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Mangilal JaIn Vs. Collector of Customs, Madras and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petition No. 380 of 1978
Judge
Reported in(1981)20CTR(Mad)314; [1982]133ITR762(Mad)
ActsIncome Tax Act, 1961 - Sections 121, 132, 132(1), 132(1A), 132(4), 132(4A), 132(5), 132(6), 132(7), 132(8), 132(9), 132(9A), 132(11), 132(12), 132(13), 132(14), 132B and 142(1); Constitution of India - Article 226
AppellantMangilal Jain
RespondentCollector of Customs, Madras and ors.
Appellant AdvocateRamani Natarajan, Adv.
Respondent AdvocateK.N. Balasubramaniam, Adv.
Cases Referred(Investigation) v. Pooran Mall
Excerpt:
direct taxation - period of limitation - sections 121, 132 and 142 of income tax act, 1961 and article 226 of constitution of india - mandate under section 132 (5) that order should be passed within 90 days from date of seizure would be satisfied if initial order passed by income-tax officer (ito) within that period - thereafter if any direction given under section 132 or by court in proceedings under article 226 any order passed pursuant to such direction would not be subject to limitation prescribed under section 132 (5) - period of limitation prescribed under section 132 (5) applies only to orders passed at initial stage - period of limitation would not be applicable when fresh order is passed by ito pursuant to any direction given by appropriate authority under section 132 (12) or by.....padmanabhan, j.1. this writ petition has been field for the issue of a writ of mandamus directing the second and third respondents, viz., the asst. director of inspection (intelligence), i.t. dept. and the ito, coimbatore, respectively, to release the currency notes of rs. 50,000 seized from the petitioner, mangilal jain. the facts of the case may be stated as follows : on march 10, 1972, the officers of the customs department intercepted one samu jaffar, and recovered from him a paper packet containing currency notes to the tune of rs. 50,000. it was alleged that the paper packet was handed over to the said samu jaffar by the petitioner, mangilal jain, in the presence of one laxmichand jain. the customs authorities opened the packet in the presence of the said samu jaffar, laxmichand.....
Judgment:

Padmanabhan, J.

1. This writ petition has been field for the issue of a writ of mandamus directing the second and third respondents, viz., the Asst. Director of Inspection (Intelligence), I.T. Dept. and the ITO, Coimbatore, respectively, to release the currency notes of Rs. 50,000 seized from the petitioner, Mangilal Jain. The facts of the case may be stated as follows : On March 10, 1972, the officers of the customs department intercepted one Samu Jaffar, and recovered from him a paper packet containing currency notes to the tune of Rs. 50,000. It was alleged that the paper packet was handed over to the said Samu Jaffar by the petitioner, Mangilal Jain, in the presence of one Laxmichand Jain. The customs authorities opened the packet in the presence of the said Samu Jaffar, Laxmichand Jain and the petitioner and two independent witnesses. It was suspected that the sum of Rs. 50,000 which was said to have been handed over by the petitioner of Samu Jaffar was the sale proceeds of smuggled goods. Though the petitioner in the first instance contended that the money did not belong to him but to his uncle, Goverchand, later he claimed that he borrowed the money from M/s. Kewal Agencies for his father's business in Bombay, that while on his way to purchase a draft in the State Bank of India, Purasawalkam, he had stopped to talk to Samu Jaffar, a casual acquaintance of him, and it was at that time the customs officers seized the money from him. The seizure of the money was followed by searches of the premises of different persons by the customs authorities. In the course of the search 1,125 gold bars of 10 tolas each with foreign markings and valued at Rs. 11,06,467.12 were also seized by the customs authorities. Show-cause notices were issued to several persons and adjudication proceedings were held by the first respondent. The first respondent passed an order of adjudication on March 1. 1973. So far as the petitioner was concerned, the leased to the petitioner. We are not concerned with the order of adjudication in so far as it related to the other persons and to the confiscation of the gold bars seized.

2. Before the money could be actually returned to the petitioner, the incident attracted the notice of the intelligence wing of the I.T. Dept. An investigation by the intelligence wing revealed that one Bakshiram was involved in smuggling activities and that the sum of Rs. 50,000, which was seized by the customs authorities from the custody of Samu Jaffar, really belonged to Bakshiram and constituted undisclosed income in his hands. Accordingly, the Commission of Income-tax, Madras-2, issued a warrant, under s. 132(1) of the I. T. Act, 1961, and on the basis of the said warrant, the Asst. Director of Inspection (Intelligence) took charge of the money from the customs Dept. Thereafter, the ITO passed an order under s. 132(5) of the I. T. Act holding that the sum of Rs. 50,000 was undisclosed income in the hands of Bakshiram. Accordingly, a sum of Rs. 21,214 was adjusted against the tax on the undisclosed income and arrears of income-tax of Bakshiram and the balance was adjusted later on against the other tax arrears of Bakshiram.

