Gauhati High Court
B.R. Metal Ltd. And Ors. vs Commissioner Of Income-Tax And Ors. on 1 April, 1999
Equivalent citations: [1999]239ITR329(GAUHATI)
JUDGMENT M. Sharma, J.
1. This writ petition has been filed by the petitioners for setting aside/quashing the warrant of authorisation dated September 17, 1998, under Section 132A(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), including the panchanama prepared by the respondent-Revenue authority and also for a direction to release Rs. 50,00,000 (rupees fifty lakhs) and other documents requisitioned under the said Section.
2. The contention of the petitioners is that petitioner No, 1 is a limited company and petitioner No. 2 is a shareholder and managing director and petitioner No. 3 is the employee of petitioner No. 1. The petitioner-company has been carrying on business of manufacture of dealing in, extractor, whole seller, retailer, exporter and importer of all types of ferrous and non-ferrous metal, alloy steels, ferro alloys, pig iron, etc. The petitioner-company also imports goods dealt in by it from the U.S.A. and the Middle East countries. That the petitioner-company has to pay huge customs duties on the imports made by it and during the current year from April 1, 1998 to September 17, 1998, paid a total amount of Rs. 4,62,29,916 (rupees four crores sixty two lakhs twenty-nine thousand nine hundred sixteen) as customs duty ; that the petitioner is a regular income-tax payer and submitted a return up to the year 1997-98. The petitioner paid income-tax of Rs. 10,34,813 for the year 1997-98 and Rs. 3,00,000 as first instalment of advance tax for the current year.
3. The petitioner's case is that on September 17, 1998, petitioner No. 3 was carrying Rs. 50,00,000 contained in two suit cases, from the office of the petitioner to its branch office at Delhi by Sahara India Airlines with two letters dated September 17, 1998, with him written on the letter pad of the company and addressed to its Delhi branch office stating that the amount was sent for depositing customs duty. It is further contended that the official of Sahara India Airlines informed the matter to the police and the said amount was seized by the police and informed the matter to the income-tax authority. Respondent No. 1, accordingly issued a warrant of authorisation and authorised respondents Nos. 2 and 3 for requisitioning the said amount from the police. Along with this cash amount, two letters were also seized by the police. By order dated October 7, 1998, while notice of motion was issued, the court after hearing the parties at length directed the respondents to release Rs. 40,00,000 out of Rs. 50,00,000.
4. The interim order of releasing the amount of Rs. 40,00,000 was passed on the consideration of the submission made on behalf of the petitioner, that the petitioner is a regular income-tax payer and used to pay advance tax and that any amount including the amount in question, which was meant for deposit of customs duty is open to the revenue authority for assessment in the coming assessment period and also that the petitioner is always at the disposal of the respondent-Revenue authority for any assessment and realisation thereof.
5. Mr. Sahewalla, learned counsel for the petitioner, has submitted that the conditions precedent for issuance of warrant of authorisation under Section 132A(1) of the Act were not present. That the authority prescribed in this Section before issue of a warrant of authorisation must have in consequence of information in his possession, reason to believe that those assets which are to be requisitioned represent either wholly or partly the income or property which had not been disclosed for the purpose of the Act. It was further submitted that the word "reason to believe" has been considered to be a most salutary safeguard on the exercise of powers by the officer concerned ; that while the "belief" may not be open to scrutiny, as it is, the final conclusion arrived at by the officer concerned as a result of mental exercise made by him on the information received, but the reason due to which the decision is reached, can always be examined by the court.
6. Section 132A(1)(a) and (b) of the Act which have a relevant bearing to the issues involved in the present case are quoted below :
"132A. Power to requisition books of account, etc.-- (1) Where the Director-General or Director or the Chief Commissioner or Commissioner, in consequence of information in his possession, has reason to believe that-
(a) any person to whom a summons under Sub-section (1) of Section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under Sub-section (1) of Section 131 of this Act or a notice under Sub-section (4) of Section 22 of the Indian Income-tax Act, 1922, or under Sub-section (1) of Section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents, has omitted or failed to produce, or cause to be produced, such books of account or other documents, as required by such summons or notice and the said books of account or other documents have been taken into custody by the officer or authority under any other law for the time being in force, or ...
(c) any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force."
Mr. Sahewalla, submitted that in view of the facts as revealed, the petitioner's case has not come under the purview of this Section.
Mr. Sahewalla, learned counsel for the petitioner, submitted that the authority prescribed has to consider the existing facts in order to arrive at a satisfaction or belief that any of the conditions stipulated in this Section exists in a particular and given case in order to authorise the officer to requisition the offending items of properties/documents from the authority in whose custody the same are lying. That only upon satisfaction of the existence of any of the conditions precedent, the competent authority under Section 132A(1) of the Act is vested with the power and jurisdiction to issue the warrant of authorisation for requisitioning the offending items of properties/documents lying in the custody of any officer or authority referred to in Section 132A(1) of the Act
7. In support of this submission, Mr. Sahewalla, learned counsel, referred to and relied on these decisions, namely, (1) ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC); and (2) Ganga Prasad Maheswari v. CIT [1983] 139 ITR 1043 (All).
