2020 (2) TMI 427 - SC - Income Tax

Refund of seized cash - deny relief by directing payment in terms of the order under Section 132(5) - HELD THAT - Direction for refund was applicable if no notice would be issued within the time stipulated. In any case, the learned judges had the option to treat the writ petition as an execution application or could have given liberty to the appellant to file an execution application which as per the law of limitation can be filed within 12 years. This aspect has been completely over-looked and not been given due consideration. The respondents do not and cannot dispute that they have to refund the seized amount. Further, considerable delay and failure to make the payment constitutes and is inseparable from the cause of action as the delay and negligence is on the part of the authorities. The appellant does not seek setting-aside or quashing of an adverse order, no third-party rights are involved and the respondents exfacie would not suffer due to a change of position. Prayer for compliance of a valid and legal order passed cannot be equated with prayers made in repeated representations seeking a change of position. Acquiescence is not apposite to patience as acquiescence is not just standing-by, and refers to assent on being aware of the violation or reflects conduct showing waiver. Laches is this case would require sheer negligence of the nature and type which would render it unjust and unfair to grant relief. When, the liability to pay ₹ 4,99,900/- is acknowledged and accepted, then to deny relief by directing payment in terms of the order under Section 132(5) of the Act would be unjust, unfair and inequitable. Statute mandates the respondents to make payment. To be fair to the counsel for the respondents, it was conceded that an appropriate order may be passed to do justice. For the aforesaid reasons, the appeal is allowed with the direction to the respondent authorities to pay ₹ 4,99,900/- with interest as per law within a period of three months from the date on which the copy of this order is received.

Issues Involved:
1. Legality of the seizure of ?4,99,900/- under Section 132 of the Income Tax Act, 1961.
2. Validity of the order passed under Section 132(5) of the Income Tax Act.
3. Compliance with principles of natural justice.
4. Entitlement to refund of the seized amount with interest.
5. Applicability of writ jurisdiction vs. execution petition for enforcement of the refund order.
6. Consideration of delay and laches in seeking relief.

Issue-wise Detailed Analysis:

1. Legality of the Seizure of ?4,99,900/-:
On 25.08.1987, the appellant was subjected to a search and seizure operation under Section 132 of the Income Tax Act, 1961, in a New Delhi hotel room, where ?5,00,000/- was found. The appellant claimed the amount was collected from a trader in New Delhi. The authorities seized ?4,99,900/-.

2. Validity of the Order Passed Under Section 132(5):
On 22.12.1987, an order under Section 132(5) was issued, retaining the seized amount due to contradictions in the appellant's explanation regarding the source of the money. The appellant challenged this order in Writ Petition No. 721 of 1988, which was partly allowed by the Bombay High Court on 25.03.2008. The order was set aside for not following principles of natural justice, and the authorities were directed to issue a show-cause notice under Rule 112-A of the Income Tax Rules, 1962.

3. Compliance with Principles of Natural Justice:
The High Court's judgment emphasized the need for following principles of natural justice before passing the order under Section 132(5). The authorities were instructed to issue a show-cause notice and provide copies of statements relied upon.

4. Entitlement to Refund of the Seized Amount with Interest:
Despite the High Court's directions, the authorities failed to locate and refund the seized amount. The appellant repeatedly requested the refund, and the authorities acknowledged the liability but did not make the payment. The Principal Commissioner of Income Tax admitted the liability in a letter dated 11.10.2017. The appellant filed another writ petition in 2018, which was dismissed by the Bombay High Court on grounds of delay and laches.

5. Applicability of Writ Jurisdiction vs. Execution Petition:
The Supreme Court found the High Court's reasoning fallacious. The writ petition should have been treated as an execution application, or the appellant should have been given liberty to file an execution application within the 12-year limitation period. The Supreme Court highlighted that writ jurisdiction under Article 226 is discretionary and equitable, not bound by the Limitation Act, 1963.

6. Consideration of Delay and Laches in Seeking Relief:
The Supreme Court rejected the argument of delay and laches, noting that the appellant's delay did not constitute acquiescence or waiver. The delay was attributed to the authorities' failure to refund the amount. The Court emphasized that writ jurisdiction is meant to render equitable justice and should not be denied due to procedural delays when the liability is acknowledged.

Conclusion:
The Supreme Court allowed the appeal, directing the respondent authorities to refund ?4,99,900/- with interest within three months. Failure to comply would entitle the appellant to file a contempt petition and claim costs. The judgment underscores the importance of equitable relief in writ jurisdiction and adherence to principles of natural justice.

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