TaxTMI 
TaxTMI 
1972 (11) TMI 13
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....colour, came from Jullundur side. The car was stopped by Balwant Singh and his party. Three persons stated in the car were Ramesh Chander, Subash Chander and Radha Kishan. The car was driven by Charan Singh, driver. Ramesh Chander, writ-petitioner, was holding one bag in his one hand and another small bag was in his other hand. Balwant Singh asked him as to what was contained in the bags. Ramesh Chander disclosed that the big bag contained currency notes worth Rs. 1,61,000 and the small bag contained the business papers. Balwant Singh interrogated him in order to satisfy as to how he was in possession of such a big amount, but no satisfactory explanation could be given by Ramesh Chander. Balwant Singh then took the car and its occupants to the Police Station, Kartarpur, where be contacted the Income-tax Officer, Jullundur, on phone in order to find out whether Ramesh Chander was a man of such big means or not. He was informed that Ramesh Chander was not a man of substance. He then rang up the Commissioner of Income-tax, Patiala, and informed him that a sum of Rs. 1,61,000 had been recovered from Ramesh Chander. The details of the talk which took place between Balwant Singh, traffic....
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.... from Patiala to Jullundur by car and were entrusted to the respective Income-tax Officers, referred to above, who were authorised to conduct the searches. In obedience to the search and seizure warrant, Shri P. R. Gupta, Income-tax Officer, Jullandur, seized a sum of Rs. 1,61,000 which was lying on the table in the office of the S. H. O., Police Station, Kartarpur, in the presence of Ramesh Chander and other police officers. He also seized the ledger and other account books which were found in another bag. The statements of many persons including those of Ganga Krishan Shukla, Charan Singh,, driver, Subash Chander, etc., etc., were recorded by the income-tax authorities. The copies of the statements of Ganga Krishan Shukla, Charan Singh, driver, and Subash Chander are annexures " B" " C " and " D " respectively with the writ petition. After this was done, Balwant Singh, traffic inspector, then recorded a ruqa at 8-00 p.m. on the basis of which the first information report against Ramesh Chander was recorded at 8-05 p.m. in Police Station, Kartarpur, under sections 411, 413 and 414 of the Indian Penal Code, and sections 4, 5 and 6 of the Foreign Exchange Regulation Act, 1947, and ....
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....pose of section 132 of the Income-tax Act. The learned judge following the two authorities, one of the Allahabad High Court in Moti Lal v. Preventive Intelligence Officer, Central Excise and Customs, Agra, and the other of the Calcutta High Court in Laxmipat Choraria v. K. K. Ganguli, came to the conclusion that since the money and the account books were known to be at a place in the custody of another department of the Government, that is, Shri Balwant Singh, traffic inspector of the Punjab Police, the warrant for search and seizure could not be issued. The learned judge, therefore, recorded the following findings : " I, therefore, hold that, in this cam, 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 ....
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....e belief as envisaged under section 132(1) of the Income-tax Act. (2) That the finding recorded by the learned single judge that when the search and seizure warrants were executed, Ramesh Chander was not in possession of the amount and the ledger and other account books and in fact it was the police who was in possession of the same, is incorrect both factually and in law and, therefore, the same be set aside. (3) That the finding of the learned judge that the articles to be searched and seized should be in concealed form and where the whereabouts of the articles to be searched and seized are already known, the search and seizure warrants cannot be issued, is incorrect. It is contended that the view taken by the learned single judge after following the authorities reported in Moti Lal's case and in Laxmipat Choraria's case that if the material which has to be seized under sub-section (1) of section 132 of the Income-tax Act is in possession of another department of the Government, no search and seizure warrants can be issued because the said articles which are sought to be searched and recovered are already in the possession of the Government department which could be made availa....
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....e 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 inventory of any such money, bullion, jewellery or other valuable article or thing ........" From a reading of this section it is obvious that before the search and seizure warrant can be issued by the Director of Inspection or by the Commissioner, there must be information in his possession and th....
