Wp/19408/2004 Of Sri B. Konda Chary v. The Assistant Director Of Income Tax-Tax (Inv)

IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE THIRTY FIRST DAY OF DECEMBERTWO THOUSAND AND FOUR PRESENT THE HON'BLE SRI JUSTICE M.H.S. ANSARI ANDTHE HON'BLE SRI JUSTICE T.CH.SURYA RAO WRIT PETITION Nos.19408 and 19429 of 2004 W.P.No.19408 of 2004 Between: Sri B. Konda Chary, S/o. B. Brahmaiah,R/o. H.No.1-6-195/1, Bapuji Nagar, Musheerabad, Hyderabad. ..... PETITIONER AND 1.The Assistant Director of Income Tax-Tax (INV), Unit II (2), Hyderabad, FourthFloor, Annexe Bldgs, Ayakar Bhavan,Hyderabad-500 004. 2.The Addl. Director of Income Tax (Inv.), Unit II, Hyderabad. (R2 is impleaded as per court order dt. 10-11-2004 in WPMP 27256 of 2004) WPMP 27256 of 2004) .....RESPONDENTS Petition under Article 226 of the Constitution of India praying that in thecircumstances stated in the affidavit filed herein the High Court may be pleased toissue a writ, order or direction, more particularly one in the nature of a writ ofmandamus declaring the action of the respondents in withdrawing the funds frompetitioner's S.B. Account No.1314 with Corporation Bank, Jubilee Hills, Hydeabadas illegal, arbitrary and mala fide and without jurisdiction and violative of Articles 14,21 and 300-A of the Constitution of India and further direct the respondents toforthwith refund the amount with interest at the rate of 18% per annum. Counsel for the Petitioner: Mr.M.V.DURGA PRASAD Counsel for the Respondents: Mr.S.R.ASHOK, Senior S.C. for I.T. Dept., W. P. No.19429 of 2004 Between: B.Srinivasa rao, S/o.Sri Venkateswara Rao,R/o.601, Krishna Block, Divya Shakthi Apartments,Navodaya colony, Yellareddyguda, Hyderabad. ..... PETITIONER AND 1.The Asst. Director of Income Tax - Tax (INV), unit II (2), Hyderabad, Fourth floor,Annexe Building, Ayakar Bhavan, Hyderabad. 2.The Addl. Director of Income Tax (Inv.) Unit II, Hyderabad. ( R2 is impleaded as per court order dt. 10-11-2004 in WPMP 27251 of 2004) WPMP 27251 of 2004) .....RESPONDENTS Petition under Article 226 of the Constitution of India praying that in thecircumstances stated in the affidavit filed herein the High Court may be pleased toissue a writ, order or direction, more particularly one in the nature of a writ ofmandamus declaring the action of the respondents in withdrawing the funds frompetitioners' S.B. Account No.220 with corporation, Bank, Jubilee Hills, Hyderabad asillegal, arbitrary and mala fide and without jurisdiction and violative of Articles 14, 21and 300-A of the Constitution of India and further direct the respondents to forthwithrefund the amount with interest at the rate of 18% per annum. Counsel for the Petitioner: Mr.M.V.DURGA PRASAD Counsel for the Respondents : Mr. S.R.ASHOK, Senior S.C.FOR I.T. Dept., The Court made the following : COMMON ORDER: (per the Hon’ble Sri Justice M.H.S. Ansari) As identical questions arise for consideration, the above two writ petitions weretaken up analogously and are being disposed of by this common order. For the sakeof convenience, we shall refer to the facts in W.P.No.19408 of 2004. Counsel for the Petitioner: Mr.M.V.DURGA PRASAD Counsel for the Respondents : Mr. S.R.ASHOK, Senior S.C.FOR I.T. Dept., The Court made the following : COMMON ORDER: (per the Hon’ble Sri Justice M.H.S. Ansari) As identical questions arise for consideration, the above two writ petitions weretaken up analogously and are being disposed of by this common order. For the sakeof convenience, we shall refer to the facts in W.P.No.19408 of 2004. The matter arises under the Income Tax Act, 1961 (for short ‘the Act’). A few factsfrom the pleadings on record need only be stated. They are; that a search andseizure operations under Section 132(1) of the Act were conducted at the businesspremises of M/s.Sri Aditya Homes Pvt. Ltd., and its Managing Director and Director.In the course of the said search proceedings, some signed blank cheques and pay-in-slips pertaining to the Savings Bank Account No.1314 with Corporation Bank,Jubilee Hills Branch, Hyderabad, of the petitioner were found and were seized.Summons were issued under Section 131 of the Act, and pursuant thereto, thepetitioner was examined on oath inter alia with respect to the said savings bankaccount. Based upon the information contained in the documents seized fromM/s.Aditya Homes Pvt. Ltd., as also on the information gathered from the