Wp/31142/2007 Of P.murugesan v. Director Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRASDated : 3-7-2008 Coram The Honourable Mr.Justice N.PAUL VASANTHAKUMARW.P.No.31142 of 2007M.P.No.1 of 2007P. Murugesan...PetitionerVs.1.Director of Income Tax(Investigation), Unit-II (1),New Building, 2nd Floor,46, Mahatma Gandhi Road,Chennai - 600 034.2.Deputy Director of Income Tax (Investigation),46, Mahatma Gandhi Road,Chennai - 600 034.3.Assistant Director of Income Tax (Inv. & Admn.)Williams Road,Tiruchirapalli - 620 001...Respondents Prayer: This writ petition is filed under Article 226 ofConstitution of India, praying this Court to issue a writ of mandamusdirecting the second respondent to release/return the amount ofRupees One Crore, seized from the petitioner on 25.11.2006 and RupeesFour Lakhs on 28.11.2006. By consent of both sides, the writ petition is taken up forfinal disposal. https://hcservices.ecourts.gov.in/hcservices/ 2.Prayer in the writ petition is to issue a writ of mandamusdirecting the respondents to release/return the amount ofRs.1,00,00,000/- (Rupees One Crore) seized from the petitioner on25.11.2006 and Rs.4,00,000/- (Rupees Four Lakhs) seized on 28.11.2006. 3.The case of the petitioner is that the Chairman of SriPonnaiah Ramajeyathammal Educational and Charitable Trust, which isrunning 14 educational institutions in Thanjavur and Trichy District,went to New Delhi on 23.11.2006 with liquid cash, for the purpose ofpurchasing a flat at East Patel Nagar, New Delhi, with a view to havean office-cum-guest house at New Delhi. He contacted one Sri GaneshEstate, New Delhi, and the said purchase deal having notmaterialised, he returned to Chennai on 25.11.2006. On arrival atthe domestic Airport at Chennai, at about 11.00 p.m. on 25.11.2006,the officials attached to the Income Tax Department intercepted theChairman and seized the cash carried by him. The Department issuedsummon under section 131 of the Income Tax Act, 1961, on the same dayand a sworn statement was recorded from the Chairman. A Panchanamawas issued by the first respondent along with cash seizure andsimultaneous search was conducted by the Income Tax officials on26.11.2006. On 28.11.2006 summon was issued to the Chairman by thefirst respondent. Panchanama and prohibitory order was issued undersection 132(3) by the Income Tax authorities to the bank officialsand freezed the bank account of the Trust and the Chairman. On1.12.2006, a sworn statement was recorded and the office premises ofthe Trust was sealed and documents were also seized. After enquiry,the prohibitory order was lifted by the department permitting thepetitioner and the Trust to operate the bank accounts. 4.It is stated in the affidavit that on 13.3.2007, thechairman wrote a letter to the respondent department and requested torelease the amounts seized. Since there was no response, on21.8.2007 a reminder was sent. Having not received any reply, thiswrit petition is filed contending that there was no material beforethe Income tax authorities for initiating proceedings under section132 of the Income Tax Act, 1961, and sufficient records were placedbefore the Director of Income Tax (Investigation), who authorisedsearch and seizure. It is further stated in the affidavit thatmere possession of cash could not be treated as an informationsufficient to infer that the cash represented income which was notdisclosed. There is no material for exercising the power undersection 132 and therefore there was no reason to believe that thepetitioner has not disclosed his income. It is the further case ofthe petitioner that for retaining the money for a period exceeding 60days by invoking section 132 of the Income Tax Act, an order ofhigher authority or by the Central Board of direct taxes is requiredas per section 132(9) and no such order was passed and therefore theamount cannot be retained after 60 days which is liable to bereturned. 5.The respondents filed counter affidavit by stating that on25.11.2006 information was received from the Area Intelligence Unit,New Delhi, that the petitioner who was travelling in IC 540, was inpossession of huge cash and therefore he was intercepted at ChennaiAirport. A sworn statement was recorded from him by the IntelligenceOfficer, Area Intelligence, Chennai, under section 131 of the IncomeTax Act, 1961. The petitioner stated that he was carrying an amountof Rs.1.05 crores in cash which was withdrawn from the corpus fund ofSri Ponnaiah Ramajeyathammal Educational and Charitable Trust and thesaid sum was received as donation from the public, which includesfees collected from the students of educational institutions. Whenthe petitioner was questioned as to whether he carried the cash fromChennai to New Delhi on 23.11.2006 by Jet Airways, he stated that hecarried the cash in two bags, one hand baggage and another checked inbaggage. A report was obtained from Jet Airways and it was foundtherefrom that the petitioner carried only a hand baggage and nochecked in baggage was carried by him. It is further stated that thecash found was mostly in the denomination of Rs.1000 and Rs.500bundles, which carry the seal of banks at North India like New Delhi,Ajmeer, etc. The statement given by the petitioner was not cogentand self contradictory. In the sworn statement recorded undersection 131 at the time of interception, petitioner stated that thesaid cash was unaccounted. Based on the entire statements andcontradictions including the admission, an authorisation for searchand seizure was issued. Consequently, the residence of thepetitioner/Chairman and Trust office premises were surveyed/searchedand various books and accounts and documents were impounded. It wasfound that the Trust did not maintain regular books of accounts forthe moneys received from the parents/alleged public. There wasintermingling of funds between the Trust and the Trustees anddiversion of funds from the Trust to individual accounts. On thebasis of the above materials and findings substantial legal issuearose as to how the public charitable trust funds were keptunaccounted, diverted to the trustees for their personal use, whichare to be determined during regular assessment. 