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....ner cannot be doubted because it was not an unknown person or a person in the street who was giving information to the Commissioner. It was a police inspector giving information from the police station itself. After having had a telephonic talk with Balwant Singh, police inspector, the Commissioner called Shri Cheema, Income-tax Officer, and got recorded the following note : " One Shri Balwant Singh, traffic inspector, Police Station, Kartarpur, has given a ring to me. He has told that the police authorities have recovered a sum of Rs. 1,61,000 from Shri Ramesh Chander, son of Shri Dewan Chand Aggarwal of Tanda Road, Jullundur. I have reasons to believe that the aforesaid money has not been disclosed for the purposes of the Indian Income-tax Act, 1922, or the Income-tax Act, 1961. I have also reasons to believe that Ramesh Chander is in possession of books of accounts and documents which will be useful for the income-tax proceedings in his case and, if asked to produce them, he would not produce them. I, therefore, authorise Shri P. R. Gupta, Shri Nathu Ram and Shri Kuldeep Raj Chopra, Income-tax Officers, to take action as per authorisation issued in this behalf under section 13....
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.... inspector, first-hand information is not available because neither Balwant Singh nor the Commissioner was examined in this case at any stage. It is also pertinent to note that the order of the Commissioner referred to above clearly shows that he had the information that Ramesh Chander was also in possession of the books of accounts and other documents which will be useful in the tax proceedings in this case. In addition to this, the contents of the first information report, which was lodged by Balwant Singh, police inspector, are also to be taken into consideration, because the whole basis on which he apprehended Ramesh Chander and his companions is contained in the first information report itself and it was in this background that he had a telephonic talk with the Commissioner of Income-tax at Patiala. It is clearly mentioned in the first information report that Ramesh Chander, on interrogation, could not reply satisfactorily about the possession of the currency notes of such a huge amount. In addition to this, we have got the statement of Shri Cheema, Income-tax Officer, Patiala, who recorded the above referred to note on the dictation of the Commissioner. According to his stat....
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....son is in possession of money, bullion, jewellery or other valuable article or thing which represents undisclosed income or property. The condition precedent to the exercise of the power to issue authorisation for search and seizure is that the Director of Inspection or the Commissioner must have the requisite reason to believe in consequence of information in his possession. The power to authorise search and seizure is hedged in by the requirement of this condition precedent and it is only if this condition is fulfilled that the power can be exercised. Of course, it is for the Director of Inspection or the Commissioner to be satisfied that there is reason to believe and the court cannot sit in appeal over the decision of the Director of Inspection or the Commissioner regarding the existence of the reason to believe nor can the court examine the adequacy of the grounds on which the reason to believe entertained by such officer is based. But there is a limited area within which the reason to believe entertained by the Director of Inspection or the Commissioner can be scrutinised by the court. This area now stands clearly demarcated by several decisions of the Supreme Court and its e....
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....Court make it clear that if the grounds on which ' reason to believe ' is founded are not relevant to the subject-matter of the inquiry or are extraneous to the scope and purpose of the statute or are such as no rational human being can consider connected with the fact in respect of which the belief is to be entertained so that no reasonable person can come to such a belief, the exercise of the power would be bad. The court would say in such a case that the reasons for the belief have no rational connection or relevant bearing to the formation of the belief and the belief is, therefore, not truly held but it is merely a pretence. It would, therefore, be seen that though the concept denoted by the words ' reason to believe ' is a subjective one, there is a limited area of objectivity within which the court can operate." I am in respectful agreement with the observations of the learned judges of the Gujarat High Court referred to above. If the Director of Inspection or the Commissioner is satisfied that there is a " reason to believe " that a person is in possession of money, etc., which is undisclosed for the purposes of the Income-tax Act, and the said belief is based on the infor....
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....en Balwant Singh, Police Inspector, gave information to the Commissioner and at the time when the search and seizure warrants were executed. I am inclined to agree with the view taken by the learned single judge that even though the first information report was registered at 8-05 p.m. still the police had already arrested Ramesh Chander and his companions and had taken possession of the amount and the account books. The contention of Mr. Awasthy, the learned counsel for the appellants, that even though Ramesh Chander was detained by the police yet it has to be held that he was not arrested and the amount in question and the account books continued to be in the possession of Ramesh Chander, cannot be accepted in view of the overwhelming evidence on the record to the contrary. Shri Balwant Singh, Police Inspector, had information that some persons, in a white coloured Ambassador Car, were coming and were in possession of a huge amount which related to a compensatory racket and the same was to be paid to the persons in the area of Police Station, Kartarpur, whose relations were living in England. It was in consequence of this information that he stopped the car in which Ramesh Chander....
