Wp(C)/1389/2012 Of Sree Balaji Refinery v. Deputy Commissioner Of Income Tax (Cental Circle)

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC FRIDAY, THE 24TH DAY OF FEBRUARY 2012/5TH PHALGUNA 1933WP(C).No. 1389 of 2012 (W) - ------------------------------- PETITIONER(S):------------------ SREE BALAJI REFINERY10/1134/1, NEW CHURCH ROAD, TRICHUR 680 001REPRESENTED BY ITS PARTNER - SUNIL JAIHIND. BY ADVS.SRI.V.V.ASOKAN SRI.R.JAIKRISHNA RESPONDENT(S): -------------------- 1. DEPUTY COMMISSIONER OF INCOME TAX (CENTAL CIRCLE)OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX (CENTRAL CIRCLE), AAYAKAR BHAVAN, S.T NAGAR,TRICHUR - 680 001. 2. COMMISSIONER OF INCOME TAX (CENTRAL)INCOME TAX DEPARTMENTOFFICE OF THE COMMISSIONER OF INCOME TAX (CENTRAL)5TH FLOOR,KADAMAKULATHY TOWERS, M.G ROAD,COCHIN 682 011. 3. COMMISSIONER OF INCOME TAX (APPEALS) SAN JAO TOWER, IS PRESS ROADERNAKULAM, KOCHI - 682 018. BY SRI.JOSE JOSEPH, SC, INCOME TAX THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON24-02-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 1389 of 2012 (W) -------------------------------- APPENDIX======== PETITIONER'S EXHIBITS =============== P1 COPY OF THE PANCHANAMMA - Date 15.01.2009 P2COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2003-04 ISSUED BY THE 1ST RESPONDENT. DATE 31.12.201004 ISSUED BY THE 1ST RESPONDENT. DATE 31.12.2010 P2 (a)COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05 ISSUED BY THE 1ST RESPONDENT.DATE 31.12.201005 ISSUED BY THE 1ST RESPONDENT.DATE 31.12.2010 P2 (b)COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2005-06 ISSUED BY THE 1ST RESPONDENT. DATE 31.12.201006 ISSUED BY THE 1ST RESPONDENT. DATE 31.12.2010 P2 (c)COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2006-07 ISSUED BY THE 1ST RESPONDENT. DATE 31.12.201007 ISSUED BY THE 1ST RESPONDENT. DATE 31.12.2010P2 (d)COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2007-08 ISSUED BY THE 1ST RESPONDENT. DATE 31.12.201008 ISSUED BY THE 1ST RESPONDENT. DATE 31.12.2010P2 (e)COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2008-09 ISSUED BY THE 1ST RESPONDENT. DATE 31.12.201009 ISSUED BY THE 1ST RESPONDENT. DATE 31.12.2010P2 (f)COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2009-10 ISSUED BY THE 1ST RESPONDENT. DATE 31.12.201010 ISSUED BY THE 1ST RESPONDENT. DATE 31.12.2010P2 (g)COPY OF THE RECTIFICATION ORDER FOR THE ASSESSMENT YEAR2003-04 ISSUED BY THE 1ST RESPONDENT.DATE 21.02.20112003-04 ISSUED BY THE 1ST RESPONDENT.DATE 21.02.2011 P2 (h)COPY OF THE RECTIFICATION ORDER FOR THE ASSESSMENT YEAR2004-05 ISSUED BY THE 1ST RESPONDENT. DATE 11.04.2011.2004-05 ISSUED BY THE 1ST RESPONDENT. DATE 11.04.2011. P2 (i)COPY OF THE RECTIFICATION ORDER FOR THE ASSESSMENT YEAR2005-06 ISSUED BY THE 1ST RESPONDENT. DATE 11.04.2011.2005-06 ISSUED BY THE 1ST RESPONDENT. DATE 11.04.2011. P2 (j)COPY OF THE RECTIFICATION ORDER FOR THE ASSESSMENT YEAR2006-07 ISSUED BY THE 1ST RESPONDENT. DATE 11.04.2011.2006-07 ISSUED BY THE 1ST RESPONDENT. DATE 11.04.2011.P3COPY OF THE BANK RECEIPT EVIDENCING REMITTANCE OF THEASSESSED TAX WITH INTEREST FOR AY -2006-07.DATE 26.04.2011.ASSESSED TAX WITH INTEREST FOR AY -2006-07.DATE 26.04.2011. P3 (a)COPY OF THE BANK RECEIPT EVIDENCING REMITTANCE OF THEASSESSEDTAXWITHINTERESTFORAY-2007-08.DATE 28.02.2011ASSESSEDTAXWITHINTERESTFORAY-2007-08.DATE 28.02.2011P3 (b)COPY OF THE BANK RECEIPT EVIDENCING REMITTANCE OF THEASSESSEDTAXWITHINTERESTFORAY-2008-09.DATE 22.02.2011ASSESSEDTAXWITHINTERESTFORAY-2008-09.DATE 22.02.2011 P2 (j)COPY OF THE RECTIFICATION ORDER FOR THE ASSESSMENT YEAR2006-07 ISSUED BY THE 1ST RESPONDENT. DATE 11.04.2011.2006-07 ISSUED BY THE 1ST RESPONDENT. DATE 11.04.2011.P3COPY OF THE BANK RECEIPT EVIDENCING REMITTANCE OF THEASSESSED TAX WITH INTEREST FOR AY -2006-07.DATE 26.04.2011.ASSESSED TAX WITH INTEREST FOR AY -2006-07.DATE 26.04.2011. P3 (a)COPY OF THE BANK RECEIPT EVIDENCING REMITTANCE OF THEASSESSEDTAXWITHINTERESTFORAY-2007-08.DATE 