High Court Of Madhya Pradesh
Samta Construction Co. vs. Pawan Kumar Sharma, Deputy Director Of Income Tax (Investigation) & Ors.
Section 132A
Dipak Misra, J.
Writ Petn. No. 1404 of 1997
5th February, 1999
Counsel appeared
G.N. Purohit, for the Petitioner : Abhay Sapre, for the Revenue
ORDER
Dipak Misra, J. :
Justifiability of the action of the Dy. Director of Income Tax (Investigation) and CIT the respondents Nos. 1 and 2, respectively, herein, requisitioning the bank draft of the petitioner in exercise of power under s. 132A of the ITAct, 1961 (hereinafter referred to as ‘the Act’) on 14th Dec., 1996, is called in question in present writ petition preferred under Art. 226 of the Constitution of India by the petitioner, a partnership firm.
2. The essential facts which require narration for the present litigation are that the petitioner firm is engaged in the business of executing various kinds of work and contract operation of quarrying of sand on lease basis from the Government of M.P. As set forth in the petition the partnership firm submitted earnest money of Rs. 72,60,000 (Seventy-two lakhs sixty thousand) only in a joint venture along with others with M.P. Matsya Vikas Nigam Ltd. (hereinafter referred to as ‘the Nigam’) in connection with a bid for fishing rights for Sagar Gandhi Dam. It isstated that due to paucity of time the petitioner could not channelise funds through its bank for which he had to obtain loans from various persons. Loans were advanced by them by way of bank drafts drawn in favour of the ‘Nigam’. Initially the tender was awarded in favour of the petitioner, it being the highest bidder but afterwards the same was withdrawn by the Department of Fisheries and the earnest money deposited was refunded by Draft No. 007387, dt. 14th Dec., 1996, payable at Union Bank of India, Main Branch, Jabalpur. The petitioner deposited the said draft in its current account at Central bank of India, Malviya Chowk, Jabalpur. The draft was forwarded by the banker of the petitioner for clearing and it was sent to the Union Bank of India, Main Branch, Jabalpur, through the clearing house. At that juncture the respondent No. 2 on recommendation of respondent No. 1 issued a warrant of authorisation for requisitioning the bank draft. As put forth in the writ petition the respondent No. 1 tookpossession of the draft under the authorisation dt. 19th Dec., 1996, issued by respondent No. 2. The Asstt. Director of Income- tax (Investigation) informed the Central Bank of India that warrant under s. 132A had been executed on the branch manager of the Union Bank of India and the draft had been delivered to him by bank authorities. Thereafter the petitioner approached the CIT for release of the draft by its letter dt. 26th Dec., 1996, but the request of the petitioner was not paid heed to. Without abandoning hope, the petitioner filed a written application on 9th Jan., 1997, requesting the respondent No. 2 to release at least 40 per cent of the amount. The said prayer was accepted.It is averred in the writ petition that the provisions enumerated under s. 132A are not meant for interfering with the formal channel of banking activities as the draft in question was not taken into custody by the bank by virtue of operation of any law, and, therefore, the warrant of authorisation issued under s. 132A by the respondent No. 2 is without jurisdiction. It is also pleaded that as per the provision of s. 132A(9) of the Act the authorising officer should hand over the assets and documents and taken possession of by him within 15 days under warrant of authorisation to the ITO having jurisdiction but in case of the petitioner the same was not done for the purpose of assessment of the petitioner. It is also put forth that the parties from whom the petitioner had raised funds are income-tax assessees and they have confirmed the transaction, and, therefore, the genuineness of the transactions is beyond doubt and there is no reason to believe that the draft was prepared out of the undisclosed income of the petitioner. It is also set forth that there has been no application of mind to reach the requisite satisfaction for issuance of authorisation under the aforesaid provision. It is also stated that the transaction has been recorded in the books of accounts maintained in the regular course of business, hence it cannot be said that the amount was a part of undisclosed income. It is averred by the petitioner that the action of respondent No. 2 in issuing warrant of authorisation under s. 132A of the Act on recommendation of respondent No. 1 is totally illegal and without jurisdiction. It is put forth that both the authorities have transgressed their jurisdiction conferred on them under s. 132A of the Act as the authorisation was possible only if some other authority acting under any other law in force had taken into custody the assets and such assets either wholly or partly believed to be undisclosed income of the petitioner. On the basis of the aforesaid averments, prayer has been made for quashment of authorisation issued under s. 132A of the Act as illegal and further for issue of a direction to release the balance amount in favour of the petitioner and not to initiate any proceeding under Chapter XIV-B of the Act and make good the loss caused to the petitioner.
