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Shiv Shanker Lal Gupta Khandelwal Vs. Commissioner of Income-tax, Bombay City Ii, and Tohers. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberC. W. No. 70 of 1967
Reported in[1968]67ITR393(Delhi)
AppellantShiv Shanker Lal Gupta Khandelwal
RespondentCommissioner of Income-tax, Bombay City Ii, and Tohers.
Cases ReferredCollector of Customs v. East India Commercial Co. Ltd. We
Excerpt:
- - the court may at any stage of the proceedings order that the central government or a state government shall be added as a defendant in any suit involving any such question as is referred to in clause (1) of article 132 read with article 147 of the constitution, if the attorney-general of india or the advocate-general of the state, as the case may be, whether upon receipt of ntoice under rule 1, or toherwise, applies for such addition and the court is satisfied that such addition is necessary or describe for the satisfactory determination of the question of law involved......the jurisdiction of this court.it was urged on behalf of the petitioner that to this petition the central government is a necessary party, and, thereforee, this court has jurisdiction to entertain this petition. if the central government is a necessary party to this petition, then this court would have jurisdiction to entertain this petition. thereforee, we have to see whether the central government is a necessary party to this petition. undoubtedly, the central government is nto a necessary party to the reliefs prayed for as against respondents nos. 1 and 2. that much was nto disputed before us. but what was said on behalf of the petitioner is that the money seized by the second respondent at any rate that portion of the money that had been appropriated towards the tax due from the.....
Judgment:

K. S. HEGDE C.J. - As a preliminary objection, to the effect that this court has no jurisdiction to entertain this petition, has been taken on behalf of the respondents and as we agree with the same, it is sufficient if we set out the facts material for the purpose of deciding that question. But before doing so, we shall qutoe the reliefs prayed for in this petition. They read thus :

&quto;The petitioner, thereforee, most respectfully prays :

That this hon'ble Court be pleased :

(a) to issue a writ of mandamus or a writ in the nature of mandamus or any toher appropriate writ, direction, or order under article 226 of the Constitution of India quashing the said search and seizure and ordering and directing the respondents to forthwith return to the petitioner the remaining files, documents and papers seized and carried away by them during the said search and seizure and the sum of Rs. 1,17,000 with interest thereon at 6 per cent. per annum from the 9th July, 1966, till payment;

(b) to issue a writ in the nature of certiorari or any toher appropriate writ, order or direction under article 226 of the constitution of India, calling for the records of the case and the order passed by the second respondent under section 132 (5) and after going into the question of the legality thereof quash and set aside the said order being the order dated the 6th October, 1966, passed by the second respondent under section 132 (5) of the Income-tax Act, 1961, and order the respondents to return the said sum with interest as prayed for in sub-paragraph (a) above;

(c) to issue a writ in the nature of prohibition, or any toher appropriate writ, direction or order under article 226 of the Constitution restraining and prohibiting the respondents, their officers, servants and agents from taking any steps or proceedings on the strength of or making use of the files, documents and toher papers and money seized during the said search and seizure effected under the provisions of section 132 of the Income-tax Act, 1961, and under the warrant of authorisation issued there under or, from making any assessment on the petitioner on the basis of the said files, documents and papers and money; and from recovering any tax out of the monies seized;

(d) to declare that the third respondent has no jurisdiction to hear the application made by the petitioner under section 132 (11) of the Income-tax Act, 1961, or to pass any order thereon with reference to the impugned order made under section 132 (5) of the Act;

(e) to declare section 132, in particular sub-sections (5) and/or (11) and (12) of the Income-tax Act, 1961, ultra virus of the Constitution under articles 14, 19 (1) (f) and 31, beyond the legislative competence of the Union, in excess of the powers, and being colourable pieces of legislation;

(g) to order the respondents to pay to petitioner the costs of this petition; and

(h) to grant such toher reliefs as the nature and circumstances of the case may require.&quto;

