IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MRS. JUSTICE K.HEMA TUESDAY, THE 23RD MARCH 2010 / 2ND CHAITHRA 1932 Crl.MC.No. 1890 of 2007(A) -------------------------- CMP.814/2007 of JUDL.MAGISTRATE OF FIRST CLASS COURT-II, KANNUR .................... PETITIONER(S): PETITIONER: ------------------------- JITENDRAKUMAR HASTIMAL MUTHALIYA, S/O. MUTHALIYA HASTIMAL, BHERUMAL HOUSE, 102 MARUTI COMPLEX, PAREL, CHAMARBANGHA STREET, MUMBAI-12. BY ADV. SRI.M.SASINDRAN SRI.K.P.HARISH SRI.M.K.DAMODARAN, SENIOR ADVOCATE RESPONDENT(S): RESPONDENT: -------------------------- 1. THE STATION HOUSE OFFICER, RAILWAY POLICE STATION, KASARAGOD, REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA,ERNAKULAM. 2. JABBAR SINGH RAO, AGED 21 YEARS, S/O. KRISHNA SINGH RAO, YASH JEWELLERS, SEIKH MEMON STREET, ZAVERI BAZAR BHERUMUL, MUMBAI-400 002. 3. P.KOYA, ASSISTNT DIRECTOR OF INCOME TAX (INV), AAYKAR BHAVAN, KANNOTHUMCHAL, POST CHOVVA,KANNUR. ADDL.R4 IMPLEADED R4. THE INTELLIGENCE OFFICER, SQUAD NO.1, DEPARTMENT OF COMMERCIAL TAXES, KASARAGOD [IMPLEADED AS ADDITIONAL 4TH RESPONDENT AS PER ORDER DT.6.8.2008 IN CRL.M.A.NO.6133/07] ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) FOR R3 SRI.GEORGE K. GEORGE, SC FOR IT FOR R3 SRI.K.B.PRADEEP, GOVT. PLEADER FOR ADDL.R4. SRI.JOSE JOSEPH, SC, FOR INCOME TAX FOR R3 THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 23/03/2010, ALONG WITH CRMC NO. 1892 OF 2007 THE COURT ON THE SAME DAY PASSED THE FOLLOWING: K.HEMA, J. -------------------------------------------------------- Crl.M.C.Nos.1890 & 1892 of 2007 -------------------------------------------------------- Dated this the 23rd day of March, 2010 ORDER The petitioner is a jewellery owner in Mumbai. A sales carrier of the petitioner was carrying some gold ornaments belonging to petitioner at Thrissur. On the way, from Kasaragod, the articles were stolen. On a complaint made by the carrier, these articles were seized by the police from the possession of the accused. A crime was registered and the articles were produced before the Magistrate Court. 2. The petitioner filed a petition under Section 451 of the Criminal Procedure Code ('the Code' for short) stating that all the gold ornaments seized are having the identification mark of 'Yash Jewellers' which is engrafted on the ornaments. Tax invoice and credit sales vouchers showing the purchase of 7 gold bars and other ornaments were seized in this case. The stock register dated 27.3.2007 also will reveal that those articles weighing 7000 gms. were handed over to the carrier, who is the second respondent herein. There are documents to prove entrustment also to the second respondent. In the above circumstances, Crl.M.C.Nos.1890 & 1892 of 2007 2 petitioner requested to release the property seized to the interim custody of the petitioner. 3. Another petition filed as CMP 842/2007 by the Assistant Director of Income Tax who is shown as first respondent herein stating that the Sub Inspector of Police informed that he seized the gold ornaments, cash etc. from the second respondent herein and a case was also registered. According to first respondent, there is no evidence to show that the gold seized by the police were accounted property of M/s.Yash Jewellery, Mumbai. Bills/delivery notes showing the quantity and description of the gold seized as required under the Central Sales Tax Act or Value Added Tax (VAT) Act are not produced. Gold and cash were seized and produced before the court are not accounted for or disclosed to the Income Tax Department and the respondent herein has no satisfactory explanation to offer about the ownership and possession of the same. 4. Therefore, it is the duty of the Income Tax Department to seize the unaccounted assets found and subject it for assessment. Therefore, first respondent requested the court to release the said amount and gold ornaments seized and produced before the court to the police so as to enable the Department to seize the same from the police for taking further action, in accordance with Crl.M.C.Nos.1890 & 1892 of 2007 3 the provisions contained in Section 132A of the Income Tax Act. The court, after a hearing and on consideration of the rival contentions, found that the documents produced by the petitioner are photostat copies and the authenticity of the documents can be established only if the originals of the documents are produced before the court. It was observed that petitioner ought to have produced admissible original documents before the court to prove the right of the petitioner over the property