3. A counter-affidavit has been filed by the answering respondents contending, inter alia, that the provisions of s. 132A cover the situation of the present nature. It is pleaded in the present case the Departmental authorities had reasons to believe that the draft was prepared from the undisclosed source of the income of the petitioner which was duly exposed in course of investigation undertaken by the officer of the investigation cell of the ITDepartment. It is stated that as per the investigation it was revealed that large amount of money was involved in the transaction. It is put forth that during the investigation the investigating agency was able to collect the names of the persons by whom drafts were prepared. It is also stated that the persons who got the drafts prepared had deposited the amount just few days before the date of preparation of the drafts. It is also pleaded that most of the persons from whose accounts the money was withdrawn for preparation of the drafts are persons of ordinary means. It is also put forth that as the amount in question related to the unexplained source of income in the hands of the petitioner there was reason to believe that the statutory conditions precedent were satisfied and accordingly the warrant of authorisation was sent to requisition the draft in exercise of the power under s. 132A of the Act, and hence there is no error in exercise of such jurisdiction. It is also set forth that one W.A. Qureshi has admitted in course of investigation that he had prepared the draft by taking cash from the petitioner and that clearly shows that the amount was from the undisclosed income of the petitioner. It is worthwhile to mention here that the respondents have taken exception to impleadment of the Dy. Director of Income-tax (Investigation) by name. A rejoinder affidavit has been filed justifying the impleadment of Dy. Director of Income-tax by name. It is also stated that transactions are through bank accounts and the identity of the persons depositing money is verifiable and there is no reason to believe that the amount in question is out of undisclosed income. The assertion of the Department to the effect the persons who had got the drafts, prepared for the purpose of advancing loan to the petitioner are of ordinary means is disputed on the basis that the depositors are income-tax assessees having regular accounts with banks. The allegation that W.A. Qureshi had stated before the respondent No. 2 that he had deposited the money by taking cash from the petitioner has been disputed. A copy of the bank account of W.A. Qureshi has been brought on record to show that he has transactions running into lakhs. It has also been clarified that when the amount has been refunded he has accepted that refund and deposited the same in his bank account. It is put forth that such information cannot be relied upon for recording satisfaction as contemplated under s. 132A of the Act. It is stated that the material collected during and after action taken under s. 132A cannot be taken into consideration. The only material which was available before the authority at the time of making the order has to be taken into consideration to record satisfaction and that alone, can be put forth in a Court of law to justify the action. The stand of the Department that the petitioner is not co-operating in the investigation has been disputed in the rejoinder affidavit. Mr. G.N. Purohit, learned counsel appearing for the petitioner, has contended that the provisions enshrined under s. 132A(1)(c) of the Act do not cover a situation of the present nature. It is his further submission that the language of the aforesaid provision being clear and unambiguous it is to be given a strict interpretation and the words “taken into custody” have to be interpreted as they are understood in law and there is no justification for broadening the horizon. The learned counsel for the petitioner has canvassed that there is no need to give a liberal construction as the legislature had only intended to engulf and cover certain types of situations. It is also submitted that a bank draft in the custody of bank for the purpose of clearing cannot be, by any stretch of imagination, construed to have been taken into custody as mere custody cannot be equated to be “taken into custody”. The learned counsel has also referred to Circular No. 179, dt. 30th Sept., 1975, issued by the Department to highlight that the applicability of the aforesaid provision is confined to certain specific spheres and is never meant to take within its sweep voluntary presentation of a bank draft in a bank for the purpose of encashment. Mr. Purohit has strenuously urged that the conditions precedent for exercise of jurisdiction under s. 132A(1)(c) have not been satisfied in the case at hand, and hence the whole action of the respondents is vitiated. Mr. Abhay Sapre, learned counsel for the respondents, has proponed that while interpreting the relevant provision the object and reasons for introduction of the said provision and the principles relating to interpretation on taxing statutes are to be kept in mind and a meaning should not be given in restricted/circumscribed sense so as to defeat the avowed object of the legislation. The learned counsel for the Revenue has urged with vehemence that the aforesaid provision was brought into statute book to avoid fraud and prevent tax evasion and the said aspects are to be given due weightage while interpreting the aforesaid provision. It is his further submission that if a restricted meaning is given to the language used in the provision it would make the same meaningless and ineffective which would not be in the arena of purposive interpretation. The learned counsel has also canvassed that fiscal authorities should have sufficient powers to prevent tax evasion and unless the provision is interpreted covering wide spectrum it would frustrate rather than further the object of the Act. It is further argued by Mr. Sapre that the words “having been taken into custody” have been used in all the clauses of s. 132A, and therefore, harmonious interpretation is warranted so that the object of the Act is furthered.
It is emphasized that absence of the use of the word ‘seizure’ in any of the clauses, namely cls. (a), (b) and (c), is quite significant and the same should be considered in proper perspective. It is urged that the words “taken into custody” should be read as “is/are in the custody” of the some officer and such a reading would further the purpose of the statute. It is also canvassed by him that if a restricted meaning to the provision is given the public purpose would be atrophied and the interpretation instead of purposive or pragmatic, would be atomistic. Mr. Sapre has also contended that in the instant case all the conditions precedent have been satisfied and, therefore, the issue of warrant of authorisation for requisition of the asset cannot be found fault with.
7. Before I proceed to deal with the rival submissions raised at the Bar it is necessary to refer to the background under which the s. 132A came to be legislated. The aforesaid provision was inserted by Taxation Laws (Amendment Act), 1975 (41 of 1975). The purpose of the aforesaid legislation was to fill up the lacuna which had existed prior to the amendment. Before the aforesaid provision came into force the IT Department had no authority to requisition the books of accounts or other documents or any asset in the custody of any officer/authority. In fact, this aspect was noticed in the case of CIT & Ors. vs. Tarsem Kumar & Anr. (1986) 58 CTR (SC) 129 : AIR 1986 SC 1477 : TC 60R.289. In the said case a search was made by the customs authority and a certain sum of money, gold sovereigns and a car were seized by the customs authorities. While the matter was pending before the customs authorities the ITO took possession of the cash on the basis of warrant of authorisation issued under s. 132 of the Act and r. 112(11) of the IT Rules. The apex Court interpreting the s. 132 held that the search and seizure warrants as issued by the IT Department was illegal and was liable to be quashed and the IT Department was liable to return the money to the customs authorities. It is to be noted here that by the time the seizure had taken place theprovision under s. 132A had not come into existence. The apex Court observed that in view of the law as it stood at the relevant time the seizure was unjustified. Relying on the aforesaid decision it is submitted by Mr. Sapre that the object of the amendment was to add/increase/widen the powers of the investigating authorities while dealing with the cases of unaccounted wealth of the assessee. It is his submission that the main objective is to allow the investigating authorities to have an access to any books of account, document and asset belonging to assessee to take in their possession to enable them to make the assessment of unaccounted wealth. Submission of the counsel for the Revenue is that the present provision was brought by way of amendment to fill up the lacuna and to give authority to the Departmental investigating agency to discover the hidden assets of the assessee and requisition the same for the purpose of assessment. It is worth mentioning here that in the case of Pooran Mal vs. Director of Inspection (Investigation) IT & Ors. 1974 CTR (SC) 25 : (1974) 93 ITR 505 (SC) : TC 60R.357 the apex Court upheld that the constitutional validity of s. 132A* by holding as follows : *Sec. 132A at that time was concerned with application of retained assets and the apex Court had upheld the validity of that s. 132A. In fact, s. 132A under consideration was inserted by the Taxation Laws (Amendment) Act, 1975 w.e.f. 1st Oct., 1975 and the then existing s. 132A was renumbered as s. 132B. Thus, the learned counsel for the Revenue is wrong in submitting that the constitutional validity of s. 132A had been upheld by the apex Court—Ed. “We are not, therefore, inclined to hold that the restrictions placed by any of the provisions of s. 132, s. 132A or r. 112A are reasonable restrictions on the freedom under Art. 19(1)(f) and (g).” I have referred to the aforesaid decision as Mr. Sapre, learned counsel for the Revenue, had urged that the constitutional validity of the aforesaid provision having been upheld by the apex Court the avowed purpose behind the legislation has to be given due poundage/ significance and effort should be made by Court of law to see that the tax evasion is curbed. Needless to emphasize that the constitutional validity of a provision is in a different arena and the applicability of a provision to a fact situation operates in quite a different sphere. Thus, I am under obligation to scan and scrutinise the provision to find out whether the same is applicable to the obtaining factual matrix.
