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IN THE HIGH COURT OF ORISSA
V. Gopala Gowda, B.N. Mahapatra, JJ.
VISA COMTRADE LTD. - APPELLANT
Versus
UNION OF INDIA - RESPONDENT
Writ Petition (C) No. 572 of 2011
Decided On : 18-05-2011
INCOME TAX - Search and seizure - Prohibitory order - Validity - Fresh warrant of authorization - Seizure of money - Validity - Conversion of money into demand draft - Legality.
Fact of the Case:
The petitioner, a company, filed a writ petition challenging the validity of a prohibitory order issued under section 132(3) of the Income Tax Act, 1961 (the Act), a fresh warrant of authorization issued under section 132(1) of the Act, and a Panchanama dated 8-1-2011. The petitioner also sought a declaration that the issuance of the fresh warrant of authorization and the Panchanama, as well as the withdrawal of Rs. 12.39 crores from the petitioner's current bank account, were illegal and without jurisdiction. The petitioner further prayed for a direction to the respondents to bring back the Rs. 12.39 crores to the petitioner's current bank account.
Finding of the Court:
The Court held that the issuance of the prohibitory order under section 132(3) of the Act, the fresh warrant of authorization issued under section 132(1) of the Act, and the Panchanama dated 8-1-2011 were not valid in law. The Court also held that the action of the income tax department in seizing the bank account and converting the money lying in the bank account into a demand draft/pay order in favor of the Commissioner of income tax department and withdrawing the same was illegal.
Issues: 1. Whether the prohibitory order issued under section 132(3) of the Act was valid? 2. Whether the fresh warrant of authorization issued under section 132(1) of the Act was valid? 3. Whether the seizure of money from the petitioner's current bank account was valid? 4. Whether the conversion of the money into a demand draft/pay order was legal?
Ratio Decidendi: 1. The Court held that the prohibitory order issued under section 132(3) of the Act was not valid because it was issued without forming any reasonable belief that the money lying in the current bank account in question was wholly or partly representing undisclosed income of the petitioner. 2. The Court held that the fresh warrant of authorization issued under section 132(1) of the Act was not valid because it was issued without any information or material in the possession of the Authorized Officer to form a satisfaction that the money lying in the current bank account in question represented wholly or partly the income of the petitioner-company and the same had not been disclosed or would not be disclosed to the income tax department. 3. The Court held that the seizure of money from the petitioner's current bank account was not valid because it was carried out without a valid warrant of authorization. 4. The Court held that the conversion of the money into a demand draft/pay order was not legal because it was done without the petitioner's consent and without any legal authority.
Final Decision: The Court allowed the writ petition, quashed the warrant of authorization issued in respect of the current bank account in question and the Panchanama dated 8-1-2011, and directed the income tax department to bring back Rs. 12.39 crores along with interest accrued thereon into the current account No. 0553002100028097 of the petitioner-Company maintained with Punjab National Bank, Station Square, Bhubaneswar forthwith.
JUDGMENT :
B.N. Mahapatra, J. - This writ petition has been filed with a prayer for quashing/setting aside the prohibitory order dated 11-11-2010 (Annexure-1) passed u/s 132(3) of the income tax Act, 1961 (for short, 'the Act') in respect of Current Account No. 0553002100028097 of the petitioner-Company maintained with O.P. No. 7-Punjab National Bank, Station Square Branch, Bhubaneswar and for declaratory relief declaring issuance of fresh warrant of authorization dated 7-1-2011 and Panchanama dated 8-1-2011 and withdrawal of Rs. 12.39 crores from the aforesaid Current Bank Account of the petitioner by opposite party-bank authorities is illegal and without jurisdiction. The further prayer of the petitioner is to direct opp. parties to bring back Rs. 12.39 crores in the above Current Account of the petitioner in question maintained with Opposite Party No. 7- Bank. Bereft of unnecessary details the facts and circumstances giving rise to the present writ petition are that the petitioner is a Company incorporated on 9-8-2006 under the provisions of the Companies Act, 1956 (in short, "Companies Act") having its registered office at HUL building, 2nd floor, 9 Shakespeare Sarani, Kolkata-700 071. The petitioner-company is an assessee under the Act, under the jurisdiction of Asstt. Commissioner of income tax, Circle-8, Kolkata having Permanent Account No. AACCV3366R and has been assessed to income tax since 2006-07. The petitioner-Company is mainly engaged in trading of coal, coke, minerals and metals. The assessment for the assessment year 2007-08 has already been completed and the petitioner-company has submitted its return of income tax before the Deputy Commissioner/Asstt. Commissioner of income tax for the assessment years 2008-09, 2009-10 and 2010-11.
2. To carry on its business, the petitioner-Company enters into contract with the international supplier for purchase of coal, coke, minerals and metals and the terms of payment to the said supplier provide that the supply of materials is to be made through Letters of Credit issued by a Bank so that the international supplier is protected of its payment. Upon signing of the contract, the petitioner-company through its Bank (O.P. No. 7) opened issuance of Letters of Credit of 180 days on the Bank of the suppliers which are located overseas. The petitioner-company maintains a current Account bearing No. 0553002100028097 (for short, 'the Account in question') with O.P. No. 7-Punjab National Bank, Bhubaneswar and the said Account in question has been earmarked for payment of Letters of Credit due.
3. On 11-11-2010 and 12-11-2010, a search and seizure operation was conducted by O.P. No. 3-the Director of income tax (Investigation), Bhubaneswar u/s 132 of the Act in the petitioner's registered office and other group of companies. During the course of search and seizure, the officials seized certain documents and issued Panchanama and also took soft copies of accounts maintained on ERP (SAP) as well as on Tally. On 11-11-2010, O.P. No. 5-the Asstt. Director of income tax (Investigation) also issued prohibitory orders (Annexure-1) u/s 132(3) of the Act on the Bank accounts of all the group of companies of VISA Steel Limited including the petitioner Company, Bank accounts of their promoters and family members including the Account in question of the petitioner Company maintained at the Branch of O.P. No. 7-Bank. vide letter dated 15-11-2010 (Annexure-2), the petitioner-company made a request to O.P. No. 5 for revocation of prohibitory order issued u/s 132(3) of the Act. The said letter was communicated along with copy of audited balance sheet as on 31-3-2010, detailed reconciliation statement of Bank account, copy of IT return acknowledgement, Bank statement/confirmation as on 31-3-2010. Pursuant to letter Annexure-2, O.P. No. 5 has withdrawn the prohibitory orders from some of the Bank accounts but did not withdraw the same issued against the Current Account in question of the petitioner-comp
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