9911796707
TMI Blog1974 (8) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... completed by about 9 p.m. A sum of Rs. 2,38,500 was found in an open almirah in the room. On the reasonable belief that out of the said sum of Rs. 2,38,500, a sum of Rs. 2,38,000 was not accounted for and that the said currency related to the sale proceeds of contraband gold, the excise authorities effected the seizure under section 121 of the Customs Act. The premises was in the occupation of A. Shahul Hameed of Kayalpatnam, the 2nd petitioner herein. The search and seizure were made in the presence of two independent witnesses. One Anwar, a relation of the second petitioner, was also present throughout the search. The mahazar prepared was attested by two independent witnesses. A copy of the mahazar was given to the 2nd petitioner and an acknowledgment was obtained. On November 2, 1972, statements of the 2nd petitioner herein and the said Anwar were recorded. One Jamal Mohammed, an advocate at Trichy, sent a telegram on November 3, 1972, to the Superintendent, Customs (Preventive), Trichy, stating that the said amount seized belonged to his client, Gulab & Co., Coimbatore, the 1st petitioner herein, and requesting for return of the same to his clients. On November 4, 1972, anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax Officer, Trichy, on November 7, 1972, and this was intimated by the 1st respondent to the Assistant Collector of Central Excise, Madurai, as a further report to him on this matter. A notice under rule 112A of the Income-tax Rules, 1962 (hereinafter called "the Rules"), was sent by the Income-tax Officer, Trichy, to the 2nd petitioner requiring him to appear before the Income-tax Officer, Trichy, on November 24, 1972, at 11 a.m. and to explain or to produce or cause to be produced evidence on which he may rely for explaining the unaccounted cash. This notice could not be served on the 2nd petitioner in person but it was served by affixture on November 9, 1972. There is no dispute in this writ petition that such a notice was served on the 2nd petitioner. On November 17, 1972, the 2nd petitioner filed a petition and a vakalat in favour of the learned counsel for the petitioner herein. In this petition he had stated that he had no claim over the money, that the money belonged to M/s. Gulab & Company, Coimbatore, and that Gulab, son of Abdul Khader, who is the managing director of the company, entrusted the said sum of Rs. 2,38,000 to him and that the money was seized on November ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment the second petitioner had stated that the statement given by him before the excise authorities was under coercion, the Income-tax Officer, Trichy, wrote a letter to the Superintendent of Central Excise, Customs (Preventive), the 1st respondent herein, to confirm that the recording of the statement was done by him without resorting to any compulsion or coercive circumstances. He had also asked him to state whether any advocate was allowed to defend the party or any cross-examination was made in the customs proceedings. By a letter dated January 24, 1973, the 1st respondent intimated the Income-tax Officer, Trichy, that the statement was recorded before two independent witnesses, that it was voluntarily given by the party on his own free will and no advocate was present and no cross-examination was made. In the meanwhile, the second petitioner through his counsel filed petitions before the Commissioner of Income-tax to direct either the Income-tax Officer, Trichy, to call for their files and records from the Coimbatore office and the Commissioner's Office or the Income-tax Officer Coimbatore, may be directed to hear the case. Copies of these petitions were also sent to the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected from the Income-tax Officer, Trichy. The Income-tax Officer, Coimbatore, issued a notice under section 132(5) and rule 112A(2) to the 1st petitioner stating that a cash amount of Rs. 2,38,500 has been seized from their people at Trichy and that he had reason to think that the money belonged to the 1st petitioner. He had also required the 1st petitioner to furnish particulars regarding the source and whether they are shown in the accounts and if so to produce evidence in support of the same on November 22,1972. The 1st petitioner replied to this notice on November 21, 1971, stating that they had entrusted the sum of Rs. 2,38,000, to the 2nd petitioner that the sum is fully accounted for in their accounts, that the seizure was bad and illegal and requested for release of the money to them. It was also stated in this letter that the balance of Rs. 500 belonged to the 2nd petitioner herein. On information that the Income-tax Officer, Trichy, had passed an order on February 3, 1973, holding that the money seized really belonged to the 2nd petitioner and that it represented his concealed income, the Income-tax Officer, Coimbatore, in his proceedings dated February 5, 1973, dropped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... believe that any person to whom summons under the relevant provisions of the Income-tax Act was issued to produce or cause to be produced any account books has