involved in the case. 5. It was also found that there is nothing illegal in releasing the gold in favour of the Assistant Director of the Income Tax, Kannur, because the Income Tax Department is the proper authority to decide whether it is accounted assets of petitioner and that no prejudice will be caused to the petitioner, since he can very well produce documents to prove his right over the gold before the Income Tax Department and get articles released in his favour. The learned Magistrate ordered to release the gold bars, cash and gold ornaments in favour of the Assistant Director, Income Tax on executing a proper receipt. He was also directed to complete the enquiry and assessment at the earliest. The petition filed by the petitioner herein was dismissed. Crl.M.C.Nos.1890 & 1892 of 2007 4 6. Challenging both the orders, petitioner filed two cases which are pending consideration by this court. Both the cases are disposed of by this common oder. During the pendency of these petitions, the Intelligence Officer, Department of Commercial Taxes, Kasaragod filed a petition to implead him as additional 4th respondent and he was impleaded. 7. Heard both sides and also learned Government Pleader for additional 4th respondent. Learned counsel for 4th respondent argued that a petition was filed by him before the Magistrate Court seeking release of the articles to him, since there is violation of the provision contained in the Central Sales Tax Act or Value Added Tax (VAT) Act. But that petition is still pending before the court and no orders are passed. Therefore, 4th respondent has come on record to see that no prejudicial order is passed against him in these proceedings. It is however conceded that the petition was filed by 4th respondent only after the impugned order was passed. 8. Learned counsel for petitioner argued that petitioner has produced all documents before the trial court and the genuineness of the documents was not disputed by the respondents. If at all there was any doubt on the genuineness of the documents, those documents being issued by the Income Tax Crl.M.C.Nos.1890 & 1892 of 2007 5 Department, could have been easily verified by the respondent and confirmed whether those are genuine or not. Learned counsel for petitioner also pointed out that the Magistrate Court has not directed petitioner to produce the original documents. So, this is not a case where the original documents were suppressed. If a direction was made, those documents could have been produced, it is submitted. Even otherwise if there was any doubt, the genuineness could have been checked up through the Department or the Police. But it was not proper to dismiss the petition on the ground that the original documents are not produced, it is submitted. 9. According to petitioner, the police has conducted a thorough investigation in this matter in respect of the theft and filed a report. Another report was also filed by the Dy. Superintendent of Police, Railways, Palakkad before the Magistrate Court on 10.5.2007 stating that he had caused personal inquiries by going to Mumbai. It is reported by him that from the list of documents produced before the court by petitioner, items 1 to 29 were checked with other establishments from Mumbai and all the documents were found to be correct. 10. In the above circumstances, when there is a report by the investigating officer that on investigation he had found that all Crl.M.C.Nos.1890 & 1892 of 2007 6 the documents were genuine after checking up with the concern, it was improper on the part of the court to dismiss the petition on the ground that the originals of the documents were not produced, it is submitted. 11. It is also pointed out that in the report of the Dy.S.P. it is revealed that the ownership of the stolen property is with the petitioner and that no other person can claim as the ownership of the properties. It is also reported that petitioner is running a jewellery shop by name Yash Jewellers in Mumbai since 3.7.2002 onwards. He has also requested the court to release the articles involved in the case to the petitioner, who is the owner and he has no objection in releasing the property to the petitioner, since it is not necessary for the purpose of investigation. In spite of all these reports, the trial court released the gold ornaments to the Income Tax Department without any sustainable reason, it is submitted. 