Union of India v Hashir S/o Abdul Latheef; Abdul Nissar S/o Hamza; State of Kerala through Sub Inspector of Police, Thirunelly Police Station, Mananthavady, represented by Public Prosecutor, High Court of Kerala

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE T.V.ANILKUMAR** **FRIDAY, THE 03RD DAY OF JULY 2020 / 12TH ASHADHA, 1942** ## **Crl.MC.No.2348 OF 2015** **CRMP NOS.4018 & 4857/2014 DATED 10-11-2014 OF JUDICIAL MAGISTRATE OF FIRST CLASS -II, MANANTHAVADY** ## **PETITIONER:** **UNION OF INDIA** **REPRESENTED BY ASSISTANT DIRECTOR OF INCOME TAX (INV), 8TH FLOOR, AAYAKAR BHAVAN, MANANCHIRA, KOZHIKODE-693001.** **BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX** ## **RESPONDENTS/PETITIONER & RESPONDENT:** **1 HASHIR S/O.ABDUL LATHEEF, KARANICHALIL VEEDU, RAROTHU VILLAGE, PARAPPANPOYIL POST, THAMARASSERY TALUK, KOZHIKODE.** - **2 ABDUL NISSAR S/O.HAMZA, MEDOTHU VEEDU, PARAPPANPOYIL POST, RAROTHU VILLAGE, THAMARASSERY TALUK, KOZHIKODE.** - **3 STATE OF KERALA THROUGH SUB INSPECTOR OF POLICE, THIRUNELLY POLICE STATION, MANANTHAVADY, REPRESENTED BY PUBLIC PROSECUTOR, HIGH COURT OF KERALA.** **BY ADV. SRI.P.A.AUGUSTIAN BY ADV. SRI.M.A.BABY BY ADV. SRI. UDAYAKUMAR.K.B. (P.P)** **THIS CRIMINAL MISC. CASE HAVING BEEN FINALLY HEARD ON 03-07-2020, THE COURT ON THE SAME DAY PASSED THE FOLLOWING:** ## **Crl.M.C.No.2348 of 2015** ## **:-2-:** ## **Dated this the 3[rd] day of July, 2020** ## **O R D E R** The petitioner, who is Assistant Director of Income Tax (Investigation), challenges the common order of the learned JFCM-II, Mananthavady in Cr.M.P.Nos.4018 and 4857 of 2014. 2. The learned Magistrate by the impugned order refused to release cash amount of Rs.38,08,700/- produced in the court by Dy.S.P. of Police, Mananthavady and dismissed Cr.M.P.No.4857/2014 filed by the petitioner seeking custody of cash, invoking Section 451 of the Cr.P.C. The person, who claimed to be entitled to possess the cash, filed Cr.M.P.No.4018/2014 which was, however, allowed in part. He is the first respondent in this Crl.M.C. and has not filed any proceeding challenging the correctness of the order of the learned Magistrate. ## **Crl.M.C.No.2348 of 2015** ## **:-3-:** **==> picture [437 x 551] intentionally omitted <==** **----- Start of picture text -----**<br> |||||||| |---|---|---|---|---|---|---| |3.|On 14.8.2014, the Deputy Superintendent of| |Police|arrested|the|second|respondent|in|this| |Crl.M.C. with currency notes of Rs.38,08,700/- for| |his failure to account for its possession. The cash| |was|produced|before|JFCM-II,|Mananthavady.|The| |investigation did not reveal commission of any| |offence punishable under the Indian Penal Code.| |During this period, on information that unexplained| |amount of cash was seized by Mananthavady Police| |from the possession of the second respondent, the| |Income|Tax|authorities|proceeded|under|the| |provisions of the Income Tax Act, 1961 (for short,| |'the|Act'|only).|The|authorities|recorded|the| |statements of the actual custodian of cash, the| |second respondent and also the first respondent who| |entrusted custody of cash with the former. In the| |meantime,|the|first|respondent|approached|the| |learned Magistrate under Section 451 of the Cr.P.C.| **----- End of picture text -----**<br> ## **Crl.M.C.No.2348 of 2015** **:-4-:** seeking interim release of the cash amount. On receipt of the notice from court, the petitioner herein also filed similar petition, i.e., Cr.M.P.No.4857/2014 seeking interim release of the amount. 4. The first respondent contended that he purchased 1 kg. of gold bar from Dubai where he was employed in 2014 and had brought it to India after paying customs duty and hence it was in his legal possession. After his sister's marriage was arranged, with a view to raising requisite finance for conduct of marriage, he sold the gold brought from Dubai along with some other gold ornaments kept in his house. The gold was sold to a jeweller in Bangalore and the sale proceeds received were entrusted with the second respondent who is his friend for being taken to his house, since he was, in connection with an urgent matter, to leave for ## **Crl.M.C.No.2348 of 2015** ## **:-5-:** Chennai. 