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....f Rs. 1,61,000. Ultimately a case under sections 411, 413 and 414 of the Indian Penal Code and sections 4, 5 and 6 of the Foreign Exchange Regulation Act, 1947, and Foreign Exchange Regulation (Amendment) Act, 1957, was also registered. Therefore, Balwant Singh, in these circumstances, cannot be said to have not arrested Ramesh Chander and taken into possession the currency notes and the account books. It is provided in section 46 of the Code of Criminal Procedure that in making an arrest the police officer shall actually touch or confine the body of the person to be arrested, unless there be a submission to the custody by word or action. In this view of the matter, when the car was stopped and the police officer took into possession the two bags and took Ramesh Chander and his companions to the Police Station, there is no doubt left that Balwant Singh had effected the arrest of Ramesh Chander and his companions. Section 60 of the Code of Criminal Procedure provides that if a police officer arrests a person without a warrant he shall without unnecessary delay and subject to the provisions contained as to bail, take or send the person arrested before a magistrate having jurisdictio....
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.... Income-tax Officer. Mr. Awasthy, the learned counsel for the Commissioner, places main reliance on Harbansingh Sardar Lanasingh v. State in support of his contention and contends that Ramesh Chander and his companions were under surveillance when they were being detained by Balwant Singh and the other police party and had not actually been arrested and, therefore, he contends that the possession of the currency notes and the account books continued to be with Ramesh Chander during the period of detention when he was not taken into custody legally by Balwant Singh. No doubt the authority relied upon by the learned counsel supports his argument, but I am inclined to take a different view of the matter. Firstly, the question before the Bombay High Court in that case was as to whether the statement made by the accused persons was hit by section 24 of the Evidence Act and while examining this question the finding that the accused were not legally arrested and were only detained was recorded and this question had, not arisen in this case. In that case, the Bombay High Court was considering the provisions of the Evidence Act vis-a-vis the provisions of the Code of Criminal Procedure. As....
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....self submits to the police officer, in that case, the police officer may not actually touch or confine the body of that person. In that case also, the arrest will be complete. To hold that a police officer can detain a person against his will, without arresting him, would be against the provisions of the Code of Criminal Procedure itself and would be against the provisions of the Constitution. The liberty of a citizen in a free country is all important and the same can only be jeopardised in accordence with the provisions of law. If a person has to be detained, he can only be detained by the authority of law and to presume that the police officer has got power to detain a person otherwise than by effecting his arrest, even though no provision of law authorises him to do so, would be against the fundamentals. Keeping in view the facts of the present case, it is apparent that Balwant Singh, police inspector, had information that the persons in the car were coming with huge currency notes and that the said persons were involved in a compensatory racket which fact and the information were corroborated when he (Balwant Singh) found Ramesh Chander in possession of the currency notes wort....
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....Commissioner has got the information that 'A' is in possession of currency notes which relate to undisclosed income and he is also informed about the exact amount and the exact place where the said currency notes are being kept and the Commissioner issues search and seizure warrants in consequence of the said information which he believes to be true, if the contention of Mr. Kaushal is accepted, then it would mean that if after the search and seizure the exact amount is recovered from the same place regarding which the Commissioner had the information, in that case, the search and seizure would be bad in law, but if the amount is not exactly the same or the place is not the same as was the information with the Commissioner, in that case, the search and seizure warrants will be good. By glancing through the provisions of section 132 of the Income-tax Act, it is apparent that it is not necessary that the articles to be searched and seized under this section should be in a hidden form or that the exact place where the articles are being placed should not be known to the Commissioner. The word " search " is used because, in the nature of the things, in a given case, when section 132 of....
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.... to the Collector of Customs, on sufficient cause being shown, to extend the period not exceeding another six months. The various provisions of the Customs Act referred to above clearly go to show that when the customs authorities seized certain goods under Chapter XIII, the same are either liable to confiscation if they are proved to be liable to confiscation or in case it is found that the provisions of law were not violated by the owner of the said goods, the same have to be returned to the persons from whom they were seized. Therefore, the view that the income-tax department could take possession of the articles seized by the customs department by merely writing a le tter of request is not correct. The customs authorities seized the goods under the statutory provisions of the Customs Act and they are bound to comply with, the provisions of the said Act which also provides the mode of disposal of the goods so seized either by way of confiscation or by returning the same to the person from whom they were seized. The customs authorities are bound by the mandate of the Customs Act, and are also bound to deal with the goods so seized in accordance with the provisions of that Act. No....
