Badar Durrez Ahmed, J.
1. By an order dated 17.01.2003, the following issues were framed for being decided at the outset:-
1) Whether the suit is barred by the provisions of Section 293 of the Income-tax Act ?
2) Whether this court has territorial Jurisdiction ?
3) Whether the action of the Director of Income Tax (Chandigarh) under Section 132 of the Income Tax Act on the plaintiff was illegal and without jurisdiction and hence bad in law ?
Thereafter, by an order dated 22.09.2005, this court observed that it would be appropriate if issue Nos. 1 & 2 are set down for hearing in the first instance before the question of recording of further evidence can be considered. Accordingly, on 23.11.2005, arguments were heard on the preliminary issues 1 & 2. This order shall dispose of the said issues.
What is the plaintiff's case?
2. Before the issues are considered, it would be necessary to point out that the plaintiff has filed this suit for damages to the tune of Rs. 36 lakhs on account of alleged losses suffered by the plaintiff by reason of the alleged abuse and misuse of the power and authority by the defendants and their subordinates. This suit was originally filed in the High Court of Madras but the plaint was ordered to be returned for presentation before the appropriate court by an order of the High Court at Madras dated 20.01.1998. It is thereafter that the present suit came to be filed before this court on 17.03.1998.
3. From the averments contained in the plaint, it appears that the plaintiff and his brother, Shri H.L. Goel were earlier conducting business together but that had fallen out. There are several averments contained in the plaint alleging misdeeds on the part of the said Shri H.L. Goel. Paragraph 3 of the plaint refers to the allegation that the said Shri H.L. Goel, out of ill will and ulterior motive, instigated the Income-tax authorities to conduct raids at the plaintiff's business premises as well as his residence and those of his close relatives excluding, of course, his own (viz., H.L. Goel's) premises. Paragraph 4 of the plaint discloses that on 14.10.1993 income-tax raids were conducted at the residential premises as well as the business premises of the plaintiff and it is alleged that such raids / search and seizure conducted by the Income-tax authorities were illegal and without jurisdiction. It is alleged that the concerned officials acted with ulterior motives which led to unblock sealing, locking of the business premises and seizure of documents and other materials both in cash and kind. It is also alleged that the details prepared under the Panchnama were incorrect and were deliberately falsified. It is alleged that the plaintiff made various representations but to no avail. Paragraph 6 of the plaint discloses that the plaintiff sent a letter dated 1.4.1994 to the Chairman, Board of Direct Taxes, New Delhi complaining about the acts of omission and commission on the part of the Income-tax officials and in particular the Defendant No. 3. The alleged irregularities and illegalities purported to have been committed by the Income-tax authorities as set out in paragraph 6 of the plaint are as under:-
i) Misplacement of valuable Solitaire by the Search Party on 14.10.1993;
ii) Shortfall of Rs. 2 lakhs cash in the lockers at Bombay;
iii) Unreasonable sealing of factory premises at focal point for more than three months where there was only half an hour work to carry out the inventory of the stocks;
iv) Jewellery worth of Rs. 3,25,000/- shown as seized in the Notice under Rule 112-A, but no Panchnama or Valuer's Report is furnished;
v) Rs.80,000/- Cash seized at Ludhiana on 14.10.1993, but there was no notice under Rule 112-A, furnished;
vi) The Fixed Deposit Receipt in the name of Shri Jagat Ram Memorial Trust which is renewed from time to time for the last 10 years seized which was worth of Rs. 1,93, 644/- but there was no notice under Rule 112-A furnished:
vii) Jewellery worth of Rs. 4,22,950/- was seized from the daughter-in-law of the Plaintiff at Ludhiana, but there was no notice under Rule 112-A, nor jewellery returned by the Assistant Director of Income-tax;
viii) The bus and cars were declared as stocks worth of Rs. 23 lakhs. However, the bus and cars have registration documents which could be assets and not 'stocks'--Both the items would not be worth more than Rs. 3 lakhs as they are assets and are duly recorded in the account books of M/s Cannon Steels Pvt. Ltd.;
ix) The seized documents and files at No. 15/2, D 'Okhla, when produced, the seals were broken;
x) The goods in the godowns were seized and sealed by the department by inflating the value. Neither the seized goods were given to prospective buyers as alleged prices nor the goods were being released since the goods were likely to deteriorate due to dampness in the godown, the Plaintiff-requested number of times to sell the goods and keep the whole sale proceeds as advance tax; but no action was taken till date; so the whole value to the tune of Rs. 37,80,000/- seized have not been taken as an advance tax inspire of the Plaintiff's request right from 26.10.1993;
xi) The list of seized goods/inventories were not provided to the Plaintiff and also the copies of Statement taken from the Plaintiff under Section 132(4) supplied were illegible. inspire of repeated requests to furnish legible copies of the statements, the concerned authority neglected and failed to provide the same under Section 132(4).