8. To understand the import, impact and effect of the provision it is essential to refer to the s. 132A of the Act which reads as under : “132A. Powers to requisition books of account, etc.—(1) Where the Director General or Director or the Chief CIT or CIT, in consequence of information in his possession, has reason the believe that : (a) any person to whom a summons under sub-s. (1) of s. 37 of the IT Act, 1922 (11 of 1922), or under sub-s. (1) of s. 131 of this Act, or a notice under sub-s. (4) of s. 22 of the Indian IT Act, 1922 (11 of 1922), or under sub-s. (1) of s. 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 IT 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 purpose of the Indian IT 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 CIT or CIT may authorise any Dy. Director, Dy. CIT, Asstt. Director (Asstt. CIT or ITO) (hereafter in this section and in sub-s. (2) of s. 278D referred to as the requisitioning officer) to require the officer or authority referred to in cl. (a) or cl. (b) or cl. (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-s. (1), the officer or authority referred to in cl. (a) or cl. (b) or cl. (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-ss. 4(A) to (14) (both inclusive) of s. 132 and s. 132B shall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-s. (1) of s. 132 by the requisitioning officer from the custody of the person referred to in cl. (a) or cl. (b) or cl. (c), as the case may be, of sub-s. (1) of this section and if for the words “the authorised officer” occurring in any of the aforesaid sub-ss. (4A) to (14), the words “the requisitioning officer” were substituted.” It is submitted by Mr. Sapre that while interpreting the aforesaid provision the object of section and the purpose intended to achieve have to be given due importance. The learned counsel has contended, this provision, in fact, has been incorporated by way of amendment to prevent tax evasion and the words used are of comprehensive import.
9. In this regard he has drawn my attention to the decision rendered in the case of C.A. Abraham vs. ITO & Anr. (1961) 41 ITR 425 (SC) : AIR 1961 SC 609 : TC 68R.350 wherein the apex Court has laid down as follows : “In interpreting a fiscal statute the Court cannot proceed to make good deficiencies if there be any : the Court must interpret the statute as it stands and in case of doubt in a manner favourable to the taxpayer. But where as in the present case, by the use of words capable of comprehensive import, provision is made for imposing liability for penalty upon taxpayers guilty of fraud, gross negligence or contumacious conduct, an assumption that the words were used in a restricted sense so as to defeat the avowed object of the legislature qua a certain class will not be lightly made.”
10. In this context, I may refer to the decision rendered in the case of The State of Tamil Nadu vs. M.K. Kandaswami etc. etc. AIR 1975 SC 1871 wherein it has been held as under : “Its main object is to plug leakage and prevent evasion of tax. In interpreting such a provision, a construction which would defeat its purpose and, in effect, obliterate it from the statute book, should be eschewed. If more than one construction is possible, that which preserves its workability, and efficacy is to be preferred to the one which would render it otiose or sterile.”
11. In this regard it is worthwhile to refer to the Statutory Construction by Crawford wherein learned author has opined as under: “The enactment which is designed to prevent fraud upon the Revenue is properly a statute against fraud rather than a taxing statute and for the reasons properly subject to a liberal construction in the Government’s favour.”
12. In this context, I may usefully refer to the decision rendered in the case of D. Stephen Joseph vs. Union of India & Ors. AIR 1997 SC 2602 wherein the apex Court has observed that the plain meaning of the words is theaccepted principles of interpretation. In this context, it is apposite to refer to the decision rendered in the case of Institute of Chartered Accountants vs. Price Waterhouse & Anr. (1997) 6 SCC 312 wherein it has been held as under : “The elementary principle of interpreting or construing a statute is to gather the mens or sententia legis of the legislature. Interpretation postulates the search for the true meaning of the words used in the statute as a medium of expression to communicate a particular thought. Statute being an edict of the legislature, it is necessary that it is expressed in clear and unambiguous language. Where, however, the words clear, there is no obscurity, there is no ambiguity and the intention of the legislature is clearly conveyed, there is no scope for the Court to innovate or take upon itself the task of amending or altering the statutory provisions. In such situation the Judges should not proclaim that they are playing the role of a law-maker merely for a exhibition of judicial valour. They have to remember that there is line, though thin, which separates adjudication from legislation. That line should not be crossed. This can be vouchsafed by “an alert recognition of the necessity not to cross it and instinctive, as well as trained reluctance to do so”. What is to be borne in mind is as to what has been said in the statute as also what has not been said. A construction which requires, for it support, addition or substitution of words or which results in rejection of words, has to be avoided, unless it is covered by the rule of exception, including that of necessity which is not the case here.”