8. It was further submitted that in view of the absence of such condition precedent, respondent No. 1 had no occasion to believe as to the existence of any conditions stipulated in the Section ; that existence of any such condition alone would confer jurisdiction to take action under Section 132A of the Act and that conditions precedent to the exericise of power of requisition under Section 132A not being in existence in the instant case, requisition of Rs. 50,00,000 belonging to the petitioner was without jurisdiction. It was further contended on behalf of the petitioner that the impugned action of the respondent is violative by non-consideration of relevant matter and the facts and circumstances of the case and the power conferred by the law having not been exercised in a bona fide manner, the impugned action is wholly illegal.
9. Mr. G. K. Joshi, learned counsel for the respondent, has furnished a copy of the satisfaction notice issued by the revenue authority and has submitted that in this note the revenue authority in clear terms explained its satisfaction. It was submitted that the information has been received from the incharge of Latasil Police Station, Guwahati, that a sum of Rs. 50,00,000 has been seized from the possession of petitioner No. 3, an employee of petitioner No. 1 by Mr. S. C. Barua, sub-inspector and officer in-charge of Azara Police Station, and that this police station also affirmed this information stating that the sum of Rs. 50,00,000 was found in the possession of petitioner No. 3, while he put two suit cases containing the entire cash through the luggage check in the counter of Sahara Airlines for flight to Delhi from Guwahati. Mr. Joshi, learned counsel for the respondent, pointing from the note of satisfaction stated that the concerned police authority, that is respondent No. 2 (sic), failed to explain satisfactorily the source of cash of Rs. 50,00,000 and provide satisfactory documentary evidence regarding procurement of huge amount of cash. It was further submitted that being satisfied on the materials/instructions received by the respondent authority, it was concluded that the said cash amount found in the possession of petitioner No. 3, appeared to be undisclosed amount and that the cash represented either wholly or partly income which has not been or would not have been disclosed for the purpose of the Income-tax Act, 1961, and that on the basis of this, the Commissioner of Income-tax, Guwahati has directed to issue warrants under Section 132A(1) of the Act to requisition the said amount from the officer-in-charge of the police station. Mr, Joshi in support of his submission relied on the following cases :
(a) Sudarshan and Co. v. CIT [1983] 139 ITR 1032 (All).
(b) Parasnath v. Union of India [1997] 225 ITR 365 (MP).
10. Mr. Sahewalla, learned counsel for the petitioner, has in his reply submitted that from the satisfaction note recorded by the respondent, it is clear that the warrant of authorisation was issued merely on the basis of the information received from the police and that satisfaction note stated that the cash found "appeared to be undisclosed" and, therefore, it was a case of suspicion, and that the same was issued merely on the basis of suspicion. To substantiate his submission, Mr. Sahewalla, learned counsel for the petitioner, relying on the decision in the case of Indian Oil Corporation v. ITO [1986] 159 ITR 956, 972 (SC), submitted that a belief cannot be based on suspicion ; more so, when there was no allegation of any offence by the police and no first information report was registered against the petitioner and thus there was no commission of any offence. Mr. Sahewalla further relying on the decision of the apex court in CIT v. Vindhya Metal Corporation [1997] 224 ITR 614 (SC), submitted that, the decision of this case is applicable in this instant case wherein the apex court decided the similar issue and quashed the warrants of authorisation issued under Section 132A.
11. Mr. Sahewalla, learned counsel for the petitioner, further submitted that petitioner No. 3 was suspiciously taking the amount through air line luggage without informing the airlines authorities which was beyond the satisfaction note and that the argument to the effect that the amount being huge, the suspicion arises naturally was also not tenable as "suspicion" cannot take the place of "reason to believe" and in support of this submission, Mr. Sahewalla referred the decision of the apex court wherein it was held that a belief cannot be based on suspicion.
12. In my discussion made hereinabove it is the admitted fact that along with the seized amount of Rs. 50,00,000 the police also seized two letters, which indicate that the amount has been sent to the Delhi office of the petitioner to pay customs duty. Further, the petitioner who is an assessee has been paying his income-tax regularly and advance tax has also been paid for the current period and in that view of the matter he also can include this amount in his return and explain the position and if found liable shall pay the tax according to the assessment. From the facts and circumstances of the case, it cannot be held that the amount is an undisclosed amount. Apparently the seized two letters disclosed the fact that the amount was meant for payment of customs duty. Therefore, I am of the view that there is merit in the submission of counsel for the petitioner that the warrant was issued merely on the. basis of the information received from the police and that according to the satisfaction note, "the cash found appeared to be undisclosed" is a clear case of suspicion. I further hold that there was no material before the Commissioner, other than the information from the police and there was no application of mind by him. It is also a fact that possession of the amount was not unexpected as the two seized-letters explained the purpose of possession of - the amount and, therefore, without anything more, the possession of cash cannot constitute information as such information cannot be treated as sufficient to bring home the inference that it was income which was not disclosed by the person in possession for the purpose of the Act.
13. In view of the judicial pronouncement and the legal position discussed above, the conditions precedent for issuance of warrant of authorisation, under Section 132A(1) are fully absent. In that view of the matter the warrant of authorisation is set aside and the respondent authority is directed to release the remaining amount of Rs. 10,00,000 (ten lakhs). It is always open-to the Revenue authority to make enquiry relating to the assessment of the amount as the petitioner is liable to show and explain the same in his income-tax return under the provisions of income-tax law. In the result the petition is allowed. No costs.