Madras High Court
Panchugurumurthy vs Commissioner Of Income-Tax And Another on 7 March, 1994
Equivalent citations: [1995]217ITR51(MAD)
JUDGMENT Raju, J.
1. These two writ petitions may be dealt with together, since they relate to almost the same subject-matter, though in respect of two different writ petitions with different reliefs pertaining to the different stages of action.
2. Writ Petition No. 21200 of 1993 has been filed for a writ of mandamus directing the respondents to return the cash of Rs. 2,29,579, the jewellery and diamonds together with interest at 15 per cent. per annum. The petitioner claims that he was employed in the Andhra Expression Service Private Limited, having its registered office at Bombay-400 002, that he was working as a courier for carrying parcels between Hyderabad and Madras on behalf of the company, that he had carried parcels from Hyderabad to Madras on November 3, 1986, and the police intercepted him and searched the packets, which were claimed to have been entrusted to the petitioner for carrying and, ultimately they were found to contain cash of Rs. 2,29,579 and some other valuables in other parcels. It is also stated that these parcels were handed over to the petitioner on behalf of his employers and they do not belong to the petitioner. The statement was said to have been recorded on November 4, 1986, and the money and other articles were said to have been taken possession of by the respondent from the Station House Officer, Flower Bazaar Police Station, Madras-1, under section 132A of the Income-tax Act. It is also stated that the respondent has passed an order on February 25, 1987, under section 132(5) of the Act determining the total tax payable at Rs. 3,620.70. It is also stated that the regular assessment of the petitioner was completed on March 30, 1990, accepting the return of income made by the petitioner under section 143(3) of the Act. In the light of the final orders passed, the petitioner claimed that he is entitled to the return of the money and the jewellery as well as the diamonds seized from him and, consequently, he moved this court with this writ petition, since, according to the petitioner, the representation made before the Commissioner of Income-tax on April 26, 1993, did not evoke any response.
3. The writ petition was admitted and a short notice was ordered. After service, the respondent entered appearance and filed a counter-affidavit. In the meantime, the respondents represented through their standing counsel on January 24, 1994, that this writ petition has been filed to stall further action by the Department under section 148 of the Act and the authorities may be granted liberty to proceed with the matter notwithstanding the pendency of the writ petition. Consequently, it was clarified in WMP No. 3390 of 1993 that the pendency of the writ petition shall not stand in the way of the Department taking any appropriate action as permissible in law. Since action was taken under section 148 of the Act, the petitioner has filed the second writ petition, namely, Writ Petition No. 2843 of 1994, praying for a writ of certiorari to call for and quash the proceedings of the second respondent dated January 11, 1994, issued under section 148 of the Income-tax Act, for reopening the assessment contending therein that the impugned proceedings were meant to get over the earlier writ petition filed and that the proposed reopening of the assessment was for mala fide reasons and that the respondents have no jurisdiction to reopen the case.
4. The respondents have filed a counter-affidavit as earlier noticed in Writ Petition No. 21200 of 1993. It is stated therein that the actual date of interception by the police attached to the Flower Bazaar Police Station (C.I.) was on October 30, 1986, and not on November 3, 1986, as claimed by the petitioner, that he was found to be in possession of cash of Rs. 2,25,579 and 100 gms. of jewellery and 10 cs. of diamonds for which possession, no convincing explanation was given to the police authorities, who registered a case, that he was remanded to judicial custody and confined to the Central Jail and it is only on receipt of information from the station house officer concerned, that a warrant of authorisation under section 132A of the Act was obtained for securing the articles and cash in question and that a statement was also obtained from the petitioner on November 4, 1986. It is stated that the statement ran counter to the explanation/statement which he had already deposed before the police authorities and that the materials on record would lead to the inescapable conclusion that the petitioner is giving conflicting statements to mislead the Income-tax Department and also to deliberately refrain from identifying the ostensible owner of the assets found from him. It is also claimed that an enquiry was initiated under rule 112A of the Income-tax Rules read with section 132(5) of the Act to identify and locate the owner of the assets and in spite of three or four letters, there was no co-operation from the employer of the petitioner and likewise some of the addressees to whom certain jewellery and diamonds were said to have been consigned had deposed before the authorities that they had never indented for the transportation of the jewellery and diamonds and they had no interest in these assets. The order under section 132(5) of the Act was said to have been passed in a summary manner within the statutory time provided therefor on February 25, 1987, holding the petitioner to be in possession of unexplained cash, jewellery and diamonds, and that they were ordered to be retained. Reference is also made to the statement said to have been given by the petitioner even on February 18, 1987, that he was never the owner of the assets and that he was only an employee of the courier company with no source at all to own such assets, though he has come before this court for the jewellery in his favour. The period of regular assessment for 1987-88 was getting barred by time on March 30, 1990, and on which date the petitioner had chosen to file a return of income admitted just his salary as income and on the same date hearing of the case was done when the petitioner's representative furnished a xerox copy of the ledger of the petitioner's employer at Bombay in an attempt to explain the availability of cash and that this move was said to be part of the scheme of manipulation for the purpose of such assessment. The information available about the suspicious nature regarding the possession of these articles has also been disclosed in the counter-affidavit. In the light of the fact that the assessment under section 143(3) of the Act made on March 30, 1990, warranted the reopening, invoking powers under section 148 of the Act, it is claimed that the notice was served on the petitioner after obtaining approval from the appropriate authority. On such basis, it is claimed that it is not open to the petitioner to claim return of the assets seized pending finalisation of the reassessment proceedings.
