Search under s.132(1) upheld, but successive s.132(3) restraint orders quashed; goods to be released after three weeks

HC partly allowed the writ petition. It upheld the validity of the authorisation and conduct of search u/s 132(1), but quashed successive restraint orders issued u/s 132(3) as lacking jurisdictional foundation and being used to circumvent the scheme of s.132(1), (5) and (8A). The HC held that it was practicable to seize the goods and that repeated cancellation and re-issuance of restraint orders without CIT approval unlawfully extended the restraint beyond the statutory 60-day limit. Since no order u/s 132(5) was passed within 120 days of the deemed seizure, the goods could not be retained. The Department was directed to release the restrained goods, articles and things after three weeks.

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Issues Involved:
1. Legality of the search and seizure u/s 132(1) of the Income-tax Act, 1961.
2. Validity of the continuation of restraint orders u/s 132(3).

Summary:

1. Legality of the Search and Seizure u/s 132(1):
The petitioners challenged the search and seizure conducted at their premises. The respondents justified the action stating that there was reason to believe the petitioners were dealing in undisclosed antique items of handicrafts. The court found no reason to disbelieve the respondents' averments and concluded that the search was justified. The court stated, "it cannot be said, in the present case, that there was no justification for the action which was taken by the respondents in issuing an authorisation under section 132(1)."

2. Validity of the Continuation of Restraint Orders u/s 132(3):
The petitioners also challenged the continuation of restraint orders. The court examined the relevant provisions, including the second proviso to section 132(1) and sub-section (3) of section 132. The court noted that the Legislature regards certain restraint orders as amounting to seizure. The court found that the restraint orders issued from time to time were not validly issued because the conditions necessary for exercising jurisdiction u/s 132(3) did not exist. The court stated, "the orders which were issued under section 132(3) were not validly issued and the goods which were found at the premises could have been seized by actually seizing the articles or by making an order of restraint under the second proviso to section 132(1) of the Act."

The court also found that the restraint orders were improperly extended without the necessary approval from the Commissioner of Income-tax, thereby circumventing the provisions of section 132(8A). The court stated, "the approval of the Commissioner of Income-tax not having been obtained under section 132(8A), the continuation of the restraint order under section 132(3), even if it could be validly passed, was not warranted."

Conclusion:
The writ petition was partly allowed. The court upheld the action of the respondents in issuing the authorisation u/s 132(1) and conducting the search but quashed the orders passed u/s 132(3). The respondents were directed to release the goods, articles, or things after three weeks.

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