Customs seized my cash and was ordered to return it. Can the income-tax department issue a search warrant and take it from customs instead?
No, not under section 132 as it then stood. The Supreme Court held that where the exact location of the money is known and it is in the lawful custody of another government department, there is nothing to search for and nothing to seize. Possession under section 132 follows physical custody, not legal title, so the money was not in the assessee's possession while customs held it. One government department cannot search another. The Court noted that the gap was later filled by section 132A, and left the Department free to approach the appropriate authorities under it.
Decided by the Supreme Court (Supreme Court of India; Sabyasachi Mukharji and R.S. Pathak JJ. Judgment by Mukharji J) on 1986-07-17, reported as (1986) 161 ITR 505; 1986 (3) SCC 489; AIR 1986 SC 1477; 1986 SCR (3) 294; (1986) 27 Taxman 305. It bears on section 132, section 132(3), section 132A of the Income Tax Act 1961, in Search, Survey & Block Assessment matters.
This is the decision that fixed the boundary between section 132 and what is now section 132A, and it is the origin of the proposition that a search presupposes something hidden. The Court took the words of the section seriously: search means to look for, seizure means taking forcibly from someone unwilling to part with the thing, and possession in section 132(3) means immediate possession or control, which was with customs. It disapproved a line of High Court decisions from Bombay, Madhya Pradesh, Madras and Kerala that had upheld such warrants on the footing that legal title remained with the assessee. It still matters because the same reasoning governs the choice of provision today: where the asset is with a police officer or another officer or authority, the route is a requisition, not a search warrant.
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On 23 August 1970 the respondent was travelling by car from Ambala to Batala when customs officers intercepted him near the Beas and took him and the driver to the Customs House at Amritsar. On search, the customs authorities took Rs 33,500 in Indian currency, ten gold sovereigns and the car. They began proceedings under section 110(2) of the Customs Act and extended the time for a show cause notice under section 124. A single judge of the Punjab and Haryana High Court quashed those proceedings on 24 April 1972. The respondent then asked customs on 11 May 1972 to return the money and the car, not claiming the sovereigns, and was told to come the next day. On that next day the Income-tax Officer served a warrant of authorisation dated 10 May 1972, made under section 132 read with Rule 112(2), on both the respondent and the customs department, and the cash passed to the income-tax authorities. The respondent filed a further writ petition; customs appealed against the single judge's order. A Division Bench dismissed the appeal and allowed the writ petition, quashing the warrants and directing the money be returned to customs. The Revenue appealed by special leave.
The appeal was dismissed, each side bearing its own costs. On the construction of section 132 and of the words search, possession and seizure as used there and in the Rules, no order can be made in respect of goods, money or papers in the custody of another department under legal authority. Where the location of the property is known to the Government, one government department cannot search another and seize from it. Possession is not always physical detention, but where physical custody was with the customs authorities under legal sanction, possession for the purposes of section 132 was not with the respondent, even though legal title was. If the location is certain there is nothing to search or look for, and the department should have sought a direction for the money to be handed over rather than resorting to section 132. The Court disapproved the contrary decisions of the Bombay, Madhya Pradesh, Madras and Kerala High Courts, agreed with the Punjab and Haryana view in Ramesh Chander, and noted that the lacuna had since been filled by section 132A with effect from October 1975, leaving the Department free to proceed under it.
The Court read the operative words in their context. Seizure implies taking forcibly from an owner or possessor who is unwilling to part with the thing, and search implies looking for something whose whereabouts are unknown. Neither idea fits a case where the asset sits in the strong room of another arm of the same Union Government which is under a legal obligation to hand it back to its owner. Section 132(3) speaks of the person in immediate possession or control, and the Court held that possession in that setting attaches to physical custody held under legal sanction rather than to title. The other sub-sections, which speak of retention and custody, point the same way; where an authority has retention and custody with legal sanction behind it, the legislature cannot have meant that it is not in possession. The contrary High Court view, which held that clause (c) speaks only of any person in possession without requiring that person to be the one whose income is undisclosed, and that no actual search need precede an order under section 132(3), was rejected on this ground: however the clause is worded, if the location is certain there is nothing to search for. The Court accepted that no title passed to customs on the seizure, but held that in this context physical possession is what matters. The proper course was to ask for the money to be handed over, through the appropriate authorities if necessary.
