Holding

The dispute over ownership of the seized jewellery cannot be decided in a writ petition, and the High Court was justified in refusing to order its return.

Summary

Smt. Kusum Lata Singhal, a tobacco stockist, challenged the seizure of her books and jewellery after a search under Section 132 of the Income Tax Act was deemed unauthorized. Her husband, R.K. Singhal, was simultaneously prosecuted under Section 132(5) and claimed the jewellery belonged to him as undisclosed income. The Rajasthan High Court held the search illegal but refused to order the return of the jewellery, citing the ownership dispute and the husband's claim. The Supreme Court dismissed the special leave petition, holding that a writ under Article 226 cannot resolve ownership disputes and that the High Court was correct in declining to order the return. Consequently, the evidence of the husband's claim remains valid despite the alleged illegality of the search.

Issues considered

Whether seized jewellery can be returned to the petitioner when the search is illegal but ownership is disputed.
Whether the High Court erred in refusing to order the return of the jewellery under Article 226 of the Constitution.
Whether the husband's claim under Section 132(5) is extinguished by the alleged illegality of the search.

Legislation cited

Income Tax Act, 1961s. 132(1), s. 132(5), s. 132(7)
Income Tax Rules, 1962s. 112A

Subjects

Income TaxSearch and seizureSection 132Ownership disputeArticle 226Illegal searchReturn of seized property

Judgment

SMT. KUSUM LATA SINGHAL
A
v.
COMMISSIONER OF INCOME TAX RAJASTHAN,
JAIPUR AND ORS.

JULY 16, 1990
B
[SABYASACHI MUKHARJI, CJ. AND K. RAMASWAMY, J.)

Income Tax Act, 1961/Jncome Tax Rules, 1962: Section 132(5),
(7)/Rule Jl2A-Search and seizure by I. T. authorities-Assessee
whether entitled to return of valuables.

The petitioner was carrying on business as a stockist of Baba
c
Brand Tobacco. The petitioner's husband, who was a sub-dealer of the
product, was living with her at all material times.

)>.. A search under section 132 of the Income Tax Act was conducted
at their house and valuables and books of account seized. A notice D
under rule 112A of the Income Tax Rules read with sub-section (5) of
section 132 of the Act was served on the petitioner.

The petitioner filed an application in the High Court under Arti-
cle 226 of the Constitution claiming return of account books and other
valuables to her. On the other hand, in the proceedings under Section E
132(5) of the Act against the petitioner's husband, he had claimed that
the ornaments belonged to him and that the same could be treated as
representing his undisclosed income.

-t The High Court came to the conclusion that the authorisation for
search under section 132(1) of the Act against the petitioner was not in F
accordance with law and, therefore, the seizure of the assets could not
be said to have been in accordance with law. The High Court however
noted that in view of the order made under section 132(5) of the Act
against the husband, the valuables could not be ordered to be returned
to the petitioner.
G
Before this Court, it was contended on behalf of the petitioner
that if search and seizure were illegal, the items of jewellery were liable
to be returned. On behalf of the Revenue, it was contended that in a
situation where there was a dispute as to who was the owner of the
jewellery and ornaments, the decision of the High Court declining to
direct their return to the petitioner could uot be faulted. H

393
394 SUPREME COURT REPORTS [1990] 3 S.C.R.

Dismissing the special leave petition, the Conrt,
A
HELD: ( 1) A dispute as to the ownership of jewellery in question
cannot be resolved in proceedings under Article 226 of the Constitution
in the manner sought for by the petitioner. [397F)

B (2) In the instant controversy the Court is not concerned whether
the proceedings against the husband under section 132(5) of the Act are
valid or not, bnt irrespective of the validity of the proceedings, the
evidence or testimony wherein the husband has asserted the ornaments
and jewellery to be his, cannot be wiped out and does not become
non-existent. The aforesaid being the factual matrix, the High Court
was pre-eminently justified in declining to direct retnrn of these items of
c jewellery and other items to the wife. If that is the position, then it
cannot be said that the High Court has committed any error in law
which required rectification by this Conrt under Article 136 of the
Constitution. [397E-G]

D Assainer & Anr. v. Income Tax Officer, Calicut, [1975] 101 ITR
854; J.R. Malhotra & Anr. v. Additional Sessions Judge, Jul/under,
[ 1976] 2 SCR 993 and Commissioner of Commercial Taxes, Board of
Revenue, Madras v. Ramkishnan Shrikishan Jhaver, AIR 1968 SC 59,
distinguished.

