Delay in Issuing Requisition u/s 132A: Delhi HC Upholds Validity and Links Seized Cash to Undisclosed Income [Read Order]

In the recent ruling,the High Court of Delhi,upheld the validity of the requisition under Section 132A of Income Tax Act,1961 and linked the seized ₹98,00,000 to undisclosed income, finding the assessee’s explanation about the cash unconvincing.

Gautam Thadani,petitioner-assessee,was subjected to a CBI search on October 20, 2012, in connection with an alleged bribe related to defense procurement. During the search, ₹98,00,000 in cash and certain documents were seized. The assessee claimed the cash belonged to M/s Global Healthline Pvt. Ltd., where he was a Director, but the CBI found his explanation unconvincing.

On January 2, 2013, the CBI informed the Income Tax Department about the seizure. The department sought additional details and summoned the assessee for an explanation in 2014. He responded that the CBI’s final findings were awaited. By 2016, the Income Tax Department learned that the CBI had filed a chargesheet and that the assessee had sought the release of the seized cash.

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On July 8, 2016, the Income Tax Department requested the CBI not to release the funds. The assessee then moved the Special Judge, CBI, for release, but the CBI stated it no longer required the cash, as the Income Tax Department was still investigating. On September 5, 2016, the Principal Commissioner of Income Tax issued a warrant under Section 132A(1)(c), and on October 1, 2016, the Special Judge rejected the assessee’s request. The CBI handed over the seized cash to the Income Tax Department on December 15, 2016.

On July 11, 2018, the Assessing Officer(AO) issued a notice under Section 148 to reopen Thadani’s assessment for AY 2013-14. However, realizing the requisition was executed under Section 132A, the department dropped the proceedings under Section 148 and issued a notice under Section 153A on October 8, 2018.

The Court looked at whether there was a delay in issuing the requisition and if it mattered. The Income Tax Department received information about the seized ₹52,70,000 on January 2, 2013, while the CBI was investigating the case. The assessee claimed the cash was from his business and a canceled car sale. The department sent summons to his company and the buyer, but the summons weren’t served, and the buyer had passed away by 2016.

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Read More: Rs. 50 Lakhs Cash Seized on Search u/s132 of Income Tax: Delhi HC directs to Treat Seized Cash as Advance Tax

The department reviewed the assessee’s tax returns, which showed little income compared to the large amount of cash. The Income Tax Officer then prepared a note for a warrant under Section 132A(1)(c) of the Act, and the requisition was issued on September 5, 2016. Though there was a delay, the department explained it due to the investigation.

The Court also considered if the requisition should be canceled. Under Section 132A, a requisition can be made if the authorities believe the cash represents undisclosed income. The petitioner’s explanation about the source of the cash was unclear and inconsistent, and he couldn’t provide proper details or evidence for the claims.

The two member bench comprising Vibhu Bakhru(Additional Chief Justice) and Swarana Kanta Sharma(Judge) found the petitioner’s explanations unconvincing and upheld the requisition, agreeing with the Income Tax Authorities that the cash was linked to undisclosed income.

To Read the full text of the Order CLICK HERE

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