3. Unaware of the Taking over of the sum of Rs. 50,000 from the customs authorities by the I.T. Dept., the petitioner filed W. P. No. 2328 of 1976 in this court for the issue of a writ of mandamus directing the customs dept. to release the sum of Rs. 50,000. The first respondent herein filed a counter affidavit in the said writ petition to the effect that the money had been seized by the second respondent herein as early as March 30, 1974. Consequently, W. P. No. 2328 of 1976 was dismissed on 22nd March, 1977. In the circumstances, the petitioner has filed this writ petition to compel respondent Nos. 2 and 3 to release the sum of Rs. 50,000 to the petitioner.

4. Mrs. Ramani Natarajan contended, on behalf of the petitioner, that it had been found in the order of adjudication dated March 1, 1973, passed by the first respondent that the sum of Rs. 50,000 belonged to the petitioner, Mangailal Jain, and that he was entitled to a return of the money. Accordingly, the first respondent had ordered the release of the amount to him. Respondents Nos. 2 and 3 have no jurisdiction to seize the money from the hands of the customs authorities. They have not issued any notice to the petitioner. The petitioner was, therefore, entitled to the release of the sum of Rs. 50,000.

5. On the other hand, Mr. A. N. Rangaswamy, the standing counsel for the revenue, contended that the investigation conducted by the intelligence wing of the I. T. Dept. showed that one Bakshiram was involved in smuggling operations and that the sum of Rs. 50,000 constituted undisclosed income in the hands of Bakshiram. In the statement given before the customs authorities on March 11, 1972, the petitioner stated that one Goverchand gave him the money to deliver it to Samu Jaffar on the same day, while Bakshiram himself gave a statement that he gave the said sum of Rs. 50,000 as loan to Mangilal Jain. In view of the fact that the petitioner had himself in the first instance disowned his title to the sum of Rs. 50,000, though he later on realised from the said statement, the I.T. authorities were convinced that the money belonged to Bakshiram. Accordingly, they gave notice to Bakshiram as the person concerned within the meaning of s. 132(5) of the I.T. Act and passed an order holding that the money constituted the undisclosed income in the hands of Bakshiram. The money was duly appropriated towards tax due on the undisclosed income and the arrears of tax due from Bakshiram. In the circumstances, Mr. Rangaswamy contended that the petitioner was not entitled to any relief in the writ petition.

6. There is no dispute about the fact that the sum of Rs. 50,000 was taken over by respondents Nos. 2 and 3 from the first respondent on the basis of a warrant issued by the Commissioner under s. 132 of the I. T. Act. In this connection, it is necessary to consider the order of adjudication passed by the first respondent. As already stated, before the customs authorities, the question as regards the sum of Rs. 50,000 was whether it was recovered from the petitioner, Mangilal Jain, and whether the petitioner was entitled to the sum of Rs. 50,000. Though in the first instance, the petitioner gave a statement that he was asked by one Goverchand to hand over the sum of Rs. 50,000 to Samu Jaffar, later he took the stand that he had borrowed the sum of Rs. 50,000 from Bakshiram for the business of his father and the money was seized from him while he was on his way to obtain a draft from the State Bank of India and while he had stopped to talk to Samu Jaffar on the way. After discussing the evidence, the first respondent in his order has clearly found in para. 88 of his order as follows :

