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Issues: (i) Whether, in proceedings for interim custody of cash under Section 451 of the Code of Criminal Procedure, 1973, the Income Tax Department was entitled to custody in preference to the person from whom the cash was seized, having regard to the scheme of Sections 131, 132A, 132B and 153A of the Income-tax Act, 1961. (ii) Whether the Magistrate could direct retention of 30% of the seized amount to secure the Department's interest while deciding interim custody.
Issue (i): Whether, in proceedings for interim custody of cash under Section 451 of the Code of Criminal Procedure, 1973, the Income Tax Department was entitled to custody in preference to the person from whom the cash was seized, having regard to the scheme of Sections 131, 132A, 132B and 153A of the Income-tax Act, 1961.
Analysis: Interim custody under Section 451 is meant to protect the property during investigation and does not determine title. Where large cash is seized and its source remains unexplained, the Income Tax authorities are entitled to proceed under Sections 131 and 132A of the Income-tax Act, 1961. Once requisition proceedings are invoked, the statutory scheme under Section 132B provides the manner in which seized or requisitioned assets are to be applied, including adjustment against tax liability after the assessment process under Section 153A. If the amount is entrusted to the Department, the statutory procedure remains available to the person from whom the cash was seized to establish source and seek release in accordance with law.
Conclusion: The claim of the Income Tax Department for interim custody was entitled to preference and was rightly to be accepted.
Issue (ii): Whether the Magistrate could direct retention of 30% of the seized amount to secure the Department's interest while deciding interim custody.
Analysis: The Magistrate's power under Section 451 is confined to interim custody and preservation of the property. Fixing a percentage to safeguard likely tax liability amounts to an assessment-related exercise, which is outside the scope of Section 451. The quantum of tax, penalty, or other liability can be determined only by the competent income tax authorities under the statutory procedure, and not by a criminal court while dealing with custody of seized cash.
Conclusion: The direction to retain 30% of the amount was unsustainable.
Final Conclusion: The common order of the Magistrate was set aside, the Department's custody claim was accepted, and the seized amount was directed to be released to the Income Tax Department for completion of proceedings under the Income-tax Act, 1961.
Ratio Decidendi: In an application for interim custody of seized cash, the court must follow the statutory scheme governing requisitioned and assessable assets and cannot pre-empt the income tax process by making a provisional determination of tax liability or by reserving a fixed portion of the amount.
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