6.It is further stated that appraisal report was furnished tothe third respondent, who is also the Assessing Officer andassessment related proceedings are in progress. A Panchanama wasissued on 26.11.2006 and on 28.11.2006 summon was issued by thesecond respondent. Since the post search enquiries were notcompleted, some of the bank accounts were prohibited from operationwith effect from 9.2.2007 under section 132(3), which wassubsequently allowed for operation. Petitioner requested the DeputyDirector of Income Tax to release the cash seized. Since thepetitioner has taken inconsistent stand stating that the amountcarried by him was unaccounted and in the request for the release ofthe amount it was stated that it was accounted, the case was notifiedto Central Circle, Madurai and the assessment proceedings are in progress. Therefore, the department could not act on the letters ofthe petitioner to release the amount. There is a prima facie caseagainst the petitioner as the explanations given by the petitionerare self-contradictory. The contention of the petitioner that thedepartment cannot retain money exceeding 60 days without permissionfrom the appropriate authorities under section 132(9) is denied bystating that section 132(9) enables making of copies or extracts anddoes not speak about the retention of assets. Assets seized undersection 132(1) can be retained by the Department without taking anyapproval from any authority upto the completion of the search relatedassessments. Stating all the above contentions in the counteraffidavit, the respondents prayed for dismissal of the writ petition. progress. Therefore, the department could not act on the letters ofthe petitioner to release the amount. There is a prima facie caseagainst the petitioner as the explanations given by the petitionerare self-contradictory. The contention of the petitioner that thedepartment cannot retain money exceeding 60 days without permissionfrom the appropriate authorities under section 132(9) is denied bystating that section 132(9) enables making of copies or extracts anddoes not speak about the retention of assets. Assets seized undersection 132(1) can be retained by the Department without taking anyapproval from any authority upto the completion of the search relatedassessments. Stating all the above contentions in the counteraffidavit, the respondents prayed for dismissal of the writ petition. 7.The learned Senior Counsel appearing for the petitionercontended that the source of the amount was already informed andthere was no contradiction about the same and on any event, theamount cannot be retained by the respondents beyond the period of 60days. The learned Senior counsel cited a Division Bench judgment ofthis Court reported in 166 ITR 244 (K.V.Krishnaswamy Naidu & CO. v.Commissioner of Income Tax) to substantiate his contention and theprocedural safeguards given under the Act is to be strictly compliedwith for the validity of the orders. Relying on the said judgmentthe learned senior Counsel submitted that the retention of the amountbeyond 60 days is unauthorised and the respondents are bound toreturn the amount subject to assessment proceedings. 8.The learned counsel for the respondents on the other handsubmitted that prima facie case is made out against the petitionerthat the amount carried by him was unaccounted and there is inherentcontradictions in the statements given by the petitioner by statingthat the amount was carried from Chennai to New Delhi in twobaggages, however, the Jet Airways stated that the petitioner carriedonly one hand baggage while he was travelling from Chennai to NewDelhi; the Rs.1000 and Rs.500 bundles carried the seal of the banksin the north India like Ajmeer, New Delhi; and therefore therespondents ordered assessment proceedings and the same is notifiedto the Central Circle, Madurai and the same are in progress.Therefore, the department cannot return the amount seized beforefinalising the assessment proceedings. With regard to the decisionrelied on by the Senior Counsel for the petitioner, the learnedcounsel for the respondents submitted that the Division Bench ofKerala High Court in the decision reported in (2006) 283 ITR 154(Ker) (Dr.N.S.D.Raju v. Director General of Income-tax) consideredsimilar issue and taking note of the amendment issued in sub-section(9A) of section 132 of the Income Tax Act, 1961, held that theauthorised officer or his collegues in the investigation wing of theIncome Tax Department, who is also an assessing officer as persection 2(7A) of the Act, has power to retain the seized books ofaccount and documents, etc. The time upto which the investigationwing can retain the money /document is upto the completion of assessment proceedings and therefore retention of seized document andmoney is legal. The Division Bench judgment of this Court wasdistinguished by the Division Bench judgment of the Kerala High Courtand rejected the similar claim for the return of the money. 9.I have considered submissions of the learned Senior Counselfor the petitioner as well as the learned counsel for the respondents. assessment proceedings and therefore retention of seized document andmoney is legal. The Division Bench judgment of this Court wasdistinguished by the Division Bench judgment of the Kerala High Courtand rejected the similar claim for the return of the money. 