2019-VIL-458-AP-DT

ANDHRA PRADESH HIGH COURT

W.P. No. 11111 of 2019

Date: 06.12.2019

SRI VENKATA PAVANI JEWELLERS

Vs

UNION OF INDIA

Petitioner: Vivek Chandra Sekhar S, Nunna Satvanaravana, Nunna Pushkar Raj, Nunna Akhilesh, Sri Singamsetti Raviteja
Respondent: B Krishna Mohan (Asst Solicitor General Of India), M Kiranmayee(SC For Incometax )

BENCH

SRI C. PRAVEEN KUMAR AND MS. J. UMA DEVI JJ.

JUDGMENT

1) Seeking issuance of a Writ of Mandamus declaring the action of the Respondents in seizing cash of Rs., 1,50,00,000/- from the petitioners and drawing panchanama, dated 24.02.2019 and 02.05.2019, as illegal and arbitrary, the present Writ Petition came to be filed.

2) The Petitioner herein is the 3rd Petitioner and Son of Petitioner No. 2, who is the Proprietor of 1st Petitioner, which is a Proprietorship concern.

3) On reliable information that gold rates are likely to be increased in few days, the Petitioner herein along with his brother’s son and his Nephew, boarded a bus to Hyderabad for purchase of gold. As 23.02.2019 was a bank holiday, being a 4th Saturday, cash which was sought to be taken to Hyderabad could not be deposited in the bank.

They carried the said cash along with them in the bus. On reaching Hyderabad, they came to know that the shops were closed, hence, they boarded Kachiguda-Chegalpattu Express on 24.02.2019 to go to Chennai for purchase of gold. It was planned that, cash would be deposited in Chennai and thereafter cash would be transferred through RTGS/NEET. But as soon as the train reached Mahaboobnagar Railway Station, the Railway Police intercepted and seized the cash. Basing on the same, a case in Crime No. 13/2019 came to be registered under Section 102 of Cr.P.C.  

4) Summons came to be issued on 27.02.2019 under Section 131(1A) of the Income Tax Act, 1961, asking the Petitioners to personally appear at 3.30 PM along with necessary documents to prove their claim if any. Thereafter, on 18.03.2019, the 2nd Respondent herein, i.e., Sub-Inspector of Police, Government Railway Police Station, Mahaboobnagar, issued summons to Petitioner No. 2 to appear before him on 22.03.2019 to give evidence. A reply came to be submitted by 2nd Petitioner on 22.03.2019 along with an affidavit expressing his inability to appear before the 3rd Respondent due to old age. On 22.03.2019, another summon was issued by 3rd Respondent directing the petitioner to produce gold and silver bullion bills from 01.02.2019 to 28.02.2019. It was further stated that, a fine upto Rs. 10,000/- would be imposed in case Petitioner No. 2 fails to furnish information. In response to the same, a reply, dated 26.04.2019, came to be submitted along with a CD giving the details of the sales data for the month of February 2019.

5) In the process, the 2nd Respondent handed over cash to 3rd Respondent, under the panchanama, dated 02.05.2019 along with an inventory of the cash seized. Thereafter, the 3 Respondent once again issued summons to the 2nd Petitioner on 06.05.2019, calling for books of accounts for the previous three years. In response to the same, the third Petitioner addressed a letter, dated 10.06.2019, explaining the genuineness of the cash seized and consequently requested the 3rd Respondent to release the cash. It was urged that the nature of the business of the petitioners was trading in bullion of gold and silver and the cash transactions and the cash seized is out of the said business transactions.  

6) On 11.06.2019, a show cause notice was issued asking the 3rd Petitioner to show cause why penalty proceedings under Section 272A(1)(c) of the Act should not be initiated for failing to comply with the summons, dated 06.05.2019. A reply, dated 12.06.2019, came to be submitted by 3rd Petitioner enclosing the information, as called for by the 3rd Respondent in the show cause notice. The correspondence between the authorities and the petitioners went on, to which, the petitioners have been submitting documents in one form or other. It is stated that, despite submission of various documents to 3rd Respondent, continuing to withhold the cash seized from the Petitioners, lead to filing of the present Writ Petition.