4. The plaintiff has further alleged that the defendant No. 2 acted in a mala fide manner and this would be also evident from the letter sent by him on 19/20.04.1994 to the Director General, Directorate of Revenue Intelligence marking copies to all the authorities concerned, a copy of this letter is Annexure-P-2 to the affidavit by way of evidence filed by the plaintiff. The subject of the letter indicates that the same pertains to the search under section 132 of the Income-Tax Act, 1961 (hereinafter referred to as 'the said Act') in the case of Shri. S.P. Goel and others and also includes statements that there is evidence of large scale under-invoicing of import of synthetic fiber and waste. It runs from pages 63 to 73 and is a detailed report of the alleged illegalities committed by the plaintiff. In the letter, it is stated that the case involves substantial evasion of customs duty which is estimated at over Rs. 120 crores during the period from 1986 onwards.
5. The names of the plaintiff and all his associates and firms are given in the letter. The letter contains the alleged modus operandi of the plaintiff and his associates as involving the imports of the Synthetic/Acrylic Fiber and waste and rags being regularly under-invoiced by 15 to 25 percent from their actual values and the difference between the actual value and the invoice price being remitted abroad through the hawala route. The last paragraph of the letter issued by the defendant No. 2 reads as under:-
The above mentioned information has been furnished to you to take such action thereupon as you may deem fit. We shall be glad to furnish any further information or assistance as may be desired.
Based on the 'information' contained in this letter dated 19/20.04.1994 issued by the Income-tax authorities, the Customs authorities took up the matter with the Income-tax authorities, Bombay, to collect documents evidencing under-invoicing of imports by the Goel Group of Companies. Summons were issued to the concerned company directing them to appear before the DRI Officer on 24.02.1995 for production of documents pertaining to the import and to give necessary evidence. Ultimately, M/s Chirag Import and Export, Bombay (a part of the Goel group of companies) were called upon to show cause to the Commissioner of Customs-II, Customs House, Madras. The proceedings of the show cause notice culminated in the order-in-original being passed by the Commissioner of Customs, Customs House, Madras on 06.11.1995, whereby the subject goods recovered under the three bills of entry Nos. 1636 dated 10.01.1995, No. 3388 dated 23.01.1995 and 3556 dated 23.01.1995 were directed to be assessed on the basis of 'invoice price' declared by the importer which was accepted as the 'transaction value' under rule 4 of the Valuation Rules, 1988 read with Section 14(1) of the Customs Act, 1962. It is also noted that the subject goods were in the custody of the departments and had been incurring considerable demurrage charges, container charges, etc., since long time.
6. Before coming to the aforesaid conclusion, the Commissioner of Customs observed as under:-
They,further, added that the value of the 'fiber' for 'tow', cannot be applied to 'synthetic soft waster' and there is no any documentary evidence to indicate that the synthetic waste or a polyester waste has been sold at 1.18 US $ per kg. The alleged impugned faxed copies supplied by the Income-tax Department referred only to fiber/tow/thread and not to the waste. On perusal of the so called faxed copies, I too find so, as stated by the importer. thereforee, the allegation made out in the Show Cause Notice as regards the price of the waste is misconceived and misleading.
And
30.5 Further, the onus lies on the Department to prove the charge of under valuation as held by the Tribunal, in the case of M/s Honesty Traders, reported in 1992 (55) ELT 102, wherein, the Tribunal observed that the material evidence that was gathered by the Department, may be sufficient for suspecting the value shown in the invoice, but, that itself is not sufficient to hold for under valuation and to enhance the value of the goods, in absence of corroborative evidence. I do not see anything on record, to show that the dealings between the importer and suppliers are not at arms length and that the price charged by the supplier is not a normal price. Assessable value cannot be determined on mere assumptions and presumptions. Suspicion, however grave would be a substitute, for a positive proof. In this case, I see no such positive proof against the party.