28.02.2011ASSESSEDTAXWITHINTERESTFORAY-2007-08.DATE 28.02.2011P3 (b)COPY OF THE BANK RECEIPT EVIDENCING REMITTANCE OF THEASSESSEDTAXWITHINTERESTFORAY-2008-09.DATE 22.02.2011ASSESSEDTAXWITHINTERESTFORAY-2008-09.DATE 22.02.2011 P3 (c)COPY OF THE BANK RECEIPT EVIDENCING REMITTANCE OF THEASSESSED TAX WITH INTEREST FOR AY -2009-10.DATE 11.04.2011.ASSESSED TAX WITH INTEREST FOR AY -2009-10.DATE 11.04.2011.P4COPY OF THE APPEAL FILED BEFORE THE 3RD RESPONDENT FOR THEASSESSMENT YEAR 2003-04. DATE 15.01.2011ASSESSMENT YEAR 2003-04. DATE 15.01.2011P4 (a)COPY OF THE APPEAL FILED BEFORE THE 3RD RESPONDENT FOR THEASSESSMENT YEAR 2004-05. DATE 15.01.2011ASSESSMENT YEAR 2004-05. DATE 15.01.2011 P4 (b)COPY OF THE APPEAL FILED BEFORE THE 3RD RESPONDENT FOR THEASSESSMENT YEAR 2005-06. DATE 15.01.2011ASSESSMENT YEAR 2005-06. DATE 15.01.2011 nk WP(C).No. 1389 of 2012 (W) -------------------------------- P4 (c)COPY OF THE APPEAL FILED BEFORE THE 3RD RESPONDENT FOR THEASSESSMENT YEAR 2006-07. DATE 15.01.2011ASSESSMENT YEAR 2006-07. DATE 15.01.2011 P4 (d)COPY OF THE APPEAL FILED BEFORE THE 3RD RESPONDENT FOR THEASSESSMENT YEAR 2007-08. DATE 15.01.2011ASSESSMENT YEAR 2007-08. DATE 15.01.2011 P4 (e)COPY OF THE APPEAL FILED BEFORE THE 3RD RESPONDENT FOR THEASSESSMENT YEAR 2008-09. DATE 15.01.2011ASSESSMENT YEAR 2008-09. DATE 15.01.2011 P4 (f)COPY OF THE APPEAL FILED BEFORE THE 3RD RESPONDENT FOR THEASSESSMENT YEAR 2009-10. DATE 15.01.2011ASSESSMENT YEAR 2009-10. DATE 15.01.2011 P5COPY OF THE REQUEST GIVEN BY THE PETITIONER BEFORE THE 2NDRESPONDENT. DATE 05.08.2009RESPONDENT. DATE 05.08.2009 P6COPY OF THE REPLY RECEIVED BY THE PETITIONER FROM THE 2NDRESPONDENT. DATE 16.11.2010.RESPONDENT. DATE 16.11.2010. P6 (a)COPY OF THE COMMUNICATION RECEIVED BY THE PETITIONERFROM THE OFFICE OF THE 2ND RESPONDENT. DATE 01.11.2011.FROM THE OFFICE OF THE 2ND RESPONDENT. DATE 01.11.2011. P7COPY OF THE REPLY GIVEN BY THE 1ST RESPONDENT.DATE 18.11.2011.DATE 18.11.2011. P7 (a)COPY OF THE COMMUNICATION RECEIVED BY THE ASSESSINGAUTHORITY FROM THE OFFICE OF THE 2ND RESPONDENT.DATE 01.11.2011.AUTHORITY FROM THE OFFICE OF THE 2ND RESPONDENT.DATE 01.11.2011. P8COPY OF THE RECTIFICATION ORDER OF THE 1ST RESPONDENT (AY2005-06) DATE 19.01.20122005-06) DATE 19.01.2012 P8 (a)COPY OF THE RECTIFICATION ORDER OF THE 1ST RESPONDENT (AY2006-07)DATE 19.01.20122006-07)DATE 19.01.2012 P8 (b)COPY OF THE RECTIFICATION ORDER OF THE 1ST RESPONDENT (AY2007-08)DATE 19.01.20122007-08)DATE 19.01.2012 P8 (c)COPY OF THE RECTIFICATION ORDER OF THE 1ST RESPONDENT (AY2008-09)DATE 19.01.20122008-09)DATE 19.01.2012 P9COPY OF THE RECEIPT EVIDENCING REMITTANCE OF THEADDITIONALLY DEMANDED AMOUNT. DATE 28.01.2012ADDITIONALLY DEMANDED AMOUNT. DATE 28.01.2012 P9 (a)COPY OF THE RECEIPT EVIDENCING REMITTANCE OF THEADDITIONALLY DEMANDED AMOUNT.DATE 28.01.2012ADDITIONALLY DEMANDED AMOUNT.DATE 28.01.2012 P9 (b)COPY OF THE RECEIPT EVIDENCING REMITTANCE OF THEADDITIONALLY DEMANDED AMOUNT. DATE 28.01.2012ADDITIONALLY DEMANDED AMOUNT. DATE 28.01.2012 P9 (c)COPY OF THE RECEIPT EVIDENCING REMITTANCE OF THEADDITIONALLY DEMANDED AMOUNT. DATE 28.01.2012ADDITIONALLY DEMANDED AMOUNT. DATE 28.01.2012 P10COPY OF THE NOTICE UNDER SECTION 271 OF THE INCOME TAX ACTP10COPY OF THE REPLY GIVEN BY THE PETITIONER.(a)P10COPY OF THE REPLY GIVEN BY THE PETITIONER.(a) RESPONDENTS' EXHIBITS:================= NIL // TRUE COPY// P.A. TO JUDGE P9 (a)COPY OF THE RECEIPT EVIDENCING REMITTANCE OF THEADDITIONALLY DEMANDED AMOUNT.DATE 28.01.2012ADDITIONALLY DEMANDED AMOUNT.DATE 28.01.2012 P9 (b)COPY OF THE RECEIPT EVIDENCING REMITTANCE OF THEADDITIONALLY DEMANDED AMOUNT. DATE 28.01.2012ADDITIONALLY DEMANDED AMOUNT. DATE 28.01.2012 P9 (c)COPY OF THE RECEIPT EVIDENCING REMITTANCE OF THEADDITIONALLY DEMANDED AMOUNT. DATE 28.01.2012ADDITIONALLY DEMANDED AMOUNT. DATE 28.01.2012 P10COPY OF THE NOTICE UNDER SECTION 271 OF THE INCOME TAX ACTP10COPY OF THE REPLY GIVEN BY THE PETITIONER.(a)P10COPY OF THE REPLY GIVEN BY THE PETITIONER.