TaxTMI 
TaxTMI 
2026 (9) TMI 1892
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....FACTS OF THE CASE : (2) On 09.05.2024, the Income Tax Department received information from the Additional Director General (Crime), Gandhinagar, regarding the discovery of cash amounting to Rs. 5,68,37,500/- at the premises of the Angadiya firm operating under the name and style of "M/s. Prime Enterprise," situated at 114, Iscon Arcade, opposite Parishima Building, Navrangpura, Ahmedabad. Pursuant thereto, the Income Tax Department conducted an inquiry in exercise of its powers under Section 131 of the IT Act. Subsequently, on 10.05.2024, a warrant of authorisation was issued under Section 132 of the IT Act, pursuant to which the aforesaid cash was seized. (2.1) Thereafter, proceedings were initiated under the provisions of the Prohibition of Benami Property Transactions Act, 1988 (for short "the Benami Act"). In the course of the said proceedings, various notices were issued to the Angadiya firm viz. M/s. Prime Enterprise. Eventually, a show-cause notice under Section 24(1) of the Benami Act was issued on 12.08.2025. (2.2) It is the case of the petitioner that during the proceedings under the Benami Act, the petitioner's ownership of the cash amounting to Rs. 5,68,37,500/....
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....cted to release the asset. (3.3) Further, it is submitted that the statutory period of 120 days from the date of authorisation of the search expired on 07.09.2024, hence the continued retention of the seized cash beyond the said period is illegal and without jurisdiction. In support of the aforesaid submissions, reliance was placed upon the decision of this Court in the case of Nadim Dilip Bhai Panjvani vs Income Tax Officer, Ward.3, [2016] 66 taxmann.com 124 (Gujarat) relied upon in the case of Ashish Jayantilal Sanghavi vs. Income Tax Officer, [2022] 139 taxmann.com 126 (Gujarat). (3.4) It is contended that, during the proceedings initiated under the Benami Act, the petitioner's ownership of the seized cash amounting to Rs. 5,68,37,500/- was established. Consequently, the proceedings under the said Act were dropped by order dated 30.12.2025. It was therefore contended that the said order constitutes a material subsequent development supporting the petitioner's claim to the seized cash, and that the amount ought to be released in favour of the petitioner, more particularly, as on today the no assessment proceedings are initiated against the petitioner. (3.5) Finally, it i....
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....t is contended that it remains a matter of investigation whether the cash found at the premises of M/s. Prime Enterprises on 10.05.2024 belongs to Shri Dilavarsinh Harisinh Zala, proprietor of Jay Maa Bhavani Traders. With regard to the petitioner's reliance upon the order dated 30.12.2025 passed under Section 24(4)(b)(ii) of the Benami Act, it was submitted that the Deputy Commissioner of Income Tax, Benami Prohibition Unit, Ahmedabad, and the Initiating Officer, Ahmedabad, had forwarded the information gathered during the proceedings under the Benami Act to respondent No. 2 vide letter dated 07.01.2026. It was contended that the order dated 30.12.2025 does not record any conclusive finding regarding the ownership of the seized cash. (4.5) It is submitted that, prima facie, the departmental database indicates that the petitioner, Shri Dilavarsinh Harisinh Zala (PAN ACPPZ1649F), had filed only two income-tax returns, namely, for A.Ys 2024-25 and 2025-26, and on perusal of the same cash amounting to Rs. 5,68,37,500/-does not appear to be commensurate with his disclosed sources of income. (4.6) It is submitted that the summons under Section 131 of the IT Act were issued to the ....
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.... contemporaneous documentary evidence. (4.10) It was further submitted that the Second Proviso to Section 132B(1)(i) of the IT Act, relating to the release of seized assets within the prescribed period of 120 days, would not apply to the petitioner, as he was a third party to the assessment proceedings. (4.11) While referring to the provisions of Section 132B of the IT Act, it is contended that it does not contemplate the automatic release of seized cash merely because no quantified liability under the IT Act or the other statutes referred to therein exists at the relevant stage. [(4.12) It was further submitted that the proceedings under the Benami Act and the IT Act operate in distinct fields. While the Benami Act concerns the determination of ownership and the identification of the beneficial owner of the seized asset, proceedings under the IT Act involve examination of the nature and source of the cash. Learned Senior Standing Counsel for the respondents submitted that, in search proceedings under Section 132 of the IT Act, the statutory presumptions under Sections 132(4A) and 292C of the IT ACT require the Department to seek an explanation from the person in whose pos....