7. Thus, it is the case of the plaintiff that the Income-tax Department and in particular the defendant No. 2 sent the letter dated 19/20.04.1994 six months after the search and seizure to the Customs Department supplying it with false information which the Customs authorities upon adjudication found to be false and without any merit. It is, thereforee, stated by the plaintiff in paragraph 12 of the plaint that with great difficulty, the plaintiff was able to get the goods released which had been detained on the basis of the aforesaid false, baseless and misleading information passed on by the defendant No. 2 to the Customs Department with mala fide intention and that it is on account of such actions which were allegedly without jurisdiction that the plaintiff has suffered losses indicated in paragraph 12 thereof and it is because of these acts that the plaintiff had filed the present suit claiming damages of Rs. 36 lakhs. This, in sum and substance, is the nature of the suit filed by the plaintiff. It is in this background that the two issues have to be decided. Issue No. 2 does not present much difficulty and, thereforee, I shall dispose of the same first.
8. Issue No. 2 'Whether this court has territorial Jurisdiction ?'
8.1 It is contended that this court does not have territorial jurisdiction to entertain the present suit. Mr Jolly, who appeared for the defendant Nos. 1 and 5, submitted that the warrant of authorisation for the search and seizure was issued by the Director, Income-tax (Investigations), Chandigarh and the jurisdiction of the case for assessment purposes under the Income-Tax Act, 1961 was with the Collectorate at Ludhiana, thereforee, the present suit which essentially pertains to the conduct of the Income-tax officials cannot be filed in this court. The defendants 1 and 2 are also situate at Chandigarh. The learned counsel for the plaintiff, however, pointed out that the objection on the ground of territorial jurisdiction raised by Mr Jolly is clearly untenable because the search that was conducted included the premises at Delhi. The seizure was also partly from Delhi and, thereforee, it is clear that part of the cause of action for the filing of the present suit arose in Delhi. According to the learned counsel for the plaintiff, this court would have territorial jurisdiction to entertain the present suit.
8.2 I am in agreement with the submissions made by the learned counsel for the plaintiff. Merely because the warrant of authorisation was issued at Chandigarh and that the jurisdiction of the case for Income-tax purposes was with the Collectorate at Ludhiana does not mean that this court would not have territorial jurisdiction to entertain and decide the present suit. What is important is that the suit is based upon the search and seizure conducted by the Income-tax officials under Section 132(1)(c) of the said Act. That search included the properties at Delhi and the seizure was also partly from Delhi. thereforee, part of the cause of action for filing the present suit arose in Delhi. Accordingly, this issue is decided in favor of the plaintiff and against the defendants.
8.3 Issue No. 1. 'Whether the suit is barred by the provisions of Section 293 of the Income-tax Act, 1961 ?'
8.4 Mr Jolly, who appeared on behalf of the defendants 1 & 5 submitted that there is an express bar to the filing of suits in civil courts in view of the provisions of Section 293 of the Income Tax Act, 1961. He also submitted that the Income-tax Act, 1961 is a complete code and all remedies are provided therein. He also pointed out that the plaintiff had not filed any writ petition challenging the search and seizure conducted on the plaintiff's residential and business premises on 14.10.1993 which forms the basis of present suit. He further referred to section 132(B) of the Income-tax Act to indicate that the said provision sets out the manner in which the seized assets are to be applied. He further referred to Section 132 (B) (3) to submit that after the seized assets are adjusted against any liabilities, the balance assets are to be returned to the persons from whose custody they were seized. Section 132(B)(4) even stipulates the payment of interest in respect of the assets which were seized and detained by the Income-tax authorities. He also submitted that if any order pertaining to return of the assets or the payment of interest under Section 132(B)(4) was objected to, then, the remedy lay in filing a revision petition under Section 264(1) of the said Act. Mr Jolly essentially made a two-fold submission:-
i) On the one hand he submitted that the present suit was barred under the provisions of Section 293 of the Income-tax Act, 1961 and;
ii) On the other hand he submitted that it would not be as if the plaintiff was remediless inasmuch as although a suit was barred under Section 293 of the said Act, the plaintiff had the remedies available to it under Section 132(B)(3) and (4) and Section 264(1) of the said Act.
8.5 He, accordingly, pressed for a decision on this issue in his favor. He also relied upon the following three decisions:-
1) Commissioner of Income-Tax and Anr. v. Parmeshwari Devi Sultania and Ors. : [1998]230ITR745(SC) ;
2) Union of India v. Natwerlal M. Badiani : [2001]250ITR641(Guj) ;
3) Prem Kumar & Sons (HUF) v. Union of India RFA No. 41/2005 decided on 18.05.2005.
