2021 (9) TMI 314 - HC - Income Tax

Recovery of the outstanding tax demand from the amounts lying deposited in foreign banks - Whether bank account can be held to be property - Corruption activity by some of NTPC officials - petitioners were maintaining accounts with National West Minister Bank, London which has been frozen by the order of the Special Court - whether the entire amount frozen in London and transferred to India is the case property or alleged proceeds of the crime and may be liable for confiscation in case the petitioner's are convicted and thus cannot be utilized for fulfilling the tax demands due against the petitioners? - petitioners contends that despite the investigation pending since 2006, no cognizance of the offence has been taken, much less, framing of any charge against the petitioner even for the offences punishable under Section 420/120-B IPC HELD THAT - Bank account of the accused or any of his relations is property within the meaning of Section 102 of the Criminal Procedure Code and a police officer in course of investigation can seize or prohibit the operation of the said account if such assets have direct links with the commission of the offence for which the police officer is investigating into. The contrary view expressed by the Karnataka, Gauhati and Allahabad High Courts, does not represent the correct law. It may also be seen that under the Prevention of Corruption Act, 1988, in the matter of imposition of fine under sub-section (2) of Section 13, the legislatures have provided that the courts in fixing the amount of fine shall take into consideration the amount or the value of the property which the accused person has obtained by committing the offence or where the conviction is for an offence referred to in clause (e) of subsection (1) of Section 13, the pecuniary resources or property for which the accused person is unable to account satisfactorily. The interpretation given by us in respect of the power of seizure under Section 102 of the Criminal Procedure Code is in accordance with the intention of the legislature engrafted in Section 16 of the Prevention of Corruption Act As per the status report filed by the CBI, the amounts transferred by TPE to RAPL in the NatWest Bank, London account, in relation to the impugned transaction are mentioned in entries 2 and 3 above, totalling to a sum of USD 2,15,71,843.90. However, the amount which was frozen and received in India is beyond the amount in relation to impugned transaction with TPE. The amount received in excess of the amount received from TPE by RAPL qua the impugned transaction cannot be prima facie termed as case property or the proceeds of the crime liable to be confiscated or for compensation in case the petitioners are charged and convicted. Consequently the learned Special Judge is directed to retain the amount received in lieu of the frozen amount of USD 2,15,71,843.90 alongwith the interest accrued thereon from the date of receipt till date and transfer the balance amount alongwith the interest accrued thereon received in the account at SBI, Tees Hazari, to the income-tax department.

Summary

Issues Involved:
1. Legality of the impugned order dated 17th May 2021.
2. Validity of the applications filed under Sections 451/457 CrPC and Section 226(4) of the Income Tax Act.
3. Determination of whether the frozen amount is case property or proceeds of crime.
4. Entitlement of the Income Tax Department to recover outstanding tax dues from the frozen amount.

Issue-Wise Detailed Analysis:

1. Legality of the Impugned Order Dated 17th May 2021:
The petitioners challenged the impugned order dated 17th May 2021, passed by the learned Special Judge, which dismissed their applications under Sections 451/457 CrPC and Section 226(4) of the Income Tax Act. The court analyzed the facts leading to the filing of these applications, including the initial FIR lodged by the CBI on 6th March 2006, the subsequent freezing of accounts, and the filing of a charge sheet under Section 420 read with 120B IPC. The court noted that the learned Special Judge had directed further investigation and had not taken cognizance of the CBI's report.

2. Validity of the Applications Filed Under Sections 451/457 CrPC and Section 226(4) of the Income Tax Act:
The court examined whether Sections 451/457 CrPC and Section 226(4) of the Income Tax Act were applicable. The learned Special Judge held that neither provision was applicable, dismissing both applications for lack of merit. The court reviewed the procedural history, including previous applications filed by the Income Tax Department and the petitioners, and the orders passed by the court directing the transfer of frozen amounts to the SBI, Tis Hazari Branch.

3. Determination of Whether the Frozen Amount is Case Property or Proceeds of Crime:
The court assessed whether the frozen amount in the NatWest Bank, London, constituted case property or proceeds of crime. The court referred to the Supreme Court's decision in State of Maharashtra Vs. Tapas D. Neogy, which held that money in a bank account could be considered "property" under Section 102 of the Criminal Procedure Code. The court concluded that the amount received in excess of the impugned transaction with TPE could not be prima facie termed as case property or proceeds of crime.

4. Entitlement of the Income Tax Department to Recover Outstanding Tax Dues from the Frozen Amount:
The court evaluated the Income Tax Department's claim for recovery of outstanding tax dues from the frozen amount. The court noted the total outstanding dues against the petitioners and the previous orders directing the transfer of funds to the SBI, Tis Hazari Branch. The court directed the learned Special Judge to retain the amount related to the impugned transaction (USD 2,15,71,843.90) along with accrued interest and transfer the balance amount with interest to the Income Tax Department.

Conclusion:
The court disposed of the petition, directing the learned Special Judge to retain the amount related to the impugned transaction and transfer the excess amount to the Income Tax Department. The court upheld the legality of the impugned order and validated the applications filed under Sections 451/457 CrPC and Section 226(4) of the Income Tax Act, providing a detailed analysis of the issues involved.