COMMISSIONER OF INCOME TAX V. M/S V.K. SOOD ENGG. & CONTRACTORS P LTD.

CWP/3210/1993

AI Insights

The case revolves around a writ petition filed by V.P. Sood challenging the legality of various orders and notices related to the search and seizure of valuables from a locker. The Income Tax authorities had conducted a search under the suspicion of undisclosed income and non-declaration of foreign currency upon the petitioner's arrival in India. The petitioner, a Non-Resident Indian, argued that he was not subject to Indian taxation and that the seizure was illegal. The respondents defended the actions as lawful, citing the need to investigate the financial activities of M/S V.K.Sood, Engineering Private Limited, linked to the petitioner. The court dismissed the petition, affirming the legality of the authorities' actions.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 717883 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 31-10-2013
• Assessment Year: misc
• Other Referred Cases: Nenmal Shankarlal Parmer Vs. Assistant Commissioner of Income Tax (Investigation), Smt. Sita Devi Vs. Commissioner of Income Tax and others, Jagmohan Mahajan & another Vs. Commissioner of Income Tax and others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: URVASHI DHUGGA
• Assessee Lawyers: AALOK MITTAL
• Keywords: Illegal seizure; Income Tax; Jurisdiction; Non-Resident Indian; Search and seizure
• Section: 142(1); 132(3); 174(4); 281-B

Judgement Text

"C.W.P. No.3210 of 1993 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH C.W.P. No.3210 of 1993. Decided on:-October 31, 2013. V.P.Sood. .........Petitioner. Versus Chief Commissioner of Income Tax, Chandigarh and others .........Respondents. CORAM: Hon'ble Mr. Justice Rajive Bhalla Hon'ble Mr. Justice Dr. Bharat Bhushan Parsoon. ***** Argued by:- Mr. Aalok Mittal, Advocate for the petitioner. Ms. Urvashi Dhugga, Advocate for the respondents. Dr. Bharat Bhushan Parsoon, J By filing this petition, the petitioner has prayed for quashing of order dated 8.1.1993 (Annexures P-6), order dated 8.1.1993 (Annexures P-7), affixture notice (Annexure P-9), letter dated 19.1.1993 (Annexure P- 12), panchnama (Annexure P-13), notice dated 27.1.1993 (Annexure P-15), order dated 17.3.1993 (Annexure P-17) and notice dated 16/18.3.1993 (Annexure P-18). 2. In brief, facts of the case are that there was search of locker alloted to the petitioner by the respondent-bank. It had resulted in seizure of cash, jewellery and other valuables. Earlier to the breaking open of the locker, notice for attachment of the locker was issued under Section 174(4) read with Section 142(1) of the Income Tax Act, 1961 (hereinafter referred Yag Dutt 2013.11.01 15:15 I attest to the accuracy and integrity of this document C.W.P. No.3210 of 1993 -2- to as, the Act). Relevant details for the assessment year 1993-94 were also asked for. It was found that the petitioner had not declared the foreign currency before the Custom/Airport Authorities while coming to India. Operation of the locker was stayed except with the prior permission of the Income Tax Authorities. 3. In the present writ petition filed by the petitioner, direction is sought against the respondents to release all seized articles claiming the seizure to be illegal. Before the proceedings could be finalized, this Court had stayed the proceedings. 4. The petitioner had taken the grounds that: (i) he being a Non-Resident Indian was not subject to taxation in India; (ii) seizure of cash, fixed deposit receipts and other articles from the lockers were illegal and unsustainable; (iii) warrants of search in the case were against M/S V.K.Sood, Engineering Private Limited, whereas the locker was in the name of the petitioner which could not have been searched; (iv) respondents No.2 and 5 had no territorial jurisdiction; (v) in the interface of attachment order under Section 281-B and restraint order under Section 132(3) of the Act, there was no occasion of breaking open the locker in the absence of the petitioner; and, (vi) there was non-compliance with the provisions of Section 132 of the Act. 5. There is tough contest from the respondents. In the joint written statement furnished by respondents No. 1 to 7 legality of the impugned annexures has been asserted. Search and seizure is also reiterated to be legal and valid. Dismissal of the writ petition has been sought. 