By TIOL News Service

CHANDIGARH, FEB 18, 2017: THE issues before the court are - Whether mere possession of undisclosed cash is not an offence under IPC and thus, the police have no statutory powers to seize it and Whether legislative intent behind the use of expression 'in relation of prosecution of any offence' in the PMGKY is to exclude a declaration only if chargesheet or complaint is filed for prosecuting a person and not merely when investigations are conducted. YES is the verdict of the High Court.

Facts of the case

The petitioner, an individual, who was travelling by a cab from Delhi was stopped by the police officials in the jurisdiction of the Lalru Police Station in State of Punjab. He was carrying Rs 30,000,00/- in cash. The police detained him and called the Income Tax Department officials which in turn seized the cash. On being questioned the assessee said that the cash amount seized from him was the sale proceeds of old jewellery belonging to him, his wife and mother, which was recently sold by him after demonetization to one Shri Raj Kumar, who was a broker and received new currency notes of denomination of Rs. 2,000/-.

In a writ petition the petitioner pleaded for un-conditional release of the sum; with a further prayer to permit him to have his Advocate present at visible but not audible distance during his interrogation and recording of the statement in connection with the said seizure of amount in this case or any proceedings consequential thereto, much less seeking refrain of any coercive action against him alleging to the aforesaid dispute; with a liberty to avail the remedy under the "Pradhan Mantri Garib Kalyan Yojana, 2016" by depositing the aforesaid amount, tax, surcharge and penalty.

The assessee's counsel further submitted that assessee did not gave any incorrect information or projected the un-disclosed income as any unlawful income. The cash in his custody should be treated as undisclosed income w.e.f.13.12.2016, for, Chapter IX-A had been inserted in the Finance Act, 2016 providing for the "Taxation and Investment regime for Pradhan Mantri Garib Kalyan Yojna, 2016", whereas on 16.12.2016, the Department of Economic Affairs, Ministry of Finance, notified the scheme that same was said to be in force from 17.12.2016 till 31.03.2017. On the same date, i.e., 16.12.2016, the Department of Revenue, Ministry of Finance also came out for the format of declaration for a person seeking to avail the benefit of Scheme. Subsequent to this CBDT, TPL Division, vide circular no.43 of 2016 issued explanatory notes regarding the said Scheme as per which only persons who were being prosecuted for any offence punishable under the specified legislations were not entitled to avail the benefit of this Scheme.

Having heard the matter, the High Court held that,

Whether mere possession of undisclosed cash is not an offence under IPC and thus, the police have no statutory powers to seize it - YES: HC

++ possession of the un-disclosed income in cash is not as per any of the offences under Indian Penal Code, therefore, the seizure of same cannot be said to be by the police officials. Not disclosing the correct income is undisputed and the offence, if any, is under Income Tax Act. The Income Tax Authorities are within their domain but the police officials cannot exercise the power under the Income Tax Act. Once the petitioner has candidly admitted the factum of having not been tried in any of the provisions of law, i.e., the offence under Section 3 of the Prevention of Money Laundering Act, 2002 etc., ibid. The police officials have rightly not involved the enforcement department and handed over the amount to the Income Tax Department for further enquiry. In such circumstances, this Court finds that action of the respondents-police officials cannot be faulted. The question to be seen is that for possessing un-disclosed income, for cognizable and un-cognizable offence under Indian Penal Code has been registered by the respondents, thus, in my view, action of the respondent-police officials in stopping the petitioner for enquiry, retaining the cash and forwarding to the Income Tax Department cannot be faulted. Thus, the contention of the petitioner of having retained the amount by the police officials on the basis of the statement made by Mr. Yatinder Sharma, is hereby rejected;

Whether legislative intent behind the use of expression 'in relation of prosecution of any offence' in the PMGKY is to exclude a declaration only if chargesheet or complaint is filed for prosecuting a person and not merely when investigations are conducted - YES: HC

++ PMGKY Deposit Scheme - it is evident that a person can avail the remedy of declaration. Last date for submitting the Form 1 as prescribed in the Rules may be made at anytime on or before 31.03.2017. The explanation is in tune of Section 199 (o) of the Finance Act, 2016 as the petitioner has made a categoric statement that he is not involved in any of the offences listed out for excluding certain declarations under the scheme;

++ this court is of the view that the use of the words "in relation of prosecution of any offence" instead of "in relation to investigating for any of the offence" clearly shows legislative intent of provisions would apply only if the chargesheet or complaint is filed for prosecuting any person under any of the provisions of Act and not merely when investigations are going on;

(See 2017-TIOL-338-HC-P&H-BENAMI)