Tax recovery from court-custody money upheld despite procedural irregularity in seizure and re-deposit

Money in court custody may still be proceeded against under the tax law where the police no longer need it for investigation or trial. A technical lapse in not first moving the Magistrate for permission, or in not following the preferred re-seizure procedure, does not by itself invalidate recovery if the statute otherwise authorises the revenue claim. The court treated the insistence on re-deposit as a formal requirement that would have defeated the department's lawful entitlement. The Magistrate's direction to deposit the amount in court was therefore set aside, and the income-tax authorities were allowed to retain the money subject to the assessee's rights under the Act.

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Issues: Whether the Magistrate could require re-deposit of currency notes seized by the Income-tax Officers when the police had already ceased to need the money, and whether the officers' action was vitiated by the fact that they did not first obtain the Magistrate's permission.

Analysis: The police seizure and the Magistrate's initial control over the currency notes did not exclude the operation of the Income-tax Act. The Act empowered the income-tax authorities to proceed against money belonging to an assessee for satisfaction of tax liability, and the course adopted by the officers, though irregular in not following the more regular procedure of moving the court, did not amount to such illegality as to require the entire amount to be restored merely for a formal re-seizure or re-application. As the police no longer needed the money for investigation or trial, insisting on re-deposit in the Magistrate's court would have served only a technical formality and could have defeated the revenue's lawful claim.

Conclusion: The order directing the Income-tax Officers to deposit the disputed amount in court was rightly set aside, and the income-tax department was permitted to retain the amount subject to the assessee's rights under the Income-tax Act.

Final Conclusion: The reference was accepted, the Magistrate's order was quashed, and the income-tax authorities' action was upheld as a substantial compliance with the tax law rather than a fatal illegality.

Ratio Decidendi: Where money in court custody is subject to a valid tax claim and the police no longer require it for criminal process, a technical departure from the preferred procedure under criminal law does not invalidate the revenue's recovery if the tax statute otherwise authorises the claim.

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