omitted or failed to produce or cause to be produced such books of account as required by such summons or notice or any person to whom 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 which will be useful for or relevant to any proceedings under the Act or any person in possession of any money or other assets and such money or other assets represent either wholly or partly income or property which has not been disclosed for the purpose of the Income-tax Act, he may issue a warrant. It may be seen from clause (c) that in case of money or other asset the conditions necessary for the issue of warrant are: (1) the Commissioner must in consequence of information in his possession have reason to believe that any person is in possession of any money or other asset; and (2) such money or other asset represents undisclosed income or property. The Commissioner is interested only in the undisclosed income or property and if that is so he must have r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l who may be a person who is the owner thereof and who is suspected of having not disclosed his income or any other person holding on behalf of the owner or a person who has a claim or some right over the same. What is important and relevant, therefore, is the reason to believe that it is the undisclosed income of a person and not in whose physical possession the same is. The meaning which is attributable to the words "custody", "possession" and "immediate possession or control" in the procedural part of the section relating to implementation of the warrant could not and shall not be projected in understanding the meaning of the words "any person is in possession" in section 132(1)(c). Having regard to the scheme of the entire provision we have no doubt that the words "any person in possession" in clause (c) of section 132(1) refer to a person to whom the undisclosed income belonged or owner of the same and they are not used in the restricted sense of only a person in physical or actual possession and control. The purposes for which a warrant could be issued are set out in sub-clauses (i) to (v) of section 132(1) which read as follows: "(i) enter and search any building or plac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Inspecting Assistant Commissioner of the Central Excise wrote to the Commissioner of Income-tax requesting him that certain Income tax Officers be authorised under section 132(1) of the Act to search and seize the silver and other articles seized by them from the petitioners. On September 28, 1969, the Commissioner issued a warrant under section 132(1). On the next day the Income-tax Officer in whose favour an authorisation was given purporting to act under section 132(3) made an order prohibiting the Assistant Collector of Customs and Central Excise from removing or parting with or otherwise dealing with the silver seized. This was done when the writ petition was pending. Thereafter, the order under section 132(3) was challenged by the petitioners in a separate writ petition. It was held that the order made under section 132(3) was illegal. The reasoning of the learned judges in that case was as follows: "Articles or things referred to in section 132(3) are those which the authorised officer was empowered to search for and seize and no other. These are articles which may be necessary to search for before they can be seized. Section 132(1)(c)(1) refers to the Commissioner ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued and the person to whom such notice was issued has omitted or failed to produce or cause to be produced such books of account or other documents as required by the summons or the notice. Here is a fact which is known to the Commissioner that he had not produced, but still a warrant for search and seizure could be issued and there was no need for him to entertain a belief that he would not produce the accounts as that has happened already. It is true that search and seizure is normally associated with individuals, firms or companies. In fact, as already noticed, the section is applied only in case of such persons. When the money or other asset is believed to be the undisclosed income of such persons certainly the warrant must be able to reach wherever such assets are kept or found. Therefore, when an authorisation is given all possible contingencies are contemplated and full power is given in order to effectively enforce the authority under the warrant. In many cases there may not be any necessity to break open the lock or gain forcible entry but that does not mean that warrant in such cases could not be issued. We do not find any inherent incompatibility in issuing a warrant for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... horaria v. K. K. Gapsguli are also similar to the one in Motilal's case. Even in that case at the time of search by the customs authorities the officers of the income-tax department were also present. In that case, which was confirmed in appeal in K. E. Johnson v. Laxmipat Choraria, an additional reasoning is given. According to the learned judges, section 132 will apply only to a case where the documents or money or assets are in possession of the person from whom seizure is