Income Tax authorities ordered to refund Rs. 9 lakhs seized from petitioner cleared of wrongdoing after investigation

Madras HC directed authorities to refund Rs. 9 lakhs seized from petitioner after investigations cleared him of wrongdoing. Assistant Director of Income Tax had recommended release of funds in 2016. Court ordered respondents to transfer seized amount to RBI within two weeks, which would then transfer to authorities for final remittance to petitioner's bank account within 10 days, following Specified Bank Notes Act 2017 and RBI operational instructions.

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Issues Involved:
1. Jurisdiction of the High Court to entertain the writ petition in light of the Supreme Court's directions on demonetization-related matters.
2. The applicability of the Supreme Court's judgment on demonetization to the appellant's case.
3. The appellant's entitlement to the refund of Rs. 9 lakhs seized during the 2016 General Elections.
4. Compliance with the Specified Bank Notes (Deposit of Confiscated Notes) Rules, 2017 and other relevant legal provisions for the return of the seized amount.

Detailed Analysis:

1. Jurisdiction of the High Court:
The appellant challenged the order of the Learned Single Judge, which closed the writ petition based on the Supreme Court's direction that no other court shall entertain, hear, or decide any writ petition related to the demonetization of old Rs. 500 and Rs. 1000 notes. The High Court noted that the Supreme Court's order dated 16.12.2016 in W.P.(Civil) No. 906 of 2016 had indeed directed that no other court should entertain such petitions, as the issue was pending before the Supreme Court.

2. Applicability of the Supreme Court's Judgment:
The appellant argued that the writ petition did not arise from the demonetization decision but was related to the refund of Rs. 9 lakhs seized from him, which was to be returned as per the order of the Assistant Director of Income Tax (Investigation). The High Court considered this argument and acknowledged that the appellant's case was not directly related to the demonetization decision but rather to the refund of seized money.

3. Entitlement to Refund of Rs. 9 Lakhs:
The appellant contended that the authorities had a duty to refund the seized amount of Rs. 9 lakhs, which was taken during the 2016 General Elections for the Tamil Nadu Legislative Assembly. The respondents argued that due to demonetization, the seized Rs. 500 and Rs. 1000 notes could not be returned. However, the Election Commission of India had taken up the issue with the Reserve Bank of India, which clarified that the Specified Bank Notes (Deposit of Confiscated Notes) Rules, 2017 could be applied for the refund.

4. Compliance with Legal Provisions:
The High Court referred to the Specified Bank Notes (Deposit of Confiscated Notes) Rules, 2017, and the operational instructions issued by the Reserve Bank of India. These rules allowed for the deposit or exchange of confiscated specified bank notes if they were seized before December 30, 2016, and produced before a court. The High Court directed the respondents to follow these rules and the operational instructions to facilitate the refund of the seized amount to the appellant.

Conclusion:
Considering the appellant was given a clean chit after investigations and the Assistant Director of Income Tax (Investigation) had directed the refund, the High Court found no impediment to returning the seized amount. The court directed the respondents to take necessary steps to hand over the Rs. 9 lakhs to the Reserve Bank of India, which would then transfer the amount to the appellant's bank account. The order of the Learned Single Judge was modified accordingly, and W.A. No. 445 of 2018 was disposed of in these terms. W.A. No. 409 of 2018 was closed as nothing survived for adjudication.

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