13. I may, in this context, refer to the decisions rendered in the case of Jitendra Tyagi vs. Delhi Administration & Anr. AIR 1990 SC 487, AIR 1992 SC 1991, Oswal Agro Mills Ltd. vs. Collector of Central Excise & Ors. AIR 1993 SC 2288, Council of Homoeopathic System of Medicine, Punjab & Ors. vs. Suchintan & Ors. AIR 1994 SC 1761 to highlight the concept when the language used is plain and unambiguous and is susceptible of only one meaning, it is to be remembered that the Act speaks for itself. I may profitably reproduce a passage from ‘Maxwell on the Interpretation of Statutes’; 12th Edn., at p. 29 which reads as under : “Where the language is plain and admits of but one meaning, the task of interpretation can hardly be said to arise. ‘The decision in this case’, said Lord Morris of Borth-y-Gest in a revenue case, “calls for a full and fair application of particular statutory language to particular facts as found. The desirability or the undesirability of one conclusion as compared with another cannot furnish a guide in reaching a decision.’ [Shop & Store Developments Ltd. vs. IRC (1967) 1 AC 472]. Where, by the use of clear and unequivocal language capable of only one meaning, anything is enacted by the legislature, it must be enforced however harsh or absurd or contrary to commonsense the result may be. [Cartledge vs. E. Jopling & Sons Ltd. (1963) AC 758]. The interpretation of a statute is not to be collected from any notions which may be entertained by the Court as to what is just and expedient [Gwynne vs. Burnell (1840) 7 C1 & F 572]. Woes are not to be construed contrary to their meaning, as embracing or excluding cases merely because no good reason appears why they should not be embraced or excluded. [Whitehead vs. James Stott Ltd. (1949) 1 KB 358]. The duty of the Court is to expound the law as it stands, and to “leave the remedy (if one be resolved upon) to others [Sutters vs. Briggs, (1922) 1 AC 1].”
14. In this context, I may profitably refer to a passage from the book “Principles of Statutory Interpretation” (Sixth Edn.) by Justice G.P. Singh wherein the learned author referring to the decision rendered in the case of IRC vs. Rossminster Ltd. (1980) 1 All ER 80 (HL) has stated so : “It must also be remembered that in applying a statute designed for detection of fraud for example, one providing for search and seizure of taxpayer’s property two competing public interests are involved : that offences involving tax frauds should be detected and punished and that the right of the individual to the protection of law from unjustified interference with his use and enjoyment of
his private property should be upheld. If the statutory words are ambiguous obscure, a construction should be placed on them that is least restrictive of individual’s rights. But a Judge should not be over zealous in searching ambiguities or obscurities in words which are plain simply because he is out of sympathy with the policy which the Act appears to give effect.”
15. In the decision rendered in the case of C.W.S. (India) Ltd. vs. CIT (1994) 118 CTR (SC) 118 : (1994) 208 ITR 649 (SC) : TC 68R.383 it has been ruled thus : “Where a literal interpretation leads to absurd or unintended result, the language of the statute can be modified to accord with the intention of Parliament and to avoid absurdity.”
16. In this context, I may refer to the decision rendered in the case of Directorate of Enforcement vs. Deepak Mahajan & Anr. AIR 1994 SC 1775 wherein it has been expressed thus : “True, normally Courts should be slow to pronounce the legislature to have been mistaken in its constantly manifested opinion upon a matter resisting wholly within its will and take its plain ordinary grammatical meaning of the words of the enactment as affording the best guide, but to winch up the legislative intent, it is permissible for Courts to take into account the ostensible purpose and object and the real legislative intent. Otherwise, a bare mechanical interpretation of the words and application of the legislative intent devoid of concept of purpose and object will render the legislature inane.” And again :…..in given circumstances, it is permissible for Courts to have functional approaches and look into the legislative intention and sometimes may be even necessary to go behind the words and enactment and take other factors into consideration to give effect to the legislative intention and to the purpose and spirit of the enactment so that no absurdity or practical inconvenience may result and the legislative exercise and its scope and object may not become futile.”
17. Thus, the Courts can creatively interprete a provision for proper implementation of the legislative intent. The thrust of the matter is whether the provision enumerated under s. 132A(1) (c) admits of any scope for creative interpretation ? Does it require to be moulded ? Will any kind of moulding or creativity be in consonance or harmony with the language employed therein ?
18. Scrutinising the anatomy of the provision under s. 132A it is perceptible that the language used in the Act is absolutely clear and unambiguous. As has been held in the decisions referred to above if the meaning is plain due effect has to be given to the words of the statute. If the words which have been employed by the legislature are reasonably capable of conveying one meaning the same should be given due regard. It is to be kept in mind that the ideas are conveyed through the words if the words have been used in a precise and unambiguous manner they must be understood in their natural ordinary sense. Mr. Sapre, learned counsel, would like this Court to read “taken into custody” as “is in custody” or “are in custody”. He has also emphasized that all the clauses should be dissected and the words used such as “any person”, “any books of account”, “any document”, “any officer”, “any other authority” and “possession or control”, “useful or relevant” should be given their due meaning so that the purpose of legislature is given due effect and the fraud on the statute is ostracised and the tax evasions are avoided. Per contra, Mr. Purohit, learned counsel, would like this Court to interpret the words in a plain and simple manner as they have been used in the section so that the law as stands is given effect to. It is to be kept in mind that the aforesaid provision was brought into the statute book as some doubts were expressed in various judgments of number of High Courts with regard to power of seizure under s. 132(1) in respect of assets in the custody of other authorities. To remove the said lacuna this provision was introduced. Before taking recourse to provision under the aforesaid s. 132A(1)(c) certain conditions precedent are to be satisfied. When the competent authority has some reasons to believe any assets either wholly or partly income or property which has not been, or would not have been,disclosed for the purpose of the Act by any person from whose possession or control such assets have been taken intocustody by any officer or authority under any other law for the time being in force, then only the competent authority may authorise any other authority mentioned in the section to require the officer or the authority to deliver such assets. Thus, on a fair reading of the provision it is clear as noon day that the provision is plain and unambiguous. Reasons to believe has to be regarded as sine qua non for issue of warrant of authorisation. Once there exists reasonable ground for formation of belief the authority can exercise the jurisdiction vested in him under this section.