5. He produced a few documents also before the court accounting for the possession of cash. 6. The learned Magistrate found that the tax Department did not file any separate objection to Cr.M.P.No.4018/2014 and therefore took the view that the tax authorities have no claim over the money seized as if the first respondent was entitled to interim custody. 7. However, giving due effect to the apprehension expressed by the Income Tax department, the petitions were disposed of with a direction that 60% of the amount in deposit shall be released to the first respondent, provided he produced a bank guarantee or adequate security of immovable property for the amount released. The balance 40% was ordered to be retained in court till the culmination of the inquiry proceeding ## **Crl.M.C.No.2348 of 2015** **:-6-:** pending before the tax authorities. Looking at the order it seems that the court was under the impression that in any case, the liability of the first respondent if assessed for tax, will not exceed 40% of the amount. It is this order which is challenged before this Court invoking Section 482 of Cr.P.C. 8. Respondents 1 and 2 were not represented today when the matter was heard. I heard the learned counsel for the petitioner. 9. It is contended that the impugned Annexure- I common order dated 10.11.2014 is illegal, since it did not take into account the provisions of the Act which entitled the authorities to demand for the cash seized and deposited in the Court. It is submitted that as per Section 132 A of the Act, the department is entitled to exclusive possession of the currency notes during the pendency of the ## **Crl.M.C.No.2348 of 2015** **:-7-:** assessment proceedings and the first respondent was not entitled to get any portion of the cash seized released from the court. It is contended that the inquiry conducted in the matter revealed that the cash seized from the possession of respondents 1 and 2 was unaccounted money being liable to tax and penalty under the provisions of the Act. Thus, the impugned order was sought to be quashed and the entire amount released to the petitioner as provided for by Section 132 A of the Act. 10. The learned counsel for the petitioner referred to Section 132 A of the Act which provides for power of the authorities to requisition for delivery of unexplained assets or cash from the custody of the concerned officer or the authority in possession of the same. But the law appears to be clear that when cash seized by a police officer is reported to the Magistrate under Section 102 of ## **Crl.M.C.No.2348 of 2015** ## **:-8-:** the Cr.P.C. and deposited, the Income Tax authorities are not justified in issuing any command to the court demanding release of cash since the expressions officer or authority referred to in Section 132 A cannot be understood to take in a court also, as held in **Abdul Khader v. Sub Inspector of Police and ors. [(1999) 240 ITR 489(Ker)]** . The law to be followed in such situation was settled in **K.Choyi v. Syed Abdulla Bafakky Thangal [1980] 123 ITR 435** and it was followed in **Abdul Khader** 's case also. The decision of the Supreme Court quoted in **Abdul Khader** 's case is extracted below; “In **K.Choyi v. Syed Abdulla Bafakky Thangal [1980] 123 ITR 435** , the Supreme Court held that where money was seized by the police from a person and was deposited in the criminal court, the Department could not, after passing an assessment order, seek to seize the money lying in the criminal court under section 132, but the appropriate remedy was for the Income Tax officer to apply to the court under section 226(4) for payment to him of the money towards the tax due.” ## **Crl.M.C.No.2348 of 2015** **:-9-:** 11. That means the Income Tax officer, who has reason to believe that unexplained amount of cash was possessed by a person, has to apply to the court under Section 226(4) for payment of the money due under the tax. This Court by order dated 28.5.2020 has called upon the petitioner to report whether assessment proceedings have been initiated and finalised and also to report the amount recoverable towards payment of tax etc. under the Act. 12. The petitioner submitted a statement on 11.6.2020 intimating that assessment was completed as against the first respondent making a demand for an amount of Rs.20,12,420/- towards tax and interest etc. It was intimated that the amount directed to be retained in JFCM Court being only Rs.15,23,480/- was insufficient to cover the entire liability of the first respondent, assessee. It is ## **Crl.M.C.No.2348 of 2015** **:-10-:** contended that when penalty leviable under Sections - 271(1)(c) is also quantified, the assessee will be liable for payment of more amount. 