12. Learned counsel for petitioner also pointed out that the only reason why Income Tax authorities made a claim for release of the property to their custody is that the articles seized in this case were not accounted for or disclosed. But, the Income Tax Department has no explanation to offer about the ownership and possession of the same. It is also submitted that in the light of Crl.M.C.Nos.1890 & 1892 of 2007 7 the report made by Dy.S.P, the ownership of the articles cannot be disputed. It is also submitted that petitioner has accounted for the articles seized and this fact is within the knowledge of the Income Tax Department. 13. Petitioner's shop is in Mumbai and the assessment is being done in the Mumbai office of the Income Tax Department. A letter is issued by the Income Tax Officer to the Assistant Director of Income Tax Officer on 7.8.2007 stating that search under Section 133A of Income Tax Act was conducted on 18.5.2007 to examine the details of the property and on preliminary enquiry it is seen that the stock of gold weighing 7000 gms. and gold ornaments weighing 2501.830 gms. is reflected in the stock register of the assessee on the date of handing over the items to the first respondent, who is an employee on 27.3.2007. 14. In such circumstances, there will be absolutely no merit in the Income Tax Department to claim that these articles are unaccounted for, it is contended. The second respondent has only sought for release of the articles to the police and not to the Income Tax Department, it is further pointed out. The Income Tax Department cannot seek for release of the articles, since there is nothing in the petition to show that any proceedings are pending against petitioner for the alleged violation of the Income Tax Act, Crl.M.C.Nos.1890 & 1892 of 2007 8 it is submitted. As per Section 132 and 132A of Income Tax Act the second respondent cannot proceed against petitioner unless the requirements under the said provisions are satisfied, it is argued. 15. As per the relevant provisions, higher officials such as Director General, Commissioner etc., have to take steps in the case of violation of the provisions of Income Tax Act and thereafter another officer has to be authorised to deal with the articles. But in this case, there is absolutely no averment in the petition filed by the second respondent that any proceedings were initiated as required under Section 132 or 132A of the Act. In such circumstances, it was illegal to release the articles to the custody of third respondent herein, it is argued. 16. Learned counsel for petitioner also argued that guidelines are issued by the Supreme Court as to how petitions under Section 451 of the Criminal Procedure Code ('the Code' for short) are to be dealt with especially in respect of silver or gold ornaments or valuables. It is also submitted that the object was also considered by the Supreme Court in the decision laid down in Sunderbhai Ambalal Desai v. State of Gujarat [(2002)10 SCC 283] and it was held that the powers of the court under Crl.M.C.Nos.1890 & 1892 of 2007 9 Section 451 of the Code should be exercised expeditiously and judiciously. 17. It is also pointed out that as per the dictum laid down in the said decision in paragraph 11 with regard to valuable articles, such as golden or silver ornaments or articles studded with precious stones, it is of no use to keep such articles in police custody for years till the trial is over and the Magistrate should pass appropriate orders as contemplated under Section 451 of the Code at the earliest. 18. The articles could be handed over to the person who is entitled to the articles after preparing detailed panchnama of such articles and taking photographs and on taking a bond that those would be produced if required at the time of trial and also after taking proper security. In the light of the dictum laid down in the said decision, petitioner is entitled to get articles on conditions imposed by the court and as laid down by the Supreme Court in the said judgment, it is strenuously argued. 19. Learned Standing counsel for the third respondent argued that document produced by petitioner cannot be relied upon by the court to pass any order in favour of petitioner. It is also submitted that letter allegedly sent by Mumbai office of the Income Tax to the Assistant Director of Income Tax does not Crl.M.C.Nos.1890 & 1892 of 2007 10 reveal that an assessment is over. It is only when an assessment is over that manipulations can be traced out. It is submitted that the stock register is in custody of the petitioner and he can make any entries to his desire. But it is only after a detailed enquiry that it can be found out whether the gold ornaments were accounted for or not. 20. In such circumstances, only on completion of assessment, the gold ornaments can be released to the petitioner, it is submitted. It is also pointed out that in the letter dated 7.8.2007 issued to the third respondent, it is mentioned that the completion of assessment in the matter shall take significant time and it is not over. Therefore, based on the documents produced by the petitioner, no order can be passed in favour of the petitioner, it is submitted. 