Seized cash and pending tax assessment: judicial custody preserved until income-tax proceedings conclude
Where income-tax proceedings concerning alleged undisclosed income were already pending, seized cash was not to be released to the claimant as interim custody. The Court treated the pending statutory assessment as determinative and held that the cash should remain under judicial custody, kept in fixed deposit, until assessment was finalised. It also preserved the Income Tax Authority's right to seek release of the amount lawfully recoverable after completion of proceedings. The order directing return of the seized cash was therefore set aside, and the money remained under judicial control pending final tax assessment.
Issues: (i) Whether the seized cash could be released to the complainant by way of interim custody when income-tax proceedings had already been initiated and remained pending; (ii) whether the seized cash ought to remain under judicial custody pending completion of assessment, with liberty to the Income Tax Authority to seek release of the recoverable amount after finalisation of proceedings.
Issue (i): Whether the seized cash could be released to the complainant by way of interim custody when income-tax proceedings had already been initiated and remained pending.
Analysis: The cash was stated to be linked to unaccounted income, and proceedings under the Income-tax Act had already been initiated. The complainant had also made a statement and filed an affidavit indicating that the amount represented income not disclosed to tax. In such circumstances, the claim for immediate return of the cash could not prevail over the pending statutory assessment process.
Conclusion: The complainant was not entitled to interim custody of the seized cash.
Issue (ii): Whether the seized cash ought to remain under judicial custody pending completion of assessment, with liberty to the Income Tax Authority to seek release of the recoverable amount after finalisation of proceedings.
Analysis: Since the income-tax proceedings were still pending, the appropriate course was to preserve the cash until the assessment attained finality. The Court therefore directed that the amount be retained in judicial custody and placed in fixed deposit, so that the revenue authorities could seek release of the portion lawfully recoverable after completion of assessment.
Conclusion: The seized cash was directed to remain in custody pending finalisation of assessment, with liberty to the Income Tax Authority to proceed thereafter for recovery of the amount due.
Final Conclusion: The order granting return of the seized cash was set aside, and the amount was retained under judicial control until the income-tax proceedings concluded.
Ratio Decidendi: Where income-tax proceedings concerning alleged undisclosed income are pending, seized cash should be preserved in judicial custody rather than released to the claimant until assessment is completed and the recoverable tax liability is determined.
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