The main legal point established in the judgment is the interpretation and application of S.132 of the Income-tax Act, 1961, in the context of seizure of money, emphasizing the lawful seizure of amounts held by authorities on behalf of the persons from whom the amounts were seized.

1. The same question arises for determination in these two petitions and the answer to the question depends on the interpretation to be placed on S.132 of the Income-tax Act, 1961, for short the Act. To start with we shall read the section.

(Section omitted)

2. The facts which led up to the petition, O.P.2226 of 1972 are the following: A sum of Rs.50,000/- was seized from the petitioner by the Central Excise Department on 14th May 1971 at 11 p. m. when the petitioner, one Sri Assainar, was travelling from Payyannoor to Kottayam in a stage carriage. The seizure was made because it was suspected that the said amount represented the value of contraband gold. The seizure was made under S.110(1) of the Customs Act, but it was found on investigation that the money seized was not liable to confiscation. In fact no notice as contemplated by S.110(2) of the Customs Act, 1962 was issued. So the money seized was liable to be returned as provided by sub-s.(2) of S.110 of the Customs Act, 1962. At that stage the Income-tax Officer who was empowered by the Commissioner as envisaged by sub-s. (1) of S.132 of the Act intervened and issued a notice purporting to be under R.112-A of the Incometax Rules, 1962 to the petitioner requiring him to explain the source of the abovesaid sums of Rs. 50,000. Counsel for the Revenue made available to us what is called "Panchanama" which from the terms thereof indicated that there has been a search of the office of the Customs Authorities and that the amount was seized. The notice under R.112-A of the Income-tax Rules is Ext. P-1 and the order under sub-s. (5) of S.132 of the Act has been produced as Ext.P-2. By the order Ext. P-2 the amount payable by way of tax on the sum Rs. 50,000 which was taken to be the total income of the petitioner for the year in question was fixed at Rs. 19,550 and the balance amount has been returned to the petitioner. The order Ext. P-2 is challenged in this petition. We shall state the grounds of the challenge later after stating the facts which led up to the petition, O. P. 2884 of 1972 for the grounds taken in the two petitions, are the same. Now turning to the facts in O.P. 2884 of 1972 they are very similar to the case that we have already stated excepting that the seizure took place pursuant to the provisions in the Foreign Exchange Regulation Act, 1947. The amount that was seized in that case was Rs. 50,010.15. A penalty of Rs. 25,000 was imposed under the Foreign Exchange Regulation Act, 1947. The balance amount available with the Enforcement Directorate was the sum of Rs. 25,010.15. At that time the Income-tax Officer intervened and issued a notice similar to Ext. P-1 in O. P. 2226 of 1972 which is Ext. P-2 in this case and having obtained the custody of the sum of Rs. 25,010.15 proceeded to determine the liability of the petitioner in the O. P. by Ext. P-3 Order and fixed it at Rs. 52,097. The entire sum of Rs. 25,010.15 was adjusted towards the liability and demand has been made on the petitioner for the balance amount due to the Income-tax Department.

3. The whole procedure adopted in these two cases has been challenged as unwarranted by law. Shortly stated the argument which, it is seen, has been accepted by more than one High Court was that the seizure contemplated by sub-s. (1)(c) of S.132 of the Act is a seizure after search; a search which will bring to light things hidden and without such a search there cannot be a seizure under clause (c) (iii) of sub-s. (1) S.132. This is so because under sub-clause (in) of clause (c) of sub-s. (1) of S.132 it is stated that the seizure must be of money or other valuable article or thing found "as a result of the search". In cases where it was known that certain amounts were with an officer or even in cases where they were visible on a table in an open hall there can be no seizure and no order can be passed under sub-s.(3) of S.132, for sub-s. (3) of S.132 will come into operation only in cases where a seizure is "i