MITHILESH KUMARI Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) IN pursuance of an authorisation issued by the Commissioner of INcome-tax, Lucknow, a raid was organised and conducted on the business and residential premises of M/s. Boolchand Fakir Chand, Dhampur, and its four partners who were brothers. This raid and the consequent search took place on August 20, 1976; as a result, a large amount of cash, documents, gold and ornaments were seized. A notice was issued under Section 132(5) of the I.T. Act, 1961, to the firm to explain the acquisition of various seized assets and source of money. The partners of the firm filed an explanation. Ultimately, on November 16, 1976, the ITO passed an order under Section 132(5) of the Act holding that he estimated the concealed income of the assessee-firm at Rs. 4,00,910 as income from undisclosed sources. He further held that on this income at the rate prevalent in the year 1976-77 tax liability to the tune of Rs. 3,34,894 arises. Penalty to the tune of Rs. 5,02,340 was also to be imposed. Total liability works out to Rs. 8,37,234. The assets seized by the department were to the extent of Rs. 4,09,885 only. He, therefore, directed the retention of the entire seized assets in his custody. IN the course of the proceedings, the ladies of the family of the partners of the assessee-firm as well as some partners, filed objections supported by affidavits stating that some of the assets seized belonged to them. They were not the property of the firm. The ITO in the course of his order passed under Section 132(5) rejected these various claims.

(2.) THE objectors filed applications under Section 132(11) of the Act on or about 10th December, 1976, before the CIT, Lucknow. He by an order dated 2nd May, 1978, dismissed all these applications. He held that the order under Section 132(5) had by then been superseded by a finalised assessment against the firm, Boolchand Fakir Chand, Dhampur. THE applications under Section 132(11) had hence become infructuous and were dismissed. Aggrieved, various objectors have come to this court under art, 226 of the Constitution.

(3.) IN the result, the petition succeeds and is allowed. The impugned order dated May 2, 1978, is quashed. The matter is remitted to the Commissioner as the notified authority to decide the applications made by the objectors under Section 132(11) of the Act afresh and in accordance with law, keeping in view the observations made above. The petitioners will be entitled to costs.