2000 (12) TMI 27 - HC - Income Tax

Summary

Issues Involved:
1. Validity of the requisition under section 132A of the Income-tax Act, 1961.
2. Validity of the consequential notice under section 158BC of the Income-tax Act, 1961.
3. Compliance with sections 102 and 457 of the Criminal Procedure Code, 1973.

Detailed Analysis:

1. Validity of the Requisition under Section 132A of the Income-tax Act, 1961:
The petitioner challenged the action of the Director of Income-tax (Investigation) in issuing a notice under section 132A of the Income-tax Act, 1961, requiring the SHO, Police Station City, Phagwara, to deliver the custody of Rs. 21,05,000 seized from the petitioner. The court examined whether the requisition made on March 23, 1998, was valid. The petitioner argued that the police officer was bound to follow the procedure under section 102 of the Criminal Procedure Code, which required reporting the seizure to the magistrate and obtaining an order under section 457 before disposing of the property. The court concluded that until an order is obtained from the magistrate, the possession of the seized assets by the police officer cannot be deemed to be under the orders of the court. Therefore, the requisition made by the Director of Income-tax was valid as the possession on March 23, 1998, was with the SHO, Police Station City, Phagwara.

2. Validity of the Consequential Notice under Section 158BC of the Income-tax Act, 1961:
The petitioner also challenged the consequential notice dated July 20, 1999, issued under section 158BC of the Income-tax Act, requiring the petitioner to prepare and file the return for the block period April 1, 1987, to March 23, 1998. The court noted that the validity of this notice depended on the validity of the requisition under section 132A. Since the requisition was held to be valid, the consequential notice under section 158BC was also held to be valid.

3. Compliance with Sections 102 and 457 of the Criminal Procedure Code, 1973:
The petitioner contended that the police officer was bound to report the seizure to the magistrate and obtain an order under section 457 of the Criminal Procedure Code before disposing of the property. The court agreed that the police officer should have obtained an order from the magistrate before delivering the possession of the seized amount to the income-tax authorities. The court held that the action of the police officer in delivering the possession of the seized amount to the income-tax authorities without obtaining an order from the magistrate was contrary to the provisions of the Criminal Procedure Code. Therefore, the court ordered that the amount delivered to the income-tax authorities be returned to the police officer, who should obtain necessary orders from the court of competent jurisdiction.

Conclusion:
(i) The requisition made under section 132A(1) of the Income-tax Act by the Director of Income-tax on March 23, 1998, was valid.
(ii) The police officer was not legally competent to deliver the possession of the seized amount to the income-tax authorities without obtaining an order from the magistrate under section 457 of the Criminal Procedure Code. The amount should be returned to the police officer for obtaining necessary orders from the court.
(iii) The consequential notice under section 158BC of the Income-tax Act dated July 20, 1999, was held to be valid. The writ petition was disposed of in these terms with no order as to costs.