2008 (7) TMI 1086 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the seizure of cash u/s 132 of the Income Tax Act, 1961.
2. Retention of seized cash beyond 60 days without higher authority approval.
3. Contradictions in the petitioner's statements regarding the source and transportation of cash.
4. Validity of assessment proceedings and retention of seized assets.

Summary:

1. Legality of the seizure of cash u/s 132 of the Income Tax Act, 1961:
The petitioner sought a writ of mandamus to direct the respondents to release Rs.1,00,00,000/- seized on 25.11.2006 and Rs.4,00,000/- seized on 28.11.2006. The petitioner claimed the cash was for purchasing a flat in New Delhi. The Income Tax Department intercepted the petitioner at Chennai Airport and seized the cash, issuing a summon u/s 131 of the Income Tax Act, 1961. The department conducted a search and issued a Panchanama and prohibitory order u/s 132(3), freezing the bank accounts of the Trust and the Chairman. The petitioner argued there was no material to initiate proceedings u/s 132 and that mere possession of cash could not infer undisclosed income.

2. Retention of seized cash beyond 60 days without higher authority approval:
The petitioner contended that retaining the money beyond 60 days without an order from a higher authority or the Central Board of Direct Taxes was unauthorized as per section 132(9). The respondents countered that section 132(9) pertains to making copies or extracts and does not address asset retention. They argued that assets seized u/s 132(1) could be retained until the completion of search-related assessments without any additional approval.

3. Contradictions in the petitioner's statements regarding the source and transportation of cash:
The respondents highlighted contradictions in the petitioner's statements, noting that he initially claimed the cash was unaccounted. The petitioner stated he carried the cash in two bags, but Jet Airways confirmed only one hand baggage was carried. The cash bundles bore seals from banks in North India, contradicting the petitioner's claim of carrying the cash from Chennai. The respondents argued these inconsistencies justified the search and seizure authorization and the initiation of assessment proceedings.

4. Validity of assessment proceedings and retention of seized assets:
The court noted that the assessment proceedings were initiated due to the petitioner's inconsistent statements. The seized amount was deposited in the Reserve Bank of India, and the assessment proceedings were ongoing. Section 132(9A) mandates that seized assets be handed over to the Assessing Officer within 60 days, who can then retain them until the completion of assessment proceedings. The court found that the retention of the money by the Assessing Officer was legal and valid. The assessment proceedings were to be completed by 31.12.2008, and the petitioner could seek a refund with interest u/s 244 if successful.

Conclusion:
The court dismissed the writ petition, holding that no case was made out for issuing a writ of mandamus. The retention of the seized money was deemed legal and valid, and the assessment proceedings were to continue. The petitioner's reliance on the Division Bench judgment of the Madras High Court was distinguished based on the facts of the case.