H.N. Seth, J.
1. These are four petitions under Article 226 of the Constitution. As all petitioners in these petitions are claiming reliefs in similar circumstances, we have, with the consent of parties, treated all these petitions and affidavits filed therein as constituting one record and have heard them together,
2. Smt. Manju Tandon, wife of Triloki Nath and Smt. Bina Tandon, wife of Ashok Kumar, are petitioners in Writ Petition No. 637 of 1976. Their respective husbands are related to each other as brothers and they reside at 169, Jijmau, Kanpur. Smt. Savitri Tandon, wife of Kailash Nath Tandon, petitioner in Writ Petition No. 638 of 1976, is the mother-in-law of the two petitioners in Writ Petition No. 637 of 1976, and she along with other members of the family also resides in house No. 169, Jajmau, Kanpur. Smt. Hira Devi Tandon, wife of Bhola Nath Tandon, petitioner in Writ Petition No. 639 of 1976, along with her daughter-in-law, Smt. Girja Devi Tandon, wife of Vijai Narain Tandon, and Smt. Vina Devi Tandon, wife of Shiam Kishore Tandon, petitioners in Writ Petition No. 640 of 1976, and other members of the family reside in house No. 28/37, Pheelkbana, Kanpur. Petitioners, Smt. Manju Tandon, Smt. Girja Devi Tandon and Smt. Vina Devi Tandon, are partners in a firm known as M. T. Agencies having shares of 4.05%, 1.5% and 1.5% respectively. Petitioner, Smt. Bina Tandon, wife of Ashok Kumar, is a partner in another firm known as M.T. Co. having 4% share therein.
3. In pursuance of an order passed by the Chief Metropolitan Magistrate, Sri T. N. Kapoof, the [Deputy Superintendent, CBI, got the two residential houses of the petitioners numbered as 169, Jajmau, and 28/37, Pheelkhana, searched by C.B.I. Inspectors, Sarvasri B. N. P. Azad and V. K. Sobti, on May 8, 1976, and recovered certain documents, ornaments and gold bonds from various portions thereof. Thereafter, the recovered articles and documents were, after obtaining necessary orders from the Chief Judicial Magistrate, produced before the Chief Metropolitan Magistrate, Delhi. The Chief Metropolitan Magistrate then directed that the seized ornaments, and articles were to be kept in the custody of the Special Police Establishment which at that time was investigating into a case with regard to fraud and cheating said to have been committed by persons connected with the firms. Messrs. Gur Prasad Ram Prasad, M. T. Company and M. T. Agencies.
4. On May 13, 1976, Smt. Hira Devi, petitioner in Writ Petition No. 639 of 1976, moved an application before the Chief Metropolitan Magistrate, Kanpur, praying that the ornaments and gold bonds, which she claimed belonged to her and which had been seized by the Special Police Establishment, be directed to be released in her favour. Sri T. N. Kapoor, Deputy Superintendent, objected to the prayer made in the application, inter alia, on the ground that the Chief Metropolitan Magistrate had no jurisdiction to direct the release of the ornaments seized by the Special Police-Establishment. However, the application filed by the petitioner has remained pending and no final orders have been passed on it as yet.
5. In the meantime, CIT, Kanpur, in exercise of his powers under Section 132Aof the I.T. Act, issued an authorization to requisition the documents andarticles seized by the C.B.I. and those documents and articles were requisitioned from the possession of Sri. T.N. Kapoor, accordingly. The ITO,Circle I (in), Kanpur; then issued notices dated 3rd September, 1976, underrule 112A of the I.T. Rules, 1962, read with Section 132(5) of the I.T. Act, 1961, to Smt. Manju Tandon and Smt. Bina Tandon, petitioners in Writ Petition No. 637 of 1976, as also to Smt. Girja Devi Tandon and Smt. Vina Devi Tandon, petitioners in Writ Petition No. 640 of 1976. The notices issued by the ITO required the aforementioned persons to explain the source of acquisition of the ornaments which had been delivered to him by Sri T. N. Kapoor, Deputy Superintendent of Police. The petitioners filed objections before the ITO on 18th September, 1976, claiming that in those proceedings the jewellery belonging to them individually which did not represent any concealed income as mentioned in the notices had been ilkgally seized. The ITO, Kanpur, vide his orders dated 17th November, 1976 (four in number), assessed Smt. Manju Tandon, Bina Tandon, Girja Devi Tandon and Vina Devi Tandon to additional tax under Section 132(5) of the I.T. Act, treating all the ornaments recovered from premises No. 169, Jajmau, Kanpur, and house No. 28/37 Pheelkhana, as belonging to them. He further directed that the said ornaments which had been produced before him should be retained in his custody for satisfying the amount determined against each of the aforementioned four petitioners. The petitioners then filed the present petitions under Article 226 of the Constitution impugning the validity of the search dated 8th May, 1976, and seizure of their respective ornaments by the Special Police Establishment. They further challenged the validity of the proceedings initiated under Section 132A of the I.T. Act, as also that of the orders passed by the ITO directing that the gold ornaments belonging to them be retained in his custody for the realisation of the dues determined against Manju Tandon, Bina Tandon, Girja Devi Tandon and Vina Devi Tandon. They further prayed that various assessment orders passed by the ITO on 17th November, 1976, should be quashed and that a direction be. issued that their respective ornaments be returned to them.
