Deemed seizure under income-tax law protects against other-law liability and bars penal action for non-refund of seized amounts.

A restraint order under section 132(3) of the Income-tax Act, once converted into a deemed seizure under the second proviso to section 132(1), was treated as having the effect of refund to the concerned persons. On that basis, the Court stated that the person concerned would not incur liability under other laws in respect of the seized amounts, and non-refund of those amounts could not by itself justify penal action. The respondents also indicated that no penal action would be taken for bona fide omission or mistake, and the writ petitions were disposed of on that clarified legal position.

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Issues: Whether a restraint order under section 132(3) of the Income-tax Act, 1961, once converted into a deemed seizure under the second proviso to section 132(1), absolves the petitioner of liability under other laws and prevents penal action for non-refund of the seized amounts.

Analysis: The restraint orders relating to refunds arising from oversubscription of share applications were converted during the pendency of the writ petition into a deemed seizure under the second proviso to section 132(1). The deemed seizure was treated as having the effect of a refund to the concerned persons, and the Court held that such seizure would relieve the petitioner of liability under laws other than the Income-tax Act, 1961. It was further observed that non-refund of the amounts so seized could not furnish a ground for action against the petitioner. The respondents also indicated that no penal action would be taken in cases of bona fide omission or mistake.

Conclusion: The deemed seizure under section 132(1) prevented adverse action on the basis of non-refund, and the petitioners were protected against liability under other laws in respect of the seized amounts.

Final Conclusion: The writ petitions were disposed of with the legal position clarified in favour of the petitioners and no penal action contemplated for bona fide errors.

Ratio Decidendi: A deemed seizure under the second proviso to section 132(1) has the effect of protecting the person concerned from liability under other laws in respect of the seized amounts, and non-refund of such amounts cannot by itself justify penal action.

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