Ia No: 1 Of 2019 v. V. Raghavan

HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD(Special Original Jurisdiction) IMONDAY, THE TWENTY EIGHTH DAY OF DECEIVBERTWO THOUSAND AND TWENTYTWO THOUSAND AND TWENTY PRESENT THE HON'BLE SRI JUSTICE M. S. RAMACHANDRA RAO ANDTHE HON'BLE SRI JUSTICE T. AMARNATH GOUD WRIT PETITION NOS: 23023 AND 29297 OF 2019 wP NO.23023 0F 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 ofAttorney Holder, Kamlesh Rajanikant Shah, S/o. Rajanikant Shah, aged about 57years, 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 ...pETrroNERKamlesh Rajanikant Shah, aged about 55 years, rep. by its General Power ofAttorney Holder, Kamlesh Rajanikant Shah, S/o. Rajanikant Shah, aged about 57years, 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 thecircumstances stated in the affidavit filed therewith, the High Court may be pleasedto issue a Writ of Mandamus or any other appropriate writ declaring that the actionof the respondents in conducting panchanama dated 28.08.2019 and seizing thecash of the petitioner amounting to Rs.s crores on the information of the Task forcepolice of the State is illegal and ultra-virus the provisions contained in the lncomeTax Act, 1961 and consequently direct the respondents to forbear from conductingany further enquiry pursuant to the said panchanama and release the said cash tothe petitioner and the Honourable Court may impose heavy costs on therespondents for the illegality committed by them. lA NO: 1 OF 2019 Petition under Section 151 CPC praying that in the circumstances stated inthe affidavit filed in support of the petition, the High Court may be pleased to directrespondents No.1 and 2 to forthwith release the cash of Rs.5 crores to the petitionerthe affidavit filed in support of the petition, the High Court may be pleased to directrespondents 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 writpetition.petition. Counsel for the Petitioner: SRI VEDULA SRINIVAS Counsel for Respondents: SRI SURYAKIRAN REDDY,ADDITIONAL SOLICITOR GENERAL OF INDIA Betwee n: Vipul Kumar Patel, S/o. tt/afatlal Patel, Aged about 40 [years, ]Fl/o. 65, SaibabaNagar Society, Padmanath Char Rasta. Tal District, Pathan, Orjrru,:.38f,??3*.* AND '1 . Union of lndia, Ministry of Finance, Department of Direct Taxes (Finance), NorthBlock, New Delhi, Rep. by its Secretary.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.NDENTS3. The Deputy Director of lncome Tax, (lnvestigation ), Unit 1(3), Aayakar Bhavan,HYderabad ...RESP.NDENTS Counsel for the Petitioner: SRI VEDULA SRINIVAS Counsel for Respondents: SRI SURYAKIRAN REDDY,ADDITIONAL SOLICITOR GENERAL OF INDIA Betwee n: Vipul Kumar Patel, S/o. tt/afatlal Patel, Aged about 40 [years, ]Fl/o. 65, SaibabaNagar Society, Padmanath Char Rasta. Tal District, Pathan, Orjrru,:.38f,??3*.* AND '1 . Union of lndia, Ministry of Finance, Department of Direct Taxes (Finance), NorthBlock, New Delhi, Rep. by its Secretary.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.NDENTS3. 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 thecircumstances 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 thecash 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 todirect the respondents to return the cash of Rs.5 crores which was originally seizedby 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 inthe affidavit filed in support of the petition, the High Court may be pleased to directthe respondents to return the cash of Rs.S crores which was originally seized by theTask Force, West Zone, Hyderabad and handed over to the 3rd respondent, to thepetitioner, pending disposal of the Writ PetitlonCounsel 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 HONOURABLE SRI JUSTICE M.S.RAMACI{ANDRA RAO ANI) I{O\OURAI}LE SRI JUSTICE T.A}IAR\AI'II GOUD \\1rit l'etition Nos.23023 and 29297 of20l9 COMMON ORDER: (Per Sri Justice M.S.Ramachandra Rao) The petitioner in W.P.No.23023 of 2019 ( for short 'the petitioner') isa proprietary concem carrying on business of purchase of agricultural landsand agricultural products throughout the country and claims that it has 46branches at different places al1 over the country having employee strength ofabout 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 W.P.No.29291 of 2019 of 2019 2019 is Vipul Kumar MafatlalPatel and he is alleged is alleged alleged to be an employee be an employee an employee employee of the the petitioner of 20 I 9 ( henceforth referred to as 'Vipul Kumar Patel'). 