7) Sri. S. Vivek Chandrasehkhar, learned counsel for the Petitioners pleads that, at the time of filing returns, the Petitioners have shown the transactions relating to the cash and also in the advance tax paid for the financial years 2019-2020. The transactions covered under the dispute was also taken into consideration. He also pleads that, in case any amount is due by the petitioners, the said amount can be adjusted and balance amount be released as it cannot be termed as a case of undisclosed income. He relied on Section 132 B of the Income Tax Act in support of his plea.

8) A counter came to be filed by the 3rd Respondent disputing the averments made in the affidavit filed in support of the Writ Petition. It is stated that, on receipt of seizure of the cash, summons under Section 131 (1A) of the Income Tax Act were issued to Petitioner Nos. 3 to 5 to produce evidence and books of accounts in support of the cash seized. It is stated that, only Petitioner No. 3 appeared on 05.03.2019, while Petitioner Nos. 4 and 5 appeared on 06.03.2019. The statement of the 3rd Petitioner was to the affect that, the cash seized belongs to the 1st Petitioner, which is a Proprietary concern of the 2nd Petitioner.

The 3rd Petitioner also stated that, Petitioner Nos. 3 to 5 were travelling to Chennai on coming to know that the gold prices were likely to increase in a day or two. According to him, the entire amount of Rs.,1,50,00,000/- was reflected in the books of accounts of the 1st Petitioner concern.

9) Insofar as 4th Petitioner is concerned, his explanation is to the effect that, portion of cash found with him was given by 3rd Petitioner for purchase of gold jewellery for M/s. Sri Venkata Paani Jewelers. The 5th Petitioner denied knowledge of cash being present in the bag given to him by the 3rd Petitioner. It is further stated that, a final show case notice was issued on 20.06.2019 to show cause as to why the sale bills submitted for the financial years 2018-19 should not be treated as bogus to which the 3rd Petitioner gave a reply on 25.06.2019.

10) Based on the material available on record, a confidential appraisal report was prepared and forwarded to the jurisdictional assessing officer on the instructions of the superior authorities on 15.07.2019, explaining the stand taken by the petitioners for carrying cash.

11) It is pleaded in the counter that cash was being taken to Chennai for purchase of gold has no basis. According to the respondents, no satisfactory explanation is forthcoming during the course of investigation before the 3rd respondent. It was further pleaded that, a show cause notice was issued on 11.06.2019 to explain as to why the penalty proceedings should not be initiated for non-compliance to the summons dated 06.05.2019. It is also stated in the counter that Respondent No. 3 in the capacity as authorized officer has requisitioned the cash under Section 132A of the Income Tax Act and based on the material brought on record has made a confidential appraisal report which has been duly forwarded to the jurisdictional Assessing Officer for further necessary action under relevant sections of the Income Tax Act. It is said that, the case is presently lying with the jurisdictional assessing officer and the Respondent No. 3 has no authority whatsoever to release the cash after it has been deposited in PD account. It is said that pursuant to the completion of such assessments, seized/requisitioned assets are dealt with as per the provisions of Section 132B of the Act.

12) The fact that a sum of Rs.,1,50,00,000/- was seized is not in dispute. It is also not in dispute that the amount has been deposited in PD account. The case is presently with the jurisdictional assessing officer. Section 132B of the Act states that assets seized under Section 132 or requisitioned under Section 132A may be dealt with in the following manner, namely:-

132A. (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, in consequence of information in his possession, has reason to believe that-

…..

(c) any assets represent either wholly or partly income or property which has not been, or would not have been, disclosed for the purposes of the Indian Income-tax Act, 1922 (11 of 1922), or this Act by any person from whose possession or control such assets have been taken into custody by any officer or authority under any other law for the time being in force, then, 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 may authorise any Additional Director, Additional Commissioner, Joint Director, Joint Commissioner, Assistant Director or Deputy Director, Assistant Commissioner or Deputy Commissioner or Income-tax Officer (hereafter in this section and in sub-section (2) of section 278D referred to as the requisitioning officer) to require the officer or authority referred to in clause (a) or clause (b) or clause (c), as the case may be, to deliver such books of account, other documents or assets to the requisitioning officer.