'When I asked Bakshiram whether Mangilal gave any receipt for the amount he replied that Marwaris do not give or take receipts, I then asked how he could give Rs. 50,000 without any receipt or signature and he replied that Mangilal was related to him and his father is known to Mangilal's father for about 40 years and that they were good friends and belonged to the same place. When I questioned him whether the customs officers raided his shop at any time, he replied that they had done so but did not recover anything or book any case. Bakshiram also showed the day book entry to the effect that he had given Rs. 50,000 to Mangilal on March 10, 1972, when the book which was in the customs house custody was shown during cross-examination at his request. He was also able to explain how that amount was available with him. When I asked him whether anybody had told him about the currency seizure before the officers came to his shop, he replied in the negative. Having regard to all these facts it is difficult for me to hold that it has been proved that the paper packet containing the sum of Rs. 50,000 was actually recovered from the possession of Shri Samu Jaffar. On the contrary, from the reply of the seizing officers, the opposite conclusion might be justified. In so far as the question whether it represents the sale proceeds of smuggled gold is concerned, I shall deal with it when I examine the case against Samu Jaffar. Mangilal having satisfactorily explained and proved the source of the sum of Rs. 50,000 and not having admitted even in the initial statement that it represented the sale proceeds of smuggled gold, cannot be held to be guilty of any offence under the Customs Act. The same applied to Lakshmichand also; nor has any case been made out against Goverchand because in his statement he had denied having given Rs. 50,000 to Mangilal. In fact he has pleaded an alibi of absence from Madras at the material time. I, therefore, hold that there is no evidence against Goverchand also under the Customs Act.'

7. Ultimately, the first-respondent directed the sum of Rs. 50,000 being released to the petitioner, Mangilal Jain. The effect of the order of adjudication is that the sum of Rs. 50,000 was seized from the petitioner as alleged by him and that he had borrowed the money from Bakshiram. Therefore, when respondents Nos. 2 and 3 took over the money from the customs authorities it must be deemed that they had seized the money from the physical possession of Mangilal Jain. If the money that the respondents Nos. 2 and 3 took over from the customs authorities represented the money which was actually seized from the physical possession of the petitioner and if it really belonged to him, as found in the order of adjudication, respondents Nos. 2 and 3 were bound to issue to the petitioner before they could pass any orders with regard to the said amount.

8. Mr. A N. Rangaswamy vehemently contended that the petitioner was not entitled to any notice before respondents Nos. 2 and 3 passed any orders with regard to the sum of Rs. 50,000. According to the learned counsel, s. 132(5) of the I.T. Act empowered the Commissioner to seize any money in the possession of a person if he had reason to believe that such person was in possession of any money which represented wholly or partly undisclosed income or property. Section 132(5) enabled the ITO, after affording reasonable opportunity to the person concerned of being heard, to pass an order estimating the undisclosed income and calculating the amount of tax on the income so estimated in accordance with the provisions of the Act. Mr. Rangaswamy contended that in this case the I. T. authorities took the money from the customs authorities in the reasonable belief that the money constituted undisclosed income in the hands of Bakshiram. The ITO gave notice to Bakshiram who was the person concerned within the meaning of s. 132(5) of the Act and passed an order under s. 132(5) of the Act. According to Mr. Rangaswamy, the petitioner was not the 'person concerned' within the meaning of s. 132(5) of the Act and was not entitled to any notice. The petitioner's remedy if he is aggrieved by the order passed by the ITO under s. 132(5) of the Act is to file an objection under s. 132(11) of the Act. I am unable to agree with the learned counsel.

