There may be cases where any other officer or authority, like Police, Customs or Sales/Trade-tax, has taken into custody books of account, other documents and assets, of a person under any law for the time being in force. These may be useful for, or relevant to, any proceedings under the Act. Section 132A empowers certain income-tax authorities to authorise certain other income-tax authorities to requisition books of account, other documents or assets taken into custody by any other officer or authority under any law for the time being in force. Rule 112D lays down the procedure for requisition and delivery of such books of account, other documents or assets

The power to requisition books of account, other documents and assets taken into custody by any officer or authority under any other law for the time being in force is also available to certain income-tax authorities. This power is available under section 132A of the Income Tax Act, 1961.

Historical background

The Hon’ble Supreme Court had earlier held that power of seizure under section 132(1) could not be exercised in respect of documents and assets which were in the custody of any other officer or authority under any other law e.g. the Collector of Customs and Central Excise, Sales Tax Commissioner, Police authorities, etc.

Money in custody of other departments cannot be seized. – [ITO v. Bafna Textiles (1987) 164 ITR 281 (SC); CIT v. Tarsem Kumar (1986) 161 ITR 505 (SC)]

To remove this lacuna, the present section 132A was inserted by Taxation Laws (Amendment) Act, 1975 with effect from 01.10.1975 with the object of empowering the Director General, Director, Chief Commissioner and Commissioner to requisition books of account and assets lying in the custody of any other officer or authority under any other law.

Text of section 132A

[1][POWERS TO REQUISITION BOOKS OF ACCOUNT, etc.

132A. (1) Where the [2][[3][Principal Director General or] Director General or [3][Principal Director or] Director or the [4][[5][Principal Chief Commissioner or] Chief Commissioner or [5][Principal Commissioner] or Commissioner], in consequence of information in his possession, has reason to believe that—

(a) any person to whom a summons under sub-section (1) of section 37 of the Indian Income-tax Act, 1922 (11 of 1922), or under sub-section (1) of section 131 of this Act, or a notice under sub-section (4) of section 22 of the Indian Income-tax Act, 1922, or under sub-section (1) of section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be produced, such books of account or other documents, as required by such summons or notice and the said books of account or other documents have been taken into custody by any officer or authority under any other law for the time being in force, or

(b) any books of account or other documents will be useful for, or relevant to, any proceeding under the Indian Income-tax Act, 1922 (11 of1922), or under this Act and any person to whom a summons or notice as aforesaid has been or might be issued will not, or would not, produce or cause to be produced, such books of account or other documents on the return of such books of account or other documents by any officer or authority by whom or which such books of account or other documents have been taken into custody under any other law for the time being in force, or

(c) any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force,

then, the [6][[7][Principal Director General or] Director General or [7][Principal Director or] Director or the [8][[9][Principal Chief Commissioner or] Chief Commissioner or [9][Principal Commissioner or] Commissioner may authorise any [10][Additional Director, Additional Commissioner,] [11][Joint Director], [12][Joint Commissioner], [13][Assistant Director [14][or Deputy Director]],[15][Assistant Commissioner [16][or Deputy Commissioner] or Income-tax Officer] (hereafter in this section and in subsection (2) of section 278D referred to as the requisitioning officer to require the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer.
(1) [17][Explanation : For removal of doubts, it is hereby declared that the reason to believe, as recorded by the income-tax authority under this subsection, shall not be disclosed to any person or any authority or the Appellate Tribunal.]

(2) On a requisition being made under sub-section (1), the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, of that sub-section shall deliver the books of account, other documents or assets to the requisitioning officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody.

(3) Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-sections (4A) to (14) (both inclusive) of section 132 and section 132B shall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of this section and as if for the words “the authorised officer” occurring in any of the aforesaid sub-sections (4A) to (14), the words “the requisitioning officer” were substituted.]

KEY NOTE

1. Inserted by the Taxation Laws (Amendment) Act, 1975, with effect from 01.10.1975.
2. Substituted for “Director of Inspection” by the Direct Tax Laws (Amendment) Act,1987, with effect from 01.04.1988.
3. Inserted by the Finance (No. 2) Act, 2014, with retrospective effect from 01.06.2013.
4. Substituted for “Commissioner” by the Direct Tax Laws (Amendment) Act,1987, with effect from 01.04.1988.
5. Inserted by the Finance (No. 2) Act, 2014, with retrospective effect from 01.06.2013.
6. Substituted for “Director of Inspection” by the Direct Tax Laws (Amendment) Act,1987, with effect from 01.04.1988.
7. Inserted by the Finance (No. 2) Act, 2014, with retrospective effect from 01.06.2013.
8. Substituted for “Commissioner” by the Direct Tax Laws (Amendment) Act,1987, with effect from 01.04.1988.
9. Inserted by the Finance (No. 2) Act, 2014, with retrospective effect from 01.06.2013.
10. Inserted by the Finance (No. 2) Act, 2009, with retrospective effect from 01.06.1994.
11. Substituted for “Deputy Director” by the Finance (No. 2) Act, 1998, with effect from 01.10.1998. Earlier “Deputy Director” was substituted for “Deputy Director of Inspection” by the Direct Tax Laws (Amendment) Act,1987, with effect from 01.04.1988.
12. Substituted for “Deputy Commissioner” by the Finance (No. 2) Act, 1998, with effect from 01.10.1998. Earlier “Deputy Commissioner” was substituted for “Inspecting Assistant Commissioner” by the Direct Tax Laws (Amendment) Act,1987, with effect from 01.04.1988.
13. Substituted for “Assistant Director of Inspection” by the Direct Tax Laws (Amendment) Act,1987, with effect from 01.04.1988.
14. Inserted by the Finance (No. 2) Act, 1998, with effect from 01.10.1998.
15. Substituted for “or Income-tax Officer” by the Direct Tax Laws (Amendment) Act,1987, as amended by the Finance Act, 1988, with effect from 01.04.1988.
16. Inserted by the Finance Act, 2017, with retrospective effect from 01.10.1975.
17. Inserted by the Finance Act, 2017, with retrospective effect from 01.10.1975.