(a) RESPONDENTS' EXHIBITS:================= NIL // TRUE COPY// P.A. TO JUDGE ANTONY DOMINIC, J. ================W.P.(C) NO. 1389 OF 2012 =================== Dated this the 24[th] day of February, 2012 J U D G M E N T Petitioner is a partnership firm engaged in the business ofrefining of gold bars, and is an assessee under the Income TaxAct, on the rolls of the 1[st] respondent. On 15/1/09, a team led bythe Income Tax Officer from Palakkad conducted a search underSection 132 of the Income Tax Act, 1961 in the premises of thepetitioner. In the search, 4136.83 grams of gold was seized andExt.P1 is the panchanama prepared during the course of thesearch. Following the search and seizure, by Exts.P2 to P2(f)orders issued on 31/12/2010, assessment for the years 2003-04to 2009-10 was completed under Section 153C of the Income TaxAct. In these orders, it is also stated that penalty proceedingsunder section 271(1)C of the Income Tax Act are being initiated.Later the assessment orders for the assessment years 2003-04 to2006-07 were rectified as per Exts.P2(g) to P2(j). 2.Case of the petitioner is that the liability under Ext.P2series of orders were discharged by remitting the tax due as perExt.P3 series of bank receipts. It is stated that they also filed Ext.P4 series of appeals against Ext.P2 series of orders, which arepending before the appellate authority, the 3[rd] respondent. 3.Subsequently, petitioner made Ext.P5 dated 5/8/09requesting the 2[nd] respondent to return the gold since they havealready paid the entire tax due under Ext.P2 series of orders. Tothat representation, they were given Ext.P6 reply requiring themto contact the assessing officer. Subsequently, Ext.P7 dated18/11/11 was issued by the 1[st] respondent informing thepetitioner that their request cannot be considered before thedisposal of Ext.P4 series of appeals. It was in these circumstances,the writ petition was filed mainly contending that the petitionerhaving discharged the tax liability due under Ext.P2 series oforders, the pendency of Ext.P4 series of appeals filed by themcannot be a justification for the respondents for refusing torelease the gold and appropriate orders are sought for. 4.A statement has been filed on behalf of therespondents, in which mainly three contentions are raised. First isthat, as per Ext.P10 dated 31/12/10 and other similar noticesissued under Section 271(1)(c) of the Income Tax Act, penaltyproceedings have already been initiated against the petitioner and that if penalty is imposed, petitionerwill have a liabilitybetween`14,72,494 and `44,17,482. It is also contended thatsubsequent to the issuance of the penalty notices, theassessment orders for the years 2005-06 to 2008-09 were againrectified by Ext.P8 series of orders issued on 19/1/2012. Thirdly,it is contended that the petitioner has an interest liability, thetotal of which is `34,129 in terms of the provisions containedunder Section 220(2) of the Income Tax Act. 4.A statement has been filed on behalf of therespondents, in which mainly three contentions are raised. First isthat, as per Ext.P10 dated 31/12/10 and other similar noticesissued under Section 271(1)(c) of the Income Tax Act, penaltyproceedings have already been initiated against the petitioner and that if penalty is imposed, petitionerwill have a liabilitybetween`14,72,494 and `44,17,482. It is also contended thatsubsequent to the issuance of the penalty notices, theassessment orders for the years 2005-06 to 2008-09 were againrectified by Ext.P8 series of orders issued on 19/1/2012. Thirdly,it is contended that the petitioner has an interest liability, thetotal of which is `34,129 in terms of the provisions containedunder Section 220(2) of the Income Tax Act. 5.In the reply affidavit filed, in so far as Ext.P8rectification orders are concerned, petitioner says that the taxliability under Ext.P8 series of orders have been discharged bythem as per Ext.P9 series of receipts. In so far