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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 ..... itled 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 the conflict in the views, the learned Judge chose to refer the matters to a Larger Bench to resolve the conflict, for according to him, if the conflict is not resolved, there will not be any consistency in the orders on applications under Section 451 or Section 457 of the Code for interim custody of currency notes. These matters have thus come up before us. 4. Heard the learned counsel for the petitioners, the learned Government Pleader as also the learned Additional Solicitor General of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Commissioner or] Commissioner or Additional Director or Additional Commissioner], [or Joint Director or Joint Commissioner] in consequence of information in his possession, has reason to believe that- (a) xxx (b) xxx (c) any person is in possession of any money, bullion, jewellery or other valuable article or thing and such money, bullion, jewellery or other valuable article or thing represents either wholly or partly income or property [which has not been, or would not be, di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 empowered to search and seize the same. Section 132A of the Act deals with powers of the authorities under the Act to make requisitions. The relevant portions of Section 132A read thus: "132A. Powers to requisition books of account, etc. (1) Where the [Principal Director General or] [Director General or [Principal Director or] Director] or the [Principal Chief Commissioner or] [Chief Commissioner or [Principal Commissioner or] Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 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, shall deliver the assets to the requisitioning officer. The Explanation to subsection (1) of Section 132A declares that the reason to believe, as recorded by the Income-tax authority under this sub-section, shall not be disclosed to any person or any authority including the Appellate Tribunal. Sub-section (3) of Section 132A clarifies that where any assets have been delivered to the requisitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isations 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 of assessment or reassessment or recomputation and also the assessment of the year relevant to the previous year in which the requisition is made. The first proviso to clause (i) of sub-section (1) is an exception to the provision contained in the sub-section and the same confers a right on the person from whom the money has been seized to prefer an applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 released to the assessee in a time framed manner. When the Act confers power on the competent authority under the Act to issue a requisition and obtain assets of assessees and adjust the same towards their liabilities, if the competent authority has reason to believe that the asset represents either wholly or partly income or property which has not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed 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 for disbursement/ appropriation of the amounts after completing the proceedings contemplated under the Act can be issued only when the court exercises the power under Section 452 of the Code for disposal of the property at the conclusion of the enquiry or trial. 13. In the result, the reference is answered upholding the view taken in Union of India sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
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