1980 (9) TMI 42 - HC - Income Tax

Summary

Issues Involved:
1. Seizure and ownership of Rs. 50,000.
2. Jurisdiction and authority of Income Tax Department.
3. Compliance with principles of natural justice.
4. Entitlement to relief and procedural fairness.

Issue-wise Detailed Analysis:

1. Seizure and Ownership of Rs. 50,000:
The petitioner, Mangilal Jain, sought a writ of mandamus for the release of Rs. 50,000 seized by customs officers from Samu Jaffar, alleging the money was handed over by the petitioner. Initially, the petitioner claimed the money belonged to his uncle, Goverchand, but later asserted it was borrowed from M/s. Kewal Agencies for his father's business. The customs authorities, after an adjudication process, directed the release of the money to the petitioner, finding no evidence of it being sale proceeds of smuggled goods.

2. Jurisdiction and Authority of Income Tax Department:
Before the money could be returned, the Income Tax Department's intelligence wing, suspecting the money belonged to Bakshiram and constituted undisclosed income, seized the money under a warrant issued by the Commissioner of Income-tax, Madras-2, under section 132(1) of the Income Tax Act, 1961. The ITO passed an order under section 132(5) holding the money as undisclosed income of Bakshiram and adjusted it against his tax dues.

3. Compliance with Principles of Natural Justice:
The petitioner contended that respondents Nos. 2 and 3 (Income Tax authorities) had no jurisdiction to seize the money without issuing notice to him. The court found that the money was indeed seized from the petitioner, as confirmed by the customs adjudication order. Therefore, the Income Tax authorities were bound to issue notice to the petitioner and afford him a reasonable opportunity to be heard before passing any orders under section 132(5).

4. Entitlement to Relief and Procedural Fairness:
The court held that the Income Tax authorities violated the principles of natural justice by not issuing notice to the petitioner before passing the order under section 132(5). The court quashed the impugned order and directed the ITO to pass fresh orders after giving the petitioner a reasonable opportunity of being heard. The court emphasized that the period of limitation prescribed under section 132(5) applies only to initial orders and not to orders passed pursuant to a court's direction.

Conclusion:
The writ petition was dismissed without costs, but the court directed the ITO to pass fresh orders within six months, ensuring compliance with the principles of natural justice. The petitioner was not entitled to the relief of mandamus for the immediate release of the sum of Rs. 50,000.