1980 (4) TMI 43 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the writ of prohibition against the Income Tax Officer (ITO).
2. Ownership and confiscation of the seized gold, gold ornaments, and diamond jewellery.
3. Compliance with the Gold (Control) Act and the Voluntary Disclosure of Income and Wealth Ordinance, 1975.
4. Jurisdiction and authority of the ITO and the Collector of Central Excise.

Detailed Analysis:

1. Legality of the Writ of Prohibition Against the Income Tax Officer (ITO):
The petitioner sought a writ of prohibition to restrain the ITO from handing over the seized gold, gold articles, and diamond jewellery to the Collector of Central Excise. The preliminary objection raised by the senior standing counsel for the Central Government argued that a writ of prohibition would not lie against the ITO. However, the court overruled this objection, stating that the ITO was acting in a quasi-judicial capacity and that under Article 226 of the Constitution of India, the court had the authority to issue appropriate directions.

2. Ownership and Confiscation of the Seized Gold, Gold Ornaments, and Diamond Jewellery:
The petitioner argued that the ITO had already passed an order under Section 132(5) of the Income Tax Act to retain the seized assets to meet the tax liabilities and that an agreement was reached to sell these assets and appropriate the sale proceeds towards the tax. The court analyzed Sections 132(5) and 132B of the Income Tax Act, concluding that these sections did not transfer ownership of the seized assets to the ITO. Instead, the ITO had the power to sell the assets and apply the sale proceeds towards the tax liabilities. Until the sale occurred, the ownership of the assets remained with the petitioner, but under distraint by the ITO.

3. Compliance with the Gold (Control) Act and the Voluntary Disclosure of Income and Wealth Ordinance, 1975:
The petitioner did not dispute that he might have contravened the provisions of the Gold (Control) Act by not making the required declaration under Section 16. The court noted that the gold, gold ornaments, and diamond jewellery were liable to confiscation under Section 71 of the Gold (Control) Act due to non-compliance with the declaration requirements. Furthermore, the petitioner had not filed a declaration under Section 16 of the Voluntary Disclosure of Income and Wealth Ordinance, 1975, and thus could not claim immunity from confiscation under this provision.

4. Jurisdiction and Authority of the ITO and the Collector of Central Excise:
The second respondent, the Collector of Central Excise, argued that the petitioner had contravened Sections 8(1) and 16(1) and (5) of the Gold (Control) Act and the Customs Act by possessing gold beyond the permissible limits. Therefore, the seized assets should be handed over to the Collector for confiscation. The court held that the ITO's authority to retain and sell the assets for tax liabilities did not negate the Collector's jurisdiction to confiscate the assets under the Gold (Control) Act. The court concluded that the petitioner remained the owner of the assets until sold by the ITO, and thus, the assets were liable to be handed over to the Collector for confiscation.

Conclusion:
The court dismissed the writ petition, holding that the petitioner had not complied with the Gold (Control) Act and the Voluntary Disclosure of Income and Wealth Ordinance, 1975. The ITO's authority to retain and sell the assets did not transfer ownership, and the assets were liable to be confiscated by the Collector of Central Excise. The writ of prohibition was not granted, and the court directed the ITO to hand over the seized assets to the Collector. No order as to costs was made.