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Nadim Dilipbhai Panjvani Versus Income Tax Officer Ward-3, Or His Sucessors To Office

2016 (1) TMI 811 - GUJARAT HIGH COURT

Seizure of Cash - Statutory time limit provided in sub-section (1) of Section 132B - whether the petitioner was able to satisfy the source of the asset? - Held that:- The Courts attach considerable importance to the time frame provided under Sections 132A and 132B of the Act when it comes to a question of retention of books of accounts or of seized assets. We cannot read the time limit provided in further proviso to Clause (i) of sub section (1) of Section 132B of the Act as being merely directo .....

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ose of releasing of the seized asset, which was made on 17.04.2014, came to be decided only on 20.07.2015 i.e. over one year later. In the meantime, the petitioner had sent two reminders. Action of the Assessing Officer cannot be countenanced. Impugned order dated 20.07.2015 is set aside. The seized cash shall be released in favour of the petitioner alongwith interest as per the statute. - Special Civil Application No. 13374 of 2015 - Dated:- 11-1-2016 - Akil Kureshi And Mohinder Pal, JJ. For th .....

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had to handover such cash to his friend Manoj P. Rajdev. The vehicle, in which, the petitioner was travelling, was intercepted by the police authorities being the election period for general election to the parliament. The police authorities, after being satisfied that the cash, which the petitioner was carrying, had no connection with the ensuing election, informed the Income Tax Department which, later on 25.03.2014 seized the cash from the petitioner. The case of the petitioner, as reflecting .....

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ash citing the decision of this Court in case of Mitaben R. Shah vs. Deputy Commissioner of Income Tax and anr. reported in 331 ITR 424. Finally, on 20.07.2015, the respondent authority rejected the application of the petitioner inter alia on the grounds that cash can be released only when the source is explained to the satisfaction of the Assessing Officer. The petitioner failed to satisfy this requirement. Assessment under Section 153A of the Income Tax Act, 1961 was still pending. The final a .....

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) was distinguished. Decision in case of Jinkal Dineshbhai Virvadiya vs. Commissioner of Income Tax reported in 367 ITR 713 was cited, in which, when it was found that the petitioner failed to satisfy the authority about the source of the asset, rejection of the request for release of the same was upheld. 3. It is this order of the authority, the petitioner has challenged on multiple grounds. However, we have focused the petitioner's ground of statutory time limit provided in sub-section (1) .....

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came to be decided by the respondent only on 20.07.2015. 5. In this context, we may peruse the statutory provisions. Section 132B of the Act pertains to application of seized or requisitioned assets and reads as under: "[Application of seized or requisitioned assets: 132B. (1) The assets seized under section 132 or requisitioned under section 132A may be dealt with in the following manner, namely:- (i) the amount of any existing liability under this Act, the Wealth-tax Act, 1957 (27 of 195 .....

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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, or the amount of liability arising on an application made before the Settlement Commission under sub section (1) of section 245C, may be recovered out of such assets]: [Provided that where the person concerned makes an application to the Assessing Officer within thirty days from the end of the month in which the asset was seized, for release of asset and the n .....

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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 di .....

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] Commissioner under sub-section (5) of section 226 and the Assessing Officer or, as the case may be, the Tax Recovery Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule. (2) Nothing contained in sub-section (1) shall preclude 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 refer .....

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, 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 s .....

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" does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII.]" 6. As per Section 1 of Section 132B of the Act, thus, the assets seized under Section 132 or requisitioned under Section 132A has to be dealt with in the manner provided in Clauses (i) to (iii) thereof. Principally, under Clause (i), it is provided that the amount of any existing liability under the Income Tax Act or the related fiscal statutes and the liability determined on completio .....

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e of the asset and the nature and source of acquisition of any such assets is explained to the satisfaction of the Assessing Officer, the amount of existing liability referred to in the said clause may be recovered out of such asset and the remaining portion, if any, may be released to the person from whose custody the asset was seized, with the prior approval of the officer prescribed under the said proviso. 7. Under Clause (i) of sub-section (1) of Section 132B, any seized assets would be adju .....

