LAWS(CAL)-1981-1-14

DWARKA PROSAD AGARWALLA Vs. DIRECTOR OF INSPECTION

Decided On January 27, 1981
DWARKA PROSAD AGARWALLA Appellant
V/S
DIRECTOR OF INSPECTION Respondents

JUDGEMENT

(1.) In this application under Article 226 of the Constitution of India the petitioner challenges the searches at his place of business as well as at his residence and the seizure of certain jewellery, books, papers, documents and money, etc., and asks for the orders cancelling such searches under Section 132 of the I.T. Act, 1961, and certain other consequential orders.

(2.) The petitioner carries on, according to the petitioner, business since 1957 and states that he had been furnishing his returns regularly and was being assessed to income-tax as such. The petitioner carries on business at No. 6, Karballa Mohammed Street, Calcutta, which falls within the territorial jurisdiction of the Commissioner of Income-tax, West Bengal-X, being the respondent No. 4, and his subordinate Income-tax Officer, D-Ward, District IV(1), Calcutta, respondent No. 5. The petitioner at all material times and even now resides at No. 6, Dr. Rajendra Road, Calcutta. On the 12th January, 1977, the Director of Inspection, being respondent No. 1, issued a warrant of authorisation under Section 132(1) of the I.T. Act, 1961, to search the petitioner's residence and office and seize the books, documents, jewellery, cash, etc. I shall have occasion to refer to the authorisation for search, because arguments have been advanced on the said authorisation. On the 14th January, 1977, the Assistant Director of Inspection, being the respondent No. 2, searched the petitioner's residence No. 6, Dr. Rajendra Road, Calcutta, and seized therefrom cash amount, fixed deposit receipts, jewellery and ornaments, including the jewellery and ornaments of the female members of his family, and Godrej lockers. Also the petitioner's office was searched and the books of account, documents and cash were seized on the same date. On the 29th January, 1977, the Assistant Director of Inspection seized two lockers, being lockers Nos. 17-N and 18-N, at Allahabad Bank, Chowringhee branch. These jewelleries, according to the petitioner, belonged to his daughter-in-law and grand-daughter. On the various dates, viz., on 10th February, 1977, 24th February, 1977, 25th February, 1977, and 5th March, 1977, the petitioner had applied, according to the petitioner, to the ITO, being the ITO, A-Ward, District 1(2), Calcutta, demanding a copy of the reasons recorded by the Director of Inspection to enable the petitioner to understand whether the conditions precedent to the search and seizure were fulfilled or not. On the 19th March, 1977, respondent No. 3 informed the petitioner that the petitioner was not entitled to know the reasons and on 29th March, 1977, according to the petitioner, the petitioner was advised that respondent No. 3 had no jurisdiction to deal with his case and hear objections. Thereupon on 1st April, 1977, the petitioner received a notice under Rule 112A(1) of the I.T. Rules, 1962, from the ITO, D-Ward, District IV(2), Calcutta, being respondent No. 4, within whose jurisdiction the petitioner carried on his business. But the petitioner alleges that such notice was out of time. On the 13th April, 1977, respondent No. 5 made a summary assessment under Section 132(5) treating the value of all the assets seized as concealed income of the petitioner and computed the purported total income of Rs. 5,82,144 and treated the same as assessable for the financial year 1976-77, and levied tax and penalty thereon of Rs. 7,06,458. I will have occasion to refer to the said order later. On the 16th May, 1977, the petitioner filed various objections before the Commissioner, respondent No. 4, demanding, inter alia, a copy of the reasons recorded by the Director of Inspection. On the 7th April, 1977, the petitioner states, the petitioner having come to know that the Central Board had transferred the case to the ITO, Central Circle-XXIII, the petitioner demanded a copy of the said order. On the 14th October, 1977, the petitioner received a copy of the order of transfer. According to the said order, the said transfer was made from ITO, A-Ward, District 1(2), to the ITO, Central-XXIII, Calcutta. No opportunity, according to the petitioner, was given to the petitioner prior to the transfer. So it was contended that the transfer was not valid. On 24th January, 1978, the petitioner requested the Commissioner, West Bengal-X, being respondent No. 4, to hear and dispose of his objections and release the said cash and jewellery. Respondent No. 4 replied that he had no such jurisdiction to hear the said objections. On the 14th February, 1978, the petitioner applied to the Director of Inspection to supply him with a copy of the reasons recorded for the search and seizure. The petitioner thereupon moved an application under Article 32 of the Constitution before the Supreme Court of India, inter alia, challenging the proviso to Section 127 of the Act. It has been alleged by the petitioner in para. 32 of the present petition before me that the said petition came up on 18th April, 1978, for a preliminary hearing before the Supreme Court of India before a Bench consisting of Fazal Ali J. and Kailasam J. The petitioner further asserts that the petitioner's counsel, with the leave of the court, withdrew the petition, in the words of the petitioner, "in view of......(as pointed out by the hon'ble court) that your petitioner did not move this hon'ble court under Article 226 and that the objections had not been disposed of by the Commissioner of Income-tax under Section 132(11) of the Income-tax Act, 1961". The petitioner, on 29th July, 1978, applied to respondent No. 4 to dispose of the objections and release the jewellery. On the 30th July, 1978, the petitioner received the letter from the Director of Inspection that he was not entitled to the copies of the reasons recorded by him. On the 1st August, 1978, the Commissioner, Central, being the respondent No. 6, extended the period of retention of the seized assets till 30th June, 1979. On 1st and 8th December, 1978, the Commissioner, West Bengal-X, being respondent No. 4, at the instance of respondent No. 8, heard the petitioner's objection under Section 132(11) of the I.T. Act, 1961. The petitioner, inter alia, demanded a copy of the reasons recorded by the Director of Inspection for the search and seizure. Respondent No. 4 overruled all the objections and retained the jewellery on 28th December, 1978. On the same date, respondent No. 7 viz., the ITO, Central Circle-XXIII, assessed wealth-tax on the value of the seized jewellery for the assessment years 1971-72, 1972-73, 1973-74 and 1974-75, and on 29th January, 1979, the respondent No. 7 assessed the petitioner for the assessment year 1976-77 to income-tax, but he did not include the purported value of the seized jewellery in the total income in the regular assessment. On 26th February, 1979, the petitioner demanded release of the said jewellery and on 2nd March, 1979, the ITO informed that the value of the jewellery related to the financial year 1976-77, by which he meant the accounting year. On the 28th March, 1979, this application was moved in this court and a rule nisi was obtained.