statementof the petitioner, the respondent sought authorization under Section 132(1) of the Actfrom the Additional Director, Income Tax Department, and based upon the warrant ofauthorization issued under Section 132(1), seized the money lying to the credit ofthe petitioner in the aforesaid account. The instant writ petition is filed for directionsupon the respondent to refund the amount with interest to the petitioner. Several contentions have been raised in the writ petition and reiterated before thisCourt by Mr. M.V. Durga Prasad, learned counsel for the petitioner. It is, however,not necessary for us to deal with the same in any detail, as, for the relief claimed inthe writ petition, the petitioner has an efficacious alternative remedy under theprovisions contained in Section 132B of the Act. To the extent relevant, theprovisions in Sections 132 and 132B are extracted hereunder. 132. (1) Where the Director General or Director or the Chief Commissioner orCommissioner or any such Joint Director or Joint Commissioner as may be empowered inthis behalf by the Board, in consequence of information in his possession, has reason tobelieve that – xxxxxxx (c) any person is in possession of any money, bullion, jewellery or other valuable article orthing and such money, bullion, jewellery or other valuable article or thing represents eitherwholly or partly income or property which has not been, or would not be, disclosed for thepurposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act (hereinafter in thissection referred to as the undisclosed income or property), then,- A. the Director General or Director or the Chief Commissioner or Commissioner, asthe case may be, may authorize any Joint Director, Joint Commissioner,Assistant Director or Deputy Director, Assistant Commissioner or DeputyCommissioner or Income-tax Officer, orthe case may be, may authorize any Joint Director, Joint Commissioner,Assistant Director or Deputy Director, Assistant Commissioner or DeputyCommissioner or Income-tax Officer, or B. such Joint Director, or Joint Commissioner, as the case may be, may authorizeany Assistant Director or Deputy Director, Assistant Commissioner orDeputy Commissioner or Income-tax Officer,any Assistant Director or Deputy Director, Assistant Commissioner orDeputy Commissioner or Income-tax Officer, xxxxxxx (iii) seize any such books of account, other documents, money, bullion, jewellery orother valuable article or thing found as a result of such search; B. such Joint Director, or Joint Commissioner, as the case may be, may authorizeany Assistant Director or Deputy Director, Assistant Commissioner orDeputy Commissioner or Income-tax Officer,any Assistant Director or Deputy Director, Assistant Commissioner orDeputy Commissioner or Income-tax Officer, xxxxxxx (iii) seize any such books of account, other documents, money, bullion, jewellery orother valuable article or thing found as a result of such search; Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade ofthe business, found as a result of such search shall not be seized but the authorisedofficer shall make a note or inventory of such stock-in-trade of the business; 132B. (1) The assets seized under Section 132 or relinquished under Section 132A may bedealt with in the following manner, namely:- xxxxxxxxxxx Provided that where the person concerned makes an application to the Assessing Officerwithin thirty days from the end of the month in which the asset was seized, for release ofasset and the nature and source of acquisition of any such asset is explained to thesatisfaction of the Assessing Officer, the amount of any existing liability referred to in thisclause may be recovered out of such asset and the remaining portion, if any, of the assetmay be released, with the prior approval of the Chief Commissioner or Commissioner, tothe person from whose custody the assets were seized. Provided further that such asset or any portion thereof as is referred to in the first provisoshall be released within a period of one hundred and twenty days from the date on which thelast of the authorizations for search under Section 132 or for requisition under Section 132A,as the case may be, was executed; It appears that such remedy has been availed of by the petitioner, though, withoutprejudice to his contentions in the instant writ petition. We are, accordingly, not inclined, for the said