The authority is required to apply its mind to the fact situation to form the belief. Apart from this condition precedent, as far as cl. (1)(c) is concerned, the other important condition precedent is that the assets must have been taken into custody by any officer or authority under any other law for the time being in force from any person who is in possession or control of such assets. Thus, the assets must be in possession or control of a person and the same must have been taken into custody by any officer or authority and such taking into custody must be by taking recourse to any other law for the time being in force. On a further scrutiny it is apparent that the words that really call for interpretation in the case at hand is “taken into custody by any officer or authority under any other law for the time being in force”. To appreciate the concept in its proper perspective it is appropriate to understand the distinction between the words ‘custody’ and ‘custody of law’. In Black’s Law Dictionary, 6th Edition, “custody” has been described as under : “The care and control of a thing or person. The keeping, guarding, care, watch, inspection, preservation or security of a thing, carrying with it the idea of the thing being within the immediate personal care and control of the person whose custody it is subjected. Immediate charge and control and not the final, absolute control of ownership, implying responsibility for the protection and preservation of the thing in custody. Also the detainer of a man’s persons by virtue of lawful process or authority. The term is very elastic and may mean actual imprisonment or physical detention or mere power, legal or physical of imprisoning or of taking manual possession. Within statute requiring that petition be “in custody” to be entitled to federal habeas corpus relief does not necessarily mean actual physical detention in jail or prison but rather is synonymous with restrain of liberty. U.S. ex rel. Writz vs. Sheehan, D. C. Wis. 319 F. Supp. 146. Accordingly, persons on probation or parole or released on bail or on own recognisance have been held to be “in custody” for purpose of habeas corpus proceedings.”
21. In the same dictionary “custody of the law” has been explained in the following terms : “Custody of the law.— Property is in the custody of the law when it has been lawfully taken by authority of legal process, and remains in the possession of a public officer (as a sheriff) or an officer of a Court (as a receiver) empowered by law to hold it.”
22. The words “custody of law” has been described in the Law Lexicon by P. Ramanatha Aiyar as under : “that custody which an officer has the right to assume over the property by virtue of legal process.” In this context, it is worthwhile to refer to the word “attachment” as has been given in Law Lexicon by P. Ramanatha Aiyar which reads as under : “The word attachment has been defined as ‘taking into custody of the law the person or property of one already before the Court, or of one who it is sought to bring before it: a writ issued at the institution or during the progress of an action, commanding the sheriff or other proper officer to attach the property, rights credits, or effects of the defendant to satisfy the demands of the plaintiffs.” The purpose of referring to the aforesaid definition is to see that in the said definition “taking into custody” has been used in the definition and it exposits a manner of attachment when the concept of “taken into custody” is used. Thus, the involvement of control by the authority who is in custody of the asset is attachment. To appreciate the denotative aspect, connotative spectrum and the conceptual eventuality of the terms “taken into custody” in the obtaining context would mean that there is some sort of exercise of jurisdiction/power /authority by an officer or an authority to take the assets into his custody. The assets must be in possession or control of a person. It is taken away from him by operation of law for the time being in force. There is no voluntary parting of the assets. It goes into the custody of the officer or authority because of involvement of some legal process. It is wroth stating here that the concept of “taken into custody” is bound to engulf in its abmit that some asset is taken into custody against the free will of the person who is in possession or control of the same. This is a condition precedent. That apart, once it is taken into custody by the officer or authority, he has the control over the assets and he takes it for a purpose, may be, to produce it in a Court of law or a quasi judicial authority, or to launch a criminal prosecution against the person concerned in respect of the same assets or for some other legal purpose. Mr. Sapre has contended that the words “taken into custody” are used in all the clauses should be read harmoniously so that certain voluntary acts have to be covered within the ambit and sweep of the said terminology. He has given examples relating to production of books of account under the provision relating to enactments under the Sales-tax laws. Submission of the learned counsel for the Revenue is that during an assessment pertaining to Sales-tax the assessee produces the books of account before the Sales-tax authority and the competent authority under the income-tax can issue warrant of authorisation to requisition the said books of account. Similar is the submission of the learned counsel relating to passport and other documents produced before the authorities under certain other statutes. The examples given by Mr. Sapre on the first flush look quite attractive but on a deeper analysis they do not withstand close scrutiny. It is to be borne in mind that when books of account are produced before the Sales-tax authority for the purpose of assessment it cannot be taken back by the assessee at his sweet will. That apart, the said authority has the jurisdiction to seize the books of accounts under certain conditions. Similarly under the Passport Act, 1920, there can be variations, impounding and revocation of passports. Hence, the examples given by Mr. Sapre relate to different field. The words ‘taken into custody’ has to be understood differently than the terms ‘in custody’. The word custody has been interpreted in different contexts by various Courts. While dealing with the concept when a person is in custody within the meaning of s. 439 of the CrPC the apex Court in the case of Niranjan Singh & Anr. vs. Prabhakar Rajaram Kharote AIR 1980 SC 785 held as under : “When he is in duress either because he is held by the investigating agency or other police or allied authority or is under the control of the Court having been remanded by judicial order, or having offered himself to the Court’s jurisdiction and submitted to its orders by physical presence. No lexical dexterity not precedential profusion is needed to come to the realistic conclusion that he who is under the control of the Court or is in the physical hold of an officer with coercive power is in custody for the purpose of s. 439. This word is of elastic semantics but its core remaining is that the law has taken control of the person. The equivocatory quibblings and hide and seek niceties sometimes heard in Court that the police have taken a man into formal custody but not arrested him, have detained him for interrogation but not taken him into formal custody and other like terminological dubiotics are unfair evasions of the straight forwardness of the law.” Their Lordships proceeded further to lay down as follows : “He can be in custody not merely when the police arrests him, produced him before a Magistrate and gets a remand to judicial or other custody. He can be stated to be in judicial custody when he surrenders before the Court and submits to its directions.”