The material facts are these : On July 9 and 11, 1966, the petitioners house and his business premises were searched by the second respondent to this petition (the First Income-tax Officer, A-III Ward, Bombay) as per the authorisation issued by the first respondent (the Commissioner of Income-tax, Bombay City II, Bombay), under section 132 (1) of the Income-tax Act, 1961. During the searches in question, several documents were seized. In addition, the second respondent seized a sum of Rs. 1,17,000. It appears, a portion of the amount seized has been appropriated towards the arrears of income-tax due from the petitioner. The petitioner is challenging the validity of those searches and seizures. It may be ntoed that the searches and the seizures in question have taken place in the City of Bombay. Respondents Nos. 1 and 2 reside in that city. Their offices are situate in that city. Even the petitioner is residing in that city. The authorisation issued by the first respondent under section 132 (1) was issued in that city. thereforee, prima facies, the entire cause of action has arisen in the City of Bombay. That being so, the reliefs, prayed for in the petition, whether considered under sub-article (1) of article 226 or under sub-article (2) of article 226, prima facie, fall outside the jurisdiction of this court.

It was urged on behalf of the petitioner that to this petition the central Government is a necessary party, and, thereforee, this court has jurisdiction to entertain this petition. If the Central Government is a necessary party to this petition, then this court would have jurisdiction to entertain this petition. thereforee, we have to see whether the Central Government is a necessary party to this petition. Undoubtedly, the Central Government is nto a necessary party to the reliefs prayed for as against respondents Nos. 1 and 2. That much was nto disputed before us. But what was said on behalf of the petitioner is that the money seized by the second respondent at any rate that portion of the money that had been appropriated towards the tax due from the petitioner, has now gone to the Consolidated Fund of India. That fund is under the control of the Government of India. thereforee, the Central Government is a necessary party to this petition. We see no force in this contention. It is only that part of the revenue that has been validly realised, that becomes a part and parcel of the Consolidated Fund of India. If petitioners contention, that the searches and seizures in question are invalid, is upheld. Then the amount seized cannto be considered as having become a part of the Consolidate Fund of India. We are now dealing with the question whether the impugned searches and seizures are valid in law. For deciding that question, the Central Government is nto a necessary party.

The next contention taken by Mr. Sharma, learned counsel for the petitioner, is that as in this petition the petitioner is challenging the virus of section 132 (5) of the Income-tax Act, 1961, the central Government is a necessary party to such a proceeding. We have now to see whether that contention can be upheld. Our attention has nto been drawn to any provision of law prescribing that the Central Government must be made a party to a proceeding in which the virus of that Act or any provision therein, is challenged. If that be the true position of law, it follows, as a necessary corollary, that to every proceeding, in which the validity of a Central Act or a provision therein, is challenged, the Central Government must be made a party. That would mean, if in a divorce proceeding under the Hindu Marriage Act, the validity of a provision in the Hindu Marriage Act is challenged, then the Central Government must be made a party to that proceeding. But that is nto the law, as we understand it. At any rate, that is nto the practice adopted in court. It is prescribed in rule 1 of Order 27A of the Civil Procedure Code that &quto;in any suit in which it appears to the court that any such question as is referred to in clause (1) of article 132 read with article 147 of the Constitution is involved, the court shall nto proceed to determine that question until after ntoice has been given to the Attorney-General for India if the question of law concerns the Central Government and to the Advocate-General of the State if the question of law concerns a State Government.&quto; Rule 2 of that Order provides that &quto;the court may at any stage of the proceedings order that the Central Government or a State Government shall be added as a defendant in any suit involving any such question as is referred to in clause (1) of article 132 read with article 147 of the Constitution, if the Attorney-General of India or the Advocate-General of the State, as the case may be, whether upon receipt of ntoice under rule 1, or toherwise, applies for such addition and the court is satisfied that such addition is necessary or describe for the satisfactory determination of the question of law involved.&quto; These provisions make it clear that the Central Government or the State Government, as the case may be, is nto a necessary party to a proceeding wherein the virus of any provision of law is challenged. toherwise, rules 1 and 2 of Order 27A will have no meaning.

