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PETITIONER: SMT. KUSUM LATA SINGHAL

       Vs.

RESPONDENT: COMMISSIONER OF INCOME TAX RAJASTHAN,JAIPUR AND ORS.

DATE OF JUDGMENT16/07/1990

BENCH: MUKHARJI, SABYASACHI (CJ) BENCH: MUKHARJI, SABYASACHI (CJ) RAMASWAMY, K.

CITATION:  1991 AIR  236            1990 SCR  (3) 393  1990 SCC  (4)  98        JT 1990 (3)   287  1990 SCALE  (2)121

ACT:     Income  Tax  Act, 1961/Income Tax Rules,  1962:  Section 132(5), (7)/Rule  112A--Search and seizure by I.T.  authori- ties--Assessee whether entitled to return of valuables.

HEADNOTE:     The petitioner was carrying on business as a stockist of Baba  Brand  Tobacco. The petitioner’s husband,  who  was  a sub-dealer of the product, was living with her at all  mate- rial times.     A  search  under section 132 of the Income Tax  Act  was conducted at their house and valuables and books of  account seized.  A  notice under rule 112A of the Income  Tax  Rules read  with  sub-section (5) of section 132 of  the  Act  was served on the petitioner. The petitioner filed an application in the High Court  under Article  226 of the Constitution claiming return of  account books and other  valuables  to  her. On the other hand, in  the  proceedings under  Section  132(5) of the Act against  the  petitioner’s husband,  he had claimed that the ornaments belonged to  him and  that  the  same could be treated  as  representing  his undisclosed income.     The High Court came to the conclusion that the  authori- sation  for search under section 132(1) of the  Act  against the  petitioner was not in accordance with law  and,  there- fore,  the seizure of the assets could not be said  to  have been  in accordance with law. The High Court  however  noted that  in view of the order made under section 132(5) of  the Act against the husband, the valuables could not be  ordered to be returned to the petitioner.     Before  this  Court, it was contended on behalf  of  the petitioner  that  if search and seizure  were  illegal,  the items of jewellery were liable to be returned- On behalf  of the  Revenue,  it was contended that in  a  situation  where there was a dispute as to who was the owner of the jewellery and  ornaments, the decision of the High Court declining  to direct their return to the petitioner could not be faulted. 394 Dismissing the special leave petition, the Court,     HELD: (1) A dispute as to the ownership of jewellery  in

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question cannot be resolved in proceedings under Article 226 of  the Constitution in the manner sought for by  the  peti- tioner. [397F]     (2)  In  the instant controversy the Court is  not  con- cerned  whether  the proceedings against the  husband  under section 132(5) of the Act are valid or not, but irrespective of the validity of the proceedings, the evidence or testimo- ny wherein the husband has asserted the ornaments and jewel- lery  to  be his, cannot be wiped out and  does  not  become non-existent.  The aforesaid being the factual  matrix,  the High  Court  was  pre-eminently justified  in  declining  to direct return of these items of jewellery and other items to the  wife. If that is the position, then it cannot  be  said that  the  High Court has committed any error in  law  which required  rectification by this Court under Article  136  of the Constitution. [397E-G]     Assainer  & Anr. v. Income Tax Officer, Calicut,  [1975] 101  ITR  854; J.R. Malhotra & Anr. v.  Additional  Sessions Judge,  Jullunder,  [1976]  2 SCR 993  and  Commissioner  of Commercial  Taxes,  Board of Revenue, Madras  v.  Ramkishnan Shrikishan Jhaver, AIR 1968 SC 59, distinguished.