2. The petitioner in W.P.No.29291 of 2019 W.P.No.29291 of 2019 of 2019 2019 is Vipul Kumar MafatlalPatel and he is alleged is alleged alleged to be an employee be an employee an employee employee of the the petitioner in W.P.No.23023 3. The petitioner claims that its annual turnover for 201 5- I 6 isRs.28,34,96,2481, for 2016-17 is Rs.20,26,86,9151-, for 2017-18 it isRs.20,26,86,915/-, for 2017-18 it is Rs.73,28,06,6231- and for 2018-19, it isPts.72,79,33,9991-. 4. The petitioner contends that it has a large tumover and it handles largequantities of cash which are also disclosed to the Income Tax Department.According to it, there are no proceedings of reopening of assessmentpending before the Income Tax Department. 5. The petitioner states that it has business transactions in the State ofTelangana also and that it entrusted a sum of Rs.5.00 Crores to its employeeVipul Kumar Patel for its business purposes. 3. The petitioner claims that its annual turnover for 201 5- I 6 isRs.28,34,96,2481, for 2016-17 is Rs.20,26,86,9151-, for 2017-18 it isRs.20,26,86,915/-, for 2017-18 it is Rs.73,28,06,6231- and for 2018-19, it isPts.72,79,33,9991-. 4. The petitioner contends that it has a large tumover and it handles largequantities of cash which are also disclosed to the Income Tax Department.According to it, there are no proceedings of reopening of assessmentpending before the Income Tax Department. 5. The petitioner states that it has business transactions in the State ofTelangana also and that it entrusted a sum of Rs.5.00 Crores to its employeeVipul Kumar Patel for its business purposes. 6. The said individual had come to Hyderabad with friends, and on23.08.2019 their car a Maruti Ciaz car bearing No.TS09FA 4948 rvasintercepted by the Task Force Police ofthe State ofTeiangana. 7. According to the petitioner, the said employee, his friends, the cash olRs.5.00 Crore together with the above vehicle and another car and twowheeler were detained illegally from 23.08.2019 onwards by the TelanganaState Police. 8. The GPA holder of the petitioner filed on 27 .8.2019 a Habeas Corpus Petition for release of the said persons, the cash and vehicles in the HighCourt of Telangana. 9. The Task Force Police filed a counter affidavit in the said WritPetition claiming that the discovery of cash with the said persons was madeon 26.08.2019 and that the police had handed over the detenues along rvithcash to the Principal Director of Income Tax, Ayakar Bhavan, Hyderabadfor taking further action against them. 10. Admittedly, the Task force Police addressed a letter under Ex.P5 letterd1.26.08.2019 to the Principal Director of Income Tax, Ayakar Bhavan.Hyderabad stating that he is handing over both the cash and the detinues tothe latter and the Deputy Director of lncome Tax, Unit I (3), Hyderabad (2nd respondent in W.P.No.23023 of 2019) acknowledged receipt of the letteron 27.08.2019 and put his stamp thereon.on 27.08.2019 and put his stamp thereon. 11. However, a panchanama was prepared by the 2nd respondent on28.08.2019 (Ex.RS) as if a search was organized by a search party consistingol 8 persons who are employees of the Income Tax Department includingthe 2"'j respondent (without mentioning the place where the alleged searchwas to be conducted in the panchanama); that there were also 2 panchwitnesses, one from Nalgonda District, Telangana and another fromDabilpura, Hyderabad who witnessed the search at the place of allegedsearch; that a warant of authorization dt.28.08.2019 was issued to the2nd respondent under Section 132 of the Income-tax Act, l96l to search theplace (whose location was not mentioned in the panchanama) by thePrincipal Director of Income Tax (Inv), Hyderabad; the search warrant wasshown at 9.00 AM on 28.08.2019 to Vipul Kumar Patel who was present atthe alleged place (not mentioned specifically); that a search was conductedat the place (not mentioned specifically in the panchanama); and allegedlythe 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 tobe given prior to the seizure of the cash by the officials of the Income TaxDeparlment under Section 132 of the Income-tax Act, l96l ; when the TaskForce Police had admitted in the counter atfidavit filed in W.P.No.18720 of2019, 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'sTask Force, West Zone Team, Hyderabad states that he handed over the cash 12. Counsel fbr the petitioner contends that authorization for search has tobe given prior to the seizure of the cash by the officials of the Income TaxDeparlment under Section 132 of the Income-tax Act, l96l ; when the TaskForce Police had admitted in the counter atfidavit filed in W.P.No.18720 of2019, 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'sTask