KAWALJEET KAUR WIFE OF LATE SHRI SURJEET SINGH SETHI V. DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION-3),

CW/5706/2024

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The case involves a writ petition filed by Kawaljeet Kaur and Anandeep Singh Sethi against the Deputy Director of Income Tax (Investigation-3), Jaipur, seeking the release of Rs.34,02,005 seized from their bank locker. The petitioners had disclosed the existence of the cash prior to its seizure and had applied for its release, which was not decided by the respondent within the statutory period. The court examined the mandatory nature of the second proviso to Section 132B of the Income Tax Act, which stipulates the release of seized assets if not decided within 120 days, and compared interpretations from various High Courts.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 747619 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 21-08-2024
• Assessment Year: misc
• Other Referred Cases: M/s Harish Forex Services Pvt. Ltd. vs. Assistant Director of Enforcement, Mitaben R. Shah Vs. DCIT, Ashish Jayantilal Sanghavai (Prop. Of M/S Vir Impex) Vs. ITO, Khem Chand Mukim Vs. Pr. Director of Income Tax (Inv.), Dipak Kumar Agarwal Vs. Assessing Officer
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: SIDDHARTH BAPNA; MEYHUL MITTAL; SARVESH JAIN
• Assessee Lawyers: SIDDHARTH RANKA; APEKSHA BAPNA
• Keywords: Income Tax Act; Seized cash; Writ petition; Bank locker; Section 132B
• Section: 132; 132A; 132B; 153B

Judgement Text

"[2024:RJ-JP:35276-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 5706/2024 1. Kawaljeet Kaur Wife Of Late Shri Surjeet Singh Sethi, Resident Of C-35, Anand Vihar, Railway Colony, Jagatpura, Jaipur 2. Anandeep Singh Sethi, Son Of Late Shri Surjeet Singh Sethi, Resident Of C-35, Anand Vihar, Railway Colony, Jagatpura, Jaipur ----Petitioners Versus Deputy Director Of Income Tax (Investigation-3), Jaipur Having Its Address At New Central Revenue Building, Statue Circle, Bhagwan Das Road, Jaipur ----Respondent For Petitioner(s) : Mr. Siddharth Ranka, Adv.with Ms. Apeksha Bapna, Adv. For Respondent(s) : Mr. Siddharth Bapna, Adv.with Mr. Meyhul Mittal, Mr. Sarvesh Jain HON'BLE MR. JUSTICE PANKAJ BHANDARI HON'BLE MR. JUSTICE PRAVEER BHATNAGAR Order Reportable 21/08/2024 1. Petitioners have preferred this writ petition inter alia praying that the illegally seized cash in hand of Rs.34,02,005/- be released. 2. Succinctly stated, the facts of the case are that an amount of Rs.34,02,005/- was seized by the respondent from the bank locker belonging to the petitioners. After the seizure, petitioners applied within 30 days explaining their source of acquisition of such assets and prayed for release of money. [2024:RJ-JP:35276-DB] (2 of 9) [CW-5706/2024] Petitioners had disclosed to the respondent about the cash in their lockers prior to the seizure vide letters dated 17.01.2023 and 21.08.2023. The seizure took place on 21.09.2023. Petitioners had filed application on 09.10.2023 and 06.11.2023 before the authorities for release of the cash, however, the respondent has not passed any orders on the same. Consequently, the petitioners were forced to file the present writ petition claiming refund of the cash seized by the respondent. 3. It is contended by Mr. Siddharth Ranka, Advocate appearing for the petitioners that under Section 132B of the Income Tax Act (for short ‘the Act’), in the first proviso, it is mentioned 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 nature and source of acquisition of any such asset is explained to the satisfaction of the Assessing Officer, the amount of any existing liability referred to in this clause may be recovered out of such asset and the remaining portion, if any, of the asset may be released, with the prior approval of the [Principal Chief Commissioner or] Chief Commissioner or [Principal Chief Commissioner or] Commissioner, to the person from whose custody the assets were seized. It is contended that the second proviso is mandatory in nature as the same provides that such asset or any portion thereof as is referred to in the first proviso shall be released within a period of one hundred and twenty days form the date on which the last of the authorizations for search under Section 132 or for requisition under Section 132A, as the [2024:RJ-JP:35276-DB] (3 of 9) [CW-5706/2024] case may be, was executed. It is argued that since there is a mandate provided under second proviso to Section 132B of the Act, the cash should have been released after the expiry of 120 days from the date of authorization under Section 132 or requisition under Section 132A of the Act. 4. Counsel for the petitioners has placed reliance on M/s Harish Forex Services Pvt. Ltd. vs. Assistant Director of Enforcement D.B. Civil Writ Petition No.14857/2022 decided by the Division Bench of this