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PETITIONER: BHUPENDRA RATILA THAKKAR AND ANR.

       Vs.

RESPONDENT: COMMISSIONER OF INCOME TAX, GUJARAT & ORS

DATE OF JUDGMENT05/12/1975

BENCH: SHINGAL, P.N. BENCH: SHINGAL, P.N. RAY, A.N. (CJ) BEG, M. HAMEEDULLAH SARKARIA, RANJIT SINGH

CITATION:  1976 AIR  636            1976 SCR  (2) 891  1976 SCC  (1) 381

ACT:      Income Tax  Act Sec.  132, 132A-Income  Tax Rules 1962, rules 112,  112A,  112B,112C-Constitutional  validity  of  - Constitution of  India, Articles  14,  19(1)(f)  &  (g)  and 31(1).

HEADNOTE:      The  petitioners  carry  on  business  as  Shroffs  and Bankers. The Income-tax Department searched various premises of the  petitioners and seized a sum of Rs. 12 lakhs in cash from the  petitioners, under  section 132  and 132A  of  the Income-tax Act.  The petitioners  contended  that  the  said amount represented  the stock-in-trade  of the  petitioners. The  petitioners  also  contended  that  the  provisions  of section 132 and 132A of the Income-tax Act, 1961, as well as rules 112,  112A, 112B  and 112C  of the  Income-Tax  Rules, 1962, were  unconstitutional as  violative  of  Article  14, 19(1)(f) and  (g) and  31(1) of  the Constitutional. Section 132 and  132A were  further  challenged  on  the  ground  of conferring naked,  abitrary,  unguided,  discriminatory  and uncanalised power on the executive authority.      Dismissing the petition, ^      HELD: (1) This Court has already upheld in Pooran Mal’s case the  validity of  section 132 and 132A as well as rules 112 and 112A. [893 A & C]      (2) Rules  112B and  112C relate  to the release of the articles seized  and are  therefore beneficial  rules and as such cannot be challenged. [893D]

JUDGMENT:      ORIGINAL JURISDICTION: Writ Petition No. 96 of 1972.      Under Article 32 of the Constitution of India.      I. N. Shroff for the appellant/petitioner.      B. B. Ahuja and S. P. Nayar for respondents.      The Judgment of the Court was delivered by      SHINGHAL J.  This is a petition under article 32 of the Constitution. Bhupendra  Ratilal Thakkar,  petitioner No. 1,