Force, West Zone Team, Hyderabad states that he handed over the cash 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 of2nd respondent mentioned in the panchanama created by the 2nd respondentas if the Income Tax Department conducted a search at an undisclosed placeat 9.00 AM on the next day i.e.,28.08.2019 and that there was anauthorization issued for the said search prior thereto, cannot be accepted;that the respondents cannot deny receipt of cash frorn the Task Force Policeon 27.08.2019 and claim that they conducted a search ofsome undisclosedplace and found the cash with Vipul Kumar Patel pursuant to suchauthorization. The absence of mention of the place of search, according tocounsel for the petitioner, is indicative of the false narrative induced by therespondents to mislead the Court and the said panchanama has to bediscarded as unbelievable. 13, According to the petitioner, the very seizure of cash lrom VipulKumar Patel without valid authorization under Section 132 is illegal; that thepetitioner's cash book, balance sheet show sufficient quantity of cash inhand from which the sum of Rs.5.00 Crores could have been made availableby the petitioner to its employee; and the money therefore has to be returnedto the petitioner with interest and heavy costs must be imposed on therespondents 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 inW.P.No.23023 of 2019, that he has been employed with the said concernfrom 01.08.2019 on a monthly salary of Rs.10,000/- to look after the business at Hyderabad, that he was entrusted Rs.5.00 Crores by his employerwhich was seized by the Task Force Police on 23.08.2019 itself; certainstatements were recorded after torturing him in the office of the Task ForcePolice by the Income Tax officials; that he had studied in Gujarati mediumand rvas not well versed with English language, but statements wererecorded by the Income Tax Department officials in English and he wasmade to sign them under coercion; that the police had taken him and othersin the early hours of 28.08.2019 to the office of the Income Tax Departmentat Ayakar Bhavan in Hyderabad along with the cash. He contended that from the moment the cash was taken out of the caron 23.08.2019, it was lying with the police only and then it was taken by theIncome [-lax ]Department oltlcials on 27.08.20 19.on 23.08.2019, it was lying with the police only and then it was taken by theIncome [-lax ]Department oltlcials on 27.08.20 19. He stated that atier going to the office of the Income Tax Departmenton 27.08.2019 midnight, again his statement was recorded in English underthreat and his signature was obtained. According to him, another statement was also obtained from him inEnglish language under threat on 28.08.2019. He stated that he and his fi:iends were let off on 28.08.2019 and thecash was retained by the Income Tax Department officials. He categorically asserted that the cash of Rs.5.00 Crores does notbelong to him and that it belongs to his employer, i.e., the petitioner inW.P.No.23023 of 2019. He therefore sought a direction to the respondents to return the saidamount to himself as he is responsible to account for the cash to hisemployer He stated that atier going to the office of the Income Tax Departmenton 27.08.2019 midnight, again his statement was recorded in English underthreat and his signature was obtained. According to him, another statement was also obtained from him inEnglish language under threat on 28.08.2019. He stated that he and his fi:iends were let off on 28.08.2019 and thecash was retained by the Income Tax Department officials. He categorically asserted that the cash of Rs.5.00 Crores does notbelong to him and that it belongs to his employer, i.e., the petitioner inW.P.No.23023 of 2019. He therefore sought a direction to the respondents to return the saidamount to himself as he is responsible to account for the cash to hisemployer 15. He also filed a notarized affidavit bearing date 04.09.2019 retractingthe statements made by him before the police and the Income TaxDepartment officials and asserting that under coercion the same wereobtained from him in English language which he does not properlyunderstand. This affidavit was sent by e-mail through a CharteredAccountant to the Income Tax Department e-mail and screen shots of the same are f,rled alongwith his affidavit. 16. Counsel for petitioner contended that mere possession ofcash of largeamount without documents regarding its ownership or possession cannot betreated as information relatable to a conclusion that it represented incomewhich would not have been disclosed by Vipul Kumar Agarwal for thepurposes of the Act and relied on decision in Commissioner of IncomeTax, Allahabad and others vs. Vindhya Metal Corporation and othersr. 