2010 (10) TMI 1170 - HC - Income Tax

Summary

Issues involved: Challenge to orders passed by the Additional District and Sessions Judge regarding custody of currency notes under Section 124 of the Bombay Police Act and Section 132A of the Income Tax Act.

Summary:
The Income Tax Department filed petitions challenging orders passed by the Additional District and Sessions Judge regarding custody of currency notes under Section 124 of the Bombay Police Act and Section 132A of the Income Tax Act. The respondent was accused under Section 124 of the Bombay Police Act for carrying cash currency of Rs. 5,90,000. The Income Tax Department sought custody of the amount for tax assessment purposes, which was initially granted by the Magistrate and later made final. The respondent challenged these orders through Criminal Appeal and Revision Application. The Additional Sessions Judge set aside the Magistrate's orders, directing an inquiry under the Code of Criminal Procedure. The Income Tax Department argued that once the competent authority requisitioned the currency notes under Section 132A, releasing them to the respondent would not be appropriate. On the other hand, the respondent's counsel contended that since the respondent was acquitted, he should be entitled to custody of the articles.

The competent authority under Section 132A of the Income Tax Act can requisition assets believed to represent undisclosed income. The Magistrate correctly placed the currency notes at the disposal of the Income Tax Department for further processing, including assessment under Section 153. Referring to a previous judgment, it was emphasized that the court's power under Section 132A is distinct from that under the Code of Criminal Procedure, with the intention to protect the state's revenue. The High Court found no rival claims for the currency notes in this case and held that the Sessions Judge erred in interfering with the Magistrate's order. The impugned order was set aside, restoring the Magistrate's order. It was clarified that if the Income Tax Department ultimately does not require the currency notes, they should be returned to the respondent. The petitions were disposed of accordingly.