Rajendra Kumar Jain v. Union of India — 1999 DIGILAW 1433 (RAJ)

Honble VERMA, J.–It is alleged that the petitioner is a sole proprietor of M/s R.S. Jewellers and is engaged in the business of importing rough emerald from abroad and after finishing them, pass on to M/s Chordia Gems in which he himself is also a partner along with other brothers and father. He is already an income tax assessee. (2). It is stated that vide invoice 3626 dated 28.1.1986 he had imported emerald worth Rs. 3.50 lacs from Real Gems Incorporation, New York as per the documents attached with the writ petition vide Ex. 1(A) to 1(M). It is further submitted that he had taken a loan of Rs. 4,77,000/- on 6.6.1986 from M/s Chordia Gems as per the books of accounts maintained by M/s R.S. Jewellers which amount was withdrawn in cash by the petitioners `MUNIM Shri Jagan Nath Bhalla from the bank accounts on the dates mentioned in the petition and as per the certificates of the bank attached as Annexures 4, 5, 6 and 7. It is stated that the relevant entries had also been made in the cash books of different amounts withdrawn on this account. This amount is said to have been handed over along with import documents to one Shri Kanti Kumar Dugar, respondent No.6, a broker and resident of Kothari Bhawan, Jaipur for making remittance to Real Gems Incorporation, New York vide invoice dated 28.1.1986 and import bill dated 4.2.1986 along with the documents. It is alleged that proper papers were prepared. Relevant entry is also said to have been made in the record. Reliance is also made on Annexure-9 a letter of Reserve Bank of India. However, according to the petitioner the amount could not be deposited because of certain deficiency in the documents and the bank had not accepted the amount and, therefore, respondent No.6 had sent back the said amount to Jaipur through his relative Shri Chain Roop Sethia who was intercepted by the police and brought to Police Station Jaipur wherein for the custody of Rs. 5,12,800/- from his briefcase carried by him which amount was seized by the police officers u/s 132-A of the Income Tax Act through Panchnama and the Panchnama dated 19.6.1986 was prepared. The statement of Shri K.K. Dugar is said to have been recorded on the same day. 5,12,800/- from his briefcase carried by him which amount was seized by the police officers u/s 132-A of the Income Tax Act through Panchnama and the Panchnama dated 19.6.1986 was prepared. The statement of Shri K.K. Dugar is said to have been recorded on the same day. It is stated that the money was seized from the employee of Shri K.K Dugar and Mr. K.K. Dugar had established this fact in his statement in regard to the amount of Rs. 4,77,000/- and on the statement made by Shri Dugar, the matter was verified by the officers of the Income Tax Department from the petitioner as well. The above-said position is said to have been stated by the petitioner to the authorities to the Income Tax Department. In pursuance of the seizure, the Income tax authorities also conducted raids on the business premises of M/s Duggar Exim Linkers, a partnership concern of respondent No.6, books of accounts and documents were seized including the documents in regard to the transaction in hand. It is stated that the statement of the petitioner was also recorded and the petitioner had informed and confirmed the position as stated above. It is the case of the petitioner that out of the sum so seized, it included the amount of Rs. 4,77,000/- of the petitioner for the purpose as mentioned above which was being held by Shri K.K. Dugar on behalf of the petitioner firm. Explanation of respondent No.6 was also asked as required u/s 127 of the Income Tax Act by the respondent No.4. (3). In view of the above-said circumstances the petitioner is said to have made an application u/s 132 of the Act to the Assistant Director of Inspection, Central Revenue, Jaipur and requested for return of the original documents together with the amount of Rs. 4,77,000/-. It was further stated that the petitioner was prepared to give the bank guarantee as well, however, this request was rejected on 12.8.1986 vide Annexure-22. He made further applications vide Annexure 23(A) and 23(B) for the same purpose but the Income Tax Officer, Central Circle-I, Jaipur rejected the same on 16.10.1986 for the reasons mentioned therein and further held that the entire amount of Rs. 5,12,800/- was an un-disclosed income and investment of Shri K.K. Dugar for the financial year 1986-87 and accounting year 1987-88 vide order Annexure- 23(A). 