S.132B(1)(i) Income Tax Act | Power Of Assessing Authority To Decide Application For Release Of Seized Assets Not Automatically Abated After 120 Days: Allahabad HC

The Allahabad High Court has held that the jurisdiction of the Assessing Authority to decide the application for release of seized assets under Section 132B (1)(i) does not abate after a period of 120 days from the date on which the last of the authorizations for search under section 132 or for requisition under section 132-A was executed.The Court held that the word “shall” in 2nd proviso to Section 132B (1)(i) is directory in nature as no stipulation is made for the automatic release of goods after the period of 120 days. It held that a levy of interest on the seized asset contemplated under Section 132B (4) does not make the “shall” in 2nd proviso to Section 132B (1)(i) mandatory in nature. The first proviso to Section 132B (1)(i) provides the person whose asset was seized an opportunity to make an application for the release of the asset before the Assessing Officer within thirty days from the end of the month in which asset was seized. If the nature and source of acquisition of the asset is explained to the satisfaction of the Officer, he may release the asset after recovering any existing liability mentioned in Section 132B (1)(i). The second proviso to Section 132B (1)(i) provides that the asset seized referred to in the first proviso or part thereof, as the case may be, shall be released within a period of 120 from the date on which the last of the authorizations for search under section 132 or for requisition under section 132-A was executed. The Court held that Section 132B (1)(i) stipulates that the amount seized shall not be withheld except when there is any outstanding recovery of tax against the assessee and the seized asset may be required to recover the tax demand which may arise upon assessment pursuant to the search. The bench comprising Justice Saumitra Dayal Singh and Justice Surendra Singh-I held that“The provisions does not stipulate any consequence of automatic release. It would first have to be invoked by the assessee by filing a proper application. Then if conditions are fulfilled, an order recording that satisfaction may be passed. It is for that purpose a timeline of 120 days is contemplated on a non-imperative basis. In the event of delay in making the decision the revenue has been saddled with interest liability @ 18 % per annum.”Case BackgroundPetitioner, a jeweller, handed Rs.36,12,000/- to his worker along with a train ticket to Kolkata to buy jewellery. The worker was apprehended by the Government Reserved Police in Mirzapur and the money was recovered from him. The Income Tax Authorities arrived later and initiated proceedings under Section 132(1-A) of the Act. During the proceedings, the worker maintained the stand that the cash belonged to the petitioner. The petitioner submitted that regular books of accounts and income tax returns had been produced at the time of investigation to show that the money recovered was not unaccounted for. Thereafter, the petitioner made an application for release of the amount, which is still pending. Counsel for the petitioner argued that upon application being made, the assessing authority ought to have examined if the nature and source of acquisition of the amount was explained and if the liability of tax/penalty existing could be satisfied from the seized amount. It was argued that since there was no pre-existing demand, the amount ought to have been released in favour of the petitioner. It was argued that 'shall' in 2nd proviso to Section 132B (1)(i) was mandatory and the entire seized amount ought to have been released at the end of 120 days once the application was not decided. It was argued that the petitioner was also entitled to interest in terms of Section 132B(4) read with Rule 119A of the Rules as the period of 120 days had expired. Counsel for Revenue argued that the petitioner had no right to refund during the pendency of assessment proceedings arising from the requisition made under Section 132A (c) of the Act. It was argued that 'shall' in 2nd proviso to Section 132B (1)(i) was directory and not mandatory in nature. High Court Verdict The Court observed that since the nature and source of the acquisition was explained and the money seized from the worker was asset seized, an application under Section 132B (1)(i) could be made. Further, it was observed that the application was made by the petitioner within the time prescribed under the proviso. The Court held that the application made by the petitioner for the release of the seized amount was maintainable. Thereafter, the issue framed by the Court was whether once the application is held maintainable and has not been decided within 120 days, will it entitle the petitioner to obtain the release of the seized assets under 2nd proviso to Section 132B (1)(i). The Court observed that the word “shall” represents mandatory nature, whereas “may” represents the directory nature of the provision. The Court relied on State of U.P. v. Manbodhan Lal Srivastava where the Supreme Court had...

S.132B(1)(i) Income Tax Act | Power Of Assessing Authority To Decide Application For Release Of Seized Assets Not Automatically Abated After 120 Days: Allahabad HC

Upasna Agrawal

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