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Issues:
1. Seizure of documents and assets during an income tax search. 2. Withdrawal of funds from a savings bank account and encashment of fixed deposit receipts by income tax authorities. 3. Jurisdiction of the Income-tax Officer to realize assets before final quantification of tax liability. Analysis: Issue 1: Seizure of documents and assets during an income tax search The petitioners filed a writ petition under Article 226 of the Constitution of India seeking various reliefs, including restraining the income tax authorities from taking action on seized documents and assets. The petitioners alleged that a search was conducted on their premises on January 12, 1995, under section 132 of the Income-tax Act, 1961. They claimed that no order under section 132 had been made and that the authorities were attempting to encash fixed deposit receipts and withdraw funds illegally. An interim order was issued restraining the encashment of fixed deposit receipts, but the authorities attempted to encash them despite the order. Issue 2: Withdrawal of funds and encashment of fixed deposit receipts The petitioners alleged that the income tax authorities had withdrawn a sum from their savings bank account and were attempting to encash fixed deposit receipts seized during the search. The authorities admitted attempting to encash the fixed deposit receipts but ceased their efforts after the interim order. The court found that the authorities had no legal authority to realize assets or withdraw funds before the tax liability was quantified through assessment. The court directed the authorities to redeposit the withdrawn amount and cancel the bank draft/pay order issued for encashment of fixed deposit receipts. Issue 3: Jurisdiction of the Income-tax Officer The court analyzed Section 132(5) of the Income-tax Act, which specifies the procedure for dealing with seized assets. The provision mandates that the Income-tax Officer can only retain assets to satisfy tax liabilities after assessment. The court held that the Income-tax Officer lacked the authority to realize assets or withdraw funds before final quantification of tax liability. The court partially allowed the writ petition, directing the authorities to redeposit the withdrawn amount, cancel the bank draft, and restrain from encashing fixed deposit receipts without proper assessment. In conclusion, the High Court partially allowed the writ petition, emphasizing the importance of following legal procedures and obtaining proper assessments before realizing assets or withdrawing funds. The judgment highlighted the limitations on the authority of the Income-tax Officer and the necessity of complying with legal provisions while dealing with seized assets during income tax searches.
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