1972 (4) TMI 32 - HC - Income Tax

This is a reference made by the learned Sessions Judge, Indore, for setting aside an order passed by the Magistratewith regard to the production of certain cash amount which was seized by the police under sections 54(l) and 550 of the Code of Criminal Procedure - reference made by the learned sessions judge is accepted and the order dated September 2, 1970, passed by the learned Magistrate directing the Income-tax Officers to deposit the disputed amount in his court is hereby set aside. This order passed by this court will, however, not affect the rights of the non-applicants, Mohammad Hanif and others, to claim the amount from the income-tax department under the provisions of the Income-tax Act. Their appeal is still pending before the higher authorities and they shall be free to prosecute not only this appeal but such other remedies also to which they may be entitled under the Income-tax Act

Summary

Issues:
1. Jurisdiction of the Magistrate for disposal of seized currency notes.
2. Authority of Income-tax Officers to seize money without permission.
3. Compliance with provisions of Criminal Procedure Code and Income-tax Act.

Analysis:
The judgment involves a reference made by the Sessions Judge to set aside an order passed by the Magistrate regarding the production and disposal of a seized cash amount. The police had seized a substantial sum of currency notes from certain individuals, suspected of being connected to a cognizable offense. Subsequently, the Income-tax Officers, acting under the authority of a warrant of authorization, seized the money from the police custody. The Magistrate directed the Income-tax Officers to deposit the money in court, which was challenged through a revision application to the Sessions Judge. The Sessions Judge opined that while the Income-tax Officers erred in not obtaining orders from the Magistrate, their actions did not amount to illegality, leading to the reference to the High Court.

The central issue revolved around the jurisdiction of the Magistrate for the final disposal of the seized currency notes and the authority of the Income-tax Officers to seize the money without explicit permission. The Magistrate, under Section 523 of the Criminal Procedure Code, had the power to make orders concerning the disposal or delivery of seized property. In this case, the Magistrate directed the police to hold the money pending further orders, presuming that investigations would ensue. The Income-tax Officers, however, seized the money based on information from the police, citing provisions of the Income-tax Act. The Income-tax Act allowed officers to apply to the court for payment of money in custody for tax discharge, but the direct seizure from police custody was deemed irregular.

The judgment emphasized that while the Income-tax Officers' procedure was irregular, it did not amount to serious illegality warranting a refund of the entire amount. The court noted that if the police no longer required the money for any offense, re-depositing it in the Magistrate's court might lead to potential misuse by the individuals involved. The court concluded that substantial compliance with the Income-tax Act and absence of serious illegality justified setting aside the Magistrate's order for depositing the money in court. The High Court accepted the reference, overturning the Magistrate's order, but clarified that the decision did not impede the individuals' rights to claim the amount through pending appeals and remedies under the Income-tax Act.