Section 132 vis-à-vis Section 132A

The intent and purpose of section 132A are similar to section 132; to get hold of evidence of tax evasion or assets acquired from tax evasion.

Assessing Officer need not disclose “Reason to believe” to conduct a search [Explanation to section 132A]

“Explanation : For the removal of doubts, it is hereby declared that the reason to believe, as recorded by the income-tax authority under section 132A, shall not be disclosed to any person or any authority or the Appellate Tribunal.” [Inserted by Finance Act, 2017 with retrospective effect from 01.10.1975]

Circumstances in which power to requisition books of account, etc. under section 132A can be exercised

An income-tax authority competent to authorise requisition of books of account, etc. under section 132A can do so only if he, in consequence of information in his possession, has reason to believe that any one or more of the circumstances referred to in clauses (a), (b) and (c) of section 132A (1) exist(s) in a case.
The competent authority should issue authorisation for requisition under section 132A(1) in a case only after proper application of mind. If so required, he should get further suitable inquiries or probe conducted, before authorising requisition in a case. An authorisation under section 132A(1) is required to be issued in Form No. 45C as provided in Rule 112D.

Forms of authorization

Forms No. 45C of warrant of authorisation under section 132A(1) issued by DGIT/PDIT/CCIT/PCIT/CIT for requisition of books of account, documents are prescribed in Rule 112 of the Income Tax Rules, 1962 for an action of search and seizure under section 132 and for requisition under section 132A as per details given below:—

S. No. Form No. Section Rule Particulars
1 45C 132A 112D(1) The authorisation under section 132A(1) by the Director General or Principal Director or the Chief Commissioner or Principal Commissioner or Commissioner shall be in Form No. 45C, shall be in writing under the signature of the officer issuing the authorisation and shall bear his seal.

Text of Rule 112D

REQUISITION OF BOOKS OF ACCOUNT, etc.

112D. (1) The authorisation under sub-section (1) of section 132A by the Director General or Director or the Chief Commissioner or Commissioner shall be in Form No. 45C, shall be in writing under the signature of the officer issuing the authorisation and shall bear his seal.

(2) The officer authorised to make a requisition under sub-section (1) of section 132A (hereinafter referred to as the requisitioning officer) shall make the requisition in writing to the officer or authority referred to in clause (a) or clause (b) or, as the case may be, clause (c) of the said sub-section (hereinafter referred to as the delivering officer or authority) calling upon the delivering officer or authority to deliver the books of account, other documents or assets specified in the requisition to him. The requisition shall be accompanied by a copy of the authorisation in Form No. 45C. A copy of the requisition, along with a copy of the authorisation in Form No. 45C, shall be forwarded to the person referred to in clause (a) or clause (b) or, as the case may be, clause (c) of sub-section (1) of section 132A.

(3) The delivering officer or authority shall prepare a list of the books of account or other documents delivered to the requisitioning officer. Before effecting delivery of any bullion, jewellery or other valuable article or thing, the delivering officer or authority shall place or cause to be placed such bullion, jewellery, article or thing in a package or packages which shall be listed with details of such bullion, jewellery, article or thing placed therein. Every such package shall bear an identification mark and seal of the requisitioning officer or of any other income-tax authority not below the rank of Income-tax Officer on behalf of the requisitioning officer, and also of the delivering officer or authority. The person referred to in clause (a) or clause (b) or, as the case may be, clause (c) of sub-section (1) of section 132A or any other person on his behalf shall also be permitted to place his seal on the said package or packages. A copy of the list prepared shall be delivered to such person and a copy thereof shall also be forwarded by the delivering officer to the Chief Commissioner or Commissioner and also to the Director-General or Director where the authorisation under sub-rule (1) has been issued by him.

(4) The provisions of sub-rules (11) to (14) (both inclusive) of rule 112 and of rule 112A, rule 112B and rule 112C shall, so far as may be, apply as if the books of account, other documents and assets delivered to the requisitioning officer under section 132A had been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b ) or, as the case may be, clause (c) of sub-section (1) of the said section and as if for the words “the authorised officer” occurring in any of the aforesaid sub-rules and rules, the words “the requisitioning officer” were substituted.

Income-tax authorities competent to authorise requisition of books of account, etc. and the income-tax authorities that can be so authorized
Column (2) of the following Table enumerates the income-tax authorities that are competent to authorise requisition of books of account, other documents or assets, taken into custody by any officer or authority, under any law for the time being in force. The list of income-tax authorities that can be so authorised (called, the ‘requisitioning officer’) appears at the corresponding lines of Column (3) of the said Table.
(1) (2) (3)
S. No. Income-tax authorities competent to authorise income-tax authorities referred to in column (3), to requisition books of account, other documents or assets, taken into custody by any officer or authority, under any law for the time being in force Income-tax authorities who can be authorised by the authorities referred to in column (2), to require the officer or authority, who has taken books of account, other documents or assets into his custody to deliver such books of account, other documents assets, to him

(1) Director General of Income Tax
(2) Principal Director of Income Tax
(3) Chief Commissioner of Income Tax Tax,
(4) Commissioner of Income Tax (1) Addl./Joint Director of Income Tax
(2) Addl./Joint Commissioner of Income
(3) Deputy Director of Income Tax,
(4) Assistant Director of Income Tax,
(5) Deputy Commissioner of Income Tax,
(6) Assistant Commissioner of Income Tax,
(7) Income-tax Officer

Under the existing administrative distribution of functions, requisition of books of account, etc. under section 132A(1) are ordinarily authorised by the Director of Income Tax (Investigation) after obtaining administrative approval of the Director General of Income Tax (Investigation).

