Balance Of Convenience To Be Considered While Deciding Interim Custody Of Seized Articles: Kerala High Court releases unaccounted cash with Rs. 50 lakhs to Income Tax Dept.
The Kerala High Court in the case of Union of India and Anr. v/s State of Kerala and Anr. released unaccounted cash with Rs. 50 lakhs to Income Tax Department and ruled that balance of convenience to be considered while deciding interim custody of seized articles.
On 12.03.2017, while conducting vehicle inspection at Tholpetty Check post, Excise Officials found that the respondent is carrying cash of Rs.50 lakhs without any proper supporting documents. Consequently, the respondent was produced before the Sub Inspector of Police, and F.I.R. was registered. The amount was also seized and the same was produced before the Judicial First Class Magistrate. Upon getting information from the Inspector of Police, Thirunelly, Income Tax authorities have issued summons to the 2nd respondent under Section 131 of the Income Tax Act seeking to explain the source of the said amount. He stated that the seized cash was not his money and it was handed over to him by his friends for starting a supermarket at Bangalore. After conducting an inquiry, the income tax authorities found that the respondent failed to explain the source of the same properly and therefore it was decided to initiate proceedings against him.
The single judge bench of Justice Ziyad Rahman A.A. noted that the amount in question was seized from the possession of the respondent, apparently, he could not explain the source of the same. Failure to explain the source warrants a proceeding under the Income Tax Act by the appropriate authorities under the said Act.
The court said that even if the amount which is the subject matter of the dispute in this case is released to the petitioner, there is a specific procedure contemplated for getting the amount released in favour of the respondent, from whose custody the amounts were seized. The only stipulation is that, for getting the aforesaid amount released in favour of the respondent, he has to convince the authorities as to the source of income and to pay the amount of taxes which is assessed on the said income in accordance with the provisions of the Income Tax Act.
The court added that if the amount is released to the respondent, it is likely to cause difficulties in initiating proceedings under Section 132-A and the further proceedings thereon. Therefore, the balance of convenience is in favour of the petitioner which was not taken into consideration by the Magistrate.
The court set aside the order passed by the magistrate along with the common order passed by the Judicial First Class Magistrate and ordered that the amounts shall be released to the Income Tax Department for completing the proceedings under Sections 132-B or 153A or any other proceeding under the Income Tax Act, as the case may be, upon the competent officer of the petitioner executing a bond undertaking to complete such proceedings within a period of six months from the date of such release.
The court added that in case of failure on the part of the petitioner in completing the proceedings, within the stipulated time, the amount shall be deposited by the petitioner, with the Judicial First Class Magistrate, thereupon the respondent shall be entitled to move to the Magistrate for getting the same released in his favour, and the same can be released in his favour, subject to such conditions, which the Magistrate may deem fit.
