2022 (3) TMI 158 - HC - Income Tax

Seized cash of Rs. 76,02,010/- to remain in custody pending assessment. Authority can claim recoverable amount post-assessment.

The court directed the seized cash of Rs. 76,02,010/- to remain in the custody of the Judicial Magistrate pending finalization of assessment proceedings ... Proceedings under Section 132 - Unaccounted income not been reported to tax - permit the petitioner to seek custody of the seized assets ie., cash of ₹ 76,02,010/- - person entitled to seize and to have custody of the property in the shape of undisclosed income - complainant submitted that though the seized amount was not disclosed to the Income Tax Authority and when the Income Tax Authorities initiated proceedings under Section 132 of the Act, they are entitled for the cash only after completion of the assessment proceedings - HELD THAT:- Admittedly, the Income Tax Authority initiated proceedings under Section 132 of the Act and issued summons under Section 131(1A) of the Act and in response, he appeared for enquiry and his statement was recorded under Section 131 of the Act on 19.04.2021. In the statement, the complainant admitted that the cash belonged to him and it is his unaccounted income which has not been reported to tax. As rightly pointed out by the learned counsel for the complainant, the Income Tax Authority initiated proceedings under Section 132 of the Act as against the complainant for non-disclosure of the income to the tune of ₹ 76,02,010/- and the said proceeding is pending. Once the assessment procedure have become final and concluded, the Income Tax Authority is entitled to get the portion of the amount due and recoverable from the complainant. In the judgment relied upon by the Income Tax Authority reported in Babu Rao Vs. the Inspector of Police [1990 (11) TMI 82 - MADRAS HIGH COURT] already the learned Judicial Magistrate released the cash in favour of the Income Tax Authority and the same was challenged by the owner of the cash and the same was dismissed saying that the Income Tax Authorities, in the eye of law, can be construed as the person entitled to seize and to have custody of the property in the shape of undisclosed income. Whereas in the case on hand, the Income Tax Authority did not file any petition under Section 451 of Cr.P.C for return of cash. The complainant filed a petition for return of cash and the same was allowed and imposed conditions. The complainant challenging the conditions imposed by the learned Judicial Magistrate No.1, Padmanabhapuram, filed Crl.M.P.No.9990 of 2021 in Crl.M.P.No. 1494 of 2021. Therefore, the above Judgment cited by the learned counsel for the Income Tax Authority is not helpful to the case on hand. Further, the complainant is not entitled to have custody of the cash, since the Income Tax Authority already initiated proceedings under Section 132 of the Act as against the complainant. The order passed on the file of the learned Judicial Magistrate No.1, Padmanabhapuram is set aside. The property, namely, the cash of ₹ 76,02,010/- deposited in R.P.No.18 of 2021 in Crime on the file of the second respondent police will have to be remained in the custody of the learned Judicial Magistrate No.1, Padmanabhapuram, pending finalization of the assessment proceedings raised by the Income Tax Authority. The learned Judicial Magistrate No.1, Padmanabhapuram, is directed to deposit the cash property in any one of the Nationalized Bank in the form of fixed deposit. After completing the assessment proceedings, the Income Tax Authority is at liberty to approach the learned Judicial Magistrate No.1, Padmanabhapuram to release the portion of the amount due recoverable from the complainant. Issues:1. Custody of seized assets - return of cash of Rs. 76,02,010/-2. Execution of bond for seized assets amounting to Rs. 76,00,000/-3. Dispute between the complainant and the Income Tax Authority regarding the ownership and custody of the seized cashAnalysis:1. Custody of Seized Assets - Return of Cash of Rs. 76,02,010/-:- The petitioner, a jewelry mart owner, entrusted gold ornaments to his driver, who was robbed of Rs. 76,40,000/- by unknown persons, leading to the recovery of the amount by police and its deposit in court custody.- The petitioner filed a petition for the return of the cash, which was allowed with conditions of executing a bond and depositing title deeds.- Subsequent petitions were filed to modify these conditions, leading to the dismissal of the petition by the Judicial Magistrate.- The Income Tax Authority intervened, citing the cash as unaccounted income, and requested the court not to release the cash.2. Execution of Bond for Seized Assets Amounting to Rs. 76,00,000/-:- The Income Tax Authority initiated proceedings against the complainant for non-disclosure of income related to the seized cash.- The complainant admitted the cash as unaccounted income during the Income Tax Authority's investigation.- The court noted that once assessment proceedings are concluded, the Income Tax Authority can recover the amount due from the complainant.3. Dispute Between Complainant and Income Tax Authority:- The Income Tax Authority argued that they are entitled to confiscate unexplained sums under the Income Tax Act and have the power to seize unaccounted cash.- The complainant contended that the Income Tax Authority should wait until assessment proceedings are finalized before seizing the cash.- The court highlighted a previous case where the Income Tax Authority was granted custody of undisclosed income, but in this case, as the Authority did not file a petition for return of cash, the complainant's petition for return was allowed.In conclusion, the court set aside the previous order and directed the cash to remain in the custody of the Judicial Magistrate pending finalization of assessment proceedings by the Income Tax Authority. The cash was to be deposited in a nationalized bank as a fixed deposit, with the Authority allowed to claim the recoverable amount after assessment proceedings are completed. Both Criminal Original Petitions were disposed of accordingly.