Madhya Pradesh High Court
Biaora Constructions (P.) Ltd. vs Director Of Income-Tax ... on 12 September, 2005
Equivalent citations: (2006)202CTR(MP)73, [2006]281ITR247(MP)
Author: A.M. Sapre
Bench: A.M. Sapre
JUDGMENT A.M. Sapre, J.
1. By filing this writ under article 226/227 of the Constitution of India, the petitioner seeks to challenge the retention order, dated April 2, 2003 (annexure P-3), passed by respondent No. 1 as also authorisation order dated April 7, 2003, issued under Section 132A of the Income-tax Act (annexure P-10). In order to appreciate the controversy involved in the writ, it is necessary to take note of the facts pleaded in the petition as also in the return duly supported by the documents as annexures to the petition and the return.
2. On April 2, 2003, one Sanjiv Naik an employee of the petitioner-company was travelling in a Maruti Esteem car bearing No. MP-09-T-791 from Biaora to Indore in the morning. When he reached near the outskirts of Indore, the station house officer of police station, Lasudia, intercepted the car and searched it.
3. In this search operation, the police party found in the car currency notes kept in a box. The police then seized the box and the notes which on being counted were found to be of the value of Rs. 30 lakhs. A panchanama (annexure P-2) was then prepared and after carrying out this seizure operation, the police (S.H.O) informed the Income-tax Department (respondents herein) about the seizure of Rs. 30 lakhs. By letter, dated April 2, 2003 (annexure P-3), impugned in this petition, respondent No. 1 directed the station house officer not to return the said amount so seized to any person much less to the person from whose custody it was seized. Since the person concerned, i.e., Mr. Sanjeev Nayak, from whom the currency notes were seized claimed to be in the employment of the petitioner-company as their site manager and also claimed that the seized money belonged to the petitioner-company hence, summons under Section 131 of the Income-tax Act was issued by respondent No. 1 to the petitioner, dated April 2, 2003, (annexure P-4), asking the petitioner to give evidence and/or to produce books of account or other documents as specified in the summons. A similar summon was also issued to one Jagdish Modani (annexure P-4-A) an employee of the petitioner. Pursuant to these summonses, the petitioner-company through Jagdish Modani, i.e., an employee of the company, appeared before respondent No. 2 and gave his statement (annexure P-5). Along with him, the statement of Sanjeev Nayak, i.e., the person from whose custody the money was seized was also recorded (annexure P-6) along with one Mr. P. Modani--director of the petitioner-company (annexure P-8). In these proceedings, the petitioner also filed books of account (annexure P-5 pages 34 to 43), certificates issued by the Bank of India, dated April 2, 2003 (annexure P-6 page 45/46, annexure P-9 pages 61 and 62). In the statement, it was deposed, inter alia, by all that the entire money which was seized is already accounted for by the petitioner in their books of account, that it is also reflected in the cash book, that it was in fact withdrawn by the petitioner from their cash credit loan account No. 1565 maintained by them for running their business activities with the Bank of India, Biaora branch, by two a/c cheques, i.e., cheque Nos. 132751 and 132752 dated March 29, 2003/March 31, 2003 totalling to Rs. 40,00,000 that the bank for safety purpose provided a box to the petitioner for carrying the currency notes, from Biaora to Indore, that the amount in question was needed for business purpose for making payments at Indore and hence, small currency notes were also exchanged from the bank. In substance, therefore, the stand of the petitioner was that the entire amount in question is accounted for, and its source having been fully explained with the documentary evidence, there is no reason much less valid reason to seize the amount and hence, it be returned to them.
4. On April 7, 2003, respondent No. 1 issued a requisition order (annexure P-10) impugned in this petition, as contemplated under Section 132A of the Act whereby the S.H.O. of police station Lasudia, was asked to deliver the seized amount of Rs. 30 lakhs to respondent No. 2. Pursuant to this order, the seized amount was accordingly handed over to respondent No. 2 and in consequence a receipt (annexure P-11) was issued.
5. On April 8, 2003 (annexure P-12), a summons under Section 131 of the Income-tax Act was issued to one Mr. P. Modani-director of the petitioner company. Pursuant to this summons, the petitioner filed reply (annexures P-13 and P-14), inter alia, reiterating the same stand mentioned supra on the earlier occasion while giving the statement. In support of the reply, the petitioner filed copies of the certificates of bank, account books, referred to supra. After submission of the reply and recording of statement, the income-tax authorities have done nothing in this case. The petitioner has filed application before the Chief Commissioner of Income-tax praying for release of the amount. However, no orders have so far been passed except sending of the letters to the petitioner to attend the hearing of the case as is clear from letter dated May 24, 2003 (annexure P-18). Instead by order dated April 24, 2003 (annexure P-16) respondent No. 2 has impounded the books of account. It is with this background and on the basis of these facts, the petitioner has come to this court questioning the very legality of the action taken by the respondents in seizing the amount by taking recourse to the provisions of Section 132A of the Income-tax Act.