In support of his contention that the Central Government is a necessary party to this petition, Mr. Sharma invited our attention to the decision of the Allahabad High Court in Swadeshi Ctoton Mills Co. Ltd. v. Sales Tax Officer. In Paragraph 31 of the judgment, it is observed, thus :

&quto;The petitioner has nto imp leaded the State of Uttar Pradesh as a party to the writ petition. In the absence of the State, the petitioner cannto be permitted to challenge the validity of the U. P. Taxation Laws Amendment Act, 1963.&quto;

These observations, undoubtedly, support the contention of Mr. Sharma. But in support of its conclusion, the court gave no reason. We do nto think that those observations correctly lay down the law. On the toher hand, we are in agreement with the view expressed by the Rajasthan High Court in Syed Hussain Ali v. Durgah Committee, Ajmer. In paragraph 75 of the judgment, Bapna, Acting C.J., speaking for the court, observed thus :

&quto;A contention was also raised by the respondents that as the virus of a Central Act were being challenged, the Union of India should have been imp leaded as a party. This argument has no force. The petitioners do nto claim any relief against the Central Government. Ntoices of the petition were served on the Attorney-General and the Advocate-General so that if the Union Government or the State Government desired to defend the provisions of the Act, it may do so.&quto;

The next contention, urged by Mr. Sharma in support of his contention, is that, as against the decision of the first respondent his client has filed an application under section 132 (11) of the Income-tax Act, 1961, and that application is pending before the Central Board of Direct Taxes, New Delhi; if the Central Board of Direct Taxes gives its decision in that application, and the order of the first respondent would get merged in that decision : and the decision of the Central Board of Direct Taxes can be challenged in this court. Hence, this court has jurisdiction to entertain this petition. In this connection, he placed reliance on the decision of the Supreme Court in Collector of Customs v. East India Commercial Co. Ltd. We are unable to agree with Mr. Sharma that the rule laid down that an order of the appellate authority when the appellate authority makes an order. In the instant case, the appellate authority gets itself merged in the order of the appellate authority when the appellate authority has made no order on the petitioners appeal. Hence, the question of merger of the lower authority order in the appellate authoritys order does nto arise for consideration. Further, according to Mr. Sharma, there is no provision for appeal against the searches and seizures effected. That being so, the rule of merger of the order of the order of the lower authority in the order of the appellate authority does nto apply to the facts of the present case.

It was urged on behalf of the petitioner that one of the reliefs asked by him is to declare that the third respondent has no jurisdiction to hear the application filed by him under section 132 (11); to that relief the third respondent is a necessary party; that respondents office is in Delhi; hence this court has jurisdiction. This is a fallacious argument. It is the petitioner who invoked the jurisdiction of the third respondent. By that device, he cannto be permitted to impose jurisdiction on this court. If he does nto want the third respondent to consider his application, it is open to him to withdraw it. According to the petitioner, the authorisation issued by the first respondent is void and, thereforee, the searches made and seizures effected are illegal. For getting relief on that basis, he could have approached the High Court of Bombay or the Supreme Court. There was no necessity for to go through the formality of filing an appeal. But if he wanted to exhaust the remedies under the Income-tax Act, then he should have waited for the decision of the third respondent before approaching this court. That being so, the mere fact that the petitioner has filed an application before the third respondent under section 132 (11), does nto confer jurisdiction on this court to entertain this petition.

Yet one toher contention taken by Mr. Sharma was that under section 132A (4) (a), the Central Government is liable to pay interest on the assets Government is a necessary party to the proceeding. According to Mr. Sharma, section 132 (5) of the Act is ultra virus of the Constitution. He is nto claiming any relief under section 132A. The reliefs claimed by him are dehors that provision. In this petition no interest under section 132 (5) is claimed. Hence, the mere existence of section 132 (5) does nto entitle the petitioner to file this application.

For the reasons mentioned above, we are of the opinion that this court has no jurisdiction to entertain this petition. In that view we have nto gone into the merits of the case. This petition is, accordingly, dismissed with costs. Advocates fee Rs. 250.

Petition dismissed


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