5. Heard learned counsel for the petitioner and the learned Departmental standing counsel. Since it was vehemently contended that the action under section 148 of the Act is arbitrary and without any justification and without complying with the necessary legal ingredients, the standing counsel for the respondent-Department was directed to produce the relevant files relating to the opinion formed for invoking the provisions of section 148 of the Act. Learned counsel made available the original form for recording the reasons for initiating proceedings under section 148 of the Act and for obtaining the approval of the appropriate authority and also the note file. It is seen from the same that the Assistant Commissioner of Income-tax, City Circle IV(2), Madras-6, has submitted the necessary proposals with the reasons justifying the reopening of the assessment on the ground that there has been an escapement of assessment under section 147, Explanation 2(c)(i) at the time of assessment on September 30, 1990. The Commissioner of Income-tax, Tamil Nadu IV, Madras-34, the appropriate authority, on going through the materials placed before him, recorded his satisfaction and approved further action. It is in such circumstances the impugned communication challenged in Writ Petition No. 2843 of 1994, came to be issued. On going through the materials placed before me, I am satisfied that sufficient reasons have been recorded by the competent authority and the statutory approval has been obtained from the appropriate authority. Consequently, the general and vague allegation of mala fides and want of sufficient basis for the proposed action under section 148 of the Act has no basis in law. A against the plea of learned counsel for the petitioner for return of the jewellery and the cash and diamonds, learned counsel for the respondents would contend that pending finalisation of the escaped assessment, this court should not interfere in the matter by ordering release of the articles, including the cash. Learned counsel for the petitioner has relied upon a decision in J. R. Malhotra v. Additional Sessions Judge, , in support of his claim. That was a case wherein under a search warrant issued under section 132 of the Act, the income-tax authorities seized certain documents and money from the assessee and the Income-tax Officer assessed the person to tax and adjusted the money seized against the tax due. Aggrieved, the said person moved the High Court and the High Court held that the search and seizure were illegal and directed the Revenue authorities to hand over the money and documents to the police to enable them to proceed in accordance with law. The police, however, dropped the proceedings against him for want of evidence. At that stage the said person moved the Magistrate for the return of the documents and money. The Magistrate directed the return of the money to the police and the order was confirmed by the Sessions Court too. Thereupon in a revision, the order of the Sessions Courts was set aside and the matter was remanded back to the Magistrate to decide whether the adjustment of the amount against tax was permissible and valid. Meanwhile the person concerned had appealed against the order of assessment and the Appellate Assistant Commissioner stayed the recovery of the tax assessed. The Magistrate, after remand by the High Court, held that the amount seized the retained by the Revenue in partial satisfaction of the tax due from the respondent, but the Additional Sessions Judge in revision directed the income-tax authorities to rerun the documents and money to the person. A writ petition filed by the Revenue challenging the order was dismissed by the High Court and the matter was pursued before the apex court and in such circumstances it was held that since the prosecution against the person concerned was dropped for want of evidence, the authorities had no right to keep the money seized from him under any provision of law. In the absence of any valid order of assessment and demand for tax, it was also observed that the Revenue authorities cannot indirectly keep the money on the pleas that there will or may be a demand and that, therefore, they should be allowed to keep the money. In may view, the ratio of the said decision will have no application to the case on hand.
6. This is a case where, as noticed earlier, against the perfunctory order passed assessing the petitioner on his own return filed under section 143 of the Act, the authorities have initiated action for reassessment. The petitioner also apparently to keep the authorities bill (sic) have waited for nearly three years before making the claim for return. The materials furnished in the counter-affidavit would go to show that the petitioner was really the mouthpiece of somebodyelse and he has been giving prevaricating statements conflicting with each other at every stage and at times the Department was finding it difficult even to trace him for service of notices. In the light of such facts and circumstances, it would be inappropriate for this court to order the return of the money as well as the jewellery and diamonds to the petitioner. The stand taken in the counter would go to show that at one stage he was denying the ownership of the property himself as is now made before this court and also claiming that he was only a courier carrying things at the behest of his employer. Be that as it may, it becomes necessary to properly identify the owner and if it is to be treated as belonging to the petitioner, he will have to explain the source and pay the tax, if any, due on the same. Issuing a direction in the nature of a writ of mandamus at this stage would defeat the ends of justice. Consequently, I am unable to countenance the claim of the petitioner. So far as Writ Petition No. 2843 of 1994 is concerned, for the reasons already recorded, the action initiated under section 148 of the Act cannot be said to be prima facie illegal to warrant the interference of this court, even at this stage. It is always open to the petitioner to oppose the proceedings and pursue other avenues of remedies available to him under the Act against any proceedings that may go against him leaving liberty to the petitioner to do so and making it clear that the observation, if any, made for the purpose of this writ petition shall not be considered as an expression of any opinion finally against the petitioner. The said writ petition shall stand dismissed.
7. So far as Writ Petition No. 21200 of 1993 is concerned, in the light of what has been stated above, no writ of mandamus as prayed for could be issued. At the same time the Department also cannot indefinitely hold the articles seized in their custody without passing final orders regarding the fate of the articles. Therefore, it becomes necessary for this court to fix a time limit within which the respondent should act to pass final orders. Mr. N. V. Balasubramaniam, learned counsel for the Department, would contend that the further course of action would depend upon the materials to be gathered from the persons concerned at Bombay and other places and sufficient time may be given. Taking into account all these aspects, I am of the view that the respondent shall have six months' time for finalising the assessment proceedings initiated under section 148 of the Act and also passing orders finally on the request for the return of the cash, jewels and diamonds either way in accordance with law simultaneously. With this limited direction, this writ petition shall stand ordered in the above terms. If the authorities are not taking effective action to finalise the proceedings and dispose of the manner within the time stipulated, it is always open to the petitioner to take appropriate steps at that stage as are permissible in law. No costs.