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TMI Blog2023 (9) TMI 1557X X X X Extracts X X X X X X X X Extracts X X X X ..... is registered under the Goods and Services Tax Act. The 2nd petitioner, the son of the 1st petitioner, oversees the business. On 6.10.2022, the 3rd petitioner, an employee, was entrusted with Rs. 40 lakhs for jewellery procurement and an additional sum of Rs. 25,000/- for related expenses. The 3rd petitioner is stated to have travelled to Thrissur, Kerala, for the purchases. During his bus journey, an inspection by the Excise Circle Inspector, Mananthavady, revealed that the 3rd petitioner carried approximately Rs. 40 lakhs in cash. Due to the 3rd petitioner's inability to provide a satisfactory explanation for the large amount, the cash was seized. It was subsequently produced before the Jurisdictional Magistrate along with a report numbered as C.M.P.No. 1866/2022. 3. The petitioners approached the learned Magistrate and filed Crl.M.P.No. 2061/2022 seeking interim release of the cash. 4. While the matter was pending consideration, the Income Tax Department filed a report indicating that the proceedings had been initiated under Section 131(1) of the Income Tax Act, 1961. Later, a report was filed before the learned Magistrate stating that the money should be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the date of seizure. It is only after the said date when the return of income is filed or is directed to be filed under Section 148 of the Act the question as to whether any tax is payable or due from the petitioners would arise. If the Department felt that an assessee had failed to submit a return of income, the Department is bound to issue a notice under Section 148 of the Act. On receipt of the said notice, the assessee has to be granted not less than 30 days to respond, and only thereafter can an assessment order be passed. It is further submitted that Section 132A of the Income Tax Act can have no application in the instant case. Placing reliance on the law laid down in Abdul Khader v. Sub Inspector of Police and Ors. [MANU/KE/0508/1998] , it was argued that the said provision would not empower the Commissioner to require a court to deliver assets that are in the court's custody. It is further submitted that the embargo under the IT Act is only against a person receiving an amount of Rs. 2 lakhs or more in respect of "transactions" other than by way of account payee cheque or draft, etc. In the instant case, there is no receipt of cash involved in respect of any t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uvin R. Menon, the learned Central Government Counsel, articulates that, pursuant to Section 132A of the Income Tax Act, a requisition for surrendering seized amounts is initiated when there exists reason to believe that any asset is representational, either in whole or in part, of income or property that has not been or would not be disclosed in adherence to the provisions of the Act. The learned counsel points out that under Section 132A, the Income Tax Department holds entitlement to the custody of the apprehended amount for subsequent appropriation relative to taxes and penalties accruable as per provisions in the Income Tax Act. It is stated that in instances involving unexplained cash or assets, the stipulations of Section 69A in conjunction with Section 115BBE are applicable. As provided in the above provisions, an individual found in possession of presumed income, manifesting as unexplained money, incurs a tax liability of 60%, with an additional surcharge of 25% applied to the tax, culminating in a comprehensive tax imposition amounting to 83.25% of the confiscated cash. The revenue is conferred with the authority to assess income over the preceding four years from individ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp;50 Lakhs, subject to the conditions stipulated in Section 147/148. The authority to conduct an assessment under Section 153A arises solely when a person has been scrutinized under Section 132 or documents or assets have been requisitioned under Section 132A. In other instances, the assessment must be concluded under Section 143. Under Sections 132 and 132A, the Department has the authority to search any individual or location and to seize any undisclosed income or valuable items found during such search or requisition assets taken into custody by any "officer or authority" under any prevailing law if it represents undisclosed income. However, this Court has held in Abdul Khader (supra) that Section 132A does not authorize the Department to requisition the "Court" to hand over the money that has been produced before the court as in the instant case. The aforesaid provision would apply only to an officer or authority. Under Section 226(4), the Department may petition the Court holding money belonging to the assessee to settle the due tax. Still, this power can be exercised only after the ascertainment of tax due after a completed assessment under the Act. Reference is made to K. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to comply with the terms will entail the necessary consequences also. His ownership or right to possession may not operate against his obligation to the Court. The entrustment or custody will not invest him with any preferential right to ownership or even possession. In the eye of law his possession or custody is only that of Court. 8. The arrangement once made is not even final till the conclusion of the inquiry or trial. Court is having the right to terminate the entrustment, get back the property from him and entrust it to somebody else whom the Court deems fit in appropriate cases even before the conclusion of the inquiry or trial. So much so, the person entrusted with the property may also be entitled to seek termination of the entrustment and surrender the property even before the conclusion of trial. Cases may arise where the person to whom interim custody was ordered may not care to undertake the obligation. In such cases the Court may have to make other arrangements for custody pending trial. After giving custody the Court may for reasons think that his custody may not be proper. In such cases the Court can terminate the arrangement and make other arrangements. Pending i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y person. Under Section 3, the 'previous year' is defined as the financial year immediately preceding the assessment year. Under Section 2(9) of the Act, 'Assessment year' is defined as the period of 12 months commencing the 1st day of April every year under Section 2(9). In short, for income earned by a person during the financial year 1st April 2022 to 31st March, 2023, the previous year is 2022-23 and the corresponding assessment year is 2023-24. 