2015 (7) TMI 1267 - HC - Income Tax

Powers to requisition books of account, etc u/s 132A - Valueable Articles and Currency Notes - whether once the requisition under section 132A of the Act is issued, the same requires to be denied on account of the objection raised by the prosecuting authority? - whether the cash of ₹ 8.10 crore would be necessary to be produced as muddamal of bribe or otherwise at the time of trial? - Held that - It is nowhere coming on record that any trap was organised that the Court may require the detailed number of series of currency notes, which also in any case at the time of panchnama, the police ought to have done. Even if it is not done, it would not be difficult to so do it and the amount cannot continue to lie with the Investigating Officer. The Court in the alternative also could have thought of placing it in the Fixed Deposit or the bank locker with any Nationalised Bank for the purpose of safety and security of the currency notes. There is no purpose worth the name that would be served if the amount continues to lie with the Investigating Officer. This being a law on the interim custody during the pendency of the trial, the vital question that is addressed by this Court is the one raised by the applicant-Department being the claimant under the provision of law which has reason to believe that the amount is unaccounted money and is liable for investigation under the Incometax Act and Rules framed thereunder, the warrant of authorisation is issued and the same is found to be sustainable by this Court. The learned trial Judge when observed that the seized amount pertained to bribe money and it was required to be preserved, it neither had regarded the provision of section 451 of the CrPC nor the law laid down on the subject, as discussed hereinabove, nor did it consider the relevant provisions of Incometax Act and the pronounced authorities on the subject while denying such requisition to the applicant-Department. The Investigating Agency was also not right in contending that the custody of this muddamal article is necessary till completion of the trial when even otherwise, the production of the same through panchnama or exhibiting the same by virtue of video recording of same could have been managed. For the foregoing reasons, the present Revision Application succeeds and the same is, accordingly, allowed. The applicant-Department shall be free to undertake all actions permitted under the law, however, he shall make the Fixed Deposit of the entire amount of ₹ 8.10 crore with the State Bank of India within a period of four weeks from the date of taking over such muddamal currency notes, initially for a period of two years and thereafter, the same shall be renewed from time to time till finalisation of such proceedings initiated by the applicant-Department.

Summary

Issues Involved:
1. Legality of the trial court's order denying the Income Tax Department's request for custody of seized currency notes under Section 132A of the Income Tax Act, 1961.
2. Applicability and interpretation of Section 132A of the Income Tax Act, 1961.
3. Relevance and necessity of the seized currency notes as muddamal (case property) in the trial under the Prevention of Corruption Act, 1988.
4. Procedures and powers of the police and courts under the Code of Criminal Procedure, 1973, specifically Sections 451 and 457.
5. Precedents and judicial interpretations relevant to the custody and disposal of seized property.

Detailed Analysis:

1. Legality of the Trial Court's Order:
The trial court had denied the Income Tax Department's request to hand over the seized currency notes, citing that the notes were required as muddamal for the trial under the Prevention of Corruption Act. The High Court found this decision erroneous, emphasizing that the trial court failed to consider the relevant provisions of the Income Tax Act and the legal precedents on the subject. The High Court concluded that the trial court's order was not sustainable and needed to be set aside.

2. Applicability and Interpretation of Section 132A of the Income Tax Act:
Section 132A of the Income Tax Act empowers the Income Tax authorities to requisition books of account, other documents, or assets from any officer or authority under any other law if they have reason to believe that such assets represent undisclosed income or property. The High Court reiterated that once a requisition under Section 132A is made, the assets must be handed over to the Income Tax Department for assessment and further proceedings. The court emphasized that the requisitioning officer's authority under Section 132A is distinct and should not be impeded by the requirements of the criminal trial.

3. Relevance and Necessity of Seized Currency Notes as Muddamal:
The prosecution argued that the seized currency notes were essential as evidence in the trial under the Prevention of Corruption Act. However, the High Court noted that the physical presence of the currency notes was not necessary for the trial. Instead, a detailed panchnama (inventory) or videography of the notes could suffice. The court highlighted that retaining the currency notes with the investigating officer served no practical purpose and that the notes should be placed in a bank for safekeeping.

4. Procedures and Powers under the Code of Criminal Procedure:
The High Court examined Sections 451 and 457 of the CrPC, which deal with the custody and disposal of property pending trial. The court clarified that these sections empower the court to make orders for the proper custody of property and that the property should not remain with the investigating officer unnecessarily. The court cited the Supreme Court's decision in Sunderbhai Ambalal Desai v. State of Gujarat, which emphasized the need for expeditious disposal of valuable articles and currency notes to prevent theft, misappropriation, or damage.

5. Precedents and Judicial Interpretations:
The High Court referred to its previous decisions in Deputy Director of Income Tax v. State of Gujarat and Shankarlal Mangilal Kulthe, which established that the police have no authority to retain seized currency notes once the Income Tax Department has made a requisition under Section 132A. The court reiterated that the requisitioning officer must be given custody of the currency notes to proceed with the assessment and other processes under the Income Tax Act.

Conclusion:
The High Court allowed the revision application, quashing the trial court's order and directing the police to hand over the seized currency notes to the Income Tax Department. The court instructed that the notes be videographed and a detailed panchnama be prepared before handing them over. The Income Tax Department was also directed to deposit the amount in a fixed deposit with a nationalized bank and to renew it periodically until the finalization of the proceedings. The court emphasized that any appropriation of the amount should be made only with the court's permission.