Union of India (UOI) vs J.M. (E.R.) and Another

P.N. Bakshi, J.—Station Officer GRP informed the Commissioner of Income Tax Varanasi that on 25-12-1581, one Vinod Kumar Jaiswal son of Hira Lal Jaiswal resident of Imamganj, Durga Devi Mirzapur was travelling by 2-Dn Kalka Mail in a 3 Tier Bogie. From his possession currency notes of the value of Rs. 4,63,000/- and some clothes were recovered which had been kept in a briefcase. Vinod Kumar has been challaned u/s 41/102 Code of Criminal Procedure read with Section 411 IPC. The Commissioner having reason to believe that the assets represented undisclosed income issued warrants of authorisation u/s 132(a) of the Income Tax Act (Form No. 45-C) read with Rule 112-D of the Income Tax Rules, 1962, in the name of the Station House Officer GRP Moghalsarai appointing Sri S. N. Kapoor as the Authorised Officer and directing him to take possession and control of the assets. It appears that SHO GRP Varanasi did not deliver possession of the seized currency unless orders have been obtained from the court. On 1-1-82 Sri Rajendra Kumar Pandey filed an application in the court of Judicial Magistrate (R) Varanasi praying that the amount in question be released in his favour or in favour of the accused Vinod Kumar. The case set up in this application was that Sri Vinod Kumar is an employee of the Firm M/s. Vindya Metal Corporation Barnraiya Tola, Mirzapur City, of which Santosh Kumar Jaiswal resident of Calcutta is a partner. The accused Vinod Kumar Jaiswal from whose possession the cash was recovered, is the nephew of Santosh Kumar and was serving as a Muneem in the aforesaid firm. The said money was being taken by Sri Santosh Kumar for the purpose of participating in an auction for the purchase of Zinc which was to be held on 29 and 30th December, 81 at Calcutta under the instructions of the Manager Materials (VAN) Steel Authorities of India Ltd. Rourkela Steel Plant. While Sri Santosh Kumar was proceeding on his journey, GRP Moghalsarai illegally detained him and seized the money in question. The rex has been paid on the seized money, no offence was made out u/s 411 IPC. On 4-1-1981 Sri S. N. Kapoor Income Tax Officer/Authorised Officer (F) Ward Varanasi filed an application requesting the court to authorise the Station Officer GRP to deliver the assets to him. Objection thereto was filed by Sri R. K. Pandey vide Annexure 7, Application Annexure 8, was again filed by Sri S. N. Kapoor Authorised Officer giving further details and praying for the release of the sum of Rs. 4,63,000/- seized from Vinod Kumar. Thereafter the impugned order was passed on 3rd February, 1982 by the Judicial Magistrate, Varanasi directing the delivery of the assets to Rajendra Kumar Pandey. Aggrieved thereby the instant revision was filed by the Union of India.

I have heard learned Counsel for the parties at considerable length and have also examined the affidavits and the impugned orders. Counsel for the Union of India has argued that having regard to the provisions of the Income Tax Act, the Magistrate has no jurisdiction to hand over the property in question to Rajendra Kumar Pandey and that an order should have been passed in favour of the authorised Officer so that the inquiry u/s 132 Income Tax Act may be conducted by the Income Tax Department. On the other hand, counsel for the Opp. Party has submitted that the order in question was within jurisdiction of the Judicial Magistrate and he was competent to hold that the assets in question belonged to Vinod Kumar Pandey under the provisions of Section 457, Code of Criminal Procedure.

In dealing with the legal question, I shall only refer to the relevant sections of the Income Tax Act. Section 132(1)(c) relates to search and seizure by an officer authorized by the Commissioner who in consequence of information in his possession has reason to believe that any person is in possession of any money, bullion, etc., which represents either wholly or partly undisclosed income. Section 132(a) refers to seizure of assets from a person by any officer or authority under any other law, for the time being in force. In case of such a seizure the Commissioner is empowered to authorise an Income Tax Officer etc. to take possession of the assets from such officer or authority.

Whether it is seizure by an officer of the Income Tax Department or a seizure by any person under any other law for the time being in force the assets so seized, constitute the subject matter of enquiry u/s 132(5) of the Income Tax Act. The Income Tax Officer while conducting this inquiry has to afford reasonable opportunity to the persons concerned of being heard and within 90 days of the seizure he has to pass an order concerning it with the previous approval of the Asstt. Commissioner. He can retain in his custody such assets, or part assets as are in his opinion sufficient to satisfy the tax demand on undisclosed income and release the remaining assets, if any to the person from whose custody they were seized.

