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Judgment
V. Ramaswami, J.—This is petition under article 226 of the Constitution of India for the issue of a writ of certiorari to call for the records of
the Commissioner of Income Tax in his proceedings in Case No. 143(9) 85-86/CBE, dated May 24, 1985, and to quash the same. That was an
order u/s 132(8) of the Income Tax Act, 1961, hereinafter referred to as ""the Act"", and that reads as follows :
The account books and other documents, (i) as per annexure ''SS'' - 22 items to the panchanama dated November 28, 1984, (ii) as per
annexures SSK-S and S/SSK/SR to the panchanama dated November 29, 1984, (iii) documents listed in the panchanama dated November 28,
1984, prepared in Ooty Office, were seized u/s 132(8) from the above assessee on November 28, 1984, and November 29, 1984. It is
necessary to retain the account books and other documents in the ADI''s custody for the following reasons :
For further investigation.
I, therefore, approve the ADI''s proposal to retain the account books and other documents for a further period up to December 31, 1985.
The ADI referred to therein is a reference to the Assistant Director of Inspection.
The petitioner is a firm of Income Tax practitioners at Coimbatore. The firm consists of two partners. The Assistant Director of Inspection
(Intelligence), the second respondent in the writ petition, who was authorised by the Director of Inspection with reference to the provisions of
section 132(1)(c) of the Act conducted a search in the head office and the branch office of the firm and also the residential premises of both the
partners on November 28, 29, 1984. The authorities had seized a sum of Rs. 40,000 in cash and some items of jewellery along with certain
documents from the residence of one of the partners. It is contended by learned counsel that to undisclosed money, bullion or jewellery, nor any
incriminated counsel admits that some of the records and account books of the firm were seized from those officers. It is further stated that even
with reference to the cash and jewellery seized from the premises of one of the partners, they had already given correct details of their source to
substantiate the presence of such articles and documents. It is seen from the order of the Income Tax Officer made u/s 132(5) of the Act that a
notice u/s 132(5) read with rule 112A of the Income Tax Rules, 1962, was issued to the petitioner on December 10, 1984, and the assessee filed
his reply to the notice on December 26, 1984. There was also a subsequent representation dated April 25, 1985. It may be mentioned that
ultimately the order made u/s 132(5) of the Act was against only one of the partners, and the finding is that the seized money and jewellery
represented the unaccounted income of one of the individual partners and it was not referable to the income of the firm as such. The petitioner had
requested for the return of the documents seized from the head office and the branch office of the firm, firstly, on the ground that the Director of
Inspection had no locus standi over the seized items and, secondly, on the ground that there were absolutely nor grounds for retaining the
documents after an order u/s 132(5) of the Act has been made. In the meantime, it appears that on May 22, 1985, the Assistant Director of
Inspection made a requested to the Commissioner of Income Tax, Coimbatore, for approval for retention of the documents seized from the
petition firm for the period beyond 180 days from the date of seizure. That request was complied with in the impugned order dated May 24, 1985.
It is at this stage that the petitioner had filed the above writ petition questioning the authority of the Assistant Director of Inspection in retaining the
documents without handing over the same to the petitioner and also questioning the jurisdiction of the Commissioner in extending the period of
detention of the documents up to December 31, 1985, in the impugned order.
Learned counsel for the petitioner contended that the Assistant Director of Inspection is not one of the officers having jurisdiction u/s 124 of the
Act over the petitioner''s firm and that, therefore, he should have handed over the documents to the Income Tax Officer having jurisdiction over the
firm within 15 days from the date of seizure as provided under sub-section (9A) of section 132 of the Act and it is only the Income Tax Officer
who has jurisdiction over the firm and who had received the documents u/s 132(9A) of the Act who has the jurisdiction u/s 132(8) of the Act to
apply for an extension of the period of detention and since in this case that Officer not having applied for such extension, the order of the
Commissioner granting extension of time was without jurisdiction.
Relevant provisions which need be considered in this connection are sub-sections (5), (8) and (9A) of section 132 and they read as follows :
Sub-section (5) :
Where any money, bullion, jewellery or other valuable article or thing (hereafter in this section and in sections 132A and 132B referred to as the
assets) is seized under sub-section (1) or sub-section (1A), the Income Tax Officer, after affording a reasonable opportunity to the person
concerned of being heard and making such enquiry as may be prescribed, shall, within 120 days of the seizure, make an order, with the pervious
approval of the Inspecting Assistant Commissioner.
