G.P. Singh, J.
1. This is a petition under Article 226 of the Constitution and is directed against a seizure of currency notes of the value of Rs. 2,02,500 by the Income-tax Officer, B-Ward, Chhindwara, under Section 132 of the Income-tax Act, 1961.
2. The petitioner No. 2 firm, Messrs. Chunnilal Nahta, is a firm carrying on business in gold and the petitioner No. 1, Pannalal, is a partner of that firm. On 15th October, 1971, the shop and residential premises of the petitioners were searched by the Collector of Customs and Central Excise, M.P. and Vidavbha, and the Central Excise Officers of Nagpur, under the authority of a search warrant. In the search currency notes of Rs. 2,02,500 and gold coins, sikkas, and ornaments weighing 812.400 gms. were seized by the Central Excise authorities. By an order passed on 18th December, 1973, the Collector of Customs and Central Excise held that the currency notes of Rs. 2,02,500 and the gold ornaments weighing 361*450 gms. had not offended any provisions of the Gold Control Act, 1968. As regards gold coins and sikkas, contraventions of the provisions of the Act were found and appropriate orders were passed in that behalf. The currency notes of Rs. 2,02,500, and the gold ornaments were ordered to be released. On 4th December, 1971, the Commissioner of Income-tax, Madhya Pradesh, Nagpur and Bhandara, issued a warrant of authorisation under Section 132(1) of the Income-tax Act, 1961, in favour of the Income-tax Officer, B-Ward, Chhindwara, and other officers to search and seize money, bullion, jewellery, etc., of the petitioner-firm which was to be found at the office of the Collector of Customs and Central Excise, Nagpur. In pursuance of the authority derived from the warrant of authorisation, the Income-tax Officer, B-Ward, Chhindwara, issued an order under Section 132(3) of the Income-tax Act on 17th December, 1971, to the Collector of Customs and Central Excise, Nagpur, not to remove or part with the sum of Rs. 2,02,500 until the withdrawal of the notice. The petitioner-firm was also informed by the Income-tax Officer on 15th December, 1971, by letter, annexure 'B', that the cash amount of Rs. 2,02,500 lying with the central excise department stood seized under Section 132 of the Act. The petitioners then filed this petition under Article 226 of the Constitution on 12th January, 1972, praying that a mandamus be issued against the Income-tax Officer, B-Ward, Chhindwara, the Collector of Customs and Central Excise, Madhya Pradesh and Vidarbha and the Union of India, commanding them to immediately release the sum of Rs. 2,02,500 in favour of the petitioners. During the pendency of this petition the Income-tax Officer passed an order on 7th March, 1972, under Section 132(5) of the Act specifying the tax on theestimated undisclosed income and other existing liability of the petitioner-firm and directing the retention of the entire amount of Rs. 2,02,500. In the rejoinder the petitioners have prayed that the order under Section 132(5) be also quashed being an order consequential to the order of seizure under Section 132(3).
3. The contention raised by the learned counsel for the petitioners is that the search and seizure envisaged under Section 132(1) can only be of that property the exact location of which is not known to the income-tax authorities. It is argued that after the seizure by the Customs and Excise authorities it was fully known to the income-tax authorities that the currency notes were in possession of the Collector of Customs and Central Excise and no question of search of these notes under Section 132 of the Act could arise. It is also argued that an order under Section 132(3) can only be issued after search and as in the instant case there was no search there could be no valid order under Section 132(3). It is further argued that there could be no seizure of these notes from the possession of the Collector of Customs and Central Excise because seizure envisages seizure from a person who is unwilling to part with the possession of the property and it could not be said that the Collector of Customs and Central Excise would not have co-operated with the income-tax authorities in making available to them the currency notes. It was also contended that the notes were not in possession of the petitioners as by the seizure under the Gold Control Act possession of the notes had passed from the petitioners to the Collector of Customs and Central Excise and for this reason also Section 132 of the Act was not attracted.
4. The contentions raised depend upon the true construction of Section 132 of the Act, the relevant clauses of which read as follows :
'132. (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 (I) of Section 37 of the Indian Income-tax Act, 1922 (XI of 1922), or under Subsection (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 (XI 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 (XI 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 the 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 (XI 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.'
5. It would be seen that the Director of Inspection or Commissioner of Income-tax can issue an authorisation under Sub-section (1) only if he has reason to believe that the conditions under Clauses (a), (b) and (c) of that sub-section are satisfied. Under Clause (a) he should have reason to believe that any person to whom a summons or notice under the provisions mentioned in that clause was issued to produce any books of account and other documents has omitted or failed to produce the required documents. Under Sub-clause (b) the Commissioner should have reason to believe that any person to whom a summons or notice as mentioned in Clause (a) has been or might be issued will not or would not produce or cause to be produced any books of account and other documents which will be useful for or relevant to any proceeding under the Income-tax Acts. And under Clause (c) he should have reason to believe that any person is in possession of any money, bullion, jewellery or other valuable article and such money, bullion, etc.. represents either wholly or partly income or property which has not been disclosed for the purposes of the Income-tax Acts. In our opinion, there is nothing in the requirements of Section 132 which may support the view that if the Commissioner has definite knowledge that the books ofaccount, documents, money, bullion, etc., sought to be searched and seized are in the possession of a particular person he cannot issue an authorisation for search and seizure of the same. The expression 'has reason to believe' itself signifies that the Commissioner has reason to be satisfied that the things to be searched are in the possession of a particular person. It would be anomalous to hold that if the Commissioner is not sure about the possession of money, bullion, etc., he can exercise his powers under Section 132 for search and seizure, but when he is sure that the undisclosed income in the shape of money, bullion, etc., is in the possession of a person, he cannot exercise his powers of search and seizure. The object of Section 132 is not merely to get information of the undisclosed income, but also to seize the money, bullion, etc., representing the undisclosed income and to retain them for purposes mentioned under Section 132(5). The construction that the learned counsel for the petitioners wants us to accept gives no importance to the words 'has reason to believe' and to the object of the section and depends solely on the literal meaning of the word 'search'. We are unable to accept it.