6. Contention of learned counsel for the petitioner is that notice of attachment (Annexure P-4) and notice of sealing of locker (Annexure P-5) Yag Dutt 2013.11.01 15:15 I attest to the accuracy and integrity of this document C.W.P. No.3210 of 1993 -3- while restraining operations therein was bad in law. It is also claimed that breaking open of the locker followed by search and seizure and that too in absence of the petitioner, was also wrong and illegal. It is asserted that the petitioner was neither having any taxable income in India nor was subject to operations of the Act and thus entire proceedings were not only illegal and prejudicial to the interest of the petitioner but were also nonest and have no backing of law. In addition, it was claimed that the notice for transfer of the case under Section 127(1) of the Act, is also not legal. 7. Stand of the respondents, on the other hand, is that the proceedings are legal and valid as respondent No.2 had reasons to believe that the cash stated to have been paid to sundry creditors, in fact, had not been so paid and was available with M/s V.K.Sood Engineers and Contractors Private Limited (hereinafter mentioned as the company) either in cash or in the form of foreign currency, fixed deposit, jewellery or other valuables etc. which were held in the name of the company, its Directors or their relatives. It is contended that respondent No.2 had 'reasons to believe' that some of the assets/valuables were being kept, interalia, in locker No.204 held in the name of the petitioner, who is real brother of Sh. V.K.Sood, Managing Director of the company. 8. We have heard learned counsel for the parties while going through the paper book. 9. Locker No.204 in name of the petitioner was provided by respondent No.8 Bank. When after attachment dated 11.12.1992 (Annexure P-5) by the Income Tax authorities, despite notice dated 18.1.1993 (Annexure P-9), the petitioner had not opened the locker and had rather shown his inability to come present and open the locker and thereafter, it was broken open resulting in seizure of various articles lying therein for which panchnama (Annexure P-3) was prepared. Action of Income Tax authorities had highly irked the petitioner, resulting in this petition. Yag Dutt 2013.11.01 15:15 I attest to the accuracy and integrity of this document C.W.P. No.3210 of 1993 -4- 10. In short, the respondents have asserted that they were on correct path and thus entire action right from the issue of warrants and their execution till the last, was within the framework of the Act and the law relating thereto. 11. To adjudicate rival claims of the parties, the following question is to be answered: “Whether action of the respondents in attaching and then breaking open the locker resulting in search and seizure, is valid and legal?” 12. Before detailed analysis is made, it would be appropriate to narrate the admitted facts. 13. Locker in question was held by the petitioner who is real brother of Sh. V.K.Sood, Managing Director of the company. This V.K.Sood, now is acting as general attorney of the petitioner. Petitioner V.P.Sood had opened different NRI accounts in his own name as also in the name of his wife Smt. Nirmala Sood and daughter Ms. Ritu Sood. Neither petitioner V.P.Sood nor any of his family members had made any declaration about huge foreign currency found in the locker before the Custom/Airport authorities while arriving in India. It has rather been found that cash worth `3.60 crores was withdrawn from respondent No.8 bank by the company for which no details are forthcoming and rather there was constant failure to explain user or investment of such heavy withdrawal of cash. 14. What happened earlier to attachment and later till breaking open of the lock & even thereafter resulting in huge seizure of articles in the search operations also must be known. 15. The company of which Sh. V.K.Sood, real brother and attorney of the petitioner was Managing Director in the return of income, had shown cash to have been paid to multiple sundry creditors. It was, however, believed by the Income Tax authorities that such cash, in fact, was Yag Dutt 2013.11.01 15:15 I attest to the accuracy and integrity of this document C.W.P. No.3210 of 1993 -5- continuing to be available with the company either in cash or in foreign currency or jewellery or in the shape of other valuables. In short, Income Tax authorities had “reasons to believe” that some of these assets/valuables of the company were being kept in the lockers held in the name of the petitioner. Income Tax authorities had also reasons to believe that Managing Director V.K.Sood and his brother Avinash Sood, Director of the company were not disclosing this unaccounted income. Consequently, authorization for search and seizure had been awarded. 