1973 (8) TMI 4 - HC - Income Tax

This appeal is against a judgment and order by which the rule obtained by respondent No. 1 was made absolute by the trial court - Whether the money seized by customs authorities can again be seized from them by the IT authorities

Issues Involved:
1. Validity of the warrant of authorization under Section 132 of the Income-tax Act, 1961.
2. Legality of the seizure of money by the income-tax authorities from the customs authorities.
3. Jurisdiction and authority of the Income-tax Officer to issue notices and make orders under Section 132(5) of the Income-tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Validity of the Warrant of Authorization under Section 132 of the Income-tax Act, 1961
The core issue revolves around whether the Commissioner of Income-tax had the jurisdiction to issue a warrant of authorization for the seizure of money already in the custody of the customs department. The court scrutinized the provisions of Section 132 of the Income-tax Act, 1961, which empowers the Commissioner to authorize a search and seizure if there is reason to believe that any person is in possession of undisclosed income or property. The court concluded that since the money was already seized by the customs authorities, Laxmipat Choraria could no longer be said to be in possession of the money. The court stated, "As soon as there was a valid seizure by the customs authorities, Laxmipat Choraria could no longer be said to be in possession of the money in question, as the very concept of seizure involves a deprivation of possession." Therefore, the Commissioner of Income-tax could not have had a reason to believe that Choraria was in possession of the money, rendering the warrant of authorization invalid.

2. Legality of the Seizure of Money by the Income-tax Authorities from the Customs Authorities
The court examined whether the income-tax authorities could legally seize money that was already in the possession of the customs authorities. The court referred to the concept of possession and seizure, emphasizing that "possession by the customs department was possession by the Union of India," and thus, the Union of India, through another department, could not seize goods already in its possession. The court cited the Supreme Court's decision in Gian Chand v. State of Punjab, which held that a seizure under the authority of law involves a deprivation of possession. The court also noted that the customs authorities had a valid legal possession of the money, and therefore, the income-tax authorities could not legally seize it again under Section 132 of the Income-tax Act, 1961.

3. Jurisdiction and Authority of the Income-tax Officer to Issue Notices and Make Orders under Section 132(5) of the Income-tax Act, 1961
The court analyzed whether the Income-tax Officer had the jurisdiction to issue notices and make orders under Section 132(5) of the Income-tax Act, 1961, based on the invalid seizure. The court referred to the provisions of Section 132(5), which requires the Income-tax Officer to make an order after affording a reasonable opportunity to the person concerned. The court observed that since the initial seizure by the income-tax authorities was invalid, any subsequent actions, including the issuance of notices and orders under Section 132(5), were also without jurisdiction. The court stated, "The learned judge in the trial court quashed the said notice and the order, holding that the authorization issued was beyond the scope of section 132 and, as such, it was illegal."

Conclusion
The court upheld the trial court's decision to quash the notice and order issued under Section 132(5) of the Income-tax Act, 1961, on the grounds that the authorization for the seizure was beyond the scope of Section 132 and thus illegal. The appeal was dismissed, affirming that the income-tax authorities did not have the jurisdiction to seize money already in the possession of the customs authorities and that the subsequent actions taken under Section 132(5) were invalid. The court concluded, "For the reasons mentioned above, this appeal fails and it is accordingly dismissed, but there will be no order as to costs."

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