1998 (3) TMI 3 - SC - Income Tax

Held that Sub-section (1) is not confined to only that person who was subjected to search and seizure operations and against whom the order u/s 132(5) was passed. The words any person appearing in sub-section (11) of section 132 of the Act are significant and even a third party can make an application to the Chief Commissioner or Commissioner

Issues Involved:
1. Maintainability of the suit for partition in light of Section 293 of the Income-tax Act, 1961.
2. Jurisdiction of the civil court under Section 9 of the Code of Civil Procedure.
3. Interpretation and application of Section 132 of the Income-tax Act concerning search and seizure operations.
4. The effect of the decree on the order under Section 132(5) and subsequent proceedings under Section 132B of the Income-tax Act.
5. The adequacy of remedies provided under the Income-tax Act for third parties.

Issue-wise Detailed Analysis:

1. Maintainability of the Suit for Partition in Light of Section 293 of the Income-tax Act, 1961:
The core issue was whether the suit for partition filed by the plaintiff was maintainable given the bar under Section 293 of the Income-tax Act, 1961. Section 293 states, "No suit shall be brought in any civil court to set aside or modify any proceeding taken or order made under this Act." The Revenue argued that the suit was barred because it sought to indirectly challenge the order passed under Section 132(5) of the Act, which retained the seized gold ornaments. The court concluded that the suit was indeed barred by Section 293, as a decree in the plaintiff's favor would effectively set aside or modify the Income-tax Officer's order.

2. Jurisdiction of the Civil Court under Section 9 of the Code of Civil Procedure:
Section 9 of the Code of Civil Procedure provides that civil courts have jurisdiction to try all suits of a civil nature except those barred by law. The subordinate judge and the High Court had previously held that the suit was maintainable, reasoning that Section 293 did not provide a blanket bar for all civil suits and that the plaintiff's legal rights had been infringed without a remedy under the Act. However, the Supreme Court disagreed, emphasizing that the substance of the suit, which sought to partition the seized gold ornaments, would directly affect the proceedings and order under the Income-tax Act, thus falling under the bar of Section 293.

3. Interpretation and Application of Section 132 of the Income-tax Act Concerning Search and Seizure Operations:
Section 132 of the Income-tax Act deals with search and seizure operations. The Income-tax Officer conducted a search and seizure operation at the premises of the first defendant, leading to the seizure of gold ornaments. The plaintiff claimed that these ornaments were her mother's stridhan and sought partition. The court noted that the Income-tax Officer had disbelieved the version that the gold ornaments belonged to the plaintiff's mother and retained the assets under Section 132(5). The court held that the plaintiff, being aware of the proceedings, should have availed the remedy under Section 132(11) by objecting to the order before the Chief Commissioner or Commissioner.

4. Effect of the Decree on the Order under Section 132(5) and Subsequent Proceedings under Section 132B of the Income-tax Act:
The court emphasized that a decree in favor of the plaintiff would directly impact the order under Section 132(5) and the subsequent proceedings under Section 132B. The decree would result in the gold ornaments being taken out of the Income-tax Officer's order, which Section 293 does not permit. The court highlighted that Section 293 was amended to include "proceeding taken" to make it more comprehensive, thus barring any suit that would modify or set aside such proceedings.

5. Adequacy of Remedies Provided under the Income-tax Act for Third Parties:
The court examined whether the remedies under the Income-tax Act were adequate for third parties like the plaintiff. It was noted that Section 132(11) allows "any person" to object to an order made under Section 132(5) and seek appropriate relief from the Chief Commissioner or Commissioner. The court held that the plaintiff did not avail this remedy and instead filed a partition suit, which was not permissible under Section 293. The court reiterated that the substance of the suit, not its form, determines its maintainability, and in this case, the suit sought to indirectly challenge the order under the Act.

Conclusion:
The Supreme Court allowed the appeal, setting aside the judgments of the High Court and the subordinate judge, and dismissed the suit filed by the plaintiff. The court underscored that Section 293 of the Income-tax Act barred the suit as it sought to set aside or modify proceedings taken under the Act. The court appreciated the assistance of the amicus curiae in the matter.

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