G.P. Singh, J.
1. This order shall also dispose of Miscellaneous Petitions Nos. 88, 89 and 90, all of 1976.
2. The Central Excise Authorities, acting under the Gold Control Act, 1968, conducted a search of the premises of Shri Ramlal Sharma, who was a leading advocate of Hoshangabad. In this search, gold and gold ornaments were seized. By order dated 4th November, 1975, the Collector, Customs and Excise, ordered absolute confiscation of primary gold and 3 sovereigns. By the same order, the Collector confiscated gold ornaments weighing 13,894 grams conditionally and directed that they could be redeemed by depositing a fine of Rs. 50,000. The fine of Rs. 50,000 on payment of which the Collector had permitted the redeeming of gold ornaments was duly paid. But before the ornaments could be returned, they were seized by the income-tax authorities on 24th January, 1976, from the Superintendent, Central Excise, Nagpur, in pursuance of an authorisation issued by the Commissioner of Income-tax, Madhya Pradesh, under section 132A of the Income-tax Act, 1961. Thereafter, the Income-tax Officer, B-Ward, Itarsi, initiated proceedings under section 132(5) of the Act. A notice was issued to Ramlal Sharma who submitted that the ornaments belonged to him and the members of his family as follows :
Smt. Kanchanbai for Shri Narmada temple, Hoshangabad and Dolaria
Bhawani Shankar Sharma
Girija Shankar Sharma
Dr. Sitasaran Sharma
Mrs. Ramlal Sharma
3. Ramlal Sharma filed signed statements of the various members of thefamily before the Income-tax Officer. By order, dated 17th April, 1976,the Income-tax Officer held that the source of acquisition of the ornamentswas satisfactorily explained to the extent of 5,582 grams as follows :
Girija Shanker Sharma
Dr. Sitasaran Sharma
Smt. Bhawani Shankar Sharma
Smt. Girijashankar Sharma
Smt. Ramlal Sharma
4. The remaining ornaments weighing 8,464 450 grams were held to be unexplained investment representing income of Ramlal Sharma from undisclosed sources. The Income-tax Officer assessed tax and penalty at Rs. 6,04,964 and retained the gold ornaments to the extent they belonged to Ramlal Sharma. The remaining ornaments weighing 5,332 grams were returned to the persons to whom they were held to belong by the Income-tax Officer. Thereafter, these petitions under article 226 of the Constitution were filed. The petitioner in Miscellaneous Petition No. 87 of 1976 is Girija Shanker. The petitioners in Miscellaneous Petitions Nos. 88, 89 and 90 are respectively Smt. Kanchanbai, Dr. Sitasaran Sharma and Bhawani Shanker. In all these petitions, the petitioners challenged the order of the Collector, Customs and Central Excise, dated 4th November, 1975, and the order dated 17th April, 1976, passed by the Income-tax Officer.
5. During the pendency of these petitions, the order of the Collector, Customs and Central Excise, was set aside in appeal and the case was remanded. The petitions, therefore, became infructuous in so far as they challenged the order of the Collector. The petitions have been pressed only in so far as they relate to the impugned order of the Income-tax Officer. The only point that has been argued by the learned counsel for the petitioners is that before passing the order, the Income-tax Officer should have issued notices to the petitioners under section 132(5) as they were 'persons concerned' within the meaning of that provision. It is not disputed before us that although the statements of the petitioners were filed by Ramlal Sharma in the proceedings under section 132(5), no notice was issued to the petitioners by the Income-tax Officers to afford them opportunity of being heard.
6. The seizure of ornaments in the instant case was made by the income-tax authorities from the Central excise authorities under Sub-section (1) of section 132A of the Income-tax Act. Sub-section (3) of this section makes section 132 applicable to such a seizure as if the income-tax authorities had themselves seized the articles from the persons from whom they were seized by the Central excise authorities.
7. Sub-section (1) of section 132 empowers the Director of Inspection or the Commissioner, etc., to authorise search and seizure, when he has reason to believe that the conditions under Clauses (a), (b) or (c) are satisfied. We are not here concerned with Clauses (a) and (b). Under Clause (c), the Director of Inspection or the Commissioner, etc., should have reason to believe that any person is in possession of any money, bullion, jewellery or other valuable article or thing, briefly referred to as the assets, which represent either wholly or partly income or property which has not been or would not be disclosed for the purposes of the Income-tax Act. UnderSub-section (3), the officer authorised to make search and seizure may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of the assets, and any statement made by any such person during such examination may thereafter be used in evidence in any proceeding under the Act. When any assets are found in the possession or control of any person in the course of a search, it may be presumed under Sub-section (4A) that such assets belong to such person. Then conies Sub-sections (5), (6) and (7) which read as under :
'132. (5) Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in sections 132A and 132B referred to as the assets) is seized under Sub-section (I) or Sub-section (1A), the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being heard and making such inquiry as may be prescribed, shall, within ninety days of the seizure, make an order with the previous approval of the Inspecting Assistant Commissioner:--
(i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him ;
(ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian Income-tax Act, 1922(11 of 1922), or this Act;
(iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act, as if the order had been the order of regular assessment;
(iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in Clause (a) of Sub-section (1) of section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof, as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized:
Provided that if, after taking into account the materials available with him, the Income-tax Officer is of the view that it is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized and may also determine the interest or penalty, if any, payable or imposable accordingly ;
Provided further that where a person has paid or made satisfactory arrangements for payment of all the amounts referred to in Clauses (ii), (iia) and (iii) or any part thereof, the Income-tax Officer may, with the previous approval of the Commissioner, release the assets or such part thereof, as he may deem fit in the circumstances of the case.
