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TMI Blog1973 (8) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... lieved that the moneys in the hands of Choraria represented the sale proceeds of smuggled goods. It appears that during the search the officers of the income-tax department were also present. On February 14, 1967, the income-tax authorities at Bombay served a warrant of authorisation under section 132 of the Income-tax Act, 1961, issued by the Commissioner of Income-tax, Calcutta. Under the authority of the said warrant issued by the Commissioner of Income-tax, Calcutta, the aforesaid sum of Rs. 42,744 was purported to have been seized by the income-tax authorities and was taken away by them from the customs authorities. Thereafter, on February 22, 1967, a notice was issued requiring Laxmipat Choraria to submit an explanation in writing as to the nature of possession and source of acquisition of the money seized by the income-tax authorities from the customs authorities at Bombay. This notice was issued under section 132(5) of the Income-tax Act, 1961. An answer to this notice was sent by the authorised representative on behalf of Laxmipat Choraria stating that the said notice was issued without jurisdiction because such a notice could be issued only if there had been a seizure und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922, or under this Act, or (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, 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, bulli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 .... (7) If the Income-tax Officer is satisfied that the seized assets or any part thereof were held by such person for or on behalf of any other person, the Income-tax Officer may proceed under sub-section (5) against such other person and all the provisions of this section shall apply accordingly ..... (9) The person from whose custody any books of account or other documents are seized under sub-section (1) may make copies thereof or take extracts therefrom in the presence of the authorised officer or any other person empowered by him in this behalf, at such place and time as the authorised officer may appoint in this behalf. (10) If a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a case where it may not be practicable for the authorised officer to seize the books of account, other documents, money, bullion, etc., and it empowers the authorised officer to serve an order on the owner or the person who is in immediate possession or control of such books of account, or documents, money, bullion, etc., not to remove, part with or otherwise deal with it. The owner or the person in whose custody the books of account or other documents, etc., have been kept may not be available for being served with an order contemplated in sub-section (3) and the said sub-section makes provision for the order to be served upon the person who is in immediate possession or control thereof. Similarly, sub-section (9) gives the person from whose custody any books of account or other documents have been seized a right to make copies thereof or take extracts therefrom in the presence of the authorised officer. Under sub-section (10) a person legally entitled to the books of account or other documents seized under sub-section (1) has been given a right to make an application to the Board asking for the return of the seized books of account if he has any objection to the approval given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. In every such case the police officer seizing the things shall send written notice of their seizure and detention to the nearest customs house ; and immediately after the dismissal of the complaint or the conclusion of the enquiry or trial, he shall cause such things to be conveyed to, and deposited at, the nearest customs house, to be there proceeded against according to law." The relevant portion of section 178A of the Sea Customs Act, 1878, is as follows : " Where any goods to which this section applies are seized under this Act in the reasonable belief that they are smuggled goods, the burden of proving that they are not smuggled goods shall be on the person from whose possession the goods were seized ...... Section 178 of the Act which empowers the Customs Officer to effect a seizure of goods suspected to be smuggled goods provides : " 178. Any things liable to confiscation under this Act may be seized in any place in India either upon land or water, of within the Indian customs waters, by any officer of customs or other person duly employed for the prevention of smuggling." In the case before the Supreme Court it was held that a seizure under the Act is one for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation to the Superintendent of Customs and Central Excise, Nagpur, to seize and take possession of all gold ornaments, etc., which were believed to have been kept in contravention of the Gold Control Rules and also account books and documents from the premises of the appellant in that case. The documents were seized by the Superintendent of Customs and Central Excise and after a few days these were sent to Delhi temporarily for translation by the departmental Hindi officer. While the documents were at Delhi the Collector of Customs, Nagpur, made an order of seizure on 6th September, 1963, under section 110(3) of the Customs Act, 1962. The first authorisation by the Assistant Collector of Customs was granted under rule 126-L(2) of the Defence of India (Amendment) Rules. The Collector of Customs made an order of seizure on 6th September, 1963, and thereafter he made a second order of seizure on 11th September, 1963, with regard to the same documents, on the ground that he was at first under the impression that the documents were under the custody of the Superintendent of Customs, but later on be came to learn that the Superintendent of Customs had already made over documents to the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rector of Inspection or the Commissioner has reason to believe that .... any person is in possession of any money, bullion, etc. " In the present case at the time when the warrant of authorisation was issued, it was known to the Commissioner of Income-tax who issued the warrant of authorisation that the books of account, other documents, money, bullion, etc., in respect of which the warrant of authorisation was issued had already been seized by the customs department. Could it be said in such a case that the Commissioner of Income-tax had reason to believe that Laxmipat Choraria was in possession of such money, bullion, jewellery, etc.? In our view the answer must be in the negative. Because, as soon as there was a valid seizure, by the customs authorities, Laxmipat