6. All the respondents, excepting the Chief Metropolitan Magistrate, Delhi, put in appearance and contested the prayer made in these petitions. Sri T. N. Kapoor filed affidavits justifying search and seizure ol ornaments by the Special Police Establishment. He also took up the plea that even though the ornaments and assets seized by the police had been handed over to the income-tax department for taking proceedings under Section 132(5) of the I.T. Act, still they were not to be released to the concerned parties as the criminal case was still under investigation. Accordingly be had written a letter, dated 24th November, 1976, to the CIT requesting him not to release the ornaments to the concerned parties without consulting the Central Bureau of Investigation. He claimed that so long as the investigation of the case was pending, the police was entitled to retain, the ornaments as the same were likely to be produced as material exhibits in the trial that was to follow the investigation.
7. According to the ITO and the CIT, the CIT had reasons to believe that the ornaments seized by the Special Police Establishment from the houses in occupation of Smt. Manju Tandon, Smt. Bina Tandon, Smt. Girja Devi and Smt. Vina Devi Tandon represented their concealed income. Accordingly, as provided in Section 132A of the I.T. Act, he authorised the IAC to requisition the ornaments in the custody of the Special Police Establishment. These ornaments were then produced before the ITO, who ultimately determined the undisclosed income of the four ladies to whom notices had been issued under Rule 112A and directed that they be retained in his custody for satisfying the dues so determined as due from them.
8. Subsequently, in the month of January, 1977, Sri T. N. Kapoor, Dy. Superintendent of Police, moved an application under Section 3 of the Criminal Law Amendment Ordinance, 1944 (Ordinance No. 38 of 1944), before the District Judge, Kanpur, praying, inter alia, that the ornaments seized by the police during investigation which were at that time in possession of the income-tax department be attached under Section 5 of the Ordinance and that in the meantime order for their immediate attachment under Section 4 of the Ordinance be made. It is significant to note that in this application, Sri Kapoor clearly stated that it had not been possible to trace the gold ornaments seized from premises at 169, Jajmau, Kanpur, and 28/37, Pheelkhana, Kanpur, to any cash said to have been obtained by the accused who had defrauded the. State Bank. However, he claimed that as the jewellery seized during investigation belonged to the accused, it could be attached up to the value as nearly as may be equivalent to that of the money or the property procured by the accused by commission of the offence of cheating and criminal misconduct. The District Judge accepted the prayer made by Sri Kapoor and made an order directing interim attachment of the ornaments under Section 4 of the Criminal Law Amendment Ordinance. Thereafter, the petitioners, vide their application, filed before this court on '1st February, 1977, got the present petitions amended and claimed reliefs by way of quashing of the proceedings under Section 132A(1) of the I.T. Act, as also that of the request made by Sri Kapoor, vide his letter dated 24th November, 1976, to the income-tax authorities requesting them not to release the gold ornaments to the parties concerned.
9. So far as the ad interim order for the attachment of gold ornaments passed by the District Judge, Kanpur, under Section 4 of the Criminal Law Amendment Ordinance, 1944, in the month of January, 1977, is concerned, its effectiveness or duration is to be governed by Section 10 of the Ordinance, which runs thus :
' 10, Duration of attachment.--AN order of attachment of property, under this Ordinance shall, unless it is withdrawn earlier in accordance with the provisions of this Ordinance, continue in force-
(a) where no court has taken cognizance of the alleged scheduled offence at the time when the order is applied for for three months from the date of the order under Sub-section (1) of Section 4 or Sub-section (2) of Section 6, as the case may be, unless cognizance of such offence is in the meantime so taken, or unless the District Judge on application by the agent of the Provincial Government thinks it proper and just that the period should be extended and passes an order accordingly ; or
(b) where a court has taken cognizance of the alleged scheduled offence whether before or after the time when the order was applied for until orders are passed by the district judge in accordance with the provisions of this Ordinance after the termination of the criminal proceedings.'
10. It is not disputed that more than three months have, since the making of the attachment order under Section 4(1) of the. Ordinance, elapsed. No cognizance by any court of the offence in connection with which the ornaments were seized by the CBI has been taken as yet. Accordingly, the attachment order passed by the district judge has ceased to be effective and is not in force any more. That attachment order, therefore, cannot stand in the way of the petitioners in obtaining the relief claimed by them.
11. During the course of hearing of the writ petition Sri J. N. Tiwari, learned senior counsel for the Central Government, appearing on behalf of the Union of India, Sri T. N. Kapoor, Deputy Superintendent of CBI, Sri V. K. Sobti, Inspector, CBI, and Sri Azad, Inspector, CBI, made the following statement on November 29, 1977 :
' Although the investigation is going on in connection with certain frauds committed by the partners of the firm, M. T, Agencies and M. T. Company, the CBI does not at present require the ornaments and gold bonds for the purpose of their investigation. Subject to the proceedings which had been initiated by the CBI under the provisions of Criminal Law Amendment Ordinance (Ordinance No. XXXVIII of 1944) and subject to any order that may be passed by the district judge in those proceedings the CBI will have no objection to the gold ornaments and gold bonds being returned to the petitioners, if the court comes to the conclusion that the retention by the income-tax authorities is not proper. If and when the CBI requires these ornaments for the purposes of the investigation that is going on or for the purpose of the trial that may follow, proper proceedings for securing ornaments and gold bonds will be taken in accordance with the procedure laid down in the Code of Criminal Procedure.' Counsel for the petitioners then stated before us that in view of the aforesaid statement made by Sri J. N. Tiwari, they will, at this stage, not press for the reliefs claimed against the CBI and that they would be confiningtheir prayer in respect of reliefs claimed against the income-tax department only. In this view of the matter, it is not necessary for us to go intothe question with regard to the validity of search and seizure effected bythe CBI on 8th May, 1976. If the petitioners ultimately succeed in showing that the ITO has no jurisdiction to retain the ornaments in his custody,they would become entitled to the return of the. ornaments as claimed bythem in these petitions.
