TMI Blog1989 (10) TMI 4X X X X Extracts X X X X X X X X Extracts X X X X ..... of mandamus, directing the opposite parties to restore the articles, etc., to the petitioners, which were seized and to declare the sealing of the shop as illegal and without jurisdiction. The petitioners have also prayed for a direction to the effect that the ornamental articles seized by the opposite parties were not liable to be seized ; and further for issue of a writ in the nature of certiorari for quashing the authorisation to the Income-tax Officer under section 132 of the Income-tax Act, 1961. Subsequently, an order under section 132, sub-section (5), of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), was passed as a result of which the writ petition was amended and relief for quashing annexure No. 3 dated January 5, 1988, passed by opposite party No. 3 was also made. It has been stated that the petitioner-firm has been carrying on business in gold and silver and has been obeying the provisions of the Excise Act and have been submitting the details of receipt or purchase of gold articles quarterly and have been maintaining all the details and have furnished them to the Excise Department. The details up to July, 1987, have already been furnished to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disclose their identity and enquired from them as to which Department they belonged and asked them as to why they were using abusive language when the petitioners have always been complying with the provisions of the Income-tax Act. It has further been stated by the petitioners that, in the meantime, many persons, including owners of a few shops, collected at the spot and they requested the visiting team to disclose their identity but they, instead of disclosing their identity, threatened the petitioners to close down the firm and the business at Aminabad. It has been stated that, when the aforesaid persons did not find anything illegal in the shops, they, without disclosing their identity, left the shop. The petitioner, after closing down the shop at 7.30 p.m. on August 31, 1987, left for his residence. It has further been stated that in the midnight of August 31, 1987, the petitioner No. 2 and his employees and a number of persons of the vicinity received information that a number of shops have been closed down by putting seal over the locks and this was done by the officers of the Income-tax Department with the help of the police of the police station, Aminabad. The petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Sd.) . . . . . . . . . . . . . . . . . . . . . . . . Authorised Officer under section 132(1) of the Income-tax Act, 1961, September 7, 1987." In view of this notice which was produced before the court, the court was not inclined to grant an interim order at that stage as the opposite parties expressed readiness to open the seal, and, as such, it was provided: "This action, i.e., opening of the seals or removal of the locks and the action contemplated under section 132 of the Income-tax Act shall be done in the presence of the petitioners or any of their authorised representatives...." On behalf of the petitioners, it was stated before the court that the seals and locks may be removed from the business premises at 10 a.m. and this was in response to the request made by the Department that since both the parties are present in court, the date and time on which the seals and locks may be removed may be indicated. Since indication was given before the court, as such, orders in this behalf were passed. It appears that the locks and seals were removed in pursuance of this order. In Writ Petition No. 22 of 1988, it has been stated that the shop was reopened on September 9, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department on January 4, 1988, under the orders of the court which was not sent to the Income-tax Officer who passed the order as he was not a party to the proceedings. In the counter-affidavit, it was stated that there was a typographical mistake in the date of the order. In fact, the order was passed on January 5, 1988, but wrongly it was typed as January 4, 1988, and the Incometax Officer passed the order on January 5, 1988, and signed every page of it. On behalf of the petitioner, it was contended that hurriedly because of the writ petition, orders were passed behind their back on January 4, 1988, and the date admittedly was changed to 5th by hand and the cuttings were not initialled by anyone and the things were suspicious. Amendment application was allowed on January 20, 1988. In the counter-affidavit, it was stated that the final orders had been passed and the petitioner had got an alternative remedy of filing an appeal under section 132(11) of the Art. As the petitioners had already filed an appeal, as such, the writ petition ought to be dismissed on the ground of alternative remedy. A perusal of section 132 of the Act reveals that there is no provision for appeal an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e bar in certain circumstances and in certain cases, like that the statute itself is ultra vires or that fundamental rights have been violated or that there is gross violation of the principles of natural justice or that the order complained of is void on the face of it or there is palpable defect, the writ petition can be entertained but that depends on the nature and facts of the case. On behalf of the petitioner, it was contended that, in the instant case, there has been encroachment upon his fundamental rights and, without any authority of law, his business was forcibly closed till the High Court intervened and the powers of search and seizure have been exercised in gross violation of the provisions of law and the powers have been so exercised for malicious and collateral purposes and further by keeping the High Court in the dark while the writ petition was pending. The order under section 132(5) of the Act was hurriedly passed in order to defeat the process of law and even otherwise, the objection under section 132(11) of the Act was not an equally efficacious