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Kerala High Court · body

1990 DIGILAW 344 (KER)

Gabriel Babu v. Asst. Director of Income tax

1990-08-23

RADHAKRISHNA MENON

body1990
Judgment :- The residence and business premises of the first petitioner were searched by the first respondent along with the Officers of the Income-tax Department, in exercise of the power vested in him under S.132(1) of The Income-tax Act, 1961, for short, The Income-tax Act. The search was followed by seizure of the properties made mention of in Exts. P1 and P4. Items 1 to 3 in Ext. P1 and the only item in Ext.P4 are admittedly immovable properties. Exts.P1 and P4 contain directions to the effect that the petitioners, inasmuch as they could not properly explain the sources of acquisition of these properties, shall not transfer or otherwise alienate them. The bank accounts of the petitioners have also been frozen by Exts.P1 and P4. 2. According to the petitioners those items which are shown as Item Nos.1 to 3 in Ext.P1 and the only item shown in Ext.P4 are incapable of being seized under S.132 because they are immovable properties and hence the seizure is not sustainable. Failure to respond to this argument has resulted in the filing of the Original Petition for the reliefs stated hereunder: "It is therefore prayed that this Hon'ble Court be pleased to call for the records of the case leading to the passing of Exhibits P1, P4, P5 (a), (b), (e), P6 and P7 and (a) To issue a writ of certiorari or any other appropriate writ, order, or direction quashing Exhibits PI, P4, P5 (a), (b) & (c), P6 & P7; (b) To issue a writ of mandamus directing the respondent not to proceed on the basis of Exhibits P1, P4, P5 (a), (b), (c), P6, P7 and direct them to withdraw the notices and release the seized articles; (c) To issue a writ of prohibition or any other appropriate writ, order, or direction prohibiting the respondents from completing the proceedings on the basis of Exhibit P1, P4, P5 (a), (b),(c), P6 and P7; (d) To award the costs and damages for the illegal action of the respondents; and (e) To pass such other appropriate orders as are deemed fit". 3. The learned counsel for the petitioners submits that Exts.P1 and P4 to the extent to which they relate to seizure of immovable properties, are not sustainable in law. 3. The learned counsel for the petitioners submits that Exts.P1 and P4 to the extent to which they relate to seizure of immovable properties, are not sustainable in law. The apparent seizure of these items of immovable properties cannot be said to be authorized by law, and hence these proceedings to the said extent are liable to be set aside. The short answer of the Revenue to this argument, discernible from the counter affidavit is this: "It was only search and seizure operations that revealed that the petitioner was in Possession of the above items of properties or to put it differently, revealed that the petitioner had unexplained investment to this gigantic magnitude, which unexplained investment, it is submitted, itself is property in the form of immovable property or to the extent of the value of these six items of properties or the expenditure incurred for acquiring these six items of properties. Of course the Revenue had some suspicion that the petitioner was in possession of several pieces of immovable property, but the location or identity was not known to the Revenue or could be identified by the Revenue. The contention of the petitioner, that no search in relation to the seizure of immovable properties relying on the theory of "known and identified", if I may be permitted to call so, is not applicable at least to the six items of properties... So to the extent of the secret investment or the investment in excess of the declared investment which, it is submitted is property was not known or identified by the Revenue. Accordingly if search reveals unaccounted assets they have to be seized. This is what is done in this case", 4. The counsel for Revenue submits that the first respondent accordingly has also issued the prohibitory order freezing the bank accounts. 5. The short question arising for consideration thus is: whether on the facts and in the circumstances of the case the first respondent was justified in seizing the immovable properties under S.132 of The Income tax Act. 6. The answer to the question depends upon the construction of S.132(1)(c), (i), (iii) and (v) of B of sub-section (1) and the second proviso thereto. 6. The answer to the question depends upon the construction of S.132(1)(c), (i), (iii) and (v) of B of sub-section (1) and the second proviso thereto. Where any officer made mention of in sub-section 1, in consequence of information in his possession, has reason to believe that any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property which has not been or would not be disclosed for the purposes of the Indian Income-tax Act, 1922 of The Income-tax Act (which is stated to be the undisclosed income or property), then such officer can authorize any Assistant Director/ Assistant Commissioner or Income-tax Officer, called the authorized officer, to 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. On such search if the authorized officer happens to find any such books of account, other documents, money, bullion, jewellery or other valuable article or thing being hidden in the building, place, vessel, vehicle or aircraft, he has the power to seize the thing found hidden. Simultaneously he shall prepare a note or an inventory of any such money, bullion, jewellery or other valuable article or thing. The proviso provides 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, he 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 authorized officer and such action of the authorized officer shall be deemed to be seizure of such valuable article or thing under sub-clause (iii). It is thus clear from these provisions that where the authorized officer has reason