Rajasthan H.C : The aforesaid petitions are listed for admission, but with the consent of learned counsel for the parties, I propose to dispose them of on the merits.

High Court Of Rajasthan

Suresh Bhai Bhola Bhai Jani & Anr. vs. Union Of India & Ors.

Sections 132A, 158BFA, Art. 226, Art. 227

R.R. Yadav, J.

Civil Writ Petn. No. 1554 of 1998

28th November, 1998

Counsel Appeared

Vineet Kothari, for the Petitioner : Sandeep Bhandawat, for the Respondents

JUDGMENT

R.R. Yadav, J. :

The aforesaid petitions are listed for admission, but with the consent of learned counsel for the parties, I propose to dispose them of on the merits.

2. By filing Writ Petn. No. 1554 of 1998, the petitioner, Shri Suresh Bhai Bhola Bhai Jani, questions the validity of warrant of authorisation dt. 27th March, 1998 (annexure 5), under s. 132A of the IT Act, 1961 (hereinafter referred as “the Act of 1961”), on the ground, inter alia that on the information in possession of the CIT (respondent No. 2) no reasonable person could have entertained a belief that the amount of Rs. 12,00,000 (rupees twelve lakhs) seized on suspicion from possession of the petitioner represents undisclosed income for the block period. Crl. Misc. Petn. No. 363 of 1998 under s. 482 Cr.PC, has been filed by the ITO, Sumerpur, questioning the legality and validity of the order dt. 4th May, 1998, passed by the Judicial Magistrate First Class and Civil Judge (Junior Division), Sumerpur District, Pali, holding Shri Suresh Bhai Bhola Bhai Jani to be entitled to refund of Rs. 4,80,000 out of Rs. 12,00,000 seized from him by the police on suspicion on the basis of insertion of s. 158BFA in the Act of 1961.

The petitioner is also aggrieved against the aforesaid order dt. 4th May, 1998, passed by the Judicial Magistrate First Class and Civil Judge (Junior Division), Sumerpur, in exercise of his power under s. 457 Cr.PC, and has filed S.B. Crl. Misc. Petn. No. 406 of 1998 seeking a relief to quash the impugned order in so far as it allows IT authorities to retain 60 per cent of the total amount of Rs. 12,00,000 with a direction to return the entire amount of Rs. 12,00,000 seized by the police on the basis of suspicion that the money was either stolen property or had been obtained through some other offence especially when the police failed to prove its suspicion.

It is conceded by learned counsel for the parties that in the aforesaid three petitions common questions of law and facts are involved and, therefore, these three petitions can easily be heard and disposed of by a composite order. Accordingly, I propose to dispose of these three petitions by a common order treating S.B. Civil Writ Petn. No.

1554 of 1998, as the leading case on the basis of the detail reasons discussed hereinbelow.

The brief facts necessary for effective and complete adjudication of the controversy involved between the parties are that on 24th March, 1998, at about 11.30 P.M., the petitioner was travelling by Bus No. RJ19-P-4243 from Pali to Ahmedabad. While the said bus was being checked on the way by the SHO, Police Thana, Sumerpur, he found cash of Rs. 12,00,000 in the possession of the petitioner and seized the same under s. 102 Cr.PC, on suspicion.

It is averred in the writ petition that the said cash of Rs. 12,00,000 carried by the petitioner was given to him for payment to one Mr. Ramesh Soni, in respect of purchase of a land for which the proprietor of Johnson Jewellers, Shri Anil Kumar P. Soni, had entered into an agreement. However, since on account of non-finalisation of the deal, on telephonic instructions of the said proprietor, the said amount was not paid to Shri Ramesh Soni and was being taken back to the owner, Shri Anil Kumar, proprietor of Johnson Jewellers, when it was seized by the police authority as aforesaid and the petitioner was arrested on 24th March, 1998.

It is further averred in para. 4 of the writ petition that the police officials recorded his incriminating statement under coercion wherein he stated that the aforesaid cash was collected against the sale of gold and silver at Pali and Jodhpur. The petitioner had already retracted from his aforesaid statement in case No. 135 of 1998.

It appears from the averments made in the writ petition that the SHO, Sumerpur, after effecting the seizure of the said amount of Rs. 12,00,000 informed the ITO, Sumerpur District, Pali, who in turn approached respondent No. 2 and obtained a warrant of authorisation on 27th March, 1998 (annexure 5) under s. 132A of the Act of 1961.

