PRAKASH JAICHAND SHAH Vs. DIRECTOR OF INCOME TAX

JUDGEMENT

(1.) By this petition under Article 226 of the Constitution of India, the petitioner has challenged warrant of authorisation dated 25th July, 2000 issued by the Director of Income Tax (Investigations) respondent No.1 herein in favour of the Deputy Director of Income Tax (Investigations), Unit III (3) - respondent No.2 herein as well as the order under section 132A dated 18th August, 2000. The petitioner also seeks a direction to the respondents to return forthwith to the petitioner the seized amount of Rs.11 lakhs with interest thereon at the rate of 15% from the date of seizure thereof till the date of repayment.

(2.) The facts of the case as stated in the petition are that the petitioner herein is a resident of Bhuj and has been working as a cotton broker. On 25th July, 2000, he was carrying with him cash of rupees eleven lakhs collected from Ahmedabad in respect of the sale of cotton through him as a broker by Shreenathji Trading Company of Bhuj Kutch to Raj Trading Company of Ahmedabad. On a written requisition from the seller Shreenathji Trading Company, Raj Trading Company had given cheques for Rs.11 lakhs, which he got discounted with a shroff by the name of M/s, J.J. Shroff at Ahmedabad and got the cash of the said amount. The petitioner was trying to take a bus to Bhuj from the S.T. Bus Depot at Gita Mandir road, Ahmedabad and was questioned by a policeman. The petitioner explained the above facts but the policeman did not believe the same and the petitioner was taken to Kagdapith Police Station, where the police took possession of the cash from him under section 102 of the Code of Criminal Procedure by drawing a panchnama and a receipt of rupees eleven lakhs was given to the petitioner. It appears that an order under section 132A of the Income Tax Act, 1961 (the Act) came to be made by the Deputy Director of Income Tax (Investigation), Unit-III (3) which indicated that the Deputy Director of Income Tax went to the office of Kagdapith Police Station and showed the warrant of authorisation under section 132A from the Director of Income Tax (Investigation), Ahmedabad and collected the amount of Rs.11 lakhs on the same day. It is the case of the petitioner that he waited for some days for a notice from the Deputy Director but having not received one, addressed a letter dated 10th August, 2000 to him through his Chartered Accountants M/s. Natha Jain and Company inter alia stating that the petitioner had been doing business of cotton for the last several years and that the petitioner had come to Ahmedabad to collect payment from Shri Rajan Shah of Raj Trading Company for the sale of cotton of his client Shreenathji Trading Company, Bhuj. After collecting money from Shri Rajan Shah through angadia M/s. J.J. Shroff, the petitioner reached the S.T. Bus Depot at Gita Mandir road, Ahmedabad for departure to Bhuj where the police questioned him and found Rs.11 lakhs in cash in his possession. He explained that Shri Rajan Shah had arranged the cash of Rs.11 lakhs against sale of cotton of M/s. Shreenathji Trading Company and that the police officer was satisfied about the identity and evidence found and could not gather any adverse facts. Therefore, they called the income tax officials who recorded the statement of the petitioner wherein he had stated that the amount had been arranged by Shri Rajan Shah through Shroff of Kalupur against purchase of cotton. The income tax officials surveyed the business premises of Shri Rajan Shah, examined his books of accounts and recorded his statement and that Shri Rajan Shah corroborated the statement of the petitioner that the payment had been arranged by him through M/s. J.J. Shroff, Kabutarkhana, Kalupur, Ahmedabad against the purchase of cotton from Shreenathji Trading Company, Bhuj and that he had made the payment to the petitioner. The income tax officials tried to contact the said J.J. Shroff to examine the source of cash but the office of the shroff was closed and he was not available. That only because J.J. Shroff was not available, cash was seized in spite of source of cash having been explained as paid by M/s. J.J. Shroff who had been doing cheque discounting business. That both the petitioner and Shri Rajan Shah requested the official on duty to keep the matter pending till the statement of M/s. J.J. Shroff was recorded but the request was turned down without any lawful reason. A copy of the cash book of M/s J.J. Shroff which according to the petitioner clearly explains the source of cash was enclosed therewith. The petitioner also requested for a copy of his statement and also Shri Rajan Shah.

(3.) By a letter dated 18th August, 2000, the Deputy Director replied that the request for release of cash is to be dealt with by the Commissioner of Income Tax, Rajkot and as such, the application is being forwarded to him and that the Assessing Officer, Bhuj will supply the copies of the statement of the petitioner and Shri Rajan Shah, if the same are going to be used as evidence against the petitioner. That in view of the aforesaid, the request made in the letter dated 10th August, 2000 cannot be acceded to at present.