directed. We have already held that the words "any person in possession" in section 132(1)(c) does not refer to the person in physical or actual possession but a person who is reasonably believed to be the owner or to whom the money or asset belonged. The decisions in Motilal's case and Laxmipat Choraria v. K. K. Ganguli were followed by the Punjab High Court in Ramesh Chander v. Commissioner of Income-tax, Commissioner of Income-tax v. Ramesh Chander and Tarsem Kumar v. Commissioner of Income-tax. In some of these cases reliance has been placed on the decision in Gian Chand v. State of Punjab. In that case, with reference to the presumption under section 178-A of the Sea Customs Act, 1878, and the burden of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the currencies. The person from whom the currency notes won by the customs authorities challenged this action of the income-tax rities under article 226 of the Constitution of India by way of a writ petition praying to direct the income-tax authorities to release the currencies in favour of the petitioners. During the pendency of the petition the Income-tax Officer passed an order under section 132(5) of the Act specifying the tax on the estimated undisclosed income and directing the retention of the entire amount. This order also was challenged in the writ petition. It was argued that "search and seizure" envisaged under section 132(1) can only be of that property, the exact location of which is not known to the income-tax authorities and it would not apply to a case where they know that the currencies were in possession of the Collector of Customs and Central Excise. It was also argued that an order under section 132(3) can only be issued after a search and since there was no need for a search no valid order was issued under section 132(3). It was further argued that the expression "search and seizure" implies a belief that the person in possession would not part with the sam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even when the person in possession is unwilling to part with it. After the income-tax authorities have armed themselves with a warrant of authorisation under section 132(1), it may be that a law abiding person in possession of the thing to be seized may easily yield up his possession, but that will not affect the validity of the warrant of search and seizure. If that were so, every warrant of search and seizure may be frustrated by yielding up possession after the issue of a warrant. It cannot be supposed that the Collector of Customs and Central Excise would oblige the income-tax authorities and hand over anything in his possession even if these authorities are not authorised to take over possession under compulsion of law". With reference to the argument that the person against whom the warrant is issued should be actually in possession, the learned judges observed: "We do not also accept the contention that clause (c) of section 132(1) contemplates that the person who has not disclosed his income or property for the purposes of the Income-tax Act should himself be in possession of the money, bullion, jewellery, etc., representing such income which is sought to be searched a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, one Mohammed Kunhi filed a petition before the court praying for the return of the amount to him on the ground that the amount in court deposit belonged to him. Koya supported the application of Kunhi and stated that he was entrusted with the money by Kunhi for being paid to a third party at Bombay. This application was dismissed. On revision before this court, it was argued that the Income-tax Officer who was authorised under section 132(1) cannot be regarded as a person entitled to possession of the amount within the meaning of section 523, Criminal Procedure Code. The learned judge held that if the court is convinced that the Income-tax Officer has the power under section 132 of the Income-tax Act to seize the money in court deposit, it would be a wholly needless and empty ritual to ask him to wait till after the court has refunded the amount to Mohammed Koya or Mohammed Kunhi and then to allow the Income-tax Officer to seize the amount from either of them the moment it is handed over to them, and that on a proper application made by the Income-tax Officer moving the court for handing over possession the same could be handed over to him. It was also argued in that case that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g straightaway. To say that such a seizure is illegal because it is not the result of such a search as is contemplated in clauses (i) and (ii) of sub-section (1) of section 132 of the Act is to indulge in a self-defeating piece of sophistry. After all, what is the meaning of the word 'search' ? The Concise Oxford Dictionary says that it means 'look for' or 'seek out'. What the Income-tax Officer has done in this case is to enter the building of the court of the Second Presidency Magistrate and to look for or seek out the amount kept in court custody and ask that it may be paid over to him, because it represents wholly or partly undisclosed income of Mohammed Koya. Be it noted that the section does not say that the Income-tax