It is alleged in the writ petition that the impugned warrant of authorisation under s. 132A of the Act of 1961 has been issued by respondent No. 2 mechanically without application of mind and also without satisfying the condition precedent for its exercise. It is further averred that there was no definable material before respondent No. 2 to arrive at such a reasonable belief as is required under s. 132A of the said Act nor any such reasonable belief has been recorded by him. It is alleged in para. 14 of the writ petition that the IT authority (respondent No. 2) is not entitled to issue any direction to the Court of the learned Magistrate under s. 132A of the said Act in whose custody the money in question is lying as the Court of the learned Magistrate does not fall within the definition of “officer or authority” under the aforesaid section. It is also alleged that though the warrant under s. 132A of the said Act is addressed to SHO Police Thana, Sumerpur, the IT Department has filed the necessary application dt. 28th April, 1998 (annexure 8), requesting the Court of the learned Magistrate, Sumerpur, in whose custody the money in question is lying, to hand over the cash to the IT authority as per warrant of authorisation dt. 27th March, 1998 (annexure 5).

After service of notice a detailed reply has been filed on behalf of answering respondents Nos. 1 to 4 emphatically denying the allegations and averments made in the writ petition. It is averred in para 1 of the reply that it is wrong to say that the petitioner is working as an employee of Johnson Jewellers. It is pointed out in the reply that the petitioner in his statement before the ITO, Sumerpur, on 3rd April, 1998, had categorically denied that he is working at the shop of Johnson Jewellers, Manak Chowk, Ahmedabad, a true copy whereof is filed and marked as annexure R/1, to the reply. In para. 3 of the reply it is averred that it is absolutely wrong to say that the said amount of Rs. 12,00,000 was carried by the petitioner to be given to Mr. Ramesh Soni in respect of purchase of the land for which the proprietor of Johnson Jewellers, Mr. Anil Kumar P. Soni, had entered into an agreement. It is pointed out that the statement recorded of Shri Ramesh Kumar Soni by the Asstt. CIT, Pali, on 3rd April, 1998, clearly showed that he had not entered into any such agreement with Mr. Anil Kumar P. Soni. A true copy of the statement of Shri Ramesh Kumar Soni recorded on 3rd April, 1998, has also been filed and marked as annexure R/2 to the reply. From the statement of Shri Ramesh Kumar Soni it is further clear that he had no such telephonic talk with Mr. Anil Kumar P. Soni. Moreover he categorically denied that he ever had a talk with Mr. Anil Kumar P. Soni on telephone. In para. 4 of the reply it is averred that case No. 135 of 1998 has already been decided by the learned Judicial Magistrate, Sumerpur. Copy of the order passed by the Judicial Magistrate is also filed which is marked as annexure R/3. This order passed by the Judicial Magistrate on 4th May, 1998, in case No. 135 of 1998 has also been challenged by the petitioner as well as by the ITO, Sumerpur, as mentioned hereinabove in the preceding paragraph of this order.

I have heard learned counsel for the parties and perused the impugned warrant of authorisation under s. 132A of the Act of 1961 issued by respondent No. 2 and the order dt. 4th May,1998, passed by the learned Judicial Magistrate in case No. 135 of 1998. At the first instance it is urged by learned counsel for the petitioner, Mr. Kothari, that the controversy involved in the present case is squarely covered by a decision taken by me in the case of Sohanlal Mundra & Ors. vs. Union of India & Ors. RLW 1996 (2) Raj. 496.

Learned counsel appearing on behalf of the answering respondents opposed the aforesaid argument with vehemence. It is urged by Mr. Bhandawat, learned counsel for the respondents, that the decision rendered by me in the case of Sohanlal Mundra & Ors. vs. Union of India & Ors. (supra), is applicable to the facts and circumstances of the present case only in so far as interpretation of scope of s. 132A of the Act of 1961 is concerned but as regards interpretation of s. 158BC of the said Act it requires reconsideration in view of the insertion of s. 158BFA in the Act of 1961 by way of the IT (Second Amendment) Ordinance, 1996, which is made enforceable w.e.f. 1st Jan., 1997. According to Mr. Bhandawat, at the time of the decision rendered by me in the case of Sohanlal Mundra vs. Union of India (supra), the total undisclosed income of the block period was determinable under s. 158BC of the Act of 1961 and tax was leviable at the rate of 60 per cent only free from interest or penalty, whereas in view of the inserted s. 158BFA now interest and penalty are also chargeable on undisclosed income of the block period. It is pointed out by Mr. Bhandawat that when the decision of the case of Sohanlal Mundra vs. Union of India (supra) was rendered by me there was absolute certainty of leviability of tax only up to 60 per cent of the amount so recovered in pursuance of an authorisation issued under s. 132A of the Act of 1961 whereas in view of the inserted s. 158BFA even more amount than recovered can be realised from the petitioner. According to Mr. Bhandawat, under sub-s. (2) of the inserted s. 158BFA the penalty can also be increased up to three times of the amount of tax so leviable in respect of the undisclosed income determined by the AO under cl. (c) of s. 158BC plus interest at the rate of two per cent of the tax on undisclosed income.

