AI Drafter 
TaxTMI 
TaxTMI 
2023 (9) TMI 1557
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.... He is an Income Tax payee and his establishment is registered under the Goods and Services Tax Act. The 2nd petitioner, the son of the 1st petitioner, oversees the business. On 6.10.2022, the 3rd petitioner, an employee, was entrusted with Rs. 40 lakhs for jewellery procurement and an additional sum of Rs. 25,000/- for related expenses. The 3rd petitioner is stated to have travelled to Thrissur, Kerala, for the purchases. During his bus journey, an inspection by the Excise Circle Inspector, Mananthavady, revealed that the 3rd petitioner carried approximately Rs. 40 lakhs in cash. Due to the 3rd petitioner's inability to provide a satisfactory explanation for the large amount, the cash was seized. It was subsequently produced before the Jurisdictional Magistrate along with a report numbered as C.M.P.No. 1866/2022. 3. The petitioners approached the learned Magistrate and filed Crl.M.P.No. 2061/2022 seeking interim release of the cash. 4. While the matter was pending consideration, the Income Tax Department filed a report indicating that the proceedings had been initiated under Section 131(1) of the Income Tax Act, 1961. Later, a report was filed before the l....
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....s the end of July 2023, and the said period had not expired on the date of seizure. It is only after the said date when the return of income is filed or is directed to be filed under Section 148 of the Act the question as to whether any tax is payable or due from the petitioners would arise. If the Department felt that an assessee had failed to submit a return of income, the Department is bound to issue a notice under Section 148 of the Act. On receipt of the said notice, the assessee has to be granted not less than 30 days to respond, and only thereafter can an assessment order be passed. It is further submitted that Section 132A of the Income Tax Act can have no application in the instant case. Placing reliance on the law laid down in Abdul Khader v. Sub Inspector of Police and Ors. [MANU/KE/0508/1998] , it was argued that the said provision would not empower the Commissioner to require a court to deliver assets that are in the court's custody. It is further submitted that the embargo under the IT Act is only against a person receiving an amount of Rs. 2 lakhs or more in respect of "transactions" other than by way of account payee cheque or draft, etc. In the instant cas....
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....stablished any right over the same. 8. In response, Sri. Suvin R. Menon, the learned Central Government Counsel, articulates that, pursuant to Section 132A of the Income Tax Act, a requisition for surrendering seized amounts is initiated when there exists reason to believe that any asset is representational, either in whole or in part, of income or property that has not been or would not be disclosed in adherence to the provisions of the Act. The learned counsel points out that under Section 132A, the Income Tax Department holds entitlement to the custody of the apprehended amount for subsequent appropriation relative to taxes and penalties accruable as per provisions in the Income Tax Act. It is stated that in instances involving unexplained cash or assets, the stipulations of Section 69A in conjunction with Section 115BBE are applicable. As provided in the above provisions, an individual found in possession of presumed income, manifesting as unexplained money, incurs a tax liability of 60%, with an additional surcharge of 25% applied to the tax, culminating in a comprehensive tax imposition amounting to 83.25% of the confiscated cash. The revenue is conferred with the authorit....
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....ome is below Rs. 50 Lakhs and ten years if it exceeds Rs. 50 Lakhs, subject to the conditions stipulated in Section 147/148. The authority to conduct an assessment under Section 153A arises solely when a person has been scrutinized under Section 132 or documents or assets have been requisitioned under Section 132A. In other instances, the assessment must be concluded under Section 143. Under Sections 132 and 132A, the Department has the authority to search any individual or location and to seize any undisclosed income or valuable items found during such search or requisition assets taken into custody by any "officer or authority" under any prevailing law if it represents undisclosed income. However, this Court has held in Abdul Khader (supra) that Section 132A does not authorize the Department to requisition the "Court" to hand over the money that has been produced before the court as in the instant case. The aforesaid provision would apply only to an officer or authority. Under Section 226(4), the Department may petition the Court holding money belonging to the assessee to settle the due tax. Still, this power can be exercised only after the ascertainment of tax due afte....
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.... entrustment and the bond executed by him in favour of the Court. Any failure to comply with the terms will entail the necessary consequences also. His ownership or right to possession may not operate against his obligation to the Court. The entrustment or custody will not invest him with any preferential right to ownership or even possession. In the eye of law his possession or custody is only that of Court. 8. The arrangement once made is not even final till the conclusion of the inquiry or trial. Court is having the right to terminate the entrustment, get back the property from him and entrust it to somebody else whom the Court deems fit in appropriate cases even before the conclusion of the inquiry or trial. So much so, the person entrusted with the property may also be entitled to seek termination of the entrustment and surrender the property even before the conclusion of trial. Cases may arise where the person to whom interim custody was ordered may not care to undertake the obligation. In such cases the Court may have to make other arrangements for custody pending trial. After giving custody the Court may for reasons think that his custody may not be proper. In such....
