Calcutta H.C : The case of Smt. Shanti Hora, the appellant, is that she carries on business of discounting of “purchies” and post- dated cheques. The appellant, an assessee under the IT Act, 1961, is regularly assessed to income-tax by the ITO, “G” Ward, Dist. SSC-VIII, Calcutta, respondent No. 6 herein.

DIPAK KUMAR SEN, J.:

The case of Smt. Shanti Hora, the appellant, is that she carries on business of discounting of “purchies” and post- dated cheques. The appellant, an assessee under the IT Act, 1961, is regularly assessed to income-tax by the ITO, “G” Ward, Dist. SSC-VIII, Calcutta, respondent No. 6 herein.

2. On 7th Nov., 1985, the officers of the IT Department raided premises No. 52, Surya Nagar, Agra, in the State of U. P., under a search authorisation issued by the CIT, Agra, respondent No. 3 herein, and conducted a search under s. 132(1) of the IT Act, 1961. The said premises No. 52, Surya Nagar, Agra, is owned by Ashok Kumar Hora, a son of the appellant. At the time of the search, the appellant was residing in the ground floor of the said premises. The officers of the IT Department after the search seized “purchies” valued at Rs. 8,30,877 and post- dated cheques for Rs. 1,53,254 as recorded in a seizure list from the ground floor of the said premises where the appellant was staying. During the course of the search, the appellant was examined on oath and she gave a statement in writing before the officers concerned under s. 132(4) of the said Act on 8th Nov., 1985. The appellant claimed to be the owner of the said “purchies” and post-dated cheques.

On or about 23rd Jan., 1986, the appellant made an application before respondent No. 3 for release of the said “purchies” and post-dated cheques. Ultimately, the “purchies” seized were released to the appellant upon the latter furnishing a bank guarantee in favour of respondent No. 3 for Rs. 8 lakhs, through the Punjab & Sind Bank, Lindsay Street Branch, Calcutta, respondent No.

5. The said guarantee was dt. 19th Feb., 1986, and was effective from that date for a period of one year and subject to further renewal at the instance of respondent No.3. The ITO, “C” Ward II (2), Calcutta, respondent No. 4, has assessed Ashok Kumar Hora, the said son of the appellant, for the accounting period ending on 31st March, 1986. It has been found and recorded in the assessment order that as the said Ashok Kumar Hora was out of Calcutta for most of the period before, during and after the said search, it could be held that Ashok Kumar Hora did not have any direct or indirect connection with the business relating to the said “purchies” and post-dated cheques. It has also been found that there was no evidence that the appellant had made any remittance to the said Ashok Kumar Hora. Subsequently, on 4th April, 1986, the appellant submitted an application to the CIT, West Bengal-XIII, Calcutta, respondent No. 1, calling upon him to make an assessment in respect of the said seizure and contended that her business in respect of the said “purchies” and post-dated cheques had been disclosed in the income-tax records of the appellant. No action was taken by respondent No. 1 on the said application.

On 9th Feb., 1987, respondent No. 6 wrote to respondent No. 3 that the assessment of the appellant and the records thereof were being dealt with by respondent No. 6 and requested respondent No. 3 to have the bank guarantee furnished by the appellant extended up to 30th Sept., 1987, within which time he expected that the assessment of the appellant for the asst. yr. 1986-87 on the basis of the search documents would be finalised. A copy of the said letter was endorsed to the appellant.

On 16th Feb., 1987, the appellant submitted an application before respondent No. 3 stating, inter alia, that the appellant had filed her return of income for the asst. yr. 1986-87 with respondent No. 6 which was pending and that no income-tax demand had been raised on the appellant uptil then. It was submitted further that respondent No. 6 had requested respondent No. 3 to have the bank guarantee extended till 30th Sept., 1987, and that the said guarantee under its terms could be renewed only at the instance of respondent No. 3. The appellant sought an order from respondent No. 3 for renewal of the said bank guarantee for a further period of one year.

In the meantime, the appellant received a letter from the Punjab & Sind Bank, Lindsay Street Branch, Calcutta, respondent No. 5, where it was stated that respondent No. 3 had made a demand for payment of the said amount of Rs. 8 lakhs under the said bank guarantee.

The appellant moved the above writ petition before the first Court on 5th March, 1987, when an order was passed directing the appellant to serve copies of the writ petition on the respondents. Respondent No. 3 was restrained from encashing the said bank guarantee through respondent No. 5 and respondent No. 5 was also directed not to encash the said bank guarantee without leave of Court. The petitioner was directed to keep the bank guarantee alive in the meantime.