17 . Counsel for petitioners also relied on D.G.I.T. vs. SpacewoodFurnitures (P) Ltd.2 and contended that warrant of authorization for searchand seizure can be issued if the authority granting it has information in itsFurnitures (P) Ltd.2 and contended that warrant of authorization for searchand seizure can be issued if the authority granting it has information in itspossession before it forms an opinion / reasonable belief that person is inpossession 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 not been or would not be disclosed; and there must be application of mind tothe material and the formation of opinion must be honest and bona fide.the material and the formation of opinion must be honest and bona fide. According to counsel for petitioners, the very fact that the money washanded over by the Task Force Police to the Income Tax Department on27.08.2019 and the authorization was issued for search on 28.08.2019suggesls that the authority giving authorization could not have given it for asearclr 1br seizure of the cash from Vipul Kumar Patel after the cash wasreceived by the Income Tax Department and the warrant of authorization isbased 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 additionalcounter-alfidavit. 19. They denied that Vipul Kumar Patel is not the employee of thepetitioner because he had stated in a statement made to the Inspector ofPolice, Commissioner's Task Force, West Zone Team, Hyderabad that he isthe Manager of a different firm by name M/s.P.Umeshchandra & Company 20. While admitting that a letter dt.26.08.2019 was received on27.08.2019 about the detention of Vipul Kumar Patel and his friends withcash of Rs.5.00 crores, it is admitted that the 2nd respondent along with herteam visited the office of the Inspector of Police, Commissioner's TaskForce, West Zone Team, Hyderabad to examine him on oath; that summonswere issued to all 7 persons and sworn statements were recorded underSection 131(14,) of the Act in which he stated that the cash belong [to] 19. They denied that Vipul Kumar Patel is not the employee of thepetitioner because he had stated in a statement made to the Inspector ofPolice, Commissioner's Task Force, West Zone Team, Hyderabad that he isthe Manager of a different firm by name M/s.P.Umeshchandra & Company 20. While admitting that a letter dt.26.08.2019 was received on27.08.2019 about the detention of Vipul Kumar Patel and his friends withcash of Rs.5.00 crores, it is admitted that the 2nd respondent along with herteam visited the office of the Inspector of Police, Commissioner's TaskForce, West Zone Team, Hyderabad to examine him on oath; that summonswere issued to all 7 persons and sworn statements were recorded underSection 131(14,) of the Act in which he stated that the cash belong [to] M/s.P.Umeshchandra & Sons. It is stated that he failed to producebooks/relevant documents relating to the cash found in his possession and soa warrant was issued under Section 132 of the Act on 28.08.2019 and theunexplained cash was seized from his hands.books/relevant documents relating to the cash found in his possession and soa warrant was issued under Section 132 of the Act on 28.08.2019 and theunexplained cash was seized from his hands. 21. It is stated that Vipul Kumar Patel did not mention that tlie cashbelongs to the petitioner M/s.Mectec and the latter had also not claimed thatthe cash belongs to them from the Income Tax Deparlment even after 50days from the date of seizure. 22, It is asserled that the provisions of Section 132 of the Act are attractcdwhere the person in possession of any money and such money either whollyor partly is income which has not been or would not be disclosed for thepurposes of the Income Tax Act, 1961 . 23. It is admitted that Vipul Kumar Patel had filed before this Court athird party affidavit dt.25.10.2019 and copy of his petition dt.04.09.2019retracting his earlier statement recorded under Section 132 of the Act on21 .08.20119 but it is stated that the contents of these affidavit/retractionpetition are contrary to the facts submitted by him on oath before the IncomeTax Department on 2'7.08.2019 and 28.08.2019. It is also stated that henever filed the said statements bcfbre the Department 24. It is also asserted that in the swom statements recorded fiom VipulKumar Patel under Section 131(1A) and 132(4) of the Act on 27.08.2019and 28.08.2019, he stated that he studied upto XII standard and that he canread, write, understand and speak in Hindi and that he can also read and understand English language and that the said statements were given withoutany threat, coercion or undue influence. Considcration bv the Court 25, Heard Sri V.Srinivas, leamed counsel for petitioner in W.P.No.23023of 2019, Sri V.V.Raghavan, learned counsel for petitioner in W.P.No.29297of 2019 and Sri Suryakaran Reddy, learned Additional Solicitor General ofIndia for respondents in both Writ Petitions. 