1. This is a reference made by the learned Sessions Judge, Indore, for setting aside an order passed by the Magistrate, First Class, Indore, with regard to the production of certain cash amount which was seized by the police under Sections 54(1) and 550 of the Code of Criminal Procedure.
2. Briefly stated, the facts giving rise to this reference are these : On February 5, 1970, Sadar Bazar police seized currency notes worth Rs. 1,73,230 from the possession of the non-applicants, Mohammed Hanif, Mohammad Sharif, Abdul Aziz, Istiaque Beg and Ishaque Mohammad, while they were in a motor car No. GJB-5330 in the city of Indore. The police suspected that the currency notes were connected with the commission of some cognisable offence. After seizing this money, the police reported the matter to the Magistrate concerned for suitable orders with regard to the custody, production and disposal of this amount. Subsequently on February 10, 1970, a report was made by the police to the Magistrate that the money was no more required by them in connection with any offence. They also reported that the Income-tax Officer, namely, the non-applicants, Satischandra and Deshmukh, under the authority of warrant of authorisation from the Commissioner of Income-tax, Nagpur, for the search and seizure of some unexplained money, have seized the said money. The Income-tax Officers, according to the report of the learned Sessions Judge, were informed by the Sadar Bazar police about the seizure of this money by them and it was consequent upon this information that warrants of authorisation were obtained and the money which under the orders of the Magistrate was kept in the custody of the police, was seized by the Income-tax Officers. When the learned Magistrate considered this regort made by the police about the seizure of the money by the Income-tax Officers, a direction was given to the police to produce the currency notes for disposal under Section 523, Criminal Procedure Code. The police, thereupon, reported their inability to produce the money as it was seized by the Income-tax Officers. The Magistrate, thereupon, issued notices to the Income-tax Officers and the Commissioner of Income-tax, Nagpur, either to produce the money or to show cause why it should not be produced.
3. In the reply filed by the Income-tax Officers it was stated that the money was lawfully seized under the provisions of the Income-tax Act and that they were not liable to produce the money as directed. The objections raised by the Income-tax Officers were rejected by the learned Magistrate, who took the view that once the property, viz., currency notes in this case, were seized and was in the custody of the court, the Income-tax Officers could not seize it without any orders from him. A direction was accordingly issued to the Income-tax Officers to deposit the money in court.
4. Against this order, a revision application was made to the Sessions Judge, who was of the view that the provisions of the Income-tax Act were special provisions in this matter and that the Income-tax Officers, though they committed a technical error in not obtaining orders from the Magistrate, did not commit any illegality so as to make them liable for the refund of the money. He has, accordingly, made this reference to this court for setting aside of this order passed by the learned Magistrate.
5. In this court, the learned counsel appearing for the Income-tax Officers supported the reference. Learned counsel appearing for Mohammad Hanif and others, from whose possession the money was seized, has opposed the reference on the ground that in this matter, the jurisdiction of the Magistrate for passing orders for the final disposal of the money was absolute and that the Income-tax Officers could not, either on the report of the police or suo motu, seize the money, which was in the court's custody. I have considered these contentions in the light of the recommendations made by the learned Sessions Judge and am of the view that, this reference must be accepted for the following reasons.
6. Section 523, Criminal Procedure Code, no doubt provides that when any police officer seizes any property under Section 51, Criminal Procedure Code, which is alleged or suspected to be stolen or which is found under the circumstances which create suspicion of the commission of any offence, then such seizure has to be forthwith reported to the Magistrate, who is authorised to make such orders as he thinks fit respecting the disposal of such property or the delivery of such property to the person entitled to the possession thereof. In the instant case, the police had seized the currency notes from the non-applicants, Mohammad Hanif and others, presumably on the suspicion that either it was stolen or it was found under the circumstances which created suspicion of the commission of any offence. The police accordingly reported the matter to the Magistrate, who directed the police to hold the money subject to further orders from him. In ordinary circumstances, the Magistrate did have the jurisdiction to pass final orders with regard to the disposal or delivery of possession of the said currency notes. He, in these circumstances, directed the police to hold the money with them pending further orders from him. The Magistrate must have presumed that the police will investigate into the matter and prosecute those from whose possession currency notes were seized in case any offence is made out against them.
