1. The petitioner seeks a writ of prohibition restraining the first respondent, the ITO, Central Circle I, madras-34, from handing over the gold, gold articles and ornaments weighing 10,395 grams of gold and 66.9 acts. of diamond seized from him on December 21, 1973. The facts of the case nay be stated briefly as follows :
The petitioner claims to carry on business in gunny bags. On December 21, 1973, his premises at 26/27, Ramanan Road, Madras, and the residence of his accountant, Vaidyanathan, at 11, Venkatesa Agraharam, Madras-4, were searched by the I. T. authorities under s. 132 of the I. T. Act. As a result of the search cash of Rs. 9,93,574 and gold, gold ornaments and diamond jewellery weighing 10,395 grams of gold and 66.9 cts. of diamond were recovered from the premises. Besides, certain documents and records were also seized by the Assistant Director of Inspection. An order under s. 132(5) of the I. T. Act was passed by the ITO. Under the said order, the first respondent estimated the alleged concealed income at Rs. 45,06,574 and levied a tax of Rs. 43,61,474. COnsequently, the order stated that all the assets that have been seized were being retained towards the tax as determined. The petitioner thereupon filed an appeal under s. 132(11) of the I. T. Act. While so, the Central Govt. promulgated an order 8, 1975, the voluntary Disclosure of Income and Wealth Ordinance, 1975. The petitioner filed a declaration under s. 14 of the said Ordinance and disclosed a sum of Rs. 23,00,300 for the assessment years 1965-66 to 1974-75. In the said declaration, the petitioner included the value of the gold and gold ornaments weighing 10,395 grams and diamond jewellery weighing 66.9 cts. The Commissioner accepted the disclosure subject to payment of tax. The petitioner then requested the first respondent and the Commissioner (Central), Madras, to appropriate the cash seized from his premises towards the tax and sell the items of gold and gold ornaments and diamond jewellery seized from his premises and appropriate the sale proceeds thereof also towards the tax. The first respondent agreed o the same. On the basis of the agreement arrived at between the petitioner and the first respondent the gold, gold ornaments and diamond jewellery were valued by Vummidi kannan of Vummidi Bangaru Chetty and Sons. While so, the second respondent, viz., the Collector of Central Excise, Madras, addressed a letter to the first respondent stating that the gold, gold ornaments and diamond jewellery seized by the I. T. department from the petitioner's premises should be handed over to him on the ground that the petitioner had committed in offence under s. 8(1) of the GOld (Control) Act and that a case has been registered against the petitioner for contravention of the provisions of s. 8 (1) of the Gold (Control) Act. The first respondent, therefore, called upon the petitioner by his letter dated October 1, 1977, to show cause why the gold, gold ornaments and diamond jewellery should not be handed over to the second respondent as required by him. It is in these circumstances the petitioner has filed this writ petition for the issue of a writ of prohibition restraining the first responded from handing over the gold, gold ornaments and diamond jewellery seized from him to the second respondent.
2. The first respondent has filed a counter-affidavit. The first respondent has admitted as substantially correct all the averments made by the petitioner in paras. 2 to 4 of his affidavit. However, the first respondent has stated that he would abide by any order that might be passed by this court.
3. Second respondent has filed a counter-affidavit. According to the second respondent, the petitioner had contravened ss. 8 (1) and 16 (1) and (5) of the Gold (Control) Act and the Customs Act, by possessing gold in excess of the quantity prescribed under the Act. The gold seized by the I. T. department, according to the second respondent, cannot be appropriated for income-tax arrears. Consequently, the first respondent was bound to had over the gold, gold ornaments and diamond jewellery to the second respondent. The items seized by the I. T. department are liable to be confiscated under s. 71 of the Gold (Control) Act. It is further counted that the by the act of seizure the ownership of the gold and jewellery did not pass to the I. T. department.
4. A supplemental affidavit has also been filed by the second respondent stating that a writ of prohibition would not lie against the first respondent. It is further stated that the petitioner will not be entitled to the immunity granted under s. 16 of the Voluntary Disclosure of Income and Wealth-tax Act, 1976, as he has not made a declaration as required by that section.
