PUNAMCHAND R SHAH Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THIS is a writ petition filed by one Punamchand R. Shah (since deceased, whose legal representatives have been brought on record), a businessman, and a director of South India Flour Mills Private Ltd. praying for the issue of a writ of certiorari so as to quash an order dated 19th December, 1972, passed under Section 132(5) of the Income-tax Act, 1961, under the following circumstances :

(2.) ON the same day, a prohibitory order under Section 132(3) of the Act was made ordering the petitioner not to remove, part with or otherwise deal with the books of account, documents, money, bullion, jewellery, etc., described in the annexure to the panchanama. They were described as being in the possession or control of the petitioner. If there was any contravention, then it was stated that the petitioner was liable to be punished with rigorous imprisonment extending to two years and a fine in accordance with Section 275A of the Income-tax Act. This prohibitory order describes also that the silverware of the petitioner and his brother, Milapchand, had been duly weighed and kept in a Godrej cupboard, sealed in the presence of two witnesses.

(3.) IT would be useful at this stage to make a brief reference to Section 132 and Rule 112A. Under Section 132(1) where the Director of Inspection or the Commissioner, in consequence of information in his possession, had reason to believe that any person is in possession of any money, bullion, jewellery, etc., and that such money, etc., represented either wholly or partly income from an undisclosed source, then he may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner of Income-tax or Assistant Director of Inspection or Income-tax Officer to enter and search any building, break open the lock of any door, box, etc., seize any books of account, money, bullion, jewellery, etc., place marks of identification on any books of account or other documents and make a note or an inventory of any such money, bullion, jewellery, etc. Where it is not practicable to seize any such books of account, other documents, money, bullion, jewellery, etc., Clause (3) empowers the authorised officer to serve an order on the owner or the person who is in immediate possession or control of the said items directing him not to remove, part with or otherwise deal with it except with the previous permission of such officer. This would have the effect of attachment of the items covered by the prohibitory order. Where any money, bullion, jewellery, etc., were seized under Sub-section (1), then the Income-tax Officer was empowered by Clause (5) to give the person concerned an opportunity of being heard and also to make his own enquiry. Within 90 days of the seizure he had to make an order with the previous approval of the Commissioner estimating this undisclosed income in a summary manner to the best of his judgment on the basis of such materials as were available to him, calculating the amount of tax on the income so estimated, and specifying the amount that would be required to satisfy any existing tax liability. He could retain in his custody the seized assets or any part thereof as were in his opinion sufficient to satisfy the aggregate of the tax liability and release the remaining portion to the person from whose custody they were seized. Where the person had paid or made satisfactory arrangements for payment of tax liability referred to above, then the Income-tax Officer could, with the previous approval of the Commissioner, release the assets or such part thereof as he may deem fit in the circumstances of the case. If any person had any objection to the order passed under Sub-section (5), he could within 30 days from the date of such order make an application to the appropriate authority, viz., the Central Board of Direct Taxes. Rule 112A of the Income-tax Rules provides for the enquiry under Section 132. Within 15 days of the seizure, the Income-tax Officer has to issue to the person in respect of whom the enquiry under Sub-section (5) of Section 132 is to be made, a notice asking him to explain or produce evidence regarding the source of the acquisition of the assets. The Income-tax Officer has 10 weeks (roughly) thereafter to complete the enquiry. Before any material gathered in the course of the examination or enquiry under this rule is used, the Income-tax Officer has to give a reasonable notice to the assessee to show cause why such material should not be used against him. IT is in the background of these provisions that we consider this case.