1978 (4) TMI 32 - HC - Income Tax

Court quashes tax order, remits for fresh consideration under Income Tax Act

The court allowed the petition, quashed the order of the Board of Direct Taxes, and remitted the matter for fresh consideration by the Notified Authority ... Application under section 132(11) of the Income-tax Act - return of property seized under search - right of person from whose custody property was seized to claim return - non-binding effect of assessment order against non-parties / res judicata - remand for fresh considerationApplication under section 132(11) of the Income-tax Act - return of property seized under search - right of person from whose custody property was seized to claim return - non-binding effect of assessment order against non-parties / res judicata - Application under section 132(11) for return of money seized from petitioner No.1 was not rendered infructuous by an assessment order under section 132(5) against the firm and required adjudication on merits. - HELD THAT: - The court found it undisputed that the cash was seized from petitioner No.1's custody, and therefore he was entitled to seek its return under sub-section (11) even though the legal ownership was asserted to belong to others. A finding in an assessment order against the firm that the sum belonged to the firm could not bind the present petitioners, who were not parties to those proceedings; such a finding did not operate as res judicata against them. The pendency of an appeal by the firm before the Tribunal did not make the petitioners' application infructuous because any eventual finding in those proceedings would not be binding on the petitioners. Further, the fact that the alleged true owners (petitioners Nos.2 and 3) had the remedy of an appeal did not preclude petitioner No.1 (from whose custody the money was seized) or petitioners Nos.2 and 3 from seeking relief under section 132(11). The application therefore required fresh consideration on its merits by the Notified Authority.The impugned order dismissing the application as infructuous is not sustainable; the application under section 132(11) must be decided on merits without treating the assessment order as binding on the petitioners.Remand for fresh consideration - application under section 132(11) of the Income-tax Act - Whether the matter should be remitted to the Notified Authority for fresh decision. - HELD THAT: - Having concluded that the Board's dismissal on the ground of infructuousness was unsustainable, the court quashed the Board's order and remitted the application to the Notified Authority for fresh adjudication in accordance with law and in light of the observations that the petitioners' rights to claim return could not be foreclosed by the assessment order against the firm. The Notified Authority is to decide the application afresh keeping in view the court's observations.The matter is remitted to the Notified Authority for fresh decision of the petitioners' application under section 132(11); the impugned order is quashed and petitioners are to have costs.Final Conclusion: The petition is allowed: the Board's order of 6th September 1976 is quashed and the application under section 132(11) is remitted to the Notified Authority for fresh decision on merits, with the petitioners entitled to costs. Issues:Application under section 132(11) of the Income Tax Act for the return of seized cash and ornaments - Dismissal of application by the Board of Direct Taxes - Claim of petitioner No. 1 that the seized money belonged to him even though part of it belonged to his wife and brother - Relevance of assessment order under section 135(2) against the firm - Competency of petitioner No. 1 to apply for the return of money - Appeal rights of petitioner Nos. 2 and 3 against the order under section 132(5).Analysis:The judgment pertains to an application under section 132(11) of the Income Tax Act for the return of seized cash and ornaments. The petitioner, accompanied by his wife and brother, visited a jeweler's premises carrying cash and jewelry. Subsequently, the income tax department raided the premises and seized the cash and ornaments from the petitioner. The Board of Direct Taxes dismissed the petitioner's application under section 132(11) on the basis that an order under section 132(5) had been passed against the jeweler firm, rendering the application infructuous. The petitioner contended that even though part of the seized money belonged to his wife and brother, he was entitled to its return as it was seized from his custody. The court agreed with this contention, emphasizing that the assessment order against the jeweler firm was irrelevant to the petitioner's claim.The court highlighted that the petitioner, from whose custody the money was seized, had the right to seek its return under section 132(11), regardless of the ownership of the money. The court rejected the department's argument that petitioner Nos. 2 and 3, the wife and brother, should have filed an appeal against the order under section 132(5) before applying under section 132(11). The court held that the failure of petitioner Nos. 2 and 3 to appeal did not preclude the first petitioner from seeking the return of the money under section 132(11). The judgment emphasized the first petitioner's interest in recovering the seized money and upheld his right to apply for its return.In conclusion, the court allowed the petition, quashed the order of the Board of Direct Taxes, and remitted the matter for fresh consideration by the Notified Authority under section 132(11) of the Income Tax Act. The court directed the Notified Authority to decide the application in accordance with the law, disregarding the findings of the assessment order against the jeweler firm. The petitioners were awarded costs for the proceedings.