Immediate release of explained seized property mandated under Income-tax Act

The High Court of Gauhati, through Justice S. N. Phukan, ruled in favor of the writ petitioner concerning the release of explained seized articles under section 132(5) of the Income-tax Act, 1961. The court held that explained seized properties, for which release was directed under section 132(5), must be released immediately, distinguishing them from assets retained without explanation under section 132B. A writ of mandamus was issued to compel the authorities to release the seized property with an explanation. The writ petition was disposed of without costs to either party.

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Issues:
1. Compliance with order for release of explained seized articles under section 132(5) of the Income-tax Act, 1961.

Detailed Analysis:

The judgment delivered by Justice S. N. Phukan of the High Court of Gauhati addresses the grievance of the writ petitioner regarding the non-compliance by the Department with the order for release of explained articles seized during a search and seizure operation conducted under section 132 of the Income-tax Act, 1961. The operation was carried out in the business and residential premises of the petitioner, and the assessing authority passed an order directing the release of explained seized property while retaining the unexplained property. The petitioner filed a representation as the properties were not released, and the Assistant Commissioner considered the representation, stating that the assets mentioned were treated as explained and eligible for release. However, the Revenue argued that the explained properties cannot be released without security due to the petitioner's total liability amounting to Rs. 62 lakhs odd.

The main issue in this case revolves around the interpretation of sub-section (5) of section 132 of the Income-tax Act, 1961. The sub-section mandates the concerned authority to pass orders within 120 days of seizure and release the remaining seized articles to the person from whom they were seized if an explanation is provided. The petitioner argued that the order under sub-section (5) is not an assessment order and that the seized explained properties should be released immediately, as assessment procedures are separate. On the contrary, the Revenue contended that section 226 empowers them to retain explained seized property, and section 132B also allows for such retention. However, Justice Phukan opined that section 226 applies after final assessment and section 132B deals with assets for which no explanation is given, not the explained seized properties.

Justice Phukan clarified that section 132B does not apply to assets for which a proper explanation has been given, as it pertains to assets retained without explanation. Therefore, the court held that the explained seized properties, for which the concerned authority directed release under sub-section (5) of section 132, must be released forthwith. Consequently, a writ of mandamus was issued to direct the authorities to release the seized property for which explanation was provided by the petitioner. The writ petition was disposed of with no costs incurred by either party.

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