In a recent case, the Court held that in the absence of a valid order of assessment and demand for income-tax, the party from whom the amount is seized, is entitled to seek interim custody. Section 132A of the Income Tax Act ,1961 says that if any officer or any authority has taken into custody any asset of a person which is not or would not have been disclosed for the purpose of Income Tax Act, the income tax authority can require the officer or authority to deliver such asset to the income tax authority.
The petitioner challenged the ruling of single bench. The Single Bench had noted that there is contradiction in the High Court decisions in Union of India v State of Kerala (2022) and R. Ravirajan v State of Kerala (2023).
In the case of Ravirajan, a requisition under Section 132A was not made. The income tax authorities approached the Magistrate under Section 451 of Code of Criminal Procedure (Cr.P.C) to get interim custody of the currency. The Court had held in that case that since a requisition under 132A was not made from the authority who seized the currency, the same cannot be made to the Court.
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The court held that the view of the High Court in Ravirajan is incorrect and stated that the purpose of sections 132, 132A and 132B of the Act is to enable the income tax authorities to hold the assets seized or requisitioned by them which they reasonably believe is or is part of asset which is or would not be disclosed for the purpose of the Act. Such assets can be appropriated towards the existing and future liabilities of the assessee. If the assessee is able to explain the nature and source of those assets within the prescribed time, those assets shall be released to him.
The Court held that if the income tax authorities are not able to seek interim custody of the currency from the magistrate, these provisions will become futile in cases where the authority is unable to issue a requisition as the asset has been already produced before the Magistrate after the seizure.
The Division Bench of Justice P. B. Suresh Kumar and Justice C. Pratheep Kumar ruled that in cases where the income tax authority has reason to believe that the asset is wholly or partly not declared or would not have been declared for the purpose of the Income Tax Act, then the income tax authorities are the competent authority to hold such assets.
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The Court further stated that as per Section 132B of the Act, the authorities can apply the money requisitioned not only for the existing liabilities but also any liabilities determined on completion of assessment or reassessment or recomputation and also the assessment of year relevant to the previous year in which the requisition is made.
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