2017 (6) TMI 251 - HC - Income Tax

Amount seized u/s 132 utilized for the purpose of discharging the liability already determined on completion of the assessment proceedings - Held that - The amount seized can only be utilized for the purpose of discharge of liability with regard to tax liability already determined and not paid by the assessee and for nothing more. In this case, the Department is only entitled to retain the amount of tax determined, as contained in para 8 of the counter affidavit, i.e. the tax liability for the assessment year 2004-2005 as admitted by the petitioners. Apart from the aforesaid, no further amount can be retained by the petitioners as the provisions to sub section (3) of Section 132B That being the position, we are of the considered view that with regard to the amount in question, at best the respondents can retain the amount so far as it pertains to discharge of tax liability of the petitioners for the year 2002-2003. 2003-2004 and 2004-2005, out of which according to petitioners showing for the assessment year 2002-2003 and for the year 2004-2005 certain amount has already been paid by them as is detailed in para 5 of their rejoinder along with documents Annexures 8/A and 8/B. The amount of ₹ 30 lacs retained by the Department cannot be permitted any further. They are liable to return the same after adjusting the liability for the years 2002-2003 and 2004-2005 that also after causing an enquiry with regard to the amount already paid by the petitioners as deailed in para 5 of the rejoinder. The remaining amount should be returned back to the petitioners after causing an enquiry with regard to the averments made in para 5 of the rejoinder within a period of one month from the date of receipt of a copy of this order.

Summary

Issues:
Seizure of amount by income tax authorities in New Delhi, delay in releasing the amount, justification for retaining the amount, statutory provisions under Income Tax Act of 1961, utilization of seized amount for discharging liabilities, pending assessment for the year 2015-2016, entitlement of the Department to retain the amount, provisions under Section 132B, payment of interest to petitioners, final decision on the writ petition.

Analysis:
The case involved the seizure of an amount of ?30 lacs by income tax authorities in New Delhi from the petitioners, who claimed to have received it as sale proceeds. The petitioners filed a writ petition seeking release of the amount after a delay of about two years. The Department justified retaining the amount due to pending tax liabilities for different assessment years. The statutory provision under Section 132B of the Income Tax Act of 1961 was analyzed, which allows seized assets to be utilized for discharging determined liabilities.

Upon scrutiny of the provisions, it was established that the Department could only retain the amount to discharge tax liabilities already determined and unpaid by the petitioners. The court ruled that the Department was entitled to retain only the amount related to tax liabilities for specific assessment years, as admitted by the petitioners. Any excess amount beyond the determined tax liabilities could not be retained by the Department as per Section 132B(3), which mandates the return of remaining assets or proceeds to the rightful owners.

The judgment directed the Department to return the seized amount of ?30 lacs to the petitioners after adjusting the tax liabilities for the relevant assessment years. An inquiry was ordered to verify the amount already paid by the petitioners. Additionally, the Department was instructed to pay interest to the petitioners as per Section 132B(4A) within two months of refunding the entire amount. The refund process was mandated to be completed within 30 days of the court order. Ultimately, the writ petition was allowed, and the case was disposed of in favor of the petitioners.