It was contended in the writ petition, inter alia, that the said search and seizure were without any authority of law and amounted to deprivation of the property of the appellant being a contravention under Art. 300A of the Constitution. It was contended further that the respondents had no jurisdiction to detain the seized “purchies” and post-dated cheques or to demand from the appellant a bank guarantee for release of the same.

It was contended further that in any event, respondent No. 3 was not entitled to ignore the request of respondent No. 6, the assessing authority of the appellant, to have the period of the bank guarantee extended and to demand from respondent No. 5 encashment of the said guarantee pending the assessment of the appellant by respondent No. 6. Respondent No. 3 was not the assessing authority of the appellant and had no jurisdiction to encash the bank guarantee till the assessment of the appellant in respect of the said “purchies” and post-dated cheques was finalised.

After service of the writ petition upon the respondents, the matter came up before the first Court on 13th March, 1987, on which date an order was passed by the first Court by which the said writ petition was dismissed only on the ground of jurisdiction. The interim order of injunction passed on 5th March, 1987, was, however, extended till 20th March, 1987. The order was passed without prejudice to the rights of the appellant to move any other High Court in India for appropriate reliefs. The present appeal is from the said judgment and order dt. 13th March, 1987.

7. Tamal Kanti Bhanja Chowdhury, the present ITO, “G” Ward, SSC-VII, Calcutta, affirmed an affidavit on 10th April, 1987, which has been filed in opposition to this petition. It is alleged in this affidavit, inter alia, that the said search was conducted at Agra under s. 132 of the IT Act, 1961, against Satpal Hora of Agra, another son of the appellant as also Ashok Kumar Hora. It is stated that the appellant also resides in the said premises No. 52, Surya Nagar, Agra, where the search was conducted and the said “purchies” and post-dated cheques were seized from the appellant. It is admitted that the appellant is assessed to income-tax in Special Survey Circle VIII, Calcutta.

It is alleged further that the said “purchies” and post-dated cheques were released by respondent No. 3 against the bank guarantee furnished by the appellant for Rs. 8 lakhs in favour of the Union of India through respondent No. 3. It is alleged that respondent No. 3 intended to obtain the said sum of Rs. 8 lakhs from respondent No. 5 by invoking the bank guarantee in terms of the provisions thereof and that respondent No. 3 was entitled in law as also under the said guarantee to enforce the same. It is alleged that this Court had no jurisdiction to entertain the writ petition and the first Court acted rightly in dismissing the said writ petition on the ground of jurisdiction. It is alleged that the appellant obtained a further extension of the order of injunction to move the appropriate Court at Agra but instead the appellant has preferred this appeal. It is contended that respondent No. 5, the bank, was under a legal obligation to encash the bank guarantee at the instance of respondent No. 3.

8. At the hearing of this application, it was contended on behalf of the appellant that the controversy raised in the present proceeding is in respect of the enforcement of a bank guarantee which has been furnished by respondent No. 5, which is a bank at Calcutta within the jurisdiction of this Court. It is contended further that on the basis of the said search and seizure, the ITO concerned, viz., respondent No. 6, intends to complete the assessment of the appellant at Calcutta within the said jurisdiction. The same has been recorded in a letter dt. 9th Feb., 1987, from respondent No. 6, issued from Calcutta a copy whereof was served on the appellant at Calcutta within the jurisdiction of this Court. It was contended that this Court had jurisdiction to entertain the writ application as a part of the cause of action of the appellant had arisen within the said jurisdiction. Contentions to the contrary were made on behalf of the respondents, the IT authorities.

9. From the facts on record, it appears to us that the said “purchies” and post-dated cheques were admittedly seized from the possession or control of the appellant and have been released to the appellant against the said bank guarantee furnished by the appellant. Under s. 132(5) of the IT Act, 1961, after any valuable article or thing is seized in search, the ITO concerned is required to make an order estimating the undisclosed income of the person concerned in a summary manner after making an enquiry and giving an opportunity to the person concerned of being heard within 90 days from the date of the seizure. The ITO concerned is further empowered under the said s. 132(5) to calculate the amount of tax on the income so estimated, determine the amount of interest payable and penalty imposable under the Act and specify the amount that would be required to satisfy any existing liability under the IT Act. The ITO thereafter is empowered to retain in his custody such assets or parts thereof as would, in his opinion, satisfy the aggregate of the said amounts and forthwith release the balance. Sec. 132(9A) provides further that where the officer authorised to search and seize has no jurisdiction over the person who is in possession of the valuable articles or things which are the subject-matter of seizure, the items seized are required to be handed over by the authorised person to the ITO having jurisdiction over such person within a period of 15 days of such seizure and thereupon the powers which are exercisable by the authorised officer in the respect of retention of books of account or documents or making copies thereof would be exercised by the ITO having jurisdiction over the person concerned.