Statutory obligation of the officer or authority who has taken books of account, other documents or assets into his custody

On the Requisitioning Officer making a requisition under section 132A, the officer or authority that has taken books of account, other documents and assets into his custody is required to deliver the same to the requisitioning officer. The said officer or authority is required to do so either forthwith or when he/it is of the opinion that it is no longer necessary to retain the same in his/its custody. The officer or the authority delivering the books of account, other documents or assets to the Requisitioning Officer is called the ‘delivering officer or authority’.

Procedure for requisition and delivery of books of account, other documents and assets

The procedure for requisition and delivery of books of account, other documents and assets is, in brief, as under:

(1) The Requisitioning Officer should make a written requisition to the delivering officer or authority, calling upon him/it to deliver the books of account, other documents and assets specified in the requisition. A copy of the authorisation in Form No. 45C should accompany the requisition.

(2) A copy of the aforesaid written requisition along with a copy of the authorisation in Form No. 45C should also be forwarded to the person referred to in clauses (a), (b) or (c) of section 132A(1).

(3) On such a requisition being made, the said officer or authority is required to deliver such books of account, other documents or assets to the requisitioning officer either forthwith or when he/ it is of the opinion that it is no longer necessary to retain the same in his/its custody.

(4) The delivering officer or authority is required to prepare a list of books of account, other documents and assets to be delivered to the requisitioning officer. In case, any books of account or document has any missing pages, or if there are any partly torn or damaged documents, this fact should be recorded in writing and both the delivering officer/authority and Requisitioning Officer should sign such recording.

(5) Where the delivering officer/authority is affecting delivery of any bullion, jewellery or other valuable article or thing, such items should be placed in package(s) and each package should contain details of things placed therein.

(6) Every such package should bear identification mark and seals of Requisitioning officer as well as of Delivering Officer/authority. It is highly advisable that at least one of the marks of identification should be in the form of signatures of the Requisitioning Officer and the delivering officer/authority. The rules permit putting the seal of any other income- tax authority not below the rank of Income tax Officer on behalf of the Requisitioning Officer. The person referred to in clause (a), (b) or (c) of section 132A or any other person on his behalf is also permitted to put his seal on the said package or packages.

(7) A copy of the list prepared is required to be delivered to the-

(i) person referred to in clauses (a), (b) or (c) of section 132A(1),
(ii) authority that issued the authorisation,
(iii) Chief Commissioner or Commissioner even if he did not issue the authorisation.

(8) The Requisitioning Officer should draw up a memorandum giving record of proceedings indicating, inter alia, the various events like, requisition made, books of account, other documents or assets delivered. The format of the memorandum appears at Appendix – III.

(9) The provisions of sub-rules (11) to (14) of rule 112 and of rules 112A, 112B and 112C, so far as may be, apply to requisition and delivery of books of account, other documents and assets as if-

(i) the books of account, other documents and assets delivered to the requisitioning officer under section 132A had been seized by him under section 132(1) from the custody of the person referred to in clause (a) or clause (b) or clause (c) of section 132(1); and

(ii) for the words “the authorised officer” occurring in any of the aforesaid sub-rules and rules, the words “the requisitioning officer” were substituted.

Handling of certain enforcement problems/situations

Some situations/problems that may arise in the enforcement of the provisions of section 132A are briefly discussed below:

(1) The officer or authority in custody of the books of account, documents or assets may refuse to deliver the same forthwith to the Requisitioning Officer on the ground that it is necessary for him to retain the same in his/its custody. In such a situation, it may be useful for the Requisitioning Officer to take the following steps in addition to such other steps as the circumstances of the case may warrant:

(i) He should try to ascertain from the said other officer or authority the approximate time by which he/it would be able to deliver the books of account, documents or assets.

(ii) Wherever possible, he should request the said officer or authority to provide to him-

(a) certified true copies of the books of account or documents, or the facility to inspect the same and obtain copies thereof; and

(b) inventory of the assets, indicating, inter alia, their quantity and value.

(2) It may be useful for the Requisitioning Officer to take the following steps in addition to such other steps as the circumstances of the case may warrant, if the said other officer or authority refuses to receive the written requisition or declines to comply with the same:

(i) He should explain to the said officer or authority the relevant legal provisions and advise him to comply with the same.

(ii) In suitable cases, he should request the Controlling Officer of such officer/authority to intervene.

(iii) He should also report the matter to the DIT (Investigation) and the CIT.

Text of section 292C

[1][PRESUMPTION AS TO ASSETS, BOOKS OF ACCOUNT, etc.

292C. [2][(1) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search under section 132 [3][or survey under section 133A], it may, in any proceeding under this Act, be presumed—

(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;

(ii) that the contents of such books of account and other documents are true; and

(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person’s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.

[4][(2) Where any books of account, other documents or assets have been delivered to the requisitioning officer in accordance with the provisions of section 132A, then, the provisions of sub-section (1) shall apply as if such books of account, other documents or assets which had been taken into custody from the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of section 132A, had been found in the possession or control of that person in the course of a search under section 132.]

KEY NOTE

1. Inserted by the Finance Act, 2007, with retrospective effect from 01.10.1975.
2. Renumbered as sub-section (1) by the Finance Act, 2008, with retrospective effect from 01.10.1975.
3. Inserted , ibid, with retrospective effect from 01.06.2002.
4. Inserted by the Finance Act, 2008, with retrospective effect from 01.10.1975.

CBDT Circular No. 10/2012, dated 31.12.2012

Subject : Section 132, read with section 132A of the income-tax Act, 1961 – Search & Seizure – assessment of preceding years in search cases during election period

As per provisions contained in section 153A and 153C of the Income Tax Act, 1961, the Assessing Officer is required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made.

2. In consequence of the powers conferred by clauses (64) and (66) of the Finance Act, 2012 the Central Government amended the Income Tax Rules, 1962, to insert a new Rule 112F after the existing Rule 112E, specifying the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made.

