2014 (11) TMI 731 - HC - Income Tax

Source of income not disclosed Claim of custody of gold ornaments by the income tax authority for the purpose of enquiry under the Income Tax Act - Criminal petition under Kerala Value Added Tax Act Whether the release of gold to the first respondent in the latter Crl. M.C. would in any way affect the power of Income Tax Authority to continue with the proceedings u/s 132A - Held that - The power of the Magistrate under Section 451 Cr.P.C. does not extend to the determination of ownership of the property seized and what was done under the impugned order is only granting the interim custody of the seized gold bars and ornaments to the first respondent in the latter Crl. M.C. subject to the conditions in the order at this distance of time viz., more than five years since the order - the release of gold to the first respondent in the latter Crl. M.C. would not in any way affect the power of Income Tax Authority to continue with the proceedings under Section 132A of the Income Tax Act and also the right to realise the amount due to Government, if any, as income tax from him out of the guarantee - the pendency of the criminal proceedings in Crime No.51 of 2008 of South Railway Police Station and all further actions pursuant thereto will not stand in the way of the Income Tax Department in initiating appropriate proceedings for the purpose of assessing tax liability of the persons concerned including the first respondent in the latter Crl.M.C., in accordance with law, besides the proceedings under Section 132A - if such proceedings are initiated by the Department it shall be concluded as expeditiously as possible and the gold seized shall be released finally only subject to the outcome of such proceedings.

Summary

Issues:
Interim custody of seized gold bars and ornaments, ownership determination, compliance with legal procedures, rights of Income Tax Authority, safeguarding departmental interests.

Interim Custody of Seized Gold Bars and Ornaments:
The case involved the seizure of 7664.5 grams of gold bars and ornaments from accused individuals, leading to multiple petitions for custody. The Intelligence Officer from the Department of Commercial Taxes, the Income Tax Department, and the first respondent filed petitions under Section 451 Cr.P.C. to gain interim custody of the gold. The court ultimately ordered the release of the gold to the first respondent, subject to specific conditions, including furnishing security for the value of the gold and complying with future court requirements.

Ownership Determination and Compliance with Legal Procedures:
The Income Tax Department contested the ownership of the gold, alleging lack of valid documentation regarding its purchase and tax evasion. The court considered the arguments presented, including claims that the first respondent's ownership was questionable due to inflated book stock and potential involvement in providing accommodation entries for undisclosed assets. Despite these contentions, the court noted that the Magistrate's power under Section 451 Cr.P.C. did not extend to determining ownership, focusing instead on granting interim custody based on the circumstances and existing orders.

Rights of Income Tax Authority and Departmental Interests:
The judgment emphasized that the release of the gold to the first respondent did not impede the Income Tax Authority's ability to pursue proceedings under Section 132A of the Income Tax Act or to recover any tax liabilities. The court underscored the importance of safeguarding the department's interests, ensuring that any tax assessments or proceedings initiated by the Income Tax Department would not be hindered by the release of the gold. The judgment further clarified that the final release of the gold would be contingent upon the outcomes of any ongoing or future proceedings related to the case, allowing the Department to intervene if necessary.

In conclusion, the judgment addressed the complexities surrounding the interim custody of seized gold, ownership disputes, compliance with legal procedures, and the rights of the Income Tax Department. By issuing specific conditions and clarifications, the court aimed to balance the interests of all parties involved while upholding the principles of justice and legal procedure.