21. It is also argued that third respondent is entitled to proceed against petitioner for violation of the provisions of the Income Tax Act and he is authorised to do so. For the purpose of proceeding against petitioner, articles involved in this case are to be released to the Income Tax Department and the order under challenge is only proper, it is submitted. 22. On hearing both sides and also learned Government Pleader appearing for the additional 4th respondent and on going Crl.M.C.Nos.1890 & 1892 of 2007 11 through the documents and the impugned orders, I am satisfied that third respondent has not sought for release of the articles involved in this case to his custody. He has only requested to release the articles to the police. The police has reported as per the report of the Dy.S.P. that they have no objection in releasing the articles to the petitioner. It is also reported by Dy.S.P. that they are satisfied that the gold ornaments belong to petitioner and also that documents produced by the petitioner as item nos.1 to 29 are genuine documents after making an enquiry. It appears that the genuineness was tested by cross-checking with the other concerns. In the above circumstances, prima facie, it appears that petitioner is the owner of the articles seized and the documents produced by him are not manipulated. 23. It can also be seen from the letter issued to the third respondent from the Mumbai office of the Income Tax Department on 7.8.2007 that a preliminary enquiry was conducted by the Department and on such enquiry it was seen that the stock of the articles involved is reflected in the stock register of the assessee and it is revealed that those articles were handed over to the second respondent herein, who was an employee on 27.3.2007. The said letter is seen attested by none other than the Commissioner of Income Tax, Mumbai. There is no Crl.M.C.Nos.1890 & 1892 of 2007 12 reason why this court shall not proceed on the basis of the said document. 24. It is also relevant to note that, though a claim is made by the Income Tax Department, there is nothing to show that any proceedings are initiated against petitioner for violation of the provisions of the Income Tax Act under Section 132 or 132A of the Income Tax Act, in accordance with the provisions contained therein. It appears from the arguments advanced that the only steps taken in respect of the articles is seeking the release of the articles to the interim custody of the third respondent herein. The third respondent would concede that the Income Tax assessment is to be done at the Mumbai Office of the Income Tax Department. 25. But no other official from the Mumbai office has come forward, seeking release of the articles in their favour. They have also not approached the trial court alleging any violation of the provisions of the Income Tax Act by the petitioner. It is also to be noted that the petition is filed by the third respondent to direct release of the article to the police, but what is done by the court is to release the same to the third respondent himself. There is no justifiable reason for doing so. In such circumstances, I am satisfied that the orders under challenge are not sustainable. Crl.M.C.Nos.1890 & 1892 of 2007 13 26. However, I make it clear that this order or any of the observations made in this order will not stand in the way of either the Income Tax Department or the Sales Tax Department in proceeding against the petitioner, in accordance with law. The observations made in this order are made only for the purpose of deciding interim custody of the articles that too, on a prima facie satisfaction of the documents, which are produced in the case. 27. In the result, the following order is passed: The articles, in respect of which interim custody is sought for, shall be released to the petitioner, on such terms and conditions as the trial court may impose in the light of the guidelines laid down in Sunderbhai Ambalal Desai v. State of Gujarat [(2002)10 SCC 283]. Petitions are allowed. K.Hema, Judge cms