if the location was certain, then there was nothing to search or look for
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Handle my notice → Ask a CA on WhatsAppNo, not under section 132 as it then stood. The Supreme Court held that where the exact location of the money is known and it is in the lawful custody of another government department, there is nothing to search for and nothing to seize. Possession under section 132 follows physical custody, not legal title, so the money was not in the assessee's possession while customs held it. One government department cannot search another. The Court noted that the gap was later filled by section 132A, and left the Department free to approach the appropriate authorities under it. This was decided by the Supreme Court (Supreme Court of India; Sabyasachi Mukharji and R.S. Pathak JJ. Judgment by Mukharji J) and bears on section 132, section 132(3), section 132A of the Income Tax Act 1961. It is reported as (1986) 161 ITR 505; 1986 (3) SCC 489; AIR 1986 SC 1477; 1986 SCR (3) 294; (1986) 27 Taxman 305. This is the decision that fixed the boundary between section 132 and what is now section 132A, and it is the origin of the proposition that a search presupposes something hidden. The Court took the words of the section seriously: search means to look for, seizure means taking forcibly from someone unwilling to part with the thing, and possession in section 132(3) means immediate possession or control, which was with customs. It disapproved a line of High Court decisions from Bombay, Madhya Pradesh, Madras and Kerala that had upheld such warrants on the footing that legal title remained with the assessee. It still matters because the same reasoning governs the choice of provision today: where the asset is with a police officer or another officer or authority, the route is a requisition, not a search warrant. If it applies to you, the first step is this: Where the asset is in the lawful custody of another authority, expect and insist on a requisition under section 132A rather than a search authorisation, and challenge a warrant issued in the name of someone who does not have the thing.
On 23 August 1970 the respondent was travelling by car from Ambala to Batala when customs officers intercepted him near the Beas and took him and the driver to the Customs House at Amritsar. On search, the customs authorities took Rs 33,500 in Indian currency, ten gold sovereigns and the car. They began proceedings under section 110(2) of the Customs Act and extended the time for a show cause notice under section 124. A single judge of the Punjab and Haryana High Court quashed those proceedings on 24 April 1972. The respondent then asked customs on 11 May 1972 to return the money and the car, not claiming the sovereigns, and was told to come the next day. On that next day the Income-tax Officer served a warrant of authorisation dated 10 May 1972, made under section 132 read with Rule 112(2), on both the respondent and the customs department, and the cash passed to the income-tax authorities. The respondent filed a further writ petition; customs appealed against the single judge's order. A Division Bench dismissed the appeal and allowed the writ petition, quashing the warrants and directing the money be returned to customs. The Revenue appealed by special leave. The matter was decided on 1986-07-17 by the Supreme Court (Supreme Court of India; Sabyasachi Mukharji and R.S. Pathak JJ. Judgment by Mukharji J). On those facts the Supreme Court held as follows. The appeal was dismissed, each side bearing its own costs. On the construction of section 132 and of the words search, possession and seizure as used there and in the Rules, no order can be made in respect of goods, money or papers in the custody of another department under legal authority. Where the location of the property is known to the Government, one government department cannot search another and seize from it. Possession is not always physical detention, but where physical custody was with the customs authorities under legal sanction, possession for the purposes of section 132 was not with the respondent, even though legal title was. If the location is certain there is nothing to search or look for, and the department should have sought a direction for the money to be handed over rather than resorting to section 132. The Court disapproved the contrary decisions of the Bombay, Madhya Pradesh, Madras and Kerala High Courts, agreed with the Punjab and Haryana view in Ramesh Chander, and noted that the lacuna had since been filled by section 132A with effect from October 1975, leaving the Department free to proceed under it.