12. Only controversy that survives for consideration in these petitions, therefore, is that with regard to the validity of the proceedings initiated by the income-tax authorities under Section 132A/132, and as to whether or not the ITO is, in pursuance of those proceedings, entitled to retain the custody of the ornaments in question.
13. Learned counsel for the respondent contended that these petitions, in so far as they seek to challenge the validity of the proceedings undertaken under Section 132A/132 of the I.T. Act and the orders passed therein, ate not maintainable. He urged that the impugned proceedings have culminated in orders dated November 17, 1976, made under Section 132(5) of the I.T. Act. Relief against such orders could, under Section 132(11) of the Act, be obtained from the authority notified in that behalf by the Central Government. As the I.T. Act provides a complete remedy for such redress, the jurisdiction of this court to entertain these petitions is, as laid down in Sub-article (3) of Article 226 of the Constitution, barred.
14. Learned counsel appearing for the petitioners, while disputing that the petitioners have an alternative remedy under the provisions contained in the I.T. Act, refuted the submission, and urged that as the present petitions are directed towards enforcing rights conferred by Part III of the Constitution (art. 31), existence of an alternative remedy under the provisions of the I.T. Act cannot bar the jurisdiction of this court to grant relief under Article 226 of the Constitution.
15. Relevant portion of Article 226 of the Constitution, as it stands after amendment made by the Constitution 42nd Amendment Act, runs thus :
'226. (1) Power of High Courts to issue certain writs.--Notwithstanding anything in Article 32 but subject to the provisions of Article 131A and Article 226A, every High Court shall have power, throughout the territories inrelation to which it exercises jurisdiction, to issue to any person or authorrity, including in appropriate cases, any Government, within those territories directions, orders or writs, including writs in the nature of habeascorpus, mandamus, prohibition, quo warranto and certiorafi, or any ofthem,--
(a) for the enforcement of any of the rights confessed by, provisionsof Part III ; or
(b) for the redress of any injury of a substantial nature by reason of contravention of any other provision of this Constitution or any provision of any enactment or Ordinance or any order, rule, regulation, bye-law or other instrument made thereunder; or
(c) for the redress of any injury by reason of any illegality in any proceedings by or before any authority under any provision referred to in Sub-clause (b) where such illegality has resulted in substantial failure of justice.........
(3) No petition for the redress of any injury referred to in Sub-clause (b) or Sub-clause (c) of Clause (1) shall be entertained if any other remedy for such redress is provided for by or under any other law for the time being in force.........'
16. A perusal of the article shows that the bar with regard to entertainment of a petition, created by Sub-article (3), operates only if the petition is directed towards obtaining relief or redress of the nature enumerated in Clause (b) or (c) of Sub-article (1) thereof. The bar does not apply to a petition directed towards enforcement of the rights conferred by Part III of the Constitution.
17. We have, therefore, to consider as to whether or not these petitions are directed towards enforcement of the rights conferred by Part III of the Constitution (fundamental rights).
18. A perusal of various petitions shows that in substance the claim of the petitioners in these petitions is that the income-tax authorities had, in the circumstances of the case, no jurisdiction either under Section 132A of the I.T. Act or under any other law to requisition from the officers of the CBI, the ornaments which they had seized from the residential houses of the petitioners. Inasmuch as the petitioners are seeking relief against the action of the respondents which, according to them, has resulted in depriving them of their property without authority of law, they are in effect seeking to enforce the rights conferred upon them by Article 31 of the Constitution which finds place in Part III of the Constitution and which runs thus :
'Article 31(1). No person shall be deprived of his property save by authority of law.'
19. It follows that if, on merits, the petitioners are able to make out that action of the respondents in requisitioning the gold ornaments, etc., from the custody of the CBI, and subsequent proceedings that followed were without authority of law, jurisdiction of this court to grant relief under Article 226 of the Constitution will not be inhibited by the provisions contained in Article 226(3) of the Constitution.