as the liability forinterest, which is pointed out in the statement filed by therespondents is concerned, contention of the petitioner is thatExt.P8 series orders were issued on 19/1/12 and that the amountsdue thereunder were paid on 28/1/12, the receipt of which areExt.P9 series. It is contended that since payments have beenmade within thirty days as per Ext.P8, there is no liability to payinterest as per the provisions contained in Section 220(2) of theIncome Tax Act. As far as the penalty proceedings initiated against the petitioner as per Ext.P10 and similar other noticesissued on 31/12/10 are concerned, the contention of thepetitioner is that on the issuance of the notices, Ext.P10(a) andsimilar other replies have been given. It is also contended thatthe pendency of the penalty proceedings cannot be a justificationfor refusing to release the gold seized on 15/01/2009 and thatsuch withholding is not permitted in terms of the provisionscontained in Section 132B of the Income Tax Act. In support ofthis contention, learned counsel for the petitioner placed relianceon the judgments in Naresh Kumar Kohli v. Commissioner ofIncome Tax (266 ITR 553), Commissioner of Income Tax v.Mukundray Kumar Shah (278 ITR 425) and J.R.Malhotra v.Addl. S.J.Jullundur (AIR 1976 SC 219). 6.I heard the learned counsel appearing for the petitionerand the learned standing counsel appearing for the respondentsand considered their submissions. 7.As far as the interest due from the petitioner andpointed out in the statement filed by the respondents, the liabilityindicated is that of `34,129. Going by para 8 of the statementfiled on behalf of the respondents, the averment is that as on date, towards the demands which were already made, there is aliability of interest accrued under Section 220(2) for belatedpayment. Therefore, the case of delay in payment and the liabilityfor interest pleaded by the respondents is not with reference toExt.P8 series of rectification orders for the assessment years2005-06 to 2008-09 alone but also in relation to Ext.P2 series oforders. Therefore, the fact that liability under Ext.P8 series hasbeen discharged by Ext.P9 series of receipts does not by itselfindicate that the petitioner has no liability to pay interest underSection 220(2) of the Income Tax Act. 8.Now what remains is the legality of the refusal of therespondents to release the gold seized. In Ext.P7 communicationissued on 18/11/11, the reason stated by the respondents forrefusing release of the gold is that the request cannot beconsidered before the disposal of the first appeal. However, in thestatement filed, the justification offered is the pendency of thepenalty proceedings evidenced by Ext.P10 and similar othernotices. During the course of the hearing also, the ground urgedfor withholding the gold seized from the petitioner is thependency of penalty proceedings. Therefore, the correctness of 8.Now what remains is the legality of the refusal of therespondents to release the gold seized. In Ext.P7 communicationissued on 18/11/11, the reason stated by the respondents forrefusing release of the gold is that the request cannot beconsidered before the disposal of the first appeal. However, in thestatement filed, the justification offered is the pendency of thepenalty proceedings evidenced by Ext.P10 and similar othernotices. During the course of the hearing also, the ground urgedfor withholding the gold seized from the petitioner is thependency of penalty proceedings. Therefore, the correctness of the stand taken by the respondents in refusing to release the goldto the petitioner has to be decided with reference to thependency of the penalty proceedings under Section 271(1)(c) ofthe Income Tax Act, 1961. 9.The case set up by the petitioner is that as at present,the liability that was due from them was only for tax under Ext.P2and Ext.P8 series of orders and that these liabilities have beendischarged by them as per Ext.P3 and P9 series of receipts.Therefore, according to them, there is no existing liability towardsany liability determined and the possibility of a future liability forpenalty cannot be a justification for withholding the gold seized. 