2020 (2) TMI 1098 - HC - Income Tax

Release of goods seized - whose custody the assets were seized - wife of the first respondent had retracted her earlier statement saying that all the seized articles belong to her and not to her husband and hence on an appeal filed by the first respondent, he was acquitted by this Court, which was also confirmed by the Hon'ble Supreme Court - HELD THAT - Even though, the Hon'ble Supreme Court confirmed the acquittal of the first respondent, it has observed that the wife of the first respondent has admitted that she has amassed the wealth by selling cycle rims and leather products without any bill and out of money amassed by her, she had persuaded her husband to deposit the same in various banks. She has also admitted that the recovered seized assets belong to her. Therefore, whether she has been prosecuted for the above non-disclosure or not is not brought before this Court. I n fine, however, the learned Single Judge failed to consider the above and directed the appellants to pass refund order in favour of the second respondent, which warrants interference of this Bench. It is not proved that all the seized properties were assessed in the name of the second respondent. Therefore, the order passed by the Single Judge is set aside to that extent alone. Hence the second appellant is directed to verify as to whether the seized assets have been shown in the returns filed by the wife of the first respondent at any point of time. If it is so, the second appellant is directed to pass orders in accordance with law, after verifying the returns filed by the wife of the first respondent, if not, the appellants are directed to take action against the wife of the first respondent in accordance with law for not showing assets in her returns and not paying the income tax. Further the Department of Commercial Tax and the Department of Wealth Tax, are directed to take action against the wife of the first respondent for selling the products without any bill and amassing wealth.

Issues Involved:
1. Legality of the refund order passed in favor of the first respondent.
2. Ownership and rightful claimant of the seized assets.
3. Compliance with Section 132-B (3) of the Income Tax Act.
4. Interpretation of judgments by the High Court and Supreme Court regarding the ownership of seized assets.
5. Procedural correctness of the Department's actions following judicial decisions.

Detailed Analysis:

1. Legality of the refund order passed in favor of the first respondent:
The appellant Department conducted a raid on the residential premises of the first respondent on 13.09.1993 and seized assets, including cash, US Dollars, Gold Biscuits, and Fixed Deposits. The Department filed a criminal case against the first respondent, which initially resulted in a conviction but was later overturned by the High Court and confirmed by the Supreme Court. Despite the acquittal, the Department issued a refund order in favor of the first respondent, which was contested by the first respondent, leading to the filing of a writ petition. The learned Single Judge directed the refund to be made in favor of the second respondent, which prompted the Department to file the present writ appeal.

2. Ownership and rightful claimant of the seized assets:
The wife of the first respondent retracted her initial statement and claimed ownership of the seized assets, stating they were acquired through her business activities. The Supreme Court accepted her claim, noting that the prosecution failed to prove that the assets belonged to the first respondent. However, the Department argued that the assets should be refunded to the person from whose custody they were seized, as per Section 132-B (3) of the Income Tax Act, which does not specify the original owner.

3. Compliance with Section 132-B (3) of the Income Tax Act:
The Department contended that the refund was correctly made to the first respondent, in compliance with Section 132-B (3) of the Income Tax Act, which mandates the release of assets to the person from whose custody they were seized. The learned Single Judge, however, interpreted this provision in light of the judicial decisions, directing the refund to the second respondent, which the Department argued was against the law.

4. Interpretation of judgments by the High Court and Supreme Court regarding the ownership of seized assets:
The High Court and Supreme Court judgments established that the seized assets belonged to the wife of the first respondent. The learned Single Judge interpreted these judgments to mean that the refund should be made to the second respondent, a company where the wife was a director. The Department argued that the judgments did not specify the recipient of the refund and that the assets were not proven to belong to the second respondent.

5. Procedural correctness of the Department's actions following judicial decisions:
The Department maintained that their actions were procedurally correct, as they refunded the assets to the first respondent, from whose custody they were seized. The learned Single Judge's direction to refund the assets to the second respondent was challenged for lack of sufficient proof and materials. The appellate bench noted that the wife of the first respondent had admitted to amassing wealth through undisclosed business activities and depositing it in various banks. The bench directed the Department to verify if the seized assets were declared in the wife's tax returns and to take appropriate action if they were not.

Conclusion:
The appellate bench set aside the Single Judge's order to refund the assets to the second respondent, directing the Department to verify the wife's tax returns and take necessary actions. The writ appeal was partly allowed, with directions for further verification and potential legal action against the wife of the first respondent for non-disclosure and tax evasion.

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