1981 (12) TMI 5 - HC - Income Tax

Summary

Issues Involved:
1. Legality and jurisdiction of the seizure of Rs. 10,00,000 under Section 132(1) of the Income-tax Act.
2. Obligation of the State Bank of India to invest the seized amount in Special Bearer Bonds.
3. Applicability of promissory estoppel based on the Special Bearer Bonds (Immunities and Exemptions) Act, 1981.

Issue-wise Detailed Analysis:

1. Legality and Jurisdiction of the Seizure:

The petitioner challenged the seizure of Rs. 10,00,000 by the Commissioner of Income-tax, Andhra Pradesh, under Section 132(1) of the Income-tax Act, claiming it to be illegal and without jurisdiction. The court examined whether the pre-conditions for issuing an authorization under Section 132(1) were satisfied. The court noted that the tax authorities had credible information leading them to believe that the money was undisclosed income. The Commissioner had reason to believe that the petitioner was in possession of the money, which justified the search and seizure. The court held that the information received raised a suspicion warranting a search, and the action of the Commissioner in issuing the warrant and the consequent seizure was neither illegal nor without jurisdiction.

2. Obligation of the State Bank of India:

The petitioner argued that the State Bank of India, Chandulal Baradari Branch, was bound to invest the seized amount in Special Bearer Bonds and was accountable to the petitioner. The court found no entry in the bank's records to show that the amount belonged to the petitioner, as the packet was deposited by the bank manager without crediting it to the petitioner's account. Even if the amount belonged to the petitioner, it was not disclosed to the tax authorities, making it liable for seizure under the Income-tax Act. The court dismissed the contention that the bank was obligated to invest the amount in Special Bearer Bonds.

3. Applicability of Promissory Estoppel:

The petitioner invoked the doctrine of promissory estoppel, arguing that the seizure violated the assurances given under the Special Bearer Bonds (Immunities and Exemptions) Act, 1981. The court examined the provisions of the Act and found no immunity or exemption from search and seizure of unaccounted money intended for the purchase of Special Bearer Bonds. The court clarified that immunity was granted only for money already invested in Special Bearer Bonds, not for money set apart for future purchase. The court held that no provision in the Act prevented the seizure of unaccounted money during the period when the bonds were not on sale. Therefore, the doctrine of promissory estoppel did not apply, and the seizure was not in violation of any assurances or promises.

Conclusion:

The court dismissed the writ petition, finding no merit in the petitioner's claims. The seizure of Rs. 10,00,000 was upheld as legal and within the jurisdiction of the tax authorities. The court rejected the petitioner's request for leave to appeal to the Supreme Court, stating that the case did not involve a substantial question of law of general importance.