JUDGMENT:     CIVIL  APPELLATE  JURISDICTION: Special  Leave  Petition (Civil) No. 15327 of 1989.     From  the  Judgment and Order dated 18.7.  1989  of  the Rajasthan High Court in D.B. Civil Writ Petition No. 2161 of 1988. C.S. Agarwal, H.R. Parekh, S.K. Jain for the Petitioner.     O.P.  Vaish,  S. Rajappa and Ms. A. Subhashini  for  the Respondents. The Judgment of the Court was delivered by     SABYASACHI  MUKHARJI, CJ. This is a special leave  peti- tion  directed  against the judgment and order of  the  High Court  of Rajasthan, dated 18th July, 1989.  The  petitioner herein  i.e.  Smt.  Kusum Lata Singhal carried  on,  at  all relevant  times, business under the name and style  of  M/s. Lata  & Company and she claims to be an authorised  stockist of Baba Brand Tobacco manufactured by M/s. 495 Dharampal Premchand Ltd., New Delhi. Mr. R.K. Singhal is the husband of the petitioner. In the judgment under appeal,  it has been stated that Mr. R.K. Singhal owns a house No. E117, Shastri  Nagar in Jaipur and the petitioner lived  with  her husband at all material times. Mr. Singhal was a partner  in Lata  Sales  Centre and is said to be a sub-dealer  of  M/s. Lata & Company.     A  search  under  section 134 of  the  Income  Tax  Act, (hereinafter  called  ’the Act’) was conducted at  the  said premises  on  25/26th  November, 1987.  During  the  search, valuables  and books of accounts were seized on 26th  Novem- ber,  1987, and a notice under rule 112A of the  Income  Tax Rules,  1962 (hereinafter referred to as ’the  Rules’)  read with sub-section (5) of Section 132 of the Act was issued to the  petitioner  by the Income Tax Officer. The  notice  was served on the husband of the petitioner.     In the application under Article 226 of the Constitution of India filed before the High Court, the petitioner claimed return  of  account  books and other  valuables  which  were seized  on 26th November, 1987. The return was  claimed  be- cause,  according  to the petitioner, the retention  of  the books  and valuables was in violation of the  provisions  of section 132 of the Act. The High Court in the judgment under

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appeal  came  to the conclusion that the  authorisation  for search  in the instant case under section 132(1) of the  Act was not valid or legal. Therefore, the High Court held  that search  was bad. At the time of search the silver  and  gold ornaments worth about Rs.4,58,1089 were found and some other silver and gold ornaments were also found but these were not seized. The High Court had directed return of account  books to  the petitioner on furnishing photostat  copies  thereof. The High Court came to the conclusion that the authorisation under  section 132(1) of the Act was not in accordance  with law  and,  therefore, the search and seizure of  the  assets could  not be said to have been in accordance with law.  The High Court noted that in view of the fact that by virtue  of the  power  under section 132(7) and the  order  made  under section  132(5) of the Act against the husband of the  peti- tioner,  the valuables etc. could not be ordered to  be  re- turned to the petitioner.     Aggrieved thereby, the petitioner seeks to challenge the said  order under Article 136 of the Constitution of  India. Mr.  C.S.  Agarwal appearing for the  petitioner,  contended before  us that if search and seizure were illegal then  the evidence  obtained by such search and seizure could be  uti- lised in subsequent proceedings, but the items of 386 jewellery   and   goods  worth,  according  to   him,   over Rs.2,97,000  were  liable to be returned. We  are,  however, unable  to  entertain this appeal. In the instant  case  the husband of the wife stayed in the same premises. The author- isation  of search and seizure in respect of  account  books and goods which were seized was against the wife but in  the proceedings under section 132(5) of the Act the husband  Mr. Singhal  has  contended and claimed that  the  ornaments  in question or the jewellery belonged to him.     Mr.  Vaish, learned counsel appearing for  the  revenue, has  drawn our attention to an authorisation issued  against the husband Mr. Singhal under sub-section (5) of section 132 of  the  Act. Indeed, Mr. R.K. Singhal has  stated  on  oath before the authorised officer at the time of search that the same  belonged  to  him and he has claimed the  same  to  be treated  as  representing his undisclosed income.  Mr.  R.K. Singhal,  the husband, as his evidence has recorded  in  the proceedings against him, has disclosed the same and  surren- dered  a total sum of over Rs.4,00,000 consisting of  undis- closed  cash of Rs. 1,16,550 and excessive  jewellery  worth Rs.2,97,750  received from his possession as his income  for the  purpose of income-tax assessment for the current  year, which he claims to have earned from his business. Therefore, it  appears that there is dispute as to who is the owner  of the  jewellery and ornaments or in other words, to  whom  do these  belong.  If in such a situation the  High  Court  has declined  to direct return of items of jewellery  and  orna- ments,  such  decision cannot be faulted.  Even  though  the search  and seizure has been declared illegal, it cannot  be illegal  and  the question of, dispute about the  items  not being  urged before the High Court, we cannot say  that  the High  Court  has committed any error in  this  case  thereby requiring  interference by this Court, or, in  other  words, that injustice has been caused to any party.     It is well-settled that the dispute as to the  ownership of  jewellery in question cannot be reserved in  proceedings under  Article 226 of the Constitution in the manner  sought for by the petitioner. Mr. Agarwal drew our attention to the decision in Assaina & Anr. v. Income Tax Officer, Calicut  & Ors.,  [1975] 101 ITR 854 wherein the Kerala High Court  has observed  that the goods which were seized from the  custody