26. [n these Writ Petitions, we are primarily concemed with the questionwhether the plea of the petitioners for return of the cash of Rs.5.00 crores tothem is legally valid or not. 27. But before that issue is dealt with, we shall first consider as to how thecash in question came into the custody of the Income Tax Deparlment. 28, The above amount of cash was seized from the custody of VipulKumar Patel is an admitted fact. The date of seizure according to thepetitioners is 23.08.2019, but the case ofthe respondent Nos.l and 2 is thatthe cash was seized on 26.08.20\9 by the Inspector of Police,Commissioner's Task Force, West Zone Team, Hyderabad; that on receivinga letter dt.26.08.2019 lrom the said Police on 21 .08.2019, the 2nd respondentand others went to the office of the Task Force Police and examined VipulKumar Patel on oath along with others and recorded sworn statements underSection I 3 I [( ]1 A) of the Act on 27 .08.2019. It is stated that thereafter becausehe did not explain the cash in his possession, warrant under Section 132 wasissued on 28.08.20 19. 28, The above amount of cash was seized from the custody of VipulKumar Patel is an admitted fact. The date of seizure according to thepetitioners is 23.08.2019, but the case ofthe respondent Nos.l and 2 is thatthe cash was seized on 26.08.20\9 by the Inspector of Police,Commissioner's Task Force, West Zone Team, Hyderabad; that on receivinga letter dt.26.08.2019 lrom the said Police on 21 .08.2019, the 2nd respondentand others went to the office of the Task Force Police and examined VipulKumar Patel on oath along with others and recorded sworn statements underSection I 3 I [( ]1 A) of the Act on 27 .08.2019. It is stated that thereafter becausehe did not explain the cash in his possession, warrant under Section 132 wasissued on 28.08.20 19. 29, Curiously, in the counter-ffidavits filed by respondent Nos.l and 2they do not give the date on which they took possession of the cash and hov,they got possession of the cash. 30. But, in the counter filed by the lnspector of Police, Commissioner'sTask Force, West Zone, Hyderabad in W.P.No.18720 of 2019 (the HabeasCorpus Writ),he stated at para no.7 as under: "7. ... ... ... I submitted a letter dt.27.08.2019 to tlte Principal Director ofIncome Tax (IT) Department, Ayakar Bhavan, Ilyderabad narrating theabove facts requesting him to take.further action in the matter. On thot, theDeputy Director o.f IncoForce Qffice and recorded their statements under Section ]31 o-f I.T. Actand requested ne to produce the alleged detenu be.fore tlrc PrincipalDirector of Income Tax (IT Department), Ayalrar Bhavan, Hyderabad forconducting further enquiry / iwestigation which is evident .fromMahazarnama, dt.27.08.2019. Accordingly, I prodlsedlbe-lJkgq ualong witlt cash belbre the Principal Department), Av-akr B hat'an, Hyderabad on tlrc sonte dqt- J'hg Lt.ol[icials rccorded their statements and seized the cq;]t iyeqt4leliapanchanama.. This shows that the cash, along with Vipul Kumar Patel and others,was handed over to the lncome Tax Deparlment by the Police on 27.08.2019itself by bringing them to the Aayakar Bhavan Ofhce of the Income TaxDepaftment in Hyderabad and statements were also recorded on the sameday by the officials of the said Depaftment. 31. The respondent Nos.l and 2 had filed Ex.R-S, a panchanama allegedlyprepared on 28.08.2019 along with their counter-affidavit referring to awarrant 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 witnesses, one from Nalgonda District and the other from Dabilpura (fromthe Old City of Hyderabad). It is stated that a warrant of authorizationdt.28.08.2019 issued to the 2'd respondent under Section 132 by thePrincipal Director of Income Tax (lNV), Hyderabad, that the said warrantrvas to search a place (the place of search is left blank) , that Vipul KumarPatel was present at that place at9 a.m. on 28.08.2019 and he read the sameand Rs.5.00 crores ofcash was seized. 