26. In this context, I may usefully refer to the decision rendered in the case of State vs. Maguni Charan Sahu & Ors. 1983 Cr. LJ 1212 wherein the High Court of Orissa relying on the observation of the apex Court in the case of Niranjan Singh (supra) held as under : “The decision in Niranjan Singh & Anr. vs. Prabhakar Rajaram Karote AIR 1980 SC 785 : 1980 Cr. LJ 426 clearly indicates that the Court was considering directly whether the accused were in custody or not and while examining that question, the Court held that “custody’ in the context of s. 439 of the code was physical control or at least physical presence of the accused in Court coupled with submission to jurisdiction and orders of the Court. The Court further indicated that the accused can be in custody not merely when the police arrested him, produced him before a Magistrate and got a remand to judicial or other custody. He could also be stated to be in judicial custody when he surrendered before the Court and submitted to its directions. In Niranjan Singh’s case (supra), the learned Judges had, therefore, clearly laid down that whether the accused had been taken into custody by being arrested or had been remanded to judicial custody on being produced before a Magistrate or had surrendered before the Court and had submitted to its directions entitled him to ask for bail. All the three situations referred to above were, therefore, considered as amounting to ‘custody’ within the meaning of s. 439(1) of the Code.”
27. This Court in the case of Vinod Kumar vs. State of M.P. 1998 (2) MPLJ 689 while interpreting the term “custody” in relation to an accused who is under the protective order of superior Court under s. 438 of the CrPC, has held as follows : “While an accused under the protective umbrella of anticipatory bail order under s. 438 of the Cr.PC appears before the competent Court and moves for regular bail it would be deemed that he is in custody and his bail application can be considered on merits.”
28. In view of the aforesaid premises, in the words “taken into custody” some sort of control, surrendering to the authority by the person concerned and many other ancillary factors are intrinsically inhered. On the contrary, these basic features are absent in custody.
29. The term “custody” has been described in ‘Corpus Juris Secundum’ Volume 25 in the following manner : “Custody.—The word “custody” is defined generally as meaning a keeping; guardianship; the state of being held in keeping or under guard; restraint of liberty; imprisonment; control of a thing or person with such actual or constructive possession as fulfils the purpose of the law or duty requiring it; and it has been stated that in defining the word, the dominant factors appear to be charge, control, and possession.”
30. In the same Volume the “custody of property” has been described as under: “The keeping of property by one who is charged with or who assumes responsibility for its safety; the care and charge of property for one who retains the right to control it; the charge to keep and care for the owner, subject to his order and direction, without any interest or right therein adverse to him; such a relation toward it as would constitute possession if the person having custody had it on his own account.”
31. On a scrutiny of the meaning given to the terms “custody”, “property in custody” and “taken into custody” it emerges that the person from whose custody the asset is taken he must be in possession or control of the same. The words “taken into custody” when given the natural and objective meaning do convey that possession of asset is taken over by an authority without the consent/volition of the person who is in possession or control of the same. In the said concept it is also inhered that the authority or officer who takes into custody gains control over it. A person from whose custody it is taken cannot get it back as and when he desires. The officer or authority exercises the lawful control over the asset and it is taken into custody with a purpose.
32. Quite apart from the above, the provision also stipulates that the officer or authority must have power or jurisdiction under any other law for the time being in force. On a plain reading of the provision it is clear as day that power must be vested in the authority or the officer under same law to take asset into custody. Mr. Sapre has made strenuous efforts by referring to the Banking Regulation Act, 1949, to emphasis that detention of the draft is in exercise of power under various provisions of the said Act.
33. In this context, it is worthwhile to refer to the definition of the word ‘banking’ which reads as under : “
‘banking’ means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise.”
34. Keeping in view the aforesaid definition and the scheme of the provision of Banking Regulation Act, I am afraid the emphasis is absolutely misplaced. The banker cannot take into custody a draft from the possession or control of a person. It is the owner or the title holder or the person in possession voluntarily parts with it for carrying out same transaction with the bank. It is presented before the bank for definite purpose. At any point of time the person who has presented draft can withdraw or bring it back. The bank has no power to retain it under any provision of law unless person concerned gives his consent. It is well known in the case of a fixed deposit it cannot be adjusted in respect of loan unless there is an agreement to that effect as they form two different transactions. Thus, the banker has no control or authority over the draft. It only accepts the instrument for limited purpose. When it is in the custody of the banker the banker retains it on behalf of the customer. The banker cannot utilize the draft for any purpose other than what has been desired by the customer. Thus, the reliance on the Banking Regulation Act is of assistance to the learned counsel for the Revenue.
