High Court Of Gujarat
Sunil Vidhyasagar GAT vs. Shalini Verma, Officer of Deputy Director of Income-tax
Section : 132A
Bhaskar Bhattacharya, ACTG. Cj. And J.B. Pardiwala, J.
Special Civil Application No. 324 Of 2012
March 12, 2012
JUDGMENT
Bhaskar Bhattacharya, Actg. CJ. – By this application under article 226 of the Constitution of India, the writ-petitioners, two brothers, have prayed for issue of writ of mandamus or any other appropriate writ for the purpose of quashing and setting aside the impugned warrant of authorization dated February 16, 2011 issued by the respondent No.1 under section 132A of the Income Tax Act, 1961 and have also prayed for a direction upon the respondents to handover the custody of the seized silver articles to the petitioners.
2. The case made out by the writ-petitioners in the writ-application may be summed up thus:-
1.The petitioners are residents of village Hupari, Taluka Hathagande, Dist. Kolhapur, Maharashtra State and are assessed to Income Tax by the Income Tax Officer, Ward No.1, Kchalkaranji, Dist. Kolhapur, in the State of Maharashtra.
2. The petitioners reside in a joint-family with their parents and are silver artisans and manufacturing silver articles and doing business separately. They are assessed to Income tax separately.
3. The petitioners have been carrying on business of purchase and sale of silver as well as articles made of silver after manufacturing those from the silver purchased by them on ‘Badala Majuri’ system, i.e. business of manufacturing of silver articles on job basis.
4. The petitioners, during the course of business over a period of time, accumulated stock of silver while doing the job-work due to difference in tounchs of silver and such gain is credited in the day-to-day Stock Register and closing stock under the head ‘increase in silver account’ since the beginning of the system.
5. All the manufacturing job, purchases and sales of silver and silver articles are supported by bills and vouchers with quantity details since the beginning of the business in the year 1992 by the petitioners and the same are duly reflected in the respective Income Tax Returns filed with the office of the respondent No.2.
6. The petitioners are engaged in business with parties residing at distance and hence, extensive travelling is required for the purpose of receiving and supplying of silver and silver articles for getting orders and for recovery.
7. On February 13, 2011, the petitioner No.2, during the course of such business, was travelling from his native place Hupari to the State of Rajasthan with silver ornaments weighing 233.643 kgs.
8. On February 14, 2011 when the petitioner No.2 was on the way from Hupari to Rajasthan by travelling on a Tata Indica Car bearing registration No. MH.12.EG.1243 along with two other persons, viz. Ismail Mahboob Mullah and Duryodhan Neminath Firgal, they were stopped at Bagwada Check Post Naka by police authorities to make some inquiries on the allegation that the petitioner No.2 was having silver ornaments/articles. The respondent No.4 also drew a panchnama on February 14, 2012.
9. On February 15, 2012, the car was detained and the police authorities arrested the petitioner No.2 along with the two above named persons travelling with him. Without giving any time to the petitioner No.2 to explain, the silver ornaments carried by them were seized at the Bagwada Toll Naka on the suspicion that those did not belong to the petitioners and were stolen materials. The respondent No.4 registered a complaint being No.1 of 2011 under section 124 of the Bombay Police Act on February 15, 2011.
10. On February 14, 2011 itself, the respondent No.4 informed the respondent No.1 with regard to the seizure of the silver ornaments. Pursuant to such intimation, the respondent No.1 asked the respondent No.4, the police authorities, by a letter dated February 14, 2011 to withhold the silver ornaments and jewellery and not to release those without prior intimation to the Income Tax Department. Letters dated February 17, 2011 and May 16, 2011 followed this intimating the respondent No.4 regarding initiation of the process in respect of those seized silver ornaments under the provisions of the Income Tax Act.
11.On February 16, 2011, the respondent No.1 also issued a warrant of authorization in the prescribed form No. 45(c) dated February 16, 2011 under section 132A(1) of the Act read with Rule 112D(1) of the Income Tax Rules.
