TMI Blog1988 (11) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... r, the Income-tax Officer, Bhadohi, Varanasi, passed an order under section 132(5) determining the total tax liability for the assessment years 1981-82, 1983-84, 1984-85, 1987-88 and 1988-89 at Rs. 25,85,988. The value of all the seized assets was determined at Rs. 7,30,683 in the order passed under section 132(5) of the Act and as the total tax liability aggregating to Rs. 25,85,988 for the aforesaid years exceeded the total value of the seized assets, the Income-tax Officer ordered retention of the entire seized assets. Thereupon, the petitioner filed this writ petition for quashing the order dated November 17, 1987, passed under section 132(5) of the Act (annexure "25" to the writ petition) and demanding immediate release of the assets seized under section 132(1) and attached under section 132(3) also the petitioner prayed for a mandamus that the respondents be directed to return all the books of account seized under section 132(1) forthwith. Affidavits having been exchanged between the parties, we propose to decide the writ petition finally. The submissions of Sri V. B. Upadhyaya, learned counsel for the petitioner, are : (i) The authority who issued the warrant of sear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remises are sought to be searched, is in possession of undisclosed assets. There is no averment in this case that the Department has given a go-by to this principle and that the warrant of search had been issued against the petitioner without any thought or caution or due to any mala fides or animosity against the petitioner. The petitioner has given no basis for the averment that there was no valid information in the possession of the Director of Inspection, who issued the warrant of search. This being so, mere denial is not enough and the petitioner, in whose knowledge the fact specially lies whether all his assets are fully disclosed or not, should have supported the denial with cogent material. The writ petition was filed on December 7, 1987, that is, after the order under section 132(5) was passed on November 17, 1987. The Income-tax Officer has already set out the details of the undisclosed assets in the said order and, therefore, it became easier for the petitioner to show that the assets said to be undisclosed in the order passed under section 132(5) had, in fact, been disclosed. There is no precise averment and no supporting material in this behalf. On these facts, merely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. The question is whether such assets can be retained after the order under section 132(5) had been passed. This submission seems to be misconceived. The question of retaining the assets covered by the order passed under section 132(3) does not arise. An order passed under section 132(3) does not amount to "seizure" and this has been made amply clear by the Explanation, which shall be inserted by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. The Explanation, which is to be inserted with effect from April 1, 1989, runs as follows : "For the removal of doubts, it is hereby declared that serving of an order as aforesaid under this sub-section shall not be deemed to be seizure of such books of account, other documents, money, bullion, jewellery or other valuable article or thing under clause (iii) of sub-section [1]" What was implied in sub-section (3) has been made explicit by the aforesaid Explanation. When an order under section 132(3) does not give rise to seizure, the question of retaining assets mentioned in clause (iii) of sub-section (1) of section 132 does not arise. An order under section 132(3) gives rise to attachment and not to seizure. By ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the purpose of the Incometax Act. Some courts took the view that seizure means taking physical possession of any valuable article or thing. To overcome this, the Legislature has amended section 132(1) by the Finance Act, 1988. The effect of this amendment is that a second proviso shall be inserted with effect from April 1, 1989, in sub-section (1) of section 132. The second proviso, which is not relevant for the instant petition, because that would be inserted only with effect from April 1, 1989, enables the authorised officer to serve an attachment order on the owner, or the person, who is in immediate possession or control thereof, in respect of an asset where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristic or due its being of a dangerous nature. The second proviso raises a fiction that such attachment order shall be deemed to be seizure of such valuable article or thing under clause (iii) and a consequential amendment has been made in sub-section (3) with effect from April 1, 1989, by adding a parenthetical clause thus : ("for reasons othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied that the assets are fully disclosed, then no order can be passed either under sub-section (1) or sub-section (2). If the assets are undisclosed, then the authorised officer may act either under sub-section (1) or sub-section (3) depending on the fact whether it is practicable or not to seize the assets, found to be undisclosed during the search. If it is practicable to seize, then the asset will be seized under sub-section (1) ; but if it is otherwise, then an order will be passed under sub-section (3). It is manifest that the condition precedent to make a seizure under clause (iii) of sub-section (1) or to make an attachment under sub-section (3) is the discovery of undisclosed assets during search. If no undisclosed asset is found during search, then no action can be taken either under clause (iii) of sub-section (1) or under sub-section (3) of section 132. In the instant case, we are concerned with two types of orders, one for seizure and the other for attachment. Against the former, the petitioner has an alternative remedy under sub-section (11) of section 132. But the question is whether the authorised officer legally passed the order under sub-section (3) in respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pets represent disclosed assets. It is, however, made clear that the stock attached under sub-section (3) cannot be held indefinitely. The purpose and scheme of sub-section (3) being absolutely different from that of sub-sections (1) and (1A) occurring in sub-section (5) of section 132, the limitation prescribed under subsection (5) cannot be extended to sub-section (3), but at the same time, an order under section 132(3) cannot continue for an unlimited period and such order should terminate after the expiry of a reasonable period. When no limitation is prescribed, then the golden rule is that action should be taken within a reasonable period. The Legislature, realising this difficulty, has added a new sub-section (8A) with effect from April 1, 1989, by the Direct Tax Laws (Amendment) Act, 1987, and by virtue of this sub-section, an order under sub-section (3) shall not be in force for a period exceeding 60 days from the date of the order, except where the approval has been obtained from the Commissioner by the authorised officer. The authorised officer having had lawful jurisdiction to make an enquiry whether a given asset found during search was disclosed or undisclosed and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en it is desirable for the Legislature to lay down a complete procedure under sub-section (3) as to how the assets would be dealt with, if the permission sought by the owner thereof is refused by the officer. Sub-section (5) clearly says that undisclosed assets, which are seized, would be retained, if the value thereof does not exceed the existing tax liability and only surplus assets would be released. So far as the assets retained under sub-section (5) to satisfy the liability already incurred are concerned, section 132B sets out a full procedure to deal with them. No such machinery has been provided under sub-section (3). This being a legal snag in sub-section (3), we direct the Income-tax Officer, Bhadohi (respondent No. 7), to release the woollen yarn and the carpets covered by the order passed under sub-section (3), immediately after the conclusion of the enquiry, even if they are found to be undisclosed assets. Lastly, we come to the question whether the petitioner is entitled to mandamus directing the respondents to return his books of account forthwith. The submission of Sri Upadhyaya is that before the expiry of 180 days, no approval of the Commissioner was obtained by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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