32. How there could be a waffant issued under Section 132 by thePrincipal Director of Income Tax (INV), Hyderabad to the 2'd respondentwithout mentioning the place to be searched, is not explained by therespondents I and 2. How could there be a search at a place which is not<Jisclosed and left blank by the 2nd respondent and her team allegedly on28.08.2019 at 9 a.m.? Also, how coincidentally at the time of the allegedsearch the respondent No.2 and her team could find two panch witnessesfrorn Nalgonda District and the Old City of Hyderabad - both too distantfrom the Basheerbagh office of the Income Tax department, at this unknownplace of search, is equally a mystery. 33. This document, in our opinion, is clearly a fabricated document of asearch of an unknown/undisclosed place. We disbelieve that any such searchrvas in fact conducted at all by the 2nd respondent and her team to seize thecash. Why the 2n'r respondent should resort to fabricating this panchanamaEx.R-8 is obvious i.e., to make out a case for seizure and retention of cashillegally by giving a colour oflegal validity. 33. This document, in our opinion, is clearly a fabricated document of asearch of an unknown/undisclosed place. We disbelieve that any such searchrvas in fact conducted at all by the 2nd respondent and her team to seize thecash. Why the 2n'r respondent should resort to fabricating this panchanamaEx.R-8 is obvious i.e., to make out a case for seizure and retention of cashillegally by giving a colour oflegal validity. 34. We deprecate this conduct ofthe 2"d respondent strongly. 35. Therefore we record a finding that the cash ol Rs.5.00 crores wasreceived by the Income Tax Department only frorn the Task Force Policeafter seizure by them and the Panchanama d1.28.08.2019 records false factsand it is a fabricated one. 36. Section 132 ofthe Act deals with procedure for search and seizure ofcash or goldor[jewellery ]or other valuable things. This Sectioncontemplates that the competent authority in consequence of information inhis possession must have 'reason to believe' inter alia that a person is inpossession of cash etc., and such cash represents either wholly or partlyincome which has not been or would not be disclosed for the purposes of theAct and he may authorize another Offlcer of the Department lower in rank toenter and search any building etc., where he has reason to suspect that booksof account or other documents, money, bullion, [jewellery ]or other valuablearticle or thing are kept and seize the same. 37. In Spacewood Furnitures Pvt. Ltd. and others (2 supra), the Supreme Court dealt with the exercise of power by the competent authorityto issue waffant for authorization for search and seizure and declared : "8. [The ][principles ]that can be deduced from the aforesaid decisionsof this Court u,hich continue to hold thefield --itllout any departure may besummarised as follows:8.1. The authoritv must have i4formation in ils possession on llrcbasis qf which a reasonable belie-f can be.founded that-a) the person concerned has omitted or failed to produce books o.l'account or other docunrenls for production of which summons or noticehad been issued Or such person will not produce such books of account or otherdoatments even if summons or notice is issued to him Or (b) sttch oerson is in possession o-f anv monev. bullion. iewellerv or other valuable article --llich reDresents cither wholly or partly income orrolt'has not been or would notlosecl.rolt'has not been or would notlosecl. 8.2. Such infbrntutiott musl be in[possession ]of the out horis ed olfic ialbafore llrc opinion is /brntccl 8.3. There must be aoolication ol min(l lo lhe material and the/brnmtion of opinion must be honest and bona {ide. Consideration of anyefiraneous or irreletanl nalerial will vitiate the belief/satis.faction. ["](emphasis supplied). 38. In our opinion, there were no circumstances existing for the PrincipalDirector of Income Tax (lNV), Hyderabad to issue any walrant for search orseizure under Section 132 of the Act on 28.8.2019 when the cash had beenhanded over to the Income Tax Department by the Task Force Police on27.8.2019 and therefore the seizure of the cash from Vipul Kumar Patel bythe respondents and its retention till date by them [is ]per se lllegal. 