M.K. Gabriel Babu and Another vs Assistant Director of Income Tax (Investigation) and Others

K.P. Radhakrishna Menon, J.—The residence and business premises of the first petitioner were searched by the first respondent along with the officers of the Income Tax Department, in exercise of the power vested in him u/s 132(1) of the Income Tax Act, 1961, for short "the Income Tax Act". The search was followed by the seizure of the properties made mention of in exhibits P-1 and P-4. Items Nos. 1 to 3 in exhibit P-1 and the only item in exhibit P-4 are, admittedly, immovable properties. Exhibits P-1 and P-4 contain directions to the effect that the petitioners, inasmuch as they could not properly explain the sources of acquisition of these properties, shall not transfer or otherwise alienate them. The bank accounts of the petitioners have also been frozen by exhibits P-1 and P-4.

According to the petitioners, those items which are shown as items Nos. 1 to 3 in exhibit P-1 and the only item shown in exhibit P-4 are incapable of being seized u/s 32 because they are immovable properties and hence the seizure is not sustainable. Failure to respond to this argument has resulted in the filing of the original petition for the reliefs stated hereunder :

"It is, therefore, prayed that this hon''ble court be pleased to call for the records of the case leading to the passing of exhibits P-1, P-4, P-5(a), (b), (c), P-6 and P-7 and

(a) to issue a writ of certiorari or any other appropriate writ, order or direction quashing exhibits P-1, P-4, P-5(a), (b) and (c), P-6 and P-7 ;

(b) to issue a writ of mandamus directing the respondent not to proceed on the basis of exhibits P-1, P-4, P-5(a), (b), (c), P-6, P-7 and direct them to withdraw the notices and release the seized articles ;

(c) to issue a writ of prohibition or any other appropriate writ, order or direction prohibiting the respondents from completing the proceedings on the basis of exhibits P-1, P-4, P-5(a), (b), (c), P-6 and P-7 ;

(d) to award the costs and damages for the illegal action of the respondents ; and

(e) to pass such other appropriate orders as are deemed fit."

Learned counsel for the petitioners submit that exhibits P-1 and P-4 to the extent to which they relate to seizure of immovable properties are not sustainable in law. The apparent seizure of these items of immovable properties cannot be said to be authorised by law and hence these proceedings, to the said extent, are liable to be set aside. The short answer of the Revenue to this argument, discernible from the counter-affidavit, is this :

"... It was only the search and seizure operations that revealed that the petitioner was in possession of the above items of property or, to put it differently, revealed that the petitioner had unexplained investment of this gigantic magnitude, which unexplained investment, it is submitted, itself is property in the form of immovable property or to the extent of the value of these six items of properties or the expenditure incurred for acquiring these six items of properties. Of course, the Revenue had some suspicion that the petitioner was in possession of several items of immovable property, but the location or identity was not known to the Revenue or could not, be identified by the Revenue. The contention of the petitioner that no search in relation to the seizure of immovable properties relying on the theory of ''known and identified'', if I may be permitted to say so, is not applicable at least to the six items of properties ... So to the extent of the secret investment or the investment in excess of the declared investment which, it is submitted, is property was not known or identified by the Revenue. Accordingly, if search reveals unaccounted assets, they have to be seized. This is what is done in this case."

Counsel for the Revenue submits that the first respondent, accordingly, has also issued the prohibitory order freezing the bank accounts.

The short question arising for consideration thus is ; whether; on the facts and in the circumstances of the case, the first respondent was justified in seizing the immovable properties u/s 132 of the Income Tax Act.

The answer to the question depends upon the construction of Section 132(1)(c), (i), (iii) and (v) of (B) of Sub-section (1) and the second proviso thereto. Where any officer made mention of in Sub-section (1), in consequence of information in his possession, has reason to believe that any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income Tax Act, 1922, or the Income Tax Act, 1961 (which is stated to be the undisclosed income or property), then such officer can authorise any Assistant Director/Assistant Commissioner or Income Tax Officer, called the authorised officer, to enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept.

