1999 (2) TMI 23 - HC - Income Tax

Summary

Issues Involved:
1. Justifiability of the requisition of the bank draft under Section 132A of the Income-tax Act.
2. Interpretation and applicability of Section 132A(1)(c) of the Income-tax Act.
3. Validity of the reasons to believe for issuing the warrant of authorization.
4. Jurisdiction of the competent authority in issuing the warrant of authorization.

Detailed Analysis:

1. Justifiability of the Requisition of the Bank Draft under Section 132A of the Income-tax Act:
The petitioner, a partnership firm, challenged the action of the Deputy Director of Income-tax (Investigation) and the Commissioner of Income-tax in requisitioning a bank draft of Rs. 72,60,000 under Section 132A of the Income-tax Act. The draft was refunded to the petitioner after a bid for fishing rights was withdrawn. The petitioner contended that the warrant of authorization was without jurisdiction and that Section 132A was not meant for interfering with formal banking activities.

2. Interpretation and Applicability of Section 132A(1)(c) of the Income-tax Act:
The court examined the language of Section 132A(1)(c) which allows requisitioning of assets taken into custody by any officer or authority under any other law. The court emphasized that the provision is plain and unambiguous, requiring that assets must have been taken into custody by an officer or authority under another law. The court distinguished between "custody" and "custody of law," noting that the bank draft presented for clearing cannot be considered as taken into custody by the bank under any legal process. The court concluded that the bank draft was not within the scope of Section 132A(1)(c), making the warrant of authorization without jurisdiction.

3. Validity of the Reasons to Believe for Issuing the Warrant of Authorization:
The court scrutinized whether the competent authority had sufficient reasons to believe that the draft represented undisclosed income. The satisfaction note indicated that the demand drafts were purchased from unexplained cash deposits and were refunded to the petitioner. The court acknowledged that the reasons recorded met the statutory requirements, but since the draft did not fall under the purview of Section 132A(1)(c), the authorization was still invalid.

4. Jurisdiction of the Competent Authority in Issuing the Warrant of Authorization:
The court reiterated that the competent authority must have jurisdiction under the specific conditions outlined in Section 132A. The provision requires that the assets must be taken into custody by an officer or authority under another law. The court found that the bank did not have the authority to retain the draft under any legal provision, thus the jurisdiction to issue the warrant of authorization was lacking.

Conclusion:
The writ application was allowed, and the authorization issued under Section 132A was quashed. The court held that the bank draft presented for clearing could not be requisitioned under Section 132A(1)(c) as it was not taken into custody by the bank under any legal process. The reasons recorded for issuing the warrant were found to be adequate, but the lack of jurisdiction rendered the authorization invalid.