SAMTA CONSTRUCTION Vs. PAWAN KUMAR SHARMA & ORS

JUDGEMENT

(1.) Justifiability of the action of the Deputy Director of Income Tax (Investigation) and Commissioner of Income Tax there respondents Nos. 1 and 2, respectively, herein, requisitioning the bank draft of the petitioner in exercise of power under Section 132A of the Income Tax Act, 1961 (hereinafter referred to as 16 'the Act') on 14-12-96 is called in question in present writ petition preferred under Article 226 of the Constitution of India by the petitioner, a Partnership Firm.

(2.) The essential facts which require narration for the present litigation are that the petitioner firm is engaged in the business of executing various kinds of work and contract operation of quarrying of sand on lease basis from the Government of M. P. As set forth in the petition the Partnership Firm submitted earnest money of Rs. 72,60,000/- (Seventy Two lacs sixty thousand) only in a joint venture along with others with M. P. Matsya Vikas Nigam Limited (hereinafter referred to as 'the Nigam') in connection with a bid for fishing rights for Sagar Gandhi Dam. It is stated that due to paucity of time the petitioner could not channelise funds through its bank for which he had to obtain loans from various persons. Loans were advanced by them by way of bank drafts drawn in favour of the 'Nigam'. Initially the tender was awarded in favour of the petitioner it being the highest bidder but afterwards the same was withdrawn by the department of Fisheries and the earnest money deposited was refunded by Draft No. 007387 dated 14-12-96 payable at Union Bank of India main Branch Jabalpur. The petitioner deposited the said draft in its current account at Central Bank of India, Malviya Chowk, Jabalpur. The draft was forwarded by the Banker of the petitioner for clearing and it was sent to the Union Bank of India main Branch Jabalpur through the Clearing House. At that juncture the respondent No. 2 on recommendation of respondent No. 1 issued a warrant of authorisation for requisitioning the bank draft. As put forth in the writ petition the respondent No. 1 took possession of the draft under the authorisation dated 19-12-96 issued by respondent No. 2. The Assistant Director of Income Tax (Investigation) informed the Central Bank of India that warrant under Section 132A had been executed on the Branch Manager of the Union Bank of India and the draft had been delivered to him by Bank authorities. Thereafter the petitioner approached the Commissioner of Income Tax for release of the draft by its letter dated 26-12-96 but the request of the petitioner was not paid heed to. Without abandoning hope, the petitioner filed a written application on 9-1-97 requesting the respondent No. 2 to release at least 40% of the amount. The said prayer was accepted. It is averred in the writ petition that the provisions enumerated under Section 132A are not meant for interfering with the formal channel of banking activities as the draft in question was not taken into custody by the Bank by virtue of operation of any law, and therefore, the warrant of authorisation issued under Section 132. A by the respondent No. 2 is without jurisdiction. It is also pleaded that as per the provision of Section 132A(9) of the Act the Authorising Officer should hand-over the assets and documents and taken possession of by him within 15 days under warrant of authorisation to the Income Tax Officer having jurisdiction but in case of the petitioner the same was not done for the purpose of assessment of the petitioner. It is also put forth that the parties from whom the petitioner had raised funds are income-tax assessees and they have confirmed the transaction, and therefore, the genuineness of the transactions is beyond doubt and there is no reason to believe that the draft was prepared out of the undisclosed income of the petitioner. It is also set forth that there has been no application of mind to reach the requisite satisfaction for issuance of authorisation under the aforesaid provision. It is also stated that the transaction has been recorded in the books of accounts maintained in the regular course of business, hence it cannot be said that the amount was a part of undisclosed income. It is averred by the petitioner that the action of respondent No. 2 in issuing warrant of authorisation under Section 132A of the Act on recommendation of respondent No. 1 is totally illegal and without jurisdiction. It is put forth that both the authorities have transgressed their jurisdiction conferred on them under Section 132A of the Act as the authorisation was possible only if some other authority acting under any other law in force had taken into custody the assets and such assets of either wholly or partly believed to be undisclosed income of the petitioner. On the basis of the aforesaid averments, prayer has been made for quashment of authorisation issued under Section 132A of the Act as illegal and further for issue of a direction to release the balance amount in favour of the petitioner and not to initiate any proceeding under Section XIV-13 of the Act and make good the loss caused to the petitioner.

(3.) A counter-affidavit has been filed by the answering respondents contending, inter alia, that the provisions of section 132A cover the situation of the present nature. It is pleaded in the present case that the departmental Authorities had reasons to believe that the draft was prepared from the undisclosed source of the income of the petitioner which was duly exposed in course of investigation undertaken by the officer of the investigation-cell of the Income Tax department. It is stated that as per the investigation it was revealed that large amount of money was involved in the transaction. It is put forth that during the investigation the investigating agency was able to collect the names of the persons by whom drafts were prepared. It is also stated that the persons who got the draft prepared had deposited the amount just few days before the date of preparation of the drafts. It is also pleaded that most of the persons from whose accounts the money was withdrawn for preparation of the drafts are persons of ordinary means. It is also put forth that as the amount in question related to the unexplained source of income in the hands of the petitioner there was reason to believe that the statutory conditions precedent were satisfied and accordingly the warrant of authorisation was sent to requisition the draft in exercise of the power under Section 132A of the Act, and hence there is no error in exercise of such jurisdiction. It is also set forth that one W. A. Qureshi has admitted in course of investigation that he had prepared the draft by taking cash from the petitioner and that clearly shows that the amount was from the undisclosed income of the petitioner. It is worthwhile to mention here that the respondents have taken exception to implement of the Deputy Director of Income Tax (Investigation) by name.