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....y law to deal with the said articles so recovered in accordance with the mandate of the respective statutes and to hold, while interpreting section 132 of the Income-tax Act, that the income-tax authorities could search and seize the articles from the possession of the other statutory authorities would be unreasonable because that will be bringing into conflict the two sets of statutes. For instance, if Balwant Singh, as a police officer, is duty bound to deal with the goods so recovered in accordance with the Code of Criminal Procedure and if it is held that the income-tax authorities could issue search and seizure warrants under section 132 of the Income-tax Act, in that case, there will be a clear conflict in the provisions of the Code of Criminal Procedure, which enjoin upon Balwant Singh, police inspector, to produce the case-property in court, and in the provisions of section 132 of the Income-tax Act, which empower the income-tax authorities to finally seize the amount for being deposited for unpaid income-tax. In such an exigency, the police officer who is duty bound to produce the amount so recovered in court under the mandate of the Code of Criminal Procedure would be obs....
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.... have been mentioned in other records of another department, in that case proceedings under section 69A can be taken and the income-tax authorities cannot be said to be prejudiced in any manner. For instance, as in the present case, the police record would show that a sum of Rs.1,61,000 was recovered from Ramesh Chander on August 6, 1971, if Ramesh Chander is tried and he is acquitted and ultimately this amount is returned to Ramesh Chander by the orders of the court, it will be open to the income-tax authorities to take proceedings under section 69A of the Income-tax Act against Ramesh Chander or any other person claiming this amount so as to explain away this amount for the purposes of the Income-tax Act, and if it is found that this amount had not been assessed to income-tax and is related to the undisclosed income, income-tax can be levied on this amount and recovery made under the provisions of the Income-tax Act. If, on the other hand, Ramesh Chander is not challaned and the police finds that there is no prima facie case to prosecute him and returns the amount to him as the same was recovered from him, even in that case the records of the police would show that Ramesh Chander....
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....ants issued by the Collector of Customs for legalising the possession of the account books, though the account books had already been recovered by the customs department itself, were validly issued. This authority would only show that the argument that if the articles are already known and not hidden, no search and seizure warrants can be issued is fallacious, at which conclusion I have already reached. In that case, there was no statuory conflict coming in between the authority who had earlier seized the account books and the authority who subsequently seized the same by issuing the seizure warrants as both the authorities belonged to the customs department. Therefore, this authority cannot be taken to lay down that the customs authorities could seize the account books which were already in possession of another statutory authority under the provisions of a particular statute. There is no merit in the last contention of Mr. Awasthy. The provisions of sub-section (9) of section 132 of the Income-tax Act provide in clear terms that the person from whose custody any books of account or other documents are seized under sub-section (1) of this section may make copies thereof or take e....
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....assing of the final order, because the final order is passed on the basis of the account books so seized from the assessee of which the assessee was not allowed to take the extracts and the copies thereof. The contention of Mr. Awasthy that the assessee could not explain the source of Rs. 1,61,000 which amount was found in cash with Ramesh Chander and, therefore, he has not been prejudiced, is without any merit. In the order passed under sub-section (5) of section 132 of the Income-tax Act, the assessee has been assessed to the tune of Rs. 8,53,190, which assessment is based on the entries made in the account books. Therefore, this contention is without any merit. Therefore, the finding arrived at by the learned single judge that the provisions of sub-section (9) of section 132 of the Income-tax Act have been violated and the assessee was prejudiced has to be affirmed but, in my opinion, even if this finding is maintained, and if the search and seizure warrants were held to be with jurisdiction, the order under sub-section (1) of section 132 of the Income-tax Act cannot be quashed on the ground that the final order under sub-section (5) was not in accordance with the provisions of ....
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....hearing the aggrieved party, to pass such orders as it may deem fit. Therefore, the Board in its discretion can, in proper cases, remand the case after setting aside the final order passed under sub-section (5) of section 132 of the Income-tax Act and direct the Income-tax Officer to pass the order afresh. If this power can be exercised by the Board, it is not understood as to why this court under its jurisdiction under articles 226 and 227 of the Constitution of India cannot issue directions which are just and proper, in this case. Therefore, if I had come to the conclusion that the search and seizure warrants issued under subsection (1) of section 132 of the Income-tax Act were valid, I would have certainly issued directions to the Income-tax Officer to pass the final order under sub-section (5) of section 132 of the Income-tax Act afresh after allowing the assessee an opportunity of getting the extracts and copies of the account books, but since I have come to the conclusion that the search and seizure warrants issued under sub-section (1) of section 132 of the Income-tax Act were illegal, firstly, because the search and seizure warrants were issued in the name of Ramesh Chander....