Court on 03.01.2024, wherein Division Bench has held that the second proviso to Section 132B of the Act is mandatory in nature and the respondents in that case were directed to pass orders for release of the assets pursuant to the search conducted within four weeks. Counsel has also placed reliance on Mitaben R. Shah Vs. DCIT 2010 (2) TMI 684 (Gujarat High Court), Ashish Jayantilal Sanghavai (Prop. Of M/S Vir Impex) Vs. ITO 2022 (4) TMI 1285 (Gujarat High Court), Khem Chand Mukim Vs. Pr. Director of Income Tax (Inv.) 2020 (1) TMI 1114 (Delhi High Court), wherein High Courts have held that the second proviso to Section 132B of the Act is mandatory in nature and the assets seized have to be released if the application is not decided within 120 days. 5. Counsel appearing for the respondent- Mr. Siddharth Bapna has opposed the writ petition. It is contended that second proviso to Section 132B of the Act was considered by the Division Bench of Allahabad High Court in Dipak Kumar Agarwal Vs. Assessing Officer: [2024] 298 taxman 578 (Allahabad), wherein it has been held that the provisions does not stipulate any [2024:RJ-JP:35276-DB] (4 of 9) [CW-5706/2024] consequence of automatic release. It was also held that under Section 132B(4)(b) of the Act, the Central Government is liable to pay interest after the expiry of 120 days. On this ground, it is argued by Mr. Siddharth Ranka- counsel for the petitioners that there is no mandate to return the assets to the assessee and if the assets are not returned, there is liability on the Central Government to pay interest for the delay in refund or release of the assets seized. It is also argued by counsel for the respondent that under Section 153B of the Act, for any seizure made, an assessment order has to be made within a time bound manner as fixed by the statute. 6. We have considered the contentions. 7. Relevant provision of the Act pertaining to the present matter reads as under:- Section 132B: Application of seized or requisitioned 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 nature and source of acquisition of any such asset is explained] to the satisfaction of the Assessing Officer, the amount of any existing liability referred to in this clause may be recovered out of such asset and the remaining portion, if any, of the asset may be released, with the prior approval of the [Principal Chief Commissioner or] Chief Commissioner or [Principal Chief Commissioner or] Commissioner, to the person from whose custody the assets were seized: Provided further that such asset or any 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 [2024:RJ-JP:35276-DB] (5 of 9) [CW-5706/2024] requisition under section 132-A, as the case may be, was executed; (4)(a) The Central Government shall pay simple interest at the rate of [one half per cent for every month or part of a month] on the amount by which the aggregate amount of money seized under section 132 or requisitioned under section 132-A, as reduced by the amount of money, if any, released under the first proviso to clause (i) of sub-section (1), 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 section 132-A was executed to the date of completion of the assessment [or reassessment or recomputation. 8. A bare perusal of Section 132B of the Act, the first proviso and second proviso would reveal that the second proviso would come into play only when an application is made to the Assessing Officer and the Assessing Officer is satisfied that such asset or part of the asset after recovering the liability may be released with prior approval of appropriate authorities to the person from whose custody the assets were seized. Thus, for applying the second proviso, there has to be some satisfaction of the Assessing Officer. This clearly goes to show that once the Assessing Officer has arrived at a satisfaction with regard to the existing liability and with regard to the return of the assets, then the second proviso would apply and the assets or part of the assets as the case may be shall be released within a period of 120 days. Thus, the second proviso is mandatory and the same would [2024:RJ-JP:35276-DB] (6 of 9) [CW-5706/2024] come into play only after the satisfaction of the Assessing Officer and the determination by him and after approval of the appropriate authorities. 9. In the present case in hand, the application was filed within thirty days before the Assessing Officer, but the Assessing Officer has not passed any order with regard to the liability or with regard to the return of the assets. Thus, the second proviso would not come into play. Further, the first proviso does not give any time line and the second proviso is applicable only when there is an assessment by the Assessing Officer. 