AI Insights
The case involves two writ petitions, W.P.No.23023 of 2019 and W.P.No.29297 of 2019, filed in the High Court of Telangana. The petitions challenged the legality of the seizure and retention of Rs.5.00 crores in cash by the Income Tax Department, which was initially seized by the Task Force Police of Telangana. The petitioner in W.P.No.23023, a proprietary firm, argued that the cash was legally theirs and disclosed to the Income Tax Department, while the petitioner in W.P.No.29297, Vipul Kumar Patel, claimed he was coerced into making statements under duress regarding the cash's ownership. The court examined the procedures followed by the Income Tax Department in seizing the cash and found significant procedural lapses, leading to the conclusion that the seizure was illegal.
Appeal Details
Counselvise Citation
[2020] 140 COUNSELVISE.COM (IT) 694661 (HC-TELANGANA)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Others
Pronouncement Date
28-12-2020
Assessment Year
misc
Judgement Text
"HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) IMONDAY, THE TWENTY EIGHTH DAY OF DECEIVBER TWO THOUSAND AND TWENTY PRESENT THE HON'BLE SRI JUSTICE M. S. RAMACHANDRA RAO AND THE HON'BLE SRI JUSTICE T. AMARNATH GOUD WRIT PETITION NOS: 23023 AND 29297 OF 2019 Between: lt4/s. I /ectec, a sole proprietary firm/concern with proprietors Neena, w/o. Kamlesh Rajanikant Shah, aged about 55 years, rep. by its General Power of Attorney Holder, Kamlesh Rajanikant Shah, S/o. Rajanikant Shah, aged about 57 years, Rl/o.79, Anushthan Bunglows, Sola, Ahmedabad, State of Gujarat, presently R/o. H. No.3-4-308114, First Floor, Basanth Colony, Lingampally, Kachiquda' Hyderabad ...pETrroNER AND 1. The Director of lncome Tax (lnvestigation ), Hyderabad 2. The Deputy Director of lncome Tax, Unit - I (3), Hyderabad. 3. The Union of lndia, I ,4inistry of Finance, Department of Direct Taxation (Finance), New Delhi. ...RESPONDENTS Petition under Artrcle 226 of |he Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a Writ of Mandamus or any other appropriate writ declaring that the action of the respondents in conducting panchanama dated 28.08.2019 and seizing the cash of the petitioner amounting to Rs.s crores on the information of the Task force police of the State is illegal and ultra-virus the provisions contained in the lncome Tax Act, 1961 and consequently direct the respondents to forbear from conducting any further enquiry pursuant to the said panchanama and release the said cash to the petitioner and the Honourable Court may impose heavy costs on the respondents for the illegality committed by them. lA NO: 1 OF 2019 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to direct respondents No.1 and 2 to forthwith release the cash of Rs.5 crores to the petitioner (covered by the panchanama dated 28.08.2019), pending disposal of the writ petition. Counsel for the Petitioner: SRI VEDULA SRINIVAS wP NO.23023 0F 2019: Counsel for Respondents: SRI SURYAKIRAN REDDY, ADDITIONAL SOLICITOR GENERAL OF INDIA WP NO: 29297 OF 2019 Betwee n: Vipul Kumar Patel, S/o. tt/afatlal Patel, Aged about 40 years, Fl/o. 65, Saibaba Nagar Society, Padmanath Char Rasta. Tal District, Pathan, Orjrru,:.38f,??3*.* AND '1 . Union of lndia, Ministry of Finance, Department of Direct Taxes (Finance), North Block, New Delhi, Rep. by its Secretary. 2. The Director of lncome Tax (lnvestigation ), Aayakar Bhavan, Hyderabad. 3. The Deputy Director of lncome Tax, (lnvestigation ), Unit 1(3), Aayakar Bhavan, HYderabad ...RESP.NDENTS Petition under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a Writ of Mandamus or any other appropriate Writ, Order or Orders, Direction or Directions to declare the action of the 3rd respondent in seizing the cash of Rs.5 crores, which was handed over by the Task Force, West Zone, Hyderabad, by seizing from the custody of the petitioner on 23.08.2019, as illegal, contrary to the provisions of lncome Tax Act, 1961 and u nco nstitutio na I and to direct the respondents to return the cash of Rs.5 crores which was originally seized by the Task Force, West Zone, Hyderabad and handed over to the 3rd respondent, to the petitioner IA NO: 1 OF 2019 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to