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....ted through M/s. Prime Enterprise. On being probed how the cash is transported to Ahmedabad from Sabarkantha, Shri Dilavarsinh Harisinh Zala stated that the cash, after it reaches some definitive amount, is being taken by himself to the office of M/s. Prime Enterprise for safe custody. Shri Dilavarsinh Harisinh Zala further stated that he would not be able to tell as to how much cash has been deposited at M/s. Prime Enterprise till date but at the given time of Search Action Rs. 5,68,37,500 was deposited with M/s. Prime Enterprise. 5. Conclusion: 5.1. Thus, in the instant case, the ownership of the cash is found to be established, and therefore the said cash is not to be considered as "Benami Property". Hence, the conditions of Section 2(9)(D) of the Act are not fulfilled. Accordingly, after considering all relevant materials, it is decided not to attach the property under section 24(4)(b)(ii) of the Prohibition of Benami Property Transactions Act, 1988. In view of the above facts, the proceedings under PBPT Act in the above-mentioned case in respect of above-mentioned asset are hereby dropped, after getting approval from the Approving Authority on 30.12.....
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....r completion of the assessment proceedings for A.Y. 2025-26 is 31.03.2027. The petitioner was issued a notice under Section 133(6) of the IT Act to appear on 27.07.2026; however, he did not appear. The proposal for centralization of the petitioner's case has been approved by the DGIT (Inv.), Ahmedabad, and the Income Tax Authority is in the process of migrating the PAN. Thus, the assessment proceedings in the case of the petitioner are under contemplation. (10) In order to appreciate the issue raised in the present writ petition, it is necessary to examine the provisions of Section 132B of the IT Act. The Coordinate Bench of this Court in the case of Nadeem Dilip Bhai Panjvani (supra), after examining the provisions of Section 132B(1) of the IT Act, has held as under: "5 In this context, we may peruse the statutory provisions. Section 132B of the Act pertains to application of seized or requisitioned assets and reads as under: "[Application of seized or requisitioned assets: 132B. (1) The assets seized under section 132 or requisitioned under section 132A may be dealt with in the following manner, namely:" (i) the amount of any existing li....
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.... 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 aforesaid by any other mode laid down in this Act. (3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized. (4) (a) The Central Government shall pay simple interest at the rate of [one-half per cent for every month or part of a month] on the amount by which the aggregate amount of money seized under section 132 or requisitioned under section 132A, as reduced by the amount of money, if any, released under the first proviso to clause ....
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....oval of the officer prescribed under the said proviso. 7. Under Clause (i) of sub-section (1) of Section 132B, any seized assets would be adjusted towards the recoveries not only against existing but also liabilities which may crystallize on completion of the assessment under Section 153A and the assessment of the relevant year to the previous year, in which, the search is initiated or the request is made or in the block assessment proceedings. Such liabilities would not only include the principal tax but also interest and penalties, if any. However, under the first proviso to Clause (i) of sub section (1), if the person concerned makes an application within the prescribed time and also satisfies the Assessing Officer about the source of acquisition of such asset, the asset would be adjustable only against the existing liabilities. In other words, upon the concerned person applying to the Assessing Officer and satisfying him about the source of the acquisition of the asset, the same would be released after adjustment towards existing liabilities, without waiting for the outcome of the assessment proceedings under Section 153A of the Act or the assessment for the year relev....
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....n the prescribed time, the authority can refuse such request on the ground of not being satisfied about the source of its acquisition. But if no such decision is taken within the time envisaged in the further proviso, releasing of the asset becomes imminent." (11) A close reading of the provision of section 132B of the IT Act more particularly, clause (i) of sub-section (1) of Section 132B of the IT Act, as discussed by this Court in the said judgment, exposit that the Proviso to Clause (i) to sub-section (1) of Section 132B of the IT Act requires that such seized assets or portion thereof referred to in the First Proviso to Clause (i) to sub-section (1) of Section 132B of the IT Act can be released within the prescribed time of 120 days, and the Assessing Officer can adjust the assets against the existing liability or even when not satisfied about the source of acquisition of the asset, he may refuse to release the same till the further liabilities which may arise upon completion of the assessment under Section 153A of the IT Act or the assessment of the year relevant to the previous year, in which the asset was seized. It is also held that the further Proviso to Clause (i) to ....