E CIVIL APPELLATE JURISDICTION'. Special Leave Petition . -<.~
(Civil) No. 15327 of 1989.

From the Judgment and Order dated 18.7.1989 of the Rajasthan -1--
High Court in D.B. Civil Writ Petition No. 2161of1988.

F C.S. Agarwal, H.R. Parekh, S.K. Jain for the Petitioner.

O.P. Vaish, S. Rajappa and Ms. A. Subhashini for the
Respondents.

The Judgment of the Court was delivered by
G
SABYASACHI MUKHARJI, CJ. This is a special leave petition
directed against the judgment and order of the High Court of
Rajasthan, dated 18th July, 1989. The petitioner herein i.e. Smt.
Kusum Lata Singhal carried on, at all relevant times, business under
the name and style of M/s. Lata & Company and she claims to be an
H authorised stockist of Baba Brand Tobacco manufactured by M/s.
K.L. SINGHAL v. C.l.T. [MUKHARJI, J.] 395

Dharampal Premchand Ltd., New Delhi. Mr. R.K. Singhal is the
'°. husband of the petitioner. In the judgment under appeal, it has been A
stated that Mr. R.K. Singhal owns a house No. E-117, Shastri Nagar in
Jaipur and the petitioner lived with her husband at all material times.
Mr. Singhal was a partner in Lata Sales Centre and is said to be a
sub-dealer of M/s. Lata & Company.
B
A search.under section 134 of the Income Tax Act, (hereinafter
called 'the Act') was conducted at the said premises on 25/26th
-1 November, 1987. During the search, valuables and books of accounts
were seized on 26th November, 1987, and a notice under rule 112A of
the Income Tax Rules, 1962 (hereinafter referred to as 'the Rules')
read with sub-section (5) of Section 132 of the Act was issued to the
petitioner by the Income Tax Officer. The notice was served on the c
husband of the petitioner.

In the application under Article 226 of the Constitution of India
filed before the High Court, the petitioner claimed return of account
books and other valuables which were seized on 26th November, 1987. D
The return was claimed because, according to the petitioner, the
retention of the books and valuables was in violation of the provisions
of section 132 of the Act. The High Court in the judgment under
appeal came to the conclusion that the authorisation for search in the
instant case under section 132(1) of the Act was not valid or legal.
- >/ Therefore, the High Court held that search was bad. At the time of E
search the silver and gold ornaments worth about Rs.4,58,089 were
found and some other silver and gold ornaments were also found but
these were not seized. The High Court had directed return of account
books to the petitioner on furnishing photostat copies thereof. The
High Court came to the conclusion that the authorisation under sec-
tion 132( 1) of the Act was not in accordance with law and, therefore, F
the search and seizure of the assets could not be said to have been in
accordance with law. The High Court noted that in view of the fact
that by virtue of the power under section 132(7) and the order made
under section 132(5) of the Act against the husband of the petitioner,
the valuables etc. could not be ordered to be returned to the
petitioner. G

Aggrieved thereby, the petitioner seeks to challenge the said
--~ order under Article 136 of the Constitution of India. Mr. C.S. Agarwal
appering for the petitioner, contended before us that if search and
seizure were illegal then the evidence obtained by such search and
seizure could be utilised in subsequent proceedings, but the items of H
/
396 SUPREME COURT REPORTS [1990] 3 S.C.R.