20. In the case of Himmatlal Harilal Mehta v. State of Madhya Pradesh [1954] 5 STC 115, the learned judges of the Supreme Coutt observed thus (page 120) :
' Explanation II to Section 2(g) of the Act having been declared ultra vires, any imposition of sales tax on the appellant in Madhya Pradesh is without the authority of law, and that being so, a threat by the State of using the coercive machinery of the impugned Act to realise it from the appellant is a sufficient infringement of his fundamental right under Article 19(1)(g) and it was clearly entitled to relief under Article 226 of the Constitution. The contention that because a remedy under the impugned Act was available to the appellant, it was disentitled to relief under Article 226 stands negatived by the decision of this court in State of Bombay v. United Motors (India) Ltd. : [1953]4SCR1069 . There it was held that the principle that a CQurt will not issue a prerogative writ when an adequate alternative remedy was available could not apply where a party came to the court with an allegation that his fundamental right had been infringed and sought relief under Article 226............ '
21. It is thus clear that neither the constitutional provisions contained in Article 226(3) nor the general principles governing the powers to issue prerogative writs oust the jurisdiction of the High Court to grant relief under Article 226 of the Constitution in cases where violation of a fundamental right is made out. Accordingly, if it is found that the petitioners are being deprived of the gold ornaments in question, without authority of law, resulting in violation of their fundamental rights guaranteed by Part III of the Constitution, it will be unnecessary for us to go into the controversy as to whether or not the petitioners could obtain redress under the provisions of the I.T. Act itself.
22. In this case, the income-tax authorities have relied upon the provisions contained in Section 132A read with Section 132 of the I.T. Act, 1961, as authorising them to requisition the gold ornaments seized by the officers of the CBI from the residential premises of the petitioners, and thereafter to retain them in their custody for satisfying the dues as determined by them. Legislature, with a view to check evasion of income-tax, enacted Section 132(1) of the I.T. Act enabling the Director of Inspection or the CIT or other officers mentioned therein, to authorise certain officials of the income-tax department to search and seize money, bullion, jewellery and other valuable articles in case the Director of Inspection or CIT has, in consequence of information in hia possession, reason to believe that such articles represent either wholly or partly income or property which has not been or would not be disclosed for the purposes of the I.T. Act, 1922, or of the I.T. Act, 1961. After such money, bullion or jewellery or other valuable article (assets) have been seized, the ITO is, under Sub-section (5) of Section 132, to make an order estimating the undisclosed income to the best of his judgment in a summary manner, after affording reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed.
23. This sub-section further authorizes the ITO to retain such articles in his custody so that it may, in accordance with the provisions of the Act, be applied for realization of the dues so determined by him. Sometimes it so happened that before the income-tax authorities could search and seize assets representing concealed income as provided in Section 132(1) or Section 132(lA), possession and custody of such assets was assumed by some other officer or authority under a law other than the I.T. Act, 1922, or the I.T. Act, 1961, and the same could not be made available to the income-tax authorities for making an order under Sub-section (5) of Section 132 or for dealing with it in the manner provided in that section. The legislature, therefore, stepped an and enacted Section 132A for meeting such a contingency. Relevant portion of Section 132A runs thus :
' Where the Director of Inspection or the Commissioner, in consequence of information in his possession, has reason'to believe that--......
(c) any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Indian Income-tax Act, 1922 (XI of 1922), or this Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force, then, the Director of Inspection or the Commissioner may authorise any Deputy Director of Inspection, Inspecting Assistant Commissioner, Assistant Director of Inspection or Income-tax Officer (hereafter in this section and in. Sub-section (2) of Section 278D referred to as the requisitioning officer) to require the officer or authority referred to in Clause (a) or Clause (b) or Clause (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer.
(2) 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 sub-section shall deliver the books of account, other documents or assets to the requisitioning 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.
(3) Where any books of account, other documents, or assets have been delivered to the requisitioning officer, the provisions of Sub-section (4A) to (14) (both inclusive) of Section 132 and Section 132B shall, so far as may be, apply as if such books of account, other documents or assets had been seized under Sub-section (1) of Section 132 by the requisitioning officer from the custody of the person referred to in Clause (a) or Clause (b) or Clause (c), as the case may be, of Sub-section (1) of this section and as if for the words the authorised officer ' occurring in any of the aforesaid Sub-sections (4A) to (14), the words ' the requisitioning officer ' were substituted.'
24. A perusal of the aforesaid section shows that the jurisdiction of the CIT to authorise an officer to requisition assets which have been taken into custody by an officer or authority under any other law and thereafter to proceed to deal with the assets in the manner provided in Section 132 and Section 132B arises only where the CIT has in consequence of information in his possession reason to believe that such assets represent either wholly or partly income or property which has not been or would not be disclosed for the purposes of the I.T. Act, 1922, or the I.T. Act, 1961, by any person from whose possession or control such assess had been taken into custody by the officer or authority from whom it was to be requisitioned.
25. Learned counsel for the petitioner contended that in this case there was absolutely no material or information in possession of the CIT on the basis of which he could reasonably believe that the ornaments which had been seized and recovered by the officers of the CBI from their residential premises, represented any income or property which had not been or would not have been disclosed for the purposes of the Indian I.T. Act, 1922, or the I.T. Act, 1961, by the petitioners. According to him, the Commissioner did not have any material even for forming a belief that the petitioners had concealed or were likely to conceal any income or property and as such no question of his believing that the ornaments which had been recovered by the officers of the CBI from the residential premises of the petitioners, representing such income or property, could possibly arise. He contended that in the circumstances the entire proceedings for requisitioning the ornaments and dealing with them in the manner provided in Section 132(5) were completely without jurisdiction and authority of law.