10. As far as factual aspects of the case are concerned, it is not disputed that the seizure was made on 21.09.2023 and an application for release of the cash seized from the lockers of the petitioners was made on 09.10.2023 and 06.11.2023, which have not been decided by the respondent. Thereafter, prior to the seizure by the respondent, the petitioners vide letters dated 17.01.2023 & 23.08.2023 had disclosed that their bank lockers were having cash to the tune of around Rs.37 lac. 11. As to whether the second proviso to Section 132B of the Act should be considered to be mandatory and whether the assets seized have to be released after the expiry of 120 days, came up for consideration before the Division Bench of this Court in Harish Forex Services Pvt. Ltd. (supra) and the Division Bench held that the provision is mandatory and the assets have to be released after the expiry of 120 days. Similar controversy arose before the Division Bench of Allahabad High Court in Dipak Kumar Agrawal (supra) and the Allahabad High Court held that the [2024:RJ-JP:35276-DB] (7 of 9) [CW-5706/2024] second proviso to Section 132B is not mandatory as in absence of statutory intent shown to exist, it may not be inferred through the process of legal reasoning-that if no order is passed within a period of 120 days, seized assets must be released notwithstanding its impact on the recovery of existing and likely demands. Division Bench of Allahabad High Court has dealt with the judgments given by Gujarat High Court and has not subscribed to the reasoning given by Gujarat High Court and Gauhati High Court. Division Bench of Allahabad High Court held that the provision does not stipulate any consequence of automatic release as the assets would first have to be invoked by the assessee by filing a proper application, then if conditions are fulfilled, an order recording that satisfaction may be passed. It is for that purpose a timeline of 120 days is contemplated on a non- imperative basis. In the event of delay in making the decision, the revenue has been saddled with interest liability @ 18 % per annum. The Allahabad High Court also held that there was no statutory boundation for releasing all the assets and as the Government has been saddled with interest, the consequence would be that if the assets are not released within 120 days, then interest would be payable under Section 132B(4)(a) & (b) of the Act. 12. In none of the judgments cited by counsel for the petitioners- Mr. Siddharth Ranka, Section 132B (4)(a) & (b) of the Act have been dealt with. 13. We are of the considered view that second proviso to Section 132B of the Act would apply only after the Assessing [2024:RJ-JP:35276-DB] (8 of 9) [CW-5706/2024] Officer has determined the liability and has come to the conclusion that the nature and source of acquisiton has been explained by the person concerned. In the present case, since the Assessing Officer has not decided the application, the second proviso to Section 132B of the Act would not come into play. We are of the considered view that the second proviso is mandatory, however, this will come into play only when the Assessing Officer has determined the liability. The purpose behind the proviso was that after determination of the liability, the assets and goods should not be retained by the department. 14. Division Bench of this Court in the judgment of Harish Forex Services Pvt. Ltd. (supra), has not discussed Section 132B (4)(a) & (b) of the Act and on bare reading of the proviso to Section 132B, the same was held to be mandatory. The said judgment is per incuriam as provisions of Section 132B (4)(a) & (b) of the Act has not been dealt with by the Division Bench. Division Bench in Harish Forex Services Pvt. Ltd. (supra) has also not considered the fact that second proviso has been made subject to the first proviso. 15. We are of the considered view that the judgment of the Allahabad High Court has dealt with Section 132B (4)(a) & (b) of the Act and has rightly come to the conclusion that the second proviso to Section 132B of the Act does not contemplate automatic release on expiry of 120 days. 16. Consequently, the prayer of the petitioners for refund of the amount cannot be granted. However, since cash has been recovered from Bank locker and even prior to recovery, petitioners [2024:RJ-JP:35276-DB] (9 of 9) [CW-5706/2024] have informed the income tax authorities about cash lying in locker, we deem it proper to direct the authorities to decide the application of the petitioners within four weeks from the date of receipt of this order by a reasoned and speaking order after hearing the petitioners. It goes without saying that if the petitioners are able to satisfy their source, the amount has to be refunded with interest as provided under Section 132B (4)(a)& (b) of the Act. 17. In view of the above, the writ petition is accordingly, disposed. All pending applications stand disposed. (PRAVEER BHATNAGAR),J (PANKAJ BHANDARI),J CHANDAN /53 "