TMI Blog1978 (1) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 639 of 1976, along with her daughter-in-law, Smt. Girja Devi Tandon, wife of Vijai Narain Tandon, and Smt. Vina Devi Tandon, wife of Shiam Kishore Tandon, petitioners in Writ Petition No. 640 of 1976, and other members of the family reside in house No. 28/37, Pheelkhana, Kanpur. Petitioners, Smt. Manju Tandon, Smt. Girja Devi Tandon and Smt. Vina Devi Tandon, are partners in a firm known as M. T. Agencies having shares of 4.05%, 1.5% and 1.5% respectively. Petitioner, Smt. Bina Tandon, wife of Ashok Kumar, is a partner in another firm known as M.T. Co. having 4% share therein. In pursuance of an order passed by the Chief Metropolitan Magistrate, Sri T. N. Kapoor, the Deputy Superintendent, CBI, got the two residential houses of the petitioners numbered as 169, Jajmau, and 28/37, Pheelkhana, searched by C.B.I. Inspectors, Sarvasri B. N. P. Azad and V. K. Sobti, on May 8, 1976, and recovered certain documents, ornaments and gold bonds from various portions thereof. Thereafter, the recovered articles and documents were, after obtaining necessary orders from the Chief Judicial Magistrate, produced before the Chief Metropolitan Magistrate, Delhi. The Chief Metropolitan Magistrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emises No. 169, Jajmau, Kanpur, and house No. 28/37 Pheelkhana, as belonging to them. He further directed that the said ornaments which had been produced before him should be retained in his custody for satisfying the amount determined against each of the aforementioned four petitioners. The petitioners then filed the present petitions under art. 226 of the Constitution impugning the validity of the search dated 8th May, 1976, and seizure of their respective ornaments by the Special Police Establishment. They further challenged the validity of the proceedings initiated under s. 132A of the I.T. Act, as also that of the orders passed by the ITO directing that the gold ornaments belonging to them be retained in his custody for the realisation of the dues determined against Manju Tandon, Bina Tandon, Girja Devi Tandon and Vina Devi Tandon. They further prayed that various assessment orders passed by the ITO on 17th November, 1976, should be quashed and that a direction be issued that their respective ornaments be returned to them. All the respondents, excepting the Chief Metropolitan Magistrate, Delhi, put in appearance and contested the prayer made in these petitions. Sri T. N. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he jewellery seized during investigation belonged to the accused, it could be attached up to the value as nearly as may be equivalent to that of the money or the property procured by the accused by commission of the offence of cheating and criminal misconduct. The District Judge accepted the prayer made by Sri Kapoor and made an order directing interim attachment of the ornaments under s. 4 of the Criminal Law Amendment Ordinance. Thereafter, the petitioners, vide their application filed before this court on 1st February, 1977, got the present petitions amended and claimed reliefs by way of quashing of the proceedings under s. 132A(1) of the I.T. Act, as also that of the request made by Sri Kapoor, vide his letter dated 24th November, 1976, to the income-tax authorities requesting them not to release the gold ornaments to the parties concerned. So far as the ad interim order for the attachment of gold ornaments passed by the District Judge, Kanpur, under s. 4 of the Criminal Law Amendment Ordinance, 1944, in the month of January, 1977, is concerned, its effectiveness or duration is to be governed by s. 10 of the Ordinance, which runs thus : "10. Duration of attachment.---An o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the retention by the income-tax authorities is not proper. If and when the CBI requires these ornaments for the purposes of the investigation that is going on or for the purpose of the trial that may follow, proper proceedings for securing ornaments and gold bonds will be taken in accordance with the procedure laid down in the Code of Criminal Procedure. " Counsel for the petitioners then stated before us that in view of the aforesaid statement made by Sri J. N. Tiwari, they will, at this stage, not press for the reliefs claimed against the CBI and that they would be confining their prayer in respect of reliefs claimed against the income-tax department only. In this view of the matter, it is not necessary for us to go into the question with regard to the validity of search and seizure effected by the CBI on 8th May, 1976. If the petitioners ultimately succeed in showing that the ITO has no jurisdiction to retain the ornaments in his custody, they would become entitled to the return of the ornaments as claimed by them in these petitions. Only controversy that survives for consideration in these petitions, therefore, is that with regard to the validity of the proceedings init ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the redress of any injury by reason of any illegality in any proceedings by or before any authority under any provision referred to in sub-clause (b) where such illegality has resulted in substantial failure of justice ......... (3) No petition for the redress of any injury referred to in sub-cl. (b) or sub-cl. (c) of cl. (1) shall be entertained if any other remedy for such redress is provided for by or under any other law for the time being in force ..........." A perusal of the article shows that the bar with regard to entertainment of a petition, created by