3. The aforesaid amendment was introduced with a view to reduce infructuous and unnecessary proceedings under the Income Tax Act, 1961 in cases where a search is conducted under section 132 or requisition made under section 132A and cash or other assets are seized during the election period, generally on a single warrant, and no evidence is available, or investigation required, for any assessment year other than the assessment year relevant to the previous year in which search is conducted or requisition is made.

4. In such cases, the officer investigating the case, with the approval of the Director General of Income Tax, shall certify that –

(i) the search is conducted under section 132 or the requisition is made under section 132A of the Act in the territorial area of an assembly or parliamentary constituency in respect of which a notification has been issued under section 30, read with section 56 of the Representation of the People Act, 1951; or

(ii) the assets seized or requisitioned are connected in any manner to the ongoing election process in an assembly or parliamentary constituency; and

(iii) no evidence is available or investigation is required for any assessment year other than the assessment year relevant to the previous year in which search is conducted or requisition is made.

5. The certificate of the investigating officer shall be communicated to the Commissioner of Income Tax and the Assessing Officer having jurisdiction over the case of such person.

Intimation by police would not confer jurisdiction on revenue to detain and withhold cash by issuance of an invalid search warrant under section 132 for a future contingency, since revenue had no reason to believe that assessee would not disclose cash transaction in return of income

The said individual had come to Hyderabad with friends, and on 23.08.2019 their car a Maruti Ciaz car bearing No. TS09FA 4948 was intercepted by the Task Force Police of the State of Telangana. The Task Force Police filed a counter affidavit in the said Writ Petition claiming that the discovery of cash with the said persons was made on 26.08.2019 and that the police had handed over the detenues along with cash to the Principal Director of Income-tax, Hyderabad for taking further action against them.

Mere possession of cash of large quantity, could not be said to constitute information which could be treated as sufficient reason, leading to an inference that it was income which would not have been disclosed by person in possession for purpose of Act. Assessee entrusted sum of Rs. 5 crore to its employee in relation to one business transaction in Telangana. Assessee’s employee and his vehicle was detained with Rs. 5 crore cash by Task Force Police of Telangana on 23.08.2019. Task Force handed over said cash to Income-tax department on 27.08.2019 – Subsequently on 28.08.2019, revenue prepared panchanama along with affidavit referring to a warrant issued under section 132 for search of a place where employee of assessee was present and cash was seized. Income-tax inspection or investigation would be permissible only in respect of a past event and not for possible future contingencies; hence if assessee would disclose, cash of Rs. 5 crore in return of income-tax, there would be no basis for retention of cash. Since there was no reason to believe that assessee would not disclose cash transaction, intimation by Task Force police on 27.08.2019 would not confer jurisdiction on revenue to detain and withhold cash by issuance of an invalid search warrant under section 132. Thus provisions of sections 132, 132A and 132B could not be invoked – [In favour of assessee] – [Mectec v. Director of Income Tax Investigation (2021) 278 Taxman 214 : 125 taxmann.com 96 (Telangana)]
Cash found from the employees of Courier services—Explanation that the cash was withdrawn from several bank accounts–Failure to produce relevant documents–Issue of warrant of authorisation is held to be valid

Two employees of Angadiya Courier Services namely Surajbhai Pravinchandra Mehta and Rajendrasinh Viramji Vaghela were travelling from Nagpur to Ahmedabad via Surat in a bus of Srinath Travels. Upon physical search of the Bus two bags containing seven packets of cash aggregating to Rs 2,45,50,000 were recovered by the Police of Vapi. The police took interrogation and revealed that they were employees of Angadiya Courier Services. Summons were issued to Surajbhai Pravinchandra Mehta and Rajendrasinh Viramji Vaghela asking them to attend the office of the DDIT(Inv) Surat along with necessary details the cash recovered from their possession. The statements were taken under section 131 both of them denied that they were not owners of the cash. Thereafter summon was issued to Kaushikkumar Dhayalal Soni a partner of V. P. Angadiya and Courier Services Ahmedabad. Partner in his statement stated that the cash belongs to Proprietor of S. K. Traders. Proprietor of S.K Traders stated that the cash were withdrawn from cash book. There was some proceedings before the Magistrate Court under section 451 of the Code of Criminal Procedure. Magistrate had ordered the Police to hand over the cash to the concerned Assessing Officer. The Assessing Officer has issued the warrant of authorisation under section 132A(1) of the Act. The assessee challenged the issue of warrant of authorisation. Dismissing the petition the Court held that when asked to submit details of bank account and cash withdrawals, assessee declined to submit details and prayed for some more time to produce relevant documents hence issue of authorisation is held to be valid.—[Kamleshbhai Rajnikant Shah. v. DIT (2020) 420 ITR 274 : (2019) 267 taxman 159 (Guj.)]

Requisition of seized assets – Cash seized under guidelines issued by Election Commission – Election Commission’s finding that seizure was not valid – Income-Tax Authorities had no jurisdiction to requisition such cash

The assessee was a proprietorship concern engaged in wholesale trading of ready-made garments. A flying squad entered his business premises claiming knowledge about huge cash lying with the assessee which according to them was meant for use in elections for influencing voters in violation of the election laws and guidelines. No notice had been received by him in this regard and thus, the authority of the flying squad was unknown. The proprietor of the assessee handed over the cash which was a collection of payments received from different customers and meant for different purposes. The cash was not even counted by the flying squad, who simply collected the cash, prepared a seizure list and left the business premises. The Committee constituted under the guidelines of the Election Commission concluded that the seized cash had no connection with the election. Meanwhile the cash was requisitioned under a warrant of authorisation issued under section 132A of the Income-tax Act, 1961. On a writ the Court held that the proceeding was an outcome of a raid conducted under the guidelines of the Election Commission of India and the seizure was not a consequence of a raid made by the Income-tax authorities under section 132 of the Act, nor could any order be passed in purported exercise of jurisdiction under section 226(3) of the Act.Even otherwise, the seizure itself was without sanction of law which was apparent from the fact that no first information report or complaint was instituted as provided under clause 4 of the Guidelines nor was the case submitted to the court of competent jurisdiction within 24 hours nor did the Committee constituted under the Guidelines take any decision to order seizure of the cash, in the absence of any first information report/complaint instituted in terms of clause 16(i). The order of requisition was not valid.—[Indian Traders v. State of Bihar (2019) 417 ITR 95 (Pat.)]