16. Under Section 139, every person whose total income during the previous year exceeds the maximum amount not chargeable to income tax shall file a return of income in the prescribed Form on or before the due date prescribed. The due date for filing of a return for most persons is 31st July of the assessment year. However, in respect of persons whose accounts are compulsorily required to be audited under the Act (tax audit), the due date is 30th September/31st October of the assessment year. If any cash is seized from a person on a date falling with the financial year 2022-23 and which the Income Tax Department contends is assessable to income tax, the due date for such person to file the return is 31st July, 2023 (unless his accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch search is conducted or requisition is made and of the relevant assessment year or years: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132-A, as the case may be, shall abate: Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made 3284[and for the relevant assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year. 20. Under Section 153A, in the case of a person, where a search is initiated under Section 132, or books of account, documents, or asset is requisitioned under Section 132, notwithstanding the other provisions of the Act, the Department can complete an assessment of income for six assessment years immediately preceding the assessment year in which search is conducted, or requisition is made. Jurisdiction to make an assessment under Section 153A will arise only when the person has been searched under Section 132 or documents or assets are requisitioned under Section 132A. In all other cases, the assessment has to be completed under Section 143. 21. It would therefore be apposite to refer to Section 132 of the Act, which provision reads as under: 132. Search and seizure.- (1) Where the Principal Director General or Director General or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner, or Joint Director or Joint Commissioner in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub-section (1) of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rch any person who has got out of, or is about to get into, or is in, the building, place, vessel, vehicle or aircraft, if the authorised officer has reason to suspect that such person has secreted about his person any such books of account, other documents, money, bullion, jewellery or other valuable article or thing; (ii-b) require any person who is found to be in possession or control of any books of account or other documents maintained in the form of electronic record as defined in clause (t) of sub-section (1) of Section 2 of the Information Technology Act, 2000, to afford the authorised officer the necessary facility to inspect such books of account or other documents;] (iii) seize any such books of account, other documents, money, bullion, jewellery or other valuable article or thing found as a result of such search: Provided that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business. (iv) place marks of identification on any books of account or other documents or make or cause to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossession, has reason to suspect that any books of account, other documents, money, bullion, jewellery or other valuable article or thing in respect of which an officer has been authorised by the Principal Director General or Director General] or Director or any other Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or Additional Director or Additional Commissioner or Joint Director or Joint Commissioner to take action under clauses (i) to (v) of sub-section (1) are or is kept in any building, place, vessel, vehicle or aircraft not mentioned in the authorisation under sub-section (1), such Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner] may, notwithstanding anything contained in Section 120, authorise the said officer to take action under any of the clauses aforesaid in respect of such building, place, vessel, vehicle or aircraft. Explanation.- For the removal of doubts, it is hereby declared that the reason to suspect, as recorded by the income-tax authority under this sub-section, shall not be disclosed to any person or any authority or the Appellate Tribunal. (2) The authorised officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound in the possession or control of any person in the course of a search, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document, stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested. (8) The books of account or other documents seized under sub-section (1) or sub-section (1-A) shall not be retained by the authorised officer for a period exceeding thirty days from the date of the order of assessment or reassessment or recomputation under sub-section (3) of section 143 or section 144 or section 147 or Section 153-A or clause (c) of Section 158-BC unless the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he course of the search or seizure or within a period of sixty days from the date on which the last of the authorisations for search was executed, the authorised officer, for reasons to be recorded in writing, is satisfied that for the purpose of protecting the interest of revenue, it is necessary so to do, he may with the previous approval of the Principal Director General or Director General or the Principal Director or Director, by order in writing, attach provisionally any property belonging to the assessee, and for the said purposes, the provisions of the Second Schedule shall, mutatis mutandis, apply. (9-C) Every provisional attachment made under sub-section (9B) shall cease to have effect after the expiry of a period of six months from the date of the order referred to in sub-section (9B). (9-D) The authorised officer may, during the course of the search or seizure or within a period of sixty days from the date on which the last of the authorisations for search was executed, make a reference to,- (i) a Valuation Officer referred to in Section 142-A; or (ii) any other person or entity or any valuer registered by or under any law for the time being in force, as may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether under the Indian Income Tax Act, 1922 (11 of 1922), or this Act, which may be pending on the date on which a search is authorised under this section or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year. 22. Under Section 132, the Income Tax Department has the power to search any person or place when they have reasons to believe, inter alia, that any person has in his possession money or other valuable article or thing which represents income and which has not been disclosed and seize any such money or valuable thing found during such search. This is not relevant in these cases as the money was not found during the search by the Department. 23. Section 132-A of the Act reads as follows: 132-A. Powers to requisition books of account, etc.