Court quashes tax order, orders return of seized money, emphasizes no conflicting seizures allowed.

The court quashed the Income-tax Officer's order and directed the return of Rs. 1 lakh to the Assistant Collector of Central Excise, Salem. The seizure by the Income-tax Department was deemed invalid as the money was already seized by the Central Excise Authorities, resulting in the petitioner losing legal possession. The court emphasized that conflicting seizures by different government departments are impermissible. The petitioner was awarded costs and an advocate's fee of Rs. 200.

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Issues Involved:
1. Validity of the seizure of Rs. 1 lakh by the Income-tax Department.
2. Jurisdiction of the Income-tax Officer to pass an order under section 132(5) of the Income-tax Act, 1961.
3. Legal possession of the seized money.
4. Conflict of authority between different government departments.
5. Entitlement to the return of the seized money.

Issue-wise Detailed Analysis:

1. Validity of the Seizure of Rs. 1 lakh by the Income-tax Department:
The petitioner challenged the seizure of Rs. 1 lakh by the Income-tax Department, arguing that the seizure was illegal and invalid. The seizure was executed under section 132(1) of the Income-tax Act, 1961, based on a warrant issued by the Commissioner of Income-tax, Mysore, on December 8, 1972. The court noted that the Commissioner can authorize the seizure of money only when he has reason to believe, based on information, that the money represents undisclosed income. The court emphasized that the money must be in the possession of the person who has committed the default of not disclosing it for tax purposes. Since the money was already seized by the Central Excise Authorities, the petitioner was divested of possession, making the Income-tax Department's seizure invalid.

2. Jurisdiction of the Income-tax Officer to Pass an Order under Section 132(5):
The Income-tax Officer passed an order under section 132(5) of the Act retaining the seized amount, citing the petitioner's tax liability. The court held that the Income-tax Officer could only exercise powers under section 132(5) if the money was validly seized under section 132(1). Since the initial seizure by the Income-tax Department was invalid, the subsequent order under section 132(5) was also deemed illegal and invalid.

3. Legal Possession of the Seized Money:
The court examined the concept of legal possession, stating that once the money was seized by the excise authorities, the petitioner lost the right to control or regulate its use. The legal possession of the money remained with the excise authorities until it was released from seizure. The court cited Supreme Court judgments to support the view that the person from whom the money is seized loses possession when the seizing authority acquires the right to control it.

4. Conflict of Authority Between Different Government Departments:
The court addressed the potential conflict between different government departments, noting that allowing one department to seize money already seized by another would lead to unwholesome conflict of authority. The court emphasized that the power conferred by section 132 is not overriding and cannot impede the exercise of powers by another authority under a different set of laws. The court cited similar views from the Calcutta High Court and the Punjab & Haryana High Court, agreeing that money already seized by one authority cannot be seized by another during the subsistence of the initial seizure.

5. Entitlement to the Return of the Seized Money:
The petitioner requested the court to direct the Income-tax Department to return the seized money. The court held that since the money was not validly seized from the petitioner by the Income-tax Department, it could not issue a direction for its return to the petitioner. However, the court directed the Income-tax Department to return the money to the Assistant Collector of Central Excise, Salem, from whom it was seized.

Conclusion:
The court allowed the writ petition, quashing the impugned order of the Income-tax Officer dated March 6, 1973, and issued a writ of mandamus directing the return of Rs. 1 lakh to the Assistant Collector of Central Excise, Salem. The petitioner was awarded costs, with an advocate's fee of Rs. 200.

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