16. Prime contention of learned counsel for the petitioner is that search warrant was not in the name of the petitioner but was, in fact, in the name of the company. This contention is proved to be wrong when one examines facts of the case. Perusal of order of attachment of the locker as also of various other accounts mentioned in Annexure P-4 reveals that in all eight fixed deposit accounts and two lockers had been put under attachment. 17. To obtain return, notices under Sections 143(1) and 174(4) of the Act had been issued to the petitioner to produce or cause to be produced documents mentioned therein. The petitioner was then called upon to come present on 16.1.1993 in the office of the Income Tax Officer, Sector 22-A, Chandigarh. Yet, another notice (Annexure P-7) was issued to petitioner V.P.Sood in terms of Section 174(4) read with Section 142(1) of the Act calling upon the petitioner to file return of his income. 18. Warrant of search was in the name of the petitioner and was not in the name of the company being run by his brother V.K.Sood. Entire communication by the Income Tax authorities was made with the petitioner only and when he did not come forward despite notice, the locker was broken open and inventory thereof was made. Seizure so effected was as under: (i) Books of accounts and documents (Annexure-A) (ii) Bullion i.e. gold, silver etc. (Annexure-B) Yag Dutt 2013.11.01 15:15 I attest to the accuracy and integrity of this document C.W.P. No.3210 of 1993 -6- (iii) Cash of `15 lacs (Annexure-C) (iv) Jewellery, ornaments etc. (Annexure-J) (v) Silver articles and silverware (Annexure-S) (vi) Other valuables, locker keys etc. (Annexure-O) 19. So far as documents (Annexure-A) seized on breaking upon the locker are concerned, interestingly, blank letterheads of M/s V.K.Sood Engineers & Contractors Pvt. Ltd., blank letter pads of M/s Saira Associates Chartered Engineers & Consultants etc. were also found in the said locker. Gold bangles, 200 in number, were found and the fixed deposit of `41 lacs were also seized. 20. Even decision of breaking open the locker was not taken by respondent No.5 in his own capacity; it was rather on the orders of the competent Income Tax authorities. Communication (Annexure P-12) dated 19.1.1993 clearly specifies the same. Needless to state that Section 132(1) of the Act authorized Income Tax authorities interalia to break open the lock. Search operation was conducted by respondent No.5 in association with four of his Inspectors and two witnesses from the public. 21. It may also be noted that warrant of authorization was dated 14.1.1993 and had been issued, interalia, under Section 132 of the Act and had been duly signed and sealed by the competent authority i.e. Respondent No.2. Merely because supervisory and authorised officer competent to issue warrants was located at Patiala and directions had been given to a subordinate officer i.e. Respondent No.5 located at Chandigarh, search and seizure operation would not become without jurisdiction. Assertion of the petitioner that entire operation was without jurisdiction and by authorities not competent for the same, is an argument of no substance. Annexure R-1 explains jurisdiction of various officers inter-se. 22. It would not be out of place to mention that even earlier a CWP Yag Dutt 2013.11.01 15:15 I attest to the accuracy and integrity of this document C.W.P. No.3210 of 1993 -7- No.16625 of 1992 had been filed by the petitioner, wherein provisional attachment issued under Section 281(B) (Annexures P-4 and P-5) by respondent No.4 was subject matter of attack. Since these assets belonged to the company, the provisional attachment earlier made, was withdrawn by the Income Tax authorities resulting in withdrawal of the said petition as having become infructuous. It is further noteworthy that notwithstanding withdrawal of CWP No.16625 of 1992 as having become infructuous, assertion all along had been made by the petitioner and even by way of additional affidavit dated 8.2.1993, that the assets attached belonged to the petitioner. Consequently, respondent No.7 had issued notice under Section 174(4) read with Section 142(1) of the Act to the petitioner. No fault thus can be found with such move of the Income Tax authorites. 23. Inventry of valuables found and seized during the course of search operations under Section 132 of the Act on 9.1.1993 from locker of the petitioner revealed that fixed deposit of the face value of `41 lacs (Annexure-O) and gold ornaments (Annexure-J) in addition to cash of `15 lacs (Annexure C-II) were seized during this operation. It would be further relevant to mention that jewellery as also blank cheque books of accounts of the company and counter-foils of pay-in-slips of deposits made were also found in the locker. 