9. On the other hand, the learned counsel for the plaintiff submitted that the bar of Section 293 would only be applicable if the Income-tax officials had acted in 'good faith'. He contended, with reference to the averments made in the plaint, that the plaintiff's brother [Shri H.L. Goel] had colluded with the Income-tax Department officials and instigated them to conduct searches in the plaintiff's business and residential premises as well as make seizures of the assets belonging to the plaintiff. The letter written by the defendant No. 2 on 19/20.04.1994 to the Customs authorities was also written with a view to cause hardship and harassment to the plaintiff. According to the learned counsel, the defendant No. 2 had no authority in law to write such a letter. The adjudication by the Commissioner by virtue of his said order dated 06.11.1995 clearly disclosed that the entire information provided by the Income-tax authorities and in particular the defendant No. 2 was false and misleading. This false information had led to the detention of the plaintiff's goods as well as resulted in the plaintiff being saddled with huge demurrage costs apart from great harassment. thereforee, the learned counsel contended that the conduct of the Income-tax officials was clearly mala fide beyond the scope of their legitimate duties and in bad faith. And, because of this, the bar of Section 293 would not come into play.
10. In rejoinder, Mr Jolly, who appeared for the Income-Tax Department, submitted that whenever any action is taken by any of the Departments under the Revenue Ministry, the other Departments are also informed. thereforee, there was nothing unusual about the letter written by the defendant No. 2 to the Customs Department. According to him, it was a letter written as a part of duty. He referred to paragraph 8 of the written statement filed on behalf of the defendant No. 5 to submit that it was the duty of the Income-tax Directorate to pass on the information and evidence available with it to the Customs Department for consideration and further investigations from their own angle, if necessary. He submitted that it was for the Customs Department to make such use of the information as deemed fit by them and how they dealt with the information is beyond the domain of the defendants nor could any comments be made on the order of the Commissioner of Customs referred to by the plaintiff. He indicated that the enquiries that were conducted between the commencement of search on 14.10.1993 till the completion of the search on 08.01.1994 revealed various facts and this information was communicated shortly thereafter in April, 2004 to the Customs authorities also. It cannot, thereforee, be said that the defendants acted in bad faith.
11. In order to have a meaningful discussion on this issue, it is necessary to examine the provisions of Section 293 of the Income-tax Act, 1961. The provisions read as under:-
293. No suit shall be brought in any civil court to set aside or modify any [proceeding taken or] order made under this Act; and no prosecution, suit or other proceedings shall lie against [the Government or] any officer of the Government for anything in good faith done or intended to be done under this Act.
Upon a close reading of the said Section, it becomes clear that it sets up a bar to two kinds of proceedings. In the first place, no suit can be brought in any civil court to set aside or modify any proceeding taken or order made under the Act. In the second place, no prosecution, suit or other proceeding would lie against the Government or any officer of the Government for anything done in good faith or intended to be done in good faith under the Income-tax Act, 1961. In the present case, the bar that is being set up is with respect to the second kind of proceeding. In order to constitute a bar for such a proceeding, it is essential that the act complained of must have been done in good faith under the Income-tax Act, 1961. In other words, the immunity granted to the Government or any officer of the Government from prosecution, suit or other proceeding is based upon the Government or the officer concerned having acted in good faith.
12. I now come to the decisions referred to by Mr Jolly. In CIT v. Parmeshwari Devi Sultania and Ors. (supra), the Supreme Court, with reference to Section 293 observed as under:-
The principles of law are, thereforee, well settled where a civil court will not assume jurisdiction. In Dhulabhai v. State of Madhya Pradesh : [1968]3SCR662 , this court laid down 7 principles for the courts to see if the suit was barred under section 9 of the Code or not. It is not necessary to set out all the 7 principles as we find that the present suit would be barred under the second principle laid down by this court which we reproduce as under (headnote):
Where there is an express bar of the jurisdiction of the court, an examination of the scheme of the particular Act to find the adequacy or the sufficiency of the remedies provided may be relevant but is not decisive to sustain the jurisdiction of the civil court.
Where there is no express exclusion the examination of the remedies and the scheme of the particular Act to find out the intendment becomes necessary and the result of the inquiry may be decisive. In the latter case, it is necessary to see if the statute creates a special right or a liability and provides for the determination of the right or liability and further lays down that all questions about the said right and liability shall be determined by the Tribunals so constituted, and whether remedies normally associated with actions in civil courts are prescribed by the said statute or not.
