1986 (7) TMI 9 - SC - Income Tax

Seizure by custom authorities - held that income tax authorities cannot utilise the provision of s. 132 to seize such amount from the customs authorities (prior to introduction of s. 132A w.e.f. 1/10/75) - held that it will be open to the income-tax authorities to approach the appropriate authorities to realise any amount of money or to recover any books of account or documents in accordance with law - Revenue's appeal is dismissed

Issues Involved:
1. Legality of the authorization warrant issued under Section 132 of the Income-tax Act, 1961.
2. Conflict between the actions taken by the Income-tax authorities under Section 132 of the Income-tax Act and the provisions of Section 110(2) of the Customs Act, 1962.
3. Interpretation of "possession" and "seizure" under Section 132 of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Legality of the Authorization Warrant Issued Under Section 132 of the Income-tax Act, 1961:
The respondent challenged the authorization warrant issued by the Income-tax Officer under Section 132 of the Income-tax Act, 1961, arguing that the money was not in his possession but was in the possession of the Customs authorities. The High Court held that the search and seizure warrants were illegal, primarily because the respondent was not in possession of the currency notes or account books, and the Income-tax authorities could not seize these items from the Customs authorities. The High Court relied on the decision in CIT v. Ramesh Chander [1974] 93 ITR 450 (P & H), which stated that the warrants were illegal if issued in the name of a person who did not have possession of the article. The Supreme Court upheld this view, stating that possession in the context of Section 132 referred to physical possession, which was with the Customs authorities.

2. Conflict Between Actions Taken by Income-tax Authorities Under Section 132 of the Income-tax Act and Provisions of Section 110(2) of the Customs Act, 1962:
The High Court found that the actions taken by the Income-tax authorities under Section 132 of the Income-tax Act conflicted with the provisions of Section 110(2) of the Customs Act, 1962. The Customs authorities had seized the money and goods under legal sanction, and the seizure was later held illegal by the court. The High Court held that the Customs authorities were bound to return the money to the person entitled to it under Section 110 of the Customs Act, and the Income-tax authorities could not seize such an amount from the Customs authorities under Section 132 of the Income-tax Act. The Supreme Court agreed, emphasizing that the physical possession of the money was with the Customs authorities, and therefore, the Income-tax authorities could not issue a search and seizure warrant for it.

3. Interpretation of "Possession" and "Seizure" Under Section 132 of the Income-tax Act:
The Supreme Court examined the interpretation of "possession" and "seizure" under Section 132 of the Income-tax Act. It was noted that "possession" had not been defined in the Act, and its legal sense did not always coincide with the popular sense. The Court referred to various legal sources and previous judgments, concluding that possession in the context of Section 132 referred to physical custody, which was with the Customs authorities. The Court also noted that the power conferred under Section 132(1) was intended for cases where the precise location of the article or thing was not known to the Income-tax Department and where it would not be ordinarily yielded over by the person having possession of it. Since the money was in the known and legal custody of the Customs authorities, it did not require search or seizure by the Income-tax Department. The Supreme Court dismissed the appeal, stating that the Income-tax authorities could approach the appropriate authorities to realize any amount of money or recover any books of account or documents in accordance with the law.

Conclusion:
The Supreme Court upheld the High Court's decision that the search and seizure warrants issued under Section 132 of the Income-tax Act were illegal, as the money was in the legal and physical possession of the Customs authorities. The Court emphasized that possession in the context of Section 132 referred to physical custody, and the actions taken by the Income-tax authorities conflicted with the provisions of the Customs Act. The appeal was dismissed with the observation that the Income-tax authorities could seek appropriate legal measures to recover the money or documents.

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