remedy. It was contended on behalf of the petitioner that, in an objection, the reliefs claimed by the petitioners a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v Ratan G. Mohatta [1965] 16 STC 599 ; AIR 1966 SC 142, which was a case under the Sales Tax Act, the very same principle was laid down. In Titaghur Paper Mills Co. Ltd. v. State of Orissa [1983] 142 ITR 663 (SC); AIR 1983 SC 603, which was also a case under the Sales Tax Act, it was observed (at page 672): ". . . the Act provides for an adequate safeguard against an arbitrary or unjust assessment. The petitioners have a right to prefer an appeal under sub-section (1) of section 23 of the Act subject to the payment of the admitted amount of tax as enjoined by the proviso thereto. As regards the disputed amount of tax, the petitioners have the remedy of applying for stay of recovery to the Commissioner of Sales Tax under clause (a) of the second proviso to sub-section (1) of section 13 of the Act." Reference was also made to certain High Court decisions and particularly to the case of Karnataka Industrial Areas Development Board v. CIT [1987] 168 ITR 96 (Kar) in which it was observed that the impugned orders of assessment can be challenged only by the mode prescribed by the Act and not by a petition under article 226 of the Constitution. Reference was also made to an unreported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 681, which was a case under the Smugglers and Foreign Exchange Manipulators (Forfeiture of Property) Act, 1976 (for short "SAFEMA"), it was held that pendency of appeal would not bar the maintainability of a petition under article 226 of the Constitution of India. The facts of the said case were distinguishable as it was found that the appellant could not move a court against his detention and he was released after the emergency was lifted and it is only thereafter that he could pursue the matter. In ITO v. Seth Brothers [1969] 74 ITR 836 (SC) ; AIR. 1970 SC 292, which was a case under section 132 of the Act, the Hon'ble Supreme Court, after reversing the decision of the Allahabad High Court, allowing the writ petition, sent back the matter again to the High Court. It was observed (headnote of AIR 1970 SC 292) : "In appropriate cases, a writ petition may lie challenging the validity of the action under section 132, Income-tax Act, 1961, on the ground of absence of power or on a plea that proceedings were taken maliciously or for a collateral purpose. But normally the High Court in such a case does not proceed to determine merely on affidavits important issues of fact especially ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernative remedy is available. When the statute itself is ultra vires, there is encroachment on the fundamental rights ; question of jurisdiction is seriously involved ; the proceedings were taken maliciously and for collateral purposes or where the private or public wrongs are so inextricably mixed up and the vindication of public justice requires or when the order on the face of it is erroneous, the bar of availability of alternative remedy may not stand in the way of entertainability of a petition under article 226 of the Constitution of India. In the instant case, the proceedings started with survey followed by sealing of the premises and then in search and seizure and ended by passing of an order under section 132(5) of the Income-tax Act; obviously, on the date on which the request was made that the case may be taken up on the third day. The provisions regarding survey are contained in section 133A of the Act, which, in so far as it is relevant, reads as under : "133A.(1) Notwithstanding anything contained in any other provision of this Act, an income-tax authority may enter (a) any place within the limits of the area assigned to him, or (b) any place occupied by any per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... king a survey. Section 132 which provides for search and seizure, as it stood at the relevant point of time, reads as follows : "132. Search and seizure.-(1) Where the Director of Inspection or the Commissioner or any such Deputy Director of Inspection or Inspecting Assistant Commissioner as may be empowered in this behalf by the Board in consequence of information in his possession, has reason to believe that (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account, or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... withstanding anything contained in section 121, it shall be competent for him to exercise the powers under this sub-section, in all cases where he has reason to believe that any delay in getting the authorisation from the Commissioner having jurisdiction over such person may be prejudicial to the interests of the Revenue . . . (5) Where any money, bullion, jewellery or other valuable article or thing (hereinafter in this section and in sections 132A and 132B referred to as the assets) is seized under sub-section (1) or sub-section (1A), the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed shall, within ninety days of the seizure, make an order, with the previous approval of the Inspecting Assistant 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 (11 of 1922), or this Act ; (iia) determining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision for sealing of the business premises either under section 133A or section 132 or any other section of the Income-tax Act. The business premises of the petitioner was sealed off, obviously after the lodging of the F.I.R. in which complaint of forcible stoppage of the work by various persons and tearing of the papers and taking out of money from their pockets was made by the income-tax authorities with the help of the police stationed at Aminabad, Lucknow. The order of sealing which was affixed on the shutter of the shop was purported to have been passed in exercise of powers under sub-section (3) of section 132 of the Act. Sub-section (3) of section 132 of the Act also nowhere provides for sealing of a shop and the stage of section 132(3) arises when an authorisation is given and only