TaxTMI 
TaxTMI 
2026 (6) TMI 720
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....the customs authorities, on 20.08.2025. Six months passed on 19.02.2026. Yet, neither any show cause notice was issued to the petitioner in terms of the provisions contained in The Customs Act, 1962 (hereinafter referred to as 'the Act'), nor any time extension order came to be passed and communicated to them before the end date. The writ petition itself was presented on 07.04.2026. On 10.04.2026 we passed the below quoted order: "1. Petitioners claim the release of the cash seized more than six months ago. 2. Shri Krishna Agarwal, learned counsel for the revenue authorities prays for and is granted ten days time to obtain clear written instructions as to why the seized cash has not been released and if statutory proceeding has been drawn within limitation. 3. Put up as fresh on 24.04.2026 showing the name of Shri Krishna Agarwal and Shri Anant Kumar Tiwari both as counsel for the respondent". 4. On the next date, Sri Krishna Agarwal, learned counsel for the DRI relied upon a document dated 18.02.2026 described to be the order passed under Section 110(2) of the Act. Its copy was taken on record and learned counsel for the petitioners granted ti....
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.... under Section 124 of the Customs Act, 1965, is 6 months from the date of seizure under Section 110(2) which is getting over on 2 March 2026. In this context, extension by further 6 months may be granted for investigation and issuance of SCN under Section 124 based on reasons/cause mentioned above, may be granted, please. Sign. Illegible Sign. Illegible 18/02/26 18/2/2026 Sign. Illegible Sign. Illegible 18/02/26 18/02/2026 Sign Illegible 18/02/2026" 5. In such circumstances, upon the case being taken up on 08.05.2026, the following further order was passed: "1. Today, first objection was raised that there is no order extending the limitation. 2. On that objection being raised by learned counsel for the petitioner, we had required Shri Krishna Agarwal to obtain further instructions. On further oral instructions, Shri Krishna Agarwal states that the single page order-sheet dated 18.02.2026 is the order passed by the ADG granting approval to extension for limitation. 3. In such circumstances, learned counsel for the petitioner prays for and is granted a weeks' time to file an appropriate appli....
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.... to the authorized officer Shri/Smt./Kum Durgesh Mishra, ITO(OSD) (AIU) (Inv.), Lucknow. Documents as per Annexure Jewellery as per Annexure Cash as per Annexure 25,20,000/- Other assets as per Annexure 4. The proceeding commenced at..13.20 A.M./P.M. on 20.05.2026 and were concluded at............. A.M./P.M. on 20.05.2026. Delivering Officer Receiving Officer Signature sign. illegible Signature sign. Illegible Date 20/05/2026 Date 20/5/2026 Designation IO Designation I.T.O C(OSD) (AIU) (INV) Seal: Seal: (Navneet Kumar) (Durgesh Mishra) Intelligence Officer (Income Tax Officer (Inv.) (AIU) (OSD) Directorate of Revenue Intelligence Lucknow Zonal Unit, Lucknow Recd. Sign. Illegible 20/05/2026" 9. Thus, though the customs authorities admit that no extension of time had been communicated to the petitioners before the expiry of six months from 20.08.2025, they now cite inability to return the cash to the petitioners for the reason of requisition made by the Income Tax authorities. 10. Having heard counsel for the part....
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....not mention the facts contained in those communications. All that he says is that from those communications "it appears that these persons (alleged creditors) are name lenders and the transactions are bogus". He has not even come to a prima facie conclusion that the transactions to which he referred are not genuine transactions. He appears to have had only a vague feeling that they may be bogus transactions. Such a conclusion does not fulfil the requirements of Section 151(2). What that provision requires is that he must give reasons for issuing a notice under Section 148. In other words he must have some prima facie grounds before him for taking action under Section 148. further his report mentions: "Hence proper investigation regarding these loans is necessary". In other words his conclusion is that there is a case for investigating as to the truth of the alleged transactions. That is not the same thing as saying that there are reasons to issue notice under Section 148. Before issuing a notice under Section 148, the Income Tax Officer must have either reasons to believe that by reason of the omission or failure on the part of the assessee to make a return under Section 1....