9. The scheme of s. 132 of the I.T. Act in so far as it relates to money is as follows : Section 132(1) provides that where the Director of Inspection or the Commissioner or any such Dy. Director of Inspection or the IAC as may be empowered in this behalf by the Board, has reason to believe that any person is in possession of any money and such money represents either wholly or partly the undisclosed income which has not been or would not be disclosed for the purpose of the Indian I.T. Act, 1922, or the I.T. Act, 1961, the Director of Inspection or the Commissioner, as the case may be, may authorise any Dy. Director of Inspection, IAC, Asst. Director of Inspection or the ITO to seize such money. Section 132(1A) provides that where any Commissioner, in consequence of information in his possession, has reason to suspect that any money, in respect of which an officer has been authorised by the Director of Inspection or any other Commissioner or any such Dy. Director of Inspection or IAC as may be empowered in this behalf by the Board to take action under cls. (i) to (v) of sub-s. (1), are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-s (1), such Commissioner may, notwithstanding anything contained in s. 121, authorise and said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft. Section 132(4) provides that the authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any money and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian I.T. Act, 1922 or under the 1961 Act. Section 132(4A)(i) provides that where any money is found in the possession or control of any person in the course of a search, it may be presumed that such money belongs to such person. Section 132(5) provides that where any money is seized under sub-s. (1) or sub-s. (1A), the ITO shall pass an order. Before passing an order, he shall afford a reasonable opportunity to the person concerned of being heard and shall make such enquiry as may be prescribed. The order shall be passed within 90 days of the seizure. The order shall estimate the undisclosed income in a summary manner to the best of his judgment on the basis of such materials as are available with him. He shall calculate the amount of tax due on the income so estimated in accordance with the provisions of the Indian I. T. Act, 1922, or the I.T. Act, 1961. He shall determine the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian I.T. Act, 1922 or the I. T. Act, 1961, as if the order had been the order of regular assessment. He shall specify 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-s. (1) of s. 230A in respect of which such person is in default or is deemed to be in default. He shall 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 cls. (ii), (iia) and (iii) and forthwith release the the remaining portion, if any, of the assets to the person from whose custody they were seized. If it is not possible for the ITO 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. Where a person has paid or made satisfactory arrangements for the payment of all the amounts referred to in cls. (ii). (iia) and (iii) or any part thereof, the ITO, 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. Section 132(6) provides that the assets retained under sub-s. (5) may be dealth with in accordance with the provisions of s. 132B. Section 132(7) provides that if the ITO is satisfied that the seized assets or any part thereof were held by such person for or on behalf of any other person, the ITO may proceed under sub-s. (5) against such person, and all the provisions of this section shall apply accordingly. Section 132(8), (9),(9A) and 10 deals with books of accounts or other documents seized. Section 132(11) provides that if any person objects for any reason to an order made under sub-s. (5), he may, within thirty days of the date of such order, make an application to such authority, as may be notified in this behalf by the Central Govt. in the Official Gazette stating therein the reasons for such objection and requesting for appropriate relief. Section 132(12) provides that on receipt of the application under sub-s. (10) the Board, or on receipt of the application under sub-s. (11) the notified authority, may after giving the applicant an opportunity of being heard, pass such order as it thinks fit. Section 132(13) provides that the provisions of the Code of Criminal Procedure, 1973, relating to searches and seizure shall apply, so far as may be, to searches and seizure under sub-s. (1) or sub-s. (1A). Section 132(14) provides for the framing of rules.

10. From the above provisions it is clear that the section empowers the authorised officer, on the basis of an authorisation issued by the Director of Inspection or the Commissioner to seize money from the possession and control of a person if the authorised officer has reason to believe that the money represents either wholly or partly undisclosed income in his hands. The authorised officer has to examine on oath the person from whose possession or control the money is seized. In this case, even though the I.T. authorities took charge of the money from the control of the customs authorities, it must be deemed that the money has been seized from the physical possession of the petitioner. I say that the money has been seized from the custody of the petitioner because in his order of adjudication the first respondent has categorically found that the customs officers seized the money from the petitioner and not from Samu Jaffar as alleged. Consequently, the authorities were bound to give notice to the petitioner and take his statement. Further, s. 132(5) enjoins that the ITO shall hold an enquiry. Before holding an enquiry, the ITO has to afford a reasonable opportunity to the person concerned. The person concerned shall primarily be the person from whose custody or possession the money has been seized because s. 132(4A) further raises a presumption that the money belongs to the person from whom it has been seized. Therefore, before any enquiry is held as required under s. 132(5) and before an order is passed, it is mandatory that a notice should be issued to the person from whom the money is seized. That the notice should be given to the person from whom the money is seized, is further made clear from the last part of s. 132(5) which states that the officer should 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 cls. (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized. Mr. Rangaswamy, the learned counsel for the revenue, argued that since the I. T. authorities had reasonable belief that the sum of Rs. 50,000, seized from the customs authorities, represented the undisclosed income in the hands of Bakshiram and not the petitioner, no notice was necessary to be given to the petitioner. The learned counsel further argued that if the petitioner was aggrieved by the order passed by the ITO under s. 132(5) the remedy would be to file an application under s. 132(11) before the appropriate authority for release of the amounts. I am unable to agree. The money that was taken charge of from the customs authorities was the money that was physically seized from the petitioner as decided by the first respondent in his order of adjudication. Without affording a reasonable opportunity to the petitioner of being heard on the question whether he was entitled to the money or whether the money belonged to Bakshiram, the I. T. authorities could not say that the money belonged to Bakshiram and that they had dealt with the same under s. 132(5) as if the money was undisclosed income in the hands of Bakshiram. If, as contended by Mr. Rangaswamy, the authorities had reason to believe that the money was held by the petitioner for and on behalf of Bakshiram and it represented the undisclosed income in the hands of Bakshiram, then the authorities were bound to give notice not only to the petitioner but to Bakshiram as well. In this context, s. 132(7) is significant. It provides that if the ITO is satisfied that the seized assets or any part thereof were held by such person for or on behalf of any other person the ITO may proceed under sub-s. (5) against such other person and all the provisions of this section shall apply accordingly. I am, therefore, clearly of the view that before the ITO passed any orders under s. 132(5) he was bound to give notice to the petitioner.

