V.K. Khanna, J. - (1.) ON July 16, 1981, a search was carried out by the Income-tax Authorities at the residential premises of the petitioner at New Delhi and his locker at Punjab and Sind Bank in New Delhi. From the residential premises, cash amounting to Rs. 72,500 was seized and from the locker three gold bricks valued at Rs. 15,00,000 were seized. This was followed by a notice issued by the Income-tax Officer under Rule 112A of the Income-tax Rules, 1962, read with Section 132(5) of the Income-tax Act, 1961, on September 15, 1981. The petitioner came forward with an estimate of his income for the assessment year 1982-83. The petitioner estimated his income for the purposes of paying advance tax at Rs. 16,97,000 on which, according to him, the advance tax payable was Rs. 10,97,140. A request was made to the Department that the said advance tax liability of Rs. 10,97,140 may be treated as fully paid and adjusted by appropriating an equal amount from out of the cash and gold already in the possession of the Department in respect of which there were proceedings under Section 132 of the Act.
(2.) THE Income-tax Officer passed an order under Section 132(5) of the Act and estimated the tax liability at Rs. 15,64,561. In the order, it was mentioned that all the assets seized valued at Rs. 15,60,000 are to be retained in order to meet the above liability. THE Income-tax Officer thereafter proceeded to make regular assessment for the assessment years mentioned in the order under Section 132(5) including the assessment year 1982-83. A notice of demand was issued under Section 156 of the Income-tax Act. THE petitioner then again repeated his request to adjust the movable assets totalling Rs. 15,60,000 towards payment of tax liability. This was also not accepted. THE Income-tax Officer issued recovery certificate to recover the tax through the Tax Recovery Officer (Central), Kanpur, and attached the house property of the petitioner, house No. 113/27 Swaroop Nagar, Kanpur, on January 8, 1986, and the Tax Recovery Officer issued a sale proclamation fixing the sale on February 13, 1986. THE petitioner approached this court challenging the action of the Income-tax Authorities and praying for the quashing of the recovery certificates and the sale proclamation issued by them. Since the parties have exchanged their pleadings even at the stage of admission, this writ petition is being disposed of finally in accordance with the provisions of the rules of the court. A counter-affidavit has bean filed in this case by respondent No. 1, inter alia, contending as follows : That the primary gold seized could not be adjusted towards the tax liability of the petitioner, since the petitioner had committed an offence under the Gold (Control) Act and the Central Excise Authorities had intimated that they would be taking action against the petitioner under the Gold (Control) Act. The petitioner was accordingly informed on September 22, 1985 (vide annexure I to the counter-affidavit), that it was not possible to dispose of the primary gold in the possession of the Department as the same may have to be handed over to the Central Excise Department to enable them to take appropriate action under the Gold (Control) Act. On April 14, 1985, the Additional Collector, Central Excise, Kanpur, wrote to the Income-tax Department that the gold may be made available for taking action under Gold (Control) Act as the entire quantity is liable to be confiscated. Another letter was also received from the Assistant Collector, Central Excise, Kanpur, that the entire gold was liable to confiscation under Section 71 of the Gold (Control) Act and the Department was requested not to dispose of any quantity of gold seized. On these and other facts, the Income-tax Officer has taken up a stand that the primary gold which was seized from the petitioner's locker was not liable to be adjusted towards the income-tax demand raised against him.
(3.) LEARNED counsel for the petitioner has challenged the action of the Income-tax Authorities relying on the provisions of Section 132B(1) of the Act. He urged that there was no discretion left with the Income-tax Officer not to adjust the seized assets towards the tax liability since the assets have been retained under Sub-section (5) of Section 132 of the Act. It has also been urged that the Income-tax Authorities could not hand over the seized gold kept in their possession to the authorities under the Gold (Control) Act as the Department had accepted to appropriate the aforesaid assets for the purposes of adjustment of the tax demand against the petitioner. 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.;