Sub-section (8) :
The books of account or other documents seized under sub-section (1) or sub-section (1A) shall not be retained by the authorised officer for a
period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same are recorded by him in writing
and the approval of the Commissioner for such retention is obtained :
Provided that the Commissioner shall not authorities the retention of the books of account and other documents for a period exceeding thirty days
after all the proceedings under the Indian Income Tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account
or other documents are relevant are completed.
Sub-section (9A) :
Where the authorised officer has no jurisdiction over the person referred to in clause (a) or clause (b) or clause (c) of sub-section (1), the books
of account or other documents or assets seized under that sub-section shall be handed over by the authorised officer to the Income Tax Officer
having jurisdiction over such person within a period of fifteen days of such seizure and thereupon the powers exercisable by the authorised officer
under sub-section (8) or sub-section (9) shall be exercisable by such Income Tax Officer.
There is no dispute that the Income Tax Officer referred to in sub-section (5) is the Income Tax Officer having jurisdiction over the person u/s
124 of the Act. It is also not disputed that ""the Income Tax Officer having jurisdiction over such person"" referred to in sub-section (9A) is the same
officer who is referred to in sub-section (5). The Income Tax Officer could not exercise his powers under sub-section (5) unless he is in legal
possession of the assets or other documents seized during the search made. Even if the authorised officer is an Income Tax Officer, if he had no
jurisdiction over the persons referred to in clause (a), (b) or (c) of sub-section (1), he could not exercise his power under sub-section (5). He shall
have to hand over the seized documents or assets to the Income Tax Officer having jurisdiction over the person to make an order under sub-
section (5). As seen from sub-section (5), there is a time-limit of 120 days from the date of seizure for making an order. It is in order to enable the
Income Tax Officer who has jurisdiction over the person to make an order under sub-section (5) within the period prescribed in cases where the
authorised officer was directed to hand over the documents or assets to that Income Tax Officer within a period of 15 days from the date of
seizure. In the circumstances, therefore, there could be no doubt that when sub-s. (9A) refers to an authorised officer having no jurisdiction over
the person, it is a reference to an officer other than an Income Tax Officer having jurisdiction to make an order under sub-section (5). Any other
construction will make sub-section (5) unworkable. For the same reason, the authorised officer referred to in sub-section (8) is the same
authorised officer referred to in sub-section (9A) as having no jurisdiction over the person. The net result, therefore, would be that if the authorised
officer is an Income Tax Officer having jurisdiction over the person, he can retain the records himself for 180 days under sub-section (8). But,
however, he will have to make an order under sub-section (5) within 120 days. If the records are required by him for any other purpose, for
example u/s 288(5), that Income Tax Officer also can ask for approval of the Commissioner for such retention. If the authorised officer happens to
be an officer other than an Income Tax Officer having jurisdiction over the person to make an order under sub-section (5), that authorised officer
shall hand over the documents and assets to the Income Tax Officer having jurisdiction over the person and once that is done, the Income Tax
Officer gets jurisdiction not only to make an order under sub-section (5) but also to exercise the powers of an authorised officer under sub-section
(8) or sub-section (9) of that section. Thus, though u/s 132(1), the Director of Inspection may authorise a Deputy Director of Inspection or an
Inspecting Assistant Commissioner or Assistant Director of Inspection or Income Tax Officer and the officer so authorised is referred to as the
authorised officer, the provisions of sub-section (8) could not be invoked by such officer unless the happens to be an Income Tax Officer having
jurisdiction over the person and who can make an order under sub-section (5). The authorisation given to such officer by the Director of
Inspection in turn also only enables such officer to search and seize the documents, records, money, bullion, jewellery or other valuable article or
thing and the other powers specifically referred to in the authorisation does not and could not enable that officer to make an order u/s 132(5)
unless such authorised officer happens to be an Income Tax Officer himself having jurisdiction over such person.