7. It is also evident that it was on the information given by the police to the Income-tax Officers that the Commissioner of Income-tax, Nagpur, acting under Section 132 of the Income-tax Act, issued a warrant of authorisation to search and seize the money which the police had in the circumstances aforesaid and in execution of the said warrant of authorisation, the money was seized by the Income-tax Officers under Sub-clause (iii) of Clause (c) of Sub-section (1) of Section 132 of the Income-tax Act. Under Sub-section (4) of Section 226 of the Income-tax Act, it is lawful for the Income-tax Officers to apply to the court in whose custody there is money belonging to the assessee for payment to him of the entire amount of such money, or, if it is more than the tax due, an amount sufficient to discharge the tax. In the instant case, the non-applicants were assessed to tax under the provisions of the Income-tax Act by a regular assessment order passed by the Income-tax Officer. So much of the money as was sufficient for discharging the tax liability was retained by the income-tax authorities and the remaining amount was paid to the non-applicants in the court of the Magistrate concerned. The non-applicants have preferred an appeal against the assessment orders and if they succeed in this appeal, the Income-tax Officers shall be liable to refund that much amount which has been treated as the tax liability of the non-applicants.
8. The question, however, raised for consideration by the non-applicants, Mohammad Hanif and others, is that the jurisdiction of the Magistrate in thematter of disposal of the seized currency notes was absolute and if the income-tax authorities had any jurisdiction to seize the money then they could do so only with the permission of the Magistrate and not independently of any permission from him. It has already been stated above that under the Income-tax Act, the Income-tax Officer had authority to make an application to the court under whose custody there was money belonging to the assessee for payment to him, vide Sub-section (4) of Section 226 of the Income-tax Act. If this procedure had been followed there would be no difficulty for the Income-tax Officers to obtain the money for the purpose of the satisfaction of the tax liability of the non-applicants, Mohammed Hanif and others. It appears that the Income-tax Officers approached the police directly and seized the money. Now the question is as to what orders are now to be passed in the aforesaid circumstances. Even if the income-tax authorities are directed to refund the money in the Court of the Magistrate, even then they would have the authority to apply to the Magistrate himself for payment to them of such amount as would b sufficient to discharge the tax liability, which in the instant case has already been ascertained. If that is done, then it would mean the observance of a mere formality for the technical compliance of some provisions of the Criminal Procedure Code and the Income-tax Act. The procedure followed by the Income-tax Officers was no doubt irregular but was not illegal to such an extent that there should be an order for the refund of the entire amount so as to enable the department to make a formal application for the payment of the money. I do not think that such an order is called for in this case.
9. If after investigation by the police it was to be found that the money was required for the enquiry into or trial of any cognisable offence, then certainly the department would have been directed to refund the amount so that the money could be subject to the orders of the Magistrate in the case under enquiry or trial before him. So far as this case is concerned, the police no more requires the money for the enquiry into and trial of any offence. When that is so, even if the money were to be deposited by the police in the Magistrate's Court the same would have been subject to the aforesaid provisions of the Income-tax Act, and the non-applicants, Mohammad Hanif and others, could not, without committing any illegality, obtain the entire amount from the Magistrate's Court. One does not know what might happen if the money is directed to be re-deposited in the Magistrate's Court. In an event the possibility of the entire amount being taken away by the non-applicants without discharging their taxability, cannot completely be ruled out. Under these circumstances, if there has been substantial compliance of the provisions of the Income-tax Act and no serious illegality has been committed, the insistence on the part of thelearned Magistrate for the deposit of the aforesaid amount in his court only for the purpose of observing a formality is, in my opinion, not called for. If the facts and circumstances of this case had made out a case of a serious illegality committed by the income-tax authority, then certainly this court would have maintained the order passed by the learned Magistrate. Since it is not so, I do not feel inclined to maintain the view taken by the learned Magistrate. On the contrary, I am clearly of the opinion that the recommendations made by the learned sessions judge are proper and must be accepted.
10. Consequently, the reference made by the learned sessions judge is accepted and the order dated September 2, 1970, passed by the learned Magistrate directing the Income-tax Officers to deposit the disputed amount in his court is hereby set aside. This order passed by this court will, however, not affect the rights of the non-applicants, Mohammad Hanif and others, to claim the amount from the income-tax department under the provisions of the Income-tax Act. Their appeal is still pending before the higher authorities and they shall be free to prosecute not only this appeal but such other remedies also to which they may be entitled under the Income-tax Act.