1972 (7) TMI 17 - HC - Income Tax

Search and Seizure - Currency notes were seized from a person by police officer - inasmuch as the currency notes produced in court are not those seized by the authorised officer, or which he was empowered to seize strictly in terms of section 132(1)(iii), the revision-petitioner is not competent to claim to have the documents (currency notes) made over to him for purposes of investigation. As the discovery is not claimed to be as a result of the search of any building or place as referred to in clause (iii) of sub-section (1) of section 132, the question of applying the provisions of sub-section (3) of section 132 also cannot arise. I, therefore, find that the order passed by the learned Sub-Magistrate, which has been confirmed by the learned District Magistrate, is perfectly in order and that it calls for no interference by this court in revision

Issues Involved:
1. Legitimacy of the seizure of currency notes by police.
2. Competency of the Income-tax Officer to claim the seized currency under section 132 of the Income-tax Act.
3. Proper procedure for the return of seized property under section 523 of the Code of Criminal Procedure.

Issue-wise Detailed Analysis:

1. Legitimacy of the Seizure of Currency Notes by Police:

The police, while on patrol duty, stopped and searched the 2nd respondent and found him carrying Indian currency notes amounting to Rs. 1,00,000. He was arrested under sections 54 and 550 of the Code of Criminal Procedure and produced before the Sub-Magistrate-I, Kozhikode. The police reported that the 2nd respondent claimed the money belonged to another individual and was meant for payment to a third party. The Sub-Magistrate remanded the accused and sent the currency notes to the Treasury for safe custody. The police later submitted a final report stating that the 2nd respondent had not committed any offense and that the money actually belonged to the 1st respondent. The learned Magistrate accepted this version and ordered the money to be returned to the 1st respondent.

2. Competency of the Income-tax Officer to Claim the Seized Currency under Section 132 of the Income-tax Act:

The revision petitioner, an Income-tax Officer, filed a petition claiming that the seized amount represented undisclosed income and should be made over to him under section 132 of the Income-tax Act, 1961. The relevant provisions of section 132 were discussed, highlighting the powers of authorized officers to seize undisclosed income or property. The learned counsel for the revision petitioner cited several decisions to support the argument that the currency notes should be handed over to the Income-tax Officer for investigation. However, the court found that the power under section 132(1)(iii) and section 132(3) of the Income-tax Act is limited and does not confer the same wide and unfettered powers as those under the Foreign Exchange Regulation Act or the Customs Act. Specifically, the court noted that no specific power is conferred on the authorized officer under the Income-tax Act to search or arrest a person found or suspected to be in possession of undisclosed income or property. The court concluded that the revision petitioner was not competent to claim the currency notes under the cited provisions of the Income-tax Act.

3. Proper Procedure for the Return of Seized Property under Section 523 of the Code of Criminal Procedure:

The court emphasized that under section 523 of the Code of Criminal Procedure, when property is seized from a person and the police report that no offense has been committed, the court's duty is to return the property to the person from whom it was seized. The court noted that the 2nd respondent did not claim the money for himself but requested it be made over to the 1st respondent, who also filed a petition for its return. The police report supported the claim that the money belonged to the 1st respondent. The court found that the primary question was whether the petitioner (Income-tax Officer) was competent to claim the money. Given the limitations of the powers under section 132 of the Income-tax Act, the court held that the learned Sub-Magistrate's order to return the money to the 1st respondent was appropriate and did not require interference.

Conclusion:

The court dismissed the criminal revision petition, upholding the order of the learned Sub-Magistrate, which was confirmed by the learned District Magistrate. The court found no merit in the petitioner's claim under section 132 of the Income-tax Act and directed that the money should be returned to the 1st respondent as originally ordered. Consequently, Crl. M. P. No. 487/1972 was disposed of, and the learned Magistrate was instructed to pass appropriate orders on the pending petition for the return of the money.

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