12.On February 28, 2011, the learned Magistrate passed a judgment in Criminal Case No. 179 of 2011 registered under section 124 of the Bombay Police Act thereby acquitting the petitioner No.2 and the two other persons who were travelling with him of the charges of section 124 of the Bombay Police Act. The learned Magistrate passed order to handover the muddamal silver articles/ornaments to the petitioner No.2 after the period for filing appeal against the said judgment was over.
13.On May 31, 2011, the respondent No.1 filed an application before the Judicial Magistrate First Class, Pardi, to stay the judgment dated April 28, 2011 as the respondent No.1 intended to challenge the said judgment by way of an appeal.
14.The learned Magistrate, therefore, stayed the operation and implementation of his judgment till June 16, 2011.
15.The respondent No.1 thereafter preferred an appeal before the Court of District and Sessions Judge, Valsad being Criminal Appeal No. 7 of 2011.
16.In the said Criminal Appeal, the respondent No.1 also filed an application for stay of the judgment dated April 28, 2011 passed by the learned Magistrate in Criminal Case No. 179 of 2011 till the final disposal of the appeal and for a direction upon the respondent No.4 not to handover the silver articles/ornaments to the petitioner No.2.
17.On June 28, 2011, the learned Additional District Judge, Valsad, passed an order of stay till July 8, 2011, which was extended from time to time till the final disposal of the appeal.
18. Ultimately, on December 14, 2011, the learned Additional District Judge, Valsad, was pleased to allow the appeal filed by the respondent No.1 by directing the respondent No.4 to handover the seized silver ornaments/articles to the respondent No.1, and also directed the respondent No.1 to decide the question involved in the proceedings under Section 132A of the Act as early as possible.
19. The petitioners filed an application before the learned Additional District Judge, Valsad, to grant 30 days’ time to approach the higher forum against the judgment and the learned Judge was pleased to grant 30 days’ time by keeping the said judgment in abeyance.
20.The petitioners, thus, have, filed the present writ-application challenging the issue of notice under section 132A of the Act. The prime ground taken is that as the petitioners are regular assessees and they are co-operating with the Income Tax Department, there was no reason to believe that the silver articles, which were seized by the respondent No.4 on February 14, 2011, were not disclosed to the Income Tax Officer. According to the petitioners, the seized articles were duly shown in the books of accounts of the petitioners and disclosed in the Returns of Income Tax filed by the petitioners before the respondent No.2 and thus, the provision of section 132A of the Act was not applicable.
21.The petitioners further contended that they had explained the source of silver articles, which are in the custody of the respondent No.4 and were ready and willing to give any further information that might be demanded by the respondent Nos.1 and 2. However, till the date of filing of the present petition, no notice or summons of any inquiry has been issued after the issue of warrant of authorization dated February 16, 2011.
22.According to the petitioners, the learned Magistrate, while acquitting the petitioners of the charges held that the seized silver ornaments were in the possession of the petitioners while doing business of sale of silver ornaments and that they were the owners of the said articles. The petitioners further contend that the silver ornaments seized are the stock-in-trade of the petitioners according to the stock register maintained by them, and as such, there was no justification of issuing the notice impugned in this writ-application.
23. The petitioners thus contend that the authorization issued by the respondent No.1 under section 132A of the Act is without any jurisdiction and contrary to the provisions of CBDT circulars and was issued in gross violation of Article 14 and 19 of the Constitution of India.
24. Apart from the aforesaid contentions, the petitioners have further contended that the action taken under section 132A of the Act to receive possession of the silver ornaments/articles, which are in custody of the respondent No.4, can be put into action only if clause (c) of section 132A(1) of the Act is attracted. According to them, in the instant case, the said provision being not attracted, the authorization issued by the respondent No.1 under section 132A of the Act is patently illegal.