On such search, if the authorised officer happens to find any such books of account, other documents, money, bullion, jewellery or other valuable article or thing being hidden in the building, place, vessel, vehicle or aircraft, he has the power to seize the thing found hidden. Simultaneously, he shall prepare a note or an inventory of any such money, bullion, jewellery or other valuable article or thing. The proviso provides that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical charateristics or due to its being of a dangerous nature, he may 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 authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under Clause (iii). It is, thus, clear from these provisions that, where the authorised officer has reason to suspect that the person concerned has hidden any books of account, other documents, money, bullion, jewellery or other valuable article or thing in his place of business, in any building, place, vessel, vehicle or aircraft, then he has the power to search the place of business, etc., and also to seize such books of account, other documents, money, bullion, jewellery or other valuable article or thing and, on effecting such seizure, he is obliged to prepare an inventory or a mahazar of the things seized by him. It is, thus, clear from the scheme of these sections that search and seizure go together. In other words, where the location of the property was known, there is no need to conduct a search. If that be so, there is no need to seize the property also, I am fortified in this view by a decision of the Supreme Court ( Commissioner of Income Tax, Haryana, Himachal Pradesh and Delhi and Others Vs. Tarsem Kumar and Another, ). The further question that would arise in this context is this : What are the properties that can be seized after the search ? According to learned counsel for the petitioner, only movables can be seized. Under no circumstances can immovable properties be seized, counsel submits. Counsel for the Revenue, however, argues that Section 132 empowers the authorised officer to issue prohibitory orders if it is found on search that the person has made secret investment which was not known or informed to the Revenue. According to him, the words used in Clause (iii) of Sub-section (1) of Section 132, namely, "seize .... ''other valuable article or thing found as a result of such search" fully explain this position. He, in this connection, made particular reference to the following averments contained in the counter-affidavit :

"The term ''other valuable article or thing'' is sufficiently wide enough to rope in the items of property that are under prohibitory orders. ''Thing'' going by the dictionary means (law) ''anything that may be subject of proprietary rights'' (The Random House Dictionary). The use of the word ''property in Section 132(1)(c), the second proviso to Section 132(1) and the deeming provision contained in the second proviso would eminently support the present action of the first respondent whose action is impugned herein."

Counsel, in support of this argument, referred to two decisions : one of the Orissa High Court in Commissioner of Income Tax Vs. N.C. Budharaja and Company, and the other of the Bombay High Court in Commissioner of Income Tax, Bombay City-II Vs. Pressure Pilling Co. (India) P. Ltd., . In these decisions, according to counsel, the learned judges have observed that the word "article" occurring in Section 84, is "capable of meaning anything corporeal". The said meaning of the word "article" used in a context different from the context in which that word occurs in Section 132, therefore, has no relevance here. It is a well-established canon of construction that words and phrases occurring in a statute are not to be taken in an isolated or detached manner dissociated from the context in which they are used. In other words, the meaning of words and phrases should take their colour from the context in which they appear. It is also a fundamental concept that, if a word occurs in association with other words which are well-defined and understood, then that word takes colour from the words with which that word is associated. A reference in this connection to the decision of the Supreme Court in State of Assam Vs. Ranga Mahammad and Others, is profitable.

Having understood the principle thus, let us see whether the words used in the section "other valuable article or thing" mean differently from the words ". . . . money, bullion, jewellery" which undoubtedly are only movables. To my mind, these words "other valuable article or thing" used in assoication with the words "money, bullion, jewellery" cannot be understood differently. The section, therefore, cannot be said to include in its ambit immovable properties also. The Delhi High Court, relying on the decision of the Supreme Court in Commissioner of Income Tax, Haryana, Himachal Pradesh and Delhi and Others Vs. Tarsem Kumar and Another, , has expressed the same view. (See the decision in Sardar Parduman Singh Vs. Union of India and others, ). This being the position in law, exhibits P-1 and P-4, to the extent to which they purport to seize immovable properties (including the prohibitory order contained therein), are liable to be set aside. The question, under the circumstances, requires to be answered in favour of the petitioners. Accordingly, exhibits P-1 and P-4, to the extent indicated above, are set aside.

Learned counsel for the petitioner has a further case that the direction to the Valuation Officer to value the properties, in the circumstances of the case, is not warranted. According to him, if no action u/s 132 can be taken against an immovable property, the direction to value it in the course of the said proceeding is also hot sustainable in law. It is not as if there is no substance in this argument. But, in the circumstances of the case, it is unnecessary to go into this question because the properties have already been valued. Whether such reports of the Valuation Officer can be used for the purpose of passing orders u/s 132(5) or making fresh assessments is no more res Integra in view of the decisions of the Supreme Court in Pooran Mal Vs. The Director of Inspection (Investigation), New Delhi and Others, and Dr Partap Singh and Another Vs. Director of Enforcement, Foreign Exchange Regulation Act and Others, .

The original petition, accordingly, is allowed to the extent indicated above. No costs.