1970 (11) TMI 16 - HC - Income Tax

Goods seized by Custom authorities - income-tax authorities in served a warrant of authorisation under section 132 - held that there cannot be an order under section 132 in respect of the goods or papers which were in the custody of a department of the Government under a legal authority i.e. the Customs authorities

Summary

Issues Involved:
1. Validity of the authorisation under section 132 of the Income-tax Act, 1961.
2. Jurisdiction of the Income-tax Officer to pass an order under section 132(5) of the Income-tax Act, 1961.
3. Jurisdiction of the High Court to entertain the application against the customs authority.

Issue-wise Detailed Analysis:

1. Validity of the Authorisation under Section 132 of the Income-tax Act, 1961:
The petitioner contended that section 132 of the Income-tax Act, 1961, could not be applied because the money and documents were in the possession of the customs authorities, not the petitioner. The court examined the meaning of "possession" and "seizure" under section 132. It was concluded that possession, in this context, did not mean mere physical custody but legal possession. Since the customs authorities had legal custody of the money, it was held that the petitioner did not have possession of the money when the authorisation was issued. The court also noted that it would be inappropriate to consider that one department of the government needed to seize goods from another department forcibly. Consequently, the authorisation issued on 10th February 1967 was deemed without jurisdiction and invalid.

2. Jurisdiction of the Income-tax Officer to Pass an Order under Section 132(5) of the Income-tax Act, 1961:
The petitioner argued that the time for disclosing income for the assessment year 1966-67 had not yet come when the seizure took place, making the order under section 132(5) invalid. The court, however, found that the proviso to sub-section (5) allows for the calculation of taxes on a fictional basis, addressing such contingencies. Thus, the court did not accept the petitioner's contention and held that the order under section 132(5) was valid. However, since the authorisation under section 132(1) was invalid, the subsequent order under section 132(5) was also struck down.

3. Jurisdiction of the High Court to Entertain the Application Against the Customs Authority:
The customs authority argued that the High Court had no jurisdiction as the officers were outside the court's jurisdiction, and the impugned actions took place outside the state. The court disagreed, stating that the improper authorisation by the income-tax department, which was within its jurisdiction, was being challenged. Additionally, the records of the income-tax department were within the court's jurisdiction. The court held that the customs authorities were necessary parties since the money could not have been retained without the income-tax department's authorisation, thus establishing jurisdiction.

Conclusion:
The court concluded that the authorisation under section 132 was improper and invalid. Consequently, the order passed by the Income-tax Officer under section 132(5) was also struck down. The rule nisi was made absolute, and writs of prohibition and mandamus were issued, prohibiting the retention of the currency notes and commanding their return to the petitioner. There was no order as to costs, and a stay of operation of the order was granted for seven weeks.