ASSAINAR Vs. ITO CALICUT

JUDGEMENT

(1.) THE same question arises for determination in these two petitions and the answer to the question depends on the interpretation to be placed on S. 132 of the Income-tax Act, 1961, for short the Act. To start with we shall read the section. (Section omitted)

(2.) THE facts which led up to the petition, O. P. 2226 of 1972 are the following: A sum of Rs. 50,000/- was seized from the petitioner by the Central Excise Department on 14th May 1971 at 11 p. m. when the petitioner, one Sri Assainar, was travelling from Payyannoor to Kottayam in a stage carriage. THE seizure was made because it was suspected that the said amount represented the value of contraband gold. THE seizure was made under S. 110 (1)of the Customs Act, but it was found on investigation that the money seized was not liable to confiscation. In fact no notice as contemplated by S. 110 (2) of the Customs Act, 1962 was issued. So the money seized was liable to be returned as provided by sub-s. (2) of S. 110 of the Customs Act, 1962. At that stage the income-tax Officer who was empowered by the Commissioner as envisaged by sub-s. (1) of S. 132 of the Act intervened and issued a notice purporting to be under r. 112-A of the Incometax Rules, 1962 to the petitioner requiring him to explain the source of the abovesaid sums of Rs. 50,000. Counsel for the Revenue made available to us what is called "panchanama" which from the terms thereof indicated that there has been a search of the office of the Customs Authorities and that the amount was seized. THE notice under R. 112-A of the Income-tax rules is Ext. P-1 and the order under sub-s. (5) of S. 132 of the Act has been produced as Ext. P-2. By the order Ext. P-2 the amount payable by way of tax on the sum Rs. 50,000 which was taken to be the total income of the petitioner for the year in question was fixed at Rs. 19,550 and the balance amount has been returned to the petitioner. THE order Ext. P-2 is challenged in this petition. We shall state the grounds of the challenge later after stating the facts which led up to the petition, O. P. 2884 of 1972 for the grounds taken in the two petitions, are the same. Now turning to the facts in O. P. 2884 of 1972 they are very similar to the case that we have already stated excepting that the seizure took place pursuant to the provisions in the Foreign Exchange Regulation Act, 1947. THE amount that was seized in that case was Rs. 50,010. 15. A penalty of rs. 25,000 was imposed under the Foreign Exchange Regulation Act, 1947. THE balance amount available with the Enforcement Directorate was the sum of Rs. 25,010. 15. At that time the Income-tax Officer intervened and issued a notice similar to Ext. P-1 in O. P. 2226 of 1972 which is Ext. P-2 in this case and having obtained the custody of the sum of Rs. 25,010. 15 proceeded to determine the liability of the petitioner in the O. P. by Ext. P-3 Order and fixed it at rs. 52,097. THE entire sum of Rs. 25,010. 15 was adjusted towards the liability and demand has been made on the petitioner for the balance amount due to the income-tax Department.

(3.) COUNSEL for the petitioner contended that the section must be strictly construed as it. contains a drastic provision permitting the invading of the privacy of an individual and deprivation of his property by seizure and merely for the purpose of imposing income-tax for which other elaborate machinery is provided under the Act; the proceeding has been characterised as summary and it was emphasised that the decision is almost final subject only to an appeal to the Board as provided by sub-section (11) of s. 132 of the Act. The normal remedy under the Act when tax is imposed which is claimed as unjustifiable is to file appeals, two of them and then seek a reference to the High Court with a further appeal to the Supreme Court if the high Court was satisfied that an appeal should be permitted as envisaged by s. 261 of the Act. Therefore it was submitted that we must construe the section so as to limit its scope and ambit. So construed it was contended that the procedure adopted in the two cases would not be justified. It was also contended that an officer who under the authority of law bad seized the monies cannot be said to be a person in possession against whom an order under sub-section (3) of S. 132 could be passed. It was vehemently argued that clause (c) of sub-section (1) of S. 132 will have no application against such an officer. It was emphasised that the provisions in the Customs Act and the Foreign exchange Regulation Act say that he who seized the articles must return the same to the person from whom it was seized.