5,12,800/- was an un-disclosed income and investment of Shri K.K. Dugar for the financial year 1986-87 and accounting year 1987-88 vide order Annexure- 23(A). This action of the Income Tax Officer was challenged before the Commissioner of Income Tax, Jaipur but the same had not been decided till the filing of the writ petition. (4). With the above-said facts, the petitioner has approached this Court on the ground that the circumstances as warranted either u/s 132 or 132(A) of the Act were not existing and, therefore, the action of the respondents was illegal. It is further submitted that the action taken u/s 132-A on the letter of the SHO was not sufficient to exercise such powers under the Act. (5). It is submitted that the respondent No.2 had no material to initiate action u/s 132A of the Act and thus the action of the respondents in not returning the amount of Rs. 4,77,000/- to the petitioner was not in accordance with law and challenges the order passed u/s 132(5), 132(4) r/w Section 112A of the Act to be illegal. It is further submitted that it was incumbent upon the officer concerned to have afforded an opportunity of hearing to the petitioner before passing the order or during the enquiry and the authorities should have recorded the statement of the petitioner as well and a prayer has been made for quashing the order dated 16.10.1986 and to return the amount of Rs. 4,77,000/- out of seized amount of Rs. 5,12,800/-. (6). No one appears on behalf of respondent Income Tax Department. From the perusal of the orders of this Court passed from time to time number of advocates had been appearing on behalf of the Income Tax Department on different dates. It seems that the Income Tax Department had been very frequently shifting the case from one counsel to another for the reasons best known to it. Initially in the year 1991 Shri Sudhir Gupta had appeared, in the year 1992 Shri Virendra Dangi too had appeared. It seems that the Income Tax Department had been very frequently shifting the case from one counsel to another for the reasons best known to it. Initially in the year 1991 Shri Sudhir Gupta had appeared, in the year 1992 Shri Virendra Dangi too had appeared. One Shri G.S. Bapna had started appearing in the year 1996, then came Shri Abhay Bhandari, then in the year 1997 Shri R.S. Rathore and Shri A.K. Bhandari appeared, in March 1997 one Shri A. Kasliwal had appeared for the department, in the year 1999 the previous advocates were replaced by Shri Ashok Gaur on behalf of the department who had appeared on number of dates. On 4.8.1999, Shri Ashok Gaur sought time to seek instructions and also to bring record for the perusal of the Court. (7). No one appears today on behalf of the Income Tax Department, but a request has been made through proxy for informing the court that even Shri Ashok Gaur is no more the standing counsel for the respondent Income Tax Department. For the reasons that the file has been taken away by the department from him which amounts to as goods as pleading no instructions. It is unfortunate that the department instead of persuing the matter in the court for the reasons best known to it, is engaging and withdrawing the engagement of counsel repeatedly without informing the court or even without seeking permission of the court and I may not be wrong to say that the department has completely failed to look into its interest in prosecuting the case. Left with no alternative when no one is appearing in the case and case is already part heard matter; the records have not been produced and the counsel engaged by the department has no instructions. I have no option but to decide the case which is pending right from 1987 on the material available in the writ petition with the assistance of the counsel for the petitioner. (8). Written statement has been filed on behalf of the respondent No.2, Commissioner of Income Tax. It is stated in the written statement that as averments made by the petitioner are to be proved on record. It is further submitted that the story put by the petitioner is only concocted story. (8). Written statement has been filed on behalf of the respondent No.2, Commissioner of Income Tax. It is stated in the written statement that as averments made by the petitioner are to be proved on record. It is further submitted that the story put by the petitioner is only concocted story. A further defence has been taken that the various payments as mentioned in the writ petition cannot be linked with the cash found. It is submitted that the amount so seized was seized from an employee of Shri Dugar respondent No.6 and there is no relation what-so-ever of the amount so claimed and amount so seized and, therefore, the order passed u/s 132(5) was justified and it was rightly found to be belonging to Shri K.K. Dugar. It is vehemently denied that the amount ever belonged to the petitioner and, therefore, the findings given by the Income Tax authorities were correct. The respondents have not attached any document what-so-ever with the written statement. (9). To support the contention, the petitioner relies on the decisions in the case of Gita Devi Dhurka vs. Income Tax Officer & others (1), and K.A. Karim & sons vs. Income Tax Officer and others (2). (10). In the case of Geeta Devi Dhurka (supra), it had been held that for the purpose of Section 132(5) and Section 132(11) of the Income Tax Act in a case