direct the respondents to return the cash of Rs.S crores which was originally seized by the Task Force, West Zone, Hyderabad and handed over to the 3rd respondent, to the petitioner, pending disposal of the Writ Petitlon Counsel for the Petitioner: SRI V. V. RAGHAVAN Counsel for Respondents: SRI SURYAKIRAN REDDY, ADDITIONAL SOLICITOR GENERAL OF INDIA The Court made the following: COMMON ORDER ANI) I{O OURAI}LE SRI JUSTICE T.A}IAR AI'II GOUD COMMON ORDER: (Per Sri Justice M.S.Ramachandra Rao) The petitioner in W.P.No.23023 of 2019 ( for short 'the petitioner') is a proprietary concem carrying on business of purchase of agricultural lands and agricultural products throughout the country and claims that it has 46 branches at different places al1 over the country having employee strength of about 300. It also deals as a wholesale trader of agricultural products, vegetables, lruits, and post-harvest crop activities. 2. The petitioner in W.P.No.29291 of 2019 is Vipul Kumar Mafatlal of 20 I 9 ( henceforth referred to as 'Vipul Kumar Patel'). 3. The petitioner claims that its annual turnover for 201 5- I 6 is Rs.28,34,96,2481, for 2016-17 is Rs.20,26,86,9151-, for 2017-18 it is Rs.20,26,86,915/-, for 2017-18 it is Rs.73,28,06,6231- and for 2018-19, it is Pts.72,79,33,9991-. 4. The petitioner contends that it has a large tumover and it handles large quantities of cash which are also disclosed to the Income Tax Department. According to it, there are no proceedings of reopening of assessment pending before the Income Tax Department. -/Y- /' HONOURABLE SRI JUSTICE M.S.RAMACI{ANDRA RAO 1rit l'etition Nos.23023 and 29297 of20l9 Patel and he is alleged to be an employee of the petitioner in W.P.No.23023 2 5. The petitioner states that it has business transactions in the State of Telangana also and that it entrusted a sum of Rs.5.00 Crores to its employee Vipul Kumar Patel for its business purposes. 6. The said individual had come to Hyderabad with friends, and on 23.08.2019 their car a Maruti Ciaz car bearing No.TS09FA 4948 rvas intercepted by the Task Force Police ofthe State ofTeiangana. 7. According to the petitioner, the said employee, his friends, the cash ol Rs.5.00 Crore together with the above vehicle and another car and two wheeler were detained illegally from 23.08.2019 onwards by the Telangana State Police. Petition for release of the said persons, the cash and vehicles in the High Court of Telangana. 9. The Task Force Police filed a counter affidavit in the said Writ Petition claiming that the discovery of cash with the said persons was made on 26.08.2019 and that the police had handed over the detenues along rvith cash to the Principal Director of Income Tax, Ayakar Bhavan, Hyderabad for taking further action against them. 10. Admittedly, the Task force Police addressed a letter under Ex.P5 letter d1.26.08.2019 to the Principal Director of Income Tax, Ayakar Bhavan. Hyderabad stating that he is handing over both the cash and the detinues to the latter and the Deputy Director of lncome Tax, Unit I (3), Hyderabad 8. The GPA holder of the petitioner filed on 27 .8.2019 a Habeas Corpus (2nd respondent in W.P.No.23023 of 2019) acknowledged receipt of the letter on 27.08.2019 and put his stamp thereon. 11. However, a panchanama was prepared by the 2nd respondent on 28.08.2019 (Ex.RS) as if a search was organized by a search party consisting ol 8 persons who are employees of the Income Tax Department including the 2\"'j respondent (without mentioning the place where the alleged search was to be conducted in the panchanama); that there were also 2 panch witnesses, one from Nalgonda District, Telangana and another from Dabilpura, Hyderabad who witnessed the search at the place of alleged search; that a warant of authorization dt.28.08.2019 was issued to the 2nd respondent under Section 132 of the Income-tax Act, l96l to search the place (whose location was not mentioned in the panchanama) by the Principal Director of Income Tax (Inv), Hyderabad; the search warrant was shown at 9.00 AM on 28.08.2019 to Vipul Kumar Patel who was present at the alleged place (not mentioned specifically); that a search was conducted at the place (not mentioned specifically in the panchanama); and allegedly the cash of Rs.5.00 Crore was seized at that time from his custody. 