PANNALAL Vs. INCOME TAX OFFICER

JUDGEMENT

(1.) THIS is a petition under Article 226 of the Constitution and is directed against a seizure of currency notes of the value of Rs. 2,02,500 by the Income-tax Officer, B-Ward, Chhindwara, under Section 132 of the Income-tax Act, 1961.

(2.) THE petitioner No. 2 firm, Messrs. Chunnilal Nahta, is a firm carrying on business in gold and the petitioner No. 1, Pannalal, is a partner of that firm. On 15th October, 1971, the shop and residential premises of the petitioners were searched by the Collector of Customs and Central Excise, M.P. and Vidavbha, and the Central Excise Officers of Nagpur, under the authority of a search warrant. In the search currency notes of Rs. 2,02,500 and gold coins, sikkas, and ornaments weighing 812.400 gms. were seized by the Central Excise authorities. By an order passed on 18th December, 1973, the Collector of Customs and Central Excise held that the currency notes of Rs. 2,02,500 and the gold ornaments weighing 361*450 gms. had not offended any provisions of the Gold Control Act, 1968. As regards gold coins and sikkas, contraventions of the provisions of the Act were found and appropriate orders were passed in that behalf. THE currency notes of Rs. 2,02,500, and the gold ornaments were ordered to be released. On 4th December, 1971, the Commissioner of Income-tax, Madhya Pradesh, Nagpur and Bhandara, issued a warrant of authorisation under Section 132(i) of the Income-tax Act, 1961, in favour of the Income-tax Officer, B-Ward, Chhindwara, and other officers to search and seize money, bullion, jewellery, etc., of the petitioner-firm which was to be found at the office of the Collector of Customs and Central Excise, Nagpur. In pursuance of the authority derived from the warrant of authorisation, the Income-tax Officer, B-Ward, Chhindwara, issued an order under Section 132(3) of the Income-tax Act on 17th December, 1971, to the Collector of Customs and Central Excise, Nagpur, not to remove or part with the sum of Rs. 2,02,500 until the withdrawal of the notice. THE petitioner-firm was also informed by the Income-tax Officer on 15th December, 1971, by letter, annexure "B", that the cash amount of Rs. 2,02,500 lying with the central excise department stood seized under Section 132 of the Act. THE petitioners then filed this petition under Article 226 of the Constitution on 12th January, 1972, praying that a mandamus be issued against the Income-tax Officer, B-Ward, Chhindwara, the Collector of Customs and Central Excise, Madhya Pradesh and Vidarbha and the Union of India, commanding them to immediately release the sum of Rs. 2,02,500 in favour of the petitioners. During the pendency of this petition the Income-tax Officer passed an order on 7th March, 1972, under Section 132(5) of the Act specifying the tax on the estimated undisclosed income and other existing liability of the petitioner-firm and directing the retention of the entire amount of Rs. 2,02,500. In the rejoinder the petitioners have prayed that the order under Section 132(5) be also quashed being an order consequential to the order of seizure under Section 132(3).

(3.) IT would be seen that the Director of Inspection or Commissioner of Income-tax can issue an authorisation under Sub-section (1) only if he has reason to believe that the conditions under Clauses (a), (b) and (c) of that sub-section are satisfied. Under Clause (a) he should have reason to believe that any person to whom a summons or notice under the provisions mentioned in that clause was issued to produce any books of account and other documents has omitted or failed to produce the required documents. Under Sub-clause (b) the Commissioner should have reason to believe that any person to whom a summons or notice as mentioned in Clause (a) has been or might be issued will not or would not produce or cause to be produced any books of account and other documents which will be useful for or relevant to any proceeding under the Income-tax Acts. And under Clause (c) he should have reason to believe that any person is in possession of any money, bullion, jewellery or other valuable article and such money, bullion, etc.. represents either wholly or partly income or property which has not been disclosed for the purposes of the Income-tax Acts. In our opinion, there is nothing in the requirements of Section 132 which may support the view that if the Commissioner has definite knowledge that the books of account, documents, money, bullion, etc., sought to be searched and seized are in the possession of a particular person he cannot issue an authorisation for search and seizure of the same. The expression "has reason to believe" itself signifies that the Commissioner has reason to be satisfied that the things to be searched are in the possession of a particular person. IT would be anomalous to hold that if the Commissioner is not sure about the possession of money, bullion, etc., he can exercise his powers under Section 132 for search and seizure, but when he is sure that the undisclosed income in the shape of money, bullion, etc., is in the possession of a person, he cannot exercise his powers of search and seizure. The object of Section 132 is not merely to get information of the undisclosed income, but also to seize the money, bullion, etc., representing the undisclosed income and to retain them for purposes mentioned under Section 132(5). The construction that the learned counsel for the petitioners wants us to accept gives no importance to the words "has reason to believe" and to the object of the section and depends solely on the literal meaning of the word "search". We are unable to accept it.