The action of the GST authorities of camping in the assessee’s home for 8 days and placing him under house arrest is illegal and a blatant abuse of powers. It has shocked the conscience of the court. This unauthorised action of the officers may tantamount to an offence under the Indian Penal Code. The officials cannot take shelter behind ignorance of law to justify their illegal actions. It is a matter of deep regret that the Chief Commissioner has attempted to justify such wrongful action on the part of the officials.

It is a matter of deep regret that the Chief Commissioner of State Tax has attempted to justify such wrongful action on the part of the officers of the department by placing reliance upon the provisions relating to power of investigation under an earlier enactment to justify the actions of the concerned officers who were exercising powers of search and seizure under section 67(2) of the CGST Act. One would expect the higher officer to reprimand the subordinate officers for their unauthorised actions. But in this case, the higher ups, for reasons best known to them are trying to shield the actions of the subordinate officers though they are not in a position to show the relevant provisions of law under which such officers were empowered to act in this manner. All that the court can say at this stage is that the reports submitted of the Chief Commissioner in response to the orders dated 25.10.2019 and 20.11.2019, do not meet with the standards expected from an authority of his stature. – [Paresh Nathalal Chauhan v. State of Gujarat – Date of Judgement : 24.12.2019 (Guj)]

Requisition of books of account–Reasons to believe to issue requisition notice not required to be disclosed to any person or Authority or Appellate Tribunal
Certain cash found in the possession of the Petitioner was seized by the police authorities. Subsequently, requisition notice was sent under section 132A. The Petitioner challenged such notice on the ground that ‘reasons to believe’ in issuing such notice were not disclosed to the Petitioner. Dismissing the writ, the High Court held that in view of the Explanation introduced to section 132A vide Finance Act, 2017 with retrospective effect from 1975, such reasons to believe are not required to be disclosed to any person, any authority or the Appellate Tribunal. (Related Assessment year : 2019-20) – [Shiv Tiwari & Ors. v. PDIT (Inv.) (2018) 305 CTR 307 : 171 DTR 209 (Raj.)]

Where Police authorities seized cash from respondent Nos. 2 and 3 while they were travelling in a car, since department had not issued any requisition with respect to said cash under section 132A and, moreover, same could not have been withheld under provision of Code of Criminal Procedure, impugned order passed by DSP releasing said cash did not require any interference

Police authorities intercepted a car and found that there were two passengers in car, respondent Nos. 2 and 3 carrying cash amount of Rs. 1.40 crores. Police authorities seized said cash under a seizure memo. Respondents contending that said cash belonged to firm in which they were employees, moved an application for release of cash. Deputy Superintendent of Police, passed an order releasing seized cash.

Under clause (c) of sub-section (1) of section 132A, it is open for the competent authority if he has reason to believe that any assets represent either wholly or in part income or property which has not been, or would not have been disclosed for the purpose of the Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force, he may require the officer or the authority to deliver such asset to the requisitioning officer. When no such requisition was made, the Police authority had no business to withhold the cash, if the same was not required for Police purposes and could not have been withheld under the powers of Criminal Procedure Code.

Department filed instant petition contending that Police authorities could not release cash without waiting for outcome of inquiry initiated by its officers. Since department had not issued any requisition with respect to seized cash under section 132A, Police authority had no business to withhold cash, particularly when same could not have been withheld under provisions of Criminal Procedure Code. Therefore, petition filed by department was to be dismissed. [In favour of assessee] – [Income Tax Officer (Investigation) v. Deputy Superintendent of Police (2017) 250 Taxman 254 : 85 taxmann.com 17 (Guj.)]

Requisition of books of account – Cash seized – Offences and prosecution – Release of cash seized with surety was held to be valid – No prejudice was caused to the revenue

When the accused was travelling on his motorcycle with a sum of Rs. 8,07,050 in cash, the Sub-Inspector of Police intercepted him and registered a case against him for offences under section 41(2) read with section 102 of the Code of Criminal Procedure, 1973. He seized the cash and produced the cash before the court. The court ordered release of the cash on stringent conditions of surety, bond, security, affidavit by the accused. On a revision petition by the ADIT (Investigation), held dismissing the revision, that there was no lapse in the conclusions arrived at regarding the return of money in part to the accused on a stringent condition. The seized amount should not be kept idle as “dead investment”. The amount seized from the accused could be utilised until the veracity of the case had been determined. Hence, the interim order was maintainable. The order of release of the cash on stringent conditions could not be said to be prejudicial to the interest of the Income-tax Department. – [ADIT (Investigation) v. A. Khader Mohideen (2013) 358 ITR 163 (Mad)]

Warrant – No evidence produced by persons carrying silver articles to establish ownership – Action of authorities held proper – Criminal Court – Appropriate Authority

The restrictions placed by the provisions of sections 132 and 132A of the Act, and rule 112A of the Income-tax Rules, 1962, are not unreasonable restrictions on the freedom under Article 19(1)(f) and (g) or Article 14 of the Constitution. No documentary evidence was produced by the persons carrying silver ornaments and articles in response to inquiries made at the time of recording of statements under section 131 of the Act to establish the source, acquisition and ownership of the silver articles. Thus, the act on the part of the concerned authority could not be said to be unreasonable justifying interference at this stage. Section 451 of the Code of Criminal Procedure, 1973, makes the criminal court custodial aegis of the property produced before the court in connection with the case regarding which an offence appears to have been committed or which appears to have been used for the commission of the offence. Therefore, the contention of the petitioners that the criminal court was not the appropriate authority or the person in terms of sub-section (2) of section 132A was not tenable. – [Sunil Vidhyasagar Gat & Anr. v. Shalini Verma Dy. Director of Income-tax (Inv.) & Ors. (2012) 347 ITR 1 : 249 CTR 172 : 69 DTR 233 (Guj)]