12. Counsel fbr the petitioner contends that authorization for search has to be given prior to the seizure of the cash by the officials of the Income Tax Deparlment under Section 132 of the Income-tax Act, l96l ; when the Task Force Police had admitted in the counter atfidavit filed in W.P.No.18720 of 2019, that they had handed over the cash of Rs.5.00 Crores on 27.08.2019, and Ex.P5 letter dt.26.08.2019 of the Inspector of Police, Commissioner's Task Force, West Zone Team, Hyderabad states that he handed over the cash (_/ I of Rs.5.00 Crores along with the detenues to the Income Tax Department and it was acknowledged on 27.08.2019 by the 2\"d respondent, the story of 2nd respondent mentioned in the panchanama created by the 2nd respondent as if the Income Tax Department conducted a search at an undisclosed place at 9.00 AM on the next day i.e.,28.08.2019 and that there was an authorization issued for the said search prior thereto, cannot be accepted; that the respondents cannot deny receipt of cash frorn the Task Force Police on 27.08.2019 and claim that they conducted a search ofsome undisclosed place and found the cash with Vipul Kumar Patel pursuant to such authorization. The absence of mention of the place of search, according to counsel for the petitioner, is indicative of the false narrative induced by the respondents to mislead the Court and the said panchanama has to be discarded as unbelievable. 13, According to the petitioner, the very seizure of cash lrom Vipul Kumar Patel without valid authorization under Section 132 is illegal; that the petitioner's cash book, balance sheet show sufficient quantity of cash in hand from which the sum of Rs.5.00 Crores could have been made available by the petitioner to its employee; and the money therefore has to be returned to the petitioner with interest and heavy costs must be imposed on the respondents for the illegality committed by them. 14. In W.P.No.2929'7 of 2019 filed by him in his individual capacity, Vipul Kumar Patei also stated that he is an employee of the petitioner in W.P.No.23023 of 2019, that he has been employed with the said concern from 01.08.2019 on a monthly salary of Rs.10,000/- to look after the 5 business at Hyderabad, that he was entrusted Rs.5.00 Crores by his employer which was seized by the Task Force Police on 23.08.2019 itself; certain statements were recorded after torturing him in the office of the Task Force Police by the Income Tax officials; that he had studied in Gujarati medium and rvas not well versed with English language, but statements were recorded by the Income Tax Department officials in English and he was made to sign them under coercion; that the police had taken him and others in the early hours of 28.08.2019 to the office of the Income Tax Department at Ayakar Bhavan in Hyderabad along with the cash. He contended that from the moment the cash was taken out of the car on 23.08.2019, it was lying with the police only and then it was taken by the Income -lax Department oltlcials on 27.08.20 19. He stated that atier going to the office of the Income Tax Department on 27.08.2019 midnight, again his statement was recorded in English under threat and his signature was obtained. According to him, another statement was also obtained from him in English language under threat on 28.08.2019. He stated that he and his fi:iends were let off on 28.08.2019 and the cash was retained by the Income Tax Department officials. He categorically asserted that the cash of Rs.5.00 Crores does not belong to him and that it belongs to his employer, i.e., the petitioner in W.P.No.23023 of 2019. 6 He therefore sought a direction to the respondents to return the said amount to himself as he is responsible to account for the cash to his employer 15. He also filed a notarized affidavit bearing date 04.09.2019 retracting the statements made by him before the police and the Income Tax Department officials and asserting that under coercion the same were obtained from him in English language which he does not properly understand. This affidavit was sent by e-mail through a Chartered Accountant to the Income Tax Department e-mail ID postmaster@incometax.gov.in and screen shots of the same are f,rled along with his affidavit. 