1974 (9) TMI 1 - SC - Income Tax

Quashing tax-seizure orders for natural justice breaches and remitting for rehearing; s.132(5) ninety-day limit waivable by consent

Whether a writ under Art.226 can quash and remit when natural justice is violated: SC held that where an authority's order is vitiated by failure to ... Limitations prescribed u/s 132(5) - Constitutional validity of section 132 and legality of the search and seizure alone were under consideration​​​​​​​ - principles of natural justice - search and seizure in pursuance of the provisions of section 132 - exercising its powers under article 226 - HELD THAT:- The power to quash an order under article 226 can be exercised not merely when the order sought to be quashed is one made without jurisdiction in which case there can be no room for the same authority to be directed to deal with it. But, in the circumstances of a case, the court might take the view that another authority has the jurisdiction to deal with the matter and may direct that authority to deal with it or where the order of the authority which has the jurisdiction is vitiated by circumstances like failure to observe the principles of natural justice, the court may quash the order and direct the authority to dispose of the matter afresh after giving the aggrieved party a reasonable opportunity of putting forward its case. Otherwise, it would mean that where a court quashes an order because the principles of natural justice have not been complied with, it should not while passing that order permit the tribunal or the authority to deal with it again irrespective of the merits of the case. The period of limitation is one intended for the benefit of the person whose property has been seized. It is open to him to waive it. We consider that to hold that the period of ninety days which is mentioned in section 132(5) is an immutable one would cause more injury to the citizen than to revenue. It is, therefore, open to the aggrieved person, as happened in this case, to agree to a fresh disposal of the case by the Income-tax Officer and thereby waive the period of limitation. Having agreed and thus persuaded the court to direct the Income-tax Officer to pass a fresh order respondents Nos. 1 and 2 cannot question the order of the Income-tax Officer on the basis of such direction. They should be deemed to be estopped from so contending. They had by their consent made the Income-tax Officer to put himself at a disadvantage, because he is now faced with the contention that he had no jurisdiction to pass a fresh order. Furthermore, it is not a case of the court conferring jurisdiction on the Income-tax Officer to decide a case after he had lost jurisdiction over the matter. The procedure from the date of seizure to the date of the second order of the Income-tax Officer is an integrated process. Though a proceeding under article 226 is an original proceeding and not by way of an appeal against the order of a court or of a tribunal, it is part and parcel of our established judicial procedure and to treat it as though it were something outside the normal procedure and not part of an integrated whole would be wholly unrealistic. It is, therefore, possible for the parties to agree to a fresh disposal by the Income-tax Officer even as the court would have ordered. It is also not a case of the parties conferring jurisdiction on the Income-tax Officer by consent. It is a case where the parties agreed to a particular mode of exercise by the Income-tax Officer of a jurisdiction which he cannot be said to have lost or in respect of which he has become functus officio. Though it is true that on passing an order under section 132(5) the Income-tax Officer can be said to become functus officio it is the court's order that revives his powers and jurisdiction. There is no question of the period of limitation in section 132(5) involving public interests. It is intended for the benefit of the parties. We are, thus, satisfied that as the period of limitation prescribed by section 132(5) is intended for the benefit of persons like the respondents, it is competent for them to waive it, that the respondents have in fact waived it, and the order of the High Court in W. P. is a consequence of such waiver, that the Income-tax Officer had, therefore, the jurisdiction to pass a fresh order. It follows, therefore, that as the High Court did not go into the question of the correctness or otherwise of the fresh order of the Income-tax Officer that the property belonged to Pooran Mal, the individual, and not to the 1st respondent-firm, it was not competent for the High Court to order the return of the 114 bars of silver to the 1st respondent-firm. During the pendency of the petition the appellants in pursuance of consent orders deposited certain securities with excise authorities and executed bonds in their favour and obtained release of the seized goods. The appellants also agreed that in the event of their failure in the writ petition the securities deposited shall be treated as sale proceeds of the said goods and treated as goods so seized for the purpose of any adjudication proceedings. They