1995 (7) TMI 5 - HC - Income Tax

Issues Involved:
1. Application of mind and reason to believe for issuing the warrant of authorisation.
2. Territorial jurisdiction of the officer issuing the warrant and its effect.
3. Effect of the order of assessment by the assessing authorities.
4. Authority of the Judicial Magistrate to order the return of goods on sapurdgi to persons claiming ownership, ignoring the warrant of authorisation.

Detailed Analysis:

Issue 1: Application of Mind and Reason to Believe for Issuing the Warrant of Authorisation
The court examined whether the officer issuing the warrant of authorisation had applied his mind and had reason to believe that circumstances existed for issuing the warrant. The court referenced the concept of "reason to believe" as discussed in prior judgments, noting that it involves a mental exercise based on information received, which must be justified and reasonable. The court concluded that in all cases, the warrant of authorisation was properly issued as the concerned officer had reason to believe that the condition precedent for the exercise of power did exist. This belief is to be judged based on the circumstances existing at the time of issuing the warrant, not subsequent events.

Issue 2: Territorial Jurisdiction of the Officer Issuing the Warrant
The court examined the argument regarding the lack of territorial jurisdiction of the officer issuing the warrant. It was noted that the person found in possession of the ornaments was not an assessee, and the persons claiming ownership were from Mathura but had failed to prove their ownership. Therefore, prima facie, it could not be said that the warrant of authorisation was issued by an officer who lacked initial jurisdiction. The court held that mere lack of jurisdiction would not render the warrant illegal; instead, the seized property would be placed at the disposal of the authority or officer having jurisdiction.

Issue 3: Effect of the Order of Assessment by the Assessing Authorities
The court examined the effect of an order of assessment having been passed by the concerned assessing authorities. It referenced the Supreme Court decision in K. Choyi v. Syed Abdulla Bafakky Thangal, which held that once an assessment is completed, the appropriate remedy for the Revenue is to make an application under section 226(4) of the Income-tax Act. The court concluded that in cases where the assessment has been completed, the warrant of authorisation shall cease to operate, and the seized property should be disposed of as per the determination made by the assessing authority.

Issue 4: Authority of the Judicial Magistrate to Order the Return of Goods on Sapurdgi
The court examined whether the Judicial Magistrate could order the return of goods on sapurdgi to persons claiming ownership, ignoring the warrant of authorisation. It referenced a Division Bench decision stating that neither the police officer nor the Magistrate had jurisdiction to inquire into the validity of the warrant of authorisation. The court concluded that the criminal court had no authority to order the handing over of property, i.e., jewellery or cash, to persons claiming it, and such orders by the Judicial Magistrate could not be sustained.

Judgments Delivered:
1. Writ Petitions Nos. 1705, 1711, 1712, 1713, 1714, 1715, 1716, 1717, 1718, and 1719 of 1990: Filed by the Union of India are allowed. The silver ornaments shall be deemed to be in the custody of the Income-tax Department, though they shall remain in the Government Treasury at Gwalior.
2. Writ Petitions Nos. 1853 of 1991 and 1984 of 1990: Disposed of with a direction that further steps in terms of section 132(5) be taken and completed. The assessing authority at Mathura is at liberty to proceed further.
3. Writ Petition No. 2155 of 1990: Dismissed. The assessment order having been passed, the custody of the cash in question is not required to be given to the officer issuing the warrant.
4. Writ Petition No. 2063 of 1990: A direction is given to hand over the cash to the parties after clearance is given by the assessing authority that all liabilities have been met.
5. Writ Petition No. 1689 of 1991: Dismissed. The assessing authority would be at liberty to apply the seized property to meet the demand raised by the assessing authority.
6. Writ Petition No. 1475 of 1990: Disposed of with the direction that the officer issuing the warrant would now complete the proceedings within the stipulated period in terms of section 132(5) of the Act.

There would be no order as to costs.

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