26. Learned counsel for the respondents, however, contended that under Section 132A, if once the Director of Inspection or the CIT had, in consequence of information in his possession reason to believe that any assets representing either wholly or partly income or property which had not been or would not have been disclosed for the purposes of the I.T. Act, he could authorise an officer of the income-tax department to requisition the same from an officer or authority who had possession of those assets under the authority of some other law. The satisfaction of the CIT in that regard was his subjective satisfaction and any error therein could not render requisitioning of the assets as being without authority of law, resulting in contravention of any fundamental right of the petitioners. He further contended that, in this case, there was material on the record before the CIT on the basis of which he could reasonably believe that the ornament recovered by the officer of the CBI from the residential premises of the petitioners represented either wholly or partly income or property which had not been disclosed by them for the purpose of the assessment. Accordingly, the action of the Commissioner in authorising requisitioning of the gold ornaments from the officers of the CBI as also subsequent proceedings for dealing with the assets after making an order under Section 132(5) of the I.T. Act were fully authorised by law.
27. The question as to when an act of a public authority can be dubbed as without authority of law and thereby affecting a fundamental right, came up for consideration before the Supreme Court in the case of Coffee Board, Bangalore v. Joint Commercial Tax Officer : [1970]3SCR147 . Chief Justice Hidayatullah, speaking for the majority, observed in para. 9 of the judgment as follows (pages 535, 536 of 25 STC):
' It is therefore necessary to state simply the propositions which are settled by this court. The ruling recognises the existence of a right to move this court under Article 32 where the action is taken under an ultra vires statute, or where, although the statute is intra vires, the action is without jurisdiction or the principles of natural justice are violated. Errors of law or of fact committed in the exercise of the jurisdiction founded on a valid law do not entitle a person to have them corrected by way of a petition under Article 32. It is also pointed out that the proper way to correct them is to proceed under the provisions for appeal, etc., or by way of proceedings under Article 226 before the High Court. '
28. In the case before us, it is not the case of the petitioners, that the income-tax authorities have acted or purported to act under a statute which is ultra vires. Accordingly, what we have to see in the present case is as to whether the action of the CIT in authorising an officer of the income-tax department to requisition the ornaments from the possession of the officer of the CBI and the subsequent proceedings following thereon are without jurisdiction or that in the present case the officers of the income-tax department have committed some error of law or fact in the exercise of their jurisdiction under the I.T. Act. Whereas, if we ultimately find that the action of the income-tax authorities in this case was without jurisdiction, it will obviously mean that the petitioners are being deprived of the gold ornaments without authority of law, on the other hand, if we find that the action of the income-tax authorities can at best amount either to an error of law or of fact in exercise of their authority or jurisdiction, no breach of fundamental right would be involved and the right of this court to consider whether any relief under Article 226 of the Constitution can be granted or not will depend upon the fact as to whether or not the I.T. Act provides a remedy for the redressing of the grievance raised by the petitioners.
29. It is significant, to note that like Section 132A of the I.T. Act, where the Director of Inspection or the CIT has been empowered to authorise an officer of the income-tax department to requisition certain assets from the possession or control of any officer or authority only when he has reason to believe about the existence of certain facts enumerated therein, Section 147 of the I.T. Act authorises the ITO to reopen assessment already made if he has reason to believe that certain facts enumerated in that section exist. While interpreting the provisions of Section 147 of the I.T. Act, the learned judges of the Supreme Court in the case of ITO v. 'Lakhmani Mewal Das : [1976]103ITR437(SC) observed thus :
' It would appear from the perusal of the provisions reproduced above that two conditions have to be satisfied before an ITO acquires jurisdiction to issue notice under Section 148 in respect of an assessment beyond the period of four years but within a period of 8 years from the end of the relevant year, namely :
(1) the ITO must have reason to believe that income chargeable to tax has escaped assessment, and
(2) he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee-
(a) to make a return under Section 139 for the assessment year to the ITO, or
(b) to disclose fully and truly material facts necessary for his assessment for that year.
Both these conditions must co-exist in order to confer jurisdiction on the ITO. '
30. While interpreting a similar provision under Section 34 of the Indian I.T. Act, 1922, the Supreme Court, in the ease of Calcutta Discount Company v. ITO : [1961]41ITR191(SC) , held that under Section 34 both the conditions, namely:
(1) the ITO had reason to believe that there had been under-assess-ment, and
(2) that he had reason to believe that such under-assessment was the result of non-disclosure of material facts must co-exist before the ITO could acquire jurisdiction to start proceedings after the expiry ol four years.
31. It is thus clear that, in the opinion of the Supreme Court, in such cases, if action has been taken by the public authorities without there being actual reasons to believe about the existence of relevant facts, such action is without jurisdiction and not merely an action which is within jurisdiction but suffers from an error of fact or law.
32. Further, in the case of ITO v. Lakhmani Mewal Das : [1976]103ITR437(SC) , the learned judges of the Supreme Court pointed out that whether the grounds on which the belief is entertained by the authority concerned are adequate or not is not a matter for the court to investigate and that the sufficiency of grounds which induces the authorities to entertain the belief is, therefore, unjustifiable. But then it is open to the person impugning the action to question the very existence of the belief and to contend that the authority actually did not entertain any such belief. The learned judges further pointed out that the expression ' reason to believe ' does not mean a purely subjective satisfaction on the part of the authority concerned. The reasons must be held in good faith and that they cannot be merely a pretence. According to them it is always open to the court to examine whether the reasons for the formation of the belief have a rational connection with or a relevant bearing on the formation of the belief and are not extraneous or irrelevant for the purposes of the section. To this limited extent the action of the authority concerned in initiating proceedings is open to challenge in a court of law.