further agreed that they shall not raise any contention in the adjudication proceedings that the said proceedings will not be valid on the ground that the goods have been released to the appellants and are not available for confiscation or imposition of fine in lieu of confiscation. It was held that the consent terms operated as a waiver of notice for extending time within six months of the seizure of goods. It was also held that the appellants had no locus standi to ask for release of the goods because the bank was in possession of the goods as the pledgee and the excise authorities seized the goods from the possession of the bank. In this case we have already mentioned that the silver bars were not seized from the respondents under section 132(1) but were attached under section 132(3). The 1st respondent-firm cannot, therefore, question the order of the Income-tax Officer on the ground that it was passed after the three months' period laid down by section 132(5), nor was it permissible for the High Court to order return of the silver bars to the 1st respondent-firm. It had not even gone into the question whether the Income-tax Officer's decision on the question of ownership of the silver bars was correct or not. The appeal is, therefore, allowed and the judgment and order of the High Court set aside. The High Court will now deal with the other contentions raised in the writ petition. Issues: (i) Whether the ninety days limitation in section 132(5) of the Income-tax Act, 1961 can be waived by the person for whose benefit it is provided and whether a fresh order passed by the Income-tax Officer pursuant to a court direction (or under section 132(12)) must itself comply with the ninety days limitation; (ii) Whether the High Court could order return of silver bars attached under section 132(3) without deciding the correctness of the Income-tax Officer's fresh order on ownership.Issue (i): Whether the period prescribed by section 132(5) is waivable by the aggrieved person and whether a subsequent order made pursuant to a court direction or under section 132(12) is bound by the original ninety days limitation.Analysis: The period in section 132(5) is intended for the benefit of the person whose property is seized. A party may waive such a benefit; consent terms that lead to a fresh disposal by the Income-tax Officer operate as waiver. Where an order within ninety days is set aside and a court directs a fresh inquiry or the notified authority directs a fresh order under section 132(11)/(12), the fresh order is not constrained anew by the original ninety days limitation; requiring such would render subsections (11) and (12) and the court's power under Article 226 otiose. The substantive question of ownership of seized property concerns title and is governed by ordinary principles applicable to tribunals and courts deciding title, not by the limitation rules applicable to assessment proceedings. Authorities on waiver and estoppel (including decisions applying similar statutory-benefit waivers) are applicable.Conclusion: The ninety days period in section 132(5) is waivable by the person for whose benefit it is enacted; a fresh order passed by the Income-tax Officer pursuant to a court direction or under section 132(12) is not required to be passed within the original ninety days period.Issue (ii): Whether the High Court could direct return of silver bars attached under section 132(3) without examining the correctness of the Income-tax Officer's fresh order on ownership.Analysis: The silver bars in question were attached under section 132(3) (not seized under section 132(1)) and the consent-directed fresh inquiry contemplated an order under section 132(5). Having waived the limitation and obtained a fresh order, respondents could not successfully contend that the Income-tax Officer lacked jurisdiction to pass that order. A High Court ordering return without adjudicating the correctness of the Income-tax Officer's fresh order effected a disposition outside permissible scope where jurisdiction and substantive ownership had not been examined in favour of the party seeking return.Conclusion: The High Court's order directing return of the attached silver bars was not permissible where the respondents had waived the limitation and the Income-tax Officer had jurisdiction to pass a fresh order; the High Court could not order return without deciding the substantive ownership issue.Final Conclusion: The appeal is allowed; the High Court judgment ordering return of the attached silver bars is set aside and the matter is remitted for consideration of remaining contentions in the writ petition by the High Court consistent with this decision.Ratio Decidendi: A statutory time-limit enacted for the benefit of a person may be waived by that person, and where a court directs a fresh disposal or the notified authority issues direction under sections 132(11)/(12), the fresh order is not required to be confined by the original time-limit in section 132(5); attachment under section 132(3) does not entitle return without adjudication of substantive ownership following a lawful fresh inquiry.