24. At this stage, reference may be made to Section 132 (1) of the Act which reads as under: “132(1) Where the Director General or Director or the Chief Commissioner or Commissioner or any such Joint Director or Joint Commissioner as may be empowered in this behalf by the Board] in consequence of information in his possession, has reason to believe that— (a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of Yag Dutt 2013.11.01 15:15 I attest to the accuracy and integrity of this document C.W.P. No.3210 of 1993 -8- account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents as required by such summons or notice, or (b) any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, any books of account or other documents which will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act, or (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing23 and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been, or would not be, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in this section referred to as the undisclosed income or property), then,— (A) the Director General or Director or the Chief Commissioner or Commissioner, as the case may be, may authorise any Joint Director Joint Commissioner Assistant Director or Deputy Director Assistant Commissioner or Deputy Commissioner or Income-tax Officer, or (B) such Joint Director, or Joint Commissioner, as the case may be, may authorise any Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income tax Officer, the officer so authorised in all cases being hereinafter referred to as the authorised officer) to— (i) enter and search any building, place, vessel, vehicle or aircraft where he has reason to suspect that such books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (iia) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; (iib) require any person who is found to be in possession or control of any books of account or other documents Yag Dutt 2013.11.01 15:15 I attest to the accuracy and integrity of this document C.W.P. No.3210 of 1993 -9- maintained in the form of electronic record as defined in clause (t) of sub-section (1) of section 2 of the Information Technology Act, 2000 (21 of 2000), to afford the authorised officer the necessary facility to inspect such books of account or other documents; (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business; (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing: Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any Chief Commissioner or Commissioner, but such Chief Commissioner or Commissioner has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c), then, notwithstanding anything contained in section 120, it shall be competent for him to exercise the powers under this sub-section in all cases where he has reason to believe that any delay in getting the authorisation from the Chief Commissioner or Commissioner having jurisdiction over such person may be prejudicial to the interests of the revenue: Provided further that where it is not possible or practicable to take physical possession of any valuable article or thing and remove it to a safe place due to its volume, weight or other physical characteristics or due to its being of a dangerous nature, the authorised officer may serve an order on the owner or the person who is in immediate possession or control thereof that he shall not remove, part with or otherwise deal with it, except with the previous permission of such authorised officer and such action of the authorised officer shall be deemed to be seizure of such valuable article or thing under clause (iii): Provided also that nothing contained in the second proviso shall apply in case of any valuable article or thing, being stock-in-trade of the business. Yag Dutt 2013.11.01 15:15 I attest to the accuracy and integrity of this document C.W.P. No.3210 of 1993 -10- 25. Reference may also be made to Section 174(4) as also to Section 142(1) of the Act which for ready reference is appended as below: “174 (4) For the purpose of making an assessment under sub-section (1), the Assessing Officer may serve a notice upon such individual requiring him to furnish within such time, not being less than seven days, as may be specified in the notice, a return in the same form and verified in the same manner as a return under clause (i) of sub-section (1) of section 142, setting forth his total income for each completed previous year comprised in the period referred to