We have seen above that the scope of section 293 of the Act has been widened now even to include any proceeding under the Act and it is not merely confined to set aside or modify any order. The form of the suit is not relevant. It is the substance which is to be seen. When the statute prescribed certain procedure and proceedings there under are held and an order passed, it is difficult to accept a contention that the proceeding and order can be modified or set aside in a civil suit filed by a third party. Section 293 is specific and does not admit the filing of a suit which has the effect of even indirectly, setting aside or modifying any proceeding taken under the Act or order made there under.
In that case, the Supreme Court held that the subordinate judge and the High Court were not correct in rejecting the contention of the revenue and holding that the suit was not barred under Section 293 of the Act. However, it appears that this decision was with regard to the first limb of Section 293 of the said Act which pertains to suits which have the effect of setting aside or modifying any proceeding taken or order made under the said Act. The decision was not rendered in the context of the second type of proceedings which is what is required to be considered in the present case.
13. The next decision referred to by Mr Jolly was the case of Union of India v. Natwerlal M. Badiani (supra) which was a Full Bench decision of the Gujarat High Court. In the context of the submission that there was a total ban of suits in the civil courts under Section 293 of the Income-tax Act, 1961, the Full Bench of the Gujarat High Court, referring to the facts of the case, held as under:-
In the case at hand, the civil suits have been filed and entertained against the public officers while they were acting under the warrant of authorisation under section 132 of the Income-tax Act, 1961, read with rule 112(1) of the Income-tax Rules and ex parte ad interim order was passed. Section 293 of the Income-tax Act in terms creates a bar of suits in civil courts in such matters against action of the public officer under warrant of authorisation under section 132 of the Income-tax Act and it is certainly a proceeding taken or order made under the Income-tax Act and section 293 in terms says that no prosecution, suit or other proceeding shall lie against the Government or any officer of the Government for anything in good faith done or intended to be done under the Act. In the case of CIT v. Parmeshwari Devi Sultania : [1998]230ITR745(SC) , the Supreme Court held that the substance and not the form of the suit is to be seen and where a certain asset was seized during search and rejecting the assesse's plea that the same included the shares of his brothers and sisters, the Income-tax Officer passed an order under section 132(5) determining the tax liabilities and directing the asset to be retained by the Department the suit filed at the instance of the assessed for partition of that very asset was held not to be maintainable. It is, thereforee, clear that in the facts of the present case also the suits were clearly barred by the provisions of section 293 of the Income-tax Act and the civil court had no jurisdiction to entertain the suit against the proceedings for search and seizure, which were being taken under section 132 of the Income-tax Act, 1961, read with rule 112 (1) of the Income-tax Rules, 1962.
14. The third and the last decision referred to by Mr Jolly was that of a Division Bench of this court in M/s Prem Kumar and Sons (HUF) {supra}. Since that decision was referred to in great detail and Mr Jolly had laid a great amount of stress on it, it would be necessary to examine the factual position as obtaining in that case. The search and seizure operation was conducted at the residential and business premises of one Shri Prem Kumar under the directions of the Director of Income-tax, Hyderabad. In the course of the search, UTI Units and NSCs belonging to the HUF, of which the said Shri Prem Kumar was a Karta, were seized by the Assistant Director of Income-tax, Bangalore. The said Mr Prem Kumar lodged a protest and sought the release of the assets which were seized by the Income-tax Department. However, as the same were still not released, the plaintiff was constrained to file a writ petition which was disposed of holding that the plaintiff should first avail of the alternative remedy, i.e., to file an appropriate application under Section 132(11) of the Income-tax Act, 1961. The said plaintiff filed the application but as the assets were still not released, the plaintiff was constrained to file another writ petition, but before the same could be disposed of, the Income-tax Department released the said UTI Units and NSCs in favor of the plaintiff. The writ petition was thereafter disposed of as having become infructuous. Thereafter, the plaintiff filed the suit for recovery of an amount of Rs. 5,62,000/- stated to be a part of the financial loss which the plaintiff had allegedly suffered as loss of interest on the maturity value of the NSCs and UTI Units. Upon the preliminary objection having been taken with regard to maintainability of the suit, the issue of whether the suit was barred under the provisions of Section 293 of the Income-tax Act was framed and was heard as a preliminary issue. The trial court held that in the facts of the case, the suit was not maintainable as the same was barred under the provisions of Section 293 of the Income-tax Act, 1961 and the suit was accordingly dismissed. An appeal there from was filed and the same was the subject matter of consideration before the said Division Bench of this court. Referring to the provisions of Section 132B4 of the Income-tax Act, 1961, the Division Bench observed that the said provision required the Central Government to pay simple interest @ 6% per annum on the amount of money seized under Section 132 or requisitioned under Section 132A, as reduced by adjustments against the liabilities towards the Income-tax Department. In this context, the Division Bench observed as under:-
The appellant, we feel, could have effectively invoked the said provision of the Income Tax Act for claiming interest on the assets and could have asked for payment of interest on the amount of loss, if any, that was caused to it. Such a relief could not be claimed by filing a civil suit as Section 293 of the said Act creates a bar in bringing a civil suit against an order made under the Income Tax Act. The appellant, thereforee, could have demanded payment of interest in terms of Section 132B(4) and in case of non-payment of the same, it could have appropriately moved the Commissioner in revision under Section 264 of the Income Tax Act. The appellant could also make a similar prayer in the writ petition which apparently was not done.