16. Counsel for petitioner contended that mere possession ofcash of large amount without documents regarding its ownership or possession cannot be treated as information relatable to a conclusion that it represented income which would not have been disclosed by Vipul Kumar Agarwal for the purposes of the Act and relied on decision in Commissioner of Income Tax, Allahabad and others vs. Vindhya Metal Corporation and othersr. 17 . Counsel for petitioners also relied on D.G.I.T. vs. Spacewood Furnitures (P) Ltd.2 and contended that warrant of authorization for search and seizure can be issued if the authority granting it has information in its possession before it forms an opinion / reasonable belief that person is in possession of money which represents wholly or partly income which had I lreez; s s.c.c. 32r 2 (zots) tz s.c.c. l?9 7 not been or would not be disclosed; and there must be application of mind to According to counsel for petitioners, the very fact that the money was handed over by the Task Force Police to the Income Tax Department on 27.08.2019 and the authorization was issued for search on 28.08.2019 suggesls that the authority giving authorization could not have given it for a searclr 1br seizure of the cash from Vipul Kumar Patel after the cash was received by the Income Tax Department and the warrant of authorization is based on fictitious facts and cannot be said to be honest and bona fide. The Stand of the Respon(lcnts 18. The respondent Nos.1 and 2 filed a counter-affidavit and an additional counter-alfidavit. 19. They denied that Vipul Kumar Patel is not the employee of the petitioner because he had stated in a statement made to the Inspector of Police, Commissioner's Task Force, West Zone Team, Hyderabad that he is the Manager of a different firm by name M/s.P.Umeshchandra & Company 20. While admitting that a letter dt.26.08.2019 was received on 27.08.2019 about the detention of Vipul Kumar Patel and his friends with cash of Rs.5.00 crores, it is admitted that the 2nd respondent along with her team visited the office of the Inspector of Police, Commissioner's Task Force, West Zone Team, Hyderabad to examine him on oath; that summons were issued to all 7 persons and sworn statements were recorded under Section 131(14,) of the Act in which he stated that the cash belong to the material and the formation of opinion must be honest and bona fide. s M/s.P.Umeshchandra & Sons. It is stated that he failed to produce books/relevant documents relating to the cash found in his possession and so a warrant was issued under Section 132 of the Act on 28.08.2019 and the unexplained cash was seized from his hands. 21. It is stated that Vipul Kumar Patel did not mention that tlie cash belongs to the petitioner M/s.Mectec and the latter had also not claimed that the cash belongs to them from the Income Tax Deparlment even after 50 days from the date of seizure. 22, It is asserled that the provisions of Section 132 of the Act are attractcd where the person in possession of any money and such money either wholly or partly is income which has not been or would not be disclosed for the 23. It is admitted that Vipul Kumar Patel had filed before this Court a third party affidavit dt.25.10.2019 and copy of his petition dt.04.09.2019 retracting his earlier statement recorded under Section 132 of the Act on 21 .08.20119 but it is stated that the contents of these affidavit/retraction petition are contrary to the facts submitted by him on oath before the Income Tax Department on 2'7.08.2019 and 28.08.2019. It is also stated that he never filed the said statements bcfbre the Department 24. It is also asserted that in the swom statements recorded fiom Vipul Kumar Patel under Section 131(1A) and 132(4) of the Act on 27.08.2019 and 28.08.2019, he stated that he studied upto XII standard and that he can read, write, understand and speak in Hindi and that he can also read and purposes of the Income Tax Act, 1961 . 