Sabyasachi Mukharji, J. - (1.) One Laxmipat Choraria was apprehended by the customs officials at the Palam Airport at Delhi, coming by an internal flight on the 13th January, 1967, with Rs. 3,60,000. Thereafter, the residence and the office premises of the Chorarias were searched by the Bombay customs authorities the same evening. As result of the search Indian currency notes amounting to Rs. 8,700 were recovered from the residence of Laxmipat Choraria and currency notes amounting to Rs. 34,074 were recovered from the office premises at Bombay. The searches were in pursuance of Section 105 of the Customs Act, 1962. The said search was conducted by the customs authorities under the reasonable belief that the moneys in the hands of the Chorarias represented the sales proceeds of smuggled goods. During the search it appears that the officers of the income-tax department were also present. On the 14th February, 1967, the income-tax authorities in Bombay served a warrant of authorisation under Section 132 of the Income-tax Act, 1961, issued, by the Commissioner of Income-tax, Calcutta. As a result of the said authorisation issued by the Commissioner of Income-tax, Calcutta, the said sum, of Rs. 42,774 was taken away by the income-tax authorities from the customs authorities. Thereafter, on the 22nd February, 1967, a notice was issued, asking Laxmipat Choraria to submit an explanation in writing as to the nature of possession and the sources of acquisition of the money recovered from the customs authorities in Bombay, by the income-tax authorities. This notice, was issued under Section 132(5) of the Income-tax Act, 1961 Laxmipat Choraria by a letter written by his authorised representative stated that the said section had no application. Thereupon, on the 12th May, 1967, an order was passed under Section 132(5) of the Income-tax Act, 1961, whereby it was held by the Income-tax Officer, "B" Ward, Hundi Circle, Calcutta, that Rs. 32,274 represented undisclosed income of the assessee and in the absence of any evidence as to which previous year or years the income belonged it was assessed at the rate prevalent in the relevant assessment year, namely, 1966-67. The notice dated 22nd February, 1967, which is annexure "C" to the petition, and the order dated 12th May, 1967, which is annexure "D" to the petition, are the subject-matters of this rule in the application under Article 226 of the Constitution made by Laxmipat Choraria, the petitioner herein.
(2.) In support of this application Mr. Ginwala, learned counsel for the petitioner, mainly urged two points before me. He contended, firstly, that Section 132 of the Income-tax Act, 1961, cannot have any application in the facts and circumstances of this case because in order to be a proper search and seizure as contemplated by Section 132 of the Income-tax Act, 1961, the documents or the moneys must be in possession of the person from whom seizure is directed. In this case when the authorisation under Section 132 of the Income-tax Act, 1961, was issued the documents and/or the moneys and/or the goods were in the possession of the customs authorities. In those circumstances it was contended by Mr. Ginwala that there could not have been any valid authorisation or proper authorisation under Section 132 of the Income-tax Act, 1961. It was, secondly, contended that the time for disclosure of income for the assessment year 1966-67 had not yet come when the purported seizure took place. Therefore, it was incorrect and improper and without jurisdiction to say that the amount of moneys recovered from the customs authorities represented the undisclosed income of the assessment year 1966-67. It could not be disclosed because time for disclosure had not yet come. On that ground Mr. Ginwala contended that the order passed under Section 132(5) by the Income-tax Officer was wholly without jurisdiction. Inasmuch as six months had already elapsed after the search by the customs authorities, the customs authorities were not entitled to retain the goods and the books and/or the moneys seized and they would not have been able to retain them but for the illegal seizure by the income-tax authorities, according to Mr. Ginwala.
(3.) The first point therefore that has to be considered in this case is whether there could have been an order under Section 132 for seizing the goods of the petitioner from the custody of the customs. It is therefore necessary to set out the relevant portion of Section 132 of the Income-tax Act, 1961. "132 Search and seizure.--(1) Where the Director of Inspection or the 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, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), he may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer (hereinafter referred to as the authorised officer) to- (i) enter and search any building or place where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept ; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by Clause (i) where the keys thereof are not available ; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search ; (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom ; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing.... (3) The authorised officer may, where it is not practicable to seize any such books of account, other document, money, bullion, jewellery or other valuable article or thing, serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it except with the previous permission of such officer and such officer may take such steps as may be necessary for ensuring compliance with this sub-section .... (5) Where any money, bullion, jewellery or other valuable article or thing (hereinafter in this section and Section 132A referred to as the assets) is seized under Sub-section (1), the Income-tax Officer, after affording a reasonable opportunity to the person concerned for being heard and making such enquiry as may be prescribed, shall, within ninety days of seizure, make an order, with the previous approval of the Commissioner,-- (i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him ; (ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act ; (iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in Clause (a) of Sub-section (1) of Section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii) and (iii) and forthwith release the remaining portion, if any of the assets to the person from whose custody they were seized : Provided that if, after taking into account the materials available with him, the Income-tax Officer is of the view that it is not possible to ascertain to which particular previous year or years such income or any part thereof relates, he may calculate the tax on such income or part, as the case may be, as if such income or part were the total income chargeable to tax at the rates in force in the financial year in which the assets were seized : Provided further that where a person has paid or made satisfactory arrangements for payment of all the amounts referred to in Clauses (ii) and (iii) or any part thereof, the Income-tax Officer may, with the previous approval of the Commissioner, release the assets or such part thereof as he may deem fit in the circumstances of the case.... (7) If the Income-tax Officer is satisfied that the seized assets or any part thereof were held by such person for or on behalf of any other person, the Income-tax Officer may proceed under Sub-section (5) against such other person and all the provisions of this section shall apply accordingly ....";