25. The petitioners have further contended that at the time of issue of the impugned warrant, the silver articles/ornaments were in the possession of the Criminal Court and, therefore, jurisdiction under section 132A of the Act could not have been exercised, as the concerned Criminal Court is not an officer or authority within the meaning of section 132 A of the Act.
3. The application is opposed by the Income Tax authorities by filing affidavit-in-reply and the contentions raised by the Income Tax authorities can be epitomized thus:
1.Senior Police Officer, Pardi, vide his letter dated February 14, 2012, informed the Income Tax Department that there had been a seizure of 233.591 kgs of silver ornaments from three persons, viz. Sanjay Vidyadhar Gaat [the petitioner No.2] Duryodhan Neminath Firgal and Ismail Mahboob Mullah, who were not carrying any bills, vouchers etc. of the seized silver ornaments/articles.
2. Statements of the abovementioned three persons were recorded under section 131 of the Act on February 14, 2011 and February 15, 2011 regarding source, acquisition and ownership of the seized silver ornaments/articles. The persons were found carrying the silver ornaments/articles in a hidden compartment in their car without any documentary proof, such as, bills etc.
3. During the course of recording of statement, Duryodhan Neminath Firgal and Ismail Mahboob Mullah admitted that the said seized articles belonged to Sanjay Vidyadhar Gaat and they were merely accompanying him.
4. Sanjay Vidyadhar Gaat stated that the seized silver ornaments/articles belonged to him and his family members but he was unable to furnish any documentary evidence to prove the source, acquisition or ownership of the seized silver. In his statement, he has stated that he was carrying the said goods for sale to customers in Rajasthan and that he used to issue bills to customers at the time of sale. However, he was not found to be carrying any bill book for this purpose.
5. Senior Inspector of Police, Pardi Police Station, was requested, vide letter dated February 14, 2011, not to release the seized silver articles without prior notice or intimation to the Income Tax Department.
6. The concerned persons at the Maharashtra-Gujarat border made an inquiry with the Sales Tax Department regarding declaration of the seized silver at the time of entry from Maharashtra into Gujarat. It was informed that no such declaration was given at the border.
7. On February 16, 2012, the Income Tax Officer [Investigation] Unit-III Kolhapur at the address mentioned in PAN database conducted a commission inquiry at Kolhapur under section 131 of the Income Tax Act. As stated by Sanjay Vidyadhar Gaat in the statement recorded under section 131 of the Act, inquiry was also conducted at the shop from where the silver business was carried out. The shop was found to be closed. Sunil Vidyadhar Gaat, the brother of Sanjay Vidyadhar Gaat, who is stated to be carrying on business with Sanjay Vidyadhar Gaat, was not present for inquiry. Inquiry regarding various aspects of silver business was made from Vidyadhar Gaat, the father of Sanjay Gaat. He was unable to produce books of accounts of the business or give any information on stock of silver and as to the fact whether books, bills etc. were maintained. He could not also provide any information about the ownership of the seized silver ornaments.
8.On February 16, 2011, a warrant of requisition was issued under section 132A of the Act, after recording of satisfaction note on the issue. The same was served on Senior Police Inspector of Pardi Police Station on February 17, 2011 with a request to handover the custody of unaccounted silver ornaments/articles weighing 233.591 kgs to the Income Tax Department for further investigation.
9. No documentary evidence was produced by the persons carrying silver ornaments/articles in response to inquiries made at the time of recording of statements under section131 of the Act on February 14, 2011 and February 15, 2011 to establish source, acquisition and ownership of the said silver articles.
10. According to Sanjay Vidyadhar Gaat, 185 kgs., out of 233.591 kgs of silver ornaments/articles seized, belonged to him and his brother Sunil Vidyadhar Gaat but he was unable to identify the ownership of the remaining silver ornaments/articles. Even in respect of his claim of ownership of 185 kgs of silver ornaments/articles, he did not produce any documentary evidence. In response to query No.17 regarding bills etc., he submitted that they were not sure how much silver the customers would be purchased from them; hence, they were not carrying the bills.
