2010 (10) TMI 845 - HC - Income Tax

Violation of the provisions of the FEMA - interception of Skoda car somewhere in the Wayanad District and on search of the vehicle they recovered an amount of 88,00,000/- in cash from the said vehicle - according to the respondents the total tax liability tentatively fixed for three financial years, i.e. 2007-08, 2008-09 and 2009-2010 is Rs.49,86,393/- and the respondents are of the opinion that the appellant would also be liable to pay penalty for an amount of Rs.10,37,940/- - Held that - It is not very clear from the record nor the respondents is able to make any statement regarding the time frame required for completing the assessment against the appellant. We are informed that the total amount lying with the respondents as on 28.7.2010, the date on which the statement in the writ petition was filed, is Rs.1,03,79,468/-, i.e. the seized amount of Rs.88,00,000/- plus the interest accrued thereon. We are also informed that pursuant to the order of the learned Single Judge the respondents have already released the amount in excess of Rs.65,00,000/- out of the above mentioned amount. In the circumstances, we deem it appropriate to modify the judgment under appeal directing the respondents to retain only an amount of Rs.40,00,000/- and release the balance amount subject to the condition that the appellant furnishes security either by way of producing bank guarantee or immovable property security to the satisfaction of the third respondent for an amount of Rs.25,00,000/-.

Summary

Issues:
1. Claim of seized amount by appellant
2. Requisition under Income Tax Act
3. Assessment proceedings against the appellant
4. Liability of the appellant under Income Tax Act
5. Release of seized amount

Claim of Seized Amount by Appellant:
The appellant claimed ownership of an amount seized by the police from a vehicle. The money was handed over to the Directorate of Enforcement, and subsequently, the Income Tax authorities issued a requisition to transfer the amount to them. The appellant approached the court seeking release of the money, which led to the current appeal.

Requisition under Income Tax Act:
The Income Tax authorities issued a notice to the appellant under Sections 132A and 131 of the Income Tax Act, requesting documents and attendance for pending assessment proceedings under Section 153A. The respondents claimed a tax liability and penalty against the appellant for multiple financial years. The total amount held by the respondents was disclosed, and a portion was already released based on a previous court order.

Assessment Proceedings Against the Appellant:
The assessment proceedings against the appellant under the Income Tax Act were pending. The court noted the uncertainty of the appellant's liability until the proceedings were completed. The authorities had initiated proceedings related to FEMA violations, which were closed after starting proceedings under the Income Tax Act.

Liability of the Appellant under Income Tax Act:
The respondents estimated the appellant's tax liability and penalty for specific financial years. The court acknowledged the difficulty in determining the exact liability until the assessment proceedings were finalized. The judgment considered the assertions made by the respondents regarding the appellant's potential liabilities.

Release of Seized Amount:
The court modified the previous judgment, directing the respondents to retain a specific amount and release the balance upon the appellant providing security through a bank guarantee or immovable property. The revised order aimed to balance the retention of funds with the appellant's ability to access a portion of the seized amount.

This detailed analysis of the judgment highlights the legal complexities surrounding the claim of seized funds, the requisition under the Income Tax Act, the ongoing assessment proceedings against the appellant, the estimated liabilities, and the conditions for the release of the seized amount.