Section 132B of the Income-tax Act, 1961 – Search and seizur

High Court of Bombay Bipin Vimalchand Jain v. Assistant Director of Income-tax (Inv.) F. I. Rebello and j.p. devadhar, jj. writ petition no. 2002 of 2007 october 17, 2007 Section 132B of the Income-tax Act, 1961 – Search and seizure – Retained assets, application of – Search conducted at petitioner’s business premises of petitioner resulted in seizure of certain cash – Petitioner’s explanation regarding nature and source of acquisition of seized cash was, on verification, found to be correct – Despite this, Assessing Officer retained said amount on ground that assessment under section 153A was yet to be finalized and that said amount would be utilized to meet tax liability on completion of assessment – Whether once explanation given by petitioner regarding nature and source of acquisition of seized cash was, on verification, found to be correct, and there being no suggestion, even remotely, that seized cash represented undisclosed income of petitioner, impugned amount could not be retained by Assessing Officer - Held, yes FACTS During the course of a survey action carried out at the business premises of the petitioner, certain cash was found. The petitioner explained that out of the said amount, a sum of Rs.1.14 crores belonged to a HUF carrying on business in the name of ‘V.J.’ thereupon, search was carried out at the business premises of ‘V,J.’. On verification of the books of account maintained by ‘V.J.’, the search party found a chit recording transfer of Rs. 1.14 crores from its shop premises to the shop premises of the petitioner and that the sales of the day matched with the cash and stock including the cash sent to the shop premises of the petitioner. Inspite of this, the search party seized the cash from the shop premises of the petitioner. Thereafter, an application was made by the petitioner under section 132B(1)(i), inter alia, seeking release of the said cash on ground that the same belonged to ‘VJ’. The Assessing Officer rejected the said application. On writ: HELD Under the first proviso to section 132B(1)(i), on an application made for release of the seized asset, within thirty days from the end of the month in which the asset was seized, the Assessing Officer on being satisfied regarding the nature and source of acquisition of such asset is empowered to recover the existing liability out of such asset and release the remaining portion of the asset. (Para 8) In the instant case, it was not in dispute that the application seeking release of the seized cash to the extent of Rs. 1.14 crores was made within 30 days of the seizure. In the impugned order, the explanation given by the petitioner regarding the nature and source of acquisition of the said amount had not been doubted or found to be unsatisfactory. Even the revenue had not disputed that the search party had verified the books of ‘VJ’ and found that the explanation given by the petitioner was correct. Once the explanation given by the petitioner regarding the nature and source of acquisition of the seized cash was on verification found to be correct, then the amount of Rs. 1.14 crore which belonged to ‘V.J.’ could not be retained by the Assessing Officer by rejecting the application filed by the petitioner. [Para 9] Only reason given in the impugned order for rejecting the application was that the assessment under section 153A was yet to be finalized. In the absence of any material on record to suggest that the seized cash represented the undisclosed income of the petitioner, the respondent No. 2 could not have rejected the application made under section 132B(1)(i) merely on the ground that the assessment under section 153A was pending. In other words, application under section 132B(1)(i) could be rejected only if the Assessing Officer had reason to believe that the seized cash represented the undisclosed income of the assessee liable to be assessed in the year in which the search took place. In the impugned order, it was not even remotely suggested that the seized cash represented the undisclosed income of the petitioner. (Para 10) In the circumstances, the impugned order was to be quashed and set aside, with the direction to the Assessing Officer to release the seized cash to the petitioner along with interest. (Para 11)