2024 (3) TMI 1081 - HC - Income Tax

Seized assets 120-day timeline under Section 132B(1)(i) is directory not mandatory, assessing authority retains jurisdiction after expiry

Dipak Kumar Agarwal Versus Assessing Officer And 4 Others

The Allahabad HC held that the 120-day timeline under Section 132B(1)(i) for releasing seized assets is directory, not mandatory. The court rejected the ... Release of the Amount Seized along with interest u/s 132B(4) read with Rule 119A - Scope of the term 'shall release' - Application of seized or requisitioned assets u/s 132B - Seeking direction to quash the seizure effected u/s 132B(1)(i) - The petitioner contended that during the course of that investigation, petitioner had produced regular books of accounts and details of his income tax returns filed for the past Assessment Years to establish that the seized cash was duly accounted for/tax paid money - HELD TH AT:- The only consequence of non-compliance of Section 132 B (1) (i) of the Act is by way of payment of interest at the highest rate provided by the legislature i.e. @ of 18 % per annum. The period for which such interest may become payable has also been specified under that provision. By imposing the levy of interest on the revenue, a plain reading of sub section (4) of Section 132 B (1) (i) of the Act, the legislature itself contemplated cases where orders may remain to be passed by the Assessing Authority within the timeline provided u/s 132 B (1) (i) of the Act. Payability of interest may arise only in a case where the order may have remained to be passed within a time stipulation provided under the second proviso to Section 132 B (1) (i) of the Act. If, the nature and source of acquisition of a seized asset is wholly explained and it may not be required for recovery of any outstanding demand or demand of tax that may arise under the assessment proposed to be made consequent to the search giving rise to the seizure itself, the same may be released. The provisions does not stipulate any consequence of automatic release. It would first have to be invoked by the assessee by filing a proper application. Then if conditions are fulfilled, an order recording that satisfaction may be passed. It is for that purpose a timeline of 120 days is contemplated on a non-imperative basis. In the event of delay in making the decision the revenue has been saddled with interest liability @ 18 % per annum. On the contrary under Section 132 (8) of the Act [as considered in Cowasjee Nusserwanji Dinshaw [1987 (3) TMI 106 - GUJARAT HIGH COURT], a statutory duty was cast on the seizing authority to itself record reasons to detain seized documents beyond 180 days and the consequence of its nonadherence was also provided by way of release of the same. Therefore, in absence of statutory intent shown to exist, it may not be inferred through the process of legal reasoning-that if no order is passed within a time of 120 days, seized assets must be released notwithstanding its impact on the recovery of existing and likely demands. As similar stipulations of time provided under different enactments have been interpreted to be directory and not mandatory. Therefore, we are unable to pursue ourselves to subscribe to the reasoning that has found its acceptance in the case of Mitaben R. Shah [2010 (2) TMI 684 - GUJARAT HIGH COURT], Ashish Jayantilal Sanghavi [2022 (4) TMI 1285 - GUJARAT HIGH COURT],Nadim Dilip Bhai Panjvani [2016 (1) TMI 811 - GUJARAT HIGH COURT] and Mul Chand Malu (HUF) [2016 (5) TMI 550 - GAUHATI HIGH COURT] As petitioner has invoked the principle-if an Act is required to be done in a particular way, it may be done in that way or not at all, we find the same to be inapplicable to the present law. In our opinion, the provision in question [Section 132 B (1) (i)] being directory, the jurisdiction of the Assessing Authority to deal with the petitioner's application dated 15.09.2022 did not lapse or abate upon expiry of the period of 120 days. Since that stipulation of law is only directory, it survives to the Assessing Authority to deal with the application, even today. We may also observe at this stage, if on due application of mind, the Assessing Authority reaches a conclusion that the nature and source of Rs. 36,12,000/- seized from Om Prakash Bind was duly explained and if assessing officer is adequately satisfied that that amount was neither required for satisfaction of any outstanding demand or satisfaction of demand that may arise pursuant to the assessment proposed to be made, such refundable amount would attract liability of interest under Section 132 B (4) of the Act read with Rule 119 A of the Rules. We decline to issue the writ of Mandamus as prayed. Instead, we dispose of the writ petition with a direction on the Assessing Authority/respondent No.2 to proceed to deal with and decide the application of the petitioner dated 15.09.2022 within two weeks from today Issues Involved:1. Legality of the seizure of Rs. 36,12,000/- under Section 132B(1)(i) of the Income Tax Act, 1961.2. Entitlement to the release of the seized amount and interest under Section 132B(4) read with Rule 119A of the Income Tax Rules, 1961.3. Interpretation of the word 'shall' in the second proviso to Section 132B(1)(i) of the Act.Summary:1. Legality of the Seizure:The petitioner, a jeweller, challenged the seizure of Rs. 36,12,000/- on 13.09.2022 under \u/s 132B(1)(i) of the Income Tax Act, 1961. The amount was recovered from the petitioner's worker, Om Prakash Bind, by the Government Reserved Police (GRP) at Mirzapur Railway Station on 31.08.2022, and later subjected to proceedings under \u/s 132(1-A) of the Act. The petitioner claimed that the seized cash was duly accounted for in his regular books of accounts and income tax returns filed since 2012-2013.2. Entitlement to Release and Interest:The petitioner applied for the release of the seized amount on 15.09.2022, as per \u/s 132B(1)(i) read with the proviso to \u/s 132B(1)(i) of the Act. The application remained pending without any decision from the assessing authority. The petitioner argued that under the second proviso to \u/s 132B(1)(i), the assessing authority was obligated to release the seized amount within 120 days if no pre-existing tax liability was found. The petitioner cited various High Court decisions supporting the mandatory nature of this provision.3. Interpretation of 'Shall':The court examined whether the word 'shall' in the second proviso to \u/s 132B(1)(i) indicates a mandatory or directory intent. The court referred to various Supreme Court judgments, emphasizing that the interpretation depends on legislative intent, the statute's object, and the consequences of non-compliance. The court concluded that the provision is directory, not mandatory, as the only consequence of non-compliance is the payment of interest under \u/s 132B(4) of the Act. Therefore, the assessing authority's jurisdiction to decide the application did not lapse after 120 days.Conclusion:The court declined to issue a writ of Mandamus for the immediate release of the seized amount. Instead, it directed the assessing authority to decide the petitioner's application dated 15.09.2022 within two weeks, by a reasoned and speaking order, after hearing the petitioner. No order as to costs.