35. In this present context, it is not out of place to refer to the Circular No. 179 dt. 30th Sept., 1975 wherein the Department had issued explanatory notes on the provisions coming into force w.e.f. 1st Oct., 1975. It reads as under : “The Amending Act has substituted the existing s. 132A by a new section and has renumbered the existing s. 132A as s. 132B. The new s. 132A provides that where any books of account, other documents or assets have been taken into custody by any officer or authority under any other law (e.g. by the Collector of Customs, Sales-tax Commissioner, etc.), the Director of Inspection or the CIT may, in the circumstances covered by s. 132, authorises any Dy. Director of Inspection, IAC, Asstt. Director of Inspection or ITO to require such officer or authority to deliver to him such books of account, other documents or assets. Where such a requisition is made, the officer or authority concerned will be required to deliver the books of account, other documents and 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.” While analysing the concept “taken into custody” it is also appropriate to scan the provision enshrined under sub-s. (2) of s. 132A. It postulates that when a requisition is made the officer or authority shall deliver the books of account, other documents or assets to the requisitioning officer. Thus, from the aforesaid provision it is plain as day that the officer or authority who has taken the assets into his or its custody has power/jurisdiction/authority to retain it for some purpose. But, a significant one, banker has no authority in law to retain a bank draft in his custody with a view to deal with it in any manner he likes. The question of retention of bank draft with it for some purpose or necessity is alien to banking transactions, may be in a case of fraud, bank may handover the cheque or draft to the police authorities for investigation but on its own it cannot retain for any purpose. Thus, it is clear that when the customer does not surrender his right to the banker, the banker has no right or control over the instrument.
In view of the preceding analysis, I am of the considered opinion that the bank draft when presented for clearing by customer to the bank cannot be said to have been taken into custody by the bank to attract the applicability of the provision enshrined under s. 132A of the IT Act. Resultantly, the warrant of authorisation requisitioning the same by the competent authority is totally without jurisdiction. Before I proceed to deal with the second limb of argument advanced by Mr. G.N. Purhoit at the cost of repetition, I am inclined to state, the words employed in the s. 132A are absolutely clear and susceptible to only one meaning. I am reminded of the observation of the learned Chief Justice, Sir Lawerence Jenkins in the case of Rabindra Kumar Ghose vs. Emperor, 1909 ILR 37 Cal. 467 which reads as under : “As Jimutavahana with his shrewd commonsense observes ‘a fact cannot be altered by 100 texts’ and as his commentator quaintly remarks : ‘If a Brahamana be slain, the precept ‘Slay not a Brahamana’ does not annul the murder.” In view of clarity of language in the statute nothing more need be stated.
39. The second limb of argument of the learned counsel for the petitioner is that the reasons have not beenrecorded by the competent authority at the time of requisitioning the asset. Submission of Mr. Purohit is that the conditions precedent for exercise of power as under any of the clauses of 132A has to be satisfied and a mechanical order cannot be passed. In this context, the learned counsel has contended that the authority while issuing warrant of authorisation is required to satisfy himself that there are sufficient reasons to believe that the asset either wholly or partly has not been or would not have been disclosed for the purpose of the Act. It is well settled, before exercising of jurisdiction under s. 132A the competent authority must be satisfied and he must have reasons to believe about the fact that the asset representing either wholly or partly income or property which has not been or would not have been, disclosed for the purpose of the Act. In the case of ITO vs. Lakhmani Mewal Das 1976 CTR (SC) 220 : (1976) 103 ITR 437 (SC) : TC 51R.598 it has been observed as follows : “The expression ‘reason to believe’ does not mean a purely subjective satisfaction on the part of the ITO. The reasons must be held in good faith. It cannot be merely a pretence.”
40. In the case of Ganga Prasad Maheshwari vs. CIT (1981) 21 CTR (All) 83 : (1983) 139 ITR 1043 (All) : TC 60R.581 the High Court of Allahabad while discussing the concept of reasons to believe has held as under : ” “Reason to believe” is a common feature in taxing statutes. It has been considered to be the most salutary safeguard on the exercise of power by the officer concerned. It is made of two words “reason” and “to believe”. The word “reason” means cause or justification and the word “believe” means to accept as true or to have faith in it. Before the officer has faith or accepts a fact to exist there must be a justification for it. The belief may not be open to scrutiny as it is the final conclusion arrived at by the officer concerned, as a result of mental exercise made by him on the information received. But, the reason due to which the decision is reached can always be examined. When it is said that reason to believe is not open to scrutiny what is meant is that the satisfaction arrived at by the officer concerned is immune from challenge but where the satisfaction is not based on any material or it cannot withstand the test of reason, which is an integral part of it, then it falls through and the Court is empowered to strike it down. Belief may be subjective but reason is objective.”