I have given my thoughtful consideration to the aforesaid rival contentions raised at the Bar. With the assistance of learned counsel for the parties. I have gone through with care and caution all the materials available on the record.

In my considered opinion there is substance in the argument of learned counsel for the respondents. To my mind after enforcement of s. 158BFA of the Act of 1961, w.e.f. 1st Jan., 1997, much water has run under the bridge. Now the IT authorities are empowered under the aforesaid section to impose interest at the rate of two per cent of the tax on undisclosed income determined under cl. (c) of s. 158BC for every month or part of a month comprised in the period commencing on the day immediately following the expiry of the time specified in the notice. Not only this under sub-s. (2) of s. 158BFA of the said Act, the AO or the CIT(A) in the course of any proceedings under Chapter XIV-B of the Act of 1961 may direct that a person shall pay by way of penalty a sum which shall not be less than the amount of tax leviable but which shall not exceed three times the amount of tax so leviable in respect of the undisclosed income determined by the AO under cl. (c) of s. 158BC. Indisputably, the seizure of Rs. 12,00,000 was done by the police from the petitioner on the basis of suspicion on 24th March, 1998, and the authorisation was issued in the present case by respondent No. 2 under s. 132A of the Act of 1961 on 27th March, 1998, whereas, mandatory provisions of s. 158BFA of the Act of 1961 were made enforceable w.e.f. 1st Jan., 1997, therefore, in view of newly inserted s. 158BFA of the said Act it can safely be held that respondents Nos. 1 to 4 are entitled to withhold the entire amount of Rs. 12,00,000 in pursuance of warrant of authorisation issued by respondent No. 2 under s. 132A of the said Act on 27th March, 1998, (annexure 5) and an argument contrary to it is not acceptable.

From the aforesaid discussion, I am of the opinion that after enforcement of s. 158BFA of the Act of 1961, the order dt. 4th May, 1998, passed by the civil Judge (Junior Division) and the Judicial Magistrate First Class, Sumerpur District, Pali, also deserves to be quashed as I am satisfied that the learned Judicial Magistrate, Sumerpur, while deciding Criminal Case No. 135 of 1998 under s. 457 Cr. PC, had committed an error in relying upon my decision in the case of Sohanlal Mundra vs. Union of India (supra). It seems to me that the aforesaid mistake has crept in the judgment of the learned Judicial Magistrate because the mandatory provisions of the newly inserted s. 158BFA of the Act of 1961 which were brought on to the statute book after my decision in the case of Sohanlal Mundra vs. Union of India (supra) were not brought to his notice.

When learned counsel for the petitioner, Mr. Kothari, was confronted with the aforesaid interpretation of s. 158BFA of the Act of 1961 he started to make submissions that the decision rendered by me in the case of Sohanlal Mundra vs. Union of India (supra), even on the point of the scope of s. 132A of the Act of 1961 requires reconsideration in view of the decision rendered by the learned Judges constituting a Division Bench of the Allahabad High Court in the case of Vindhya Metal Corporation vs. CIT (1983) 36 CTR (All) 238 : (1985) 156 ITR 233 (All) : TC 62R.288, which was affirmed by the Supreme Court in the case of CIT vs. Vindhya Metal Corporation (1997) 139 CTR (SC) 495 : (1997) 224 ITR 614 (SC) : TC 62R.286.

In reply learned counsel for the respondents, Mr. Bhandawat, invited my attention to para. 11 of the decision rendered by me in the case of Sohanlal Mundra vs. Union of India (supra) relating to the interpretation and scope of s. 132A of the Act of 1961. According to Mr. Bhandawat, the ratio of the case cited by learned counsel for the petitioner, Mr. Kothari, is not applicable to the facts and circumstances of the case of Sohanlal Mumdra (supra).

