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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 ..... 12.2024 to complete the assessment. The Department can assess escaped income u/s 147/148 before the expiry of three years from the end of the relevant assessment year if the escaped income is less than Rs. 50 Lakhs and ten years from the end of the relevant assessment year if the escaped income is more than Rs. 50 Lakhs subject to the conditions mentioned in Section 147/148. Whether Section 153A of the IT Act, relied on by the learned Magistrate, would have any application in the instant case ? - 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. Under Section 132, the Income Tax Department has t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meet the tax due by that assessee, and such power can be exercised only when the tax has been determined to be due by an assessment completed under the Act. As the assessment has not been completed, such a course cannot now be adopted. The advantage gained by the revenue owing to the detection of cash from the possession of the 3rd respondent is that the 1st petitioner has come forward claiming the amount. While making an assessment, the revenue would be in a position to insist that the amounts seized also be included in the returns to be submitted by the 1st petitioner before the due date. In the case on hand, the 1st petitioner is yet to file his assessment. He would have to disclose the sum of Rs. 40 Lakhs, which was seized from his employee. The Revenue can thereafter complete the assessment in accordance with the provisions of the Act. As there is no valid order of assessment and no culminated demand for Income Tax, the revenue cannot aspire to keep the money on the premise that there will be demand later in point of time. At present, there is no authority of law under which the money can be demanded and be kept by the revenue. We find that there is considerable force in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ersees 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 released to the IT Department for appropriation towards the taxes and interest payable and the penalty leviable, which would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 transaction. According to the learned counsel, as no certificate has been drawn up under Section 222 of the IT Act, the only option left t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urrendering 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 individuals from whom unexplained cash has been seized. The aforementioned provisions are relied upon, and it is urged that the resultant tax oblig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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. Choyi (supra) and it is urged that if an assessment is concluded while assets are in the Court s custody, the suitable recourse for the Revenue is to file an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 inquiry or trial more than one such arrangement could be made. The order is only of an interlocutory nature. 9. Ever/in cases of rival claims for interim custody, the preference made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 are required to be tax audited, in which case the last date for filing of the return is 30th September/31st October. 17. The Income Tax Act contemplates two types of assessments, viz., i assessment pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 year or years: Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless (a) the Assessing Officer has in his possession books of account or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment 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 37 of the Indian Income Tax Act, 1922 (11 of 1922), or under sub-section (1) of Section 131 of this Act, or a notice under sub-section (4) of Section 22 of the Indian Income Tax Act, 1922 (11 of 1922), or under sub-section (1) of Section 142 of this Act was issued to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 be made extracts or copies therefrom; (v) make a note or an inventory of any such money, bullion, jewellery or other valuable article or thing: Provided that where any building, place, vessel, vehicle or aircraft referred to in clause (i) is within the area of jurisdiction of any Principal Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 may requisition the services of, (i) any police officer or of any officer of the Central Government, or of both; or (ii) any person or entity as may be approved by the Principal Chief Commissioner or the Chief Commissioner or the Principal Director General or the Director General, in accordance with the procedu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 reasons for retaining the same are recorded by him in writing and the approval of the Principal Chief Commissioner or Chief Commissioner, Principal Commissioner or Commissioner, Principal Director General or Director General] or Director for such retention is obtained: Provided that the Principal Chief Commissioner or Chief Commissioner, Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 approved by the Principal Chief Commissioner or the Chief Commissioner or the Principal Director General or the Director General, in accordance with the procedure, as may be prescribed, in this regard, who shall estimate the fair market value of the property in the manner as may be prescribed, and submit a report of the estimate to the authorised office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Indian Income Tax Act, 1922 (11 of 1922), or under sub-section (1) of Section 131 of this Act, or a notice under sub-section (4) of Section 22 of the Indian Income Tax Act, 1922 (11 of 1922), or under sub-section (1) of Section 142 of this Act was issued to produce, or cause to be produced, any books of account or other documents has omitted or failed to produce, or cause to be pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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. Under Section 132-A, if the Department has reason to believe, inter alia, that any asset which represents income and which has not been disclosed under the Act by any person has been taken into custody by any officer or authority under any other law for the time being in force, then the Department can requisition such officer or authority to deliver such asset to the Department and such officer or au ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Act, the Wealth Tax Act, 1957, the Expenditure Tax Act, 1987, the Gift Tax Act, 1958 and the Interest Tax Act, 1974, and the amount of the liability determined on completion of the assessment or reassessment or recomputation and the assessment of the year relevant to the previous year in which search is initiated or requisition is made, or the amount of liability determined on completion of the assessment under Chapter XIV-B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 liability referred to in clause (i) of sub-section (1), exceeds the aggregate of the amount required to meet the liabilities referred to in clause (i) of sub-section (1) of this section. (b) Such interest shall run from the date immediately following the expiry of the period of one hundred and twenty days from the date on which the last of the authorisations for search under Section 132 or requisition under Section 132-A was executed to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch 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 income tax authority may enter any place of business or profession referred to in sub-section (1) only during the hours at which such place is open for the conduct of business or profession and, in the case of any other place, only after sunrise and before sunset. xxxxxx xxxxxxxxxx xxxxxxxx xxxxxxx (4) An income tax authority acting under this section shall, on no account, remove or cause to be removed from the place wherein he has entered, any cash, stock or other valuable articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ped 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 belonging to the assessee to meet the tax due by that assessee, and such power can be exercised only when the tax has been determined to be due by an assessment completed under the Act. As the assessment has not been completed, such a course cannot now be adopted. The advantage gained by the revenue owing to the detection of cash from the possession of the 3rd respondent is that the 1st petitioner has come forward claiming the amount. While making an assessment, the revenue would be in a posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p 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 money on the plea that there will be a demand, and, therefore, the money should be allowed to be kept with the Revenue. 36. In the case on hand, the 1st petitioner is yet to file his assessment. He would have to disclose the sum of Rs. 40 Lakhs, which was seized from his employee. The Revenue can thereafter complete the assessment in accordance with the provisions of the Act. As there is no valid order of assessment and no culminated demand for Income Tax, the revenue cannot aspire to keep the money on the p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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