Officer can enter and search only the building of the person who had failed to disclose his income for the purposes of the Indian Income-tax Act. What the section says is that where any person is in possession of any money which represents wholly or partly undisclosed income, the Income-tax Officer can enter and search any building or place where he has reason to suspect that such money is kept. This means that seizure can be effected even from the custody of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtant case which we have to notice at this stage. In that case in two suits filed by the respondent-firm decrees were passed against the Union of India for refund of customs duty charged in excess. Some income-tax amounts were also due from the firm. The Income-tax Officer issued a notice under section 46(5A) of the Indian Income-tax Act, 1922, calling upon the Collector of Customs to pay the amount due under the decree to him and stating that his receipt would constitute a good and sufficient discharge of the liability for refund to the firm. After remitting the amount in the Reserve Bank, the Collector of Customs applied to the High Court under Order 21, rule 2, of the Code of Civil Procedure, for adjustment of the decree by this payment to the Income-tax Officer. The High Court held that the adjustment of the decree could not be granted because the decrees were against the Union of India and not against the Collector of Customs, that the sums were held by the Collector of Customs on behalf of the Union of India and not on behalf of the firm. Reversing this judgment the Supreme Court held that the payment made by the Collector of Customs ought to be certified under Order 21, rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to seizure of the assets under sub-section (1) of section 132 and giving all opportunity to the person concerned for being heard. We have already seen that the words "any person in possession" in section 132(1)(c) refer to the person to whom the money belonged and from whose income the same had not been included for the purpose of the Income-tax Act. Therefore, the words "person concerned" in section 132(5) could refer only to the person against whom a warrant is issued and not the person who was in actual possession. This does not mean that the person who was in physical possession and from whom the actual seizure was effected need not be given any opportunity of being heard. He is of course a person who is entitled to be heard both under the provisions of the Act and under the principles of natural justice. We are supported in this opinion by the decision of the Gujarat High Court in Ramjibhai Kalidas v. I. G. Desai, Income-tax Officer. We may usefully quote the passage from the judgment which is as follows: "What is the true connotation of the expression 'person concerned' ? Mr. Pathak on behalf of the petitioners contended that the words 'person concerned' referred only to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel for the petitioners that there were no grounds for the Commissioner to entertain a belief that the sum of Rs. 2,38,000 was the undisclosed income of the second petitioner and that he was in possession. We have already seen that the Commissioner came to know that a large sum of Rs. 2,38,000 was found in the possession of the second petitioner which was seized by the excise authorities and there was no satisfactory explanation available about the source of money. The second petitioner was not an assessee of income-tax and there was no evidence of any known source for such income. In the circumstances, it is stated by the Commissioner that he entertained a reasonable belief that, prima facie, the money wholly or partly appeared to be the income or property which is not disclosed for the purpose of income-tax. Of course, the words "reason to believe" in section 132(1) does not mean purely a subjective satisfaction on the part of the Commissioner. The court could examine the question with reference to the materials available with the Commissioner and whether they have a rational connection or relevant bearing to the formation of the belief. If the reasons were extraneous or irreleva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained under duress or that it was not voluntary; secondly, the Superintendent, Central Excise, to whom a reference was made had confirmed that the statement was given by the party voluntarily and on his own free will in the presence of two independent witnesses; and, thirdly, the 2nd petitioner had not adduced any proof before the Income-tax Officer in support of his allegation that the statement was not voluntary and that it was obtained under duress. Further, the detailed particulars given in the statement could not have been in the knowledge of the central excise authorities. The Income-tax Officer, therefore, concluded that there is no reason to doubt the veracity of the statement recorded by the central excise authorities and there is no reason why he should not place reliance upon such a testimony. The learned counsel vehemently contended that the Income-tax Officer erred in relying on the statement recorded by the excise authorities without giving the 2nd