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TMI Blog2021 (1) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... has violated any provision of Law. This is because, as held in Vindhya Metal Corporation and others [ 1997 (3) TMI 3 - SUPREME COURT ] mere possession of cash of large quantity, without anything more, could hardly be said to constitute information which could be treated as sufficient by a reasonable person, leading to an inference that it was income which would not have been disclosed by the person in possession for purpose of the Income Tax Act. In the absence of any rival claim for the cash amount of ₹ 5.00 crores by any third party, the respondents cannot imagine a third party claimant and on that pretext retain the cash indefinitely from M/s.Mectec thereby violating Article 300-A of the Constitution of India. A return of income would be filed by M/s.Mectec, the petitioner for the annual year 2019-20 only after 31st March, 2020. The explanation of the cash transaction can be expected to be found only after such return of income is filed by the petitioner. There is no basis for the respondents to presume that petitioner would not disclose the cash transaction of ₹ 5.00 crore in its Income Tax return which was not filed by the alleged date of seizure of the cash by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... losed to the Income Tax Department. According to it, there are no proceedings of reopening of assessment pending before the Income Tax Department. 5. The petitioner states that it has business transactions in the State of Telangana also and that it entrusted a sum of ₹ 5.00 Crores to its employee Vipul Kumar Patel for its business purposes. 6. The said individual had come to Hyderabad with friends, and on 23.08.2019 their car a Maruti Ciaz car bearing No.TS09FA 4948 was intercepted by the Task Force Police of the State of Telangana. 7. According to the petitioner, the said employee, his friends, the cash of ₹ 5.00 Crore together with the above vehicle and another car and two wheeler were detained illegally from 23.08.2019 onwards by the Telangana State Police. 8. The GPA holder of the petitioner filed on 27.8.2019 a Habeas Corpus Petition for release of the said persons, the cash and vehicles in the High Court of Telangana. 9. The Task Force Police filed a counter affidavit in the said Writ Petition claiming that the discovery of cash with the said persons was made on 26.08.2019 and that the police had handed over the detenues along with cash to the Principal Director o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AM on the next day i.e., 28.08.2019 and that there was an authorization issued for the said search prior thereto, cannot be accepted; that the respondents cannot deny receipt of cash from the Task Force Police on 27.08.2019 and claim that they conducted a search of some undisclosed place and found the cash with Vipul Kumar Patel pursuant to such authorization. The absence of mention of the place of search, according to counsel for the petitioner, is indicative of the false narrative induced by the respondents to mislead the Court and the said panchanama has to be discarded as unbelievable. 13. According to the petitioner, the very seizure of cash from Vipul Kumar Patel without valid authorization under Section 132 is illegal; that the petitioner's cash book, balance sheet show sufficient quantity of cash in hand from which the sum of ₹ 5.00 Crores could have been made available by the petitioner to its employee; and the money therefore has to be returned to the petitioner with interest and heavy costs must be imposed on the respondents for the illegality committed by them. 14. In W.P.No.29297 of 2019 filed by him in his individual capacity, Vipul Kumar Patel also stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as information relatable to a conclusion that it represented income which would not have been disclosed by Vipul Kumar Agarwal for the purposes of the Act and relied on decision in Commissioner of Income Tax, Allahabad and others vs. Vindhya Metal Corporation and others1. 17. Counsel for petitioners also relied on D.G.I.T. vs. Spacewood Furnitures (P) Ltd.2 and contended that warrant of authorization for search and seizure can be issued if the authority granting it has information in its possession before it forms an opinion / reasonable belief that person is in possession of money which represents wholly or partly income which had (1997) 5 S.C.C. 321 (2015) 12 S.C.C. 179 not been or would not be disclosed; and there must be application of mind to the material and the formation of opinion must be honest and bona fide. According to counsel for petitioners, the very fact that the money was handed over by the Task Force Police to the Income Tax Department on 27.08.2019 and the authorization was issued for search on 28.08.2019 suggests that the authority giving authorization could not have given it for a search for seizure of the cash from Vipul Kumar Patel after the cash was receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Patel under Section 131(1A) and 132(4) of the Act on 27.08.2019 and 28.08.2019, he stated that he studied upto XII standard and that he can read, write, understand and speak in Hindi and that he can also read and understand English language and that the said statements were given without any threat, coercion or undue influence. Consideration by the Court 25. Heard Sri V.Srinivas, learned counsel for petitioner in W.P.No.23023 of 2019, Sri V.V.Raghavan, learned counsel for petitioner in W.P.No.29297 of 2019 and Sri Suryakiran Reddy, learned Additional Solicitor General of India for respondents in both Writ Petitions. 