BAFNA TEXTILES Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) The petitioner M/s. Bafna represeated by its partner, has challenged in this writ petition the order dt.6-3-1973 passed by the Incometax Officer (Assessment 4) Circle II Bangalore under Sec.132(5) of the Income Tax Act 1961 (hereinafter referred to as the Act by which a sum of Rs.1 "lakh belonging to the petitioner has been retained.

(2.) On the 6th of Decr. 1973 one Mahendra Kumar was carrying cash of Rs. One lakh when he was apprehended by the Central Excise Authorities at Salem near Valaypatty and the cash of Rs. 1 lakh found on the person of Mahendra Kumar was seized. On the 8th of Decr. 1972, the Commr. of Income-tax for Mysore at Bangalore issued a warrant of authorisation under Sec.132(1) of the Act and Rule 112(1) of the Income-tax Rules, 1962 (hereinafter referred to as the Rules) to V. Kalyan Sundaram, I Income-tax Officer, Circle II Salem 4 to search and seize the money of M.s. Bafna Textiles, C.S.Street. Bangalore which represents, the income which has not been disclosed for the purpose of Income-tax Act and which he has reason to suspect is to be found at the Office of the Assistant Collector of Central Excise, Salem. In response to the aforesaid warrant of authorisation, the authorised officer seized Rs.1 lakh from the office of the Assist. Collector of Central Excise, Salem. It is not disputed that though The cash of Rs.l lakh was seized by the Excise Authorities from the person of Mahendra Kumar that the said amount belongs to the petitioner. The petitioner's Advocate Shri J. Jeshtmal was addressed a letter by the Asst. Collector of Central Excise, Salem-7 on the 14th of Decr. 1972 whereby He was informed that Rs.1 lakh seized from -Mahendra Kumar, Bangalore by the Central Excise Officers of Salem has since been transferred to the Commr. of Income-tax, Bangalore on a warrant issued by him and that therefore further correspondence in that behalf should be , made with the Income-tax Department, Bangalore. The Income tax Officer, Assessment-5 Circle II Bangalore issued a notice to this petitioner under S.132 (5) of the Art read with Rule 112A of the Rules requiring it to explain the nature of the possession and the source of acquisition of Rs. one lakh seized by the Income tax Department. By letter of the petitioner's Advocate dt.8-1-1973, a reply was given to the aforesaid notice wherein it is stated that an amount of Rs.l lakh is available, as cash in the books of accounts seized by the Income tax Department and that therefore the said amount be returned to the petitioner. On the 6th of March, 1973 the Incometax Officer Assessment-4 Circle II, Bangalore made an order under S. 132, (5) of the Act retaining the entire amount of Rs.l lakh on the ground that the tax liability of the petitioner is greater than Rs.1 lakh. It is the said older that is challenged in this Court by the petitioner,

(3.) Shri K. Srinivasan learned Counsel appearing for the petitioner, contended that the seizure of cash of Rs.l lakh in this case by the Incometax Department is illegal and invalid and that therefore the impugned order made under S.132(5) of the Act is also illegal and invalid. To appreciate this contention it is necessary to set out sub-sees. (1) to (5) of S.132 of the Act as follows : The warrant of authorisation was issued in this case by the commr of Income-tax, Mysore at Bangalore on 8th. Deer. 1972, under S. 132(1) (i) and (iii) of the Act and Rule 112(1) of the Rules. The Commissioner can under sub-sec. (1) of S.132, authorise an Income-tax Officer to search any building or place where he has reason to suspect that money is kept and to seize such money as is found as a result of such search. That power can be exercised by the Commissioner only when he is in possession of information from which he has reason to believe that any person is in possession of any money etc., which, represents income or property which has not been disclosed for the purpose of the Income-tax Act, 1922 or the Act. When in pursuance of the warrant of authorisation issued under S. 132(1) the authorised officer seizes the money then tho Income-tax Officer becomes entitled to take action under sub-sec. (5) of S.132 of the Act. The Income-tax Officer can, after affording reasonable opportunity to the person concerned, for being heard and making an enquiry in accordance with the rules, pass an order within the prescribed time with the previous approval of the Commissioner estimating the undisclosed income in a summary manner and calculating the amount off tax on the income so estimated and specifying the amount that will be required to satisfy the liability and retaining in his custqdy such part of the seized amount of cash as in his Opinion is sufficient to satisfy the liability and to release the remaining amount to the person from whose custody the money was seized. The summary assessment made under 8.132(5) is subject to final and regular assessment. It is, therefore clear that Sec. 132 of the Act confers special powers on the Income-tax Department to seize and retain cash etc. belonging to a person even before passing a regular order of assessment against him. The power to make summary assessment and to retain the amount can be exercised under sub-sec. (5) of S.132 of the Act by Income-tax Officer only when the money etc. has bean validly seized under sub-sec-tion (l) of S:132. If the seizure of the amount under 3.132(1) is, invalid, the Income-tax Officer will not have jurisdiction to exercise powers conferred on him by Section 132 (5) of the Act.