IN HIGH COURT OF KERALA AT ERNAKULAM PRESENT HONOURABLE MR.JUSTICE T.V.ANILKUMAR FRIDAY, 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, COURT ON SAME DAY PASSED FOLLOWING: Crl.M.C.No.2348 of 2015 :-2-: Dated this 3rd day of July, 2020 O R D E R petitioner, who is Assistant Director of Income Tax (Investigation), challenges common order of learned JFCM-II, Mananthavady in Cr.M.P.Nos.4018 and 4857 of 2014. 2. learned Magistrate by impugned order refused to release cash amount of Rs.38,08,700/- produced in court by Dy.S.P. of Police, Mananthavady and dismissed Cr.M.P.No.4857/2014 filed by petitioner seeking custody of cash, invoking Section 451 of Cr.P.C. person, who claimed to be entitled to possess cash, filed Cr.M.P.No.4018/2014 which was, however, allowed in part. He is first respondent in this Crl.M.C. and has not filed any proceeding challenging correctness of order of learned Magistrate. Crl.M.C.No.2348 of 2015 :-3-: 3. On 14.8.2014, Deputy Superintendent of Police arrested second respondent in this Crl.M.C. with currency notes of Rs.38,08,700/- for his failure to account for its possession. cash was produced before JFCM-II, Mananthavady. investigation did not reveal commission of any offence punishable under Indian Penal Code. During this period, on information that unexplained amount of cash was seized by Mananthavady Police from possession of second respondent, Income Tax authorities proceeded under provisions of Income Tax Act, 1961 (for short, 'the Act' only). authorities recorded statements of actual custodian of cash, second respondent and also first respondent who entrusted custody of cash with former. In meantime, first respondent approached learned Magistrate under Section 451 of Cr.P.C. Crl.M.C.No.2348 of 2015 :-4-: seeking interim release of cash amount. On receipt of notice from court, petitioner herein also filed similar petition, i.e., Cr.M.P.No.4857/2014 seeking interim release of amount. 4. 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 view to raising requisite finance for conduct of marriage, he sold gold brought from Dubai along with some other gold ornaments kept in his house. gold was sold to jeweller in Bangalore and sale proceeds received were entrusted with second respondent who is his friend for being taken to his house, since he was, in connection with urgent matter, to leave for Crl.M.C.No.2348 of 2015 :-5-: Chennai. 5. He produced few documents also before court accounting for possession of cash. 6. learned Magistrate found that tax Department did not file any separate objection to Cr.M.P.No.4018/2014 and therefore took view that tax authorities have no claim over money seized as if first respondent was entitled to interim custody. 7. However, giving due effect to apprehension expressed by Income Tax department, petitions were disposed of with direction that 60% of amount in deposit shall be released to first respondent, provided he produced bank guarantee or adequate security of immovable property for amount released. balance 40% was ordered to be retained in court till culmination of inquiry proceeding Crl.M.C.No.2348 of 2015 :-6-: pending before tax authorities. Looking at order it seems that court was under impression that in any case, liability of first respondent if assessed for tax, will not exceed 40% of 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 matter was heard. I heard learned counsel for petitioner. 9. It is contended that impugned Annexure- I common order dated 10.11.2014 is illegal, since it did not take into account provisions of Act which entitled authorities to demand for cash seized and deposited in Court. It is submitted that as per Section 132 of Act, department is entitled to exclusive possession of currency notes during pendency of Crl.M.C.No.2348 of 2015 :-7-: assessment proceedings and first respondent was not entitled to get any portion of cash seized released from court. It is contended that inquiry conducted in matter revealed that cash seized from possession of respondents 1 and 2 was unaccounted money being liable to tax and penalty under provisions of Act. Thus, impugned order was sought to be quashed and entire amount released to petitioner as provided for by Section 132 of Act. 10. learned counsel for petitioner referred to Section 132 of Act which provides for power of authorities to requisition for delivery of unexplained assets or cash from custody of concerned officer or authority in possession of same. But law appears to be clear that when cash seized by police officer is reported to Magistrate under Section 102 of Crl.M.C.No.2348 of 2015 :-8-: Cr.P.C. and deposited, Income Tax authorities are not justified in issuing any command to court demanding release of cash since expressions officer or authority referred to in Section 132 cannot be understood to take in court also, as held in Abdul Khader v. Sub Inspector of Police and ors. [(1999) 240 ITR 489(Ker)]. 