1998 Supreme(SC) 335

1998(3) Supreme 141
Supreme Court of India
(From Orissa High Court)
Sujata V. Manohar & D.P. Wadhwa, JJ.
Commissioner of Income Tax, Bhubaneshwar & Anr. --Appellants
versus
Parmeshwari Devi Sultania & Ors. -Respondents
Civil Appeal No. 142 of 1997
Decided on 6-3-1998
Counsel for the Parties :
For the Appellants : Ranbir Chandra, C.V.S. Rao, (Ms. Shashi Kiran) Advocate for B.K. Prasad, Advocates.
For the Respondents : N.K. Bisht, Advocate (NP).
For the Amicus Curiae by the Court : Joseph Vellapally, Sr. Advocate and R.K. Kapoor, Advocate.

Important Point
When plaintiff was aware of search and seizure proceedings u/s 132 of Income Tax Act, her suit of partition for ornaments seized in said proceedings, is barred u/s 293 of Income Tax Act.

Headnote:Income Tax Act, 1961-Sec­tions 132, 132B and 293-Search and seizure-Application of retain­ed assets-Bar of suits in Civil Courts-C.P.C., 1908-Section 9-Search and seizure u/s 132 of defe­dant No. 1 Babulal premises (Step brother of appellant)-Ornaments in his custody seized-Ornaments to be given to various legatee’s under the Will of defendant No. 1’s father-Appellant filing suit for partition of ornaments on the basis of said Will-Making all step bro­thers, sisters from 2nd wife of her father with Income Tax authorities as parties - Revenue contending suit not maintainable u/s 9 C.P.C. r/w Section 293 Income Tax Act-Trial Court dismissed this objection-Confirmed by High Court-High Court holding order u/s 132(5) though challengable u/s 132(ii) is not a bar to partition suit of plaintiff-Whether correct? (No).

       Held : We do not think that the High Court approached the question in its proper perspective. It failed to consider the effect of the decree if passed in the suit on the order under Section 132(5) of the Act or other proceedings under Section 132B of the Act. When Section 293 originally stood, it provided that “no suit shall be brought in any civil court to set aside or modify any assessment or order made under this Act”. The word “assessment” was omitted and the words “proceeding taken” were inserted in its place. This made the section more compre­hensive in nature. Direct effect of the decree in the suit would be that the gold ornaments, subject matter of this suit, would be taken out of the order of the Income Tax Officer under Section 132(5) of the Act and would not be available to be applied in proceedings under Section 132B of the Act. It is immaterial if the proceeding under Section 132 gives no finality to the order passed under Section 132(5) or 132(11) of the Act. It is not the case of the Revenue that Income Tax Authority can grant decree for partition. It is not also material for the decision of the case if the will now set up by the plaintiff was genuine or not. The question that felt squarely for consideration was the right of the plaintiff as a third party in the proceedings under Section 132 of the Act. (Para 9)

       Further held : We think Section 293 is quite specific and does not admit of any ambiguity if ultimately a suit is to result in a decree or order which sets aside or modifies any proceeding taken or order made under the Act, that suit would not be maintainable. We are not concerned with the frame of the suit as such but to see the ultimate result to which the suit would lead to. In the present case, both the Commissioner of Income-tax and Union of India have been impleaded as defendants. On pleadings of the parties, an issue will have to be framed on the validity of proceedings under Section 132 of the Act which cannot be permitted in view of the bar contained in Section 293 of the Act. (Para 10)

       Held also : We have seen above that the scope of Section 293 of the Act has been widened now even to include any proceeding under the Act and it is not merely confined merely to set aside or modify any order. Form of suit is not relevant. It is the substance which is to be seen. When the statute prescribed certain procedure and proceedings thereunder are held and order passed, it is difficult to accept a contention that proceeding and order can be modified or set aside in a civil suit filed by a third party. Section 293 is specific and does not admit filing of a suit which has the effect of even indirectly setting aside or modifying any proceeding taken under the Act or order made thereun­der. In the present case, search and seizure were effected as per the provisions of the Act, assets and documents seized and statement of Babulal recorded under sub-section (4) of Section 132 of the Act wherein he admitted that the gold was acquired from his and his broth­er’s undisclosed income which he was even prepared to surrender to tax. It was thereafter in the course of further enquiry that he came up with a version that the gold ornaments in question belonged to his step-mother who bequeathed the same for the benefit of children of the plaintiff and other children that would be born to the second wife of his father. This version did not find favour with the Income-tax Officer and he was not satisfied that gold ornaments in question did not belong to Babulal. It was, a therefore, not necessary for him to issue any notice under sub-section (7) of Section 132 of the Act to the plaintiff. In any case, the plaintiff was well aware of the pro­ceedings before the Income-tax Officer and she could have also filed objection to the order made by the Income-tax Officer under Section 132(5) of the Act to the Chief Commissioner or Commissioner under Section (11) thereof which remedy she did not avail. Considering the whole gravemen of the plaintiff in the suit and the law on the sub­ject, we are of the opinion that the Subordinate Judge and the High Court were not correct in rejecting the contention of the Revenue and holding that the suit was not barred under Section 293 of the Act. (Para 17)

       Held consequently : We, therefore, allow the appeal set aside the impugned judgment of the High Court and of the Subordinate Judge and dismiss the suit filed by the plaintiff. (Para 18)