Court custody of seized cash bars interim apportionment and requires recovery through the tax statute after final assessment.

Cash seized by police and produced before the criminal court under criminal procedure law cannot be released to the Income-tax Department directly once it is in court custody. The Department must pursue recovery through the statutory mechanism for payment towards tax dues after assessment becomes final. In proceedings for interim custody, the Magistrate cannot assess probable tax liability or divide the seized cash between competing claimants. On that reasoning, an order releasing part of the cash on security was stated to be legally unsustainable, and the amount was to remain in court custody until final assessment.

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Issues: Whether the Magistrate could release a portion of cash seized from the accused on interim custody while assessment proceedings under the Income-tax Act, 1961 were pending, and whether the entire amount had to be retained in court until the tax liability was finally determined.

Analysis: Cash seized by the police and produced before the criminal court under Section 102 of the Code of Criminal Procedure, 1973 cannot be demanded by the Income-tax Department for direct release to itself under Section 132A of the Income-tax Act, 1961 once the amount is in court custody. The proper course for the Department is to proceed under Section 226(4) of the Income-tax Act, 1961 for payment towards tax dues after the assessment attains finality. The Magistrate could not, while deciding an application under Section 451 of the Code of Criminal Procedure, 1973, undertake an assessment of probable tax liability or apportion the seized cash between rival claimants. The order granting release of 60% of the cash on security was therefore legally unsustainable.

Conclusion: The entire cash amount was required to remain in court custody until the assessment proceedings became final, and only thereafter could the tax authorities seek release of the amount legally recoverable.

Ratio Decidendi: Where seized cash is in the custody of a criminal court, interim release cannot be ordered on an of probable tax liability; the amount must be retained pending final assessment, and the Income-tax Department must seek recovery through the statutory mechanism under Section 226(4) of the Income-tax Act, 1961.

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