where during a search some materials are seized and they are claimed by a third party, the Income Tax Officer even at the time of issuing notice u/s 112-A would have to be satisfied as to the person against whom he would like to proceed u/s 132(5). Therefore, if at the time when notice under Rule 112-A is issued, the Income Tax Officer primafacie is of the view that it did not belong to the person from whom they were seized, it would be open to him to take proceedings under Section 132(5) against that third party who made the claim instead of the person from whom the goods were seized. (11). In the case of M.A. Karim and sons (supra), it was held that the functions of the Income tax Officer are quasi-judicial and his action should be bonafide and in consonance with the principles of natural justice. (11). In the case of M.A. Karim and sons (supra), it was held that the functions of the Income tax Officer are quasi-judicial and his action should be bonafide and in consonance with the principles of natural justice. One of the rules of natural justice is that no decision shall be given against a party without affording him reasonable opportunity of hearing. Some amount was seized by the Enforcement Directorate during a search from the residence of `K, who was the managing partner of a firm. Proceedings were started against `K. The firm claimed that the money belonged to it and filed an affidavit in support of it. The firm also produced accounts and documents. The Income Tax Officer passed an order u/s 132(5) holding that the sum represented income of K from undisclosed sources. The firm was not given an opportunity to be heard and, therefore, it had filed a petition to quash the order passed u/s 132(5). It was observed as under:- ``Held, that a firm and a partner therein are distinct and different persons and they are treated so under the I.T. Act. Hence, the notice given to K could not be treated as notice to the firm. The amount that was seized was very large. In such a case, where the very title to the property or the ownership of the amount had to be adjudicated, it was only fair, proper and reasonable, that the person, who claimed that the amount belonged to it, should be given an adequate and effective opportunity to substantiate its claim. The petitioner laid its claim, filed an affidavit and produced documents and accounts. The Revenue gathered materials and examined persons but the petitioner was not informed about them; nor was an opportunity afforded to the petitioner to put forth its case on such material nor to meet the materials gathered by the Revenue. The procedure adopted by the ITO. In such circumstances, was unfair, unjust and unreasonable and violated all canons of fair play and natural justice. The order passed by the ITO under S. 132(5) was, therefore, liable to be quashed. (12). The procedure adopted by the ITO. In such circumstances, was unfair, unjust and unreasonable and violated all canons of fair play and natural justice. The order passed by the ITO under S. 132(5) was, therefore, liable to be quashed. (12). Yet in another judgment relied by the petitioner in the case of Vindhya Metal Corporation & Others vs. Commissioner of Income-Tax and others (3), it was held in the circumstances of the case that: `(i) the mere fact that V was in possession of a huge amount of cash and did not have documents regarding its ownership and the fact that his name was not found in the list of income- tax assessees could not be treated as sufficient information leading a reasonable man to the inference that the amount would not be disclosed for income tax purposes. The condition precedent for the exercise of power under S. 132A was lacking and the order made under it was liable to be quashed. (ii) there was no material on record to sustain the order made on the firm. The seizure of the books of account and the sum of Rs. 17,353 was without the authority of law. Hence, that order was also liable to be quashed. (13). Similar was the position in the Division Bench judgment of Punjab & Haryana High Court in the case of Tejpal Oswal vs. ITO & Others (4). (14). From the above narration of facts and law, it is clear that the petitioner had been claiming that the part of the amount belongs to the petitioner and for the reason that at any given time to notice was issued to the petition but it was incumbent upon the Income-tax authorities to have issued notice to the present petitioner as well for establishing their cases, the matter needs reconsideration at the level of the concerned ITO and as such a direction is issued to the concerned authorities to hear the petitioner as well who shall produce all relevant record before the concerned officer for passing appropriate order and it does without saying that in case ultimately the version of the petitioner is accepted, the action shall be taken according to law for the refund of the amount. (15). With the above-said observations, the writ petition is disposed off.