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TMI Blog1975 (7) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... r other valuable article or thing as per annexure of which you are in immediate possession or control either as owner or otherwise without any previous permission. If you contravene this order, you shall be punishable with rigorous imprisonment which may extend to two years and shall also be liable to a fine under section 275A of the Income-tax Act, 1961. Annexure (A) Bank Accounts : Savings account No. 978/71, in the name of Sri M. Shajahan, Shaji Manzil, Valacode, Punalur, Dated 20-3-1975, Sd. Authorised Officer (under sec. 132) Income-tax Officer, A-Ward, Quilon." Orders impugned in the other O. Ps. are similar and to the same effect. The contention taken up by the petitioners is that section 132(3) does not confer any power on the authorised officer, that is, the first respondent, to issue a prohibitory order in the nature of exhibit P-1. The reading of the said provision, it is said, would indicate that the proceedings envisaged therein must relate to money, etc., which has not been disclosed for the purposes of the Income-tax Act and which it is not practicable to be seized by invoking the provisions contained in sub-section (1) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed officer) to-- (i) enter and search any building or place where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept ; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available ; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search ; (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom ; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing. (2) The authorised officer may requisition the services of any police officer or of any officer of the Central Government, or of both, to assist him for all or any of the purposes specified in sub-section (1) and it shall be the duty of every such officer to comply with such requisition. (3) The authorised officer may, where, it is not practicable to seize any such books of account, other docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized : Provided further that where a person has paid or made satisfactory arrangements for payment of all the amounts referred to in clauses (ii) and (iii) or any part thereof, the Income-tax Officer may, with the previous approval of the Commissioner, release the assets or such part thereof as he may deem fit in the circumstances of the case. (6) The assets retained under sub-section (5) may be dealt with in accordance with the provisions of section 132A. (7) If the Income-tax Officer is satisfied that the seized assets or any part thereof were held by such person for or on behalf of any other person, the Income-tax Officer may proceed under sub-section (5) against such other person and all the provisions of this section shall apply accordingly. (8) The books of account or other documents seized under sub-section (1) shall not be retained by the authorised officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account or other documents or assets seized. Explanation.1--In computing the period of ninety days for the purposes of sub-section (5), any period during which any proceeding under this section is stayed by an order or injunction of any court shall be excluded. Explanation 2.--In this section, the word ' proceeding ' means any proceeding in respect of any year, whether under the Indian Income-tax Act, 1922, or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year." The Central Board of Direct Taxes has, in exercise of the power conferred by section 295(1) of the Act, framed rule 112 prescribing the procedure to be followed by the Commissioner and authorised officers and rule 112A about the motion of enquiry under section 132. Rules 112B and 112C deal with how the assets are to be released if they have to be released. The said rules are hereinbelow extracted : " Rule 112. Search and seizure.--(1) The powers of search and seizure under section 132 shall be exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , safe, almirah or any other receptacle situate in such building or place, to open the same and allow access to inspect or examine its contents, and, where the keys thereof are not available or where such person fails to comply with any such requirement, may cause any action to be taken including the breaking open of such box, locker, safe, almirah or other receptacle, which the authorised officer may deem necessary for carrying out all or any of the purposes specified in the authority issued under sub-rule (2). (4B) The authorised officer may, where it is not practicable to seize the money, bullion, jewellery or other valuable article or thing or any books of account or document, serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of the authorised officer, who may take such steps as may be necessary for ensuring compliance with this sub-rule. (5) Where any person in or about such building or place is reasonably suspected of concealing about his person any article for which search is being made, such person may also be searched by the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorisation under sub-rule (2) has been issued by him. (11) The authorised officer may convey the book of account and other documents ; if any, seized by him in the course of the search made by him and the package or packages, if any, referred to in sub-rule (10) to the office of any income-tax authority not below the rank of Income-tax Officer (hereinafter referred to as the Custodian). Any money seized in the search referred to above may also be deposited with the Custodian. (12) (i) The Custodian shall take such steps as be may consider necessary for the safe custody of-- (a) books of account and other documents, and (b) the package or packages, conveyed to him. (ii) The Custodian may deposit for safe custody all or any of the packages with any branch of the Reserve Bank of India or the State Bank of India or of its subsidiaries or a Government treasury. (iii) Where any money has been deposited with the Custodian, he may credit the money or remit the money through the nearest Government Treasury free of charge for being credited in the personal Deposit Account of the Commissioner in the Government Treasury at the place where the office of the Commissioner is s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer shall give a reasonable notice to that person to show cause why such material should not be used against him. Rule 112B. Release of articles under section 132(5).--Where in pursuance of sub-section (5) of section 132 of the Act, the assets or part thereof have to be released, the Income-tax Officer shall forthwith deliver the same to the person from whose custody they were seized in the presence of two respectable witnesses. Rule 112C.--Release of remaining assets.--Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section (1) of section 132A are discharged shall be forthwith made over or paid to the person, from whose custody the assets were seized in the presence of two respectable witnesses." In the light of decided cases there cannot be, and rightly the petitioners have not made, any attack on the constitutionality of the concerned section or rule. While making a law under any entry in the Schedule to the Constitution, it is competent to the legislature to make all such incidental and ancillary provisions as may be necessary to effectuate the law. In the case of a taxing statute, it is open to the legisl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sued. (vii) Any irregularity in the course of entry, search and seizure committed by an officer acting in pursuance of the authorisation will not be sufficient to vitiate the action taken provided the officer has, in executing the authorisation, acted bona fide. (viii) The Act and the Rules do not require that the warrant of authorisation should specify the particulars of documents and books of accounts; a general authorisation to search for and seize documents and books of account relevant to or useful for any proceeding complies with the requirements of the Act and the Rules. (ix) It is for the officer making the search to exercise his judgment and seize or not seize any documents or books of account. (x) An error committed by the officer in seizing documents which may ultimately be found not to be useful for or relevant to the proceeding under the Act will not by itself vitiate the search, nor will it entitle the aggrieved person to an omnibus order releasing all documents seized. (xi) The aggrieved party may undoubtedly move a competent court to pass an order releasing the documents seized. In such a proceeding the officer who has made the search will be called u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn by the Supreme Court. As Ayyangar points out the power conferred under section 132(1) is contemplated in relation to cases where the precise location of the article or thing is not known to the income-tax department, and, therefore, a search must be made for it, and where it will not be ordinarily yielded by the person having possession of it. The power to seize money, bullion, jewellery or other valuable article or thing is, not an arbitrary power. The section does not confer such arbitrary authority upon the revenue officers. The Commissioner or the Director of inspection must have in consequence of information, reason to believe that any person is in possession of such money or thing representing either wholly or partly income or property which has not been disclosed for the purpose of the Indian Income-tax Act. Then recording reasons for the belief he must issue an authorisation in favour of a designated officer to search the promises and exercise the powers set out therein. The primary condition for entry into and making search of any building or place is the reason to believe that such money, article or thing would be found there. There, if it is found by the authorised of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... balance, in so far as the same is sufficient and available... When moneys are deposited in a bank the ownership of the money, passes to the bank and the right of the bank over the moneys lodged with it cannot be a lien at all... The mere fact that a banker invites deposits, and is prepared to pay interest on them, is proof enough of his intention to make use of it as he likes, and earn interest therefrom, so as not only to enable him to pay interest to his depositor but also to earn profits for himself. But even if the banker pays no interest on the money deposited, he is his customer's debtor and not a bailee, because he undertakes to repay on demand a sum, equivalent to the amount deposited with him, and the customer has no right whatsoever to claim the identical coins or notes, deposited by him with his banker. The latter can pay the amount in any kind of legal tender '." (Taunan--Banking Law and Practice in India, 11th edition, page 79). No doubt, with regard to securities and valuables deposited for safe custody, the banker's position is different. The property in them remains with the customer. Sri P.A. Francis, learned counsel for the revenue, sought to contest the positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or otherwise, disposed of by the bank indeed if the funds are lost, destroyed, or stolen, or become worthless the loss must be borne by the bank, even though it is free from negligence or fault." For the sake of completeness I will also quote from paragraph 340 at page 304 of the same book : " The relationship of a depositor in a savings bank or of a depositor having a savings account, to the bank is dependent upon the nature of the bank's business or corporate make up and upon the way and for whose ultimate benefit the business of the bank is conducted. If the deposit is in a savings bank which has a capital stock and stockholder the relationship is practically the same as that existing ' between the ' depositor of a commercial account and the bank which carries the account--namely, that of debtor and creditor. However,where a savings bank is conducted solely for the benefit of the depositors, the deposits constituting its only capital, and the income from interest, etc., after deducting expenses, is divided among the depositors, the relationship between them and the bank is not that of the ordinary debtor and Creditor but is more merely that of trustee and cestui que tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 132(1)(c) the search is in respect of the money of which a person is in possession and which money either wholly or partly represents income or property which had not been disclosed for the purpose of the Income-tax Act and the order under section 132(3) could also only be issued only in respect of such money on the ground that it is not practicable to seize the same. Therefore, I do not find any way to sustain the legality of exhibit P-1 order in the three cases. The learned counsel for the revenue cited in support of his contention the decision of the Delhi High Court in Mrs. Kanwal Shamsher Singh v. Union of India . The facts and decision in the case as summarised in the headnote of the case is as follows : " While carrying out a search of the petitioner's residence pursuant to an authority under section 132(1) of the Income-tax Act, 1961, on February 2, 1973, the authorised officer took possession of the keys of two lockers in a safe deposit company and both the lockers were sealed. On February 7, 1973, the lockers were opened, inventories of their contents were prepared and orders were issued to the company restraining it from parting with or allowing the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be in the position of a bailee. But once the proceedings were over that officer will no longer be a bailee. The statutory obligation cast on him to return the article to the person from whom it was seized would come into operation. He would, therefore, be holding the article on behalf of the person from whom it was seized. If that be so, under sub-section (1)(c) of section 132, the articles can be seized from such person because his possession was on behalf of the person who had possession before seizure. The question that came up for consideration in that case being different, that case also is not pertinent here. It was also contended on behalf of the revenue that the Act itself provides adequate remedy for a person aggrieved by an order under section 132(3). Whether the Act provides such remedy or not, where any authority acts without jurisdiction or in excess of jurisdiction which action might result in unnecessary harassment of the person concerned, this court can intervene under article 226. Alternative remedy even if available is not always a bar to this court acting under article 226. I need only refer to the decision of the Supreme Court in Calcutta Discount Co. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X
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