1975 (12) TMI 3 - SC - Income Tax

Validity of rules 112B and 112C with reference to article 14 of the Constitution - Rule 112B relates to the release of the articles seized u/s 132(5) and merely provides that Officer shall deliver the same to the person from whose custody they were seized. Rule 112C provides for the release of the remaining assets, and it is to the effect that they shall be paid to the person from whose custody they were seized - Both rules beneficial rules - rules are valid

Summary

Issues:
Challenge to the constitutionality of sections 132 and 132A of the Income-tax Act, 1961 and rules 112, 112A, 112B, 112C, and 112D of the Income-tax Rules, 1962. Seizure of money and documents by income-tax authorities under section 132. Allegation of abuse of authority by income-tax authorities. Admissibility of seized property. Comparison with a previous judgment on similar grounds.

Analysis:
The petitioners, a partnership firm engaged in the business of "shroffs and bankers," challenged the seizure of Rs. 12,00,000 and documents by income-tax authorities under sections 132 and 132A of the Income-tax Act, 1961. They contended that the seizure was unjustified as the money was part of the firm's stock-in-trade and had been duly recorded in the books of account. Additionally, they argued that the provisions of sections 132 and 132A were unconstitutional, violating articles 14, 19(1)(f) and (g), and 31(1) of the Constitution. The petitioners also questioned the legality of rules 112, 112A, 112B, 112C, and 112D of the Income-tax Rules, 1962, alleging they lacked legal backing and were violative of article 14.

In response, the income-tax authorities justified the seizure, stating it was based on the Commissioner's belief that the petitioners might not produce the necessary documents for tax proceedings. They refuted the claim that the seized money was the firm's stock-in-trade and contested the petitioners' arguments against the legality of sections 132 and 132A of the Act and the Rules. The authorities maintained that there was sufficient evidence to support the seizure under section 132(1) of the Act.

The petitioners referenced a previous judgment, Pooran Mal v. Director of Inspection (Investigation) of Income-tax, where similar issues were addressed. The court in that case had upheld the constitutionality of sections 132 and 132A of the Act, dismissing claims of violation of fundamental rights. While the petitioners sought examination of specific rules not covered in the previous judgment, the court found rules 112B and 112C to be beneficial and valid under article 14 of the Constitution. Consequently, the court dismissed the current writ petition, noting the lack of merit and resemblance to the previous case. No costs were awarded in this matter.