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.... tax is charged for any 'assessment year' in respect of the total income of the 'previous year' of every person. Under Section 3, the 'previous year' is defined as the financial year immediately preceding the assessment year. Under Section 2(9) of the Act, 'Assessment year' is defined as the period of 12 months commencing the 1st day of April every year under Section 2(9). In short, for income earned by a person during the financial year 1st April 2022 to 31st March, 2023, the previous year is 2022-23 and the corresponding assessment year is 2023-24. 16. Under Section 139, every person whose total income during the previous year exceeds the maximum amount not chargeable to income tax shall file a return of income in the prescribed Form on or before the due date prescribed. The due date for filing of a return for most persons is 31st July of the assessment year. However, in respect of persons whose accounts are compulsorily required to be audited under the Act (tax audit), the due date is 30th September/31st October of the assessment year. If any cash is seized from a person on a date falling with the financial year 2022-23 and which the Income Tax Department contends is assessab....
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....(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and of the relevant assessment year or years: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132-A, as the case may be, shall abate: Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment ye....
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....ct shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 20. Under Section 153A, in the case of a person, where a search is initiated under Section 132, or books of account, documents, or asset is requisitioned under Section 132, notwithstanding the other provisions of the Act, the Department can complete an assessment of income for six assessment years immediately preceding the assessment year in which search is conducted, or requisition is made. Jurisdiction to make an assessment under Section 153A will arise only when the person has been searched under Section 132 or documents or assets are requisitioned under Section 132A. In all other cases, the assessment has to be completed under Section 143. 21. It would therefore be apposite to refer to Section 132 of the Act, which provision reads as under: 132. Search and seizure.- (1) Where the Principal Director General or Director General or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissio....
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....books of account, other documents, money, bullion, jewellery or other valuable article or thing are kept; (ii) break open the lock of any door, box, locker, safe, almirah or other receptacle for exercising the powers conferred by clause (i) where the keys thereof are not available; (ii-a) search any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; (ii-b) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of Section 2 of the Information Technology Act, 2000, to afford the authorised officer the necessary facility to inspect such books of account or other documents;] (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: Provided that bullion, je....
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....planation.- For the removal of doubts, it is hereby declared that the reason to believe, as recorded by the income-tax authority under this sub-section, shall not be disclosed to any person or any authority or the Appellate Tribunal. (1-A) Where any Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in consequence of information in his possession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the Principal Director General or Director General] or Director or any other Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner to take action under clauses (i) to (v) of sub-section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-section (1), such Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner] may, notwithstanding anything contained in Section 120, authorise the said officer t....
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....his sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income Tax Act, 1922 (11 of 1922), or under this Act. (4-A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document, stamped, executed or attested, that it was duly stamped and executed or at....
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....r in this section and in Sections 132-A and 132-B referred to as the assets) seized under that sub-section shall be handed over by the authorised officer to the Assessing Officer having jurisdiction over such person within a period of sixty days from the date on which the last of the authorisations for search was executed and thereupon the powers exercisable by the authorised officer under sub-section (8) or sub-section (9) shall be exercisable by such Assessing Officer.] (9-B) Where, during the course of the search or seizure or within a period of sixty days from the date on which the last of the authorisations for search was executed, the authorised officer, for reasons to be recorded in writing, is satisfied that for the purpose of protecting the interest of revenue, it is necessary so to do, he may with the previous approval of the Principal Director General or Director General or the Principal Director or Director, by order in writing, attach provisionally any property belonging to the assessee, and for the said purposes, the provisions of the Second Schedule shall, mutatis mutandis, apply. (9-C) Every provisional attachment made under sub-section (9B) shall ....
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....For the purposes of sub-sections (9-A), (9-B) and (9-D), the last of authorisation for search shall be deemed to have been executed,- (a) in the case of search, on the conclusion of search as recorded in the last panchnama drawn in relation to any person in whose case the warrant of authorisation has been issued; or (b) in the case of requisition under Section 132-A, on the actual receipt of the books of account or other documents or assets by the authorised officer. Explanation 2.-In this section, the word "proceeding" means any proceeding in respect of any year, whether under the Indian Income Tax Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year. 22. Under Section 132, the Income Tax Department has the power to search any person or place when they have reasons to believe, inter alia, that any person has in his possession money or other valuable article or thing which represents income and which has not been disclose....