13. Going through the counter affidavit filed by the first respondent, his contention appears to be that the cash seized from his possession is an accounted money for which he is not liable to be assessed for the amount as fixed by the authorities under the Act. 14. The assessment order dated 29.12.2018 produced before this Court shows that the first respondent was assessed after following the procedure prescribed by the Act. He cannot therefore contend in this proceeding that he is not liable for payment of tax, interest and penalty unless the order itself is challenged before the appropriate authority competent to entertain appeal under the Act. As to the amount for which he could ## **Crl.M.C.No.2348 of 2015** ## **:-11-:** be finally held liable, it is for the authorities under the Act to determine and quantify the sum. Such an inquiry cannot be undertaken by the Magistrate while deciding the petitions filed under Section 451 of the Cr.P.C. seeking release of cash amount from the court. Therefore, the apportionment of the amount as between the claimants and release of 40% of the cash amount in deposit to the petitioner as if such portion of the amount would satisfy the claim of the Income Tax authorities is factually and legally wrong. That part of the impugned order allowing the first respondent to get release of 60% of cash in deposit on tender of bank guarantee, therefore, requires to be modified. 15. As already referred to in **Syed Abdulla Bafakky Thankgal** 's case supra, the appropriate remedy open to the Income Tax officer is to apply Section 226(4) of the Act for payment of money ## **Crl.M.C.No.2348 of 2015** **:-12-:** towards tax and other amounts due. That means, once the assessment proceedings have become final and conclusive, the authorities under the Act are entitled to apply to the learned Magistrate for release of the portion of amount due and recoverable from the first respondent under law. In other words, the amount necessary for satisfying the liability of the first respondent will have to remain in the custody of the court despite any claim being raised by parties demanding interim custody, pending finalisation of the assessment proceedings. In the result, this Crl.M.C. is disposed of directing JFCM-II, Mananthavady, to retain the entire amount of cash in deposit intact and await finality of the assessment proceedings initiated against the first respondent. The right to recover the amount will enure to the first respondent only **Crl.M.C.No.2348 of 2015** ## **:-13-:** in the situation of the order of assessment being either set aside in appeal or other appropriate legal proceedings. Otherwise, the authorities under the Act will be entitled to move the court for release of the requisite portion of amount of tax etc. due to the Department and recoverable under the Act. All pending interlocutory applications are closed. Sd/- ## **T.V.ANILKUMAR JUDGE** ami/ ## **Crl.M.C.No.2348 of 2015** ## **:-14-:** ## **PETITIONER'S EXHIBITS** : - **ANNEXURE I : CERTIFIED COPY OF THE ORDER OF JFCM COURTII, MANANTHAVADY, IN CRL.M.P.NO.4857/2014.** - **ANNEXURE Ii : TRUE COPY OF THE SWORN STATEMENT OF 2ND RESPONDENT DATED 26.8.2014.** **ANNEXURE III : TRUE COPY OF THE SWORN STATEMENT RECORDED FROM THE 1ST RESPONDENT DATED 30.9.2014.** **ANNEXURE IV : COPY OF THE DEMAND NOTICE AND ASSESSMENT ORDER DATED 29.12.2018.** **ANNEXURE R1-A : TRUE COPY OF THE PURCHASE BILL AND INFORMATION TO DUBAI/SHARJHA POLICE AND AIRPORT BOTH DATED 16.1.2014** **ANNEXURE R1-B : TRUE COPY OF THE EMIRATES AIRLINE BOOKING VOUCHER AND CHALLAN NO.9194 DATED 17.1.2014 ANNEXURE R1-C : TRUE COPY OF THE SALE BILL NO.457 & 458 OF MAHALASA SILVER SHOPPY PVT. LTD., BANGALORE BOTH DATED 13.8.2014.**