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2017 (10) TMI 1162 - HC - Income TaxLegality of amount seized lying in Canara bank - refusing to release an amount of ₹ 5 Crores from out of the seized amount - consequential benefits under the PMGKY Scheme - Held that - As pointed out earlier, the amount taken away from the current account of the petitioner was ₹ 36.98 Crores. Out of the said amount, a sum of ₹ 20 Crores has been disclosed under the PMGKY Scheme. If the declaration filed by the petitioner under Section 199C is accepted by the department, the department will have to do two things, viz., (a) to release the amount of ₹ 5 Crores; and (b) to allow the petitioner to encash the amount of ₹ 5 Crores invested in RBI bonds under Section 199F. In other words if the declaration under PMGKY Scheme is accepted by the department, the petitioner will get release of ₹ 5 Crores. Though according to the petitioner the department will be left with a surplus of ₹ 16.97 Crores, even after the release of ₹ 5 Crores, the case of the department is that they left only with a sum of ₹ 5 Crores after releasing a sum of ₹ 5 Crores, after adjusting the amount payable under all heads for all these years. Therefore, we are of the considered view that the release of ₹ 5 Crores will not hamper either any investigation or further proceedings on the part of the department. There is also one more aspect. If the declaration under PMGKY Scheme is accepted by the department, the petitioner will not only get immediate release of ₹ 5 Crores, but will get RBI bonds encashable after four years to the total value of ₹ 5 Crores together with interest. The amount lying in RBI bonds, if allowed to be retained as security for any eventuality, till the conclusion of all the proceedings, the departments interest will be more safeguarded, even if they release the amount of ₹ 5 Crores. Therefore, in fine, the writ petition is disposed of directing the respondents to release an amount of ₹ 5 Crores to the petitioner within two weeks. The amount of ₹ 5 Crores lying in RBI bonds, shall be kept by the department as security for the release of the amount hereby ordered, until the conclusion of any proceedings pending or to be initiated by the department. If the declaration under PMGKY Scheme is finally accepted, the RBI bonds may also be released to the petitioner, provided no other dues are found payable by the petitioner.
Issues Involved:
1. Legality of the seizure of ?20 Crores. 2. Entitlement to the benefits under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) Scheme, 2016. 3. Release of ?5 Crores from the seized amount. 4. Compliance with pre-conditions under the PMGKY Scheme. 5. Application of Section 132B of the Income Tax Act. 6. Dispute over the remaining seized amount and its adjustments. Detailed Analysis: 1. Legality of the Seizure of ?20 Crores: The petitioner challenged the seizure of ?20 Crores from their current account by the Assistant Director of Income Tax. The petitioner claimed that the seizure was illegal and sought to have it declared as such. However, the court noted that the seizure was conducted under Section 132(3) of the Income Tax Act following demonetization and substantial cash deposits by the petitioner. The court observed that the seizure was a consequence of the petitioner's actions and that the petitioner had initially agreed to disclose ?40 Crores under the PMGKY Scheme but later reduced it to ?20 Crores. Consequently, the court did not find the seizure illegal. 2. Entitlement to Benefits under the PMGKY Scheme: The petitioner sought to declare ?20 Crores under the PMGKY Scheme. The scheme required payment of 30% tax, 10% penalty, 33% surcharge, and the deposit of 25% of the declared income in RBI Bonds. The petitioner faced difficulties in fulfilling these conditions due to the seizure of their funds. The court noted that the petitioner had complied with the conditions through interim orders: ?9.98 Crores was appropriated for tax, penalty, and surcharge, and ?5 Crores was converted into RBI Bonds. The court held that the petitioner's entitlement to the scheme benefits was subject to the outcome of the pending W.P.No.9262 of 2017. 3. Release of ?5 Crores from the Seized Amount: The petitioner requested the release of ?5 Crores, arguing that the department had sufficient funds left even after releasing this amount. The department opposed this, citing Section 132B of the Income Tax Act and the potential future liabilities. The court found that even after releasing ?5 Crores, the department would have a surplus amount, thus not prejudicing the department's case. The court directed the release of ?5 Crores to the petitioner within two weeks, with the RBI Bonds kept as security until the conclusion of proceedings. 4. Compliance with Pre-conditions under the PMGKY Scheme: The petitioner had to satisfy three pre-conditions to benefit from the PMGKY Scheme: payment of tax, penalty, and surcharge; deposit of 25% of the declared income in RBI Bonds; and filing a declaration in Form-I. The court noted that the petitioner fulfilled these conditions through interim orders and the department's consent for appropriating ?9.98 Crores. The court held that the petitioner's entitlement to the scheme benefits was conditional on the final outcome of W.P.No.9262 of 2017. 5. Application of Section 132B of the Income Tax Act: The department argued that Section 132B, which deals with the application of seized assets, applied to the case, preventing the release of ?5 Crores. The petitioner contended that PMGKY Scheme provisions should override Section 132B. The court sided with the department, stating that the seizure occurred before the petitioner's declaration under the PMGKY Scheme, making Section 132B applicable. However, the court balanced the interests by ordering the release of ?5 Crores while keeping RBI Bonds as security. 6. Dispute Over the Remaining Seized Amount and Its Adjustments: The petitioner claimed that the department had a surplus of ?16.97 Crores after releasing ?5 Crores, while the department contended that only ?10.44 Crores would remain. The court did not delve deeply into this dispute, noting that even by the department's account, sufficient funds would be left after releasing ?5 Crores. The court emphasized that the department's interests would be safeguarded by retaining the RBI Bonds as security. Conclusion: The court disposed of the writ petition by directing the release of ?5 Crores to the petitioner within two weeks, with the RBI Bonds kept as security. The court emphasized that this decision would not prejudice the department's case and that the petitioner's entitlement to the PMGKY Scheme benefits was subject to the final outcome of W.P.No.9262 of 2017. The court also closed any pending miscellaneous petitions related to this writ petition.
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