petitioner an opportunity of contradicting the statement of the Superintendent, Central Excise, that the statement was given by him voluntarily and out of his own free will. There could be no doubt that an involuntary stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. All these contradictions were put to him specifically when he was examined on December 2, 1972, by the Income-tax Officer, Trichy. He had stated generally for everyone of these questions that he had not stated so and that the statement was recorded by the excise authorities under compulsion and intimidation. So far as the difference in name is concerned, he said that because of beating by the excise authorities he had mixed up the names. After this questioning, a further notice was issued on January 19, 1973, to the 2nd petitioner requiring him to produce whatever evidence he has in his possession, to explain the source of Rs. 2,38,000 after particularly inviting his attention to the statement made on December 2, 1972, and fixing a further enquiry on January 23, 1973. His further statement was recorded on January 23, 1973, and this statement related to his association with Gulab & Company, Coimbatore, and their accounts. But the 2nd petitioner did not offer or produce any evidence to show that the prior statement given by him before the excise authorities was not voluntary. In those circumstances, the Income-tax Officer could have proceeded on the basis that the statement reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer, Coimbatore, on January 22, 1973. This statement was given voluntarily by the 1st petitioner in the presence of such counsel. We have no doubt that the Income-tax Officer refers only to these statements of the petitioners as statements given by various parties and none else. So far as the account books are concerned, it is the 1st petitioner's own account books which he wanted the Income-tax Officer, Trichy, to look into that were referred to in the order. The learned counsel for the petitioner was not able to show that any other statement or account books of anybody else was relied on by the Income-tax Officer. We do not, therefore, think there is any substance in this ground raised by the learned counsel. Many of the other statements which the learned counsel took exception to in the impugned order are in the nature of inferences arising from the facts and circumstances of the case and no specific evidence is available. It is true that at one place there is some reference to Gulab travelling in the State Transport Bus from Coimbatore to Trichy and reaching there at 10.30 a.m. and there is also a statement to the effect that there is no State Transport Bus arrivin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiry might not be possible even if this court were to direct such enquiry. It would be arguable, on which we do not express any opinion, whether the Income-tax Officer would in such a case have jurisdiction to make any order relying on the directions of the court. In fact, in Pooranmal & Sons v. Director of Inspection, where the court issued a writ of certiorari quashing the order on the basis of violation of the principles of natural justice and directing the Income-tax Officer to make a fresh order after giving opportunity, an order made in pursuance of the High Court's order was challenged on the ground that it was made beyond 90 days from the date of seizure. It was held that the Income-tax Officer had no jurisdiction to make that order in spite of the fact that it is only the High Court that passed the earlier order which directed a fresh enquiry to be made and order passed thereon. As already stated, we are not expressing any view on this point. It may also be pointed out that a regular appeal is provided against the impugned order to the Central Board of Direct taxes under section 132(11). Being an appeal the petitioners could raise all the objections which they had raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that they are incompetent, without his being obliged to wait until those proceedings run their full course.... In the second place, the doctrine has no application in a case where the impugned order has been made in violation of the principles of natural justice." In the present writ petition, as originally filed, a number of grounds had been taken that section 132 of the Income-tax Act was violative of article 14 and article 19(1)(f) and (g) of the Constitution of India. But the learned counsel did not advance any argument on the constitutional validity of section 132. The learned counsel for the petitioners relied on the second exception referred to above relating to the violation of the principles of natural justice. It is seen from the decision of the Supreme Court in State of Uttar Pradesh v. Mohammad Nooh, which was relied on in support of this second exception that there is no such absolute rule enunciated in that case that in every case without exception this court shall have to interfere under article 226 of the Constitution irrespective of any other consideration when there is a violation of the principles of natural justice. The Supreme Court had only st ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