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of  a particular person, should normally be returned to  the person  from  whose custody the same had  been  seized.  The aforesaid  may be the position where there is no dispute  as to the ownership of the goods in question. In such a  situa- tion,  return of the goods to the person from whose  custody the  same are seized, may be possible but the said  decision or the observations therein would be no authority in support of  the  petitioner’s contention in the instant  case  where there is a dispute. 397     Our attention was also drawn to certain observations  of this Court in J.R. Malhotra & Anr. v. Addl. Sessions  Judge, Jullundur & Ors., [1976] 2 SCR 993 in support of the  propo- sition  that  revenue could not indirectly  keep  the  money seized on the plea that there would be a demand and that the money may be kept by revenue where surrender and seizure was wrong. We are afraid that the aforesaid observations of this Court  are also of no avail in the light of the  perspective that  we have mentioned hereinbefore. The said  observations were made entirely in a different context.     Our attention was also drawn to the observations of this Court in Commissioner of Commercial Taxes, Board of Revenue, Madras & Anr. v. Ramkishan Shrikishan Jhaver etc., AIR  1968 SC  59 in support of the proposition that when a search  was found illegal, the goods should be returned. Normally speak- ing, that would be so. This proposition is unexceptional but in the light of the controversy as we have perceived in this case,  we  are clearly of the opinion that  this  submission will not be of any assistance in doing justice in this case.     Mr.  Agarwal further contended that if  the  proceedings under Section 132(5) for the original search were held to be invalid  then  all proceedings thereafter would  be  invalid and,  therefore,  the proceedings initiated as a  result  of that  search even against the husband, would be invalid  and such a statement of the husband recorded, cannot be utilised any further. In the instant controversy we are not concerned whether  the proceedings against the husband  under  section 132(5)  of the Act are valid or not but irrespective of  the validity  of the proceedings, the evidence or  testimony  as mentioned  hereinbefore, wherein he has asserted  the  orna- ments and jewellery to be his, cannot be wiped out and  does not  become non-existent. After all, we are  concerned  with the contention of the husband that the jewellery in question belongs to him, in this case. The aforesaid being the factu- al matrix, the High Court, in our opinion, was pre-eminently justified  in declining to direct return of these  identical jewellery and other items to the wife. If that is the  posi- tion then it cannot be said that the High Court has  commit- ted  any error in law which requires rectification  by  this Court.  This application for leave under Article 136 of  the Constitution  is certainly not entertainable. In  the  prem- ises,  this application must be dismissed without any  order as to costs. Interim orders, if any, are vacated. R.S.S.                                        Petition  dis- missed. 398