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....sets can be released merely because he/she has filed an application under the First Proviso to Clause (i) to sub-section (1) of Section 132B of the IT Act. As per the First Proviso to Section 132B(1)(i) of the IT Act, the person concerned has to make an application within a period of thirty days from the end of month in which assets are seized. However, the quintessential feature is that the taxpayer has to explain the nature and source of acquisition of the asset to the satisfaction of the Assessing Officer. The recording of satisfaction by the Assessing Officer on the disclosure/explanation is mandatory for determination of existing liability and proportionate release of assets, and the remaining portion can be released with the prior approval of the authority mentioned therein. The existing liability is the tax liability which is already determined and not paid by the assessee, and it is not the liability which is yet to be determined. In the present case, unquestionably, the petitioner has not made an application for releasing of the seized asset within a period of 30 days. Moreover, he has not whispered about the nature and source of acquisition. Even if the taxpayer discloses....
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....be recorded by the Assessing Officer in the First Proviso to Clause (i) to sub-section (1) of Section 132B of the IT Act is on the explanation/disclosure including its source tendered by the concerned person, who is seeking release of assets by filing an application within a period of 30 days, whereas in the Second Proviso to Clause (i) to sub-section (1) of Section 132B of the IT Act the satisfaction on the source of acquisition and the discharge of liability is determined on completion of assessment proceedings as mentioned in Clause (i) to sub-section (1) of Section 132B of the IT Act. In either of the Proviso, the satisfaction of the Assessing Officer determining the source of seized assets is compulsory and cannot be diluted. The reading of First Proviso refers to two eventualities; (i) the adjustment of amount of existing liability by the Assessing Officer, and (ii) the release of remaining portion of assets, after adjustment by the competent authority. The Second Proviso to Section 132B(1)(i) of the IT Act will only get triggered, if any decision is taken by Assessing officer on the application filed by the taxpayer within a period of 30 days as specified in the First Provis....
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....b). Section 132B(4) of the IT Act outlines the statutory mechanism for the payment of interest by the Central Government on aggregate money seized or requisitioned during a search and seizure, as reduced by the amount of money, if any released under the First Proviso to Clause (i) to sub-section (1) of Section 132B of the IT Act and also of proceeds of the assets sold towards the discharge of liability referred in Clause(i) of sub-section(1) of Section 132B of the IT Act. Clause(a) to sub-section (4) to Section 132B of the IT Act mandates the Government to pay interest on "the aggregate amount of money seized" as reduced by the amount of money, "if any" released under the First Proviso to Clause (i) to sub-section (1) of Section 132B of the IT Act. Thus, if no money is released under the First Proviso to Clause (i) to sub-section (1) of Section 132B of the IT Act, the aggregate amount, which was initially seized, will carry the prescribed interest. The Revenue is required to pay interest on excess amount after determination of tax liability on completion of the assessment proceedings as specified in Clause (i) to sub-section (1) of Section 132B of the IT Act or on the original seiz....
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....ollector and Ors., 2021 (2) S.C.C. 392 (Full Bench). Once the consequences of retaining the seized assets is prescribed, in our opinion, the release cannot be held to be mandatory, but would be directory. There may be cases, where the application filed by the taxpayer, as the present petitioner, under the First Proviso to Clause (i) of sub-section (1) of Section 132B of the IT Act is bereft of any explanation, he/she merely asks for release, without disclosure of nature and source of acquisition, and the Assessing Officer does not decide such application, then in such cases, the automatic release of assets on completion of 120 days will do violence to the provisions of Section 132B of the IT Act. As previously held by us, the First Proviso casts a statutory obligation on the assessee to disclose the nature and source of acquisition of assets, and if the assessee fails to do so, the Assessing Officer is not supposed to call from him/her to explain. If the application is bereft of any explanation as required by the statute, the Assessing Officer is not supposed to take cognizance of the application. Thus, the automatic release of seized assets on completion of 120 days, as referred i....
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....re followed in the subsequent decision of this Court in the case of Ashish Jayantilal Sanghavi (supra), do not examine the effect of Section 132B(4) of the IT Act on clause (i) of Section 132B(1) and the provisos thereto. The decision in Mitaben R. Shah (supra) relies upon the decision rendered in the case of Cowasjee Nusserwanji Dinshaw vs. ITO, (1987) 165 ITR 702 (Guj.), which deals with the provisions of Section 132(8) of the IT Act, directing the retention of books of account and other documents beyond a period of 180 days, unless reasons for their continued retention were recorded in writing with the approval of the Commissioner, and, in the absence thereof, the books of account were required to be released. In our considered opinion, the ratio of Cowasjee Nusserwanji Dinshaw (supra), which was subsequently followed in other decisions, cannot be applied to the scheme of Section 132B of the IT Act. Instead of invoking the principle of per incuriam, we are of the opinion that the issues raised before us call for determination by a Larger Bench, since the view expressed in the aforesaid judgments has subsequently been followed.. (23) Under the provisions of Rules 5 and 6 of th....