9 understand English language and that the said statements were given without any threat, coercion or undue influence. Considcration bv the Court 25, Heard Sri V.Srinivas, leamed counsel for petitioner in W.P.No.23023 of 2019, Sri V.V.Raghavan, learned counsel for petitioner in W.P.No.29297 of 2019 and Sri Suryakaran Reddy, learned Additional Solicitor General of India for respondents in both Writ Petitions. 26. [n these Writ Petitions, we are primarily concemed with the question whether the plea of the petitioners for return of the cash of Rs.5.00 crores to them is legally valid or not. 27. But before that issue is dealt with, we shall first consider as to how the cash in question came into the custody of the Income Tax Deparlment. 28, The above amount of cash was seized from the custody of Vipul Kumar Patel is an admitted fact. The date of seizure according to the petitioners is 23.08.2019, but the case ofthe respondent Nos.l and 2 is that the cash was seized on 26.08.20 9 by the Inspector of Police, Commissioner's Task Force, West Zone Team, Hyderabad; that on receiving a letter dt.26.08.2019 lrom the said Police on 21 .08.2019, the 2nd respondent and others went to the office of the Task Force Police and examined Vipul Kumar Patel on oath along with others and recorded sworn statements under Section I 3 I ( 1 A) of the Act on 27 .08.2019. It is stated that thereafter because he did not explain the cash in his possession, warrant under Section 132 was issued on 28.08.20 19. 10 29, Curiously, in the counter-ffidavits filed by respondent Nos.l and 2 they do not give the date on which they took possession of the cash and hov, 30. But, in the counter filed by the lnspector of Police, Commissioner's Task Force, West Zone, Hyderabad in W.P.No.18720 of 2019 (the Habeas Corpus Writ),he stated at para no.7 as under: Department), Av-akr B hat'an, Hyderabad on tlrc sonte dqt- J'hg Lt. ol[icials rccorded their statements and seized the cq;]t iyeqt4lelia panchanama.. This shows that the cash, along with Vipul Kumar Patel and others, was handed over to the lncome Tax Deparlment by the Police on 27.08.2019 itself by bringing them to the Aayakar Bhavan Ofhce of the Income Tax Depaftment in Hyderabad and statements were also recorded on the same day by the officials of the said Depaftment. 31. The respondent Nos.l and 2 had filed Ex.R-S, a panchanama allegedly prepared on 28.08.2019 along with their counter-affidavit referring to a warrant issued to Vipul Kumar Patel for search of a place which is left blank, details of the search party including the 2nd respondent, names of two panch they got possession of the cash. \"7. ... ... ... I submitted a letter dt.27.08.2019 to tlte Principal Director of Income Tax (IT) Department, Ayakar Bhavan, Ilyderabad narrating the above facts requesting him to take.further action in the matter. On thot, the Deputy Director o.f Inco Force Qffice and recorded their statements under Section ]31 o-f I.T. Act and requested ne to produce the alleged detenu be.fore tlrc Principal Director of Income Tax (IT Department), Ayalrar Bhavan, Hyderabad for conducting further enquiry / iwestigation which is evident .from Mahazarnama, dt.27.08.2019. Accordingly, I prodlsedlbe-lJkgq u along witlt cash belbre the Principal ll witnesses, one from Nalgonda District and the other from Dabilpura (from the Old City of Hyderabad). It is stated that a warrant of authorization dt.28.08.2019 issued to the 2'd respondent under Section 132 by the Principal Director of Income Tax (lNV), Hyderabad, that the said warrant rvas to search a place (the place of search is left blank) , that Vipul Kumar Patel was present at that place at9 a.m. on 28.08.2019 and he read the same and Rs.5.00 crores ofcash was seized. 32. How there could be a waffant issued under Section 132 by the Principal Director of Income Tax (INV), Hyderabad to the 2'd respondent without mentioning the place to be searched, is not explained by the respondents I and 2. How could there be a search at a place which is not
Other Referred Cases
Commissioner of Income Tax, Allahabad and others vs. Vindhya Metal Corporation and others, D.G.I.T. vs. Spacewood Furnitures (P) Ltd.
Laws Referred To
Income Tax Act, 1961, Constitution of India
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