10.Having considered the rival submissions made, I am ofthe view that this claim of the petitioner will have to be decidedwith reference to the provisions contained in Section 132(B)(1) ofthe Income Tax Act, 1961. This section deals with application ofseized or requisitioned assets under Sections 132 and 132A of the Act. This section, being of relevance to the controversy, isextracted below for reference. Application of seized or requisitioned assets. 132B (1)The assets seized under section 132 orrequisitioned under section 132A may be dealt with in the following manner namely: (i)the amount of any existing liability underthis Act, the Wealth-tax Act, 1957 (27 of 1957), theExpenditure-tax Act, 1987 (35 of 1987), the Gift-taxAct, 1958 (18 of 1958) and the Interest-tax Act, 1974(45 0f 1974) and the amount of the liability determinedon completion of the assessment [under section 153Aand the assessment of the year relevant to the previousyear in which search is initiated or requisition is made,or the amount of liability determined on completion ofthe assessment under Chapter XIV-B for the blockperiod, as the case may be] including any penaltylevied or interest payable in connection with suchassessment) and in respect of which such person is indefault or is deemed to be in default, may be recoveredout of such assets: 11.A close reading of Section 132B(1)(i) of the Act shows that it consists of two parts. The former part provides forapplication of the seized assets against “the existing liabilityunder the Income Tax Act, Wealth-tax Act, Expenditure-tax Act,Gift-tax Act and the Interest-tax Act. Thus it is clear that this partof clause (i) provides for application of the seized assets against“existing liability” under the aforesaid Acts only. On the otherhand, the latter part of this clause provides for application of theseized assets towards “liability determined” in two situations. Thefirst is to the liability determined on completion of the assessmentunder section 153A and of the year relevant to the previous year 11.A close reading of Section 132B(1)(i) of the Act shows that it consists of two parts. The former part provides forapplication of the seized assets against “the existing liabilityunder the Income Tax Act, Wealth-tax Act, Expenditure-tax Act,Gift-tax Act and the Interest-tax Act. Thus it is clear that this partof clause (i) provides for application of the seized assets against“existing liability” under the aforesaid Acts only. On the otherhand, the latter part of this clause provides for application of theseized assets towards “liability determined” in two situations. Thefirst is to the liability determined on completion of the assessmentunder section 153A and of the year relevant to the previous year in which search is initiated. The second is, towards the liabilitydetermined on completion of the assessment under Chapter XIV-Bof the Act for the block period. The further provision in this clauseclarifies that the “liability determined” under both the aforesaidsituations include “any penalty levied or interest payable” inconnection with such assessment under the Act. Assessmentscontemplated in this part of the section are initiated following theseizure and therefore the expressions “liability determined”occurring in the section should be understood as liability to bedetermined in an assessment. Similarly the expression “penaltylevied” should also be read as penalty to be levied in aproceedings under section 271(1)C of the Act. 12.In so far as this case is concerned, the respondents donot contend that the petitioner had any existing liability andtherefore, the first part of section 132B(1)(i) of the Act does nothave any relevance. As already stated above, the contention ofthe