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TMI Blog2012 (8) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... A, JJ. J.P. Shah for the petitioner. K.M. Parikh for the Respondent. ORDER Ms. Harsha Devani, J. By this petition under Article 226 of the Constitution of India, the petitioner has challenged warrant of authorisation dated 25th July, 2000 issued by the Director of Income Tax (Investigations) - respondent No.1 herein in favour of the Deputy Director of Income Tax (Investigations), Unit - III (3) - respondent No.2 herein as well as the order under section 132A dated 18th August, 2000. The petitioner also seeks a direction to the respondents to return forthwith to the petitioner the seized amount of Rs. 11 lakhs with interest thereon at the rate of 15% from the date of seizure thereof till the date of repayment. 2. The facts of the case as stated in the petition are that the petitioner herein is a resident of Bhuj and has been working as a cotton broker. On 25th July, 2000, he was carrying with him cash of rupees eleven lakhs collected from Ahmedabad in respect of the sale of cotton through him as a broker by Shreenathji Trading Company of Bhuj - Kutch to Raj Trading Company of Ahmedabad. On a written requisition from the seller Shreenathji Trading Company, R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Shri Rajan Shah, examined his books of accounts and recorded his statement and that Shri Rajan Shah corroborated the statement of the petitioner that the payment had been arranged by him through M/s. J.J. Shroff, Kabutarkhana, Kalupur, Ahmedabad against the purchase of cotton from Shreenathji Trading Company, Bhuj and that he had made the payment to the petitioner. The income tax officials tried to contact the said J.J. Shroff to examine the source of cash but the office of the shroff was closed and he was not available. That only because J.J. Shroff was not available, cash was seized in spite of source of cash having been explained as paid by M/s. J.J. Shroff who had been doing cheque discounting business. That both the petitioner and Shri Rajan Shah requested the official on duty to keep the matter pending till the statement of M/s. J.J. Shroff was recorded but the request was turned down without any lawful reason. A copy of the cash book of M/s J.J. Shroff which according to the petitioner clearly explains the source of cash was enclosed therewith. The petitioner also requested for a copy of his statement and also Shri Rajan Shah. 3. By a letter dated 18th August, 2000, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer like a Director and this power is to be exercised in a very careful manner and with a lot of circumspection. It was submitted that in the facts of the present case, it was the case of the petitioner that the amount of Rs. 11 lakhs had been secured by him from M/s. J.J. Shroff by discounting the cheques given to him by Shri Rajan Shah of M/s. Raj Trading Company of Ahmedabad. Shri Rajan Shah, the purchaser of cotton had confirmed the same and had stated on oath that he had given the cheques which were discounted with the Shroff, viz. M/s. J.J. Shroff to obtain the cash and that it was the same cash which was found in the possession of the petitioner. In the circumstances, the statement of the petitioner having been corroborated by Shri Rajan Shah, there was absolutely no material with the respondent No. 1 whereby it can be stated that there was requisite information and requisite belief. It was further submitted that both the petitioner and Shri Rajan Shah had requested the officer to keep the matter pending till the statement of M/s. J.J. Shroff was recorded but the request was turned down without any lawful reason. It was urged that no irreparable damage would have been c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also reflected in the bank statement of M/s. J.J. Shroff which also is annexed alongwith the affidavit-in-rejoinder. It was pointed out that bank passbook of Raj Trading Company also demonstrates issuance of cheques drawn in favour of Tamilnad Mercantile Bank Ltd. bearing numbers of the cheques which have been discounted by M/s. J.J. Shroff in favour of Shreenathji Trading Company. It was submitted that in the light of the aforesaid bank statements and accounts produced by the petitioner, it is apparent that the petitioner had explained the cash amount in his possession; that there was no reason for the respondent No. 1 to believe that the cash of Rs. 11 lakhs represented either wholly or partly, income or property which had not been or would not have been disclosed for the purpose of the Act of the petitioner. Reliance was placed upon the decision of the Allahabad High Court in the case of Vindhya Metal Corpn. v. CIT [1985] 156 ITR 233 which came to be confirmed by the Supreme Court in the case of CIT v. Vindhya Metal Corpn. [1997] 224 ITR 614/91 Taxman 192. It was submitted that the facts of the present case are similar to the facts of the said case and as such, the cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of J.J. Shroff - Shri Jashubhai had been informed on telephone to pay Rs. 11 lakhs in cash to the petitioner who is a cotton trader and accordingly the petitioner had informed him on telephone that he had received Rs. 11 lakhs in cash from Shri Jashu Patel, the owner of J.J. Shroff. It was, accordingly, submitted that there is a discrepancy in the statement of the petitioner and Shri Rajan Shah and as such, the respondent No. 1 had every reason to form the opinion as required under section 132A of the Act. Attention was also invited to the affidavit-in-reply filed by the respondent No. 3 wherein it