1970 (10) TMI 5 - HC - Income Tax

Search - goods in the custody of Central Excise Authorities - proper procedure for the Income-tax Authorities is to proceed under ss. 69 69A and 69B of the IT Act - order under sub-section (3) of section 132 freezing the silver was clearly unauthorised so it is quashed

Summary

Issues Involved:
1. Validity of the order under Section 132(3) of the Income-tax Act, 1961.
2. Scope and applicability of Section 132(3) in the context of known assets.
3. Allegation of colorable exercise of powers by the Income-tax Department.

Issue-wise Detailed Analysis:

1. Validity of the Order under Section 132(3) of the Income-tax Act, 1961:

The petitioners challenged the validity of the order made under Section 132(3) of the Income-tax Act, 1961, which restricted the removal or dealing with the silver seized by the customs authorities. The court examined whether the impugned order fell within the scope of Section 132(3). The court noted that the silver was already known to the Income-tax Department to be in the custody of the customs authorities, and therefore, no question arose of invoking the jurisdiction under Section 132. The court concluded that the order under Section 132(3) was made without the authority of law and thus quashed it.

2. Scope and Applicability of Section 132(3) in the Context of Known Assets:

The court analyzed the provisions of Section 132, which confers powers to search and seize assets that are undisclosed or hidden. The court emphasized that Section 132(3) applies only to those articles or things that are the subject of authorization under Section 132(1)(c) and require a search to locate. Since the location of the silver was already known and it was in the custody of a public officer, the court held that it did not require a search or seizure. The court stated, "The power conferred under section 132(1) is contemplated in relation to those cases where the precise location of the article or thing is not known to the income-tax department and, therefore, a search must be made for it." Consequently, the court found that the order under Section 132(3) was not applicable to the silver in question.

3. Allegation of Colorable Exercise of Powers by the Income-tax Department:

The petitioners contended that the proceedings by the Income-tax Department constituted a colorable exercise of powers to obstruct and defeat the writ petition pending in the court. However, the court found it unnecessary to examine this contention in detail, as the primary issue regarding the validity of the order under Section 132(3) had already been resolved in favor of the petitioners. The court noted, "In the view which has found favour with me, I find it unnecessary to examine the other contention raised by the petitioners that the action taken by the income-tax department amounts to a colourable exercise of the powers conferred by section 132."

Conclusion:

The High Court of Allahabad allowed the petition, quashing the order dated September 29, 1969, made by the Income-tax Officer, Agra, under Section 132(3) of the Income-tax Act, 1961. The court held that the order was made without the authority of law, as the silver in question was already known to be in the custody of the customs authorities and did not require a search or seizure. The petitioners were entitled to their costs.