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TMI Blog2024 (9) TMI 1568X X X X Extracts X X X X X X X X Extracts X X X X ..... r partly income or property which has not been or would not be disclosed for the purposes of the Act. Even though this Court held in Abdul Khader [ 1998 (11) TMI 76 - KERALA HIGH COURT] that Section 132A does not empower the competent authority to make a requisition to a court for delivery of assets, it was made clear in the said case that the competent authority under the Act is entitled to seek interim custody of the seized assets. In the said view of the matter, according to us, the view expressed in Union of India that the competent authority under the Act is entitled to seek interim custody of the currency notes in the facts of the said case, is in order. A close reading of the judgment in J.R. Malhotra [ 1975 (12) TMI 170 - SUPREME COURT] would indicate that the case dealt with therein relates to a seizure effected prior to the introduction of Sections 132A and 132B of the Act. What the learned Judge omitted to take note of, is the power conferred on the competent authorities to hold any assets if it has reason to believe that the same represents either wholly or partly income or property which has not been, or would not be disclosed for the purposes of the Act. Of course, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-tax Act, 1961 (the Act) to seek interim custody of currency notes seized and produced before the Jurisdictional Magistrate or seized and reported to the Jurisdictional Magistrate in terms of Section 102 of the Code of Criminal Procedure (the Code). 2. In Union of India v. State of Kerala, 2022 SCC OnLine Ker 11017 , the learned Single Judge of this court opined that in the light of the provisions contained in the Act, especially Sections 132A and 132B, the authorities under the Act are entitled to seek interim custody of the currency notes. However, in R. Ravirajan v. State of Kerala, (2023) SCC OnLine Kerala 8444 , another learned Single Judge struck a different note on the issue and held that in the absence of a valid order of assessment and demand for Income-tax, the party from whom the amount is seized, is entitled to seek interim custody. In R. Ravirajan, the learned Single Judge distinguished the decision in Union of India as one rendered on the facts of that case, without noting the principles of law laid down by the Apex Court in J.R. Malhotra v. Addl. Sessions Judge, (1976) 1 SCC 430. 3. When the above matters came up before another learned Single Judge, having noticed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot settle the right to ownership [ See V. Parakashan v. K.P. Pankajakshan, 1985 SCC OnLine Ker 333]. The conflict in the decisions referred to above needs to be resolved keeping in mind the scope of the proceedings under Sections 451 and 457 of the Code. 7. As noted, it is in the light of Sections 132A and 132B of the Act that the learned Single Judge in Union of India took the view that the authorities under the Act are entitled to seek interim custody of the currency notes, whereas in R. Ravirajan, the learned Single Judge held that the above provisions cannot have any application in the context. 8. In the background of the facts stated above, it is necessary to understand the scope of Sections 132A and 132B of the Act before proceeding further in the matter. In order to understand the scope of the said provisions, it is necessary to first refer to Section 132 of the Act as well. Section 132 of the Act deals with Search and Seizure. The relevant portions of Section 132 read thus: 132. Search and seizure (1) [Where the [Principal Director General or] Director General or [Principal Director or] Director or the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2 of the Information Technology Act, 2000 (21 of 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: x x x x x x (underline supplied) As evident from the extracted provision where in consequence of information, the competent authority has reason to believe that any person is in possession of any money and that such money represents either wholly or partly income which has not been, or would not be, disclosed for the purposes of the Act, then, the competent authority is empowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer, the provisions of sub-sections (4A) to (14) (both inclusive) of section 132 and section 132B 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 subsections (4A) to (14), the words the requisitioning officer were substituted. (underline supplied) As seen from the extracted provision, where in consequence of information, the competent authority has reason to believe that any assets represent either wholly or partly income which has not been, or would not have been, disclosed for the purposes of the Act by any person from whose possession or control such assets have been taken into custody by any officer or authority, then, the authority is empowered to make a requisition directing the officer or authority to deliver the same to the requisitioning officer and if a requisition is made, the officer or authority under any other law concerned, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior approval of the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, to the person from whose custody the assets were seized: Provided further that such asset or any portion thereof as is referred to in the first proviso shall be released within a period of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 or for requisition under section 132A, as the case may be, was executed; (ii) if the assets consist solely of money, or partly of money and partly of other assets, the Assessing Officer may apply such money in the discharge of the liabilities referred to in clause (i) and the assessee shall be discharged of such liability to the extent of the money so applied; (iii) xxxx (2) xxxx. (3) xxxx. (4) xxxx (underline supplied) As seen from the extracted provision, if the asset requisitioned is money, in terms of clause (i) to sub-section (1), the Assessing Officer is entitled to apply such money in the discharge of the liabilities of the person from whom it was obtained under the Act which includes not only the existing liabilities, but also liabilities determined on completion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 132A has not been made in that case and the same cannot be made to a court where the currency notes have been deposited. The learned Judge relied on the decision of this Court in Abdul Khader v. Sub-Inspector of Police, 1998 SCC OnLine Ker 580, to arrive at the said conclusion. 10. We have perused meticulously the provisions contained in Sections 132, 132A and 132B of the Act. A combined reading of the said provisions would indicate that the object of the said provisions is to enable the competent authorities under the Act to hold the assets seized under Section 132 or requisitioned under Section 132A for appropriation towards existing and future liabilities of the assessee, except in cases where the assessee is able to explain the nature and source of the acquisition of the assets seized or requisitioned, provided the competent authority has reason to believe that the assets represent either wholly or partly the income which has not been or would not be disclosed for the purpose of the Act. As provided for in Section 132B, the scheme of the provisions is that in cases where the assessee is able to explain the nature and source of acquisition of the asset, the asset shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority who seized the same before the Jurisdictional Magistrate, as clarified by this Court in Abdul Khader, the competent authority shall be held to be authorised to prefer an application seeking interim custody of the currency notes under Section 451 of the Code, for otherwise, Sections 132A and 132B, would become futile. Needless to say, the view expressed in R. Ravirajan that the provisions contained in Sections 132A and 132B are not relevant in the context, does not appear to us to be correct. 12. As we propose to uphold the view expressed in Union of India, it is necessary to clarify that the direction in Union of India that the competent authority under the Act, on receipt of the seized currency notes, shall complete the proceedings contemplated against the person concerned within a period of six months and if not, the amount shall be redeposited and shall be released to the person from whom the amount has been seized, is not in accordance with law. Such a direction is unwarranted inasmuch as the scope of the proceedings is only to decide the person who is best suited to have custody of the currency notes until the conclusion of enquiry or trial. According to us, direction f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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