(6) The assets retained under Sub-section (5) may be dealt with in accordance with the provisions of section 132B.
(7) If the Income-tax Officer is satisfied that the seized assets or any part thereof were held by such person for or on behalf of any other person, the Income-tax Officer may proceed under Sub-section (5) against such other person and all the provisions of this section shall apply accordingly.'
8. Sub-section (5) of section 132 empowers the Income-tax Officer to estimate the undisclosed income, calculate the amount of tax on this income, determine the amount of interest and penalty payable, specify the amount of existing liability and to retain in his possession so much of the assets as are in his opinion sufficient to satisfy the aggregate of the tax, interest, penalty and existing liability and to return the remaining assets to the person from whom they were seized. Before making the order under Sub-section (5), the Income-tax Officer has to afford to the person concerned a reasonable opportunity of being beard. The 'person concerned' in subsection (5), in our opinion, is the person concerning whom the Income-tax Officer makes an order under that Sub-section estimating the undisclosed income, calculating the amount of tax on the income so estimated, determining the amount of interest payable and the amount of penalty imposable, and specifying the amount that will be required to satisfy any existing liability. The opportunity of being heard and enquiry contemplated under Sub-section (5) are not for finding out as to who is the owner of the assets, but for estimating the amount of undisclosed income, and tax, interest and penalty in relation to this income. The proceeding under Sub-section (5) is essentially in the nature of summary assessment and the person concerned is the person whose undisclosed income and tax liability are estimated for retaining the assets. The person from whose custody the assets are seized will normally be presumed to be the owner thereof under Sub-section (4A) and he would be the person concerned against whom proceedings would be taken under Sub-section (5). Such a person, however, may make a statement under Sub-section (4) that the seized assets or any part thereof were held by him for and on behalf of any other person. If the Income-tax Officer is satisfied as to the correctness of this statement, he may, as contemplated by Sub-section (7), proceed under Sub-section (5) against such other person. The person concerned under Sub-section (5) would then be the person for and on whose behalf the assets were held by the person from whom they were seized. If only part of the assets wereheld by the person from whom they were seized on behalf of any other person and if the Income-tax Officer decides to proceed against both of them, then both of them would be the persons concerned under subsection (5).
9. The construction adopted by us, apart from being the natural construction of the language used in Sub-section (5) of section 132, is supported by Rule 112A of the Income-tax Rules, 1962, which has been made to prescribe the manner of enquiry referred to in Sub-section (5). This rule required notice ' to the person in respect of whom inquiry under Sub-section (5) of section 132 is to be made'. The rule does not provide for notice to all persons who may claim to be the owners of the assets. It is to be taken note of that the inquiry contemplated under Sub-section (5) is to be completed within 90 days. If the Income-tax Officer is held to be duty bound to notice each and every person who may claim to be the owner of the assets seized, it may not be possible to complete the inquiry within the statutory period. If, supposing, the person from whom the assets are seized informs the Income-tax Officer that the assets belong to B and B on being noticed informs that the assets belong to C and so on, the Income-tax Officer will find it difficult to complete the inquiry if all these persons are to be noticed and heard before an order under Sub-section (5) is passed. This is another consideration which supports the construction adopted by us.
10. We are fortified in our conclusion by a decision of the Gujarat High Court in Ramjibhai Kalidas v. I, G. Desai, Income-tax Officer : 80ITR721(Guj) , where Bhagwati C.J. (as he then was), referring to the words 'person concerned', observed :
'The 'person concerned' would be the person in respect of whom the Income-tax Officer proposes to make an order under Sub-section (5). Such person has to be given a reasonable opportunity to be heard before an order is made against him and the assets seized are retained for satisfaction of his existing and estimated tax liability,'
11. We may also point out that a person claiming to be the owner of the assets retained by the Income-tax Officer and who has not been proceeded against under Sub-section (5) and has, therefore, not been heard, is not without a remedy. The assets retained because of the fiction created by Section 132B(l)(iii) are deemed to be under distraint under section 226(5). The Third Schedule to the Act makes the provisions of the Second Schedule relating to attachment and sale applicable to the property distrained under section 226(5). The person claiming to be the owner may, therefore, make a claim under Rule 11 and, if the claim is rejected, he may bring a suit under Rule 11(6). This is also the view of the Gujarat High Court inRamjibhai's case : 80ITR721(Guj) . It cannot, therefore, be said that the construction placed by us would involve any hardship to the owners of the assets who have not been heard under Sub-section (5) of Section 132.
12. In the instant case, the assets were seized from Ramlal Sharma, He was the person against whom the Income-tax Officer decided to proceed under Sub-section (5) of Section 132. The Income-tax Officer did not decide to proceed against the petitioners under that provision. The petitioners, therefore, cannot complain that they were not noticed and that they were not given any opportunity of being heard under Sub-section (5).
13. The petitions fail and are dismissed. There shall be no order as to costs. The security amount deposited by the petitioners shall be refunded to them.