sub-article (3), operates only if the petition is directed towards obtaining relief or redress of the nature enumerated in cl. (b) or (c) of sub-article (1) thereof. The bar does not apply to a petition directed towards enforcement of the rights conferred by Part III of the Constitution. We have, therefore, to consider as to whether or not these petitions are directed towards enforcement of the rights conferred by Part III of the Constitution (fundamental rights). A perusal of various petitions shows that in substance the claim of the petitioners in these petitions is that the income-tax authorities had, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oust the jurisdiction of the High Court to grant relief under art. 226 of the Constitution in cases where violation of a fundamental right is made out. Accordingly, if it is found that the petitioners are being deprived of the gold ornaments in question, without authority of law, resulting in violation of their fundamental rights guaranteed by Part III of the Constitution, it will be unnecessary for us to go into the controversy as to whether or not the petitioners could obtain redress under the provisions of the I.T. Act itself. In this case, the income-tax authorities have relied upon the provisions contained in s. 132A read with s. 132 of the I.T. Act, 1961, as authorising them to requisition the gold ornaments seized by the officers of the CBI from the residential premises of the petitioners, and thereafter to retain them in their custody for satisfying the dues as determined by them. Legislature, with a view to check evasion of income-tax, enacted s. 132(1) of the I.T. Act enabling the Director of Inspection or the CIT or other officers mentioned therein, to authorise certain officials of the income-tax department to search and seize money, bullion, jewellery and other valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer. (2) On a requisition being made under sub-section (1), the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, of that sub-section shall deliver the books of account, other documents or assets to the requisitioning officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody. (3) Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-section (4A) to (14) (both inclusive) of section 132 and section 132B shall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of this section and as if for the words ' the authorised officer ' occurring in any of the aforesaid sub-sections (4A) to (14), the words ' the requisitioning officer' we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that regard was his subjective satisfaction and any error therein could not render requisitioning of the assets as being without authority of law, resulting in contravention of any fundamental right of the petitioners. He further contended that, in this case, there was material on the record before the CIT on the basis of which he could reasonably believe that the ornament recovered by the officer of the CBI from the residential premises of the petitioners represented either wholly or partly income or property which had not been disclosed by them for the purpose of the assessment. Accordingly, the action of the Commissioner in authorising requisitioning of the gold ornaments from the officers of the CBI as also subsequent proceedings for dealing with the assets after making an order under s. 132(5) of the I.T. Act were fully authorised by law. The question as to when an act of a public authority can be dubbed as without authority of law and thereby affecting a fundamental right, came up for consideration before the Supreme Court in the case of Coffee Board, Bangalore v. Joint Commercial Tax Officer [1970] 25 STC 528 ; AIR 1971, SC 870. Chief Justice Hidayatullah, speaking for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... when he has reason to believe about the existence of certain facts enumerated therein, s. 147 of the I.T. Act authorises the ITO to reopen assessment already made if he has reason to believe that certain facts enumerated in that section exist. While interpreting the provisions of s. 147 of the I.T. Act, the learned judges of the Supreme Court in the case of ITO v. Lakhmani Mewal Das [1976] 103 ITR 437, 445 observed thus : " It would appear from the perusal of the provisions reproduced above that two conditions have to be satisfied before an ITO acquires jurisdiction to issue notice under s. 148 in respect of an assessment beyond the period of four years but within a period of 8 years from the end of the relevant year, namely : (1) the ITO must have reason to believe that income chargeable to tax has escaped assessment, and (2) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee--- (a) to make a return under s. 139 for the assessment year to the ITO, or (b) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist in order t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the validity of proceedings under s. 147/148 of the I.T. Act, 1961, inter alia, on the ground that the ITO concerned had no reason to entertain a belief as mentioned in that section. The Full Bench of that court refused to entertain that question and observed thus : " The learned counsel for the petitioner urged that the ITO had no reason to believe, in consequence of any information in his possession, that any income had escaped assessment. He urged that the assessee had disclosed the receipts on account of charity in the balance-sheet submitted by him along with the return. According to him, it was a case of mere change of opinion by the ITO. On the other hand, Shri