The customs department is holding my cash. Can the income-tax department issue a search and seizure warrant to take it from them?
No, not under the law as it stood before 1 October 1975. The Supreme Court held that section 132 does not authorise an order in respect of money, goods or papers that are in the custody of another department under legal authority. Where the exact location of the property is known, there is nothing to search or look for, and the Department should ask for the money to be handed over or take steps through the appropriate authorities. Physical possession, not legal title, is what 'possession' means in section 132. The Revenue's appeal was dismissed.
Decided by the Supreme Court (Supreme Court of India; Sabyasachi Mukharji and R. S. Pathak, JJ (judgment by Sabyasachi Mukharji, J)) on 1986-07-17, reported as 1986 AIR 1477; 1986 SCR (3) 294; 1986 (3) SCC 489; (1986) 161 ITR 505; 1986 SCC (Tax) 629; (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 settled a conflict running across the High Courts on whether one government department can search another, approving the Punjab and Calcutta view and overruling the Bombay, Madhya Pradesh, Madras and Kerala decisions the other way. It matters now mainly for two things it fixes: 'possession' in section 132 follows physical custody held under legal sanction, not title; and the section is aimed at things whose location is unknown and which would not be handed over. The Court itself recorded that the lacuna it exposed was filled by section 132A with effect from October 1975, so for later years the requisition route, not section 132, is the answer.
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On 23 August 1970 the respondent was intercepted near the Beas while travelling by car and taken to the Customs House at Amritsar, where the customs authorities took possession of Indian currency, ten gold sovereigns and the car. The customs department extended the time for a show cause notice under section 110(2) of the Customs Act, 1962, and that order was quashed by a single judge of the Punjab and Haryana High Court on 24 April 1972. The respondent then asked the customs authorities to return the money and the car and was told to come the next day. Meanwhile the Income-tax Officer served a warrant of authorisation dated 10 May 1972 under section 132 of the Act read with Rule 112(2) on the respondent and on the customs department, and the cash was taken by the income-tax authorities. The respondent moved the High Court under Articles 226 and 227. A Division Bench quashed the search and seizure warrants and directed the Department to return the money to the customs authorities. The Revenue appealed by special leave.
The appeal was dismissed. On a construction of section 132 and the context in which 'search', 'possession' and 'seizure' are used, there can be no order in respect of goods, money or papers in the custody of another department under legal authority; where the location of the property was known to the Government, one government department could not search another and seize them. The Court agreed with the Punjab and Haryana view in Ramesh Chander and the Calcutta view in Laxmipat Choraria, and declined to sustain the contrary decisions of the Bombay High Court in Noor Mohd. Rahimatulla Gillani, the Madhya Pradesh High Court in Pannalal, the Madras High Court in Gulab and Company and the Kerala High Court in Assainar. It recorded that the lacuna had since been filled by section 132A with effect from October 1975, and observed that it remained open to the income-tax authorities to approach the appropriate authorities to realise the money or recover books in accordance with law. Parties bore their own costs.
'Possession' is not defined in the Act and is a word of ambiguous meaning whose legal senses do not always match the popular one; it is not always the same as manual detention. Sub-section (3) speaks of the person 'in immediate possession or control', which does not detract from possession in the popular sense. Where the physical custody of the money was with the customs authorities under legal sanction and authority, it would be improper to say that possession for section 132 remained with the respondent. That other sub-sections use 'retention' and 'custody' does not show a legislative intention that a person holding with legal sanction is not in possession. The Court accepted the reasoning of the Allahabad Division Bench in Moti Lal, delivered by Pathak, J, that section 132(1) is contemplated for cases where the precise location of the article is not known and where it would not ordinarily be yielded up by the person having possession; such an article alone can be the subject of an order under section 132(3). Title is not the test: title here remained with the respondent, but the language used makes physical possession the relevant and material fact, and physical possession was with the customs authorities when the authorisation was passed. Since the location was certain there was nothing to search or look for, and the proper course was to seek a direction for handing over the money through the appropriate authorities.
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 the law as it stood before 1 October 1975. The Supreme Court held that section 132 does not authorise an order in respect of money, goods or papers that are in the custody of another department under legal authority. Where the exact location of the property is known, there is nothing to search or look for, and the Department should ask for the money to be handed over or take steps through the appropriate authorities. Physical possession, not legal title, is what 'possession' means in section 132. The Revenue's appeal was dismissed. This was decided by the Supreme Court (Supreme Court of India; Sabyasachi Mukharji and R. S. Pathak, JJ (judgment by Sabyasachi Mukharji, J)) and bears on section 132, section 132(3), section 132A of the Income Tax Act 1961. It is reported as 1986 AIR 1477; 1986 SCR (3) 294; 1986 (3) SCC 489; (1986) 161 ITR 505; 1986 SCC (Tax) 629; (1986) 27 Taxman 305. This is the decision that settled a conflict running across the High Courts on whether one government department can search another, approving the Punjab and Calcutta view and overruling the Bombay, Madhya Pradesh, Madras and Kerala decisions the other way. It matters now mainly for two things it fixes: 'possession' in section 132 follows physical custody held under legal sanction, not title; and the section is aimed at things whose location is unknown and which would not be handed over. The Court itself recorded that the lacuna it exposed was filled by section 132A with effect from October 1975, so for later years the requisition route, not section 132, is the answer. If it applies to you, the first step is this: Check the date: for assets in another authority's custody, requisition under section 132A is the route after 1 October 1975, and a section 132 warrant is not.