Section 457 Code of Criminal Procedure refers to the procedure to be adopted by the police upon seizure of property. Admittedly the seizure has been made by the GRP Moghalsarai. Section 457 Code of Criminal Procedure runs as follows:

Whenever the seizure of property by any police office is reported to a Magistrate under the provisions of this Code, and such a property is not produced before a Criminal Court during an inquiry or trial, the Magistrate may make such order as he thinks fit respecting the disposal of such property or the delivery of such property to the person entitled to the possession thereof, or if such person cannot be ascertained, respecting the custody and production of such property.

There can be no doubt that even in respect of seizure under the Income Tax Act, Magistrate would have jurisdiction u/s 457 Code of Criminal Procedure to pass orders with respect to the seized property covered by that section. The material question however is as to who is the person entitled to possession of the property. There can be no dispute that the inquiry u/s 457 Code of Criminal Procedure is only a summary inquiry. The Income Tax Act is a specialised law, which has been enacted for specific purposes of realization of due taxes from the citizen. The provisions of a specialised law always overrides the provisions of a general-law. As 1 have mentioned above, the Section 132(5) of the Income Tax Act lays down the procedure for conducting an inquiry with regard to the assets which the Income Tax Commissioner has reason to believe is undisclosed income. Section 132A(c) contemplates the seizure of assets by an officer or authority under any other law for the time being enforced, except the Income Tax Act. With respect to such seizures provision has been made in the same section authorising the Commissioner to nominate a Requisition-Officer. Sub-section (2) of Section 132A runs as follows:

On a requisition being made under Sub-section (1) the Officer or authority referred to in Clause ''A'' or Clause ''B'' or Clause ''C'' as the case may be of that subsection, shall deliver the books of accounts, other documents, or assets to the requisition officer either forthwith or when such officer or Authority is of the opinion that it is no-longer necessary to retain the same in his or its custody.

It is thus clear that under this sub-section, the Requisition Officer would be the person entitled to the seized assets. The assets have been seized by an officer or authority which in the instant case is the SHOGRP. He has refused to deliver possession of the assets without an order of the Court. The Magistrate, therefore, should have directed the assets to be released in favour of the Requisition Officer. It was not his function in the circumstances of the case to have embarked upon an inquiry into the nature of the assets and the ownership of the same in a summary way. That inquiry has to be conducted by the Income Tax Officer u/s 132(5) of the Income Tax Act as already mentioned above.

It appears from the record that the investigating agency has submitted a final report in favour of the accused. If that report is accepted by the Magistrate, the result would be that no case u/s 411, IPC would be made out against the accused. But so far as the release of the Assets is concerned, that cannot be made to Rajendra Kumar Pandey, who claims to be a partner of India Metal Corporation Mirzapur, and who claims that this money constitutes assets of this firm. I have perused the facts stated in the affidavits and the counter-affidavits, and the allegations which have been made by Rajendra Kumar Pandey claiming ownership of the assets and by the department alleging that the assets were undisclosed income of the said firm which had only filed a return of income tax for an amount of Rs. 2400/- in the assessment year under Sections 81-82. I would, however, not like to give any finding of my own on this factual question because that is likely to prejudice the case of the parties. These are all matters which would be considered by the Income Tax Officer while conducting the inquiry u/s 132(5) of the Income Tax Act. In this view of the matter, I am of the opinion that the order passed by the Magistrate is erroneous and illegal and liable to be set aside.

As I have mentioned above, the Income Tax Officer is required to complete the inquiry within a period of 90 days of the seizure. After the conclusion of the inquiry within the stipulated period, he is only authorised to deduct the tax due if any, payable on the undisclosed income, if it is found to be so, and to return the remaining assets to the person from whose custody they were seized.

In the result, therefore, this application in revision is allowed. The impugned order passed by the Judicial Magistrate (Eastern Railway) Moghalsarai dated 3rd February, 1982, is set aside and the Court below is directed to deliver possession of the seized assets of Rs. 4,63,000/- and the clothes seized from Sri Vinod Kumar to Sri S. N. Kapoor, Income Tax Officer/Authorised Officer (F) Ward Varanasi, so that the enquiry may be conducted u/s 132(5) of the Income Tax Act, in accordance with law.