In a significant ruling the Allahabad High Court held that the power of Assessing Authority under the Income Tax Act, 1961 to decide application for release of seized assets not automatically abated after 120 days.
The writ petition has been filed to quash the seizure of Rs. 36,12,000/- dated 13.09.2022, effected under Section 132B(1)(i) of the Income Tax Act. Further relief has been sought to release the said amount detained since 01.09.2022, together with due interest payable under Section 132(B)(4) read with Rule 119 (A) of the Income Tax Rule, 1961 (‘the Rules’).
During the course of that investigation, petitioner had produced regular books of accounts and details of his income tax returns filed for the past Assessment Years to establish that the seized cash was duly accounted for/tax paid money. On 15.09.2022, the petitioner made an application to the assessing authority/respondent No.3 in terms of Section 132 B (1) (i) read with the proviso to Section 132 B (1) (i) of the Act to release the amount Rs.36,12,000/-.
The senior counsel for the petitioner submitted that in view of the clear language of Section 132 B (1) (i) of the Act read with the second proviso thereto, once the application had been made by the petitioner to release the seized amount, the assessing authority was obligated to examine, if the nature and source of acquisition of any part of the seized money was explained. Further, it was obligated to examine, if there was any existing liability of tax or penalty etc. against the petitioner that may be satisfied from the seized amount.
Relying heavily of the second proviso, it has been urged, in absence of any decision made under the first proviso, the entire seized amount had to be released at the end of 120 days time period specified therein. Since, the petitioner had made the application within the stipulated time of 30 days (from the end of month in which assets/money was seized), that period of 120 days would expire not beyond mid January, 2023. Since no decision was made within that time, the petitioner has become absolutely entitled to release of that money.
A Division Bench of Justices Surendra Singh-I and S.D. Singh observed that “In our opinion, the provision in question [Section 132 B (1) (i)] being directory, the jurisdiction of the Assessing Authority to deal with the petitioner’s application dated 15.09.2022 did not lapse or abate upon expiry of the period of 120 days. Since that stipulation of law is only directory, it survives to the Assessing Authority to deal with the application, even today.”
“Plainly that mandate of law does not exist under the provision of Section 132 B (1) (i) of the Income Tax Act. This provision only contemplates-a person subjected to search may not be made to wait endlessly for release of valuable assets that may have been seized during the course of search. If, the nature and source of acquisition of a seized asset is wholly explained and it may not be required for recovery of any outstanding demand or demand of tax that may arise under the assessment proposed to be made consequent to the search giving rise to the seizure itself, the same may be released.:
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