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....irector, Additional Commissioner, Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income Tax Officer (hereafter in this section and in sub-section (2) of Section 278-D referred to as the requisitioning officer) to require the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer. Explanation.- For the removal of doubts, it is hereby declared that the reason to believe, as recorded by the income-tax authority under this sub-section, shall not be disclosed to any person or any authority or the Appellate Tribunal.] (2) On a requisition being made under sub-section (1), the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, of that sub-section shall deliver the books of account, other documents or assets to the requisitioning officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody. (3) Where any books of account, other ....
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....does not empower the Commissioner to require the court to deliver the assets. The provision is referable only to an "officer" or "authority" referred to under sub-section (1) and not the court. A similar question has been considered by a Division Bench of the Punjab and Haryana High Court in CIT v. Balbir Singh, [1993] 203 ITR 650, referred to earlier wherein the Tax Recovery Officer under whose custody lay the assets recovered, was not holding the assets independently. It was deposited with him in pursuance of the order of the court. Therefore, a warrant could not have been issued against the court since the officer is holding the assets on behalf of the court. Of course, it is open to the Income-tax Officer to apply to the Magistrate for the release of the assets in their favour. In the order referred to by the Income-tax Department in Crl. R.P No. 571 of 1996 (Ibrahim Othayoth v. Sub-Inspector of Police, [1998] 232 ITR 320 (Ker)), and connected cases, it is a case where the Department themselves applied for release of the articles seized. The question under section 132A was not raised or considered in that case. 26. It was held that Section 132-A does not empower the Dep....
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.... or for requisition under Section 132-A, as the case may be, was executed; (ii) if the assets consist solely of money, or partly of money and partly of other assets, the Assessing Officer may apply such money in the discharge of the liabilities referred to in clause (i) and the assessee shall be discharged of such liability to the extent of the money so applied; (iii) the assets other than money may also be applied for the discharge of any such liability referred to in clause (i) as remains undischarged and for this purpose such assets shall be deemed to be under distraint as if such distraint was effected by the Assessing Officer or, as the case may be, the Tax Recovery Officer under authorisation from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner] under sub-section (5) of Section 226 and the Assessing Officer or, as the case may be, the Tax Recovery Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule. (2) Nothing contained in sub-section (1) shall preclude the recovery of the amount of liabilities afo....
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.... anything contained in any other provision of this Act, an income tax authority may enter- (a) any place within the limits of the area assigned to him, or (b) any place occupied by any person in respect of whom he exercises jurisdiction, or (c) any place in respect of which he is authorised for the purposes of this section by such income tax authority, who is assigned the area within which such place is situated or who exercises jurisdiction in respect of any person occupying such place at which a business or profession or an activity for charitable purpose is carried on, whether such place be the principal place or not of such business or profession or of such activity for charitable purpose, and require any proprietor, trustee, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession or such activity for charitable purpose- (i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place, (ii) to afford him the necessary facility to check or verify the cas....
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....n in the situation that has arisen on the facts of the case. There can be no question of making a seizure under Section 132 of the Income Tax Act and proceeding further under the provisions of that section, once an assessment is completed. Seizure under Section 132 relates to a pre-assessment stage. If an assessment is completed before the seizure is effected and while the assets are still in the custody of the court, the appropriate remedy for the Revenue is to make an application under Section 226(4) of the Income Tax Act. 32. The Apex Court had made it clear that if an assessment is completed while assets are in the custody of the Court, the appropriate remedy to the Revenue is to make an Application under Section 226(4). The Department will not be entitled to make this request in the instant cases as no assessments have been completed as yet. 33. In the case on hand, the seizure was effected on 8.10.2022. The income earned by a person during the financial year 1st April 2022 to 31^st March 2023 is to be assessed in the year 2023-24. The 1st petitioner, being an assessee is bound to file a return of income not before 31st July, 2023. If the 1st petitioner does not disclose....
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....of authorisation. The High Court of Punjab and Haryana held the search to be invalid and directed the Revenue to return the money and the books. On appeal, the High Court on November 22, 1972, accepted in part the appeal of the Revenue and held that the amount and the books and documents be returned by the Revenue to the Station House Officer, Police Station, Kartarpur, who was directed to proceed in accordance with law. Finally, after several developments, the learned Magistrate directed the Income Tax authorities to return the amount in dispute, and the said order was affirmed by all courts. The matter finally reached the Hon'ble Supreme Court. While confirming the order passed by the learned Magistrate, the Apex Court held as under in paragraphs 18 and 19 of the judgment. 18. There is no criminal case against the respondent Romesh Chander. The order of the High Court dated May 25, 1972 directed the return of the sum of Rs 1,61,411 and the documents to the respondent Romesh Chander. The order of the learned Single Judge was affirmed by the High Court on November 22, 1972. No appeal was preferred against the order of the High Court. The order of the High Court was that th....