Awasthy, learned counsel for the revenue, invited our attention to Kalyanji Mavji's case [1976] 102 ITR 287 (SC), and urged that the information contemplated by s. 147(b) may be obtained even from the record of the original assessment from an investigation of the material on record or the facts disclosed thereby or from other enquiry or research into facts or law and that cases where ' income liable to tax has escaped assessment due to oversight, inadvertence or mistake committed by the ITO ' may also be brought u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al right was involved or not was neither canvassed nor discussed by the learned judges. This case is not authority for the proposition that in a case where the condition precedent for the exercise of jurisdiction by a public authority does not exist, the action of the public authority concerned if it results in deprivation of property would still not involve contravention of fundamental right under art. 31. Accordingly, we have to proceed to consider as to whether before authorising an officer of the income-tax department to requisition the gold ornaments which were then in the custody of the officer of the CBI, the CIT had any material on the basis of which he could reasonably believe, (1) that the gold ornaments in the custody of the officer of the CBI represented either wholly or partly income or property of the petitioners, and (2) that the petitioners had not or would not be disclosing such income or property for the purposes of proceedings under the I.T. Act, 1922, or I.T. Act, 1961. Originally, Sri K. K. Pandey, Assistant Director of Inspection (Intelligence), Kanpur, filed a counter-affidavit in the case asserting baldly that the Commissioner had information from the Dy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... promptly come to the knowledge of the bank and consequently the discounters, i.e., the Union Carbide, with the result that the amounts involved could not be recovered. Further, Messrs. M. T. Agencies and Messrs. M. T. Co., Pratap Market, Aminabad, Lucknow, another associate firm of Messrs. Gur Prasad Ram Prasad were stockists of Messrs. Voltas Ltd. also. It was revealed that 15 cheques aggregating Rs. 5,76,725.40 issued by these firms in favour of Messrs. Voltas Ltd. and negotiated by the latter at the State Bank of India, Kanpur main branch, were also unaccounted for. Those cheques were drawn on banks at Lucknow and sent to the State Bank of India, Lucknow branch, for collection. The cheques were dishonoured on presentation and were returned to Kanpur main branch from where these were removed/destroyed by the manipulation of the firm with the complicity of the bank staff. The modus operandi in all other respects in both the cases was the same. Some members of the bank staff were suspended and notices were sent to the firm to pay the amount due. Messrs. Gur Prasad Ram Prasad acknowledged liability and offered a repayment programme. Sums aggregating Rs. 9,28,611.43 were paid by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40 lakhs. While the CIT, Kanpur II, was still investigating into the matter, the Delhi Special Police Establishment C.I.A./II organised a search of several premises of the said firms, their partners and associates in the course of investigation of certain offences on the basis of the first information report lodged by the Chief Manager, State Bank of India, Kanpur, and seized a large number of documents and valuables as per the seizure memos prepared by them. Information of the said searches was sent by the Deputy Superintendent of Police C.B.I./SPE/CIU(B), New Delhi, vide letter dated 3rd June, 1977, according to which cases had been registered against Messrs. Gur Prasad, Chowk, Kanpur, Messrs. M.T. Agencies, Kamla Market, Aminabad, Lucknow. As a result of simultaneous searches conducted at the aforesaid firm and their partners heavy jewellery items had been recovered and seized from the premises belonging to the petitioners. The CIT, Kanpur II, thereupon asked for the list of documents, books of account, papers and the valuables seized by the Special Police Establishment at the said searches by letter dated 5th July, 1976, addressed to the said Deputy Superintendent of Police. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kanpur II, from the records that were handed over to him by the CIT, Lucknow. The information in the possession of the CIT, as revealed in the supplementary counter-affidavit of Sri C. S. Pandey, might have provided a reasonable basis for the CIT, Kanpur, to believe that the persons connected with Messrs. Gur Prasad Ram Prasad, M. T. Co. and M. T. Agencies had played fraud on the State Bank of India and thereby made an unjust gain of a huge amount. The amount so gained, however, continued to be reflected in their respective bank accounts. This much of information available with the CIT, Kanpur, could not possibly provide any basis to believe that the bank account in which the huge amount was unjustly gained by the three firms, continued to be reflected, was not brought to the notice of the ITO while making assessments for the relevant years. It is not the case of the income-tax authorities before us that the CIT had scrutinised the proceedings of the earlier assessment years which might have shown that the three firms had filed their respective returns or had manipulated their accounts in such manner so as to indicate that the cheques issued by them for payment of the price of go ..... X X X X Extracts X X X X X X X X Extracts X X X X
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