33. Learned counsel for the income-tax department, however, relied upon a Full Bench decision of the Punjab and Haryana High Court in the case of Jai Hanuman Trading Co. Pvt. Ltd. v. 1TO , where in a petition under Article 226 of the Constitution the assessee impugned the validity of proceedings under Section 147/148 of the I,T, Act, 1961, inter alia, on the ground that the ITO concerned had no reason to entertain a belief as mentioned in that section. The Full Bench of that court refused to entertain that question and observed thus (page 45):
' The learned counsel for the petitioner urged that the ITO had no reason to believe, in consequence of any information in his possession, that any income had escaped assessment. He urged that the assessee had disclosed the receipts on account of charity in the balance-sheet submitted by him along with the return. According to him, it was a case of mere change of opinion by the ITO. On the other hand, Shri Awasthy, learned counsel for the revenue, invited our attention to Ralyanji Mavji's case : [1976]102ITR287(SC) , and urged that the information contemplated by Section 147(b) may be obtained even from the record of the original assessment from an investigation of the material on record or the facts disclosed thereby or from other enquiry or research into facts or law and that cases where income liable to tax has e'scaped assessment duetto oversight, inadvertence or mistake committed by the ITO ' may also be brought under Section 147(b). We do not, however, propose to go into this question having regard to another formidable objection raised by Shri Awasthy that under the amended provisions of Article 226 of the Constitution we are precluded from going into these questions if any other remedy is provided by or tender any other law for the time being in force. Shri Awasthy argued tha'it the assessee was entitled to raise the question of non-existence of reasons f6r belief before the assessing authority, the AAC and the Appellate Tribunal. In the famous case of Calcutta Discount Company Ltd. v. ITO : [1961]41ITR191(SC) , the Supreme Court recognised the existence of alternative remedy under the provisions of the I.T. Act, 1922, when it observed at page 207 :
' Mr. Sastri mentioned more than once the fact that the company would have sufficient opportunity to raise this question, viz., whether the ITO had reason to believe that under-assessirient -had resulted from nondisclosure of material facts, before the ITO himself in the assessment proceedings, and if unsuccessful there, before the Appellate Officer or the Appellate Tribunal or in the High Court under Section 66(2) of the I.T. Act, 1922. The existence of such alternative remedy is not however always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action.' While the High Court previously had the freedom to issue a high prerogative writ notwithstanding the existence of an alternative remedy, it is now precluded from doing so because Article 226(3) provides, ' no petition for the redress of any injury referred to in Sub-clause (b) or Sub-clause (c) of Clause (1) shall be entertained if any other remedy for such redress is provided for by or under any other law for the time being in force'.'
34. It is significant to note that in this case the learned judges of the Punjab and Haryana High Court proceeded on an assumption that in a case where the validity of proceedings under Section 147/148 of the I.T. Act, 1961, were being impugned on the basis that the ITO befofe initiating proceeding under that section did not have any reason to believe about the existence of the facts mentioned in that section, the case was covered by Clauses (b) and (c) of Article 226(1) of the Constitution and not by Clause (a) of that article. The question whether in such a case any violation of fundamental right was involved or not was neither canvassed nor discussed by the learned judges. This case is not authority for the proposition that in a case where the condition precedent for the exercise of jurisdiction by a public authority does no't exist, the action of the public authority concerned if it results in deprivation of property would still not involve contravention of fundamental right under Article 31.
35. Accordingly, we have to proceed to consider as to whether beforeauthorising an officer of the income-tax department to requisition the goldornaments which were then in the custody of the officer of the CBI, theCIT had any material on the basis of which he could reasonably believe,(1) that the gold ornaments in the custody of the officer of the CBIrepresented either, wholly or partly income or property of the petitioners,and (2) that the petitioners had not or would not be disclosing such incomeor property for the purposes of proceedings under the I.T. Act, 1922, orI.T. Act, 1961.
36. Originally, Sri K. K. Pandey, Assistant Director of Inspection (Intelligence), Kanpur, filed a counter-affidavit in the case asserting baldly that the Commissioner had information from the Dy. S.P., CBI, SPE, CIU, New Delhi and Kanpur, and other sources on the basis of which he formed the requisite belief and issued the warrants of authorization thereafter (para. 6 of the counter-affidavit). Subsequently, Sri C. S. Pandey, Deputy Director of Inspection (Intelligence), Income-tax Department, Kanpur, filed a supplementary counter-affidavit in Civil Misc. Writ No. 637 of 1976 on November 16, 1977, stating the nature of the information that was available with the CIT before he issued the authorisation under Section 132A of the I.T. Act for requisitioning the gold ornaments from the custody of the officers of the CBI.
