AI Drafter 
TaxTMI 
TaxTMI 
2024 (9) TMI 1568
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....B, the authorities under the Act are entitled to seek interim custody of the currency notes. However, in R. Ravirajan v. State of Kerala, (2023) SCC OnLine Kerala 8444, another learned Single Judge struck a different note on the issue and held that in the absence of a valid order of assessment and demand for Income-tax, the party from whom the amount is seized, is entitled to seek interim custody. In R. Ravirajan, the learned Single Judge distinguished the decision in Union of India as one rendered on the facts of that case, without noting the principles of law laid down by the Apex Court in J.R. Malhotra v. Addl. Sessions Judge, (1976) 1 SCC 430. 3. When the above matters came up before another learned Single Judge, having noticed the conflict in the views, the learned Judge chose to refer the matters to a Larger Bench to resolve the conflict, for according to him, if the conflict is not resolved, there will not be any consistency in the orders on applications under Section 451 or Section 457 of the Code for interim custody of currency notes. These matters have thus come up before us. 4. Heard the learned counsel for the petitioners, the learned Government Pleader as also th....
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....nterim custody of the currency notes, whereas in R. Ravirajan, the learned Single Judge held that the above provisions cannot have any application in the context. 8. In the background of the facts stated above, it is necessary to understand the scope of Sections 132A and 132B of the Act before proceeding further in the matter. In order to understand the scope of the said provisions, it is necessary to first refer to Section 132 of the Act as well. Section 132 of the Act deals with Search and Seizure. The relevant portions of Section 132 read thus: "132. Search and seizure (1) [Where the [Principal Director General or] Director General or [Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner or Additional Director or Additional Commissioner], [or Joint Director or Joint Commissioner] in consequence of information in his possession, has reason to believe that- (a) xxx (b) xxx (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents e....
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.... [Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business;] (iv) place marks of identification on any books of account or other documents or make or cause to be made extracts or copies therefrom; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing: x x x x x x" (underline supplied) As evident from the extracted provision where in consequence of information, the competent authority has reason to believe that any person is in possession of any money and that such money represents either wholly or partly income which has not been, or would not be, disclosed for the purposes of the Act, then, the competent authority is empowered to search and seize the same. Section 132A of the Act deals with powers of the authorities under the Act to make requisitions. The relevant portions of Section 132A read thus: "132A. Powers to requisition books of account, etc. (1) Where the [Princip....
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....ad been seized under sub-section (1) of section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of this section and as if for the words "the authorised officer" occurring in any of the aforesaid subsections (4A) to (14), the words "the requisitioning officer" were substituted. " (underline supplied) As seen from the extracted provision, where in consequence of information, the competent authority has reason to believe that any assets represent either wholly or partly income which has not been, or would not have been, disclosed for the purposes of the Act by any person from whose possession or control such assets have been taken into custody by any officer or authority, then, the authority is empowered to make a requisition directing the officer or authority to deliver the same to the requisitioning officer and if a requisition is made, the officer or authority under any other law concerned, shall deliver the assets to the requisitioning officer. The Explanation to subsection (1) of Section 132A declares that the reason to believe, as recorded by the Income-tax ....
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....m whose custody the assets were seized: Provided further that such asset or any portion thereof as is referred to in the first proviso shall be released within a period of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 or for requisition under section 132A, 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) xxxx (2) xxxx. (3) xxxx. (4) xxxx" (underline supplied) As seen from the extracted provision, if the asset requisitioned is money, in terms of clause (i) to sub-section (1), the Assessing Officer is entitled to apply such money in the discharge of the liabilities of the person from whom it was obtained under the Act which includes not only the existing liabilities, but also liabilities determined on completion of assessment or reassessment or recomputation and also the assessme....
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.... be made to a court where the currency notes have been deposited. The learned Judge relied on the decision of this Court in Abdul Khader v. Sub-Inspector of Police, 1998 SCC OnLine Ker 580, to arrive at the said conclusion. 10. We have perused meticulously the provisions contained in Sections 132, 132A and 132B of the Act. A combined reading of the said provisions would indicate that the object of the said provisions is to enable the competent authorities under the Act to hold the assets seized under Section 132 or requisitioned under Section 132A for appropriation towards existing and future liabilities of the assessee, except in cases where the assessee is able to explain the nature and source of the acquisition of the assets seized or requisitioned, provided the competent authority has reason to believe that the assets represent either wholly or partly the income which has not been or would not be disclosed for the purpose of the Act. As provided for in Section 132B, the scheme of the provisions is that in cases where the assessee is able to explain the nature and source of acquisition of the asset, the asset shall be released to the assessee in a time framed manner. When the....