Court orders release of seized cash, finding Income Tax Dept lacked jurisdiction. Petitioner to receive cash within 8 weeks.

The Court allowed the writ petition challenging the seizure of cash by the Flying Squad, directing the Income Tax Department to release the seized cash to the petitioner within eight weeks. The Court found that the Income Tax Department lacked jurisdiction over the seized cash and did not adhere to the procedural requirements under the Income Tax Act. The Court emphasized that the seizure was not conducted under the relevant provisions of the Act and ordered the release of the cash with a provision for interest at 10% if not refunded within the stipulated time.

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Issues Involved:
1. Legality of the seizure of cash by the Flying Squad.
2. Authority of the Income Tax Department to requisition and hold the seized cash.
3. Compliance with the guidelines issued by the Election Commission of India.
4. Jurisdiction and procedural adherence under the Income Tax Act, 1961.

Detailed Analysis:

1. Legality of the Seizure of Cash by the Flying Squad:
The writ petition challenges the seizure of Rs. 26,90,000/- by the Flying Squad led by the Executive Magistrate, Muzaffarpur, on the grounds that the seizure lacked foundation and was conducted without prior notice. The petitioner, a proprietorship firm engaged in wholesale trading of ready-made garments, contended that the cash was a collection of payments from customers and not intended for election-related activities. The cash was seized without being counted on-site, and a seizure list was prepared. Subsequently, the cash was counted at the District Treasury Office, Muzaffarpur, and quantified at Rs. 26,90,000/-, with the seizure list signed by the petitioner’s proprietor.

2. Authority of the Income Tax Department to Requisition and Hold the Seized Cash:
The Income Tax Officer, QRT, Muzaffarpur, summoned the petitioner’s proprietor under Section 131 of the Income Tax Act for recording his statement. The seized cash was handed over to the Income Tax Department by the Treasury Officer, Nodal Officer, and the Member of the Flying Squad. The petitioner’s attempts to seek the release of the cash through representations to various authorities, including the Assistant Director of Income Tax and the District Magistrate, Muzaffarpur, were unsuccessful. The Court found that the Income Tax Department assumed jurisdiction over the seized cash without proper authority, as the seizure was not conducted under Section 132 of the Income Tax Act, nor was there a duly constituted proceeding under Section 226(3) of the Act.

3. Compliance with the Guidelines Issued by the Election Commission of India:
The Court noted that the seizure was conducted under the guidelines issued by the Election Commission of India, which required the Flying Squad to seize cash suspected of being used for election-related bribery. However, the guidelines also mandated that the case be submitted to a court of competent jurisdiction within 24 hours and that a complaint or FIR be lodged immediately. The guidelines further required a three-men Committee to examine the validity of the seizure and take steps for the release of cash if it was not linked to any candidate or political party. The Committee concluded that the seized cash had no connection with the election, and the Income Tax Department was asked to release the cash.

4. Jurisdiction and Procedural Adherence under the Income Tax Act, 1961:
The Court held that the Income Tax Department’s requisition of the seized cash was without jurisdiction and sanction of law. The guidelines did not empower the Income Tax Department to requisition cash seized under the Election Commission’s guidelines, nor did they provide for depositing such cash with the Income Tax Department. The Court emphasized that the seizure was not conducted under Section 132 of the Income Tax Act, and the requisition did not satisfy the provisions of Section 226(3) of the Act. The Court directed the Income Tax Department to release the seized cash to the petitioner within eight weeks, failing which the petitioner would be entitled to interest at 10% on the seized cash from the date of seizure until the refund.

The writ petition was allowed with the directions for the release of the seized cash and observations on the lack of jurisdiction and procedural adherence by the Income Tax Department. The Court expressed no opinion on the ongoing proceedings under Sections 131 and 132A of the Income Tax Act.

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