5. Mr. U. N. R. Rao, the senior standing counsel for the central Govt., raised preliminary objection that a writ of prohibition will not lie against the first respondent. In this case, the ITO had seized gold, gold ornaments and diamond jewellery and had initiated proceedings under s. 132 of the I. T. Act. Further, the petitioner had made a declaration under the VOluntary disclosure of Income and Wealth Ordinance, 1975. In the circumstances, the first respondent has been acting in a quasi judicial capacity vis-a-vis the petitioner. The petitioner's case is that under the provisions of the I. T. Act, the first respondent having decided to retain the gold, gold ornaments and diamond jewellery and apply the sale proceeds thereof in adjustment of the tax liability of the petitioner, the latter will have no jurisdiction to had over the items seized to the second respondent. In the circumstances, I do not find how a writ of prohibition will not lie. Even otherwise, Mr. Rao. conceded that the ambit of art. 226 of the Constitution of Indian being wide, it will be open to this court to give appropriate directions to the first respondent. In the circumstances, the preliminary objection in overruled.
6. Admittedly, the I. T. department seized cash to the extent of Rs. 9,93,574 and gold, gold ornaments and diamond jewellery weighing 10,395 grams of gold and 66.9 cts. of diamond. It is equally not disputed that on March 19, 1974, the ITO passed an order by which he estimated the alleged concealed income of the petitioner at Rs. 45,06,574 and also fixed the amount of tax payable by the petitioner at Rs. 43,61,574. The first respondent also stated in that order that all the assets seized were being retained to satisfy the aggregate of the amounts of tax payable by the petitioner. It is also common ground that after the promulgation of the Voluntary Disclosure of Income and Wealth Ordinance, 1975, the petitioner made a declaration under s. 14 of the Ordinance. He disclosed a sum of Rs. 23,00,000 for the assessment years 1956-66 to 1974-75. In arriving at the said income, the petitioner included the value of the gold, gold ornaments and diamond jewellery weighing 10,395 grams and 66.9 cts. respectively. The disclosure made by the petitioner in terms of s. 14 if the Ordinance was accepted by the Commissioner subject to the payment of tax. An agreement was arrived at between the petitioner and the first respondent that the cash seized from the premises of the petitioner should be adjusted against the tax due from the petitioner and that the gold, gold ornaments and diamond jewellery seized from the petitioner should be sole and the sale proceeds appropriated towards tax.
7. Section 16 of the Gold (Control) Act reads as follows :
'16. (1) Save as otherwise provided in this Chapter every person who owns, or is in possession, custody or control of, any article or ornament at the commencement of this Act, or acquires the ownership, possession, custody or control of any article or ornaments thereafter, shall made, within thirty days from such commencement or from such acquisition, as the case may be, or within such further period as the Administrator may, on sufficient cause being shown allow, a declaration in the prescribed form as to the quantity, description and other prescribed particulars of any article or ornament, or both, owned, possessed, held or controlled by him :
Provided that no such declaration shall be required to be made where a person who, having owned, possessed, held or controlled any article or ornament before the commencement of this Act, has already made a declaration in relation to that article, or ornament, or both : Provided further that nothing in this sub-section shall be construed as enabling any declaration to be made in respect of any gold for which the period prescribed or allowed under the law for the time being in force before the commencement of this Act had expired before such commencement.'
8. Section 16 (5) (b) of the Gold (Control) Act states as follows :
'No declaration referred to in sub-section (1) or sub-section (3) shall be required to be made,--....
(b) in relation to any ornaments, or both articles and ornaments, where both articles and ornaments are owned, possessed, held or controlled unless the total weight of such ornaments or both articles and ornaments, as the case may be, owned, possessed, held or controlled by -
(i) an individual who is not a member of a family exceeds two thousand grammes,
(ii) a family, exceeds four thousand grammes.'