has been stated the cash has been seized by the income tax authorities under section 132A of the Income Tax Act and the same can be dealt with only in accordance with the procedure laid down under section 158BC (d) read with section 132B of the Act. Proceedings under section 158BC were initiated and are in progress before the Assessing Officer, and therefore, the petition filed before the C.I.T., Rajkot for release of the seized cash being premature, was not considered. That the request of the petitioner will be considered on completion of the proceedings initiated under section 158BC o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation) Unit-III(3), Ahmedabad to keep the file containing the impugned order passed by him available with the learned counsel for the revenue for perusal of the court on the returnable date. It may be pertinent to note that till date, the file containing the impugned order has not been produced before this court for its perusal. 9. From the facts and contentions noted hereinabove, admittedly the petitioner herein was carrying cash of Rs. 11 lakhs and was detained by the police authorities and the cash of Rs. 11 lakhs was seized by the police authorities under section 102 of the Code of Criminal Procedure. Subsequently, the police officers informed the income tax department to record the statement of the petitioner and Shri Rajan Shah. Thereafter, the Deputy Director prepared a satisfaction note and placed the same alongwith the statements and other documents before the respondent No. 1, who recorded satisfaction and issued warrant of authorisation under section 132A of the Act. 10. The question that arises for consideration is as to whether on the facts of the present case there was any material with the respondent No. 1 to arrive at a satisfaction as required under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement of the petitioner who had stated that the amount of Rs. 11 lakhs in cash had been handed over to him by Shri Rajan Shah in respect of proposed sale of cotton bales of M/s. Shreenathji Trading Company, Bhuj. Thus, it was the case of the petitioner that the amount had been collected by way of payment from Shri Rajan Shah for sale of cotton bales of his client Shreenathji Trading Company, Bhuj. The respondent No.2 had also recorded the statement of Shri Rajan Shah who had stated that he had asked M/s. J.J. Shroff to hand over Rs. 11 lakhs in cash to the petitioner. It is the case of the petitioner that Rajan Shah had issued five cheques in favour of Shreenathji Trading Company which he had deposited with M/s. J.J. Shroff and had obtained Rs. 11 lakhs in cash. It is the say of Rajan Shah that he had issued five cheques in favour of Shreenathji Trading Company against which cash had been obtained by the petitioner from M/s. J.J. Shroff. From the documents annexed with the petition, which form part of the record of the income tax authorities, it is apparent on a perusal of the accounts of J.J. Shroff that the same clearly show receipts of cheques No. 937738, 937739, 937740, 937741 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the police authorities. Thus, the entire exercise of recording statements, conducting survey action, preparation of satisfaction note and application of mind by the Director of Income Tax to the material on record has taken place within a span of about five to six hours. 13. It may further be noted that despite a direction by this court to produce the record on the basis of which the Director of Income Tax recorded satisfaction as regards the fulfillment of the condition precedent for exercise of powers under section 132A of the Act, the same has not been produced for the perusal of the court. However, in the affidavit-in-reply filed by the second respondent, extracts of the statements of the petitioner and Rajan Shah recorded under section 133A of the Act have been reproduced. It is the case of the respondents that the petitioner could not adduce satisfactory evidence to show the source of cash found and seized from him and that all he could say was that he had received the cash from Rajan Shah. Rajan Shah has in his statement recorded under section 133A of the Act stated that he had given the cash of rupees eleven lakhs to the petitioner through M/s J.J. Shroff. Thus, without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entry that a sum of Rs. 4,63,000/- had been handed over to V, who was the nephew of one of the partners, for making purchases. A sum of Rs. 17,353/- was cash balance with the firm. This sum and the books of account of the firm were carried away by the income tax authorities. On a writ petition to direct return of the amount as well as cash balance of Rs. 17,353/- and the books of accounts, the High Court held that: (i) the mere fact that V was in possession of a huge amount of cash and did not have documents regarding its ownership and the fact that his name was not found in the list of income-tax assessees could not be treated as sufficient information leading a reasonable man to the inference that the amount would not be disclosed for income tax purposes. The condition precedent for the exercise of power under section 132A was lacking and the order made under it was liable to be quashed; and (ii) there was no material on record to sustain the order made on the firm. The seizure of the books of accounts and the sum of Rs. 17,353/- was without authority of law and, therefore, liable to be quashed. The aforesaid decision came to be carried before the Supreme Court in the case of V ..... X X X X Extracts X X X X X X X X Extracts X X X X
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