Petitioner to Apply for Seized Cash Adjustment Under Tax Law; Benami Ownership Order Quashed; Case Sent for Reconsideration.

The court ruled that the petitioner must file an application under Section 132B of the Income Tax Act, 1961, for the adjustment of seized cash against tax liability, as the writ petition was deemed premature. The order treating the petitioner as the beneficial owner of the seized cash under the Prohibition of Benami Property Transactions Act, 1988, was quashed. The case was remitted to the fifth respondent for reconsideration. The petitioner was directed to submit the necessary application within seven days, and the third respondent was instructed to resolve it within eight days, emphasizing prompt action due to concurrent proceedings.

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Issues:
The issues involved in the judgment are the adjustment of seized cash against tax liability under the Income Tax Act, 1961 and the proceedings under the Prohibition of Benami Property Transactions Act, 1988.

Adjustment of Seized Cash Against Tax Liability:
The petitioner filed a writ petition seeking a Mandamus to direct the adjustment of cash seized from the petitioner's friend against the petitioner's tax liability for the Assessment Year 2021-2022. The cash of Rs.99,75,000/- seized from the petitioner's friend was taxed in the hands of the petitioner. The petitioner argued that the seized cash is an asset of the petitioner under Section 132B of the Income Tax Act, 1961 and should be adjusted against the tax liability. However, the Standing Counsel for the respondents contended that the writ petition was premature as the petitioner had not filed an application as required under the first proviso to Section 132 of the Income Tax Act, 1961. The court held that while there is a duty on the respondents to appropriate the seized amount upon application, the petitioner must first file the necessary application under the provision.

Proceedings under the Prohibition of Benami Property Transactions Act:
Meanwhile, the fourth respondent initiated proceedings under Section 263 of the Income Tax Act, 1961, and the fifth respondent passed an order treating the petitioner as the beneficial owner of the seized cash, holding it to be a benami transaction under the Prohibition of Benami Property Transactions Act, 1988. The petitioner challenged this order through a writ petition, which was allowed, quashing the order and remitting the case back to the fifth respondent for a fresh order after considering the facts on merits. The court directed the petitioner to file an appropriate application under Sections 132B of the Income Tax Act within seven days and instructed the third respondent to dispose of the application within eight days thereafter. The judgment highlighted the need for expeditious action by the third respondent considering the parallel proceedings under the Prohibition of Benami Property Transactions Act likely to be heard and disposed of by the fifth respondent.

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