-(1) Where the Principal Director General or Director General or Director or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner in consequence of information in his possession, has reason to believe that- (a) any person to whom a summons under sub-section (1) of Section 37 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sub-section, shall not be disclosed to any person or any authority or the Appellate Tribunal.] (2) On a requisition being made under sub-section (1), the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, of that sub-section shall deliver the books of account, other documents or assets to the requisitioning officer either forthwith or when such officer or authority is of the opinion that it is no longer necessary to retain the same in his or its custody. (3) Where any books of account, other documents or assets have been delivered to the requisitioning officer, the provisions of sub-sections (4-A) to (14) (both inclusive) of Section 132 and Section 132-B shall, so far as may be, apply as if such books of account, other documents or assets had been seized under sub-section (1) of Section 132 by the requisitioning officer from the custody of the person referred to in clause (a) or clause (b) or clause (c), as the case may be, of sub-section (1) of this section and as if for the words "the authorised officer" occurring in any of the aforesaid sub-sections (4-A) to (14), the words "the requisitioning officer" were substituted. 24. Un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e court. Of course, it is open to the Income-tax Officer to apply to the Magistrate for the release of the assets in their favour. In the order referred to by the Income-tax Department in Crl. R.P No. 571 of 1996 (Ibrahim Othayoth v. Sub-Inspector of Police, [1998] 232 ITR 320 (Ker)), and connected cases, it is a case where the Department themselves applied for release of the articles seized. The question under section 132A was not raised or considered in that case. 26. It was held that Section 132-A does not empower the Department to requisition a "Court" to deliver any seized assets, and the provision is referable only to an officer or authority. In view of the above, as the seized money has been deposited in Court by the Excise officer, then the requisitioning power under Section 132-A cannot be availed by the Department. 27. Now, it is necessary to understand the implications of Section 132B of the IT Act. Section 132-B reads as under: 132-B. Application of seized or requisitioned assets.-(1) The assets seized under Section 132 or requisitioned under Section 132-A may be dealt with in the following manner, namely:- (i) the amount of any existing liability under this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der authorisation from the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner] under sub-section (5) of Section 226 and the Assessing Officer or, as the case may be, the Tax Recovery Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule. (2) Nothing contained in sub-section (1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act. (3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized. (4)(a) The Central Government shall pay simple interest at the rate of one-half per cent for every month or part of a month] on the amount by which the aggregate amount of money seized under Section 132 or requisitioned under Section 132-A, as reduced by the amount of money, if any, released under the first proviso to clause (i) of sub-section (1), and of the proceeds, if any, of the assets sold towards the discharge of the existing l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession or such activity for charitable purpose- (i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place, (ii) to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein, and (iii) to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act. Explanation.-For the purposes of this sub-section, a place where a business or profession or activity for charitable purpose is carried on shall also include any other place, whether any business or profession or activity for charitable purpose is carried on therein or not, in which the person carrying on the business or profession or activity for charitable purpose states that any of his books of account or other documents or any part of his cash or stock or other valuable article or thing relating to his business or profession or activity for charitable purpose are or is kept. (2) An i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In the case on hand, the seizure was effected on 8.10.2022. The income earned by a person during the financial year 1st April 2022 to 31st March 2023 is to be assessed in the year 2023-24. The 1st petitioner, being an assessee is bound to file a return of income not before 31st July, 2023. If the 1st petitioner does not disclose the income that has been detected, the Department would have time to complete the assessment till 31.12.2024. The Department would have the power to assess escaped income under Section 147/148 before the expiry of three years from the end of the relevant assessment year. The jurisdiction to make an assessment under Section 153A will arise only when the person has been searched under Section 132 or documents or assets are requisitioned under Section 132A. In all other cases, the assessment has to be completed under Section 143. However, in view of the law laid down in Abdul Khader (supra), Section 132A would not empower the Department to requisition the learned Magistrate. Section 132B would also have no application in view of the above. As held by the Apex Court in Choyi (supra) the revenue can only apply to the Court in whose custody there is money belon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court dated May 25, 1972 directed the return of the sum of Rs 1,61,411 and the documents to the respondent Romesh Chander. The order of the learned Single Judge was affirmed by the High Court on November 22, 1972. No appeal was preferred against the order of the High Court. The order of the High Court was that the amount of Rs 1,61,411 and the books and other documents were to be returned to the Station House Officer. After the criminal case had been filed the authorities have no right to keep the money, under any provision of law. There is no question of adjustment of the sum of Rs 1,61,411 by reason of the fact that there is no valid order of assessment and there is no demand for income tax. 19. The Revenue cannot indirectly keep the money on the plea that there will be a demand, and, therefore, the money should be allowed to be kept with the Revenue. There must be authority of law under which the money can be kept. There is no legal order to keep the money. The appeal, therefore, fails and is dismissed with costs. (emphasis supplied) 35. It was held that if there is no valid order of assessment and no demand for income tax, the Revenue cannot indirectly keep the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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