11.On the aforesaid facts, it is apparent that the respondent concerned had bona fide belief as required under section 132A of the Act for issue of notice and the contentions raised by the petitioners were not tenable in the eye of law.
4. The petitioners filed an affidavit-in-rejoinder to the affidavit-in-reply filed by the respondent No.1 thereby denying the statement made by the respondent authorities and virtually reiterating the case made out in the writ-petition.
5. Mr. Karia, learned advocate appearing on behalf of the petitioners laboriously contended before us that both his clients being Income Tax Assessees and the seized silver having been disclosed in their accounts submitted before the Income Tax Officer, there was no justification of proceeding under section 132A of the Act. According to Mr. Karia, his clients were and are ready to answer all queries and supply all required information that will be demanded by the income tax authorities, if the income tax authorities so desire. Mr. Karia further contends that those articles being stock-in-trade of his clients, the seizure of those articles amounted to violation of their fundamental rights to carry on business. Mr. Karia further contents that his clients are ready and willing to give security of the proposed assessed tax as may be suggested by the respondent authorities in this regard in this Court subject to final decision of the authorities under the Act.
1. Mr. Karia lastly contended that the notice under section132A of the Act was itself bad as the same was issued at a point of time when the silver articles were in the custody of the Court, and thus, the notice should be set aside on that ground alone.
6. Mr. Bhatt, learned senior counsel appearing on behalf of the Revenue, on the other hand, opposed the aforesaid contentions of Mr. Karia and has contended that having regard to the materials available on record, there is no justification of branding the notice as a mala fide one. Mr. Bhatt contends that the requisition was made to the police authorities when the same was in the custody of the police and thus, the contention of Mr. Karia that the notice is illegal is not tenable. Mr. Bhatt further contends that within the narrow scope of jurisdiction under Article 226 of the Constitution of India, this Court should not pass any order, which would prevent the Income Tax authorities from proceeding in accordance with law. Mr. Bhatt contends that all the formalities required under the Income Tax Act for issue of notice under section 132A having been complied with, this Court should dismiss the writ-application.
7. Therefore, the only question that arises for determination in this writ-applicant is whether the respondent authorities lawfully issued notice under section 132A of the Act.
8. In order to appreciate the questions involved in the writ-application, it will be profitable to refer to the provisions contained in section 132 and 132A of the Act, which are quoted below:
“132. Search and seizure
1. Where the Director General or Director or the Chief Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner 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 under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or
(c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922) or this Act (hereinafter in this section referred to as the undisclosed income or property), then-
(A) the Director General or Director or the Chief Commissioner or Commissioner, as the case may be, may authorise any Additional Director or Additional Commissioner or Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or
(B) such Additional Director or Additional Commissioner or Joint Director or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner of Deputy Commissioner or Income-tax Officer, (the officer so authorised in all cases being hereinafter referred to as the authorised officer) to –
(i) enter and search any building , place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept;
(ii) break open the look of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available;
(iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that a such person has secreted about his person any such books of account, other documents, money bullion, jewellery or other valuable article or thing;
(iib). require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section(1) of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents;
(iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search:
provided that bullion, jewellery or other valuable article or thing being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business;
(iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies there from;
(v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing:
Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any Chief Commissioner or Commissioner, but such Chief Commissioner or Commissioner has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then notwithstanding anything contained in section 120, 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 Chief Commissioner or Commissioner having jurisdiction over such person may be prejudicial to the interest of the revenue:
Provided further that 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 characteristics or due to its being of a dangerous nature, the authorised officer may 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 authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii):
Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stock-in-trade of the business:
Provided also that no authorisation shall be issued by the Additional Director or Additional Commissioner or Joint Director or Joint Commissioner on or after the 1st day of October, 2009 unless he has been empowered by the Board to do so.
(1A) Where any Chief Commissioner or Commissioner, in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the Director General or Director or any other Chief Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner to take action under clauses (i) to (v) of sub-section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-section (1), such Chief Commissioner or Commissioner may, notwithstanding any thing contained in section 120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft.