Learned counsel for the Revenue contended that the Assistant Director of Inspection who was authorised by the Director of Inspection u/s
132(1) is an officer who has jurisdiction over the person referred to in clause (a) or clause (b) or clause (c) of sub-section (1) and that he need not
hand over the documents or assets seized under sub-section (9A) and that he could exercise his powers under sub-section (8). She further
contended that the Income Tax Officer having jurisdiction to make an order under sub-section (5) could get the records from the Assistant
Director of Inspection or the Assistant Director of Inspection may send the records to the Income Tax Officer for the purpose of making an order
under sub-section (5) and get the return of the same and proceed to exercise his powers under sub-section (8). When these documents are
handed over either at the request of the Income Tax Officer or voluntarily by the Assistant Director of Inspection so as to enable the Income Tax
Officer to make an order under sub-section (5), though the physical custody may be with the Income Tax Officer, the legal custody is with the
Assistant Director of Inspection, and therefore, the impugned order is valid. In this connection, she referred to the definition of ""Director of
Inspection"" in section 2(21) of the Act and the provisions contained in sections 131(1A) and 135. Section 2(21) defines ""Director of Inspection
as a person appointed to be a Director of Inspection under sub-section (1) of section 117, and includes a person appointed to be an Additional
Director of Inspection, a Deputy Director of Inspection or an Assistant Director of Inspection. Section 131(1A) provides that if the Assistant
Director of Inspection has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or class of persons
within his jurisdiction, then, for the purpose of making any enquiry or investigation relating thereto, it shall be competent for him to exercise the
powers conferred under sub-section (1) on the Income Tax Authorities, notwithstanding that no proceedings with, respect to such person or class
of persons are pending before him or any other Income Tax authority. Sub-section (1) of section 131 states that the Income Tax Officer, Appellate
Assistant Commissioner, Inspecting Assistant Commissioner, Commissioner (Appeals) and Commissioner shall, for the purposes of the Act, have
the same powers as are vested in a court under the Code of Civil Procedure, 1908 (5 of 1908), when trying a suit in respect of the specified
matters referred to therein. Section 135 state that the Director of Inspection, the Commissioner and the Inspecting Assistant Commissioner shall be
competent to make any enquiry under the Act and for this purpose shall have all the powers that than Income Tax Officer has under the Act in
relation to the making of enquiries. It may be seen from these provisions that for the purpose of exercising certain powers, the Assistant Director of
Inspection is equated with a Director of Inspection and he is enabled to exercise that power. They all relate to making an enquiry or investigation
relating to any income that has been concealed or is likely to be concealed. Assuming that the Assistant Director of Inspection in this case had
jurisdiction throughout the territory of Tamil Nadu for such enquiry or investigation, he could not be considered to be an Income Tax Officer who
could make an order under sub-section (5) nor can he be considered to be an officer who have jurisdiction over the person referred to in sub-
section (5). We have already stated that on a harmonious construction of sub-section (5), (8) and (9), unless the authorised officer happens to be
an Income Tax Officer having jurisdiction over such person, that officer shall hand over the seized records within 15 days from the date of seizure
to the Income Tax Officer having jurisdiction over the person in order to enable him to make an order within the prescribed time under sub-section
(5). Unless the Income Tax Officer gets the documents as provided under sub-section (9A), he could not make an order under sub-section (5)
and merely because the Assistant Director of Inspection handed over the records, that would not confer jurisdiction on him to make an order
within the prescribed time under sub-section (5). He would not be a person who is authorised to make an order unless the records came to his
possession as provided under sub-section (9A). The order itself is made with reference to money, bullion jewellery or other valuable article or
thing seized under sub-section (1) or sub-section (1A) and there is no provision other than sub-section (9A) which authorises the person who has
seized those records to hand them over to the Income Tax Officer for making an order under sub-section (5). We may also state that learned
counsel for the Revenue could not rely upon any provision in the Act or any rule or notification conferring specifically the powers of the Income
Tax Officer under sub-section (5) to be exercisable by the Assistant Director of Inspection. The only communication which she could refer to is the
Board''s Circular No. XII/II/199, Jurisdiction of Intelligence Wing, which reads as follows (at p. 146 of 153 ITR) :
The Jurisdiction of Intelligence Wing is, for the present, confined to the Commissioner''s charges in which the various units of the Wing are located
so that they may be able to do intensive work in the limited areas and show results. There is, however, no objection to utilising the officers of the
Intelligence Wing outside the present Commissioner'' charges, if an important case arises and it is necessary to do so in the interests of Revenue.