thereafter the authorised officer can, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentence apparently is in different ink and in a different hand. It further mentions that it is suspected that a huge amount of income is concealed at those places and, therefore, they have resisted the survey operation. It also mentions that warrants under section 132(1) may be issued in the following names for the above premises. It also indicated that the notice if issued under section 131 shall not be complied with. This sentence again seems to have been inserted between two lines subsequently in another ink and in another handwriting. These two insertions are not initialled by anyone. Therefore, in the order sheet, the names of four shop keepers and their partners including the petitioner have been given and in the bottom it has been mentioned "search warrants are placed below for signature please". The same bears the signature of the Deputy Director of Inspection. The Chief Commissioner of Incometax, on the back of it, seems to have passed the following order : "Discussed with Deputy Director of Inspection. The case is covered under section 132(1)(c) and (b). I am satisfied that it is a fit case for action under section 132(1) in the shop premises. Authorisation issued." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Some loose papers were found in the premises which disclosed heavy sales. Stock of gold jewellery was being weighed. During the course of survey, Sri Banwari Lal Kanchal, Secretary of the Vyapar Mandal, entered the premises and asked for my identity card. I showed the same to him. Then he asked for authorisation of survey. I told him that I am an Income-tax Officer and I do not need any authorisation. On this, he flared up and used filthy language. By this time, a mob of about more than hundred persons had collected. They all created hindrance to the survey and Sri Kanchhal took me out of the shop and prohibited me from carrying out the survey. The proprietor of the shop, Sri Shyam Kartik, tore off the statement given by him and also the papers which were found in his shop. The stocks of gold and silver ornaments in the shop are expected to be of about Rs. 25 to 30 lakhs. No proper books of account were found in the shop which give rise to a suspicion that the entire stock is unaccounted. Now, the shutters of the shop have been closed by the mob and the shop keepers and it is not possible to carry out survey. Kindly issue further instructions. I am sending this information to you t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able article which has not been or would not be disclosed for the purpose of incometax only then the order of search and seizure could be passed. The words "reason to believe" postulate application of mind and assigning of reasons. The words used are "reason to believe" and, as such, it has a rational nexus between "reason" and "belief" as has been observed by the Hon'ble Supreme Court in Ganga Saran and Sons P. Ltd. v. ITO [1981] 130 ITR 1, while interpreting a similar provision in section 147 of the Incometax Act. Similarly, in S. Narayanappa v. CIT [1967] 63 ITR 219 (SC), it has been held (headnote): "The expression 'reason to believe' in section 34 does not mean a purely subjective satisfaction on the part of the Income-tax Officer. The belief must be held in good faith ; it cannot be merely a pretence. It is open to the court to examine whether the reasons for the belief have rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section." In Gulab and Co. v. Superintendent of Central Excise [1975] 98 ITR 581 (Mad), it has been observed (headnote) : "The words 'reason to believe' in section 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 1043 (All). The authorisation order in this case, reference to which has been made earlier, reads as under : "Discussed with Deputy Director of Investigation. The cases are covered under section 132(1)(c) and (b). I am satisfied that it is a fit case for action under section 132(1) in the shop premises. Authorisation issued." This order has been passed on the back of the report in which reference to all the four shops in which survey was not allowed to be made on that date has been made. The word used is "cases" meaning thereby that the said order was passed in respect of all the cases. The order which is vague and in the nature of a general authorisation in respect of all the four shops nowhere indicates that, in respect of any particular shop, there was any definite and separate information received by him on the basis of which he could have harboured such a reasonable belief that taking of action under section 132(1)(c) and (b) of the Incometax Act was necessary. There is no specific or separate order in respect of the petitioner's shop. The order, as it is, clearly indicates that the four reports were not before the Chief Commissioner of Income-tax, or even if they c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing, but not before starting search and seizure and in case any such statement was recorded, it will not purport to be one under section 132(4) of the Act as it is only during the course of a search that a statement could be recorded. As has been mentioned earlier, against the sealing off and seizure, a writ petition was filed and when the same came up for hearing, learned counsel for the Department took time to obtain instructions. In the notice it was stated that the information was sent to the Commissioner, but it could not reach the officer who passed the order dated January 4, 1989. The order, it appears, was passed on January 5, 1989. Anyhow, this fact was taken into consideration while allowing the amendment application. It was in this background that the order under section 132(5) of the Income-tax Act was passed and the proceedings for search and seizure themselves being illegal and void, the same could not have been made the foundation of any order under section 132(5) of the Act. While passing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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