2023 (11) TMI 654 - HC - Income Tax

Search and Seizure - Validity of Order passed u/s 132(3) prohibiting petitioners/assessee from removing articles (liquor bottles) in the cupboard at the resident without prior permission of the IT Authorities - challenge is founded on the ground that exercise of power by the Authorities is colourable in nature since the subject matter in question relates to Section 132 (1) but not u/s. 132(3) - HELD THAT - Bare perusal of Section 132(1) elicits that where the Revenue receives information which compels them to believe that any person is in possession of any money, bullion, jewellery or other valuable articles or things and such item represents either wholly or partly undisclosed income for the purpose of Income-tax Act, then Revenue is empowered to enter and search any building, place, vessel, vehicle or aircraft where such articles are suspected to be kept, or break open the lock of any door, box, locker, safe, cupboard (almirah) or other receptacle of which keys are not available or search any person who is suspected of having on his person any such article or require of any person to afford the authority concerned the necessary facility to have access the articles or to seize such articles found as a result of such search and to place marks of identification on any such articles after making note or inventory if these articles are stock-in-trade. Officer concerned u/s. 132(1) has wide powers of search and seizure of articles mentioned therein which include books of account, other documents, money, bullion, jewellery, other valuable articles. Whereas sub-section (3) of Section 132 can be invoked for imposing similar prohibitory order in regard to various articles which for reasons other than the reasons mentioned in second proviso to Section 132(1) make it impossible or impracticable for the competent authority to take physical possession or to remove. The expression valuable article is not defined in Income-tax Act but is understood in common parlance to include all such things which have value or in other words are marketable. The objection of Revenue that liquor cannot even be included in the expression valuable article / thing defies the very definition of valuable article or thing understood in common parlance and, therefore, deserves to be and is rejected. Pertinently, Section 132 deals with search and seizure contains comprehensive provisions for which the Revenue may encounter. This provision thus is quite exhaustive. The entire Section 132 does not give any indication that the expression valuable article / thing can have restrictive meaning to the extent as indicated by counsel for Revenue. Another aspect which deserves consideration is that Taxing Statute is to be understood by the plain meaning of the words employed and to which no intendment or implication is permissible. While interpreting Taxing Statute in case of doubt, meaning understood in common parlance is to be accepted. Thus what comes out loud and clear is that the impugned order is an outcome of colourable exercise of power by the Revenue Authorities which have wrongly invoked Section 132(3) of IT Act since the facts and circumstances were suitable enough for invocation of Section 132(1). Liquor is undoubtedly a thing which is a valuable article since it has value in the market. Thus, by the very wide sweep and extent of expression valuable article , liquor stands included within the expression valuable article . Moreso, the objection of Revenue that liquor cannot even be included in the expression valuable article / thing defies the very definition of valuable article or thing understood in common parlance and, therefore, deserves to be and is rejected. Pertinently, Section 132 deals with search and seizure contains comprehensive provisions for which the Revenue may encounter. This provision thus is quite exhaustive. The entire Section 132 does not give any indication that the expression valuable article / thing can have restrictive meaning to the extent as indicated by counsel for Revenue. Another aspect which deserves consideration is that Taxing Statute is to be understood by the plain meaning of the words employed and to which no intendment or implication is permissible. While interpreting Taxing Statute in case of doubt, meaning understood in common parlance is to be accepted. In view of above discussion what comes out loud and clear is that the impugned order is an outcome of colourable exercise of power by the Revenue Authorities which have wrongly invoked Section 132(3) of IT Act since the facts and circumstances were suitable enough for invocation of Section 132(1). Revenue has failed to satisfy that this was a case which made it impossible/impracticable for Revenue to seize the liquor found at the premises of petitioners and, therefore, it can be presumed that there were no compelling reasons to invoke Section 132(3). Impugned order passed by respondent No.2 u/s. 132(3) of IT Act is set aside. Revenue is saddled with cost of Rs. 10,000/- .

Summary

Issues Involved:
1. Whether the invocation of Section 132(3) of the Income Tax Act by the authorities was justified.
2. Whether liquor can be considered a "valuable article" under Section 132 of the Income Tax Act.
3. Whether the Revenue authorities' actions constituted a colorable exercise of power.

Summary:

Issue 1: Invocation of Section 132(3) of the Income Tax Act
The petitioners challenged the order dated 29.09.2023, which prohibited them from removing liquor bottles from a cupboard without prior permission from IT Authorities, arguing that Section 132(3) was improperly invoked. They contended that the situation warranted action under Section 132(1) instead. The Revenue justified the order by stating that the liquor bottles could not be seized without Excise Authorities' permission, thus necessitating the use of Section 132(3).

Issue 2: Liquor as a "Valuable Article"
The court examined whether liquor qualifies as a "valuable article" under Section 132. The term "valuable article" is not explicitly defined in the Income Tax Act but is understood to include items with market value. The court concluded that liquor, having market value, falls within the definition of a "valuable article."

Issue 3: Colorable Exercise of Power
The court found that the Revenue's invocation of Section 132(3) was a colorable exercise of power. The circumstances were suitable for applying Section 132(1), which includes comprehensive provisions for search and seizure. The court cited the case of B.K. Nowlakha, emphasizing that restraint orders should not circumvent the provisions of Section 132(1) and that practical difficulties must exist to justify using Section 132(3).

Conclusion:
The court set aside the impugned order dated 29.09.2023, allowing the petitioners' challenge. The Revenue was granted liberty to invoke the appropriate provisions if advised. Additionally, the court imposed a cost of Rs. 10,000 on the Revenue, with Rs. 5,000 to be paid to the petitioners and the remaining Rs. 5,000 to the Madhya Pradesh State Legal Services Authority, to be forwarded to the Permanent Artificial Organ Transplantation Centre, Jabalpur. Compliance was required within 60 days, failing which the matter would be listed for execution of the cost order.