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

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 petitioner's argument that seized cash must be automatically released after 120 days without an order. The assessing authority retains jurisdiction to decide release applications even after the timeline expires, with interest liability at 18% per annum for delays. The court distinguished this provision from Section 132(8) which contains mandatory release provisions. The HC directed the assessing authority to decide the pending release application within two weeks.

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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.

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