39. ln our opinion, intimation by the Police to the [Incorne ][Tax]Department on 27.08.2019 would not conf'er [jurisdiction ]on the lncome [Tax]Depaftnlent to detain and withhold cash, that too by [issuance ][of ][an invalid]search rvarrant under Section 132 ot'the Act; and there [is ][no ][basis ][lor ][the]Income Tax Department to invoke the [provisions ][of ][Section 132, ][l32A ][and]l32B ol the Act since there [is no ]['reason ][to ][believe' that ][the ][assessee ][has]violated any provision of Law. 40. This is because, as [held ][in ][Vindhya Metal ][Corporation and ][others]( I supra), mere possession of cash of [large ][quantity, ][without ][anyhing ][more,]could hardly be said to [constitute ][information which could ][be ][treated ][as] 39. ln our opinion, intimation by the Police to the [Incorne ][Tax]Department on 27.08.2019 would not conf'er [jurisdiction ]on the lncome [Tax]Depaftnlent to detain and withhold cash, that too by [issuance ][of ][an invalid]search rvarrant under Section 132 ot'the Act; and there [is ][no ][basis ][lor ][the]Income Tax Department to invoke the [provisions ][of ][Section 132, ][l32A ][and]l32B ol the Act since there [is no ]['reason ][to ][believe' that ][the ][assessee ][has]violated any provision of Law. 40. This is because, as [held ][in ][Vindhya Metal ][Corporation and ][others]( I supra), mere possession of cash of [large ][quantity, ][without ][anyhing ][more,]could hardly be said to [constitute ][information which could ][be ][treated ][as] sufficient by a reasonable person,, leading to [an ][inference ][that ][it ][was income]which would not have been disclosed by the [person ]in [possession ][for]purpose of the Income Tax Act. 41, The petitioner in Writ Petition No.23023 of 2019 is the only claimantfor the cash which was tbund in the hands of one of its employees, VipulKumar Patel. ln Writ Petition No.29297 of 201 t he also states that the cashbelongs to the petitioner in Writ Petition 23023 of 2019 and that he is their'employee from 01.08.2019. There is no police case about the genuinenessor other"wise of the cash. 42. The stand in the counter-affidavit that Vipul Kumar Patel did notproduce any letter furnished by the petitioner in Writ Petition No.23023 of2019 that he is its employee before the Income Tax Department thoughopporlunity was given to him allegedly on five occasions, and therefbre he isnot its employee cannot be accepted in the light ofthe third-party affidavit ofVipul Kumar Patel filed in Writ Petition No.23023 of 2019 enclosing copyof appointment letter of Vipul Kumar Patel issued on 01.08.2019 along rvithsalary slips for four months. 43. lt is not the case of the respondents i and 2 that there was any claimmade by M/s.P.Umeshchandra & Company or M/s. P.Umeshchandra &Sons, who they clain-r was mentioned by Vipul Kumar patel as owner olthecash before the Task Force police and in statements under Sec. 131(lA) orSec.132 of the-Act, before the Income Tax Department for the cash ofRs.5.00 crores which is in custody of the Income Tax Department tiom28.08.2019 tilldate. 44. Now, both M/s.Mectec, the petitioner in W.P.No.23023 of 2019 andVipul Kumar Patel are asserting that the said cash belongs only toM/s.Mectec. 45. It was no doubt open to the Income Tax Department, if there was anyrival claim for the cash of Rs.5.00 crores by M/s.Umeshchandra & Sons, toflle an Inter Pleader suit in a competent Civil Court invoking Order XXXVof C.P.C., but there was no occasion for it to do so in the absence of anyclaim before it by M/s.P.Umeshchandra & Sons or M/s P.Umeshchandra &Sons 46. In the absence ofany rival claim for the cash amount of Rs.5.00 croresby any third pa(y, the respondents cannot imagine a third party claimant andon that pretext retain the cash indefinitely from M/s.Mectec therebyviolating Article 300-A of the Constitution of India. 47. We may also point out that a return of income would be filed byM/s.Mectec, the petitioner in W.P.No.23023 of 2019 for the annual year2019-20 only after 31" March, 2020. The explanation of the cash transactioncan be expected to be found only after such retum of income is filed by thepetitioner. There is no basis for the respondents to presume that petitionerwould not disclose the cash transaction of Rs.5.00 crore in its Income Taxreturn which was not filed by the alleged date of seizure of the cash by thePolice, i.e., 26.08.201 9. 48. As rightly contended by the petitioner, an income tax inspectionandi ol investigation rvould be permissible only in respect of [a ][past ]event butnot for possible future contingencies; and if the petitioner was going to disclose and explain the cash of Rs.5.00 crore in its income tax returns [fbr]2019-20, there was no basis for proceeding with any coercive action againstthe petitioner such as retention of cash 48. As rightly contended by the petitioner, an income tax inspectionandi ol investigation rvould be permissible only in respect of [a ][past ]event butnot for possible future contingencies; and if the petitioner was going to disclose and explain the cash of Rs.5.00 crore in its income tax returns [fbr]2019-20, there was no basis for proceeding with any coercive action againstthe petitioner such as retention of cash 49. Retention of cash by the respondents even before the commencementof an offence under the Income Tax Act, 1961, i.e., possible future non-disclosure by the petitioner in Writ Petition No.23023 ol 2019 in its incometax return which would be filed after 31" March,2020 would clearly violateArticle 300-A of the Constitution of lndia. 