(2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government or of both, to assist him for all or any of the purposes specified in sub-section (1) or sub-section (1A) and it shall be the duty of every such officer to comply with such requisition.
(3) The authorised officer may, where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing, for reasons other than those mentioned in the second proviso to sub-section (1), 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 such officer may take such steps as may be necessary for ensuring compliance with this sub-section.
[Explanation.- 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).]
(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is fond to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922) or under this Act.
[Explanation.-For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.]
[(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed-
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
(ii) that the contents of such books of account and other documents are true; and
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.]
(5) omitted
(6) omitted
(7) omitted
(8) The books of account or other documents seized under sub-section (1) or sub-section (1A) shall not be retained by the authorised officer for a period exceeding thirty days from the date of the order of assessment under section 153A or clause (c) of section 158BC unless the reasons for retaining the same are recorded by him in writing and the approval of the Chief Commissioner, Commissioner, Director General or Director for such retention is obtained:
Provided that the Chief Commissioner, Commissioner, Director General or Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-Tax Act 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed.
(8A) An order under sub-section (3) shall not be in force for a period exceeding sixty days from the date of the order.
(9) The person from whose custody any books of account or other documents are seized under sub-section (1) or sub-section (1A) may make copies thereof, or take extracts there from, in the presence of the authorised officer or any other person empowered by him in this behalf, at such place and time as the authorised officer may appoint in this behalf.
(9A) Where the authorised officer has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c) of sub-section (1), the books of account or other documents or any money, bullion, jewellery or other valuable articles or thing (hereinafter in this section and in sections 132A and 132B referred to as the assets) seized under that sub-section shall be handed over by the authorised officer to the Assessing Officer having jurisdiction over such person, within a period of sixty days from the date on which the last of the authorisations for search was executed and thereupon the powers exercisable by the authorised officer under sub-section (8) or sub-section (9) shall be exercisable by such Assessing Officer.
(10) If a person legally entitled to the books of account or other documents seized under sub-section (1) or sub-section (IA) objects for any reason to the approval given by the Chief Commissioner, Commissioner, Director General or Director under sub-section (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents and the Board may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit.
(11) Omitted
(11A) Omitted
(12) Omitted
(13) The Provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches and seizure shall apply, so far as may be, to searches and seizure under sub-section (1) or sub-section (1A).
(14) The Board may make rules in relation to any search or seizure under this section; in particular, and without prejudice to the generality of the foregoing power, such rules may provide for the procedure to be followed by the authorised officer-
(i) for obtaining ingress into any building, place, vessel, vehicle or aircraft to be searched where free ingress thereto is not available;
(ii) for ensuring safe custody of any books of account or other documents or assets seized.
Explanation 1. For the purpose of sub-section (9A), “execution of an authorisation for search” shall have the same meaning as assigned to it in Explanation 2 to section 158BE.
Explanation 2.- In this section, the word “proceeding” means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year.
132A. Powers to requisition books of account, etc.
(1) Where the Director General or Director or the Chief Commissioner or Commissioner, 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 subsection (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 and the said books of account or other documents have been taken into custody by any officer or authority under any other law for the time being in force, or
(b) any books of account or other documents will be useful for, or relevant to, any proceeding under the Indian Income- tax Act, 1922 (11 of 1922), or under this Act and 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, such books of account or other documents on the return of such books of account or other documents by any officer or authority by whom or which such books of account or other documents have been taken into custody under any other law for the time being in force, or
(c) any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force,
then, the Director General or Director or the Chief Commissioner or Commissioner may authorise any Additional Director, Additional Commissioner, Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer (hereafter in this section and in sub-section (2) of section 278D referred to as the requisitioning officer) to require the officer or authority referred to in clause (a) or clause (b) or clause (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.
2. Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-sections (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” were substituted. [Emphasis supplied].
