Law:

Section:

Section 132 of the Income-tax Act, 1961 - Search and seizure - On information that some persons coming in car were in possession of huge amount which related to compensatory racket, traffic police inspector stopped car in which one 'RC' with his companion was travelling - Inspector found 'RC' was in possession of certain unexplained amount - He then took all of them and also car to Police Station and contacted income-tax authorities - Commissioner on basis of such information issued search and seizure warrant against 'RC', firms in which 'RC' was partner and residential premises of partners - ITO passed order under section 132(5) - Whether when Commissioner had clearly recorded finding that amount seized had not been disclosed for purpose of Act, omission to state grounds on which he came to entertain that belief, would not vitiate issuance of search and seizure warrants - Held, yes - Whether, however, search and seizure warrants could not be issued under section 132 for seizing articles which were already in possession of another statutory authority - Held, yes - Whether, therefore, since at time when search warrants were issued and when they were executed, 'RC' was not in possession of currency notes and account books, but in fact Police authorities were in possession of same, search warrants were illegal - Held, yes - Whether, in such circumstances, income-tax authorities were to be directed to return money and documents seized from police station to police authorities - Held, yes FACTS 'B', traffic inspector of Punjab Police received secret information that some smugglers having a big amount of currency notes with them and were going in a car to distribute the same illegally amongst the persons whose relations were living in England. 'B' and his party stopped the car. There were three persons in the car 'RC', 'SC' and 'RK'. 'RC' was holding two bags in his hands. One bag contained currency notes worth Rs. 1,61,000 and the other bag contained the business papers. As no satisfactory explanation could be given by 'RC', 'B' took the car and its occupants to the Police Station, where he contacted the ITO, on phone. He was informed that 'RC' was not a man of…

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