B.P. Jeevan Reddy, C.J. - (1.) CMWP No. 909 of 1990 and CMWP No. 1362 of 1990. These two writ petitions filed by Sardar Harinder Singh can be disposed of under a common order. The reliefs sought for in CMWP No. 1362 of 1990 are for issuance of an appropriate writ, order or direction, (1) restraining the income-tax authorities from handing over the seized goods to the Central Excise Department and (2) restraining the Central excise authorities from compelling the income-tax authorities to part with primary gold seized from the petitioner in favour of the Central Excise Department.
(2.) THE reliefs sought for in CMWP No. 909 of 1990 are (1) to restrain the Tax Recovery Officer from realizing the income-tax dues by sale of the assets and properties of the petitioner until they sell the assets seized by them towards the tax liability of the petitioner and (2) direct the income-tax authorities to sell the seized gold and adjust it against the tax liability and the penalty imposed against the petitioner under the Gold (Control) Act, 1968. The petitioner is a director of Singh Engineering Works (P) Ltd., Kanpur. His brothers are also directors of the said company. On July 16, 1981, a raid was conducted by the income-tax authorities at the office premises and residences of the directors of the company including the petitioner. The petitioner's bank lockers in the Punjab and Sind Bank, Defence Colony, New Delhi, were also opened on the following day, i.e., July 17, 1981. From these lockers, three gold bullion bars, each weighing 250 tolas were seized. From the residence and office premises, of course, some articles, cash and other documents were seized. This raid, it is unnecessary to specify, was conducted under the provisions of Section 132 of the Income-tax Act. On October 13, 1981, an order under Sub-section (5) of Section 132 of the Income-tax Act (summary assessment order) was made by the Income-tax Officer, Central Circle III, Kanpur, whereunder the petitioner was found liable to pay tax at an amount exceeding rupees fifteen lakhs. It was also directed that the assets seized from the petitioner must be utilised towards discharge of the said liability. A regular assessment was also made for the relevant assessment year and a demand notice issued under Section 156 for the tax assessed and due. The petitioner submitted a representation to the income-tax authorities requesting them to sell the seized assets in the first instance and adjust the amount realised towards the tax liability determined against him. This request was refused by the income-tax authorities, who issued a recovery certificate for the amount due against the petitioner and for realizing the same, the petitioner's immovable properties including a house at Kanpur were brought to sale. The petitioner thereupon approached this court by way of a writ petition, being W. P. No. 303 of 1986 (Harinder Singh v. 1TO [1987] 166 ITR 763) questioning the recovery certificate as well as the proclamation of sale of his immovable properties. It is necessary to notice the contentions raised in that writ petition and the decision of the court. The contentions urged were :-- (i) In the light of the provisions of Section 132B(1) of the Income-tax Act, the Income-tax Officer had no option but to adjust the seized assets towards the tax liability inasmuch as the seized assets had been retained under Sub-section (5) of Section 132. (ii) The income-tax authorities had no power to hand over the gold seized and kept in their possession to the authorities under the Gold (Control) Act inasmuch as the Income-tax Department had accepted to appropriate the aforesaid seized assets towards the tax due.
(3.) THESE contentions were repelled by the court. It is necessary to notice the reasoning of the court in this behalf (at pages 767, 768) : "(i) The first question which requires determination in this case is whether the authorities under the Gold (Control) Act are entitled to take action in respect of gold which has been seized by the income-tax authorities under the Income-tax Act, although it has been retained under Section 132(5) of the Income-tax Act. It has not been disputed that the three bricks of gold which had been seized are primary gold. Under Section 8 of the Gold (Control) Act, there is a restriction on the possession of primary gold without following the procedure laid down in the Act. It has not been shown to us that the petitioner could validly hold those bricks of primary gold under the Gold (Control) Act If that be so, prima facie, the petitioner would be deemed to have contravened the provisions of the Gold (Control) Act and the Gold Control Authorities could take action against him. However, as the primary gold has not been seized by the authorities under the Gold (Control) Act, the question that further arises for consideration is whether they could ask the income-tax authorities not to sell the gold for satisfaction of the income-tax demand and produce the same before them. In this connection, the provisions of Section 111 of the Gold (Control) Act may be looked into. It provides that the provisions of the Act or any rule or order made thereunder shall have effect notwithstanding anything inconsistent therewith contained in any enactment. Section 105 of the Gold (Control) Act provides as follows : 'Officers required to assist Gold Control Officer.--All officers of police and all officers of Government engaged in the collection, or prevention of evasion, of revenue are hereby required and empowered to assist the Gold Control Officers in the execution of the provisions of this Act or of any rule or order made thereunder.' The income-tax authorities, who would be deemed to be officers under the said section, are required and empowered to assist the Gold Control Officers in the execution of the provisions of this Act. Section 64(b) confers power on the Gold Control Authorities to ask any person, which will include an Income-tax Officer to produce before him, the primary gold which has been seized by him. It is, therefore, clear that under the provisions of the Gold (Control) Act, the officer under that Act was within his jurisdiction to have asked the Income-tax Officer not to dispose of the gold but produce the same before him for taking action under the Gold (Control) Act, in case the petitioner was still its owner. (ii) The contention, in our opinion, appears to be not correct inasmuch as Section 132B(2) specifically provides that notwithstanding the provisions of Section 132B(1), the Income-tax Officer may follow other modes for recovering the outstanding demand. Apart from that, since the petitioner remains the owner of the gold, the Income-tax Officer cannot be prevented from handing over the same to the excise authorities. A similar question came up for consideration before the Madras High Court in P.P. Kanniah v. ITO [1981] 129 ITR 414. It was held therein that till the sale takes place, the ownership of the properly will continue to remain in the hands of the petitioner but under distraint by the Income-tax Officer, and the Income-tax Officer cannot be prohibited from handing over the seized article to the excise authorities for the purposes of taking action under the Gold (Control) Act, 1968. The question can also be looked at from another angle. Under the Income-tax Act, the authorities are not concerned with whether the activities of the petitioner are legal or illegal. An assessee may be earning income by indulging in illegal activities like smuggling. The income-tax authorities have got no power to stop the activities of such an assessee and the only power which they have is to levy income-tax on the income which such an assessee may be earning even from such an illegal activity. Similar is the case here. Possession of the primary gold was prohibited under the Gold (Control) Act and the petitioner has committed an offence thereunder. However, the purpose of seizure by the income-tax authorities was not to punish the petitioner for his illegal activity of possession of primary gold but was for purposes of assessing his tax liability. Sections 132 and 132B of the Act confer power on the income-tax authorities for realising the income-tax dues from the seized assets. However, if the seized asset is the subject-matter of any case and liable to confiscation, the income-tax authorities cannot be forced to appropriate the tax demand from the sale of the seized primary gold. The income-tax authorities are bound to assist the Gold Control authorities and are also liable to produce the gold before the Gold Control authorities. The steps taken by the Income-tax Officer, to recover the tax from the petitioner by attachment and sale of the house property cannot, therefore, be illegal of unauthorised." (at page 768). Accordingly, the writ petition was dismissed. The decision is reported in Harinder Singh v. ITO [1987] 166 ITR 763 (All). It is stated by counsel for both the parties before us that an application to grant leave to appeal against the said judgment has also been rejected by the Supreme Court.;