On 23 August 1970 the respondent was intercepted near the Beas while travelling by car and taken to the Customs House at Amritsar, where the customs authorities took possession of Indian currency, ten gold sovereigns and the car. The customs department extended the time for a show cause notice under section 110(2) of the Customs Act, 1962, and that order was quashed by a single judge of the Punjab and Haryana High Court on 24 April 1972. The respondent then asked the customs authorities to return the money and the car and was told to come the next day. Meanwhile the Income-tax Officer served a warrant of authorisation dated 10 May 1972 under section 132 of the Act read with Rule 112(2) on the respondent and on the customs department, and the cash was taken by the income-tax authorities. The respondent moved the High Court under Articles 226 and 227. A Division Bench quashed the search and seizure warrants and directed the Department to return the money to the customs authorities. 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 Sabyasachi Mukharji, J)). On those facts the Supreme Court held as follows. The appeal was dismissed. On a construction of section 132 and the context in which 'search', 'possession' and 'seizure' are used, there can be no order in respect of goods, money or papers in the custody of another department under legal authority; where the location of the property was known to the Government, one government department could not search another and seize them. The Court agreed with the Punjab and Haryana view in Ramesh Chander and the Calcutta view in Laxmipat Choraria, and declined to sustain the contrary decisions of the Bombay High Court in Noor Mohd. Rahimatulla Gillani, the Madhya Pradesh High Court in Pannalal, the Madras High Court in Gulab and Company and the Kerala High Court in Assainar. It recorded that the lacuna had since been filled by section 132A with effect from October 1975, and observed that it remained open to the income-tax authorities to approach the appropriate authorities to realise the money or recover books in accordance with law. Parties bore their own costs.
'Possession' is not defined in the Act and is a word of ambiguous meaning whose legal senses do not always match the popular one; it is not always the same as manual detention. Sub-section (3) speaks of the person 'in immediate possession or control', which does not detract from possession in the popular sense. Where the physical custody of the money was with the customs authorities under legal sanction and authority, it would be improper to say that possession for section 132 remained with the respondent. That other sub-sections use 'retention' and 'custody' does not show a legislative intention that a person holding with legal sanction is not in possession. The Court accepted the reasoning of the Allahabad Division Bench in Moti Lal, delivered by Pathak, J, that section 132(1) is contemplated for cases where the precise location of the article is not known and where it would not ordinarily be yielded up by the person having possession; such an article alone can be the subject of an order under section 132(3). Title is not the test: title here remained with the respondent, but the language used makes physical possession the relevant and material fact, and physical possession was with the customs authorities when the authorisation was passed. Since the location was certain there was nothing to search or look for, and the proper course was to seek a direction for handing over the money through the appropriate authorities. 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 AIR 1477; 1986 SCR (3) 294; 1986 (3) SCC 489; (1986) 161 ITR 505; 1986 SCC (Tax) 629; (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. On a construction of section 132 and the context in which 'search', 'possession' and 'seizure' are used, there can be no order in respect of goods, money or papers in the custody of another department under legal authority; where the location of the property was known to the Government, one government department could not search another and seize them. The Court agreed with the Punjab and Haryana view in Ramesh Chander and the Calcutta view in Laxmipat Choraria, and declined to sustain the contrary decisions of the Bombay High Court in Noor Mohd. Rahimatulla Gillani, the Madhya Pradesh High Court in Pannalal, the Madras High Court in Gulab and Company and the Kerala High Court in Assainar. It recorded that the lacuna had since been filled by section 132A with effect from October 1975, and observed that it remained open to the income-tax authorities to approach the appropriate authorities to realise the money or recover books in accordance with law. Parties bore their own costs. 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 Sabyasachi 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. Where a warrant names a person who did not in fact hold the asset, take the point that possession under section 132 follows physical custody. If the location of the asset was known to the Department before the warrant issued, argue there was nothing to search for. Trace what happened to the asset first — here the customs seizure had already been quashed and the money was due back to the assessee.
Superseded by amendment. The judgment itself records that the lacuna in the law was filled by section 132A with effect from October 1975, so the gap it exposed no longer exists for later years. Its construction of 'possession' and 'search' in section 132 is not disturbed by anything I read, but I could not check later authority. 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 the reporter's headnote and the 'ACT' note, which I have not used; the record is written from the judgment. The judgment records the seized currency as Rs 33,500 in the headnote and Rs 93,500 in the body, and I cannot resolve which is right. The reasons in the Punjab and Haryana High Court's judgment under appeal are known only through this Court's account of them. 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. On a construction of section 132 and the context in which 'search', 'possession' and 'seizure' are used, there can be no order in respect of goods, money or papers in the custody of another department under legal authority; where the location of the property was known to the Government, one government department could not search another and seize them. The Court agreed with the Punjab and Haryana view in Ramesh Chander and the Calcutta view in Laxmipat Choraria, and declined to sustain the contrary decisions of the Bombay High Court in Noor Mohd. Rahimatulla Gillani, the Madhya Pradesh High Court in Pannalal, the Madras High Court in Gulab and Company and the Kerala High Court in Assainar. It recorded that the lacuna had since been filled by section 132A with effect from October 1975, and observed that it remained open to the income-tax authorities to approach the appropriate authorities to realise the money or recover books in accordance with law. Parties bore their own costs.
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