9. After hearing the learned counsel for the parties and after going through the materials on record including the provisions of the Act under which the proceedings have been initiated we find that the restriction placed by the provisions of Sections 132, 132A or Rules 112A are not unreasonable restrictions on the freedom under Articles 19 (1) (f) and (g) or Article 14 of the Constitution.(See Pooran Mal v. Director of Inspection [1974] 93 ITR 505 (SC) and Bhupendra Ratilal Thakkar v. CIT [1976] 102 ITR 531 (SC).
10. The provisions of Sections 132(1)/(5), 132A and R. 112A are directed against persons who are believed on good grounds to have illegally evaded the payment of tax on their income and property. Therefore, drastic measures to get at such income and property with a view to recover the government dues would stand justified in themselves. In the interest of the community, it is only right that the fiscal authorities should have sufficient powers to prevent large-scale tax evasion.
11. The power to order search and seizure is vested in the highest officers of the department. Secondly, the exercise of this power can only follow a reasonable belief entertained by such officer that any of the three conditions mentioned in Section 132A (1) (a), (b) and (c) exists. The safeguards in Ss. 132, 132A and Rules 112A are adequate to render the provisions of search and seizure as less onerous and restrictive as is possible under the circumstances.
12. Since, this application has been filed challenging the impugned warrant of authorization dated February 16, 2011 issued by the respondent No.1 under section 132A of the Act, we cannot lose sight to of the fact that the scope of investigation is very limited at this stage.
13. The High Court exercising jurisdiction under Article 226 of the Constitution has power to set aside a warrant of authorization issued under Section 132A of the Act, if the condition precedent to the exercise of the jurisdiction does not exist. The Court may in such a proceeding, in exercise of its powers, ascertain whether the authority issuing such authorization is the appropriate authority who in consequence of information in his possession, had reason to believe that the conditions mentioned in either of the sub-sections (a) or (b) or (c) of the Section 132A (1) were present. The Court may also decide whether from the circumstances of the case, the appropriate authority might have reason to believe that any of those conditions existed. However, the jurisdiction of the Court extends no further. Whether on the information in his possession, the said authority should exercise his power under Section 132A, must be decided by the said authority and not by the High Court. The concerned authority under Section 132A alone is entrusted with the power to administer the same. If from the materials disclosed it may be prima facie said that he had reason to believe that any of those conditions existed, it is not open to the High Court, exercising powers under Article 226 of the Constitution, to set aside the warrant of authorization on a re-appraisal of the evidence. On the other hand, if the writ-petitioner can establish mala fides on the part of the authorities concerned or that in the circumstances, no reasonable person would come to the conclusion that the conditions mentioned therein existed, the High Court can interfere at that stage.
14. Bearing in mind the aforesaid principles, we now propose to examine the materials on record placed before us.
1. In the case before us, no documentary evidence was produced by the persons carrying silver ornaments/articles in response to inquiries made at the time of recording of statements under section131 of the Act on February 14, 2011 and February 15, 2011 to establish source, acquisition and ownership of the said silver articles.
2. According to Sanjay Vidyadhar Gaat, the petitioner no. 2 185 kgs., out of 233.591 kgs of silver ornaments/articles seized, belonged to him and his brother Sunil Vidyadhar Gaat but he was unable to identify the ownership of the remaining silver ornaments/articles. Even in respect of his claim of ownership of 185 kgs of silver ornaments/articles, he did not produce any documentary evidence. In response to query No.17 regarding bills etc., he submitted that they were not sure how much silver the customers would be purchased from them; hence, they were not carrying the bills.
3. From the aforesaid materials we do not find any reason to prevent the appropriate authority to proceed in accordance with the Act to administer its lawful power vested in the concerned officer. Even the concerned persons at the Maharashtra-Gujarat border made an inquiry with the Sales Tax Department regarding declaration of the seized silver at the time of entry from Maharashtra into Gujarat. It was found that no such declaration was given at the border. No explanation has been given by the petitioners why no such declaration was given if the object of the petitioners was lawful transaction of the business in a different State.
