2000 (4) TMI 20 - HC - Income Tax

Summary

Issues:
1. Seizure of cash under the Foreign Exchange Regulation Act (FERA).
2. Release of seized amount subject to bank guarantees.
3. Conflict between Income-tax Department and FERA authorities regarding the seized amount.
4. Applicability of section 132A of the Income-tax Act.
5. Pending demand against the petitioner by the Income-tax Department.
6. Decision on releasing the seized amount and conditions for bank guarantees.

Seizure of Cash under FERA:
In a search conducted, cash amounting to Rs. 1,18,00,000 was seized at the petitioner's premises under FERA, leading to ongoing proceedings against the petitioner and their wife. The petitioners sought the release of the seized amount subject to furnishing bank guarantees.

Release of Seized Amount Subject to Bank Guarantees:
The Income-tax Department opposed the release, fearing the money might not be available if an order of confiscation is passed. The petitioners agreed to furnish bank guarantees to address this concern, ensuring the Department's interests are protected.

Conflict Between Income-tax Department and FERA Authorities:
The Income-tax Department argued that section 132A of the Income-tax Act authorized remittance to them, while the petitioners disputed its applicability. The return of the authorization by FERA authorities was highlighted, emphasizing no pending demand against the petitioners currently.

Applicability of Section 132A of the Income-tax Act:
The Income-tax Department claimed authority under section 132A, but discrepancies in the counter affidavit raised doubts. The petitioners emphasized the absence of any pending demand and questioned the applicability of the section.

Pending Demand Against the Petitioner:
A pending demand of Rs. 19,75,186 was cited by the Income-tax Department, which the petitioners contested due to ongoing assessment proceedings. The court left it to the Department to take necessary legal actions to recover any pending demand.

Decision on Releasing Seized Amount and Bank Guarantees:
After considering arguments, the court directed the release of the seized amount to the petitioners upon furnishing bank guarantees to the satisfaction of the Director of Enforcement. The court ensured safeguards for the Income-tax Department's interests by specifying conditions for bank guarantee discharge.

This judgment resolves the issues surrounding the seizure of cash under FERA, conflicting claims between the Income-tax Department and FERA authorities, and the release of the seized amount subject to bank guarantees, providing clarity on pending demands and legal proceedings.