It is in this context that the Division Bench agreed with the findings recorded by the Trial Court that the suit would be hit by the provisions of Section 293 and the same would not be maintainable. The Division Bench also referred to the aforesaid decisions in the case of Parmeshwari Sulatania (supra) and Union of India v. Natwarlal M. Badiani (supra) in the following manner:-
The Full Bench of the Gujarat High Court in the case of Union of India v. Natwarlal M. Badiani (supra), relying on the decision of the Supreme Court in Parmeshwari Devi Sultania (supra) held that the suits are clearly barred by the provisions of Section 293 of the Act and the Civil Court has no jurisdiction to entertain the suit against proceeding for search and seizure, which are taken under Section 132 of the Income Tax Act.
I am of the view that the decisions cited by Mr Jolly are all in the context of the first kind of proceedings mentioned in the said Section 293. In situations where a suit is sought to be brought for setting aside or modifying any proceeding taken or order made under the said Act, there is no doubt that such a suit would be barred. But, the present case does not fall within this class. It falls under the second kind of proceedings which are directed against the Government or any officer of the Government. The immunity from suits or proceedings is conditional upon the actions of the Government or its officers having been taken in `good faith` under the Act. thereforee, what has to be examined in the present case is the question of 'good faith.
In Black's Law Dictionary, Sixth Edition, good faith is defined as under:-
Good faith. Good faith is an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage, and an individual's personal good faith is concept of his own mind and inner spirit and, thereforee, may not conclusively be determined by his protestations alone. Doyle v. Gordon 158 N.Y. S.2 d 248, 259, 260. Honesty of intention, and freedom from knowledge of circumstances which ought to put the holder upon inquiry. An honest intention to abstain from taking any unconscientiously advantage of another, even through technicalities of law, together with absence of all information, notice, or benefit or belief of facts which render transaction unconscientiously. In common usage this term is ordinarily used to describe that state of mind denoting honesty of purpose, freedom from intention to defraud, and, generally speaking, means being faithful to one's duty or obligation. Efron v. Kalmanovitz 249 Cal. App. 187, 57 Cal. Rptr. 248, 251.
In Paragdass Mathuradas v. The Income-Tax Officer, Central Circle I, Calcutta : [1950]18ITR757(Cal) , a learned Single Judge of the Calcutta High Court was considering the question of applicability of Section 67 of the Income-tax Act, 1922 which is in pari materia to the provisions of Section 293 of the Income Tax Act, 1961. In that case, the question arose as to the legality of the detention of the books of the assessed by the Income-tax Officer. The court held that the act of detention was illegal and was not justified by any provisions of the Income-tax Act, 1922. The further question arose whether, although such detention of books was illegal and unjustified, the same was bona fide or not. The court observed that if the action of the Income-tax Officer was not bona fide, then he would not be entitled to the protection under Section 67 of the Income-tax Act, 1922. The court discussed the matter as under:-
I have held that the act of detention is illegal and is not justified by any provisions of the Indian Income-tax Act, but the matter does not end there. If it was proved before me that the Income-tax Officer knew that he had not under the statute any authority to detain the books and was intentionally detaining the books in contravention of the statutes, he would not be entitled to protection under Section 67 of the Indian Income-tax Act. But if he detained the books under the bona fide belief that he had power to do so under the provisions of the Indian Income-tax Act, the act of detention would be an act in good faith intended to be done by him under the Indian Income-tax Act. It appears that there is no reported case negativing the power of the Income-tax Officer to detain the books. On the whole and upon consideration of the entire evidence before me, I am of the opinion that the Income-tax Officer was acting bona fide and in fact intended to exercise power which he though he had under the Act. He is, thereforee, protected by virtue of Section 67 of the Indian Income-tax Act.
