P P KANNIAH Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner seeks a writ of prohibition restraining the first respondent, the ITO, Central Circle I, madras-34, from handing over the gold, gold articles and ornaments weighing 10, 395 grams of gold and 66.9 acts. of diamond seized from him on December 21, 1973. THE facts of the case nay be stated briefly as follows :THE petitioner claims to carry on business in gunny bags. On December 21, 1973, his premises at 26/27, Ramanan Road, Madras, and the residence of his accountant, Vaidyanathan, at 11, Venkatesa Agraharam, Madras-4, were searched by the I. T. authorities under s. 132 of the I. T. Act. As a result of the search cash of Rs. 9, 93, 574 and gold, gold ornaments and diamond jewellery weighing 10, 395 grams of gold and 66.9 cts. of diamond were recovered from the premises. Besides, certain documents and records were also seized by the Assistant Director of Inspection. An order under s. 132 (5) of the I. T. Act was passed by the ITO. Under the said order, the first respondent estimated the alleged concealed income at Rs. 45, 06, 574 and levied a tax of Rs. 43, 61, 474. COnsequently, the order stated that all the assets that have been seized were being retained towards the tax as determined.

(2.) THE petitioner thereupon filed an appeal under s. 132 (11) of the I. T. Act. While so, the Central Govt. promulgated an order 8, 1975, the voluntary Disclosure of Income and Wealth Ordinance, 1975. THE petitioner filed a declaration under s. 14 of the said Ordinance and disclosed a sum of Rs. 23, 00, 300 for the assessment years 1965-66 to 1974-75. In the said declaration, the petitioner included the value of the gold and gold ornaments weighing 10, 395 grams and diamond jewellery weighing 66.9 cts. THE Commissioner accepted the disclosure subject to payment of tax. THE petitioner then requested the first respondent and the Commissioner (Central), Madras, to appropriate the cash seized from his premises towards the tax and sell the items of gold and gold ornaments and diamond jewellery seized from his premises and appropriate the sale proceeds thereof also towards the tax. THE first respondent agreed o the same. On the basis of the agreement arrived at between the petitioner and the first respondent the gold, gold ornaments and diamond jewellery were valued by Vummidi kannan of Vummidi Bangaru Chetty and Sons. While so, the second respondent, viz., the Collector of Central Excise, Madras, addressed a letter to the first respondent stating that the gold, gold ornaments and diamond jewellery seized by the I. T. department from the petitioner's premises should be handed over to him on the ground that the petitioner had committed in offence under s. 8 (1) of the GOld (Control) Act and that a case has been registered against the petitioner for contravention of the provisions of s. 8 (1) of the Gold (Control) Act.

(3.) THE section cannot be read to mean that once the ITO passes an order under s. 132 (5), to the effect that he was retaining in his hands part off the assets or the whole thereof for the purpose of meeting the aggregate of the tax liability as estimated under s. 132 (5) (i) and (ii) of the I. T. Act, the property in the assets immediately passes to the ITO. THE section can only mean that it will be open to the ITO to appropriate the sale proceeds of the assets against the liability of the person concerned, unless it be that the entire assets are in the form of cash.Section 132B of the I. T. Act, 1961, also, far from supporting the petitioner, supports the case of the second respondent. THE section does not say that the assets retained under s. 132 (5) immediately become the property of the ITO. On the other hand, s. 132B (1) (iii) clearly says that the ITO may recover the amount of the liabilities by the sale of assets other than money, while money can be applied in the discharge of the liabilities. Section 132B (1) (iii) make it clear that for the purpose of enabling the ITO to sell the assets, such assets shall be deemed to be under distraint as if such distraint was effected by the ITO under authorisation from the Commissioner under sub-s. (5) of s. 226.