11. Mr. Rangaswamy cited the decision of the Bench of this court in Gulab & Co. v. Supdt. of Central Excise : [1975]98ITR581(Mad) and stated that the person concerned shall refer only to the person to whom a warrant is issued and not the person who was in actual possession. This decision is not an authority for the proposition that the person concerned would not take in the person from whom the money was seized. The contention before the Bench was that the words 'person concerned' could refer only to the person from whom the goods were seized and, therefore, the section could not be invoked unless the person who was believed to have not disclosed the income or other asset was in physical or actual possession or in the possession of any other person on his behalf and not in their own right or authority. This contention was not accepted by the Bench. The learned judges observed as follows (p. 602) :

'That sub-section refers to seizure of the assets under sub-section (1) of section 132 and giving all opportunity to the person concerned for being heard. We have already seen that the words `any person in possession' in section 132(1)(c) refer to the person to whom the money belonged and from whose income the same had not been included for the purpose of the Income-tax Act. Therefore, the words `person concerned' in section 132(5) could refer only to the person against whom a warrant is issued and not the person who was in actual possession. This does not mean that the person who was in physical possession and from whom the actual seizure was effected need not be given any opportunity of being heard. He is of course a person who is entitled to be heard both under the provisions of the Act and under the principles of natural justice.'

12. The learned judges quoted the following passage from the judgment of the Gujarat High Court in Ramjibhai Kalidas v. I. G. Desai, ITO : [1971]80ITR721(Guj) :

'`What is the true connotation of the expression 'person concerned Mr. Pathak, on behalf of the petitioners, contended that the words 'person concerned' referred only to the person form whose possession the undisclosed income or property was seized and they had no reference to the owner of the undisclosed income or property in cases where the person in possession was other than the owner. This contention does not appeal to us. The words used are 'person concerned' and not 'person from whose custody or possession the assets were seized'. We find that in sub-section (5) itself, the legislature has used two different expressions, namely, 'person concerned' and 'person from whose custody they were seized'. To equate one expression with the other would be to attribute looseness of language to the legislature. The ordinary canon of construction is that when the legislature has used two different expressions in the same section, the legislature must have intended to convey two different meanings. The words 'person concerned' in the context in which they occur clearly refer to the person who would be concerned or affected by the making of the order and retention of the seized assets under sub-section (5). Ordinarily, having regard to the nature of the undisclosed income or property the person found in possession of it would be the owner and in the absence of any information to the contrary, the Income-tax Officer would presume him to be the owner and proceed against him under sub-section (5). Where such is the case, the person in possession would be the 'person concerned' for the purpose of sub-section (5). But, if, as a result of examination of the person in possession under sub-section (4) or otherwise, the Income-tax Officer comes to know that someone other than the person in possession is the owner of the undisclosed income or property, he may proceed to take action against such person under sub-section (5) and in that event such person and not the person in possession would be the 'person concerned'. 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 given a reasonable opportunity of being heard before an order is made against him and the assets seized are retained for the satisfaction of his existing and estimated tax liability.'

13. Mr. Rangaswamy then cited the decision in Girija Shanker Sharma v. Union of India : [1978]114ITR875(MP) . This decision, far from supporting the case of Mr. Rangaswamy, states that notice to the person from whom the money was actually seized is necessary. Singh J. has observed as follows (p. 880) :

'Before making the order under sub-section (5) the Income-tax Officer has to afford to the person concerned, a reasonable opportunity of being hard. The 'person concerned' in sub-section (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 as 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 form 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 an on whose behalf the assets were held by the person from whom they were seized. If only part of the assets were held by the person from whom they were seized. If only part of the assets were held by the person form 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 sub-section (5).'

14. From the above decisions, it follows that ordinarily the person in possession is the owner and in the absents of any information to the contrary the ITO would presume him to be the owner. Therefore, he is the person who is entitled to be heard both under the provisions of the Act and on the principles of natural justice. No doubt, if after hearing him the ITO comes to the conclusion that he holds the property for and on behalf of some other person he may proceed to take action against such person under sub-s. (5) and in that event such person and not the person in possession would be the person concerned. The decisions cited by Mr. Rangaswamy do not lay down the law that the person from whose possession money has been recovered need not be given any notice. I am, therefore, of the view that the impugned order passed by respondents Nos. 2 and 3 under s. 132(5) is in violation of the principles of natural justice and has to be set aside.