9. It is admitted that the petitioner did not make a declaration as required under s. 16 of the Gold (Control) Act :
'71. (1) Any gold in respect of which any provision of this Act or any rule or order made thereunder has been, or is being, or is attempted to be, contravened, together with any package, covering or receptacle in which such gold is found, shall be liable to confiscation.
Provided that where it is established to the satisfaction of the officer adjudging the confiscation that such gold or other thing belongs to a person other tan the person who has, by any act or omission, rendered it liable to confiscation, and such act or omission was without the knowledge or connivance of the person to whom it belongs, it shall not be ordered to be confiscated but such other action, as is authorised by this Act, may be taken against the person who has, by such act or omission, rendered it liable to confiscated.'
10. In view of the above sections, Mr. Rao contended that the petitioner was in possession of gold, gold ornaments and diamond jewellery beyond the permissible limits prescribed in s. 16 (5) of the Gold (Control) Act and of the Gold (Control) Act. He not having made any such declaration was, according to Mr. Rao, liable to be proceeded against under s. 71 of the Gold (Control) Act.
11. Mr. V. Ramachandran, the learned counsel for the petitioner, did not dispute the fact that the petitioner might have contravened the provisions of the Gold (Control) Act by not making the declaration as required under s. 16 of the Act. According to the learned counsel, it will be open to the second respondent to take appropriate proceedings against the petitioner for alleged violation of any of the provisions of the Gold (Control) Act but it will no be open to the second respondent to confiscate the gold, gold ornaments and diamond jewellery. Mr. Ramachandran did not dispute the fact that, in an ordinary case, where a person owned, possessed, held or controlled gold ornaments above the limits prescribed under s. 16 (5) of the Gold (Control) Act, did not make declaration as required by s. 16 (1), the said gold would be liable to confiscation under s. 71 of the Act. But the argument of the learned counsel was that at the time the second respondent issued the notice to the first respondent calling upon him to hand over the gold, gold ornaments and diamond jewellery, the first respondent had already passed an order under s. 132(5) of the I. T. Act stating that the seized assets would be retained to meet the aggregate tax liabilities of the petitioner. The learned counsel also heavily learned on the agreement arrived at between the petitioner and the first respondent under which the first respondent has been authorised to sell the seized assets and appropriate the sale proceeds towards the tax liabilities of the petitioner. Therefore, as on the date the second respondent made a demand on the first respondent had become the owner of the assets. In the circumstances, the petitioner could not be said to be either the owner or the person in possession or control of the gold, gold ornaments and diamond jewellery.
12. Since it is not disputed that as on 1st January, 1976, the petitioner owned gold, gold ornaments and diamond jewellery in excess of the permissible limits prescribed under s. 16 (5) of the Gold (Control) Act, all these items of jewellery were liable to confiscation under s. 71 of the Gold (Control) Act. But the question for consideration is whether on the the date the 2nd respondent made a demand on the first respondent to hand over the jewellery to the former the petitioner continued to be the owner of these items of jewellery or whether the property in them had passed to the first respondent and the latter had become the owner thereof as contended for by Mr. Ramachandran.
13. Section 132(5) of the I. T. Act, 1961, reads as follows :
'Whether any money, bullion, jewellery or other valuable article or thing (hereinafter in this section and section 132A referred to as the assets) is seized under sub-section (1), the Income-tax Officer, after affording a reasonable opportunity to the person concerned for being heard and making such enquiry as may be prescribed, shall, within ninety days of the seizure, make an order, with the previous approval of the 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;
(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 ar 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 clause (ii) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized........'
14. Section 132B ofthe I.T.Act,1961, reads as follow :
'132B.(1) The assets retained under sub-section (5) of section 132 may be dealt with in the following manner namel :-
(i) The amount of the existing liability referred to in clause (iii) of the sub-section and the amount of the liability determined on completion of the regular assessment or reassessment for all the assessment years relevant to the previous years to which the income referred to in clause (i) of that sub-section related (including any penalty levied or interest payable in connection with such assessment or reassessment) and in respect of which he is in default or is deemed to be in default may be recovered out of such assets.
