2014 (4) TMI 1209 - HC - Income Tax

Currency notes seized by the police during the search and seizure - Income Tax authorities entitlement to receive tax on the seized amount but currency notes are not to be handed over to the authority - Held that - Considering the provisions of Sections 132A(2) 132B and 153A of the Income Tax Act 1961 and the case relied by the learned Senior Advocate for the applicant Department I am of the view that the impugned order is contrary to the provisions of the Income Tax Act 1961 and currency notes seized by the police during the search and seizure in exercise of powers under Prohibition of Gambling Act deserves to be handed over to the Income Tax Department. Accordingly order dated 28.06.2013 passed by the learned Metropolitan Magistrate Court No.22 Ahmedabad in Misc. Application No.108 of 2013 is hereby quashed and set aside and the Incharge Police Officer of Ellisbridge Police Station Ahmedabad shall hand over muddamal being currency notes of 4, 78, 356/and 36, 30, 990/to the concerned officer of the petitioner department.

Summary

Issues:
1. Seizure of currency notes during a raid.
2. Legal obligations of police authorities regarding seized muddamal.
3. Jurisdiction of the Income Tax Department for assessment and tax collection.

Analysis:
1. The petitioner, an Income Tax Officer, filed a petition seeking to quash an order directing the handing over of seized muddamal to the respondent after deducting tax. The raid at the respondent's premises revealed gambling activity and the seizure of currency notes amounting to a significant sum. The respondent challenged the seizure in a Criminal Misc. Application, which was rejected by the Metropolitan Magistrate.

2. The petitioner relied on provisions of the Income Tax Act, including Sections 132A(2), 132B, and 153A, to argue that the police were obligated to hand over the seized muddamal to the Income Tax Department. The petitioner's counsel cited a previous court order to support their argument. The respondent did not contest the legal position and agreed to hand over the currency notes to avoid delays in the assessment process.

3. After considering the relevant provisions of the Income Tax Act and the arguments presented, the court concluded that the order directing the handing over of the seized currency notes to the respondent was contrary to the law. The court held that the currency notes should be handed over to the Income Tax Department for assessment and tax collection. Consequently, the order of the Metropolitan Magistrate was quashed, and the police were directed to hand over the currency notes to the Income Tax Department. The petition was allowed only to this extent, in favor of the Income Tax Department.