Search and seizure – Unexplained cash seized by police – Writ is not maintainable – Warrant of authorisation is held to be valid [Article 226]

Cash of Rs. 6.5 Lacs was seized by police from the vehicle in which the petitioner was travelling. Thereafter warrant of authorisation was issued under section 132A, by Director of Income Tax (Inv.) requiring the police authorities to deliver the seized cash to the Income-tax department and the cash was deposited in Court. Assessee filed a writ petition to quash the proceedings on the ground that the amount of Rs. 6.50 seized from him on 23.01.2001 was the amount received by him on sale of agricultural lands and as against sale of house on various dates beginning from 03.06.1994. The court held that it was not clear how and under what circumstances the amounts received by the petitioner during the period of six years were kept by him or were carried by him on the said date. As the explanation was not a convincing, the writ is not maintainable under Article 226 of the Constitution of India. – [Atta Husain v. Director of Income Tax (Investigation) & Ors. (2012) 246 CTR 207 (MP)]

There must be some material which can be regarded as information which must exist on file on basis of which authorising officer can have reason to believe that action under section 132A is called for

Whether there must be some material which can be regarded as information which must exist on file on basis of which authorising officer can have reason to believe that action under section 132A is called for. While sufficiency or otherwise of information cannot be examined by court, existence of information and its relevance to formation of belief can undoubtedly be gone into. Assessee, cotton broker, was carrying rupees Rs. 11 lakhs and while trying to board bus, he was detained by police authorities resulting in seizure of entire cash. On receipt of seizure information from police, Income-tax officials recorded statement of assessee wherein he had stated that amount had been arranged by one R through JJ against purchase of cotton – Thereafter, Deputy Director prepared a satisfaction note and placed it along with statements and other documents before Director of Income-tax (Investigation), who recorded satisfaction and issued warrant of authorisation under section 132A. On basis of warrant of authorisation, Deputy Director collected amount of Rs. 11 lakhs. Since R had in his statement recorded under section 133A stated that he had given cash to assessee through JJ, then without due verification with JJ, no satisfaction could have been recorded that seized cash represented income which had not been, or would not have been, disclosed for purposes of Act by assessee. Therefore, respondent could not have formed requisite belief under section 132A and as such, impugned warrant of authorisation could not be sustained. [In favour of assessee] – [Prakash Jaichand Shah v. Director of Income-tax (Investigations) (2012) 208 Taxman 136 : 23 taxmann.com 8 (Guj.)]

Belief required under section 132A is subjective and not open to objective test; where there was no allegation of malice against respondent in petition nor was it argued that he acted mala fide while issuing warrant of requisition, it could not be held to be invalid

The petitioner carried on the business in the purchase and sale of raw silver, manufacture and sale of silver ornaments. During routine checking in a hotel, the police authorities found the petitioner in possession of raw silver and silver ornaments and cash. The police, on suspicion that the silver and cash might have nexus with some crime such as theft, etc., seized the same and informed the Income-tax Department. Thereupon, the DIT (Inv.) issued the warrant of requisition under section 132A to the concerned police officer. The petitioner filed writ petition assailing the validity of the warrant of requisition on the ground that the conditions precedent for the exercise of the powers under section 132A(1) were not satisfied.

A statutory functionary must act in a manner laid down in a statute. A bare reading of section 132A(1) makes it clear that the power conferred on the authority is conditional and the condition precedent for authorizing an action is possession of information by the authority, in consequence of which the authority must have reason to believe that the person concerned has assets which have not been or would not have been disclosed for the purpose of the Act.
The expressions ‘information’ and ‘reason to believe’ mean that for taking an action under section 132A, there has to be a rational connection between the information and belief about the assets which have not been or would not have been disclosed by the person concerned.

In the instant case, there was no allegation of malice against respondent No. 1 nor was it argued that he acted mala fide while issuing the warrant of requisition. The record produced by the respondent clearly established that respondent No. 1 was in possession of the information from which he had reason to believe that the money and silver seized from the petitioner represented wholly or partly assets which had not or would not have been disclosed for the purpose of income-tax. From the reasons recorded by respondent No. 1, it was not possible to hold that the information coming to his notice was either not tangible or had no nexus with the formation of his belief about the assets. It could not be held that the belief of respondent No. 1 was either unreasonable or based on irrelevant information. The belief required under section 132A is subjective and not open to objective test. Therefore, it could not be said that the warrant of requisition issued by respondent No. 1 under section 132A was invalid. Accordingly, the writ petition filed by the petitioner deserved to be dismissed. – [Krishnagopal v. Director of Income-tax (Investigation) (2009) 308 ITR 273 : 182 Taxman 203 (MP)]

It was held that it is only when the assessee fails to explain its source when called upon to do so or when the source to acquire the assets is found to be not legal or when it could not be explained satisfactorily that formation of belief is made out in favour of the Revenue resulting in attracting the rigour of section 132A. – [Biaora Constructions (P) Ltd. v. Director of Income-tax (Investigation) (2006) 281 ITR 247 (MP)]

Huge amount of cash was recovered from custody of petitioner No. 1 by police – On verbal enquiries by police, petitioner No. 1 initially explained that cash belonged to petitioner No. 2 which was withdrawn from bank at ‘Sandhwa’ on two consecutive days and was given to him to deposit same at ‘Indore’ – However, subsequently petitioner No. 1 explained that money was handed over to him by petitioner No. 2 to deliver it to some one else – On physical examination of currency notes, it was found that most of bundles did not contain bank slips and in some bundles bank slips were of different dates and of different banks – Further, petitioner No. 1 also failed to show that he was having any earlier business transaction with petitioner No. 2 – Director of Income Tax (Inv.) issued a warrant of authorisation to take cash into departmental custody – In view of slips of currency notes, initial statement made to police and change of version by petitioner No. 1, it could be inferred that cash in hand of petitioner No. 1 was such, which had not been or would not have been disclosed for purpose of Act – Therefore, it could be said that there was material to form opinion/reason to believe as required for issuance of authorization