37. In the supplementary counter-affidavit it was asserted that the Chief General Manager, State Bank of India, Kanpur, informed the CIT that Messrs. Union Carbide India Ltd., Lucknow office, enjoyed a demand drafts purchase limit facility from the State Bank of India, Lucknow branch, where-under the cheques issued to them by different parties towards payment of goods supplied were encashed immediately by the bank and proceeds credited to their account. The bank became holder in due course of cheques after negotiation, which were sent by the Lucknow branch to the different branches of the bank for collection from the drawee banks. If the cheques were dishonoured on presentation they were returned to the Lucknow branch which recovered the amount from the discounters, i.e., the Union Carbide. In the course of internal audit of the State Bank of India which commenced in May, 1975, it was revealed that 20 cheques aggregating Rs. 38,05,765 91 issued by the firms, M/s. Gur Prasad Ram Prasad, Chowk, Kanpur, and their associates M/s. M. T. Agencies, 12 Kamla Market, Aminabad, Lucknow, in favour of the Union Carbide and negotiated by the latter with the Lucknow branch of the State Bank of India, were not accounted for. Those cheques, after negotiation, had been sent by the Lucknow branch of the State Bank of India to its Kanpur branch for collection from the drawee banks established locally. Investigation had revealed that the partners of the firm had won over the loyalties of certain members of the staff of the State Bank of India, Kanpur main branch, and had with their complicity removed, destroyed, altered the cheques and/or manipulated patters in such a way that the cheques could not be realized and the fact of non-realization of the cheques did not promptly come to the knowledge of the bank and consequently the discounters, i.e., the Union Carbide, with the result that the amounts involved could not be recovered. Further; Messrs. M. T. Agencies and Messrs. M. T. & Co., Pratap Market, Aminabad, Lucknow, another associate firm of Messrs. Gur Prasad Ram Prasad were stockists of Messrs. Voltas Ltd. also. It was revealed that 15 cheques aggregating Rs. 5,76,725.40 issued by these firms in favour of Messrs. Voltas Ltd. and negotiated by the latter at the State Bank of India, Kanpur main branch, were also unaccounted for. Those cheques were drawn on banks at Lucknow and sent to the State Bank of India, Lucknow branch, for collection. The cheques were dishonoured on presentation and were returned to Kanpur main branch from where these were removed/ destroyed by the manipulation of the firm with the complicity of the bank staff. The modus operandi in all other respects in both the cases was the same. Some members of the bank staff were suspended and notices were sent to the firm to pay the amount due. Messrs. Gur Prasad Ram Prasad acknowledged liability and offered a repayment programme. Sums aggregating Rs. 9,28,611.43 were paid by them and thereafter they did not adhere to their repayment programme. Other firms did not pay any amount. This showed that the aforesaid firm had fraudulently held the bank's fund and used them in their business over a period of time. It was apprehended that their turnover and income must have increased considerably by the free availability of such a huge amount.
38. The CIT, Kanpur, thereupon went to Lucknow personally and investigated into the matter and took the record of M.T. Co., Pratap Market, Lucknow, and Messrs. M.T. Agencies, Kamla Market, Aminabad, Lucknow, in 5 folders in his possession on April 21, 1976. Further information was received by the CIT, Kanpur, from an unknown source by post on April 28, 1976, which was also passed on by him to CIT, Kanpur II, and it was to the effect that during the period January, 1972, to June, 1974, the partnership firm, M. T. Agencies of Lucknow, issued cheques worth several lakhs in favour of two Kanpur firms. Union Carbide and Voltas. These cheques were discounted from the State Bank of India, Kanpur. When the cheques were sent to the State Bank of India, Lucknow, for collection, they were destroyed and never debited to the account of M/s. M. T. Agencies with the Dena Bank or Canara Bank, Lucknow. Cheques were similarly issued by Gur Prasad Ram Prasad Agencies in favour of Union Carbide, Lucknow, and were discounted with the State Bank of India, Lucknow. When the cheques were sent to the State Bank of India, Kanpur, for collection they were destroyed and never debited to the said Gur Prasad Ram Prasad's account with Hindustan Commercial Bank and other banks. Both the firms belonged to the same family and played fraud in collusion with unscrupulous members of the staff. The cheque books of the two firms for the above period were, seized and accounts with their bankers were examined. It will be seen that the cheques amounting to Rs. 40 lakhs had not been debited to their account although the State Bank of India, Kanpur and Lucknow, had paid the amount to Union Carbide and Voltas. The partners of the two firms were working frantically to destroy the evidence. Immediate action was accordingly necessary. On this basis, an inference should be drawn that the cheques so issued, but not cashed, represented the cost of the goods purchased and consequently the firm and/or their partners had concealed income to the tune of Rs. 40 lakhs.
39. While the CIT, Kanpur II, was still investigating into the matter, the Delhi Special Police Establishment C.I.A./II organised a search of several premises of the said firms, their partners and associates in the course of investigation of certain offences on the basis of the first information report lodged by the Chief Manager, State Bank of India, Kanpur, and seized a large number of documents and valuables as per the seizure memos prepared by them. Information of the said searches was sent by the Deputy Superintendent of Police C.B.I./SPE/CIU(B), New Delhi, vide letter dated 3rd June, 1977, according to which cases had been registered against Messrs. Gur Prasad, Chowk, Kanpur, Messrs. M.T. Agencies, Kamla Market, Aminabad, Lucknow. As a result of simultaneous searches conducted at the aforesaid firm and their partners heavy jewellery items had been recovered and seized from the premises belonging to the petitioners. The CIT, Kanpur II, thereupon asked for the list of documents, books of account, papers and the valuables seized by the Special Police Establishment at tke said searches by letter dated 5th July, 1976, addressed to the said Deputy Superintendent of Police. These lists were voluminous and were supplied by the Deputy Superintendent of Police, vide his letter dated 21st July, 1976, to the CIT, Kanpur II. The material so collected was studied by the CIT, Kanpur II, and the matter was discussed with the Deputy Director of Inspection on 4th August, 1976, and thereupon the Commissioner was satisfied that the requirements of Section 132A(1)(b) and (c) of the I.T. Act, 1961, had been fulfilled.
