2024 (1) TMI 337 - HC - FEMA

Enforcement Directorate must release seized currency after 2 years 9 months delay violates Section 132B Income Tax Act

M/s Harish Forex Services Pvt. Limited, Shri Harish Bhatija, Sunny Bhatija, Fate Purane Noton Ki Dukaan, Harish Enterprises, Shakuntala Bhatija, Pooja Bhatija, Satvik Bhatija Versus Assistant Director Of Enforcement, Adjudicating Authority, Directorate Of Enforcement, Assistant Director Of Enforcement, Complainant And Investigating Authority, Directorate Of Enforcement

M/s Harish Forex Services Pvt. Limited, Shri Harish Bhatija, Sunny Bhatija, Fate Purane Noton Ki Dukaan, Harish Enterprises, Shakuntala Bhatija, Pooja ... Issues involved:The validity of seizure/confiscation by the respondents and seeking direction to return/release the money, currency illegally confiscated/seized.Judgment details:Issue 1: Seizure of Indian and Foreign currencyThe petitioners challenged the seizure of Indian and Foreign currency by the authorities, citing non-compliance with the provisions of the Income Tax Act, 1961. The petitioners argued that the stock-in-trade of the business should not have been seized and that the authorities were required to release the assets within 120 days. Despite multiple representations seeking release of the seized assets, no response was received, and a show cause notice was issued after a significant delay. The court noted the inaction of the respondents in releasing the currency and directed them to comply with the provisions for release.Issue 2: Applicability of FEMA, 1999 and Act, 1961The court considered the provisions of Section 37 of the Foreign Exchange Management Act, 1999 (FEMA, 1999) which confers power of search and seizure on the officers of Enforcement Directorate. It was highlighted that the power should be exercised in accordance with the provisions of the Income Tax Act, 1961, subject to the limitations laid down under the said Act. The court emphasized the importance of expeditiously determining liabilities and releasing assets within the specified time frame.Issue 3: Compliance with statutory provisionsThe court analyzed the provisions of Section 132B of the Income Tax Act, 1961, which governs the application of seized and requisitioned assets. The court noted that the assets seized must be released within 120 days from the date of the search authorization. Emphasis was placed on the need for timely determination of liabilities and the release of assets accordingly. The court found the respondents' inaction in releasing the seized assets to be in violation of the statutory provisions.Separate Judgment:The High Court, comprising Hon'ble Mr. Justice Arun Bhansali and Hon'ble Mr. Justice Ashutosh Kumar, partly allowed the petition. The respondents were directed to pass appropriate orders for the release of the seized assets within four weeks from the date of the judgment. However, it was clarified that the release of assets would be subject to the final outcome of the proceedings initiated by the respondents against the petitioners.