jewellery and goods worth, according to him, over Rs.2,97,000 were
A
liable to be returned. We are, however, unable to entertain this ~
appeal. In the instant case the husband of the wife stayed in the same
premises. The authorisation of search and seizure in respect of account
books and goods which were seized was against the wife but in the
proceedings under section 132(5) of the Act the husband Mr. Singhal
B has contended and claimed that the ornaments in question or the
jewellery belonged to him.
Mr. Yaish, learned counsel appearing for the n:venue, has drawn ,_
our attention to an authorisation issued against the husband Mr. Sing-
hal under sub-section (5) of section 132 of the Act. Indeed, Mr. R.K.
Singhal has stated on oath before the authorised officer at the time of
c search that the same belonged to him and he has claimed the same to
be treated as representing his undisclosed income. Mr. R.K. Singhal,
the husband, as his evidence has recorded in the proceedings against
him, has disclosed the same and surrendered a total sum of over .-1,
Rs.4,00,000 consisting of undisclosed cash of Rs.1, 16,550 and exces-
sive jewellery worth Rs.2,97,750 received from his possession as his
D
income for the purpose of income-tax assessment for the current year,
which he claims to have earned from his business. Therefore, it
appears that there is dispute as to who is the owner of the jewellery
and ornaments or in other words, to whom do these belong. If in such
a situation the High Court has declined to direct return of items of
jewellery and ornaments, such decision cannot be faulted. Even ·-<_ -
E though the search and seizure has been declared illegal, it cannot be
illegal and the question of. dispute about the items not being urged
before the High Court, we ~annot say that the High Court has commit-
ted any error in this case thereby requiring interference by this Court, --< -
or, in other words, that injustice has been caused to any party.
F
It is well-settled that the dispute as to the ownership of jewellery
in question cannot be reserved in proceedings under Article 226 of the
Constitution in the manner sought for by the petitioner. Mr. Agarwal
drew our attention to the decision in Assaina & Anr. v. Income Tax
Officer, Calicut & Ors., [1975} 101 ITR 854 wherein the Kerala High
Court has observed that the goods which were seized from the custody
G of a particular person, should normally be returned to the person from
whose custody the same had been seized. The aforesaid may be the
position where there is no dispute as to the ownership of the goods in
question. In such a situation, return of the goods to the person from
whose custody the same are seized, may be possible but the said deci-
H sion or the observations therein would be no authority in support of
the petitioner's contention in the instant case where there is a dispute.
K.L. SINGHAL v. C.I.T. (MUKHARJI, J.) 397

Our attention was also dr11wn to certain observations of this A
Court in J. R. Malhotra & Anr. v. Addi. Sessions Judge, Jullundur &
Ors., [1976) 2 SCR 993 in support of the proposition that revenue
could not indirectly keep the money seized on the plea that there
would be a demand and that the money may be kept by revenue where
surrender and seizure was wrong. We are afraid that the aforesaid
B
./ observations of this Court are also of no avail in the light of the
perspective that we have mentioned hereinbefore. The said observa-
tions were made entirely in a different context.

Our attention was also drawn to the observations of this Court in
Commissioner of Commercial Taxes, Board of Revenue, Madras &
Anr. v. Ramkishan Shrikishan Jhaver etc., AIR 1968 SC 59 in support c
of the proposition that when a search was found ~illegal, the goods
should be returned. Normally speaking, that would be so. This pro-
position is unexceptional but in the light of the controversy as we have
perceived in this case, we are clearly of the opinion that this submis-
sion will not be of any assistance in doing justice in this case.
D
Mr. Agarwal further contended that if the proceedings under
Section 132(5) for the original search were held to be invalid then all
proceedings thereafter would be invalid and, therefore, the proceed-
ings initiated as a result of that search even against the husband, would
be invalid and such a statement of the husband recorded, cannot be
E
utilised any further. In the instant controversy we are not concerned
whether the proceedings against the husband under section 132(5) of
the Act are valid or not but irrespective of the validity of the proceed-
ings, the evidence or testimony as mentioned hereinbefore, wherein
he has asserted the ornaments and jewellery to be his, cannot be wiped
out and does not become non-existent. After all, we are concerned
F
with the contention of the husband that the jewellery in question
belongs to him, in this case. The aforesaid being the factual matrix; the
High Court, in our opinion, was pre-eminently justified in declining to
direct return of these identical jewellery and other items to the wife. If
that is the position then it cannot be said that the High Court has
committed any error in law which requires rectification by this Court.
G
This application for leave under Article 136 of the Constitution is
certainly not entertainable. In the premises, this application must be
dismissed without any order as to costs. Interim orders, if any, are
vacated.

R.S.S. Petition dismissed.
H