TaxTMI 
TaxTMI 
2011 (8) TMI 678
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....itioners are companies incorporated under the provisions of the Companies Act, 1956, having their registered office at Dua Complex, Panposh Road, Rourkela. The petitioners are mainly engaged in manufacturing sponge iron, TMT and structural steel. The petitioners have been regularly filing their income-tax returns. On the strength of warrant of authorisation dated June 18, 2011, there were search and seizure operations in the busi-ness premises of the petitioner-companies on July 6, 2011, and July 7, 2011. In the course of search, by letter dated July 6, 2011 under annexure I the authorized officer issued prohibitory order under section 132(3) of the Act to the branch manager, IDBI Bank, Rourkela, directing him not to remove, part with or otherwise deal with the articles mentioned in the said order without his permission. Vide letter dated July 6, 2011 (annexure 3), the assistant general manager, Mid Corporate Rourkela intimated the petitioner, Maa Vaishnavi Sponge Ltd., that they have received a notice from the Deputy Director of Income-tax (Investigation) to disclose information regarding transaction in the accounts and to disclose credit facility sanc- tioned with details of thei....
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.... Government organizations and to discharge the contractual obligation, the operation of the bank accounts is very much necessary. Due to seizure of the bank accounts of the petitioners, their business got closed and more than 500 daily wage workers were rendered unemployed. The staff quarters are in dark due to non-payment of electricity bill. Statutory payments like staff salary, provident fund, ESI, service tax, excise duty, entry tax could not be paid. Due to arbitrary action committed by opposite party Nos. 1 to 5, the petitioners' business has been paralyzed. Placing reliance on the judgment of this court in the case of Visa Comtrade Ltd. v. Union of India (W. P. (C) No. 572 of 2011, disposed of on May 18, 2011) [2011] 338 ITR 343 (Orissa)), Mr. Kar prayed for quashing of the prohibitory order (annexure I) issued under section 132(3) of the Act. 6. Mr. A. K. Mohapatra, learned senior standing counsel for the Income-tax Department, submitted that there is no illegality in issuing prohibitory order in respect of the bank accounts in question. The search and seizure action under section 132(3) is valid as the same has been conducted as per warrant of authorisation dated J....
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.... Seth Brothers [1969] 74 ITR 836 (SC), stating that if the action taken is a regular one in the course of his functions except where the action taken is malicious or for a collateral pur- pose, the court would not interfere merely by substituting its own office for that of the officials, pointing out that the inconvenience caused is temporary. The decision of the hon'ble Supreme Court in M. P. Sharma v. Satish Chandra, District Magistrate, AIR 1954 SC 300, was cited in support of the view that such inconvenience caused by search and seizure is only temporary interference of fundamental right and would constitute a reasonable restriction. It was further held that the High Court was satisfied that there was sufficient prima facie justification for the order in that case and attachment of such bank account had been held to be valid. 8. On the rival contentions, the questions that would arise for consideration are as follows : "(i) Whether before issuing the prohibitory order under section 132(3) of the Act the Assessing Officer has formed any prima facie opinion on the basis of the materials on record that the money deposited in various bank accounts represents partly ....
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.... 132(3) of the Act. It is only when the authorised officer has reasonably believed that incorporeal assets such as bank deposits or deposits in pass books, document, etc., found on a search represent wholly or partly the undisclosed property of the assessee and the circumstances of the given case (for reasons other than those mentioned in the second proviso to sub-section (1)) do not permit immediate seizure of the same, the provision of sub-section (3) of section 132 may be resorted to. Thus, section 132(3) can be resorted to only if there is any practical difficulty in seizing the asset which is liable to be seized. Therefore, it is only when in the course of search any jewellery, ornament or money, etc., is discovered and on scrutiny it is found to be undisclosed property the same can be seized under section 132(1)(iii) or for the reasons stated in the second proviso to sub-section (1) or for the reason stated in section 132(3), an order can be served on the owner or person who is in immediate possession or control of the assets that he shall not remove, part with or otherwise deal with it except with previous permission of the authorized officer, as the case may be. 12. The in....
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....nest and bona fide businessmen are not harassed because they are the source of the Government revenue. Therefore, various fiscal statutes provide that before taking any drastic step including search and seizure operation in case of an assessee, the competent authority has to first record its satisfaction for taking such action." 14. Therefore, order under section 132(3) cannot be issued indiscriminately or it is not automatic in a search and seizure proceeding as contended by learned senior standing counsel, Mr. A. K. Mohapatra. 15. In the instant cases, it is not the case of the opposite party income-tax authorities that any deposit/transaction made in the various bank accounts in respect of which prohibitory order under section 132(3) of the Act has been issued represent wholly or partly the undisclosed income of the assessee-petitioners. On the contrary, the stand of the opposite party income-tax authorities is that the prohibitory order under section 132(3) has been issued for the purpose of finding out whether any transaction made in those accounts represents undisclosed income of the assessees. The petitioners' case is that the accounts were disclosed to the I....
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.... the judgment of the Punjab and Haryana High Court in Om Parkash Jindal v. Union of India [1976] 104 ITR 389 (P&H) and the decision of the Allahabad High Court in the case of Sriram Jaiswal v. Union of India [1989] 176 ITR 261 (All), held that prohibitory order under section 132(3) of the Act issued in respect of bank accounts without forming any belief or without any material on record to conclude that the amount deposited in such bank accounts is either wholly or partly undisclosed income of the petitioner is not sustainable in law. 18. The decision of the apex court in M. P. Sharma, AIR 1954 SC 300, has no application to the present cases as in that case the apex court while examining as to whether issue of search warrant under section 96(1) of Criminal Procedure Code, 1898, infringes the fundamental right under article 19(1)(f) and 19(1)(g), (5) of the Constitution, held that a search by itself is not a restriction on the right to hold and enjoy property. No doubt a seizure and carrying away is a restriction of the possession and enjoyment of the property seized. This, however, is only temporary and for the limited purpose of investigation. A search and seizure is, ther....