9.I have considered submissions of the learned Senior Counselfor the petitioner as well as the learned counsel for the respondents. 10.Admittedly there was search and seizure of documents andmoney. The assessment proceedings have been initiated due to theinconsistent stand taken by the petitioner with regard to the sourceof the money as to whether it was accounted or unaccounted.Admittedly the amount was seized on 25.11.2006 and 28.11.2006. Sincethere was inherent contradictions in the statements of thepetitioner, the said amount was remitted in the Reserve Bank ofIndia, Chennai on 28.11.2006, pending investigation. Originalchallan for the said remittance was also produced before this Courtand a xerox copy was handed over to the learned Senior Counsel forthe petitioner during the course of the arguments. Now assessmentproceedings are admittedly in progress as the case was notified toCentral Circle, Madurai, and is yet to be completed. Section 132(9A) which was substituted by the Finance Act, 2002, with effect from1.6.2002 is as follows: "132(9A). Where the authorised officer has nojurisdiction over the person referred to in clause(a) or clause (b) or clause (c) of sub-section(1), the books of account or other documents, orany money, bullion, jewellery or other valuablearticle or thing (hereafter in this section and insections 132A and 132B referred to as the assets)seized under that sub-section shall be handed overby the authorised officer to the Assessing Officerhaving jurisdiction over such person within aperiod of sixty days from the date of which thelast of the authorisations for search was executedand thereupon the powers exercisable by theauthorised officer under sub-section (8) or sub-section (9) shall be exercisable by such AssissingOfficer."From the perusal of the above provision it is evident that the booksof account or other document or any money etc., seized under sub-section (1) of section 132 shall be handed over by the authorisedofficer to the Assessing Officer having jurisdiction within a periodof 60 days and thereafter the powers shall be exercised by suchassessing officer. 11.Here in this case, the authorised officer is the thirdrespondent, who was also the assessing officer and on transfer, thematter is now pending with the assessing officer viz., CentralCircle, Madurai, and therefore retaining the money beyond 60 days is not in violation of the above referred rule. The third respondentwas the authorised officer as well as the assessing officer as perSection 2(7A) of the Income Tax Act, 1961 and now the assessmentproceedings are transferred to the Assessing Officer, Madurai CentralCircle, under section 120(2) of the Income Tax Act, 1961, by theDirector of Income Tax and all the seized documents are handed overto the Assessing Officer, Madurai. The assessing Officer can retainthe books, etc., seized as per section 132(1) of the Income Tax Act,1961, till the completion of the assessment proceedings. Hence theretention of the books and money by the assessing officer isperfectly legal and valid. The assessment proceedings will have tobe completed and after completion of the assessment proceedings, ifthe petitioner succeeds he is entitled to get refund of the amountsseized with interest under section 244 of the Income Tax Act, 1961.Now the amount is under the safe custody of the Reserve Bank of India. 12.From the letter of the Deputy Commissioner of Income Tax,Central Circle, Madurai-2, it is seen that on the basis of thereports received from the DDIT Unit-21, Chennai, on the searchconducted, notices under section 153A were issued to the petitioneron 15.10.2007 and notices under section 153C were issued to the Truston 13.3.2008 and they have sought for time to file returns of income.It is also stated therein that the assessment have to be completedbefore 31.12.2008 as per law. As the assessment proceedings have tobe completed within a period of six months, no direction could beissued to return the amount as admittedly the investigation was alsoconducted by the assessing officer himself and the same is nowpending with the Assessing Officer, Madurai, with all books ofaccounts. The transfer order was passed on 28.6.2007. Prior to thesaid date the matter was with the Assessing Officer, Trichy, who isnone other than the third respondent. The investigating officer andthe assessing officer being one and the same officer, the judgmentrelied on by the learned Senior Counsel for the petitioner reportedin 166 ITR 244 (cited supra) will not help the petitioner in anymanner and the facts in this case is identical to the facts of thecase arose before the Division Bench of Kerala High Court reported in(2006) 283 ITR 153 (Ker) (cited supra). 13.In the light of the above findings, I hold, no case is madeout by the petitioner to issue a writ of mandamus as sought for.There is no merit in the writ petition and the writ petition isdismissed. No costs. Connected miscellaneous petition is alsodismissed.sd/-Asst.Registrar /true copy/ Sub Asst.Registrar vr To 1.The Director of Income Tax(Investigation), Unit-II (1),New Building, 2nd Floor, 46, Mahatma Gandhi Road,Chennai - 600 034.New Building, 2nd Floor, 46, Mahatma Gandhi Road,Chennai - 600 034. 2.The Deputy Director of Income Tax (Investigation),46, Mahatma Gandhi Road, Chennai - 600 034.46, Mahatma Gandhi Road, Chennai - 600 034. 3.The Assistant Director of Income Tax (Inv. & Admn.)Williams Road, Tiruchirapalli - 620 001Williams Road, Tiruchirapalli - 620 001 +1 cc To Ms.P.Kavitha, Advocate, SR.35063 1 cc To Mr.Pushya Sitaraman, Standing Counsel for I.T.Cases, SR.34649 W.P.No.31142 of 2007 bvn [co]gkg/17.7gkg/17.7