10. From the aforesaid provisions, a case appears to have been made out by the appellant that the ITO having jurisdiction over the appellant is respondent No. 6 and not respondent No. 3. Valuable articles belonging to the appellant have been seized and under s. 132 of the IT Act, 1961, it is incumbent that a summary estimation of the undisclosed income of the appellant should be made by respondent No. 6 and an assessment of tax on such undisclosed income should be calculated along with interest and penalty, if payable or leviable. Respondent No. 3, prima facie, was bound to hand over the articles seized or the bank guarantee furnished by the appellant in lieu thereof to respondent No. 6 who thereupon would be entitled to proceed to take further steps under s. 132. Admittedly, respondent No. 3 is seeking to enforce the bank guarantee furnished through a bank at Calcutta against the appellant, the assessee, who is required to be assessed in respect of the said articles seized by respondent No. 6 at Calcutta. Under s. 132 of the said Act, no asset can be retained and appropriated before the undisclosed income, if any, is estimated and tax thereon is calculated in accordance with the IT Act. In the instant case, no such estimate of the undisclosed income of the appellant has been made nor has the amount of tax payable by the appellant on such undisclosed income been calculated.

11. It appears that under s. 132(9A), respondent No. 3 ceased to have any seisin over the assets seized from the appellant which ought to have been made over to respondent No. 6. Also, prima facie, the present respondent No. 6 has or would be deemed to have seisin over the assets of the appellant which have been seized and it is for respondent No. 6 to decide whether the said bank guarantee furnished by the appellant should be invoked at this stage or not. It is on record that respondent No. 6 wanted the period of the bank guarantee to be extended for a further period up to 30th Sept., 1987, within which time he expected to complete the assessment of the appellant in respect of the documents seized on search.

On the facts as noted hereinbefore and for the reasons as stated hereinabove, it appears to us that a part of the cause of action of the appellant in the writ petition arose within the jurisdiction of this Court. The bank guarantee is enforceable at Calcutta. Further steps required to be taken following the search and seizure in the instant case are required to be taken by respondent No. 6, the ITO, having jurisdiction over the appellant, whose office is situated at Calcutta. We also note that in the assessment of Ashok Kumar Hora, the ITO concerned has recorded in his assessment order that the documents seized in the search related to the appellant and Ashok Kumar Hora had not been assessed in respect of the said assets seized.

12. For the reasons as aforesaid, we accept the case of the appellant. At the instance of the parties, the appeal is treated as in the day’s list. The learned advocate for the respondents waives service of the notice of appeal. By consent, filing of paper book is dispensed with and the undertaking given in that behalf is directed to be discharged. The appeal and the application are heard together and are disposed of by the following order :

The order dt. 13th March, 1987, under appeal is set aside. A rule is directed to be issued on the writ petition as prayed for. There will be an interim order as follows : Stay is granted on 13th March, 1987, to continue till the disposal of the rule. It is made clear that respondent No. 6 will be entitled to proceed with the assessment of the appellant in the meantime and if any demand is raised on the appellant on such assessment on the basis of the documents seized, respondent No. 6 will be entitled to invoke the said bank guarantee through respondent No. 3, if necessary and encash the same to the extent of such demand. It is further made clear that if, in the meantime, any assessment is made on Satpal Hora, the other son of the appellant at Agra, on the basis of the items seized, respondent No. 3 will be entitled to invoke the said bank guarantee and encash the same to the extent of the demand raised on such assessment.

The appellant is directed to keep the said bank guarantee renewed till the disposal of the rule. Such renewal is to be effected 14 days before the date of expiry and if the same is not renewed, respondents Nos. 3 and 6 will be entitled to invoke and encash the said bank guarantee. In any event, respondent No. 3 will be entitled to extend the period of the said bank guarantee for any period he may decide in consultation with respondent No. 6.

13. At the instance of the parties, the following directions are given for the expeditious disposal of the rule issued by us. The respondents will file their affidavit in opposition within three weeks from date, the affidavit in reply to be filed within one week thereafter. Liberty is given to the parties to apply before the first Court for early disposal of the rule

Each party to pay and bear its own costs.

All parties to act on the operative part of this judgment.

SHYAMAL KUMAR SEN, J.:

I agree.

[Citation : 169 ITR 446]