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is  the   managing  partner  of  the  other  petitioner  M/s Rajnikant Nareshchandra  Shroff, which is a partnership firm carrying on  the business  of  "shroffs  and  bankers".  Its principal place  of business  is said  to be  at Mehmadabad, with branches  at Surat  and Bombay. The petitioners applied for registration  of the firm on April 7, 1971, and had time to file  their return  of income  upto June 30, 1972. It has been claimed  that the  firm had large sums of money in cash as well as ’hundis’ and other bills of exchange which formed its stock-in-trade  and that  there was no justification for thinking that  it would  not do what was required to be done under the  law relating to income-tax. The firm had a sum of Rs. 12,00,000/-  as cash  on January 10, 1972, which is said to have  been duly  entered in  its books  of account in the Bombay branch  office. The  grievance of  the petitioners is that some of the 892 respondents entered  these premises on January 10, 1972, "in purported exercise  of the powers conferred by section 132", and seized  the sum  of Rs. 12,00,000/- along with the books of account  and other  documents. Searches  are also said to have been  carried out  in Mehmedabad  office and the branch office at  Surat, and some more books of account, papers and documents are said to have been seized there.      The petitioners  have stated  that as  the sum  of  Rs. 12,00,000/- was  the stock-in-trade  of the firm, and it had not been  secreted,  there  was  no  justification  for  the seizure of  the money  or the books and the other documents. They have  accordingly stated  that the seizure was an abuse of the  authority conferred  by ss.  132 and  132-A  of  the Income-tax Act,  1961, hereinafter  referred to  as the Act, and rules  112, 112-A, 112-B, 112-C and 112-D of the Income- tax Rules,  1962, hereinafter  referred to as the Rules. The petitioners have contended that ss. 132 and 132-A of the Act are unconstitutional  because they are violative of articles 14, 19(1)(f)  and (g)  and 31(1) of the Constitution. It has also been urged that the aforesaid rules are illegal as they are  not  backed  by  any  legal  authority.  The  aforesaid provisions have also been challenged on the ground that they are violative  of article 14. In regard to ss. 132 and 132-A of the  Act, the  petitioners have  further stated that they should be  struck down  as  they  confer  naked,  arbitrary, unguided,  discriminatory   and  uncanalised  power  on  the executive authority.  The petitioners  have also  prayed for the restoration of the property which has been seized by the income-tax authorities.  It has  been  pointed  out  in  the petition that  three similar  writ petitions were pending in this Court,  including writ petition No. 446 of 1971. Pooran Mal vs. Director of Inspection Investigation.      The  respondents  have  admitted  the  search  and  the seizure of  the property, but have stated that this was done because   the   Commissioner   of   Income-tax,   Gujarat-I, respondent  No.   1,  had   reasons  to   believe  that  the petitioners would  not produce  their books  of account etc. even though  they would  be useful  to  the  department  for taking proceedings  under the  Act. It  has also been stated that there  was enough  material before the Commissioner for exercising the  power  under  s.  132(1)  of  the  Act.  The respondents have  made specific averments in this connection including  the   averment  that   books  of   account   were unreliable,  and   that  the  claim  that  the  sum  of  Rs. 12,00,000/- was shown as balance in the books of account was incorrect. They  have also  denied the  allegation that  any search was  carried on  in the Mehmedabad head office of the petitioner firm  or that  the sum of Rs. 12,00,000/ was kept

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as the  firm’s stock-in-trade or that the firm was left with no  other  money  whatsoever.  The  petitioners’  contention against the legality of ss. 132 and 132-A of the Act and the Rules has also been controverted.      It will  be recalled  that in  their writ  petition the petitioners have  made a  specific reference to Pooran Mal’s writ petition  No. 446 of 1971. That case has been heard and decided by  this Court on December 14, 1973 and the decision has been reported in Pooran Mal 893 etc. vs.  Director of  Inspection (Investigation)  of Income Tax, New  A Delhi and others Mr. Shroff has frankly conceded that the points which have been raised in this petition have been considered in that case, and that he has nothing to say in regard  to the  validity of  ss. 132 and 132-A of the Act and rules 112 and 112-A of the Rules or the averments in the petition in  that connection.  In fact  it has  been held by this Court  in Pooran  Mal’s case that "it was impossible to hold that the impugned provisions were violative of articles 14, 19  or 31."  All that  Mr. Shroff has argued is that the validity of  rules 112-B  and 112-C of the Rules was not the subject matter  of examination in Pooran Mal’s case and that it would be necessary for this Court to examine that part of the controversy,  as and  when it  is permissible  to do so, with reference  to the  provisions  of  article  14  of  the Constitution.      We have  gone through  rules 112-B  and  112-C  of  the Rules. Rule  112-B relates  to the  release of  the articles seized under  s. 132(5) of the Act, and merely provides that where, in  pursuance of  that section,  any assets  or  part thereof have  to be  released, the  Income-tax officer shall forthwith deliver  the same  to the person from whom custody they were seized. Rule 112-C provides for the release of the remaining assets, and it is to the effect that they shall be made out  or paid to the person from whose custody they were seized, after  the discharge  of the liabilities referred to in cl  (i) of  sub-section (1)  of S. 132-A of the Act. Both these are  therefore beneficial  rules, and  there can be no satisfactory reason  for  challenging  their  validity  with reference to  article 14  of the  Constitution. So  when the present case  is not different from Pooran Mal’s case, there is no  merit in  this writ petition. It is hereby dismissed. There will however be no order as to costs. P.H.P.                                   Petition dismissed. 894