1992 (6) TMI 4 - HC - Income Tax

Issues Involved:
1. Legality of the order under section 132(5) of the Income-tax Act, 1961.
2. Jurisdiction of the Commissioner of Income-tax, Bombay City III, Bombay.
3. Validity of the order passed under section 132(12) of the Income-tax Act.
4. Requirement of regular assessment under section 143 of the Income-tax Act before releasing the seized goods.
5. Binding nature of the order passed by the Commissioner of Income-tax under section 132(12).

Issue-Wise Detailed Analysis:

1. Legality of the order under section 132(5) of the Income-tax Act, 1961:
The case involves a search and seizure operation conducted under section 132 of the Income-tax Act, 1961, on the premises of the respondent company, resulting in the seizure of 890.321 metric tons of CRCA sheets/coils. The Assistant Commissioner (Investigation) retained 643.221 metric tons of these goods under section 132(5), considering them as unexplained income of the assessee. The Commissioner of Income-tax, Bombay, later found that the goods belonged to different parties who had paid taxes on them, except for one party, Shri Mahendrakumar Choudhury, who had not yet provided evidence of tax payment.

2. Jurisdiction of the Commissioner of Income-tax, Bombay City III, Bombay:
The appellant contended that the Commissioner of Income-tax, Bombay City III, lacked jurisdiction to pass the order under section 132(12) as the jurisdiction had been transferred to the Assistant Commissioner, Central Circle 30, Bombay. However, it was noted that section 130(2) of the Income-tax Act, which could have supported this contention, had been deleted by Parliament before the order was passed. The court held that the Commissioner retained jurisdiction to pass orders on pending proceedings even after the transfer of the file.

3. Validity of the order passed under section 132(12) of the Income-tax Act:
The court emphasized that an order passed under section 132(12) by the Commissioner of Income-tax is binding and must be complied with unless declared void by a competent court. The court referred to the de facto doctrine, which protects the acts done by an officer under the color of lawful authority, even if their appointment is later found defective. This principle ensures the stability and order in the administration of justice.

4. Requirement of regular assessment under section 143 of the Income-tax Act before releasing the seized goods:
The appellant argued that the goods should not be released until the regular assessment under section 143 was completed. The court rejected this argument, stating that sections 132 and 143 operate independently. The order under section 132(12) is not contingent upon the completion of a regular assessment. The court clarified that the legislative intent does not require the retention of goods until the regular assessment is made.

5. Binding nature of the order passed by the Commissioner of Income-tax under section 132(12):
The court held that the order passed by the Commissioner of Income-tax under section 132(12) is binding on the income-tax authorities. The authorities are under a statutory duty to comply with such orders. The court cited the principle that an order, even if later found invalid, remains effective until it is set aside by a competent authority. The refusal to release the goods based on the order under section 132(12) was deemed wrongful.

Conclusion:
The court concluded that the appellant wrongfully refused to release the goods of Naranarayan Saraf. The appeal was dismissed, and the court directed the release of the goods upon the production of a no objection certificate from Bijay Kumar Saraf, as offered by the respondent's counsel, to protect the interests of the income-tax authorities. The judgment reinforces the binding nature of orders passed under section 132(12) and clarifies the jurisdictional and procedural aspects related to the release of seized goods.

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