41. The learned counsel for the Revenue has placed reliance on the decision rendered in the case of Prabhubhai Vastabhai Patel vs. R.P. Meena (1997) 139 CTR (Guj) 428 : (1997) 226 ITR 781 (Guj) : TC 61R.254. In the case of Prabhubhai Vastabhai Patel (supra) the conditions precedent under s. 132 have been considered. The language used under ss. 132 and 132A as far as reasons to believe are concerned are almost same. After referring to catena of decisions their Lordships have culled out following principles : “The Courts have, thus, time and again examined the purpose and scope of powers conferred upon the authorized officer under s. 132 of the Act as well as the constitutionality of the provisions contained therein. The Courts have held that the exercise of power of search and seizure infringes upon the privacy of a citizen and causes social stigma, it is, therefore, mandatory that the condition precedent must be satisfied. The condition precedent is the possession of information and the reason to believe that the bullion, jewellery or other valuable article or thing represents wholly or partly income or property which has not been or would not be disclosed for the purpose of the Act. On a perusal of all the above referred to judgments, the principles that emerge can be summarized as under : (a) The authority must be in possession of information and must form an opinion that there is reason to believe that the article or property has not been or would not be disclosed for the purpose of the Act. (b) The information must be something more than mere rumour or gossip or hunch. (c) The information must exist before the opinion is formed. (d) The authorized person must actively apply his mind to the information in his possession and shall form opinion whether there is reason to believe or not. The opinion must be formed on the basis of the material available at that time. (e) The opinion must be based on the material which is available and it should not be formed on the basis of extraneous or irrelevant material. (f) That the formation of opinion shall have rational connection and bearing to the reasons for such opinion. The formation of opinion should be based on active application of mind and the bona fide and not be accentuated by mala fide, bias or based on extraneous or irrelevant material. The belief must be bona fide and cogently supported. The Courts have further held that the existence or otherwise of the condition precedent is open to judicial scrutiny. (g) The Court would examine whether the authorised person had material before it on which he could form the opinion whether there is rational connection between the information possessed and the opinion formed. However, the Court would not sit in appeal over the opinion formed by the authorised person if the authorised person had information in his possession and the opinion formed is on the basis of such material. The Court would not examine whether the material possessed was sufficient to form an opinion. (h) The Court cannot go into the question of aptness or sufficiency of the grounds upon which the subjective satisfaction is based. (i) If the belief is bona fide and is cogently supported, the Court will not interfere with or sit in appeal over it.”
42. Keeping in view the aforesaid principles the obtaining factual matrix has to be appreciated. Mr. Sapre, learned counsel for the Revenue, has produced the original record to show that the conditions precedent as far as formation of opinion is concerned are satisfied. The said satisfaction reads as under : “Satisfaction note for obtaining authorisation under s. 132A of the IT Act. Please see the report of Inspector of Income-tax regarding unexplained investments by some persons of Jabalpur in purchasing demand drafts worth Rs. 72.60 lakhs. A reading of this note will reveal that the following persons purchased DDs detailed as under from different banks of Jabalpur. S. Name of person DD. No. Amount Bank No. 1. Agarwal Agencies 002085 & 6,00,000 each Union Bank of India 002086 2. M/s Samta Constr. 606276 6,00,000 State Bank of India 3. Anil Bhatia 724146 6,00,000 Bank of Baroda 4. Reliable Constr. 724145 & 9,00,000 + -do724147 6,00,000 5. Prabha Sharma 2895469 4,00,000 Canara Bank 6. W.A. Qureshi & 120329 4,00,000 each Vijaya Bank S.W. Qureshi 120330 7. Pawan K. Agarwal 353323 1,00,000 Bank of India Sushma Rani & 353324 1,00,000 -do-Padma R. Agrawal 353327 1,00,000 -do8. Not known 002269 2,00,000 Central Bank of India 002270 3,00,000 -do002271 4,00,000 -do002272 3,00,000 -doNot known 596379 5,00,000 United Commercial Bank, JBP Not known 873762 1,60,000 State Bank of India Total 72,60,000 Regarding these DDs details were collected from various banks such as the account from which the DDs were purchased, the sources of money which came into these accounts for purchase of DDs, etc. The details so collected reveal that for DDs worth Rs. 45,00,000 the persons concerned made deposits of money just a few days before. These money deposits are also in cash in so many cases. It seems that these bank accounts have been channelising unexplained cash into the DDs. All these DDs were purchased in favour of Managing Director, M.P. Matsya Vikas Nigam, Bhopal on 26th Nov., 1996. Then they were submitted by M/s Samta Constructions, Jabalpur as bid money for fisheries contract to be obtained from M.P. Matsya Vikas Nigam. However, because of some litigation the auction could not materialize and the M.P. Matsya Vikas Nigam, Bhopal returned the amount of Rs. 72,60,000 to M/s Samta Construction, Co., Jabalpur through DD. No. 007387/000026000, dt. 14th Dec., 1996, purchased from Union Bank of India, Malviya Nagar, Bhopal. This DD is favouring M/s Samta Construction Co. Jabalpur and is drawn on Union Bank of India, Main Branch, Jabalpur. This DD being the refund of money invested by different persons enlisted above is required to be taken possession of. It is, therefore, requested that an authorisation under s. 132A of the IT Act may please be issued in the name of Manager of Union Bank of India, Main Branch, Jabalpur for the assessee M/s Samta Construction Co. thereby enabling the authorised officers to requisition and obtain DD. No. 007387/000026000, dt. 14th Dec., 1996. Out of abundant caution we have already served letters to the Managers of Union Bank of India, Malviya Nagar, Bhopal and Main Branch Jabalpur for not allowing the encashment of the said demand draft. Submitted for perusal, consideration and necessary action. (P.K. Sharma) Dy. Director of (Inv.), JBP I have carefully considered the facts contained in the note of DD (Inv.), I am fully satisfied that this is the fit case for action under s. 132A of the IT Act, 1961. Put up warrant of authorisation.” Mr. Purohit, learned counsel, has contended that it is obligatory on the part of competent authority to express the belief that the asset in question has not been or would not have been disclosed. In the case at hand, the competent authority has perused the note and recorded his satisfaction. It cannot be said that absence of expression in exact statutory terms would vitiate the recording of satisfaction. Hence, I am of the considered view, the proposition propounded by Mr. Purohit is devoid of substance. The reasons recorded meet the requirement of the provisions and no fault can be found with the same. As I have already held that the competent authority had no jurisdiction to issue warrant of authorisation to requisition the asset in question as the same does not come within the ambit and sweep of s. 132A(1)(c) of the Act, the conclusion that there is no fault/error in recording of reasons would not entitle the competent authority to retain the property. In the ultimate analysis the writapplication deserves to be and is hereby allowed and the authorisation made by respondent No. 2 under s. 132A of the Act and the proceedings in consequences thereof are quashed. However, there shall be no order as to costs.
[Citation : 244 ITR 845]
