which was stopped by Balwant Singh, Traffic Inspector of Police, near Kartarpur at about 11 a.m. Balwant Singh recovered two bags from the car one of which contained currency notes of the value of Rs. 1,61,000 and the other contained a ledger book and some other documents. He took the occupants of the car along with the car and the recovered bags to the police station, Kartarpur and got into touch with the Income-tax Officers at Jullundur and the Commissioner of Income-tax at Patiala on phone. The Commissioner of Income-tax issued warrants of authorization empowering Sarvshri Nathu Ram, P. R. Gupta and Kuldip Raj Chopra, Income-tax Officers of Jullundur, to search and seize money, bullion, jewellery or other valuable articles or things and sent them through Shri J. S. Cheema, Income-tax Officer, Special Investigation Branch, in the staff car from Patiala to Jullundur. Shri J. S. Cheema, on arrival at Jullundur at about 5-30 p.m., was told by Shri Gujjar Mal and Shri G. S. Sandhu, Income-tax Officers, that Shri Nathu Ram, Income-tax Officer, had gone to the business premises of the petitioner-firms while Shri P. R. Gupta had gone to the police station, Kartarpur. Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order passed on October 22, 1971. Written statements have been filed on behalf of the respondents justifying the search, the seizure and the assessment order passed on October 22, 1971. The learned counsel for the petitioners has vehemently argued that the issuance of warrants of authorisation for search and seizure of the money, books of account and other documents was contrary to the provisions of section 132 of the Act, the relevant provisions of which are as under: " 132. (1) Where the Director of Inspection or the Commissioner, in consequence of information in his possession, has reason to believe that-..... (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such 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 (XI 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 ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, with the previous approval of the Commissioner, (i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him; (ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian Income-tax Act, 1922 (XI of 1922), or this Act; (iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in clause (a) of sub-section (1) of section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oses of sub-section (5), any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. Explanation 2.--In this section, the word, proceeding means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922 (XI of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year. " In view of these provisions, it has to be determined whether the Commissioner of Income-tax was justified in issuing the warrants of authorisation for search and seizure of the money and the documents, including the ledger book which were lying in the police station, Kartarpur. Before issuing the warrants of authorisation, the Commissioner of Income-tax dictated the following order to Shri J. S. Cheenia, as has been deposed to by Shri Cheema in his statement recorded on May 16, 1972: " One Shri Balwant Singh., Traffic Inspector, Police Station, Kartarpur, has given a ring to me. He has told that the police author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Balwant Singh handed over a memorandum at 8 p.m. on August 6, 1971, to the Station House Officer, Kartarpur, on the basis of which First Information Report was recorded in that police station. The date and hour of occurrence is mentioned as August 6, 1971, at 11 a.m. It is significant to note that Balwant Singh did not prepare this memorandum when he arrested the petitioner and detained his companions and the recovered articles at 11 a.m. although he had taken Ramesh Chander and his companions along with the two bags containing the money and the documents to the police station and lodged them in the office room of the Station House Officer. Evidently, he was waiting for some one from the income-tax office to arrive and tell him as to what should be done with the money, the ledger and the documents taken possession of by him. He had told the Commissioner of Income-tax on telephone that Rs. 1,61,000 had been recovered from Shri Ramesh Chander as that specific amount is mentioned in the order of the Commissioner of Income-tax. It cannot therefore, be said that the money bag was still in the possession of Ramesh Chander when Shri P. R. Gupta made the search and seized the bag conta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the illaqa of Kartarpur." (The memorandum and the First Information Report are in Gurmukhi and the above extract is the English rendering of the relevant portion thereof.) The above extract from the First Information Report shows that Balwant Singh, after in formation had been received from the informer, stopped the car of Ramesh Chander and took him and his companions with the car and all the articles found therein in his custody, but found that no offence had been committed by Ramesh Chander by being in possession of the money bag and the other bag containing his ledger book and other documements According to his own showing, he got into touch with the Income-tax Officer, Jullundur, and the Commissioner of Income-tax, Patiala, for seeking their advice as to what should be done in the case. He was evidently informed by those authorities that he should keep Ramesh Chander along with the bags containing and documents in his custody till warrant for search and seizure reached the police station in order to enable the Income-tax Officers to take possession of the recovered money and documents merits under those warrants. It was nothing but gross abuse of his position and powers as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r had evaded tax for the previous year or years, isussue the warrants of authorisation. But in the absence of any such information from the right quarters, it cannot be said that he had a genuine belief that Ramesh Chander had evaded the payment of the tax and the