Petitioner No. 1 was on his way to the Bhopal in his car which was checked by the police and a huge amount of cash was found with him. On being asked, petitioner No. 1 explained that the cash was of petitioner No. 2, which was given to him to be deposited in the bank account of the petitioner No. 2 at Indore and said cash was withdrawn by petitioner No. 2 from his bank at Sandhwa. The police seized the cash and car and registered a case under section 102 of the Cr. PC. The police also informed the director of IT as to the seizure of the cash. The Director immediately issued authorisation under section 132A authorising respondent No. 2, ITO who, in turn, required the police to handover possession of seized cash to him. Thereafter, respondent No. 2 issued notice under section 131(1A) to petitioner No. 1 to appear and produce the books of account before him. Subsequently, respondent No. 2 impounded the books of account produced by petitioner No. 1. On writ Petition :

The police authorities had seized cash under section 102 of Cr.PC 1973. On verbal enquiries from petitioner-1, he informed that the cash was withdrawn from the bank at Sandhwa on two consecutive days i.e., 22.01.2003 and 23.01.2003. However, on physical examination of the currency notes found in possession of petitioner No. 1, it was observed that most of the bundles did not contain bank slips, and in some bundles the bank slips were dated 17.01.2003, 18.01.2003, 20-1-2003, 21.01.2003 and 22-1-2003 issued from various banks based in Indore. Some of the bank slips also carried slips of private parties. It was highly improbable that such bundles of cash which were of different dates would reach from Indore to some bank of another town Sandhwa and thereafter could be withdrawn further from the bank at Sandhwa. Petitioner No. 1 could not satisfactorily explain the source of acquisition of the cash found in his possession by the police authorities. Thus, it appeared that there was reason to believe that the assets represented either wholly or partly income or property which has not been, or would not have been disclosed for the purposes of the IT Act, by petitioner No. 1 from whose possession or control such assets had been taken into custody by the police authorities. It was, therefore, proposed by Dy. Director of IT (Inv.) to initiate the action, if deemed fit, to issue warrant of authorisation. The proposal was put up before the respondent No. 1, Director of IT (Inv.). He, on the basis of facts collected, had observed that he had reason to believe that amount in question represented income/property, which had not been and would not have been disclosed for the purpose of IT Act, warrant of authorization was, therefore, issued to take cash into Departmental custody.
No doubt that a citizen is entitled to carry the currency notes with him but on being required to explain, he has to explain the possession of the currency notes. In the instant case, initial explanation, which was given, had not been found to be in tune with the bank slips. The letter was sent by fax by petitioner No. 2 which bore the date 23.01.2003. From the statement of petitioner No. 2, it was clear that it was issued on 24.01.2003. It was supposed to be carried by petitioner No. 1. From the facts and circumstances, it had been inferred that source of money which had been found in the possession of petitioner No. 1 had not been explained. Petitioner No. 2 might be income-tax payee but in the instant case money was found in the possession of petitioner No. 1. Statement of petitioner No. 1 which had been recorded on 24.01.2003 reflected that money was handed over by petitioner No. 2 and it was to be given to someone else, whose name was not disclosed. It was to be informed on the telephone. It was not stated that amount was to be deposited in bank at Indore. Such a statement was given to the police. On being questioned about the contradictions by respondent No. 2, petitioner No. 1 had stated that he was not able to inform the police properly as to the purpose of carrying the currency notes. It was stated by petitioner No. 1 that amount was withdrawn from bank at Sandhwa, the fax letter mentioned that amount was withdrawn from a different bank. He had stated that he had made the statement due to mistake. When he was questioned that on certain bundles of currency notes there was seal of some different banks, and as per fax, amount had been withdrawn on different dates and on some of the bundles there were slips of the private parties, and on remaining bundles there were bank slips of bank at Indore, petitioner No. 1 stated that he was not aware of these facts. On being questioned when petitioner No. 2 left Sandhwa, he answered that he left on 23.01.2003 in the night at about 9.00 – 9.30 PM. In the initial statement recorded by respondent No. 2, petitioner No. 1 was unable to explain the possession as was apparent from his statement that he was told by petitioner No. 2 to deposit the amount in bank at Indore. On being questioned that whether on earlier occasions he had carried money of petitioner No. 2, he answered in negative. On being questioned that when money was to be deposited in bank at Indore why he carried it to the Bhopal, he stated that it was his mistake and he had further submitted that he came all of a sudden to Bhopal, it was not pre-planned. He had further submitted that he had no business relations with petitioner No. 2 and he was not a partner in any of his business. He had not transacted any business on behalf of petitioner No. 2 on earlier occasions. He had not deposited in bank any amount in cash on earlier occasions. He had further submitted that he had not withdrawn any amount from the bank. On being questioned that it was amount which was undeclared money of petitioner No. 2, he answered that he had nothing to say.
In the facts and circumstances of the case, the explanation given that amount was withdrawn from bank branch at Sandhwa on alleged two dates was found prima facie not reliable one. There were sufficient reasons to form such an opinion in view of the slips on currency notes, initial statement made to the police and the change of version by petitioner No. 1, thus, prima facie it was inferred that cash in hand of petitioner No. 1 was such which had not been or would not have been disclosed for the purpose of the Act. It was not shown that petitioner No. 1 was having any earlier business transactions with petitioner No. 2 and explanation given was wholly unsatisfactory. Therefore, there was material to form opinion/reason to believe as required for issuance of authorization. Possession had not been satisfactorily explained, facts and circumstances were such, it could not be said that there was no material to form an opinion. Resultantly, no merit was found in the instant petition. The writ petition was to be dismissed. – [Amar Agarwal v. Director of Income Tax (Investigation) (2005) 276 ITR 182 : 144 Taxman 762 (MP)]

