2022 (8) TMI 963 - HC - Income Tax

Search u/s 132 - Entitlement refund of the seized cash which is otherwise declared unaccounted money and taxed in the hands of the searched person - case of the Revenue that the said entry was made by the firm after the seizure of the cash and the same is clearly borne out from the said book entry itself which narrates the factum of litigation of the seized cash in the Court of CJM - HELD THAT - It is pertinent to note that nothing has been placed on record by the writ-applicant to suggest that the proceedings undertaken by the department u/s 132 of the Act, were objected to by the writ-applicant at the relevant point of time. In fact, the inaction on the part of the writ-applicant firm as against the statement of the searched person Bhuraram Patel, AO has been made to form a reasonable belief of treating the seized cash in the hands of the searched person Bhuraram, for initiation of the proceedings under Section 153A of the Act as against Bhuraram only. It was only when the said fact was noticed in the proceedings before the Rajasthan High Court challenging the criminal proceedings arising out of Section 457 Cr.P.C. that the papers related to the writ-applicant were placed before the Revenue Department, which culminated into the reopening proceedings u/s 148 - Court further finds that the reopening proceedings in the case of the writ-applicant has been carried out in terms of Section 143(3) read with Section 147 of the Act rather than Section 153C of the Act. Again, there is no challenge to the order declaring the seized cash in the hands of Bhuraram Patel as unaccounted income of the searched person. Even, there is no challenge to the order of penalty and the seized cash being adjusted towards the same. We find that there is no irregularity or illegality in the order passed by the Assessing Officer, treating the seized cash as unaccounted income in the hands of the searched person Bhuraram Patel.. This Court does not find any fault with the department of having refused to release the seized amount at the relevant point of time or even the refund thereafter. At the same time, declaring the income in the case of the writ- applicant being not taxable, will not ipso facto result into refund of the seized cash, which has otherwise been realized from the searched person. It is well-settled legal position that prerogative writs under Article 226 of the Constitution can be issued only in grave cases where the subordinate tribunals or bodies or officers act wholly without jurisdiction, or in excess of jurisdiction, or in violation of principles of natural Justice, or refused to exercise jurisdiction vested in them, or there is error apparent on the face of record which has resulted in manifest injustice. As rightly observed that the legal formulations cannot be enforced divorced from the realities of the fact situation of the case. While administering law, it is to be tempered with equity, and if the equitable situation demands after setting right the legal formulations, not to take it to the logical end, the High Court would be failing in its duty if it does not notice the equitable consideration and mould the final order in exercise of its extraordinary jurisdiction. Any other approach would render the High Court a normal Court of Appeal, which it is not.

Issues Involved:
1. Legitimacy of the seized cash.
2. Appropriation of seized cash by the Income Tax Department.
3. Refund entitlement of the writ-applicant firm.
4. Compliance with legal procedures under the Income Tax Act.
5. Adherence to principles of natural justice.

Detailed Analysis:

Legitimacy of the Seized Cash:
The writ-applicant, a partnership firm engaged in courier services, claimed ownership of Rs. 24,50,000 seized from its employees by Ajmer Police. The firm asserted that the cash was intended for purchasing a property. Contrarily, Bhuraram, one of the employees, admitted to the Income Tax Department that the cash was his undisclosed income from the sale of silver, leading to its assessment as his income.

Appropriation of Seized Cash by the Income Tax Department:
The seized cash was deposited with the Income Tax Department, Jodhpur, and later transferred to Ahmedabad. Bhuraram's income was assessed, and a penalty was levied on him. The department adjusted the seized cash against Bhuraram's tax liabilities and refunded the balance to him. The firm’s claim for the cash was not entertained as the cash was seized from Bhuraram, not the firm.

Refund Entitlement of the Writ-Applicant Firm:
The firm sought a refund of the seized cash, arguing that the department should not have appropriated it towards Bhuraram's liabilities. The firm’s assessment for the same amount was initiated but later deleted by the CIT(A). However, the department maintained that the cash belonged to Bhuraram, as he had admitted it during the assessment proceedings.

Compliance with Legal Procedures under the Income Tax Act:
The court examined the procedures under Sections 132, 132A, and 132B of the Income Tax Act, which govern the seizure and application of assets. The department followed these procedures, treating the cash as Bhuraram’s unaccounted income based on his statements and subsequent assessment.

Adherence to Principles of Natural Justice:
The firm argued that the department’s actions violated natural justice principles as it was not notified before the cash was appropriated towards Bhuraram's liabilities. The court noted that the firm did not challenge the proceedings against Bhuraram at the relevant time and only sought a refund much later. The court found no substantial injustice or procedural irregularity warranting interference under Article 226.

Conclusion:
The court concluded that the writ-applicant firm was not entitled to the refund of the seized cash. The department’s actions were in accordance with the legal provisions and based on Bhuraram’s admissions. The court emphasized that writ jurisdiction under Article 226 is discretionary and should not be exercised unless there is substantial injustice or violation of jurisdictional principles. The writ-application was thus rejected.

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