Case: Smt. Kusum Lata Singhal Vs. Commissioner Of Income Tax Rajasthan,Jaipur And Ors

SABYASACHI MUKHARJI CJI.This is a special leave petition directed against the judgment and order of the High Court of Rajasthan, dated July 18, 1989. The petitioner herein, i.e., Smt. Kusum Lata Singhal, carried on, at all relevant times, business under the name and style of Lata and Company and she claims to be an authorised stockist of Baba Brand Tobacco manufactured by Dharampal Premchand Ltd., New Delhi. Mr. R. K. Singhal is the husband of the petitioner. In the judgment under appeal, it has been stated that Mr. R. K. Singhal owns a house No. E 117, Shastri Nagar, in Jaipur and the petitioner lived there with her husband at all material times. Mr. Singhal was a partner in Lata Sales Centre and is said to be a sub-dealer of Lata and Company A search under section 132 of the Income-tax Act (hereinafter called "the Act") was conducted at the said, premises on 25/26th November, 1987. During the search, valuables and books of account were seized on November 26, 1987, and a notice under rule 112A of the Income-tax Rules, 1962 (hereinafter referred to as "the Rules"), read with sub-section (5) of section 132 of the Act was issued to the petitioner by the Income-tax Officer. The notice was served on the husband of the petitionerIn an application under article 226 of the Constitution of India filed before the High Court, the petitioner claimed return of account books and other valuables which were seized on November 26, 1987. The return was claimed because, according to the petitioner, the retention of the books and valuables was in violation of the provisions of section 132 of the Act. The High Court, in the judgment under appeal, came to the conclusion that the authorisation for search in the instant case under section 132(1) of the Act was not valid or legal. Therefore, the High Court held that the search was bad. At the time of search, silver and gold ornaments worth about Rs. 4, 58, 085 were found and some other silver and gold ornaments were also found but these were not seized. The High Court had directed return of account books to the petitioner on furnishing photostat copies thereof. The High Court came to the conclusion that the authorisation under section 132(1) of the Act was not in accordance with law and that, therefore, the search and seizure of the assets could not be said to have been made in accordance with law. The High Court noted that, in view of the fact that by virtue of the power under section 132(7) an order had been made under section 132(5) of the Act against the husband of the petitioner, the valuables, etc., could not be ordered to be returned to the petitionerAggrieved thereby, the petitioner seeks to challenge the said order under article 136 of the Constitution of India. Mr. C. S. Agarwal, appearing for the petitioner, contended before us that if the search and seizure were illegal, then the evidence obtained by such search and seizure could be utilised in subsequent proceedings, but the items of jewellery and goods worth, according to him, over Rs. 2, 97, 000 were liable to be returned. We are, however, unable to entertain this appeal. In the instant case, the husband and the wife stayed in the same premises. The authorisation for search and seizure in respect of account books and goods which were seized was against the wife but in the proceedings under section 132(5) of the Act, the husband, Mr. Singhal, has contended and claimed that the ornaments in question or the jewellery belonged to him Mr. Vaish, learned counsel appearing for the Revenue, has drawn our attention to an authorisation issued against the husband, Mr. Singhal, under sub-section (5) of section 132 of the Act. Indeed, Mr. R. K. Singhal has stated on oath before the authorised officer at the time of search that the same belonged to him and he has claimed the same to be treated as representing his undisclosed income. Mr. R. K. Singhal, the husband, as his evidence has recorded in the proceedings against him, has disclosed the same and surrendered a total sum of over Rs. 4, 00, 000 consisting of undisclosed cash of Rs. 1, 16, 550 and excessive jewellery worth Rs. 2, 97, 750 received from his possession as his income for the purpose of income-tax assessment for the current year, which he claims to have earned from his business. Therefore, it appears that there is a dispute as to who is the owner of the jewellery and ornaments or, in other words, to whom these belong. If, in such a situation, the High Court has declined to direct return of items of jewellery and ornaments, such decision cannot be faulted. Even though the search and seizure has been declared illegal, it cannot be illegal and the question of dispute about the items not being urged before the High Court, we cannot say that the High Court has committed any error in this case thereby requiring interference by this court, or, in other words, that injustice has been caused to any partyIt is well-settled that the dispute as to the ownership of jewellery in question cannot be resolved in proceedings under article 226 of the Constitution in the manner sought for by the petitioner. Mr. Agarwal drew our attention to the decision in Assainar v. ITO wherein the Kerala High Court has observed that the goods which were seized from the custody of a particular person should normally be returned to the person from whose custody the same had been seized. The aforesaid may be the position where there is no dispute as to the ownership of the goods in question. In such a situation, return of the goods to the person from whose custody the same are seized may be possible but the said decision or the observations therein would be no authority in support of the petitioners contention in the instant case where there is a dispute Our attention was also drawn to certain observations of this court in J. R. Malhotra v. Addl. Sessions Judge, Jullundur in support of the proposition that the Revenue could not indirectly keep the money seized on the plea that there would be a demand and that the money may be kept by the Revenue where surrender and seizure was wrong. We are afraid that the aforesaid observations of this court are also of no avail in the light of the perspective that we have mentioned hereinbefore. The said observations were made entirely in a different contextOur attention was also drawn to the observations of this court in Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver in support of the proposition that when a search was found illegal, the goods should be returned. Normally speaking, that would be so. This proposition is unexceptionable but in the light of the controversy as we have perceived in this case, we are clearly of the opinion that this submission will not be of any assistance in doing justice in this caseMr. Agarwal further contended that if the proceedings under section 132(5) for the original search were held to be invalid, then all proceedings thereafter would be invalid and, therefore, the proceedings initiated as result of that search even against the husband would be invalid and such statement of the husband recorded cannot be utilised any further. In the instant controversy, we are not concerned with whether the proceedings against the husband under section 132(5) of the Act are valid or not but, irrespective of the validity of the proceedings, the evidence or testimony as mentioned hereinbefore, wherein he has asserted the ornaments and jewellery to be his, cannot be wiped out and does not become non-existent. After all, we are concerned with the contention of the husband that the jewellery in question belongs to him, in this case. The aforesaid being the factual matrix, the High Court, in our opinion, was pre-eminently justified in declining to direct return of the identical jewellery and other items to the wife. If that is the position, then it cannot be said that the High Court has committed any error in law which requires rectification by this court

Decision reasoning: 0[ds]Our attention was also drawn to the observations of this court in Commissioner of Commercial Taxes v. Ramkishan Shrikishan Jhaver in support of the proposition that when a search was found illegal, the goods should be returned. Normally speaking, that would be so. This proposition is unexceptionable but in the light of the controversy as we have perceived in this case, we are clearly of the opinion that this submission will not be of any assistance in doing justice in this caseMr. Agarwal further contended that if the proceedings under section 132(5) for the original search were held to be invalid, then all proceedings thereafter would be invalid and, therefore, the proceedings initiated as result of that search even against the husband would be invalid and such statement of the husband recorded cannot be utilised any further. In the instant controversy, we are not concerned with whether the proceedings against the husband under section 132(5) of the Act are valid or not but, irrespective of the validity of the proceedings, the evidence or testimony as mentioned hereinbefore, wherein he has asserted the ornaments and jewellery to be his, cannot be wiped out and does not become non-existent. After all, we are concerned with the contention of the husband that the jewellery in question belongs to him, in this case. The aforesaid being the factual matrix, the High Court, in our opinion, was pre-eminently justified in declining to direct return of the identical jewellery and other items to the wife. If that is the position, then it cannot be said that the High Court has committed any error in law which requires rectification by this court