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es an application within the prescribed time and also satisfies the Assessing Officer about the source of acquisition of such asset, the asset would be adjustable only against the existing liabilities. In other words, upon the concerned person applying to the Assessing Officer and satisfying him about the source of the acquisition of the asset, the same would be released after adjustment towards existing liabilities, without waiting for the outcome of the assessment proceedings under Section 153 .....

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sition under Section 132A, as the case may be, was executed. This further proviso, therefore, has to be viewed and interpreted in the background of the provisions contained in Clause (i) of sub section (1) of Section 132B of the Act and the first provisio to the said clause. The further proviso, thus, requires that such assets or portion thereof referred to in the first provisio would be released within the prescribed time. Of course when this further proviso refers to any portion of the asset, .....

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of the counsel for the revenue that the further proviso would have to be read in continuation of the first proviso and therefore would not override the provision of the first proviso which requires the Assessing Officer to release the asset only upon being satisfied with the source of its acquisition. However, this further proviso puts a time limit, within which, such asset must be released. The question of not releasing the asset would arise only upon the decision on an application that may ha .....

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on the ground of not being satisfied about the source of its acquisition. But if no such decision is taken within the time envisaged in the further proviso, releasing of the asset becomes imminent. 9. Somewhat similar question arose before this Court in case of Mitaben R. Shah vs. Deputy Commissioner of Income tax and anr (supra), in which also, the application for release of the seized assets and books of accounts was decided after expiry of 120 days from the last of the authorizations. Divisi .....

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contained in Section-132B(1) are very clear and unambiguous. Section-132B deals with the assets seized under Section- 132 or recognized under Section-132A of the Act. A detailed procedure is prescribed under Section-132B(1)(i) of the Act. Out of such seized assets, the amount of the existing liability or the amount of the liability determined on the completion of the regular assessment or reassessment including any penalty levied or interest payable in connection with such assessment or reasses .....

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tody the assets were seized. The second proviso to this Section makes it clear that the assets are required to be released within a period of 120 days from the date on which the last of the authorization for search under Section-132 or for requisition under Section- 132A, as the case may be, was executed. 19. Considering the above provisions, the petitioner made an application within the permissible time limit. Despite the fact that the period of 120 days was over, the assets were not released. .....

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he fact that in earlier petition, after issuance of notice time was sought for to file the reply affidavit. However, this time was utilized for the purpose of passing the order so as to make the earlier petition as infructuous one. In the affidavit-in-reply the respondents have come out with the stand that a detailed note was prepared by the Assistant Director of Investigation whereby the the petitioner's claim for release of the gold ornaments and jewellary was rejected. However, the said n .....

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he expiry of the said period the order was passed raising all sorts of contentions. However, this is not permissible in view of the mandate contained in second proviso to Section-132B(1)(i) of the Act. It clearly says that the assets or any portion thereof shall have to be released within a period of 120 days. Once this period is over the respondents have no authority to retain these assets. Interpreting somewhat similar provisions, this Court has already taken the view in Cowasjee Nusserwanji D .....

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d are of no consequence and they are not tenable at law. 20. In the above view of the matter, all these orders which are challenged in the present group of petitions retaining the assets beyond the period of 120 days are hereby quashed and set aside and the respondent authorities are directed to release the gold ornaments and jewellary seized by them during the course of search and seizure operation forthwith and in any case not latter than two weeks from the date of receipt of the writ of this .....

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such purpose. The Court held that, continued retention of the books and accounts and seized documents would, therefore, be illegal and invalid. It was observed as under: "In the present case, the account books/documents were seized in November/December,1984. Admittedly, after the expiry of the period of 180 days, the documents have been retained by the revenue authorities without communicating the reasons stated by the authorized officer and the approval of the Commissioner. To date, no suc .....

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