23. For deeper and better understanding of the arguments advanced at the Bar, it would be expedient to reproduce para. 11 of the decision rendered by me in the case of Sohanlal Mundra vs. Union of India (supra), which is the bone of contention between the parties. Para. 11 reads thus : “It is further true that when issuance of an authorisation under s. 132A of the IT Act, 1961, is challenged in a Court of law, it will be open to the petitioners to contend that on the facts or information disclosed no reasonable man could have arrived at the conclusion that the action under s. 132A was called for although formation of opinion under the said section is subjective. It is well to remember that jurisdiction under Art. 226 of the Constitution of India of this Court is very limited. In fact this Court cannot afford to act as an appellate or revisional Court and as such has no justification to examine meticulously the information in order to decide for itself as to whether action under s. 132A was called for or not Suffice it to say that in exercise of extraordinary jurisdiction this Court can examine whether the act of issuance of an authorisation under s. 132A is arbitrary or mala fides or whether the subjective satisfaction which is recorded is such that it indicates lack of application of mind of the appropriate authority. According to me the reason to believe must be based on definable material or materials and if the information or the reason to believe has no nexus with the belief or there is no definable materials or tangible information for formation of such belief then in such a case action taken under s. 132A of the IT Act, 1961, would be treated as illegal.”

The facts of the case of Vindhya Metal Corporation (supra) rendered by the Division Bench of the Allahabad High Court and affirmed by the Supreme Court reveal that the Corporation filed the writ petition questioning the validity of the warrant of authorisation issued by the CIT under s. 132A of the Act of 1961. It is held in that case by the learned Judges constituting the Division Bench of the Allahabad High Court that on the information in the possession of the CIT, no reasonable person could have entertained a belief that the amount in the possession of the petitioner represented undisclosed income which ought to have been disclosed by him for purposes of the Acts and the writ petition was allowed. Against the aforesaid finding of fact, the CIT appealed to the Supreme Court and the apex Court affirmed the aforesaid finding recorded by the learned Judges constituting the Division Bench of the Allahabad High Court in the case of Vindhya Metal Corporation (supra).

In my humble opinion the ratio decidendi of the decision rendered by me in the case of Sohanlal Mundra, about the interpretation of scope of s. 132A of the Act of 1961 is in full consonance with the ratio decidendi laid down by learned Judges constituting the Division Bench of the Allahabad High Court in the case of Vindhya Metal Corporation (supra), which is affirmed by the Supreme Court hence it does not require reconsideration. I see no reason to differ from the ratio decidendi laid down by me in the case of Sohanlal Mundra (supra) in so far as it relates to the interpretation of scope of s. 132A of the Act of 1961 and it deserves to be reiterated in the light of the decision rendered by the learned Judges constituting the Division Bench of the Allahabad High Court in the case of Vindhya Metal Corporation (supra), which is affirmed by the apex Court.

I feel it necessary at this stage to observe that the argument of learned counsel for the petitioner that the decision rendered by me in the case of Sohanlal Mundra (supra), interpreting the scope of s. 132A requires reconsideration is wholly misplaced. It is to be noticed that in the case of Sohanlal Mundra (supra) the original record regarding information was produced before me by the IT Department and on a careful scrutiny of the same I was satisfied that there was definable material available before the CIT to issue a warrant of authorisation under s. 132A of the Act of 1961. It is further borne out from a perusal of para. 13 of the decision rendered by me in the case of Sohanlal Mundra (supra) that from the scrutiny of the original file produced by the IT Department it was found that on the basis of definable materials available before the CIT such belief was entertainable by a prudent man. After recording the aforesaid finding it was held in the aforesaid case that while the sufficiency or otherwise of the information cannot be examined by the Court yet existence of information and its relevance to the formation of the belief can be considered. It was also found from a perusal of the original file that the existence of information and its relevance to the formation of belief by the CIT was successfully demonstrated, therefore, I refrain to examine the sufficiency or otherwise of the information produced before the CIT before issuing the warrant of authorisation under s. 132A of the Act of 1961. Thus, the interpretation relating to the scope of s. 132A of the Act of 1961 still holds water and does not require reconsideration; however, it is held that in view of the newly inserted s. 158BFA of the Act of 1961 the decision rendered by me in the case of Sohanlal Mundra (supra), relating to refund of 40 per cent of the amount seized in pursuance of an authorisation issued under s. 132A of the said Act does not hold water, hence it is overruled to this extent only, for the reasons given hereinbelow at the appropriate place.