to suspect that the person concerned has hidden any books of account, other documents, money, bullion, jewellery or other valuable article or thing in his place of business, in any building, place, vessel, vehicle or aircraft, then he had the power to search the place of business etc. and also to seize such books of account, other documents, money, bullion, jewellery or other valuable article or thing and on effecting such seizure, he is obliged to prepare an inventory or mahazar of the things seized by him. It is thus clear from the scheme of these sections that search and seizure go together. In other words where the location of the property was known there is no need to conduct a search. If that be so, there is no need to seize the property also. I am fortified in this view by a decision of the Supreme Court. (See C.I. T. v. Tarsem Kumar, 161 ITR 505). The further question that would arise in this context in this: What are the properties that can be seized after the search? According to the learned counsel for the petitioner only movables can be seized. Under no circumstances immovable properties can be seized, the counsel submits. The counsel for the Revenue however, argues that S.132 empowers the authorized officer to issue prohibitory orders if it is found on search that the person has made secret investment which was not known or informed to the Revenue. According to him the words used in clause (iii) of subsection 1 of S.132 namely "seize' other valuable article or thing "found as a result of such search" fully explain this position. He in this connection made particular reference to the following averments contained in the counter affidavit: "The term "other valuable article or thing" is sufficiently wide enough to rope in the item of properties that are under prohibitory orders. "Thing" going by the dictionary means (law) "anything that may be the subject of proprietary right" (The Random House Dictionary). The use of the word "property" in S.132(1)(c), the second proviso to S.132(1) and the deeming provision contained in the second proviso would eminently support the present action of the first respondent whose action is impugned herein". "Thing" going by the dictionary means (law) "anything that may be the subject of proprietary right" (The Random House Dictionary). The use of the word "property" in S.132(1)(c), the second proviso to S.132(1) and the deeming provision contained in the second proviso would eminently support the present action of the first respondent whose action is impugned herein". The counsel in support of this argument referred to two decisions; one of the Orissa High Court in C.I. T. v. C. Budharaja & Company, (121 ITR 212) and the other of the Bombay High Court in C.I.T. v. Pressure Piling Co. (126 ITR 335). In these decisions, according to the counsel, the learned judges have observed that the word 'article' occurring in S.84,as "capable of meaning anything corporeal". The said meaning of the word 'article' used in a context different from the context in which that word occurs in S.132 therefore has no relevance here. It is a well-established cannon of construction that words and phrases occurring in a statute are to be taken not in an isolated or detached manner dissociated from the context in which they are used. In other words the meaning of words and phrases should take their colour from the context in which they appear. It is also fundamental that if a word occurs in association with other words, which are well defined and understood, then that word takes colour from the words with which that word is associated. A reference in this connection to the decision of the Supreme Court in Stafe of Assam v. Ranga Muhammad (AIR 1967 SC 903) is profitable. 7.Having understood the principle thus, let us see whether the words used in the section "other valuable article or thing" mean differently from the words "...money, Bullion, jewellery" which undoubtedly are only movables. To my mind these words 'other valuable article or thing' used in association with the words 'money, bullion, jewellery' cannot be understood differently. The section therefore cannot be said to be include in its ambit immovable properties also. The Delhi High Court, relying on the decision of the Supreme Court in Tarsemkumar, has expressed the same view. (See the decision in Sardar Parduman Singh v. Union of India (166 ITR 115). The section therefore cannot be said to be include in its ambit immovable properties also. The Delhi High Court, relying on the decision of the Supreme Court in Tarsemkumar, has expressed the same view. (See the decision in Sardar Parduman Singh v. Union of India (166 ITR 115). This being the position in law Exts.P1 and P4 to the extent to which they purport to seize immovable properties (including the prohibitory order contained therein) are liable to be set aside. The question under the circumstances requires to be answered in favour of the petitioners. Accordingly Exts.P1 and P4 to the extent indicated above are set aside. 8. The learned counsel for the petitioner has a further case that the direction to the valuation officer to value the properties, in the circumstances of the case, is not warranted. According to him if no action under S.132 can be taken against an immovable property, the direction to value it in the course of the said proceeding is also not sustainable in law. It is not as if there is no substance in this argument. But in the circumstances of the case it is unnecessary to go into this question because the properties have already been valued. Whether such reports of the valuation officer can be used for the purpose of passing orders under S.132(5) or making fresh assessments no more is res integra in view of the decision of the Supreme Court in Pooran Mai v. Director of Inspection (93 ITR 505) and Partap Singh v. Director of Enforcement (155 ITR 166). The Original Petition accordingly is allowed to the extent indicated above. No costs.