This may be done only when the case is very important and you consider it necessary in the interests of Revenue.
This can hardly be considered as conferring jurisdiction of any kind on the Assistant Director of Inspections. Learned counsel then referred to a
decision of the single judge of this court in the case of K. Raju Vs. Third Income Tax Officer, Circle I, Salem, And Others, . In that case, though
there was a reference to section 132(9A) of the Act, there is no discussion on the scope of that provision. After referring to the Board''s Circular
dated July 21, 1966, printed at page 653 of Part II of Volume XII of the Central Board of Direct Taxes Bulletin, the learned judge observed as
follows (p. 146).
Thus, it is clear that the jurisdiction of the officers of the Intelligence Wing over the persons will be co-extensive with that of the Commissioner''s
charge in which the wing is located. Therefore, when an Assistant Director of Inspection is authorised by the Commissioner u/s 132(1)(a) of the
Act to conduct a search, it would follow that such an Assistant Director of Inspection would also be the Authorised Officer having jurisdiction over
the person subjected to search within the meaning of section 132(8) of the Act. Hence, the seventh respondent can perform all the functions under
sub-sections (8) and (9) of section 132 of the Act in his capacity as the Authorised Officer having jurisdiction over the person referred to in clause
(a) or (b) or (c) of sub-section (1) of section 132 of the Act without prejudice to the power of the Income Tax Officer who has jurisdiction u/s 124
of the Act over the persons subjected to search.
We are unable to agree that this decision in any way help the contention of the learned counsel for the Revenue. If this decision in construed as
holding that the Assistant Director of Inspection is an authorised officer having jurisdiction over the person and that he could not be considered as
an authorised officer who has no jurisdiction within the meaning of sub-section (9A), with great respect to the learned judge, was are unable to
agree for the reasons stated earlier.
It was then contended by learned counsel for the Revenue that in any case, sub-section (9A) should be restricted to a case where the
authorised officer is an Income Tax Officer about having no jurisdiction over the person and that sub-section (8) would apply to all other cases.
This contention cannot be accepted for more than one reason. There are no words either limiting the scope of sub-section (9A) to an Income Tax
Officer who has no jurisdiction or limiting the scope of sub-section (8) to an authorised officer other than an Income Tax Officer who has no
jurisdiction over the person. Secondly, in a case where the authorised officer happens to be an officer other than an Income Tax Officer, the
provision of sub-section (5) could not be invoked. We are, therefore, unable to accept the contention of learned counsel.
In the foregoing circumstances; if the Assistant Director of Inspection had retained the records beyond the period of 15 days from the date of
seizure, the retention itself would have been illegal. However, factually we find that the records were handed over to the Income Tax Officer who
made the order u/s 132(5) even before December 10, 1984, that is, within 15 days from the date of seizure. Though the notice issued u/s 132(5) is
dated December 10, 1984, and that establishes the handing overt the documents, in the counter-affidavit filed in the writ petition on behalf of
respondents Nos. 1 to 3, it is stated that the account books are handed over to the Income Tax Officer for the specific purpose of enabling the
assessee to take extracts and also to enable the Income Tax Officer to pass an order u/s 132(5) of the Act and that the custody, though not
physically, was always with the Assistant Director of Inspection. In the light of the discussions above, if the Assistant Director would be illegal and
he could not have also asked for extension of time. The order of the Commissioner extending the period of retention at the request of the Assistant
Director of Inspection is in the circumstances without jurisdiction. We should also keep in mind that wide and extensive powers are conferred in
the matter of search and seizure u/s 132 and the only safeguard available to a citizen against arbitrary exercise of that power is the procedural
safeguards provided therein. The satisfaction of the Director of Inspection u/s 132 itself may not be assailable and it may be contended that it is
subjective satisfaction and therefore, a strict compliance with the procedural formalities is a sine qua non for the validity of the orders. We have
already noticed that the provisions of section 132 had not been complied with and, therefore, the impugned order is liable to be set aside and it is
accordingly set aside. The writ petition is allowed and the rule nisi is made absolute. The petitioner will be entitled to his costs. Counsel''s fee Rs.
500 (rupees five hundred only).
Writ Appeal No. 999 of 1985 :
On view of the order in the writ petition, no orders are necessary in the writ appeal.