4. Thus, the act on the part of the concerned authority cannot be said to be unreasonable justifying interference at this stage. We are also satisfied that no material has been placed by the petitioners to justify inference of any mala fide on the part of the Revenue in this case.
15. Mr. Karia, lastly made a desperate attempt to convince us that on the date of issue of warrant of authorisation, the seized silvers being in custody of the court, the same was not in the custody of the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of Section 132 A of the Act and thus, the impugned warrant of authorisation is liable to be set aside. In support of such contention, Mr. Karia relied upon the decisions of the Kerala and Patna High court in the cases of Abdul Khader v. Sub-Inspector of Police [1999] 240 ITR 489 (Ker) and Janardan Das v. Bindeswari Prasad Sah [1999] 238 ITR 65 (Pat) respectively. Mr. Bhatt, appearing for the Revenue, on the other hand placed strong reliance upon the decision of the Madras High Court in the case of Babu Rao v. Inspector of Police [1991] 190 ITR 616 (Mad) taking a contrary view.
16. In order to appreciate the aforesaid question, it will be profitable to refer to the provisions of Section 451 of the Code of Criminal Procedure which is quoted below:
“451. Order for custody and disposal of property pending trial in certain cases.
When any property is produced before any Criminal Court during any inquiry or trial, the Court may make such order as it thinks fit for the proper custody of such property pending the conclusion of the inquiry or trial, and, if the property is subject to speedy and natural decay, or if it is otherwise expedient so to do, the Court may, after recording such evidence as it thinks necessary, order it to be sold or otherwise disposed of.
Explanation.- For the purpose of this section, “property” includes –
(a) property of any kind or document which is produced before the Court or which is in its custody,
(b) any property regarding which an offence appears to have been committed or which appears to have been used for the commission of any offence.”
17. A plain reading of the aforesaid provision leaves no doubt that the said Section makes the Criminal Court custodia legis of the property produced before the court in connection with the case regarding which an offence appears to have been committed or which appears to have been used for the commission of the offence. In this connection, we may profitably refer to the following observations of the Supreme Court in the case of Smt. Basava Kom Dyamogouda Patil v. State of Mysore in AIR 1977 SC 1749 while considering the scope of Section 561 of the Criminal P.C. (5 of 1898) which is equivalent to the present Section 451 under the present Code:
“A production before the Court does not mean physical custody or possession by the Court but includes even control exercised by the Court by passing an order regarding the custody of the articles. In the instant case when once the Magistrate, after having been informed that the articles were produced before the Court, directed the Sub-Inspector to keep them with him in safe custody, to get them verified and valued by a goldsmith, the articles were undoubtedly produced before the Court and became custodia legis.”
18. We, therefore, find no substance in the above contention of Mr. Karia that the Criminal Court was not the appropriate authority or the person in terms of sub-section (2) of Section 132A in view of our finding that the said court was the custodia legis of the seized articles.
19. We, consequently, are unable to follow the decisions of the Kerala High Court and the Patna High Court in the cases of Abdul Khader (supra) Janardan Das (supra) as those decisions overlooked the above view taken by the Supreme Court in the case of Smt. Basava Kom Dyamogouda Patil (supra); on the contrary, we follow the decision of the Madras High Court in the case of Babu Rao (supra).
20. All the points taken by Mr. Karia having failed, we find no merit in this Special Civil Application so as to quash the warrant of requisition under Section 132A of the Act. We make it clear that we have otherwise not entered into the merit of the defence that would be taken by the petitioner in the proceedings under the Act within the limited scope of this application. The dismissal of this application will not stand in the way of the petitioners in taking appropriate defence in the proceedings in the Act and the appropriate authority under the Act will not be influenced by our observations in this application as the scope of the two proceedings are different.
21. The Special Civil Application is thus dismissed. No costs.
[Citation : 347 ITR 1]
