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High Court Of Allahabad
B.N.Misra, Om Prakash, JJ.
Sriram Jaiswal - Appellant
Versus
Union Of India (Uoi) And Ors. - Respondent
Civil Miscellaneous Writ 1228 of 1987
Decided on : Nov 05,1988
INCOME TAX - Search and seizure - Power to retain assets - Section 132(5) - Order under Section 132(3) - Validity - Scope of enquiry - Limitation - Release of attached assets - Books of account - Return - Section 132(8) - Approval of Commissioner - Delay - Effect.
Fact of the Case:
The petitioner, a sole proprietor of a carpet manufacturing and sales business, challenged the order passed under Section 132(5) of the Income-tax Act, 1961, determining the total tax liability and retaining the seized assets. The petitioner also sought the release of assets seized under Section 132(1) and attached under Section 132(3), as well as a mandamus directing the respondents to return all seized books of account.
Finding of the Court:
1. The court held that the petitioner failed to provide cogent material to support the denial of valid information by the Department, and therefore, the court declined to call upon the respondents to disclose the information they received before acting under Section 132(1). 2. The court clarified that an order under Section 132(3) does not amount to seizure, but rather to attachment, and the question of retaining or not retaining such assets by the Income-tax Officer after the order under Section 132(5) does not arise. 3. The court interpreted Section 132 and held that an investigation regarding the nature of an asset, whether disclosed or undisclosed, has to be made twice: first by the authorising officer and then by the authorised officer. 4. The court found that the order passed under Section 132(3) attaching the woollen yarn and carpets for want of verification was illegal, as no order under Sub-section (3) can be passed when the authorised officer is in doubt whether the asset is disclosed or undisclosed. 5. The court directed the Income-tax Officer to conclude the enquiry within 10 days to ascertain whether the woollen yarn and carpets represented disclosed or undisclosed assets and to release them immediately after the conclusion of the enquiry, even if they were found to be undisclosed assets. 6. The court declined to issue a mandamus directing the respondents to return the books of account forthwith, as the approval to retain the books beyond 180 days was obtained from the Commissioner within time.
Issues: 1. Whether the petitioner had provided cogent material to support the denial of valid information by the Department, thereby warranting the court to call upon the respondents to disclose the information received before acting under Section 132(1)? 2. Whether an order under Section 132(3) amounts to seizure or attachment, and whether the question of retaining or not retaining such assets by the Income-tax Officer after the order under Section 132(5) arises? 3. How many times and by whom an investigation regarding the nature of an asset, whether disclosed or undisclosed, has to be made? 4. Whether the order passed under Section 132(3) attaching the woollen yarn and carpets for want of verification was legal or illegal? 5. What should be the course of action if the woollen yarn and carpets were found to be undisclosed assets on enquiry? 6. Whether the petitioner was entitled to a mandamus directing the respondents to return the books of account forthwith?
Ratio Decidendi: 1. The court held that the petitioner's mere denial of valid information was not sufficient to shift the onus to the respondents to disclose the information they received. The petitioner should have supported the denial with cogent material. 2. The court clarified that an order under Section 132(3) does not amount to seizure, but rather to attachment, and the question of retaining or not retaining such assets by the Income-tax Officer after the order under Section 132(5) does not arise. 3. The court interpreted Section 132 and held that an investigation regarding the nature of an asset, whether disclosed or undisclosed, has to be made twice: first by the authorising officer and then by the authorised officer. 4. The court found that the order passed under Section 132(3) attaching the woollen yarn and carpets for want of verification was illegal, as no order under Sub-section (3) can be passed when the authorised officer is in doubt whether the asset is disclosed or undisclosed. 5. The court directed the Income-tax Officer to conclude the enquiry within 10 days to ascertain whether the woollen yarn and carpets represented disclosed or undisclosed assets and to release them immediately after the conclusion of the enquiry, even if they were found to be undisclosed assets. 6. The court declined to issue a mandamus directing the respondents to return the books of account forthwith, as the approval to retain the books beyond 180 days was obtained from the Commissioner within time.
Final Decision: The writ petition was partly allowed. The Income-tax Officer was directed to conclude the enquiry within 10 days to ascertain whether the woollen yarn and carpets represented disclosed or undisclosed assets and to release them immediately after the conclusion of the enquiry, even if they were found to be undisclosed assets. The court declined to issue a mandamus directing the respondents to return the books of account forthwith.
Om Prakash, J.
1. The petitioner carried on a business in manufacture and sale of carpets as sole proprietor of the concern, Sriram Carpet Industries, Gopiganj, district Varanasi. A search and seizure operation was conducted on July 22, 23, 1987, at the principal place of business, Gopiganj, district Varanasi, at the shopping complex, Maldahia, and at the residential premises, D-64/143, Shastri Nagar, Sigra, Varanasi, of the petitioner. During the search and seizure operation, gold ornaments, silver ornaments, cash, etc., were seized under Section 132(1) of the Income-tax Act, 1961 (briefly "the Act") and a restraint order was passed under Section 132(3) of the Act, for want of verification in respect of the following assets :
Rs.
(i) Stock of woollen yarn, etc. 7,00,855
(ii) Stock of 85 carpets 5,58,603
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12,59,458
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2. Thereafter, the Income-tax Officer, Bhadohi, Varanasi, passed an order under Section 132(5) determining the total tax liability for the assessment years 1981-82, 1983-84, 1984-85, 1987-88 and 1988-89 at Rs. 25,85,988. The value of all the seized assets was determined at Rs. 7,30,683 in the order passed under Section 132(5) of the Act and as the total tax liability aggregating to Rs. 25,85,988 for the aforesaid years exceeded the total value of the seized assets, the Income-tax Officer ordered retention of the entire seized assets.
Thereupon, the petitioner filed this writ petition for quashing the order dated November 17, 1987, passed under Section 132(5) of the Act (annexure "25" to the writ petition) and demanding immediate release of the assets seized under Section 132(1) and attached under Section 132(3) also the petitioner prayed for a mandamus that the respondents be directed to return all the books of account seized under Section 132(1) forthwith.
3. Affidavits having been exchanged between the parties, we propose to decide the writ petition finally.
4. The submissions of Sri V.B. Upadhyaya, learned counsel for the petitioner, are :
(i) The authority who issued the warrant of search had no information on the basis of which he could have reason to believe within the meaning of Section 132(1) that the petitioner was in possession of undisclosed assets.
(ii) Under Section 132(5), the Income-tax Officer can retain only those assets which have been seized under Section 132(1) and he has no power to retain the assets for which an order has been passed under Section 132(3), after having passed the order under Section 132(5).
(iii) Under Section 132(3), the authorised officer can pass a restraint order only in respect of the undisclosed assets and no such order can be passed simply to make an investigation whether a given asset is disclosed or undisclosed.
(iv) The books of account, having been seized under Section 132(1), are liable to be returned, as they cannot be retained after the expiry of 180 days, without valid approval of the Commissioner within the meaning of Section 132(8).
Sri Upadhyaya vehemently pressed that learned standing counsel be asked to produce the record to show the information having been received by the Department. His simple submission is that since the petitioner denied that there was valid information with the Department, it is for the respondents to show that there was information within the meaning of Section 132(1) with the authority, who issued the warrant of search. The question is whether the respondents can be called upon to disclose information, simply because it is denied by the petitioner that there was valid information with the Department. Ordinarily, when the existence of a fact is denied by a party, the onus will shift to the other party to prove that the fact or the state of things, alleged to have existed, in fact, existed but this ordinary rule does not fit in the scheme of Section 132 of the Act. A s
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