Retention of seized cash to be utilised towards tax dues already determined

Fatema Hussain & Anr. Vs UOI & Ors. (Patna High Court)- Amount seized under section 132 can be utilised for the purpose of discharging the liability already determined on completion of the assessment proceedings and if that be the position then at best the amount that could be retained for dis­charging the liability will only be with regard to the assessment made in this particular case for the assessment years 2002-03, 2003-04 and 2004-05 as admitted by the petitioners in the rejoinder to the counter affidavit. Apart from the aforesaid, merely because assessment for the year 2015-16 is pending, no statutory right is available to the Department to retain any amount on this count.

Full Text of the High Court Judgment / Order is as follows:- 

Facts on record go to show that on 21-3-2014 when the petitioners were carrying a sum of Rs. 30 lakhs in New Delhi purportedly having received it as certain sale proceeds, the author­ities of the Income Tax Department at New Delhi seized the amount and thereafter when the amount was not released and no action was taken for a period of about two years, this writ petition has been filed.

2. In the meanwhile, the petitioners were issued with summons, vide annexure 5 on 24-3-2014 and immediately on 12-5-2014 the peti­tioners appeared before the authority in pursuance of the said notice and it is stated that the documents and explanation with regard to the amount was submitted. Thereafter, when nothing was done, the petitioners filed this writ petition and sought for release of the amount in question.

3. On notice being issued the Departmental authorities have filed a counter affidavit and that only justification for retaining the amount is the one, contained in para 8 of the counter affidavit, which for the sake of conveni­ence is reproduced hereinunder :–

“8. That it is stated that the demand is pending against the asses-see amounting to Rs. 21,755 for the assessment year 2002-03, Rs. 62,860 for the assessment year 2003-04 and Rs. 17,111 for the assessment year 2004-05. Further, assessment is pending for the assessment year 2015-16. The amount will be released after adjust­ment of due tax.”

4. Except for contending that the aforesaid liabilities are to be discharged by the petitioners and the assessment for the year 2015-16 is pending, there is no explanation from the Department for retaining the amount. Even if the entire liability as indicated for the years 2002-03 and 2003-04 are taken note of, it would not be beyond 85,000 rupees. The statutory pro­vision under the Income Tax Act of 1961 for dealing with the issue in ques­tion is under sub-section (1) to section 132B, which provides that when an asset like the one is seized under section 132B, the procedure for dealing with it is contained in sub-section (l)(i) of the aforesaid section, which reads as under :–

“(i) the amount of any existing liability under this Act, the Wealth Tax Act, 1957 (27 of 1957), the Expenditure Tax Act, 1987 (35 of 1987), the Gift Tax Act, 1958 (18 of 1958), and the Interest Tax Act, 1974 (45 of 1974), and the amount of the liability determined on completion of the assessment under section 153A 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 XTV-B for the block period, as the case may be (including any penalty levied or interest payable in connec­tion with such assessment) and in respect of which such person is in default or is deemed to be in default, may be recovered out of such assets.”

5. On analysing the aforesaid provision, it is clear that the amount seized under section 132 can be utilised for the purpose of discharging the liability already determined on completion of the assessment proceedings and if that be the position then at best the amount that could be retained for dis­charging the liability will only be with regard to the assessment made in this particular case for the assessment years 2002-03, 2003-04 and 2004-05 as admitted by the petitioners in the rejoinder to the counter affidavit. Apart from the aforesaid, merely because assessment for the year 2015-16 is pending, no statutory right is available to the Department to retain any amount on this count.

6. On going through the statutory provisions, as are detailed hereinabove, it is crystal clear that the amount seized can only be utilised for the purpose of discharge of liability with regard to tax liability already determined and not paid by the assessee and for nothing more. In this case, the Depart­ment is only entitled to retain the amount of tax determined, as contained in para 8 of the counter affidavit, i.e., the tax liability for the assessment year 2004-05 as admitted by the petitioners. Apart from the aforesaid, no further amount can be retained by the petitioners as the provisions to sub-section (3) of section 132B clearly indicates what we have been stated hereinabove, which reads as under :–

“(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.”

7. That being the position, we are of the considered view that with regard to the amount in question, at best the respondents can retain the amount so far as it pertains to discharge of tax liability of the petitioners for the year 2002-03, 2003-04 and 2004-05, out of which according to the petitioners showing for the assessment year 2002-03 and for the year 2004-05 certain amount has already been paid by them as is detailed in para 5 of their rejoinder along with documents annexures 8A and 8B.

8. In view of the aforesaid, we are very clear in our mind that the amount of Rs. 30 lakhs retained by the Department cannot be permitted any further. They are liable to return the same after adjusting the liability for the years 2002-03 and 2004-05 that also after causing an enquiry with regard to the amount already paid by the petitioners as detailed in para 5 of the rejoinder. The remaining amount should be returned back to the petitioners after causing an enquiry with regard to the averments made in para 5 of the rejoinder within a period of one month from the date of receipt of a copy of this order. That apart for the amount to be released to the petitioners after such detention the respondents shall also pay interest to the petitioners as provided under sub-section (4A) of section 132B to be calculated in accord­ance with law. The amount, of interest shall be paid within a period of two months from the date the entire amount is refunded. The amount be refunded to the petitioners within a period of 30 days from the date of presentation of a copy of this order.

9. With the aforesaid, the writ petition stands allowed and disposed of.