Choraria could no longer be said to be in possession of the money in question, as the very concept of seizure involves a deprivation of possession. In the facts of the present case, therefore, it cannot be said that the Commissioner of Income-tax had or could, have reason to believe that Laxmipat Choraria was in possession of the money. Once there was a valid seizure of the money by the customs deparatment t Choraria wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gain seize it through another department, namely, the income-tax department. Let us now turn to the provisions of section 132 of the Income-tax Act, 1961, to find out whether that section contemplates seizure of money as in this case. Sub-section (5) of section 132 empowers the Income-tax Officer to make certain orders in respect of the money, bullion, etc., which has been seized under sub-section (1), after affording a reasonable opportunity to the person concerned. Clause (iii) of that sub-section refers to the existing liability in respect of which such person is in default or deemed to be in default, and authorises the Income-tax Officer to retain such portions of the seized asset as are sufficient to satisfy the amounts referred to in clauses (ii) and (iii) and to release the balance to the person from whose custody it was seized. This obviously means that if the person from whose possession money, bullion, etc., was seized is not found then it is to be returned to the person from whose custody it was seized. The second proviso to section 132(5)(iii) provides that if a person has paid or has made satisfactory arrangement for payment of all the amounts referred to in clauses ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore us is the decision in Motilal v. Preventive Intelligence Officer, Central Excise and Customs, Agra. In that case the customs department seized some silver bars, pieces of silver, and currency notes belonging to the petitioner. Thereafter, the Commissioner of Income-tax, Agra issued a warrant of authorisation on the strength of which the authorised officer served an order under section 132(3) upon the Assistant Collector, Customs and Central Excise, Agra, not to remove, part with, or otherwise deal with the silver seized by the customs authorities. On an application under article 226 of the Constitution praying for a direction upon the customs authorities to return the silver to the petitioner, the Allahabad High Court held that the warrant of authorisation issued by the Commissioner of Income-tax could not in law include the authority to search for and seize goods already with the Assistant Collector of Customs and Central Excise. That case, therefore, does not help the appellants in any way. The next case relied upon by the appellants in support of the proposition that even if the documents are in possession of the Central Government the authority under a particular statute h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income-tax Act. The facts of that case were thatthree motor vehicles belonging to the respondent were confiscated in 1947 by the customs officer for the alleged violation of customs laws. The order of confiscation was ultimately set aside in 1952 and the vehicles were ordered to be returned to the respondent. The vehicles were kept in an open space and left uncared for with the result that they had deteriorated. The vehicles were sold as unclaimed property by a Magistrate under section 523(9) of the Code of Criminal Procedure for Rs. 2,213 and odd. After the order of confiscation of the vehicles had been set aside, the respondent applied for return of the vehicles but was told that those had been sold and the sale proceeds paid to a creditor of the respondent. Thereupon the respondent brought a suit against the State for the return of the said vehicles or in the alternative for their value. The trial court passed a decree against the State for Rs. 26,797 and odd. On the authority of that case it was sought to be argued that after the seizure of goods is made under the provision of a particular statute the authority seizing the goods is the bailee in respect of those goods and, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y or the obligation of the Government to return it. The order of disposal in any event was obtained on a false representation that the property was an unclaimed property. Even if the Government cannot be said to be in the position of a bailee, it was in any case bound to return the said property by reason of its statutory obligation or to pay its value if it had disabled itself from returning it either by its own act or by any act of its agents or servants. In these circumstances it is difficult to appreciate how the contention that the State Government is not liable for any tortious act of its servants can possibly arise." On the basis of the aforesaid decision we are unable to accept the broad proposition as contended for by learned counsel on behalf of the appellants that, as soon as there is a seizure of goods by a department of the Government in pursuance of some statutory provision the Government became the bailee in respect of those goods and, therefore, possession of those goods remains with the persons from whom the goods were seized. This view of ours finds support from the observations made by the Supreme Court in Durga Prasad v. Superintendent (Prevention), Central Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s transfer was effected by the income-tax authorities the seizure made by the income-tax authorities had lost its efficacy, with the result that the subsequent proceedings taken by them were without jurisdiction. On the basis of the contention raised on behalf of the appellant the questions which came up for consideration before the Rajasthan High Court were whether the Income-tax Officer was authorised to transfer the primary gold recovered by him to the Superintendent of Central Excise, Jaipur, and whether as a result of this transfer the seizure made by the Income-tax Officer would lose its efficacy, with the result that the subsequent proceedings taken by him were rendered without jurisdiction. So far as the first question is concerned it was held that there was nothing in section 132 of the Income-tax Act to prevent the Income-tax Officer to hand over the seized goods to any other competent officer if that officer in exercise of his lawful power under any other law wants to take the goods. It is upon this view that the Rajasthan High Court held that if the Superintendent of Central Excise at Jaipur was competent to take possession of the gold that had been recovered by the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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