26. In these Writ Petitions, we are primarily concerned with the question whether the plea of the petitioners for return of the cash of ₹ 5.00 crores to them is legally valid or not. 27. But before that issue is dealt with, we shall first consider as to how the cash in question came into the custody of the Income Tax Department. 28. The above amount of cash was seized from the custody of Vipul Kumar Patel is an admitted fact. The date of seizure according to the petitioners is 23.08.2019, but the case of the respondent Nos.1 and 2 is that the cash was seized on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Nalgonda District and the other from Dabilpura (from the Old City of Hyderabad). It is stated that a warrant of authorization dt.28.08.2019 issued to the 2nd respondent under Section 132 by the Principal Director of Income Tax (INV), Hyderabad, that the said warrant was to search a place (the place of search is left blank) , that Vipul Kumar Patel was present at that place at 9 a.m. on 28.08.2019 and he read the same and ₹ 5.00 crores of cash was seized. 32. How there could be a warrant issued under Section 132 by the Principal Director of Income Tax (INV), Hyderabad to the 2nd respondent without mentioning the place to be searched, is not explained by the respondents 1 and 2. How could there be a search at a place which is not disclosed and left blank by the 2nd respondent and her team allegedly on 28.08.2019 at 9 a.m.? Also, how coincidentally at the time of the alleged search the respondent No.2 and her team could find two panch witnesses from Nalgonda District and the Old City of Hyderabad - both too distant from the Basheerbagh office of the Income Tax department, at this unknown place of search, is equally a mystery. 33. This document, in our opinion, is clearly a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be in possession of the authorised official before the opinion is formed. 8.3. There must be application of mind to the material and the formation of opinion must be honest and bona fide. Consideration of any extraneous or irrelevant material will vitiate the belief/satisfaction. (emphasis supplied). 38. In our opinion, there were no circumstances existing for the Principal Director of Income Tax (INV), Hyderabad to issue any warrant for search or seizure under Section 132 of the Act on 28.8.2019 when the cash had been handed over to the Income Tax Department by the Task Force Police on 27.8.2019 and therefore the seizure of the cash from Vipul Kumar Patel by the respondents and its retention till date by them is per se illegal. 39. In our opinion, intimation by the Police to the Income Tax Department on 27.08.2019 would not confer jurisdiction on the Income Tax Department to detain and withhold cash, that too by issuance of an invalid search warrant under Section 132 of the Act; and there is no basis for the Income Tax Department to invoke the provisions of Section 132, 132A and 132B of the Act since there is no 'reason to believe' that the assessee has violated any pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es by any third party, the respondents cannot imagine a third party claimant and on that pretext retain the cash indefinitely from M/s.Mectec thereby violating Article 300-A of the Constitution of India. 47. We may also point out that a return of income would be filed by M/s.Mectec, the petitioner in W.P.No.23023 of 2019 for the annual year 2019-20 only after 31st March, 2020. The explanation of the cash transaction can be expected to be found only after such return of income is filed by the petitioner. There is no basis for the respondents to presume that petitioner would not disclose the cash transaction of ₹ 5.00 crore in its Income Tax return which was not filed by the alleged date of seizure of the cash by the Police, i.e., 26.08.2019. 48. As rightly contended by the petitioner, an income tax inspection and/ or investigation would be permissible only in respect of a past event but not for possible future contingencies; and if the petitioner was going to disclose and explain the cash of ₹ 5.00 crore in its income tax returns for 2019-20, there was no basis for proceeding with any coercive action against the petitioner such as retention of cash. 49. Retention of cash ..... X X X X Extracts X X X X X X X X Extracts X X X X
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