petitioner is that the section entitles the respondents to applythe assets seized only towards existing liability, liabilitydetermined, penalty levied and interest payable. According tothem, they have already paid the tax and interest due from them and that so far no penalty has been levied on them and that thesection does not entitle the respondents to retain the assetsseized, towards an anticipated future liability such as penalty tobe levied. Therefore, they contend that the gold seized is liable tobe returned to them. 13.Having considered this contention of the petitioner, Ishould confess my inability to accept the plea. The search undersection 132 of the Act led to the seizure of gold and the seizureresulted in the determination of liability of tax by virtue of theassessment orders passed against the petitioner. These ordersitself stated that penalty proceedings under section 271(1)C ofthe Act are being initiated and accordingly such proceedings havebeen initiated and are pending. This section, admittedly entitlesapplication of the seized assets towards tax liability to bedetermined. Going by the words of the statute, liability of taxdetermined includes penalty levied. When statute recognises theentitlement of the respondents to apply the asset seized towardsthe tax liability determined,which includes penalty, it is puerile tocontend that the statute obliges the respondents to return thesame on determination of the tax liability and before levying the penalty. Further, if the argument that the section does not permitretention of seized assets for application against liability to bedetermined either towards tax or penalty is accepted, applicationof such assets would be possible only against tax liabilitiesalready determined or penalty already levied and in the absenceof such existing liabilities, the assets will have to be returned tothe person concerned. This interpretation will render the latterpart of section 132B(1)(i) meaningless and such a situationcannot be accepted. Therefore, I am of the view that the sectionentitles the respondents to retain the gold in question with themuntil penalty is levied and apply the same towards the liability sodetermined, provided the petitioner is in default or deemed to bein default. penalty. Further, if the argument that the section does not permitretention of seized assets for application against liability to bedetermined either towards tax or penalty is accepted, applicationof such assets would be possible only against tax liabilitiesalready determined or penalty already levied and in the absenceof such existing liabilities, the assets will have to be returned tothe person concerned. This interpretation will render the latterpart of section 132B(1)(i) meaningless and such a situationcannot be accepted. Therefore, I am of the view that the sectionentitles the respondents to retain the gold in question with themuntil penalty is levied and apply the same towards the liability sodetermined, provided the petitioner is in default or deemed to bein default. 14.As far as the judgments in Naresh Kumar Kohli v. Commissioner of Income Tax(266 ITR 553) andCommissioner of Income Tax v. Mukundray Kumar Shah(278 ITR 475) relied on by the learned counsel for the petitionerare concerned, facts of these cases show that in those casesappeals were already decided in favour of the party concerned.On that basis, courts took the view that there was no existing liability to justify withholding of the asset seized. Similarly, theApex Court judgment in J.R.Malhotra v. Addl. S.J.Jullundur(AIR 1976 SC 219) was also a case where the seizure was alreadyheld illegal and it was on that basis the case was decided. Thusthe facts of these cases are incomparable to the facts of this caseand therefore these judgments are not of any assistance to thepetitioner herein. For the aforesaid reasons, this writ petition deserves to bedismissed and I do so. No costs. Rp ANTONY DOMINIC, JUDGE