2023 (6) TMI 132 - HC - Income Tax

Assessment of trust v/ss trustees - Unexplained assets (money) seized - unexplained income in the hands of 2nd petitioner, the managing trustee - assessment in his individual capacity - scope and authority of the 2nd respondent to requisition the assets under clause (c) to sub- section (1) to Section 132A - HELD THAT - Trust is an independent assessable unit for the purpose of income tax and distinct from the trustee viz., 2nd petitioner herein, who is subject to assessment in his individual capacity. A look at the facts would show that to resolve the controversy raised in the writ petition and to direct the return of the seized money, would necessarily require this court to examine the title over the assets seized from 2nd petitioner herien viz., whether it belongs to 1st or 2nd petitioner. Income Tax Department having already proceeded to find that the money seized belongs to the 2nd petitioner and having treated the same as income in the hands of the 2nd petitioner and orders of assessment having been made against the 2nd petitioner which is also the subject matter of challenge, it appears that examining the validity of the seizure would necessarily lead one to the question as to title of the assets seized from the 2nd petitioner which would think may not be appropriate in the light of the subsequent development viz., order of assessment in the name of the 2nd petitioner and the challenge to it by way of appeal inasmuch as there is no challenge to the order of assessment which is before this court and thus yet another reason which prompts me to think that it may not be appropriate to entertain the writ petition inasmuch as question of title over the assets/monies is essentially a question of fact which ought to be decided on the basis of the evidence which is to be let in and appreciation of such exercise is beyond the realm of jurisdiction under Article 226 of the Constitution of India. Writ petition cannot be entertained. However, it would be open to the petitioners to avail the statutory remedy against the impugned proceeding rejecting the petitioners claim for return of the assets (money) seized.

Summary

Issues Involved:
1. Scope and authority of the 2nd respondent under Section 132A of the Income Tax Act, 1961.
2. Legality of the seizure of cash by the 4th respondent.
3. Impact of subsequent assessment orders on the writ petition.

Summary:

Issue 1: Scope and Authority under Section 132A of the Income Tax Act
The primary question revolves around the 2nd respondent's authority to requisition assets under Section 132A of the Income Tax Act, 1961. The 2nd respondent requisitioned Rs.68,14,000/- seized by the 4th respondent/Election Officer under the Standard Operating Procedure (SOP) dated 29.05.2015. The petitioners sought the release of this amount. The court noted that the requisition under Section 132A must be based on "reason to believe" that the assets were not disclosed for tax purposes. The court found that the SOP does not constitute "law" for the purpose of Section 132A(1)(c) and thus the requisition of assets was without jurisdiction.

Issue 2: Legality of the Seizure by the 4th Respondent
The petitioners challenged the legality of the seizure by the 4th respondent, arguing that it was contrary to the SOP and any subsequent requisition by the Income Tax authorities was illegal. The court referenced the Patna High Court judgment in Indian Traders vs. State of Bihar, which held that SOPs do not empower authorities to transfer seized assets to the Income Tax Department under Section 132A. The court concluded that the seizure and subsequent requisition were beyond the authority granted under Section 132A.

Issue 3: Impact of Subsequent Assessment Orders
The court took judicial notice of subsequent events, specifically the assessment order dated 29.04.2021, which treated the seized money as unexplained income in the hands of the 2nd petitioner. The court noted that any order directing the return of the money to the 1st petitioner trust would indirectly decide the title over the assets, which is currently under appeal. The court emphasized that determining the title over the assets is a factual question beyond the jurisdiction under Article 226 of the Constitution of India.

Conclusion:
The writ petition was dismissed, with the court stating that the petitioners could pursue statutory remedies against the impugned proceedings dated 01.02.2021. The time spent in the writ petition would be excluded from the limitation period for filing an appeal. The court did not issue any costs and closed the connected miscellaneous petitions.