Assets in custody of court – Assets (gold) seized by security police and consequently in custody of court – Commissioner’s action of taking possession of gold as per warrant issued under section 132A—Possession not valid as section 132A empowers Commissioner to order requisition of assets only from officer or authority – Requiring court to deliver assets clearly beyond such powers and without jurisdiction – Gold to be returned back to court

Held: Section 132A empowers the Commissioner to order requisition of assets. If in the opinion of the officer the assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purpose of the Income Tax Act, on being satisfied, the officer empowered may authorise any officer under sub-section (2) of section 278D to require the officer or authority, to deliver such books of account, other documents or assets to the requisitioning officer. Section 132A does not empower the Commissioner to require the court to deliver the assets. The provision is referable only to an “officer” or “authority” referred to under sub-section (1) and not the court. Thus the warrant issued under section 132A by the Commissioner and the seizure of the gold from the custody of the court was held to be without jurisdiction. Therefore, the Commissioner was directed to return the gold seized forthwith to the Judicial First Class Magistrate. – [Abdul Khader v. Sub-Inspector of Police & Ors. (1999) 240 ITR 489 : (2000) 158 CTR 319 (Ker)]

No requisition once matter is before Court

The power under section 132A cannot be exercised once the matter goes before the Court. Power under section 132A should be exercised immediately after the property is seized by making requisition to police; section 132A(1) will not be applicable in the proceeding before a court.— [Janardan Das v. Bindeshwari Prasad Shah (1999) 238 ITR 65 (Pat)]

It was held that mere unexplained possession of an amount, without anything more, cannot be said to constitute information which could be treated as sufficient by a reasonable person, leading to an inference that it was income which had not been disclosed by the person in possession for purposes of section 132A of the Act. – [CIT v. Vindhya Metal Corporation (1997) 224 ITR 614 (SC)]

A search was conducted at business premises of assessee by police department during which cash and silver were seized – ITO requisitioned these assets under section 132A and made order under section 132(5), read with section 132(7), and took possession of the seized assets – Action taken by the Assessing Officer was in accordance with the relevant provisions of the Income-tax Act – Once the proceedings under section 132, read with section 132A, have taken place, it is the authorities under the Act who alone have jurisdiction in the matter and even in a case where search and seizure under section 132 may not be in accordance with law, if certain cash and valuables are found and seized, an order can be made under the provisions of section 132(5) and (7) which will be subject to the final assessment

The police authorities had conducted a search of the premises of the petitioner and seized a sum of Rs. 2 lakhs and silver weighing 4.865 kg. These assets were taken possession of by the Income-tax Officer from the police authorities under section 132A of the Act and thereafter an order under section 132(5), read with section 132(7), was passed. On writ, the petitioner contended that the income-tax authorities were in collusion with the police authorities and that handing over of cash and silver to the income-tax authorities was not in accordance with law. On the other hand, it was contended by the revenue that cash and silver were not seized but they had been taken possession of from the police authorities, and the proceedings under section 132 A were initiated and the provisions of section 132 were applicable.

A perusal of section 132A, more so, its sub-section (1)(c), will show that, even if the officer mentioned therein, in consequence of information in his possession, has reason to believe that any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Income-tax Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force, then such officer can authorise the Deputy Director, etc., to require the officer or authority to deliver such books of account, other documents or assets to the requisitioning officer. So far as documents are concerned, they are dealt with under section 132A(1)(a) and (b). It will further be seen that as and when action is taken under section 132A, the provisions of section 132 of the Act are applicable.

In the instant case, from material on record it appeared that, in respect of cash of Rs. 2 lakhs and silver weighing 4.865 kg. an order under section 132(5), read with section 132(7), of the Act was made by the ACIT and the amount of Rs. 2 lakhs was taken in possession being unexplained and concealed income for the assessment year 1991-92. The matter was taken to the Commissioner who, so far as the retention of the jewellery was concerned, made an order in favour of the petitioner. Thus, it could not be said that the ITO was in collusion with police authorities.

Further, once the proceedings under section 132, read with section 132A, has taken place, it is the authorities under the Act who alone had jurisdiction in the matter and even in a case where search and seizure under section 132 may not be in accordance with law, if certain cash and valuables are found and seized, an order can be made under the provisions of section 132(5) and (7) which will be subject to the final assessment. Consequently, no merit in this writ petition. It is hereby dismissed with no order as to costs. (Related Assessment year : 1991-92) – [Chandra Prakash Agrawal v. State of Rajasthan (1994) 205 ITR 562 : 76 Taxman 559 (Raj.)]

Warrant of authorisation under section 132 could not be issued where money and documents were taken in possession by a Police Inspector

No warrant of authorisation under section 132 could be issued where money and documents were taken possession of by a police inspector and the CIT could have no reason to believe within the meaning of section 132 when he did not know anything about the person concerned and made no enquiry from the ITO concerned as regards evasion of tax. The High Court relied on the following observations at pages 478-479 of the report:

“I have come to the conclusion that the search and seizure warrants issued under section 132(1) of the Income-tax Act were illegal, firstly, because the search and seizure warrants were issued in the name of Ramesh Chander and he was in fact not in possession of either the currency notes or account books, and secondly, the income-tax authorities could not seize the currency notes and account books from the police officer who is duty bound to proceed with the case property in accordance with the provisions of the Code of Criminal Procedure.” – [Ramesh Chander & Ors. v. CIT & Ors. (1974) 93 ITR 450 (P&H) Further approved by Hon’ble Supreme Court in CIT v. Tarsem Kumar (1986) 161 ITR 505 : 58 CTR 129 (SC)]

KEY NOTE

However, he can take possession after requisition under section 132A if the same is in custody of any other authority under any other law.

Posted on: May 26th, 2021