money recovered from him represented that income. It is nothing unusual for a businessman to have this much amount of money in his possession for the purpose of his business. There is no doubt left in my mind that the Commissioner of Income-tax issued the warrant of authorisation for search and seizure of the money and other documents solely with the purpose of obtaining possession of that amount, which possibly the police officer could not keep in his possession without registering a case for the commission of some offence against Shri Ramesh Chander. It is really curious that the said case was registered against him after the recovered money, the subject of the offence, had been allowed to be taken away by the Income-tax Officers. The provisions of section 132 of the Act were abused in this case. A reference may usefully be made to the decision of a Division Bench (Pathak and Gulati JJ.) of the Allahabad High Court in M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) which enables the authorised officer to break open the lock of any door, box, locker, safe, almirah or other receptacle when the keys thereof are not available. The power to seize, it is clear from clause (iii), is contemplated in the case of those articles or things found as a result of such search. In my opinion, the power conferred under section 132(1) is contemplated in relation to those cases where the precise location of the article or thing is not known to the income-tax department and, therefore, a search must be made for it, and where it will not be ordinarily yielded over by the person having possession of it and, therefore, it is necessary to seize it. If it is only such article or thing which is contemplated by section 132(1), then it is such article or thing alone which can be the subject of an order under section 132(3). I am unable to accept the contention on behalf of the income-tax department that section 132(3) will include a case where the location of the article or thing is known and where ordinarily theperson holding custody of it will readily deliver it up to the income-tax department. Such article or thing, I think, requires neither search nor seizure. U ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he law was satisfied, its substance was not. I hold that the order under section 132(3) was an order without the authority of law. It is urged on behalf of the income-tax department that the power exercised by the Commissioner of Income-tax under section 132(1) is administrative or executive in nature and it is not open to the court, especially in writ jurisdiction, to sit in judgment over the reasonableness of the belief of the Commissioner contemplated under that provision. We are referred to Income tax Officer, A-Ward, Agra v. Firm Madan Mohan Damma Mal and Income-tax Officer, Meerut v. Seth Brothers . It seems to me clear that this court has jurisdiction to consider whether on the material before the Commissioner of Income-tax it was at all reasonably possible to entertain the belief as to the existence of the circumstances mentioned in section 132(1) justifying a search and seizure. If upon that material it is not possible in any view of the matter to hold such belief, the matter falls clearly within the jurisdiction of this court. But if upon the material present before the Commissioner it is possible to believe that the considerations mentioned in section 132(1) exist and ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (5) of section 226 also to attach and sell movable property of the assessee. But that provision can be pressed into aid only after a regular assessment has been made and the assessee is in default or is deemed to be in default in respect of the tax liability due from him. Under subsection (5) of section 132, the assets can be put under distraint even before the final assessments are made and even before the assessee can be said to be in default. In other words, an action under sub-section (5) of section 132 really amounts to attachment before judgment. This is the vital difference between an action under section 132(5) and the one under subsection (5) of section 226. The consequences that ensue upon an action under section 132 are, indeed, drastic and extraordinary and, therefore, it becomes necessary to determine the exact scope of section 132, so that, if a case does not squarely fall under that section, the income-tax department should not be permitted to take recourse to it. There is one more distinction which may be pointed out here. When one closely looks at subsection (5) of section 132, one finds that it is confined to the assets which are seized as a result of search un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch ...... money, bullion, jewellery, or other valuable article found as a result of such search '. In other words, under section 132, the power to search and seize go together. If no search is called for, no seizure can be made, whether the seizure is actual under sub-clause (iii) of clause (c) of sub-section (1) of section 132 or by way of attachment as contemplated by sub-section (3) of that section. An order of attachment under sub-section (3) of section 132 cannot, therefore, be passed without taking recourse to section 132(1). It follows, therefore, that a search must be carried out under section 132(1) before an order under sub-section (3) can be passed. This explains the reason why the department issued a warrant of search of the premises of the Assistant Collector, Central Excise, Agra, in respect of the silver which had been recovered by the excise department from the assessee's possession and which was lying in the custody of the Assistant Collector, Agra. The department's anxiety obviously was to seize the silver and to utilize it towards the payment of the tax liability of the assessee and not merely to permit the excise department to retain the silver in its custody as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead of saying the same thing in my own words. A learned single judge of the Calcutta High Court in Laxmipat Choraria v. K. K. Ganguli considered the point