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Issues:
Validity of steps taken by income-tax authorities under section 132 of the Income-tax Act, 1961 regarding attachment, removal, or disposal of assets and bank amounts without final assessment and demand creation. Analysis: The petitioners challenged the validity of actions taken by income-tax authorities under section 132 of the Income-tax Act, 1961, without a final order of assessment and penalty against them. The petitioners sought a direction to restrain authorities from attachment, removal, or disposal of assets like bank amounts and fixed deposits. The key contention was that the authorities had prematurely encashed fixed deposit receipts without determining the petitioners' liability, which was deemed unjustified and unauthorized by the petitioners' counsel. The central issue for determination was whether section 132 of the Act empowers income-tax authorities to realize assets and convert them into cash without a final assessment and demand creation. The petitioners argued that such actions could only be taken after quantifying the demand and for discharging the liability. The income-tax authorities justified their actions under section 132(1)(iii) of the Act, stating that they had the jurisdiction to seize assets like fixed deposit receipts and bank deposits when the sources of such deposits were unexplained. The court analyzed the provisions of section 132 of the Act and concluded that while authorities were authorized to seize valuables and assets, including bank accounts and fixed deposits, they were not empowered to realize assets and convert them into cash until after a final assessment and demand creation. The court referred to relevant case laws to support its conclusion, emphasizing that encashment or withdrawal of fixed deposit receipts without quantifying the demand was unauthorized. In the absence of any final assessment creating a demand against the petitioners, the court partially allowed the writ application. It directed the authorities to refund or deposit the sum withdrawn from the bankers, fixed deposit receipts, or bank drafts. The court justified the seizure but instructed authorities not to make further encashments until assessment and demand creation. Additionally, the authorities were directed to take necessary steps for renewal of deposits when required, and the petitioners were entitled to interest from the date of encashment of fixed deposit receipts till restoration or renewal.
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