15. The next question that arises for consideration is whether the petitioner is entitled to the relief of the writ of mandamus for the release of the money. Mr. Rangaswamy contended that the revenue had reason to believe that the money seized from the possession of the petitioner represented the undisclosed income of Bakshiram in his hands and that consequently the revenue would be entitled to hold a fresh enquiry after giving notice to the petitioner. Mr. Rangaswamy further pleaded that the ITO did not in the first instance give notice to the petitioner as the statements given by the petitioner before the customs officer were contradictory, that the petitioner had in the first instance disowned any title to the money seized and therefore, the revenue bona fide believed that the money was seized from Samu Jaffar and that it belonged to Bakshiram. The learned counsel contended that the department and acted bona fide throughout. On the other hand, Mrs. Ramani Natarajan strenuously contended that as early as on March 1, 1973, the first respondent had found that the money was seized from the petitioner and ordered the release of the money to him. Yet, the revenue did not issue any notice to the petitioner. They passed order s under s. 132(5) without giving any information to the petitioner that they had seized the money from the customs authorities. Mrs. Ramani Natarajan further argued that under s. 132(5) the ITO was bound to pass an order within 90 days of the seizure. Consequently, inasmuch as no order has been passed under s. 132(5). against the petitioner within 90 days from the date of seizure, respondents Nos. 2 and 3 would not be competent to hold any further enquiry and the money should be ordered to be released.

16. The power of the appropriate authorities to seize money due if there is reasonable belief that it represented the undisclosed income of a person has not been disputed by Mrs. Ramani Natarajan. It is the definite case of the revenue that the money was seized from Samu Jaffar and that it represented the undisclosed income of one Bakshiram. The revenue is not bound by the order of adjudication passed but he first respondent stating that the money belonged to the petitioner. In the circumstances, it cannot be denied that respondents Nos. 2 and 3 were entitled to take the money from the customs authorities and pass an order under s. 132(5). However, in view of my finding that a notice was necessary to the petitioner before an order could be passed under s. 132(5), respondents Nos. 2 and 3 are void to issue notice to the petitioner and hold a fresh enquiry. However, the learned counsel for the petitioner argued that I would have no jurisdiction to direct a fresh enquiry to be held as any such direction would be contrary to the provisions of s. 132(5). In other words, the submission of the learned counsel for the petitioner was that after the period of 90 days from the date of seizure, the ITO would not be competent to pass any order under s. 132(5).. It is, therefore, necessary to consider the question whether it will be open to the ITO to hold a fresh enquiry after giving notice to the petitioner and pass appropriate orders under s. 132(5), notwithstanding the fact that 90 days from the date of seizure had elapsed.

17. In Director of Inspn. of Income-tax v. Pooran Mall & Sons : [1974]96ITR390(SC) , pursuant to an authorisation issued under s. 132(1) of the I. T. Act, 1961, searches were carried out on October 15 and 16, 1971, at the residence and business premises of one Pooran Mall and certain jewellery, cash and account books were seized. Certain silver bars were also seized. On January 12, 1972, the ITO passed a summary order under s. 132(5) on the basis that all the assets seized belonged to Pooran Mall. Thereupon, Pooran Mall & Sons, in which Pooran Mall was partner, and Pooran Mall himself filed a writ petition in the High Court challenging the order dated 12th January, 1972. In 6th April, 1972, the High Court on consent of parties quashed the order and permitted the department to make a fresh enquiry after giving an opportunity to the petitioner and to pass a fresh order within two months. After a fresh enquiry the ITO passed an order on June 5, 1972, holding that the silver bars belonged to Pooran Mall, the individual, and not to the firm, Pooran Mall & Sons. Thereupon, the firm and Pooran Mall again filed a writ petition challenging the second order and the High Court held that the ITO had no jurisdiction to pass that order beyond the period prescribed in s. 132(5) and set aside the order and directed return of the 114 bars of silver. The revenue appealed to the Supreme Court. The Supreme Court reversed the decision of the High Court. The Supreme Court held as follows (p. 394) :

'Even if the period of time fixed under section 132(5) is held to be mandatory that was satisfied when the first order was made. Thereafter, if any direction is given under section 132(12) or by a court in writ proceedings, as in this case, we do not think an order made in pursuance of such a direction would be subject to the limitations prescribed under section 132(5). Once the order has been made within ninety days the aggrieved person has got the right to approach the notified authority under section 132(11) within thirty days and that authority can direct the Income-tax Officer to pass a fresh order. We cannot accept the contention on behalf of the respondents that even such a fresh order should be passed within ninety days. It would make the sub-section (11) and (12) of section 132 ridiculous and useless.'

