2024 (10) TMI 1371 - HC - Income Tax

Seized cash release under Section 132B requires assessment officer's liability determination before 120-day timeline triggers

Kawaljeet Kaur Wife Of Late Shri Surjeet Singh Sethi, Anandeep Singh Sethi Versus Deputy Director Of Income Tax (Investigation-3), Jaipur

The HC held that the second proviso to Section 132B mandating release of seized assets within 120 days applies only after the AO determines liability and ... Seeking release of cash seized illegally - scope of second proviso to Section 132B - amount was seized by the respondent from the bank locker belonging to the petitioners - mandate to return the assets to the assessee - HELD THAT:- Once AO has arrived at a satisfaction with regard to the existing liability and with regard to the return of the assets, then the second proviso would apply and the assets or part of the assets as the case may be shall be released within a period of 120 days. Thus, the second proviso is mandatory and the same would come into play only after the satisfaction of the AO and the determination by him and after approval of the appropriate authorities. In the present case in hand, the application was filed within thirty days before the AO, but the AO has not passed any order with regard to the liability or with regard to the return of the assets. Thus, the second proviso would not come into play. The first proviso does not give any time line and the second proviso is applicable only when there is an assessment by the AO. As far as factual aspects of the case are concerned, it is not disputed that the seizure was made on 21.09.2023 and an application for release of the cash seized from the lockers of the petitioners was made on 09.10.2023 and 06.11.2023, which have not been decided by the respondent. Thereafter, prior to the seizure by the respondent, the petitioners vide letters dated 17.01.2023 & 23.08.2023 had disclosed that their bank lockers were having cash to the tune of around Rs. 37 lac. We are of the considered view that second proviso to Section 132B would apply only after the AOhas determined the liability and has come to the conclusion that the nature and source of acquisiton has been explained by the person concerned. In the present case, since the AO has not decided the application, the second proviso to Section 132B would not come into play.The second proviso is mandatory, however, this will come into play only when the AO has determined the liability. The purpose behind the proviso was that after determination of the liability, the assets and goods should not be retained by the department. We are of the considered view that the judgment of the Allahabad High Court in Dipak Kumar Agarwal [2024 (3) TMI 1081 - ALLAHABAD HIGH COURT] has dealt with Section 132B(4)(a) & (b) of the Act and has rightly come to the conclusion that the second proviso to Section 132B of the Act does not contemplate automatic release on expiry of 120 days. The prayer of the petitioners for refund of the amount cannot be granted. However, since cash has been recovered from Bank locker and even prior to recovery, petitioners have informed the income tax authorities about cash lying in locker, we deem it proper to direct the authorities to decide the application of the petitioners within four weeks from the date of receipt of this order by a reasoned and speaking order after hearing the petitioners. It goes without saying that if the petitioners are able to satisfy their source, the amount has to be refunded with interest as provided under Section 132B(4)(a)& (b) of the Act. Issues:1. Seizure of cash from bank locker2. Application for release of seized cash3. Interpretation of Section 132B of the Income Tax Act4. Mandatory nature of second proviso of Section 132B5. Legal precedent on release of seized assets6. Assessment order timeline under Section 153BAnalysis:1. The petitioners filed a writ petition seeking the release of illegally seized cash amounting to Rs. 34,02,005 from their bank locker. They had previously disclosed the cash in their lockers to the respondent before the seizure.2. The petitioners applied for the release of the cash within 30 days of seizure, explaining the source of acquisition. However, the respondent did not pass any orders on the application, leading to the filing of the writ petition by the petitioners for the refund of the seized cash.3. The contention was made under Section 132B of the Income Tax Act, focusing on the first and second provisos. The second proviso mandates the release of seized assets within 120 days from the date of authorization under Section 132 or requisition under Section 132A.4. Legal precedent from various High Courts was cited to support the mandatory nature of the second proviso to Section 132B. The judgments emphasized that assets must be released if the application is not decided within 120 days.5. The respondent argued against the writ petition, citing a different interpretation of the second proviso based on a judgment from the Allahabad High Court. The Allahabad High Court held that the provision does not stipulate automatic release and that interest liability on the Central Government is incurred after 120 days.6. The High Court analyzed the provisions of Section 132B and concluded that the second proviso is mandatory but only applicable after the Assessing Officer determines the liability and source of acquisition. Since the Assessing Officer had not decided on the application, the second proviso did not come into play.7. The judgment highlighted the need for the Assessing Officer's determination before the second proviso applies. The court directed the authorities to decide on the application within four weeks and refund the amount with interest if the petitioners satisfy the source of the cash.8. Ultimately, the writ petition was disposed of, with the court emphasizing the importance of timely assessment and determination of liabilities under the Income Tax Act.