By TIOL News Service

PATNA, JUNE 05, 2017: THE ISSUE BEFORE THE COURT IS - Whether amount seized u/s 132 can be utilized for the purpose of discharging the liability already determined and not paid by the assessee on completion of assessment proceedings. YES is the verdict.

Facts of the case:

During the subject year, when the assessee was carrying a sum of Rs.30 lacs in New Delhi purportedly having received it as certain sale proceeds, the authorities of the income tax department at New Delhi seized the amount and thereafter when the amount was not released and no action was taken for a period of about two years. In the meanwhile, the petitioners were issued with summons and immediately the petitioners appeared before the authority in pursuance to the said notice and it is stated that the documents and explanation with regard to the amount was submitted. Thereafter, when nothing was done, the petitioners filed this writ petition and sought for release of the amount in question.

On appeal, the HC held that,

++ except for contending that the aforesaid liabilities are to be discharged by the petitioners and the assessment for the year 2015- 2016 is pending, there is no explanation from the Department for retaining the amount. Even if the entire liability as indicated for the year 2002-2003 and 2003-2004 are taken note of, it would not be beyond 85,000/- rupees. The statutory provision under the Income Tax Act for dealing with the issue in question is u/s 132B(1), which provides that when an asset like the one is seized u/s 132B, the procedure for dealing with it is contained in sub-section (i) of the aforesaid Section, which reads that the amount of liability determined on completion of the assessment and in respect of which such person is in default or is deemed to be in default, may be recovered out of such assets. On analyzing the aforesaid provision, it is clear that the amount seized u/s 132 can be utilized for the purpose of discharging the liability already determined on completion of the assessment proceedings and if that be the position then at best the amount that could be retained for discharging the liability will only be with regard to the assessment made in this particular case for the A.Y 2002-2003, 2003-2004 and 2004-2005 as admitted by the petitioners in the rejoinder to the counter affidavit. Apart from the aforesaid, merely because assessment for the year 2015-2016 is pending, no statutory right is available to the Department to retain any amount on this count. On going through the statutory provisions, as are detailed hereinabove, it is crystal clear that the amount seized can only be utilized for the purpose of discharge of liability with regard to tax liability already determined and not paid by the assessee and for nothing more;

++ in this case, the Department is only entitled to retain the amount of tax determined i.e. the tax liability for the A.Y 2004-2005 as admitted by the petitioners. Apart from the aforesaid, no further amount can be retained by the petitioners. That being the position, we are of the considered view that with regard to the amount in question, at best the Revenue can retain the amount so far as it pertains to discharge of tax liability of the petitioners for the year 2002-2003. 2003-2004 and 2004-2005, out of which according to petitioners showing for the assessment year 2002-2003 and for the year 2004-2005 certain amount has already been paid by them. In view of the aforesaid, we are very clear that the amount of Rs.30 lacs retained by the Department cannot be permitted any further. They are liable to return the same after adjusting the liability for the years 2002-2003 and 2004-2005 that also after causing an enquiry with regard to the amount already paid by the petitioners. That apart for the amount to be released to the petitioners after such detention the respondents shall also pay interest to the petitioners as provided under sub section 4A of Section 132B to be calculated in accordance with law.

(See 2017-TIOL-1052-HC-PATNA-IT)