18. In CIT v. National Taj Traders : [1980]121ITR535(SC) , the question arose whether the period of limitation of two years prescribed under section 33B(2)(b) of the Indian I. T. Act, 1922 would apply to orders passed pursuant to an order of remand. Sub-section (1) of s. 33B conferred power on the Commissioner to revise the ITO's orders. Sub-section (2) (b) prescribed a period of limitation by providing that no order shall be made under sub-section (1) after the expiry of two years from the date of the order sought to be revised. In the particular case, the Commissioner exercised his powers under s. 33B and passed an ex parte order on 6th August, 1962. Against the order of the Commissioner the assessee filed an appeal to the Appellate Tribunal under s. 33B (3). The Appellate Tribunal vacated the Commissioner's order dated 6th August, 1962, on the ground that the order violated the principles of natural justice and remanded the matter to the Commissioner with a direction to dispose of it afresh after giving due opportunity to the respondents. Arising out of the order of the Appellate Tribunal two matters were referred for adjudication by the High Court. One of the question that was referred was whether the Appellate Tribunal acted properly by vacating the order of the Commissioner under s. 33B and in directing him to dispose of the proceedings afresh after giving due opportunity to the assessee. In dealing with this question the High Court of Calcutta held that though the Tribunal acted properly in vacating or cancelling the Commissioner's order, it did not act properly in directing him to dispose of the case afresh under s. 33B (1) because the period of two years prescribed under s. 33B (2) (b) for him to act under s. 33B (1) had expired. In other words, the High Court held that the provisions of sub-s. (2) (b) were absolute and covered even a revisional order of a Commissioner passed in pursuance of an order given by an appellate authority. Against the order of the High Court, the revenue took up the matter to the Supreme Court. The Supreme Court observed as follows (p. 544) :

'These considerations compel us to construe the words of sub-s. (2) (b) as being applicable to suo motu orders of the Commissioner in revision and not to orders made by him pursuant to a direction or order passed by the Appellate Tribunal under sub-s. (4) or by any other higher authority. Such construction will be in consonance with the principle that all parts of the sections should be construed together and every clauses thereof should be construed with reference to the context and other clauses thereof so that the construction put on that particular provision makes a consistent enactment of the whole statute.'

19. In this connection, the Supreme Court approved of the correctness of the decision of the Bombay High Court in Solanki's case : [1960]39ITR522(Bom) . The Supreme Court further followed the decision in Pooran Mall's case : [1974]96ITR390(SC) , and quoted the passage therefrom which I have already quoted. With reference to s. 132, the Supreme Court further observed as follows (p. 546 of 121 ITR) :

'`It may be pointed out that in s. 132 there is no provision removing or relaxing the bar of limitation contained in s. 132(5) enabling the ITO to pass an order afresh pursuant to any direction issued to him by a higher authority under s. 132(12) and even then this court took the view that the limitation prescribed under s. 132(5) will be applicable only to the initial order to be made by the ITO and not to an order that would be made by him pursuant to a direction from the Board or notified authority. The concerned provisions were read together and such construction was put on sub-s. (5) of s. 132 as made a consistent enactment of the whole statute.''

20. The next decision to be referred to is yet another decision of the Supreme Court in Grindlays Bank Ltd. v. ITO : [1980]122ITR55(SC) . During the assessment proceedings for the assessment year 1972-73, a notice under s. 142(1) of the I. T. Act, 1961, was issued to the assessee, Grindlays Bank Ltd., for production of certain accounts and documents. Challenging that notice, the assessee filed a writ petition in the Calcutta High Court. A single judge of the Calcutta High Court passed an order of injunction restraining the ITO from proceeding with the assessment and on March 25, 1975, made the order operative for the pendency of the petition. On August 31, 1976, the single judge disposed of the petition by his judgment including therein a direction to the assessee to comply with the notice and a direction to the ITO to complete the assessment by March 31, 1977. Sub-sequently, the single judge amended his judgment requiring the assessment to be completed on March 31, 1977, but not before that date and the ITO made the order on the date. The assessee preferred an appeal to a Division bench of the High Court and the Division Bench allowed the appeal, quashed the notice and the assessment dated March 31, 1977, and also directed the ITO to make a fresh assessment. The assessee appealed to the Supreme Court. It was contended before by limitation the High Court was not competent to give a direction for a fresh assessment. Pathak j., speaking for the court, observed as follows (p. 59) :