The said Section 67 of the 1922 Act was also the subject matter of consideration by a learned Single Judge of the Allahabad High Court in the case of Jwala Prasad v. S.N. Verma, Formerly Additional District Magistrate (Rural), Kanpur, and Anr. : [1970]78ITR352(All) . The court in that case held that the bar enacted by Section 67 cannot apply in respect of proceedings which were incompetent and which, thereforee, cannot be considered as proceedings under the Act. The learned Single Judge referred to the dictum of Lord Thankerton in Secretary of State v. Mask & Co. and I reproduce the same as it would be instructive:-
It is settled law that the exclusion of the jurisdiction of the civil courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied. It is also well settled that even if jurisdiction is so excluded, the civil courts have jurisdiction to examine into cases where the provisions of the Act have not been complied with, or the statutory Tribunal has not acted in conformity with the fundamental principles of judicial procedure.
It was noted in the said Allahabad High decision that the same view was affirmed by the Supreme Court in the case of State of Kerala v. Ramaswami Iyer & Sons : [1966]61ITR187(SC) in the following words:-
I am also not satisfied that the action of the defendants in the present case can be said to be in good faith.
The learned Single Judge also referred to an earlier decision of the Allahabad High Court in the case of Kedar Nath v. State : AIR1965All233 to the following effect:-
Good faith imports the exercise of due care and attention. A person can be excused for having committed an error of judgment only if he exercised due care and attention and his conduct makes it clear that there was no negligence according to reasonable standards. The standard of care required is that of a reasonably prudent man who acts with the care and caution required of a person in his position dealing with a matter of similar importance.
Then, the learned Single Judge referred to Lord Campbell's remarks in Spooner v. Juddow [1850] 4 M.I.A. 353, 379 (P.C.) as under:-
Our books actually swarm with decisions putting a contrary construction upon such enactments, and there can be no rule more firmly established, than that if parties bona fide and not absurdly believe that they are acting in pursuance of statutes and according to law, they are entitled to the special protection which the legislature intended for them, although they have done an illegal act.
15. The conclusion arrived at by the learned Single Judge upon a consideration of the aforesaid cases was that it is a truism that an officer cannot chose to entertain an absurd view of law and claim that he was induced to the bona fide belief that his action was valid and legal, and, thereforee, he should be protected from the damages claimed by the party aggrieved by the offending action.
16. In Bansal Exports Pvt Ltd v. Union of India : [1996]217ITR83(Delhi) , a learned Single Judge of this court considered the provisions of Section 293. The contention before the court was that in the facts of the case, there was no material before the officers of the Income-tax Department to pass the order of restraint under Section 132(3) of the Income-tax Act, 1961 and that as the restraint order had ultimately been withdrawn by the Department, the action of the officers could not have been said to be in good faith and, thereforee, the suit was not barred under Section 293 of the Income-tax Act, 1961. The court did not agree with this submission and observed that it is a question of fact whether the action taken by the Department was not in good faith and no evidence had been led on this point by any of the parties. The court also observed that in case the officers of the Department, on the basis of the material before them, decided to pass an order of restraint, the same could not be said to be an act of bad faith nor could the act be said to be mala fide. It observed as under:-.The action of the Department at times may be erroneous but all erroneous actions cannot be said to be mala fide. While passing the orders, an error can be committed by the officers of the Department, but such an error cannot always be said to be in bad faith...
The learned Single Judge concluded that the Department had the power under Section 132 to pass an order of restraint and the officers, thereforee, on the basis of the material had chosen to pass such an order which cannot be said to be without jurisdiction nor could the same be said to be in bad faith. On the basis of this finding, the court held that the suit was not maintainable in view of the provisions of Section 293 of the said Act.
