Patna High Court
Vinod Poddar And Anr. vs Commissioner Of Income-Tax And Ors. on 21 July, 1993
Author: Aftab Alam
Bench: Aftab Alam
JUDGMENT G.C. Bharuka, J.
1. The present writ application has been filed by the petitioners for commanding the respondents to make over the jewellery seized from their possession on December 4, 1979, as evidenced by the panchnama (annexure "1").
2. The relevant admitted facts may be stated in short. Petitioner No. 2, Smt. Pratibha Poddar, is the wife of Sri Vinod Poddar, petitioner No. 1; the jewellery referred to above and a sum of Rs. 20,800 in cash were seized and taken custody of from a bank locker of the petitioners with Vijaya Bank on December 4, 1979, under Section 132(1) of the Income-tax Act, 1961 (hereinafter "the Act" only). Subsequently, the said money and jewellery were retained by the Income-tax Officer under his order dated February 18, 1980 (annexure "2"), passed under Section 132(5) of the Act. In the said order, the source of cash seized was accepted as explained but the explanation regarding acquisition of jewellery valued at Rs. 1,22,211 was rejected thereby treating the investment as income from undisclosed sources. The liability under the Act towards tax, penalty and interest was estimated at Rs. 1,73,528. While making the regular assessment for the assessment year 1980-81, the Assessing Officer valued the jewellery at Rs. 1,22,211. He accepted the explanation for jewellery worth Rs. 1,12,211 only. Accordingly, he added Rs. 20,800 being cash seized and Rs. 10,000 against jewellery as income from undisclosed sources under Section 69A of the Act to the assessed income. Finally, on appeal, the said additions were deleted as is evident from the appellate order dated November 6, 1987 (annexure "6"). On finalisation of the regular assessment, the petitioners requested the respondents for releasing the jewellery in their favour on the plea that if the amount of cash seized is adjusted against their liabilities arising under the Act, then the retention of the jewellery cannot be said to be justified in law. But the respondents did not accede to the prayer.
3. In the present writ application, a counter-affidavit has been filed by the respondents justifying the retention of the jewellery on the plea that demands under the Act are still outstanding against the petitioners. The details of the demands as set out in paragraph 5 of the counter-affidavit are as follows :
(A) Smt. Pratibha Poddar, w/o Vinod Poddar, Proprietor Messrs. Veekay Enterprises, Kankarbagh, Patna.
DCR No. Assessment year Amount of tax liability Nature of demand Rs.
I/1545 1980-81 670 income-tax 339 interest under section 220(2) I/1546 1981-82 500 penalty under section 271(l)(b) I/1539 1981-82 4,560 income-tax and interest under section 215 I/1544 1982-83 15,000 penalty under section 271(l)(c) I/1543 1982-83 328 penalty under section 140 I/1542 1982-83 1,680 penalty under section 271(l)(a) I/1540 1982-83 17,074 income-tax and interest under sections 215. 216 and 139(8) I/2004 1988-89 38 interest under section 139(8) (B) Sri Vinod Poddar (partner), c/o. Messrs. Universal Steel Enterprises, Kankarbagh, Patna.
DCR No. Assessment year Amount of tax liability Nature of demand Rs.
I/1536 1981-82 6,504 income-tax and interest under sections 139(8) and 215 I/1537 1980-81 12,676
-do.-
I/1538 1980-81 500 penalty under section 273(2)(a) I/1580 1980-81 9,913 penalty under section 271(l)(c) (C) Messrs. Universal Steel Enterprises, Kankargabh, Patna.
DCR No. Assessment year Amount of tax liability Nature of demand Rs.
I/1522 1978-79 132 interest under section 220 I/1523 1979-80 400 penalty under section 273 I/1524 1982-83 17,128 income-tax and interest under sections 139(8), 215 and 220 I/1525 1981-82 7,128 do
4. From the above, it is clear that so far as the assessment year 1980-81, which is relevant to the seizure in question is concerned, the liability of petitioner No. 1 has been shown as Rs. 670 towards tax and Rs. 339 towards the interest under Section 220(2) of the Act and there is no outstanding liability of petitioner No. 2.
5. In these backdrop of facts, the questions that have emerged from the submissions made at the Bar are as to : (i) whether the retention of seized assets can be continued on grounds other than those set out under, Section 132(5) of the Act ; (ii) whether the income-tax authorities can levy interest on the demands due to them without adjusting the money seized under the Act against the statutory liabilities ; and (iii) whether the petitioners are not entitled to claim interest on the amount found in excess of the liabilities referred to in Section 132B(1)(i) of the Act ?
6. The relevant provisions may be noticed hereunder, which are as follows :
"132. (5) Where any money, bullion, jewellery or other valuable article or thing (hereinafter in this section and in Sections 132A and 132B referred to as 'the assets') is seized under Sub-section (1) or Sub-section (1A), the Income-tax Officer, after affording a reasonable opportunity to the person concerned of being heard and making such enquiry as may be prescribed, shall, within ninety days of the seizure, make an order, with the previous approval of the Inspecting Assistant Commissioner,--
(i) estimating the undisclosed income (including the income from the undisclosed property) in a summary manner to the best of his judgment on the basis of such materials as are available with him ;
(ii) calculating the amount of tax on the income so estimated in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act ;
(iia) determining the amount of interest payable and the amount of penalty imposable in accordance with the provisions of the Indian Income-tax Act, 1922 (11 of 1922), or this Act, as if the order had been the order of regular assessment ;
(iii) specifying the amount that will be required to satisfy any existing liability under this Act and any one or more of the Acts specified in Clause (a) of Sub-section (1) of Section 230A in respect of which such person is in default or is deemed to be in default, and retain in his custody such assets or part thereof as are in his opinion sufficient to satisfy the aggregate of the amounts referred to in Clauses (ii), (iia) and (iii) and forthwith release the remaining portion, if any, of the assets to the person from whose custody they were seized :...