(3.) There were several contentions urged in support of this application. But before I deal with these, one contention may be disposed of first, viz., according to the petitioner by the purported order dated 30th May, 1977, under Section 127 of the I.T. Act, 1961, the Central Board had transferred the case of the petitioner from the ITO, A-Ward, District 1(2), to the ITO, Central Circle-XXIII. But the petitioner states that at that time the ITO, D-Ward, District IV(1), the respondent No. 4, was not in seisin of the case and the petitioner's objection made under Section 132(8) was pending before the ITO, West Bengal X, who disposed of the same by his order dated 27th December, 1978. The transfer order was thus, according to the petitioner, invalid and that is the point urged before me that the ITO, Central Circle-XXIII, was not competent to make the assessment or to make the counter-affidavit. In the premises, the assessment order made by respondent No. 5, the ITO, D-Ward, District IV(1), and the confirmation thereof made by the Commissioner, West Bengal-X, is totally misconceived and without jurisdiction. In view of the order annexed to the affidavit-in-opposition being the order transferring the case under Sub-section (1) of Section 127 of the I.T. Act, 1961, and the corrigendum issued on the 9th September, 1977, and the communication dated 21st June, 1979, and the corrigendum dated 27th August, 1977, and the further corrigendum dated 31st August, 1977, read with the order dated 30th May, 1977, in my opinion, this contention that when the order of transfer was made from an officer over whom the petitioner had no jurisdiction can no longer be sustained. The said orders of transfer and the corrigendum issued thereunder were all produced before me and certified copies had been filed in this proceeding and I direct that the certified copies of such bundle of corrigendum which I am marking annex. "A" be filed and kept on record of this matter.