[Explanation.-For the removal of doubts, it is hereby declared 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 or the Appellate Tribunal.]

13) Further, the Central Board of Direct Taxes (CBDT) has also issued instructions, dated 11.12.2006, on the issue of release of cash deposited in PD account. The relevant portion of the instructions is reproduced hereunder:

[Section 132B of the IT Act lays down the procedure for application and release of asses seized u/s 132 or requisitioned u/s 132A of the IT Act. As per the provisions of clause (i) of Section 132B(1), such assets have to be applied for recovery of any existing liability under the Income Tax Act, the Expenditure-tax Act, the Wealth Tax Act, the Gift-tax Act and the Interest Tax Act, 1974, and the liability determined on completion of the search and seizure assessment, including any penalty levied or interest payable in connection with such assessment. The balance, if any remaining after such adjustment has to be forthwith released to after such adjustment, has to be forthwith released to the person from whose custody such asset was seized in accordance with the provisions of Section 132B(3). On such release of money (lying in the PD Account), the Government is also under obligation to pay interest in accordance with the provisions of Section 132B(4).

….

11. In the light of the above, it has been decided that cash deposited in P.D. Accounts be strictly dealt with as under:-

Where an application is made in accordance with first proviso to section 132B(1)(i) for release of seized cash and the nature and acquisition of such cash is explained to the satisfaction of the Assessing Officer, the seized cash should be released within the time limit provided under that section after adjustment of any existing liability.

Where seized cash or part thereof was not released under first proviso section 132B(1)(i), the amount lying in PD account should be released within one month of passing the (search and seizure) assessment order after –  

(i) adjusting the seized cash against any existing liability and the amount of liability determined on completion of the search and seizure assessment; and

(ii) in cases where penalty proceedings, connected with such assessment, have been initiated, retaining out of the balance an amount to meet the expected liability on account of the penalty imposable.

Where assessee is in appeal against the assessment order and the penalty has not been imposed up to the date of the order of the CIT (Appeals), the position regarding the amount lying in the PD Account should be reviewed at the time of giving effect to the order of the CIT (Appeals). Only such amount thereof should be retained which is sufficient to meet the expected amount of penalty imposable on the assessment as revised in appeal effect. The balance should be released within one month from the order under Section 250, after recovery of any existing demand at that time.

The amount, which was retained after the assessment order or the order of the CIT (Appeals) for the amount of penalty imposable, should be released within one month from passing of the penalty order, after recovery of demand arising out of the penalty order and nay other demand existing at that time.

Where assessment was made before issue of this Instruction and cash in PD Account has not yet been dealt with or partly deal with, all the Assessing Officers should examine such cases and amount lying in the PD Account be released within one month from the date of this Instruction, after adjusting against –

(i) any existing demand; and

(ii) expected amount of penalty, if any, imposable on the basis of assessment order [if no appeal has been filed before CIT (Appeals) or the case has not yet been decided by CIT (Appeals)] or assessment order as revised under Section 250 or, as the case maybe, under Section 254. …].

14) In view of the provisions of the Act referred to earlier and the instructions given by the CBDT, it is clear that the assessing officer is the final authority to release the amount subject to the conditions referred to therein. The proceedings before the said authority are pending adjudication. Further, Section 132B of the Act relates to procedure for applications and release of assets seized under Section 132 or requisitioned under Section 132A of the Act, and the matter is pending before the concerned assessing officer.  

15) Having regard to the guidelines issued by the Central Board of Direct Taxes and Section 132B of the Income Tax Act, the assessing officer shall take into account the advance tax paid, the documents filed along with the returns and pass appropriate orders in connection with the assessment at the earliest, preferably within a period of 3 months from today in accordance with law and release the cash to the extent permissible with interest if the petitioners are otherwise entitled to, after making necessary adjustments as required under law.

16) Accordingly, with the aforesaid direction the Writ Petition is disposed of. No order as to Costs.

17) Consequently, miscellaneous petitions pending, if any, shall stand closed.

 

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