132B.(1)(i) The amount of the existing liability referred to in Clause (iii) of the said sub-section and the amount of the liability determined on completion of the regular assessment or reassessment for all the assessment years relevant to the previous years to which the income referred to in Clause (i) of that sub-section relates (including any penalty levied or interest payable in connection with such assessment or reassessment) and in respect of which he is in default or is deemed to be in default may be recovered out of such assets. . . .
(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 referred to in Clause (i) of Sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized.
(4) (a) The Central Government shall pay simple interest at the rate of twelve per cent. per annum on the amount by which the aggregate of money retained under Section 132 and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in Clause (iii) of Sub-section (5) of that section exceeds the aggregate of the amounts 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 six months from the date of the order under Sub-section (5) of Section 132 to the date of the regular assessment or reassessment referred to in Clause (i) of Sub-section (1) or, as the case may be, to the date of last of such assessments or reassessments."
7. From the provisions contained under Section 132(5) of the Act, it is quite clear that the Income-tax Officer can retain the seized assets in whole or part only to the extent it is necessary to satisfy the aggregate of the amount of the tax estimated, the amount of interest and penalty payable imposable and any existing liability under the Acts referred to in Clause (iii). In the present case, it does not appear from the records, as is evident from the order under Section 132(5) of the Act (annexure "2"), that there was any "existing liability" within the meaning of the aforesaid provisions on the date of the said order since existing liability under the said provisions can only mean liabilities determined till that date under the respective statutory provisions and in respect whereof the assessee is in default or is deemed to be in default.
8. Further, turning to the provisions of Section 132B, the seized assets can be applied only in satisfying the existing liability as they stood on the date of passing of the order under Section 132(5) and the liabilities respecting "the assessment years" relevant to the previous years to which the income referred to in Section 132(5)(i) relates. The assessment years for these provisions can be the assessment year relevant to the previous years till the date of seizure during which the income-tax authorities could have estimated undisclosed income. If thereafter, as provided under Section 132B(3) of the Act, after due satisfaction of the aforesaid liabilities, any assets or proceeds thereof remain, then those need to be forthwith handed over or paid to the person from whose custody the assets were seized. Under Sub-section (4), the Central Government has been made liable to pay interest at the rate prescribed therein, if the amount retained is found to be in excess of the aggregate amount referred to in Sub-section (1)(i) of this section.
9. Now, coming to the facts of the present case, in view of the above discussions, it is clear that 1980-81 is the only assessment year relevant for determining the rights and liabilities of the assessee under Section 132(5) read with Section 132B. Even according to the respondents, as stated in the counter-affidavit, the said liability has been found to be only to the extent of Rs. 670 and Rs. 339 towards tax and interest, respectively. Therefore, at best, Rs. 1,009 can be said to be the amount which can be recovered out of the seized assets, namely, Rs. 20,800 being cash and jewellery valued at Rs. 1,22,000 on the date of the seizure, i.e., on December 4, 1979. It is so because under Section 132B(1) the seized assets can be applied only for discharging the existing liability referred to in Section 132(5)(iii) and the amount of liability to be determined on completion of regular assessment or reassessment for all the assessment years relevant to the previous years to which the income referred to in Section 132(5)(i) relates, namely, the undisclosed income assessed on the basis of the seized assets. It is elementary that the income pertaining to the seized assets can be only of the previous years prior or relating to the date of seizure. Therefore, the tax and incidental liabilities arising under the Act for the assessment years relating to the period subsequent to the date of seizure cannot be realised out of the seized assets. As stated above, the value of the assets being much in excess of the aggregate adjustable liabilities, the remainder ought to have been forthwith made over and paid to the petitioners with interest as required under Sub-sections (3) and (4) of Section 132B of the Act.
10. I am of the considered opinion that the respondents are not entitled to retain the entire seized assets on the ground that certain liabilities under the Act have come into existence subsequent to the passing of the order under Section 132(5) of the Act. The contrary plea taken on behalf of the Revenue cannot be supported by the provisions contained under the Act which have to be necessarily construed strictly.
11. In the case of J.R. Malhotra v. Addl. Sessions Judge, AIR 1976 SC 219 (paragraph 19) (at page 222), the Supreme Court while dealing with the seizure under Section 132 of the Act has held that "the Revenue cannot indirectly keep the money on the plea that there will be a demand, and, therefore, the money should be allowed to be kept with the Revenue. There must be authority of law under which the money can be kept".
12. In view of the law set out as above and the facts of the present case, it has to be held that the respondents have acted without authority of law in retaining the seized assets. Accordingly, they are hereby directed to return the same forthwith as mandated under Sub-section (3) of Section 132B of the Act. It is also held that the petitioners will be entitled to interest at the rates applicable during the relevant period as per the provisions of Sub-section (4) of the said Section in respect of the amounts which were found to be in excess of the aggregate of the amount referred to in Clause (i) of Sub-section (1) thereof. The writ application is accordingly allowed but without costs.
Aftab Alam, J.
13. I agree.