reason, to go into the merits of thecontention as to whom the seized money belongs, as it is open to the petitioner topursue the application already filed before the Assessing Officer for release of theamount seized and to satisfy him about the nature and source of acquisition of thesaid assets. With regard to the question of jurisdiction, it was contended by Mr. Durga Prasadthat no proceeding or action under Section 132 of the Act was initiated against thepetitioner and, therefore, the respondent has no jurisdiction to take any action against the petitioner or his property or to take away the amount lying to the credit ofthe petitioner’s savings bank account. It was further contended that under Section132 (2), there is no power or jurisdiction to attach or to issue garnishee order againstthird parties. From the counter affidavit, it will appear that on the basis of the documents seizedfrom the business premises of M/s. Sri Aditya Homes Pvt. Ltd., and based uponfurther information provided by the petitioner in his statement, the respondent formeda belief that the savings bank account of the petitioner is a benami account of M/s.SriAditya Homes Pvt. Ltd. The respondent, thereafter, placed his findings forconsideration of the Additional Director of Income Tax (Inv.), Unit-II, who isempowered to issue warrant of authorization under Section 132 (1) of the Act. It alsoappears from the counter affidavit that the Additional Director of Income Tax (Inv.)came to the conclusion based on the material available on record that he has reasonto believe that the savings bank account of the petitioner is the benami account ofM/s. Sri Aditya Homes Pvt. Ltd., and that the said company is the beneficial owner ofthe said bank account, and, therefore, issued warrant of authorization. Mr. S.R. Ashok, learned Senior Standing Counsel for I.T. Department, has placedbefore us the files. On perusal of the same, it would appear that the reasons onwhich the opinion was formed by the Additional Director of Income Tax (Inv.) arecontained in the files. Therefore, it cannot be said that based on the informationavailable on record on which such belief was formed and the reasons recordedtherein, no reasonable person could have entertained such belief. The basis forexercise of power under Section 132(1) of the Act has to be the formation of beliefand the belief has to be formed on the basis of receipt of information by theAuthorising Officer. The writ Court cannot examine either the sufficiency oradequacy of the material based on which such belief can be formed. It is theexistence of information and its relevance, and the formation of belief that is open tojudicial scrutiny. Viewed in this light, it cannot be said that either there was noinformation or that the information based on which a belief could be formed has nonexus i.e., rational connection or relevant bearing to the formation of the belief. Thereasons which led the Authorising Officer to form the belief have been recorded byhim in the files placed before us. We, therefore, find no substance in the contentionthat the respondent had no jurisdiction to seize the amount lying in the account. Theauthorization itself has not been questioned. We are further of the view that the other contention of the petitioner as to thejurisdiction of the respondent to seize the amount lying in the account of thepetitioner founded on the ground that only a prohibitory order under sub-Section (3)of Section 132 of the Act could have been issued but money could not have beenseized is misconceived. The reliance upon the decisions pertaining to Fixed DepositReceipts (FDRs) is in-appropriate to the case on hand. For the reasons aforesaid, the writ petition is liable to be and is accordinglydismissed. However, it is clarified that this order shall not preclude the petitionerfrom seeking such alternative remedies as are open to him in law and as he may beadvised for release of the seized amount. The files submitted for our perusal by the learned Senior Standing Counsel for theDepartment be returned to him forthwith. ______________________ (M.H.S.ANSARI, J.) 31[st] December 2004. ______________________ (T.CH. SURYA RAO, J.) ARS 1.The Assistant Director of Income Tax-Tax (INV), Unit II (2), Hyderabad, FourthFloor, Annexe Bldgs, Ayakar Bhavan, Hyderabad-500 004. 2.The Addl. Director of Income Tax (Inv.), Unit II, Hyderabad. 3.Two CD copies.