'The character of an assessment proceeding, of which the impugned notice and the assessment order formed part, being quasi-judicial, the certiorari jurisdiction of the High Court under art. 226 was attracted. Ordinarily, where the High Court exercises such jurisdiction it merely quashes the offending order and the consequential legal effect is that but for the offending order and the consequential legal effect is that but for the offending order the remaining part of the proceeding stands automatically revived before the inferior court or tribunal with the need for fresh consideration and disposal by a fresh order. Ordinarily, the High Court does not substitute its own order for the order quashed by it. It is, of course, a different case where the adjudication by the High Court establishes a complete want of jurisdiction in the inferior court or tribunal to entertain or to take the proceeding at all. In that event, on the quashing of the proceeding by the High Court, there is no revival at all.'

21. In this connection, the leaned judge followed the decision of the Supreme Court in Director of Inspection of Income-tax (Investigation) v. Pooran Mall & Sons : [1974]96ITR390(SC) , and extracted the following passage therefrom (p. 60 of 122 ITR) :

'`The court in exercising its powers under article 226 has to mould the remedy to suit the facts of a case. If in a particular case a court takes the view that the Income-tax Officer, while passing an order under section 132(5), did not give an adequate opportunity to the party concerned, it should not be left with the only option of quashing it and putting the party at an advantage even though it may be satisfied that on the material before him the conclusion arrived at by the Income-tax Officer was correct or dismissing the petition because otherwise the party would get an unfair advantage. The power to quash an order under article 226 can be exercised not merely when the order sought to be quashed is one made without jurisdiction in which case there can be no room for the same authority to be directed to deal with it. But, in the circumstances of a case, the court might take the view that another authority has the jurisdiction to deal with the matter and may direct that authority to deal with it or where the order of the authority which has the jurisdiction is vitiated by circumstances, like failure to observe the principles of natural justice the court may quash the order and direct the authority to dispose of the matter afresh after giving the aggrieved party a reasonable opportunity of putting forward its case. Otherwise, it would mean that where a court quashes an order because the principles of natural justice have not been complied with, it should not, while passing that order, permit the tribunal or the authority to deal with it again irrespective of the merits of the case.''

22. The principles that emerge from the above decisions is that the mandate under s. 132(5) of the I. T. Act, 1961, that an order should be passed within 90 days from the date of seizure will be satisfied if the initial order is passed by the ITO within that period. Thereafter, if any direction is given under s. 132(12) or by a court in proceedings under art. 226 of the Constitution of India, any order passed pursuant to such a direction would not be subject to the limitation prescribed under s. 132(5). Any other conclusion would take away the right made a available to persons aggrieved by the order to prefer objections under s. 132(11). It will also make any order that may be passed under s. 132(12) ineffective. Further, the court, which exercise its powers under art. 226 of the Constitution, has got inherent powers as observed by the Supreme Court in Grindlays Bank Ltd. v. ITO : [1980]122ITR55(SC) , to make all such orders as are necessary for doing complete justice to the parties. The impugned order, in the instant case, has to be quashed not because the ITO had no jurisdiction to pass the order but because the principles of natural justice had not been complied with in the sense that no notice had been given the petitioner. To uphold the argument of Mrs. Ramani Natarajan that no direction should be given to the ITO to pass a fresh order after giving the petitioner a reasonable opportunity of putting forward his case would be putting the petitioner at an unfair advantage. I have, therefore, no hesitation in holding that the period of limitation prescribed under s. 132(5) applies only to orders passed at the initial stage. The period of limitation will not apply when a fresh order is passed by the ITO pursuant to any direction given by the appropriate authority under s. 132(12) or by the High Court in proceedings under art. 226 of the Constitution of India.

23. In the result, the order passed by the ITO under s. 132(5) is quashed and the ITO, the third respondent herein, is directed to pass fresh orders under s. 132(5) after giving the petitioner a reasonable opportunity of being heard. In view of the fact that a long time has elapsed since the seizure took place the third respondent is directed to dispose of the matter within six months from this date. In the view that I have taken the petitioner is not entitled to the relief of mandamus for the release of the sum of Rs. 50,000. With the direction as given above, the writ petition is dismissed without costs.


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