The Court read the operative words in their context. Seizure implies taking forcibly from an owner or possessor who is unwilling to part with the thing, and search implies looking for something whose whereabouts are unknown. Neither idea fits a case where the asset sits in the strong room of another arm of the same Union Government which is under a legal obligation to hand it back to its owner. Section 132(3) speaks of the person in immediate possession or control, and the Court held that possession in that setting attaches to physical custody held under legal sanction rather than to title. The other sub-sections, which speak of retention and custody, point the same way; where an authority has retention and custody with legal sanction behind it, the legislature cannot have meant that it is not in possession. The contrary High Court view, which held that clause (c) speaks only of any person in possession without requiring that person to be the one whose income is undisclosed, and that no actual search need precede an order under section 132(3), was rejected on this ground: however the clause is worded, if the location is certain there is nothing to search for. The Court accepted that no title passed to customs on the seizure, but held that in this context physical possession is what matters. The proper course was to ask for the money to be handed over, through the appropriate authorities if necessary. In the words reproduced by the source cited on this page: "if the location was certain, then there was nothing to search or look for"
It was decided by the Supreme Court on 1986-07-17 and is reported as (1986) 161 ITR 505; 1986 (3) SCC 489; AIR 1986 SC 1477; 1986 SCR (3) 294; (1986) 27 Taxman 305. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 132, section 132(3), section 132A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was dismissed, each side bearing its own costs. On the construction of section 132 and of the words search, possession and seizure as used there and in the Rules, no order can be made in respect of goods, money or papers in the custody of another department under legal authority. Where the location of the property is known to the Government, one government department cannot search another and seize from it. Possession is not always physical detention, but where physical custody was with the customs authorities under legal sanction, possession for the purposes of section 132 was not with the respondent, even though legal title was. If the location is certain there is nothing to search or look for, and the department should have sought a direction for the money to be handed over rather than resorting to section 132. The Court disapproved the contrary decisions of the Bombay, Madhya Pradesh, Madras and Kerala High Courts, agreed with the Punjab and Haryana view in Ramesh Chander, and noted that the lacuna had since been filled by section 132A with effect from October 1975, leaving the Department free to proceed under it. It arises in Search, Survey & Block Assessment matters, on section 132, section 132(3), section 132A of the Income Tax Act 1961, and was decided by Supreme Court of India; Sabyasachi Mukharji and R.S. Pathak JJ. Judgment by Mukharji J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Argue possession by reference to who physically holds the asset, not who owns it; the Court held physical possession is what the section is concerned with. Keep the two questions separate: whether the original seizure by the other department was lawful, and whether the tax authorities may take the asset from it. Do not read this as barring the Department altogether; it expressly left it free to approach the appropriate authorities under the law as it now stands.
Superseded by amendment. The Court decided the case on the law as it stood before section 132A and said in terms that the lacuna had since been filled by that section with effect from October 1975. The construction of search, seizure and possession stands and is still cited, but the result no longer follows: an asset in the custody of another officer or authority can now be requisitioned. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The harvested page carries a reporter's headnote above the judgment, which has been disregarded. The judgment decides only the validity of the section 132 warrant on the law then in force and says nothing about the conditions for a valid requisition under section 132A, which is what a case on these facts would now turn on. The fate of the ten gold sovereigns, which the respondent did not claim, and of the car is not dealt with. The text carries evident transcription errors, including the date of the single judge's order printed as 1372. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was dismissed, each side bearing its own costs. On the construction of section 132 and of the words search, possession and seizure as used there and in the Rules, no order can be made in respect of goods, money or papers in the custody of another department under legal authority. Where the location of the property is known to the Government, one government department cannot search another and seize from it. Possession is not always physical detention, but where physical custody was with the customs authorities under legal sanction, possession for the purposes of section 132 was not with the respondent, even though legal title was. If the location is certain there is nothing to search or look for, and the department should have sought a direction for the money to be handed over rather than resorting to section 132. The Court disapproved the contrary decisions of the Bombay, Madhya Pradesh, Madras and Kerala High Courts, agreed with the Punjab and Haryana view in Ramesh Chander, and noted that the lacuna had since been filled by section 132A with effect from October 1975, leaving the Department free to proceed under it.
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