(ii) If the assets consist solely of money, or partly of money and partly of other assets, the Income-tax Officer may apply such money in the discharge of the liabilities referred to in clause (i) and the assessee shall be discharged of such liability to the extent of the money so applied.
(iii) The assets other than money may also be applied for the discharge of any such liability referred to in clause (i) as remains undischarged and for this purpose such assets shall be deemed to be under distraint as if such distraint was effected by the Income-tax Officer under authorisation from the Commissioner under sub-section (5) of section 226 and the Income-tax Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third schedule.
(2) Nothing contained in sub-section (1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act.
(3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized........'
15. Section 132(5) of the I. T. Act empowers the ITO to retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts of the tax due on the the estimated undisclosed income of a person and release the remaining portion. The section cannot be read to mean that once the ITO passes an order under s. 132(5), to the effect that he was retaining in his hands part off the assets or the whole thereof for the purpose of meeting the aggregate of the tax liability as estimated under s. 132(5)(i) and (ii) of the I. T. Act, the property in the assets immediately passes to the ITO. The section can only mean that it will be open to the ITO to appropriate the sale proceeds of the assets against the liability of the person concerned, unless it be that the entire assets are in the form of cash.
16. Section 132B of the I. T. Act, 1961, also, far from supporting the petitioner, supports the case of the second respondent. The section does not say that the assets retained under s. 132(5) immediately become the property of the ITO. On the other hand, s. 132B(1)(iii) clearly says that the ITO may recover the amount of the liabilities by the sale of assets other than money, while money can be applied in the discharge of the liabilities. Section 132B(1)(iii) make it clear that for the purpose of enabling the ITO to sell the assets, such assets shall be deemed to be under distraint as if such distraint was effected by the ITO under authorisation from the Commissioner under sub-s. (5) of s. 226. This makes the position clear, viz., that till the power of sale is exercised and the gold, gold ornaments and diamond jewellery are sold by the ITO the gold, gold ornaments and diamond jewellery can be said to be only under distraint and it cannot be said that the property in the gold, gold ornaments and diamond jewellery has passed to the ITO. If the entire property in the gold, gold ornaments and diamond jewellery is to be deemed o have passed to the ITO, there would be no question of the officer returning the assets or the proceeds thereof, which remain after the liabilities are adjusted, to the person concerned as provided for under s. 132B. This is made clear by the letter dated 24th December, 1976, written by the petitioner to the ITO. The letter clearly states that the petitioner has agreed for the sale of the assets and for the appropriation of the sale proceeds towards tax due. The petitioner has further stated in the letter that the excess, if any, after adjustment of the tax liabilities has to be returned to him. I am, therefore, not persuaded to agree with the submission of Mr. Ramachandran that by reason of ss. 132(5) and 132B and by reason of the order passed by the first respondent under s. 132(5) of the I. T. Act, the property in the gold, gold ornaments and diamond jewellery had passed from the petitioner to the first respondent. The first respondent has only the power to sell the gold, gold ornaments and diamond jewellery and adjust the sale proceeds towards arrears of tax due from the petitioner. Till the sale takes place the ownership of the property will continue to remain in the hands of the petitioner but under distraint by the ITO.
17. The Voluntary Disclosure of Income and Wealth Ordinance, 1975, was promulated on October8, 1975. It is submitted that the petitioner only made a declaration under s. 14 of the said Ordinance disclosing an income of Rs. 23,00,000 as already stated, for the years 1965-66 to 1974-75, and that the same was accepted by the Commissioner. It is also not disputed that s. 16 of the said Ordinance gives immunity from confiscation for violation of the provision of the Customs Act and the Gold (Control) Act only if a person files a declaration as requited by the section. It is not disputed that the petitioner had not filed a declaration under s. 16 of the Ordinance and assuch s. 16 of the Ordinance cannot come to the aid of the petitioner.
18. In the result, the writ petitioner fails and is dismissed, but in the circumstances there will no order as to costs.