It is next contended by learned counsel for the petitioner that even if the decision rendered by me in the case of Sohanlal Mundra (supra), does not require reconsideration with regard to the interpretation of the scope of s. 132A of the Act of 1961 even then whenever issuance of an authorisation under the aforesaid section is challenged in a Court of law it will be open to the petitioner to contend that on the facts or on information disclosed, no reasonable man could have arrived at a conclusion that the action under s. 132A of the Act of 1961 was called for although formation of opinion under the said section is subjective. In the present case, the source of tangible information disclosed to respondent No. 2 on the basis of which authorisation under s. 132A of the Act of 1961 has been issued by him deserves to be investigated by this Court. There is substance in the aforesaid argument of learned counsel for the petitioner. At the risk of repetition it is reiterated that while exercising extraordinary jurisdiction under Art. 226/227 of the Constitution the High Court is required to examine in each case whether the act of issuance of authorisation under s. 132A of the Act of 1961 is arbitrary, mala fide or whether the subjective satisfaction which is recorded is as such that it indicates lack of application of mind of the appropriate authority. It is to be examined in each case with care and caution that the reason to believe must be based on definable material or materials and if the information or the reason to believe has no nexus with the belief or there is no definable material or tangible information for formation of such belief then in such a case action taken under s. 132A of the said Act would be treated to be arbitrary and illegal. Judicial review conferred upon the High Court under Arts. 226 and 227 of the Constitution is to be held to be a basic feature of the Constitution with an avowed object to ensure that the High Court is to act as a bulwark for protection of rights of citizenry and it would check the vagaries, negligence and mistakes of the executive or high handedness of the party before it against another on the anvil of rationality and reasonableness.

With the aforesaid introspection let us examine on the facts of the present case whether reason to believe is based on tangible and credible information having nexus with such belief for taking action under s. 132A of the Act of 1961 by way of issuing authorisation under the said section.

In the present case also on behalf of answering respondents, the original record relating to information is produced before me and on a careful scrutiny of the original file produced by the IT Department on the basis of which warrant of authorisation has been issued under s. 132A of the Act, 1961, I am satisfied that there were definable materials available before respondent No. 2 to issue a warrant of authorisation under the aforesaid section and an argument contrary to it is not acceptable. The act of issuing the authorisation by respondent No. 2 on 27th March, 1998, (annexure 5) in the present case cannot be said to be based on hunch or incredible information. The act of respondent No. 2 in issuing the authorisation under s. 132A of the said Act cannot said to be arbitrary or mala fides. The order of authorisation passed by respondent No. 2 in the present case cannot be termed to have been passed without application of his mind to the credible information in his possession. Since the order of authorisation envisaged under s. 132A of the Act of 1961 is subjective in character hence I decline to investigate the sufficiency or otherwise of the information produced before respondent No. 2 before issuing the warrant of authorisation under the aforesaid section.

It goes without saying that in view of inserted s. 158BFA by the IT (Second Amendment) Ordinance, 1996, which is made enforceable w.e.f. 1st Jan., 1997, the decision taken by me in the case of Sohanlal Mundra (supra), issuing a direction to the respondent to refund a balance of 40 per cent amounting to Rs. 3,92,000 to the petitioner out of the total amount of Rs. 9,80,000 does not hold water. In the case of Sohanlal Mundra (supra), the IT Department failed to justify withholding of total amount of Rs. 9,80,000 whereas in the present case in view of the newly inserted s. 158BFA of the Act of 1961, the respondents have succeeded in demonstrate before me that they are entitled to withhold the total amount of Rs. 12,00,000 of the petitioner for the reasons given hereinabove.

In view of the aforesaid discussion, I am of the opinion that the instant petition is liable to be dismissed subject to and without prejudice to the right of the petitioner to show cause and explain before the IT authorities that no part of Rs. 12,00,000 is his undisclosed income. The order dt. 4th May, 1998, passed by the learned Judicial Magistrate First Class and Civil Judge (Junior Division), Sumerpur District, Pali, in Misc. Case No. 135 of 1998 in exercise of his power under s. 457 Cr.PC, releasing Rs. 4,80,000 to the petitioner and remaining amount of Rs. 7,20,000 to the respondents, relying upon my decision in the case of Sohanlal Mundra (supra), also deserves to be quashed for the reasons discussed hereinabove.

Upshot of the aforementioned discussion is that the instant Writ Petn. No. 1554 of 1998 and S.B. Crl. Misc. Petn. No. 406 of 1998 filed by the petitioner lack merit and as such are hereby dismissed subject to and without prejudice to his right to show cause and explain before the IT authority that no part of Rs. 12,00,000 is his undisclosed income. S.B. Crl. Misc. Petn. No. 363 of 1998 filed by the ITO, Sumerpur, is hereby allowed with a direction to the learned Judicial Magistrate, Sumerpur, to release the entire amount of Rs. 12,00,000 to the IT Department. The assessing authority is directed to conclude the proceedings against the petitioner under Chapter XIV-B of the Act of 1961 within a reasonable period, preferably within six months from today.

In the peculiar facts and circumstances of the case costs are made easy.

[Citation : 249 ITR 363]

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