6. The respondents have filed the return. It is stated on behalf of the respondents that the impugned action taken pursuant to Section 132A ibid is justified on facts. It is stated that there is an information in possession of the respondent as also (respondent No. 3) has reason to believe that assets in question, i.e., Rs. 30 lakhs, have not been and/or would not have been disclosed for taxing purpose by the petitioner from whose possession the same have been taken into custody. It is contended that the bundles of notes seized bore different dates of withdrawal and hence, there was a basis to seize assets treating the same as unaccounted/undisclosed income of the petitioner. It is also contended that there existed several inconsistencies in the statement recorded of the persons on behalf of the petitioner pursuant to summons issued by the respondents and hence a case under Section 132A ibid is made out.
7. Heard Shri G.M. Chafekar, learned senior counsel with Shri Sarda, learned Counsel for the petitioner, and Shri A.P. Patankar, learned Counsel for the respondents.
8. Placing reliance on several decisions of the Supreme Court and other High Courts reported in CIT v. Vindhya Metal Corporation ; Union of India v. Ajit Jain ; Ajit Jain v. Union of India [2000] 242 ITR 302 (Delhi); Vindhya Metal Corporation v. CIT interpreting the provisions relating to search and seizure contained in Sections 132 and 132A ibid, learned Counsel for the petitioner in the first instance contended that the impugned authorisation (annexure P-10) issued under Section 132A of the Act does not satisfy the requirement of Section 132A(1)(c) and hence bad in law. It was his contention that the twin requirements needed for invocation of powers under Section 132A ibid, namely, "information in possession" and "has reason to believe" are not present in the facts of this case. It was further contended that the other requirement contained in Clause (c), namely, "which has not been" or "would not have been disclosed" by the person from whose possession/control such assets have been taken into custody are also not satisfied in this case so as to invoke the powers conferred under Section 132A ibid by the Revenue against the petitioner. Learned Counsel contended that voluminous documents filed by the petitioner immediately after seizure pursuant to summons issued to them clearly and unmistakably proved beyond any reasonable doubt that the seized assets (Rs. 30 lakhs) belonged to the petitioner and were duly accounted for in their books of account. According to learned Counsel, copies of bank statements showing withdrawal of amounts from the bank account of the petitioner, copies of account books, certificate issued by the bank certifying withdrawals by cheques were sufficient proof in support of the fact that the seized amount was not an income/assets from any undisclosed sources but it was an income which has been disclosed in the books and/or would have been disclosed in the return. In reply, learned Counsel for the Revenue supported the impugned action on the basis of the stand taken in the return. According to learned Counsel, in view of inconsistent statements made, and different dates mentioned in the currency notes, seized, the impugned action was called for by invoking the powers conferred under Section 132A ibid.
9. Having heard learned Counsel for the parties and having perused the record of the case, I am inclined to allow the writ and quash the impugned retention and authorisation (annexures P-3 and P-10), issued under Section 132A of the Act.
10. Law on the point of interpretation of Section 132 and Section 132A and in particular the words employed therein in regard to exercise of powers and its extent and judicial review by courts is fairly well settled. This is what was held by the Allahabad High Court in the case of Vindhya Metal Corporation v. CIT . This view was later upheld by the Supreme Court in an appeal arising out of this very case in a case reported in CIT v. Vindhya Metal Corporation :
It is settled that the existence or otherwise of the condition precedent to exercise of power under these provisions is open to judicial scrutiny. The absence of the condition precedent would naturally have the effect of vitiating the authorisation made by the Commissioner in either of the two provisions and the proceedings consequent thereto. While the sufficiency or otherwise of the information cannot be examined by the court, the existence of information and its relevance to the formation of the belief can undoubtedly be gone into. Also, whether on the material available with the Commissioner, any reasonable person could have arrived at the conclusion that a search, seizure or requisition should be authorised is a field open to judicial review (see Chhugamal Rajpal v. S.P. Chaliha ; Motilal v. Preventive Intelligence Officer ; H.L. Sibal v. CIT ; ITO v. Lakhmani Mewal Das ; Smt. Manju Tandon v. T.N. Kapoor [1978] 115 ITR 473 (All) and Ganga Prasad Maheshwari v. CIT .