17. The expression 'good faith' came up for consideration before the Supreme Court in the case of Bijendra Singh v. State of U.P. and Ors. : [1981]2SCR287 . The Supreme Court was considering the expression 'good faith' as appearing in Section 5 (6) proviso (b) of the U.P. Imposition of Ceiling on Land Holdings Act, 1960. Since there was a debate as to the meaning of the expression 'good faith' and the same was not defined in the said Ceiling Act, the court was required to express its opinion on the same. The Supreme Court observed as under:-
18. The expression 'good faith' has not been defined in the Ceiling Act. The expression has several shades of meaning. In the popular sense, the phrase 'in good faith' simply means 'honestly, without fraud, collusion, or deceit; really, actually, without pretence and without intent to assist or act in furtherance of a fraudulent or otherwise unlawful scheme'. (see WORDS AND PHRASES, Permanent Edition, Vol. 18-A, page 91). Although the meaning of 'good faith' may vary in the context of different statutes, subjects and situations, honest intent free from taint of fraud or fraudulent design, is a constant element of its connotation. Even so, the quality and quantity of the honesty requisite for constituting 'good faith' is conditioned by the context and object of the statute in which this term is employed. It is a cardinal canon of construction that an expression which has no uniform, precisely fixed meaning, takes its colour, light and content from the context.
18. In Sewakram Sobhani v. R.K. Karanjia, Chief Editor, Weekly Blitz and Ors. : 1981CriLJ894 , the Supreme Court was required to consider the meaning of expression 'good faith' as appearing in Section 52 of the IPC which defines it in a negative fashion as follows:-
Nothing is said to be done or believed in 'good faith' which is done or believed without due care and attention.
Chinnappa Reddy, J, concurring with A.P. Sen, J, observed that:-
Good faith, thereforee is a matter of evidence. It is a question of fact to be decided on the particular facts and circumstances of each case.
And he further observed that:-
Surely the stage for deciding these questions has not arrived yet. Answers to these questions at this stage, even before the plea of the accused is recorded can only be a priori conclusions. 'Good faith' and 'public good' are, as we said, questions of fact and matters for evidence. So, the trial must go on.
19. Considering all the aforesaid decisions, it becomes clear that 'good faith' entails honest intent free from taint of fraud or fraudulent design. It is also clear that an erroneous decision and/or erroneous assumption of jurisdiction, if done bona fide, cannot be labelled as an act not done in good faith. However, the erroneousness of the decision must not extend to such an extent that it would amount to an absurd view opposed to clear judicial pronouncements. The parameters are well-settled for judging whether an action is in good faith or not even in the context of Section 293 of the Income-tax Act, 1961. However, at what stage are these to be considered is the question. Can the issue of a bar under Section 293 be decided as a preliminary issue at the threshold, particularly when we are concerned with the second kind of proceedings contemplated under Section 293 whereunder the immunity from prosecution, suit or other proceeding is conditional upon the Government or any officer of the Government having acted in good faith under the Income-tax Act From the discussion of the facts of the present case, it is clear that debatable issues of fact arise on this question of good faith. The plaintiff has alleged that the passing on of information which was ultimately held to be baseless to the Customs authorities was an act done in bad faith. The defendants on the other hand have contended that the letter dated 19/20.04.1994 was written in good faith and as a part of the policy that action taken by one Department or information received by one Department is notified to other Departments of the Revenue for appropriate independent actions. Who is right and who is wrong can only be established after evidence is led on the issue. The Supreme Court in Sewakram Sobhani (supra) and this Court in Bansal Exports (supra) have clearly held that the question of good faith is a matter of evidence. It is a question of fact to be decided on the particular facts and circumstances of each case. It must be remembered that the present case is not one where we are dealing with suits which would have the effect of setting aside or modifying any proceeding taken or order made under the Income-tax Act, 1961. Those were the line of cases which were referred to by Mr Jolly being Parmeshwari Devi Sultania (supra), Union of India v. Natwerlal M. Badiani (supra) and M/s Prem Kumar and Sons (HUF) {supra}. In those type of proceedings, the question of good faith does not at all arise and, thereforee, there would be no difficulty in deciding the question of maintainability of suit at the threshold. The present case is not one such case. The present case pertains to the second type of prosecutions, suits or proceedings mentioned in Section 293 of the Income-tax Act, 1961 where the question of good faith has to be decided.
20. Since good faith is a matter of evidence and has to be decided as a question of fact, the stage for coming to a decision on the maintainability of this suit under Section 293 of the Income-tax Act has not been reached. thereforee, this issue cannot be decided at this preliminary stage and has to be kept alive till the evidence has been led. It is so decided.