6. We are also unable to accept the contention that the power under Section 132(1)(c) cannot be exercised where the thing to be seized is in possession of a person who may willingly part with his possession. There is no such condition contained either expressly or impliedly in Section 132(1)(c) and it would not be proper to read such a requirement by implication. Indeed, it would be impossible for the income-tax authorities to know whether the person in possession is going to willingly part with his possession or not. There is no obligation on any one, not even on Government officers of other departments, to deliver anything to the income-tax authorities except when the law requires them to do so. Authorisation to search and seize under Section 132(1)(c) enables the income-tax authorities to seize a, thing even when the person in possession is unwilling to part with it. After the income-tax authorities have armed themselves with a warrant of authorisation under Section 132(1), it may be that a law-abiding person in possession of the thing to be seized may easily yield up his possession, but that will not affect the validity of the warrant of search and seizure. If that were so, every warrant of search and seizure may be frustrated by yielding up possession after the issue of a warrant. It cannot be supposed that the Collector of Customs and Central Excise would oblige the income-tax authorities and hand over anything in his possession even if these authorities are not authorised to take over possession under compulsion of law. The customs authorities after the seizure made by them can only retain possession under Section 66 of the Gold Control Act, 1968, for a period of six months within which period they are required to complete all proceedings in relation to the things or documents seized. If no contravention ofthe Gold Control Act is found, they are bound to release the documents or things seized in favour of the owner or person from whom they were seized. Therefore, if the income-tax authorities are not armed with the authority of law to search and seize the things in possession of the customs authorities which they had seized earlier under the Gold Control Act, the income-tax authorities cannot secure possession of these things. It is true that after the income-tax authorities arm themselves with a warrant of authorisation under Section 132, the customs authorities are not expected to quarrel and would yield up the things required under the authorisation, but that is because of compulsion of the law under which the warrant is issued. How far a person in possession of a thing would resist search and seizure under Section 132(1)(c) of the Income-tax Act cannot be anticipated from before and, therefore, it is difficult to accept the argument that if it is expected that the person in possession would easily yield up his possession, no warrant for search and seizure can be issued.
7. Learned counsel for the petitioners invited our attention to the various powers which can be exercised by a person in whose favour authorisation is issued. For example, the person authorised by the Commissioner of Income-tax can enter and search any building, break open the lock of any door, box, locker, etc. But that does not mean that in every case the person authorised by the warrant will have to exercise all these powers in making the search and seizing the thing required. These powers have been conferred upon the income-tax authorities to cover all types of cases and if in a particular case the person who is in possession of the thing required to be searched and seized does not resist the authority of the warrant and yields up the thing which is seized, it cannot be said that the warrant and the seizure in pursuance thereof are illegal or unauthorised.
8. Equally untenable is the contention that an actual search must precede an order under Section 132(3). The words 'any such books of account, other document, money, bullion, jewellery or other valuable article or thing' as they occur in that sub-section refer to books of account, other document, money, bullion, etc., mentioned in Clauses (a), (b) and (c) of Section 132(1) and not necessarily to books of account, other document, money, etc., that may be discovered after an actual search. Before a power under Section 132(3) can be exercised it is no doubt necessary that there should be an authorisation for search and seizure under Section 132(1) and the thing in respect of which an order is made must be one regarding which conditions mentioned in Clauses (a), (b) and (c) are satisfied. But, in our opinion, it is not necessary that the thing in respect of which an order is made under Section 132(3) must be one which has been discovered after an actual search.
9. We do not also accept the contention that Clause (c) of Section 132(1) contemplates that the person who has not disclosed his income or property for the purposes of the Income-tax Act should-himself be in possession of the money, bullion, jewellery, etc., representing such income which is sought to be searched and seized. Clause (c) speaks of 'any person who is in possession' and it does not specifically refer to the possession of a person who has not disclosed his income. All that this clause requires is that the money, bullion, etc., should be such which represents either wholly or partly income or property which has not been disclosed for the purposes of the Indian Income-tax Act and such money, bullion, etc., should be in possession of any person. The person in possession may be that person who has not disclosed the income or may be someone else. This construction is also supported by the use of the words 'immediate possession' in Section 132(3). The immediate possession contemplated under Sub-section (3) may or may not be of the owner of the thing which is required to be searched and seized. Again, section 132(7) also shows that the person in possession from whom the thing is seized may be holding it on behalf of any other person and it is against that other person that proceedings would be taken under Section 132(5). So far as the instant case is concerned, the currency notes seized by the customs authorities were no doubt in the immediate possession of the Collector of Customs and Central Excise, but the Collector was under a legal obligation to return the notes to the petitioners after the proceedings under the Gold Control Act had been finalised. The power of the Collector of Customs and Central Excise was only to retain the goods seized for a limited period and, therefore, it can certainly be said that the currency notes were held by the Collector of Customs for and on behalf of the petitioners, more so because there was no contravention of the Gold Control Act in respect of the notes.
10. We have been referred to two cases, viz., Motilal v. Preventive Intelligence Officer, Central Excise and Customs, Agra, [1971] 80 I.T.R. 418 (All.) and Laxmipat Choraria v. K.K. Gunguli, ) [1971] 82 I.T.R. 306 (Cal.).
11. which no doubt support the argument of the learned counsel for the petitioners, but for the reasons already indicated above we respectfully dissent from the view taken in these cases.
12. The petition fails and is dismissed with costs. Counsel's fee Rs. 250.