whether there could have been an order under section 132 for seizing the goods of the petitioner in that case from the custody of the customs department. After setting out the various sub-sections of section 132, the learned judge observed as under : " The question is, at the relevant time, that is to say when the authorisation was issued, namely, 10th February, 1967, in whose possession were the moneys, goods or books in question. The expression possession has not been defined in the Act. Possession is a word of ambiguous meaning and its legal sense does not always coincide with the popular sense. Reference may be made to Halsbury's Laws of England, volume 29, 3rd edition, articles 1720-1735, pages 366 to 371. Possession again may not always be synonymous with manual detention or physical retention of the goods or moneys. Law dictionaries and text books are unanimous that the expression is incapable of an exact definition. Without however entering into the complexities either of language or of jurisprudence and having regard t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition that the income-tax department which is another department of the Union of India had to be armed with authority to take forcible custody from another department of the same Government or had to be armed with authority to gain custody from an unwilling person. It would be wholly inappropriate, in my opinion in the context where one department of the Government takes the goods or the documents or the monevs from another department of the same Government to use the expression ' seizure '. Having regard to the context in which the expression ' possession ' and ' seizure ' have been used, I have come to the conclusion that there cannot be an order under section 132 in respect of goods or moneys or papers which are in the custody of one department of the Government under a legal authority. In the premises the warrant of authorisation issued in this case on the 10th February, 1967, was without jurisdiction and invalid." In the present case, these observations also aptly apply if we substitute the " police officer " for " customs department ". As I have already pointed out above, Balwant Singh had informed the Commissioner of Income-tax that he had recovered a sum of Rs. 1,61,000 fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing or place and make a search where he has reason to believe that any books of account or other documents which in his opinion will be useful for, or relevant to, any proceedings under the Act, may be found. The officer making a search may seize any books of account or other documents and place marks of identification on any such books of account or other documents, make or cause to be made extracts or copies therefrom and may make an inventory of any articles or things found in the course of any search which in his opinion will be useful for, or relevant to, any proceeding under the Act, and remove them to the income-tax office or prohibit the person in possession from removing them. He may also examine on oath any person in possession of or control of any books of account or documents or assets. The section does not confer any arbitrary authority upon the revenue officers. The Commissioner or the Director of Inspection must have, in consequence of information, reason to believe that the statutory conditions for the exercise of the power to order search exist. He must record reasons for the belief and he must issue an authorisation in favour of a designated officer to search th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated was that Balwant Singh had informed him that a sum of Rs. 1,61,000 had been recovered from Ramesh Chander. No other reason has been stated and words of sub-section (3) of section 132 have been reproduced. No decision has been brought to my notice contrary to the decisions of the Allahabad and Calcutta High Courts referred to above, to the effect that if the money or the documents are known to be at a place in the custody of another department of the Government, the warrant for search and seizure can be issued, therefore, hold that in this case, the Commissioner of Income-tax had no jurisdiction to issue the warrant of authorisation for search and seizure of the money and the documents which had been recovered from Ramesh Chander, petitioner, by Balwant Singh, Traffic Inspector, and which were lying in the office room of the Station House Officer, Kartarpur. The proceedings for search and seizure were wholly illegal and void as the sole object of issuing the warrants of authorisation was to somehow obtain possession of the sum of Rs. 1,61,000 and the documents already recovered from Ramesh Chander by Balwant Singh without there being any basis for the belief that he had evaded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpleted within 90 days after getting the approval of respondent No. 1 on the basis of the material collected by respondent No. 3. On petitioner's own case the sum of Rs. 1,61,000 did not belong to the petitioner's firms but it was part of the amount of Rs. 1,73,000 entrusted to petitioner No. 1 by various Delhi parties for purchase of their goods. Thus, the pettionersdid not need any inspection of the seized material for a proper of the money. There was hardly any point in making full extracts from these books and documents except to delay the pending proceedings. Therefore, respondent No. 3 was justified in not acceding to the request of the petitioners." The order of assessment made on October 22, 1971, shows that the ledger book containing 251 pages, allegedly seized from Ramesh Chander in the office room of the Station House Officer, Kartarpur, was utilised for the purpose of assessment. From that book, the names of 10 debtors and three creditors were noted in the order. The amount due from the debtors is shown as Rs. 6,41,679 while the amount due to the creditors is shown as Rs. 17,489. The Motion Bench, while admitting the civil writ, had directid that the petitioner should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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