JUDGMENT
1. By means of this petition under Article 226 of the Constitution, the petitioners had questioned the validity of various steps taken by the respondent-income-tax authorities in exercise of powers conferred on them under Sub-sections (1) and (3) of Section 132 of the Income-tax Act, 1961 (hereinafter to be referred as “the Act”). A direction has also been sought restraining such authorities from taking steps regarding attachment, removal or disposal of the bank amounts, fixed deposits, bank lockers and other immovable properties as also to take steps to return the entire amounts collected by them from the respondent-bank on the basis of premature encashment of various fixed deposits.
2. Having heard Mr. K.N. Jain, senior counsel appearing for the petitioners, and Mr. L.N. Rastogi, senior counsel for the income-tax authorities, as well as Mr. Shailendra Kr. Sinha, senior counsel appearing for the State Bank of India, this application is being disposed of at the stage of admission itself.
3. As would appear from the pleadings of the parties, no final order of assessment and penalty, etc., has yet been passed against the petitioners creating a demand against them in excess of the amount so deposited. By this time, it has already been settled that an amount in credit with the banker is always liable to attachment under Section 132(3) of the Act. The provision, therefore, contemplates a prohibitory order not to deal with the money so deposited by such person, except with the prior permission of the authority.
4. Mr. Jain contended that Section 132 of the Act does not confer any jurisdiction on the income-tax authorities to realise the assets and convert them into cash. Such steps could only be possible when the demand was finally quantified and the assets were to be realised in discharge of the liability. According to him, in the instant case all such formalities were yet to be completed but the income-tax authorities have arbitrarily realised the fixed deposit receipts and withdrawn the money from the bank. Therefore, such action of the authorities was wholly unjustified and unauthorised.
5. In the background of the facts noticed above, the solitary question relevant for determination is whether Section 132 confers any jurisdiction on the income-tax authorities to realise the assets and convert them into cash. In the instant case the allegation is that certain fixed deposit receipts, etc., have been collected from the respective bank and encashed prematurely without determining petitioners’ liability, etc. Although a counter affidavit has been filed on behalf of respondent No. 5 it has not been indicated that such steps were taken to discharge the liability in order to satisfy the demand. But, however, Mr. Rastogi contended that seizure of documents, books of account, jewellery, other valuables including money deposits, etc. were effected under the provisions of Section 132(1)(iii) of the Act because the petitioners were unable to explain the sources of such deposit. He further contended that as per Section 132(1) of the Act, the Revenue authorities have full jurisdiction to search and seize such deposits including FDRs and other bank deposits.
6. We have already noticed that on a bare reference to the various provisions of Section 132 of the Act, one can safely hold that the income-tax authorities are duly authorised to seize any of the valuables including bank accounts and fixed deposits in appropriate cases in exercise of their powers under those provisions. But in spite of ample opportunity no provision under the Act was pointed out by learned counsel whereby an authority can realise assets and convert them into cash or take steps for disposal until and unless, after making a final assessment, any demand was created.
7. Section 132(5) of the Act indicates that till the tax liability is finally quantified by making an assessment, the Assessing Officer can only retain in his custody such assets or part thereof as, in his opinion, are sufficient to satisfy the amounts referred to in Clauses (ii), (ii)(a) and (iii) of this section. The provisions of Section 132 of the Act do not confer any authority to realise assets and convert them into cash. Such action can of course be possible, when the demand is finally quantified and assets are required to be realised in discharge of the liability. In the instant case, since such stage has not yet come, therefore, encashment or withdrawal of fixed deposit receipts, etc., would certainly be without any jurisdiction. Therefore, the impugned action of the authorities to that extent appears to be wholly unauthorised. Reference in this regard can be made to a decision of the Allahabad High Court in the case of Dheer Singh v. Assistant Director of Income-tax [1998] 230 ITR 343. Yet a reference can also be made to a decision of this court in the case of Santosh Verma v. Union of India [1991] 189 ITR 549. In the instant case also such steps of the Revenue authority were held unauthorised. It would be apt to notice a relevant passage of the report hereunder (page 552) :
“. . . It is no doubt well-settled that an amount in credit with the banker is always liable to attachment. An action in that behalf can be taken under Sub-section (3) of Section 132 of the Act. That provision contemplates a prohibitory order not to deal with the monies deposited by the petitioner except with the prior permission of the authority. Such an order would have been undoubtedly justified but the bank, in my opinion, could not have been directed under Section 132(3) of the Act to convert the amount deposited by the petitioner by preparing a draft in favour of the Commissioner of Income-tax. No provision of law was brought to our notice to support this action …”
8. Mr. Rastogi, however, contended that in the abovementioned case no order for refund or restoration of the amount seized from the bank was ever passed. Therefore, the petitioners cannot take help from the ratio of the abovementioned case. In our view, such a submission of Mr. Rastogi may not be available in the present case. Because in the aforementioned case, the court having noticed the conduct of the concerned petitioner and in view of the fact that orders of assessment and penalty were already passed quantifying the demand, did not consider it proper to direct the respondent-authorities to refund the amount. But, of course, a liberty was given to the assessee to lay claim for such refund in case the orders of assessment and penalty were ultimately set aside.
9. In the instant case as noticed above, nothing was brought before us to show that any order of assessment was made against the petitioners, creating demand. Therefore, for the reasons stated above, we have no option but to allow the writ application in part, with a direction to the respondents to refund or to deposit the sum, withdrawn by them from the bankers, fixed deposit receipts or bank drafts, etc., if any. Further, though we justify the seizure in the instant case, we direct the authorities not to make further encashment, until assessment and creation of demands. The authorities shall also take appropriate steps for renewal, etc., of such deposits as and when necessary. The petitioners would also be entitled for the amount of interest from the date of encashment of the fixed deposit receipts till restoration or renewal.