50. So, even the statements recorded under Section 132 of the Act fl'ornVipul Kumar Patel cannot be relied upon by the respondents to contend thathe is working with M/s. P. Umesh Chandra and Sons or M/s. P. UrneshChandra and Company and not the petitioner. 51. In these circumstances, the very seizure and retention of the cashamount of Rs.5.00 crore by the respondents lrom 27.08.2019 till date isillegal and unsustainable. 52. The learned Additional Solicitor General initially sought to placereliance on proviso to Section i32B(1Xi) and raised a plea that the petitionershould hle an application for retum of the cash before the Income TaxDepartment and then it wouid adjudicate the issue of ownership of the cash.When we pointed out to him that the 'Assessing Officer' of both petitionersis in Gujarat State, and the cash was seized at Hyderabad in the State ofTelangana, and the Assessing Officer of petitioners in Gu.jarat would haveno knowledge of the circumstances leading to the seizure of the cash at Hyderabad, and also would not have custody of the cash to be returned to thepetitioners, ,he drd not press rhe said contention. 53' For a, the afbresaid reasons, the writ petitions are a,owed; the actionofthe respondents in conducting panchanama dt.2g.0g.2019 and seizing cashol Rs'5 00 crores from vipul Kumar patel, employee of the petitioner inw'P'No'23023 0f 201g, and retaining it till date, is illegal and urtra vires theprovisions of the Income Tax Act, 1961 and arsd violative of Art. 14 and300-4 of the constitution of India ; the respondents are directed to forbearfrom conducting any further enquiry pursuant to the said panchanama underthe said Act; and they shall refund within 4 weeks from date of receipt ofcopy of this order the said cash of Rs.5.00 crores to the petitioner inw'P.No.23023 of 2019 with interest at 12yo p.a. from 29.0g.2019 till date ofpayment to the said petitioner. The respondents shall also pay costs ofRs.20,000/- to the petitioner in W.P.No.23023 of 2019. 54' Pending miscellaneous petitions, if any, in these writ petitions shallstand closed. w.P.NO.23023 0F 2019 Costs Quantified by Hon'ble Court (That theRespondents in W.P.No.23023 o'f 2019 aredirected to pay costs of Rs.20,0001 (RupeesRespondents in W.P.No.23023 o'f 2019 aredirected to pay costs of Rs.20,0001 (RupeesTwenly Thousand only) to the Petitioner inW.P.No.23023 of 2019.W.P.No.23023 of 2019. 20,000-00TOTAL20,000-00 To, $D/-K.SAtLESHtAS S I STAI.IT R^EG I STRARLh |-Y,-..-SECTION OFFICER //TRUE COPY// The Director of lncome Tax (lnvestigation), Hyderabad 1 The Deputy Director of lncome Tax, Unit - I (3), Hyderabad. 2 3The Secretary, Ministry of Finance, Department of Direct Taxation (Finance),Union of lndia, New Delhi.Union of lndia, New Delhi. One CC to Sri Vedula Srinivas Advocate CC to Sri Vedula Srinivas Advocate to Sri Vedula Srinivas Advocate Sri Vedula Srinivas Advocate Vedula Srinivas Advocate 20,000-00TOTAL20,000-00 To, $D/-K.SAtLESHtAS S I STAI.IT R^EG I STRARLh |-Y,-..-SECTION OFFICER //TRUE COPY// The Director of lncome Tax (lnvestigation), Hyderabad 1 The Deputy Director of lncome Tax, Unit - I (3), Hyderabad. 2 3The Secretary, Ministry of Finance, Department of Direct Taxation (Finance),Union of lndia, New Delhi.Union of lndia, New Delhi. One CC to Sri Vedula Srinivas Advocate CC to Sri Vedula Srinivas Advocate to Sri Vedula Srinivas Advocate Sri Vedula Srinivas Advocate Vedula Srinivas Advocate 4.One CC to Sri Vedula Srinivas Advocate CC to Sri Vedula Srinivas Advocate to Sri Vedula Srinivas Advocate Sri Vedula Srinivas Advocate Vedula Srinivas Advocate 5.One CC to Sri Suryakiran Reddy, Additional Solicitor General of lndia 6.One CC to Sri V. V. Raghavan, Advocate [(OPUC)]7.Two CD Copies5.One CC to Sri Suryakiran Reddy, Additional Solicitor General of lndia 6.One CC to Sri V. V. Raghavan, Advocate [(OPUC)]7.Two CD Copies HIGH COURT DATED: [2811212020] 11 [5iA]/€irJ^)'Jc'ro!)29DEC2{mo*.t{DF.s PT.iC COMMON ORDERWP NOS: 23023 AND 29297 OF 2019 ALLOWING THE WP NO.23023 OF 2019WITH COSTS & ALLOWING THE WP NO.29297 OF 2019WITHOUT COSTS s$lQcspieA)r,q\,-\""-*