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. decision of Supreme Court quoted in Abdul Khader's case is extracted below; In K.Choyi v. Syed Abdulla Bafakky Thangal [1980] 123 ITR 435, Supreme Court held that where money was seized by police from person and was deposited in criminal court, Department could not, after passing assessment order, seek to seize money lying in criminal court under section 132, but appropriate remedy was for Income Tax officer to apply to court under section 226(4) for payment to him of money towards tax due. Crl.M.C.No.2348 of 2015 :-9-: 11. That means Income Tax officer, who has reason to believe that unexplained amount of cash was possessed by person, has to apply to court under Section 226(4) for payment of money due under tax. This Court by order dated 28.5.2020 has called upon petitioner to report whether assessment proceedings have been initiated and finalised and also to report amount recoverable towards payment of tax etc. under Act. 12. petitioner submitted statement on 11.6.2020 intimating that assessment was completed as against first respondent making demand for amount of Rs.20,12,420/- towards tax and interest etc. It was intimated that amount directed to be retained in JFCM Court being only Rs.15,23,480/- was insufficient to cover entire liability of 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, assessee will be liable for payment of more amount. 13. Going through counter affidavit filed by first respondent, his contention appears to be that cash seized from his possession is accounted money for which he is not liable to be assessed for amount as fixed by authorities under Act. 14. assessment order dated 29.12.2018 produced before this Court shows that first respondent was assessed after following procedure prescribed by Act. He cannot therefore contend in this proceeding that he is not liable for payment of tax, interest and penalty unless order itself is challenged before appropriate authority competent to entertain appeal under Act. As to amount for which he could Crl.M.C.No.2348 of 2015 :-11-: be finally held liable, it is for authorities under Act to determine and quantify sum. Such inquiry cannot be undertaken by Magistrate while deciding petitions filed under Section 451 of Cr.P.C. seeking release of cash amount from court. Therefore, apportionment of amount as between claimants and release of 40% of cash amount in deposit to petitioner as if such portion of amount would satisfy claim of Income Tax authorities is factually and legally wrong. That part of impugned order allowing 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, appropriate remedy open to Income Tax officer is to apply Section 226(4) of Act for payment of money Crl.M.C.No.2348 of 2015 :-12-: towards tax and other amounts due. That means, once assessment proceedings have become final and conclusive, authorities under Act are entitled to apply to learned Magistrate for release of portion of amount due and recoverable from first respondent under law. In other words, amount necessary for satisfying liability of first respondent will have to remain in custody of court despite any claim being raised by parties demanding interim custody, pending finalisation of assessment proceedings. In result, this Crl.M.C. is disposed of directing JFCM-II, Mananthavady, to retain entire amount of cash in deposit intact and await finality of assessment proceedings initiated against first respondent. right to recover amount will enure to first respondent only Crl.M.C.No.2348 of 2015 :-13-: in situation of order of assessment being either set aside in appeal or other appropriate legal proceedings. Otherwise, authorities under Act will be entitled to move court for release of requisite portion of amount of tax etc. due to Department and recoverable under 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 ORDER OF JFCM COURT- II, MANANTHAVADY, IN CRL.M.P.NO.4857/2014. ANNEXURE Ii : TRUE COPY OF SWORN STATEMENT OF 2ND RESPONDENT DATED 26.8.2014. ANNEXURE III : TRUE COPY OF SWORN STATEMENT RECORDED FROM 1ST RESPONDENT DATED 30.9.2014. ANNEXURE IV : COPY OF DEMAND NOTICE AND ASSESSMENT ORDER DATED 29.12.2018. ANNEXURE R1-A : TRUE COPY OF PURCHASE BILL AND INFORMATION TO DUBAI/SHARJHA POLICE AND AIRPORT BOTH DATED 16.1.2014 ANNEXURE R1-B : TRUE COPY OF EMIRATES AIRLINE BOOKING VOUCHER AND CHALLAN NO.9194 DATED 17.1.2014 ANNEXURE R1-C : TRUE COPY OF SALE BILL NO.457 & 458 OF MAHALASA SILVER SHOPPY PVT. LTD., BANGALORE BOTH DATED 13.8.2014. Union of India, Kozhikode v. Hashir / Abdul Nissar / State of Kerala