40. A perusal of the facts mentioned by Sri C. S. Pandey, Dy. Director of Inspection, in the supplementary counter-affidavit shows that the CIT was given some information according to which the persons connected with the three firms, namely, Messrs. Gur Prasad Ram Prasad, Messrs. M.T. Agencies and Messrs. M.T. Company had practised fraud on the State Bank of India and had so manipulated the affairs that the price of the goods purchased by them from Messrs. Union Carbide and Messrs. Voltas was credited to their accounts but the corresponding debit was actually not made in the accounts of the respective firms. Further, on a search being made, the gold ornaments in question were recovered by the officer of the CBI from the premises where four of the petitioners who were connected with the firms, M.T. Agencies and M.T. Company, as partners were residing. At the request of the CIT, the officers of the CBI supplied lists of various documents and ornaments and other valuables seized by them during the course of their search. It is significant to note that while forwarding the lists of all the documents and the articles seized during the search the officers of the Central Bureau of Investigation neither forwarded the documents nor the articles that had been seized by them. The CIT, before issuing the authorisation under Section 132A of the I.T. Act, had no opportunity to study or look into the documents which had been seized by them. According to the supplementary counter-affidavit of Sri C. S. Pandey, the CIT, Kanpur, had obtained certain records relating to M.T. Company and M.T. Agencies from the CIT, Lucknow, but he did not mention as to what the record obtained by the CIT, Kanpur II, from the CIT, Lucknow, actually revealed. A further opportunity was given to the respondents to file a further supplementary affidavit but the respondents have declined to file the same. It is, therefore, not known as to what information was gathered by the CIT, Kanpur II, from the records that were handed over to him by the CIT, Lucknow.
41. The information in the possession of the CIT, as revealed in the supplementary counter-affidavit of Sri C. S. Pandey, might have provided a reasonable basis for the CIT, Kanpur, to believe that the persons connected with Messrs. Gur Prasad Ram Prasad, M. T. Co. and M. T. Agencies had played fraud on the State Bank of India and thereby made an unjust gain of a huge amount. The amount so gained, however, continued to be reflected in their respective bank accounts. This much of information available with the CIT, Kanpur, could not possibly provide any basis to believe that the bank account in which the huge amount was unjustly gained by the three firms, continued to be reflected, was not brought to the notice of the ITO while making assessments for the relevant years. It is not the case of the income-tax authorities before us that the CIT had scrutinised the proceedings of the earlier assessment years which might have shown that the three firms had filed their respective returns or had manipulated their accounts in such manner so as to indicate that the cheques issued by them for payment of the price of goods purchased from Union Carbide and Voltas had been cashed. The fact that the partners of the three firms had played fraud on the State Bank of India and had thereby made an unjust gain by itself could not provide a basis for the CIT to believe that the three firms or their partners had actually concealed any income or that they were not going to disclose the same for purposes of the I.T. Act. In our opinion, the material available with the CIT at the time of issuing the authorisation under Section 132A was not such on the basis of which he or any other person could reasonably believe that either the three firms or their respective partners had actually concealed or that they were going to conceal their income. Further, there was absolutely no material before the CIT to show that the ornaments in question had been obtained with the aid of any concealed income received by the petitioners in their capacity as partners of the three firms. Accordingly, we have no hesitation in coming to the conclusion that on the materials disclosed by Sri C.S. Pandey in the supplementary counter affidavit filed by him, the CIT, Kanpur II, had no reason to believe that the gold ornaments in the custody of the officers of the CBI represented wholly or partly income or property of the petitioners which had not been or would not be disclosed for the purposes of proceedings either under the Indian I.T. Act, 1922, or the I.T. Act, 1961, The condition precedent for issuing authorisation to requisition the ornaments from the officers of the CBI and thereafter to make an order under Section 132(5), therefore, did not exist. The proceedings, whereunder the ITO made the orders dated 17th November, 1976, and consequent retention of the ornaments for purposes of that order, are, therefore, liable to be quashed. That inevitably raises the question as regards the disposal of these ornaments. In view of the statement made before us by Shri J. N. Tiwari, advocate, which we have quoted in extenso elsewhere in this judgment, the ornaments must be returned to the petitioners.
42. In the result, the petitions succeed and are allowed with costs. The entire proceedings initiated by the CIT, Kanpur II, under Section 132A read with Section 132(5) of the I.T. Act, 1961, against the petitioners, Smt. Manju Tandon, Smt. Bina Tandon, Smt. Girja Devi and Smt. Vina Devi Tandon, as also the orders dated November 17, 1976 (four in number), passed against them, are, quashed. The respondents are directed to return the ornaments and gold bonds requisitioned by them from the custody of the officers of the CBI to the petitioners immediately.