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.... under those provisions as of little importance. They have substituted the form for the substance." (emphasis supplied) 13. That principle was followed and applied in Union of India vs Rai Singh Dev Singh Bist, (1973) 3 SCC 581 and Sahara India (Firm) (1) vs CIT, (2008) 14 SCC 151. In both decisions, it was held that the approval order may not be passed mechanically and it must reflect that before reaching the required satisfaction, the higher authority had applied its mind and thus examined the fitness of the case for the purpose of grant of approval. 14. To the extent mandatorily no cash seized may be retained beyond a period of six months and further to the extent the Act prescribes that the extension of time may be granted for "reasons to be recorded in writing", the note sheet is a mute document. As to what may amount to "reasons to believe", the issue is no longer res integra. 15. Considering the law laid down by the Supreme Court, in the context of the Income Tax Act, a coordinate bench to which one of us (S.D. Singh, J.) was part, in Mudra Exports vs Deputy Commissioner of Income Tax, 2024:AHC:59707-DB, it was observed as below: "16. As to what amounts ....
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.... 17. Then, a co-ordinate bench decision of this Court in Indra Prastha Chemicals Ltd. Vs. CIT (2004) 271 ITR 113, applied that law and held as below:- "11. The expression "reason to believe" in section 147 does not mean purely subjective satisfaction on the part of the Assessing Officer. The belief must be held in good faith; it cannot be merely a pretence. It is open to the court to examine whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the section. To this limited extent, the action of the Assessing Officer in starting proceedings under section 147 is open to challenge in a court of law as held in S. Narayanappa v. CIT, [1967] 63 ITR 219 (SC); Kantamani Venkata Narayana and Sons v. First Additional ITO, [1967] 63 ITR 638 (SC); Madhya Pradesh Industries Ltd. v. ITO, [1970] 77 ITR 268 (SC); Sowdagar Ahmed Khan v. ITO, [1968] 70 ITR 79 (SC); ITO v. Lakhmani Mewal Das, [1976] 103 ITR 437 (SC); ITO v. Nawab Mir Barkat Ali Khan Bahadur, [1974] 97 ITR 239 (SC); CST v. Bhagwan Industries (P.) Ltd.,[1973] 31 STC 293 (SC) and State of Punjab v. Balbir Singh, ....
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....iod of limitation, to issue the show cause notice and thereby to further enable retention of cash Rs. 25,20,000/- beyond the period of six months. 17. Second, even more vitally, on the statement made by Sri Krishna Agarwal, it is certainly not in dispute that the note sheet referred to above (described as the order by the DRI), was never issued to or served upon the petitioners, before expiry of six months. Thus, neither of the conditions prescribed under Section 110 of the Act was fulfilled. 18. Consequently, it has to be concluded that the petitioners had earned a right to be returned the entire cash Rs. 25,20,000/- on expiry of six months. Till that date no requisition had been received by the DRI Authorities from the Income Tax Authorities, to hand over the cash to them. 19. Therefore, the retention of the money from 20.02.2026 to 20.05.2026 is wholly illegal and outside the procedure prescribed by the law. The cash ought to have been returned on the mandatory statutory condition not fulfilled, without any application by the petitioners. To retain it beyond the period of six months was without jurisdiction. 20. In that circumstance, the petitioners approached this C....
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....communication dated 18.02.2026 had not been communicated to the petitioners. In that circumstance, only for the purposes of completion of record, we had required learned counsel for the petitioners to bring on record the said document, before the proceedings may be concluded. Thus, the matter was posted for today. 25. In that light of the proceedings and conduct of the DRI authorities, it is absolutely shocking and therefore, unacceptable that just two days prior to the date fixed in these proceedings, without taking leave of the Court, in a wholly hurried manner, the requisition that may have been received by the customs authorities (from the income tax authorities), was executed, practically the same day, if not within the same hour. Thus, requisition first issued by the Income Tax authorities on 19.05.2026 at Lucknow, has been given effect to at 13:20 pm on 20.05.2026, at Bareilly. 26. In view of above we are forced to reach a conclusion that DRI authorities have deliberately attempted to defeat the ends of justice and specifically the present petition. Their conduct appears to be directed not to participate in the proceedings, but to over reach and defeat the proceedings,....
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....ty, or directions of this Hon'ble Court. The circumstances leading to the present situation arose due to bona-fide understanding. 12. That it is most respectfully submitted before this Hon'ble Court that due diligence and due caution shall be exercised by this office in future in all the sub-judice matters. 13. That it is most respectfully submitted that the officer who had put up the proposal for extension of the period of issuance of Show Cause Notice under section 110(2) of the Customs Act 1962 had put up the reasons for seeking extension on the file and the competent authority, in agreement with those reasons, had put his dated signature on the Note Sheet. However, in further such extensions to be granted in such matters, independent reason will be recorded by the competent authority and the order of extension shall also be communicated to the concerned party in terms of Section 110(2) of the Customs Act, 1962. 14. That the present affidavit may kindly be taken on record in the interest of justice, this Hon'ble Court may graciously be pleased to accept the present unconditional apology, take a lenient view in the matter and pass such furth....