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Mithilesh Kumari Vs. Commissioner of Income-tax and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberWrit Petition Nos. 283 and 284 to 290 of 1978
Judge
Reported in[1979]119ITR728(All)
ActsIncome Tax Act, 1961 - Sections 132(5), 132(11) and 132(12); Constitution of India - Article 226
AppellantMithilesh Kumari
RespondentCommissioner of Income-tax and ors.
Appellant AdvocateS.N. Misra and ;U.S. Saxena, Adv.
Respondent AdvocateAshok Gupta, Adv.
Excerpt:
- - in the course of the proceedings, the ladies of the family of the partners of the assessee-firm as well as some partners, filed objections supported by affidavits stating that some of the assets seized belonged to them. 4. the submission made on behalf of the objectors is well-founded and is supported by an authority of this court in hari kishan v......under section 132(5) of the i.t. act, 1961, to the firm to explain the acquisition of various seized assets and source of money. the partners of the firm filed an explanation. ultimately, on november 16, 1976, the ito passed an order under section 132(5) of the act holding that he estimated the concealed income of the assessee-firm at rs. 4,00,910 as income from undisclosed sources. he further held that on this income at the rate prevalent in the year 1976-77 tax liability to the tune of rs. 3,34,894 arises. penalty to the tune of rs. 5,02,340 was also to be imposed. total liability works out to rs. 8,37,234. the assets seized by the department were to the extent of rs. 4,09,885 only. he, therefore, directed the retention of the entire seized assets in his custody. in the course of.....
Judgment:

Satish Chandra, C.J.

1. In pursuance of an authorisation issued by the Commissioner of Income-tax, Lucknow, a raid was organised and conducted on the business and residential premises of M/s. Boolchand Fakir Chand, Dhampur, and its four partners who were brothers. This raid and the consequent search took place on August 20, 1976; as a result, a large amount of cash, documents, gold and ornaments were seized. A notice was issued under Section 132(5) of the I.T. Act, 1961, to the firm to explain the acquisition of various seized assets and source of money. The partners of the firm filed an explanation. Ultimately, on November 16, 1976, the ITO passed an order under Section 132(5) of the Act holding that he estimated the concealed income of the assessee-firm at Rs. 4,00,910 as income from undisclosed sources. He further held that on this income at the rate prevalent in the year 1976-77 tax liability to the tune of Rs. 3,34,894 arises. Penalty to the tune of Rs. 5,02,340 was also to be imposed. Total liability works out to Rs. 8,37,234. The assets seized by the department were to the extent of Rs. 4,09,885 only. He, therefore, directed the retention of the entire seized assets in his custody. In the course of the proceedings, the ladies of the family of the partners of the assessee-firm as well as some partners, filed objections supported by affidavits stating that some of the assets seized belonged to them. They were not the property of the firm. The ITO in the course of his order passed under Section 132(5) rejected these various claims.

2. The objectors filed applications under Section 132(11) of the Act on or about 10th December, 1976, before the CIT, Lucknow. He by an order dated 2nd May, 1978, dismissed all these applications. He held that the order under Section 132(5) had by then been superseded by a finalised assessment against the firm, Boolchand Fakir Chand, Dhampur. The applications under Section 132(11) had hence become infructuous and were dismissed. Aggrieved, various objectors have come to this court under art, 226 of the Constitution.

3. We have heard learned counsel and we find that the Commissioner totally misconceived the ambit of the jurisdiction vested in him by Sub-sections (11) and (12) of Section 132 of the Act. The objectors claimed that the assets mentioned in their objections belonged to them and not to the assessee-firm. The assessment order passed against the firm was not passed in their presence and they were not bound by it. On the other hand, the Com-missioner was bound to hear them and decide their objections on merits. Their objections could not be dismissed in limine on the ground that the assessment of the firm has been finalised or that the grievance of the objectors does not arise out of the order passed by the ITO under Section 132(5) of the Act.

4. The submission made on behalf of the objectors is well-founded and is supported by an authority of this court in Hari Kishan v. Notified Authority under the Income-tax Act : [1979]117ITR276(All) . In that case, it was held that any finding recorded by the ITO while passing an assessment order against the firm is not binding on other persons and that the assessment order has no material bearing on the claim of the persons other than the firm. These persons were undoubtedly persons interested within the meaning of Sub-Sections (11) and (12) of Section 132 because they were claiming to be the owners of some of the assets which had been seized at the search. They were entitled to establish their claims. They were also entitled to a finding on their claims at the hands of the Commissioner.

5. In the result, the petition succeeds and is allowed. The impugned order dated May 2, 1978, is quashed. The matter is remitted to the Commissioner as the notified authority to decide the applications made by the objectors under Section 132(11) of the Act afresh and in accordance with law, keeping in view the observations made above. The petitioners will be entitled to costs.


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