11. In view of the aforesaid principle of law laid down, there can be no dispute for the proposition that the court is possessed of the power to examine the existence of information and its relevance necessary for formation of belief and, secondly, whether on the material available with the Commissioner, any reasonable person could have arrived at the conclusion that a search, seizure or requisition should be authorised under Section 132/132A ibid.
12. In my considered view, in the light of the documents such as (i) account books of the petitioner (annexure P-5), (ii) certificate of bank, certifying withdrawal of Rs. 40,00,000 (annexure P-6) prior to the date of seizure, (iii) certificate of bank certifying exchange of notes (annexure P-9) filed by the petitioner coupled with the fact that the petitioner is a regular assessee subject to assessment proceedings under the Income-tax Act, no case for invocation of requisition of assets within the meaning of Section 132A of the Act was made out against the petitioner. In other words, the petitioner had furnished adequate and sufficient material with the respondents to show that the sources of assets have been explained beyond any reasonable doubt and hence there was no need to invoke Section 132A ibid in relation to the assets in question.
13. It is not in dispute that the petitioner is a regular assessee having PAN. It is also not in dispute that the amount in question was withdrawn from the bank by the petitioner from their account vide 2 cheques on March 29, 2003 totalling to Rs. 40,00,000 (annexure P-6), i.e., just 2 days prior to seizure on April 2, 2003. It is also not in dispute that the bank provided their box and exchanged currency notes (annexure P-9) on the request of the petitioner. It is also not in dispute that the said sum did reflect in the books of account of the petitioner as is clear from the entries in the cash book (annexure P5, page 35/36). In view of these documents, there was no justification on the part of the Income-tax Department (R-1/3) to invoke the powers conferred under Section 132A ibid for forming an opinion as contemplated under Section 132A(1)(c) that there is an information in their possession and that they have reason to believe that the assessee has not disclosed or would not have disclosed the assets in question for being taxed in their hands in any of the assessment year. In other words, there does not appear to be any valid and/or legal basis for forming an opinion so as to entitle the authorities specified in Section 132A for its invocation against the petitioner. It is not a case where the petitioner has failed to file any material or failed to explain the source or failed to file any material documents in support of the assets seized. But it is a case where the petitioner has filed relevant and material documents needed in such type of cases. As stated supra, the very fact that the amount seized was withdrawn from the bank by cheques and the account books did reflect such credit/ debit entries which are subjected to scrutiny in assessment proceedings of the petitioner indicated that, there is no case for invocation of powers conferred under Section 132A ibid. In other words, if the petitioner had failed to file/tender any document or failed to submit any explanation or having filed the same had been totally irrelevant and/or against the subject matter of seizure then invocation of powers under Section 132A of the Act would have been held justified.
14. Every asset which is capable of being seized under Section 132A of the Act cannot be subjected to the rigour of Section 132/132A ibid proceedings by the Revenue. It is only when the assessee fails to explain its source when called upon to do so or when the source to acquire the asset is found to be not legal or when it could not be explained satisfactorily then, formation of belief stands made out in favour of the Revenue resulting in attracting the rigour of Section 132A ibid and in consequence its retention for being dealt with under Section 132A and the special procedure prescribed for assessment.
15. In my opinion, the law laid down in the case of Vindhya Metal Corporation applies to the facts of the case in favour of the petitioner rather than in favour of the Revenue. In fact, the facts of this case stand on a stronger footing than that of the one involved in Vindhya Metal's case for striking down the impugned action taken under Section 132A ibid. In that case also the High Court struck down the authorisation and the same was upheld by the Supreme Court.
16. In the light of the aforesaid discussion, I was not impressed by any of the submissions urged by learned Counsel for the respondent/Revenue which were based on what was contained in the return. In my view, the stand taken by the Revenue by pointing out some inconsistency in the statement of witnesses and different dates in the currency notes do not in any way give rise for forming a belief for invocation of powers conferred under Section 132A ibid by the Revenue against an assessee.
17. Accordingly, and in view of the foregoing discussion, the petition succeeds and is hereby allowed. Impugned letter dated April 2, 2003 (annexure P-3) followed by the impugned authorisation, dated April 7, 2003 (annexure P-10) issued by respondent No. 2 is quashed by a writ of certiorari. As a consequence, the respondents are directed to return the seized amount of Rs. 30,00,000 to the petitioner forthwith as was done in the case of Vindhya Metal Corporation .
18. No costs.