in sub-section (1) and his estimated total income for any part of the previous year comprised in that period; and the provisions of this Act shall, so far as may be, and subject to the provisions of this section, apply as if the notice were a notice issued under clause (i) of sub-section (1) of section 142.” “142(1) For the purpose of making an assessment under this Act, the Assessing Officer may serve on any person who has made a return under section 115WD or section 139 or in whose case the time allowed under sub-section (1) of section 139 for furnishing the return has expired a notice requiring him, on a date to be therein specified, - (i) Where such person has not made a return within the time allowed under sub-section (1) of section 139 or before the end of the relevant assessment year, to furnish a return of his income or the income of any other person in respect of which he is assessable under this Act, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, or: Provided that where any notice has been served under this sub-section for the purposes of this clause after the end of the relevant assessment year commencing on or after the 1st day of April, 1990 to a person who has not made a return within the time allowed under sub-section (1) of section 139 or before the end of the relevant assessment year, any such notice issued to him shall be deemed to have been served in accordance with the provisions of this sub-section, (ii) to produce, or cause to be produced, such accounts or documents as the Assessing Officer may require, or (iii) to furnish in writing and verified in the prescribed manner information in such form and on such points or matters (including a statement of all assets and liabilities of the assessee, whether included in the accounts or not) as the Assessing Officer may require: Provided that - Yag Dutt 2013.11.01 15:15 I attest to the accuracy and integrity of this document C.W.P. No.3210 of 1993 -11- (a) the previous approval of the Joint Commissioner shall be obtained before requiring the assessee to furnish a statement of all assets and liabilities not included in the accounts; (b) the Assessing Officer shall not require the production of any accounts relating to a period more than three years prior to the previous year.” 26. A co-joint reading of these provisions reveals that the authorities had exercised their powers within the ambit and scope of the Act and not arbitrarily or capriciously as has been alleged by the petitioner. Had petitioner’s version that he had come to India to spend some days with members of his family as also to plan establishment of a 100% export unit as per Government of India Policy, been correct, not only there was to be declaration of currency, jewellery and cash with the Custom/Airport authorities but there was also to be presence of circumstances showing steps taken by the petitioner towards starting of such an export unit. 27. Since warrant of authorization is found to be for the purpose of search of the locker held in the name of the petitioner, there is nothing to conclude that authorization was improper. Sequelly, authority cited by the petitioner as Nenmal Shankarlal Parmer Vs. Assistant Commissioner of Income Tax (Investigation) (1992) 195 I.T.R. 582 (Karnataka) in peculiar facts and circumstances of the case, has no application. Similarly, since there was enough material with the authorities to form an opinion warranting search under Section 132 of the Act, facts of the case in hand being different and distinguishable from the facts of authorities cited as Smt. Sita Devi Vs. Commissioner of Income Tax and others (1980) 122 I.T.R. 105 (P&H) and Jagmohan Mahajan & another Vs. Commissioner of Income Tax and others (1976) 103 I.T.R. 579 (P&H) and thus no help is available to the petitioner from these authorities. 28. Entire operation carried out by the respondents, interalia, qua the locker and accounts of the petitioner cannot be faulted either on facts or Yag Dutt 2013.11.01 15:15 I attest to the accuracy and integrity of this document C.W.P. No.3210 of 1993 -12- in law. The petitioner has not been able to successfully point out any vitiating circumstance in search and seizure operations. 29. There being no merit, the petition is dismissed. (Dr. Bharat Bhushan Parsoon) Judge (Rajive Bhalla) Judge October 31, 2013 'Yag Dutt' 1. Whether Reporters of local papers may be allowed to see the judgment? 2. Whether to be referred to the Reporters or not? 3. Whether the judgment should be reported in the Digest? Yag Dutt 2013.11.01 15:15 I attest to the accuracy and integrity of this document "