2009 (8) TMI 257 - HC - Income Tax

Requisition of cash under section 132A Employee arrested for stealing cash from employer Police seizing currency notes and informing department - The scope of inquiry under section 451 of the Code of Criminal Procedure as also under section 132A of the Income-tax Act is quite different. - Under section 451 of the Code, the criminal court has limited power to make inquiry. However, the court has no power to go in detail and, hence, specific provision is made in the Act under section 132A once the proceedings is initiated by the Department. Under section 132A of the Act, neither the court nor the police authority has the power to release the currency notes - Hence, held that criminal court has not power to release currency notes to employer -In view of section 132 of the Act, it shall be the duty of the police authority to comply with requisition issued by the authorised officer of the Department. The police authority has no power to retain the muddamal or hand it over to respondent No. 2. It was incumbent upon police officer to have handed over muddamal to the Department for completion of the proceedings initiated by it Order passed by trial court had to be quashed and set aside

Summary

Issues Involved:
1. Custody of seized muddamal currency notes.
2. Applicability of Section 132A of the Income-tax Act.
3. Powers of the Magistrate under Section 451 of the Code of Criminal Procedure.
4. Compliance with requisition by the Income-tax Department.

Detailed Analysis:

1. Custody of Seized Muddamal Currency Notes:
The primary issue in this case was the custody of muddamal currency notes amounting to Rs. 42.50 lakhs, which were seized from an accused employee. The complainant (respondent No. 2) filed an application under Section 451 of the Code of Criminal Procedure to obtain these notes. The Deputy Director of Income-tax (Investigation) also claimed the right over the currency notes to complete the proceedings initiated against respondent No. 2. The Metropolitan Magistrate partially allowed the complainant's application, handing over Rs. 30 lakhs to him while retaining Rs. 12.20 lakhs with the police. This order was challenged by the Deputy Director of Income-tax through a revision application.

2. Applicability of Section 132A of the Income-tax Act:
The Deputy Director of Income-tax argued that once proceedings under Section 131 read with Section 132 of the Income-tax Act were initiated, neither the court nor any other agency had the power to release the muddamal currency notes. The Department contended that the Magistrate's order contravened Section 132A of the Act, which mandates that the police must comply with the requisition issued by the authorized officer and hand over the seized assets.

3. Powers of the Magistrate under Section 451 of the Code of Criminal Procedure:
The court examined whether the Magistrate had the authority to release the muddamal currency notes under Section 451 of the Code of Criminal Procedure. It was concluded that the criminal court has limited power to make inquiries under Section 451 and cannot interfere with the proceedings initiated by the Income-tax Department under Section 132A of the Act. The court emphasized that the scope of inquiry under Section 451 of the Code and Section 132A of the Act is different, and the Magistrate should not have ordered the release of the currency notes when the Department had already initiated proceedings.

4. Compliance with Requisition by the Income-tax Department:
The court noted that the police failed to comply with the requisition issued by the Income-tax Department, which was a grave illegality. Despite being informed about the pending revision application, the police handed over the muddamal currency notes to the complainant based on the Magistrate's order. The court held that it was the duty of the police to hand over the muddamal to the Department for the completion of its proceedings.

Conclusion:
The High Court quashed and set aside the order dated April 6, 2009, passed by the learned Metropolitan Magistrate. The court directed that the muddamal currency notes, given to the complainant on a personal bond, be handed over to the Income-tax Department through the Police Inspector within fifteen days. The court's observations were made solely for deciding this revision and would not prejudice the parties in the trial or pending proceedings before the Department. The revision application was allowed, and the related miscellaneous application was disposed of accordingly.