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IN THE HIGH COURT OF FOR THE STATE OF TELANGANA
M.S. Ramachandra Rao, T. Amarnath Goud, JJ.
Mectec – Appellant
Versus
The Director of Income Tax (Investigation) and Ors. – Respondents
Writ Petition Nos. 23023 and 29297 of 2019
Decided On : 28-12-2020
Income Tax - Seizure of Cash - Section 132 of the Income-tax Act, 1961 - Summary of Acts and Sections: Section 132, 132B, 300-A of the Constitution of India - The court found the seizure and retention of the cash amount of Rs. 5.00 crore by the respondents from 27.08.2019 till date to be illegal and unsustainable. The respondents were directed to refund the cash with interest at 12% p.a. from 28.08.2019 till the date of payment to the petitioner.
Fact of the Case:
The petitioner, a proprietary concern, entrusted a sum of Rs. 5.00 Crores to its employee for business purposes. The cash was seized by the Task Force Police and later handed over to the Income Tax Department. The petitioner sought the return of the cash, claiming it belonged to them.
Finding of the Court:
The court found the seizure and retention of the cash by the respondents to be illegal and violative of the Income Tax Act, 1961 and the Constitution of India. The respondents were directed to refund the cash with interest and pay costs to the petitioner.
Issues: The primary issue was the legality of the seizure and retention of the cash by the Income Tax Department. The court also considered the ownership of the cash and the validity of the search warrant issued under Section 132 of the Income-tax Act, 1961.
Ratio Decidendi: The court held that the seizure and retention of the cash by the respondents was illegal and violative of the Income Tax Act, 1961 and the Constitution of India. It emphasized that there was no basis for the Income Tax Department to invoke the provisions of Section 132, 132A, and 132B of the Act.
Final Decision: The Writ Petitions were allowed, and the respondents were directed to refund the cash of Rs. 5.00 crores to the petitioner with interest at 12% p.a. from 28.08.2019 till the date of payment. The respondents were also ordered to pay costs to the petitioner.
ORDER :
M.S. Ramachandra Rao, J.
1. The petitioner in W.P. No. 23023 of 2019 (for short 'the petitioner') is a proprietary concern carrying on business of purchase of agricultural lands and agricultural products throughout the country and claims that it has 46 branches at different places all over the country having employee strength of about 300. It also deals as a wholesale trader of agricultural products, vegetables, fruits, and post-harvest crop activities.
2. The petitioner in W.P. No. 29297 of 2019 is Vipul Kumar Mafatlal Patel and he is alleged to be an employee of the petitioner in W.P. No. 23023 of 2019 (henceforth referred to as 'Vipul Kumar Patel').
3. The petitioner claims that its annual turnover for 2015-16 is Rs. 28,34,96,248/-, for 2016-17 is Rs. 20,26,86,915/-, for 2017-18 it is Rs. 20,26,86,915/-, for 2017-18 it is Rs. 73,28,06,623/- and for 2018-19, it is Rs. 72,79,33,999/-.
4. The petitioner contends that it has a large turnover and it handles large quantities of cash which are also disclosed to the Income Tax Department. According to it, there are no proceedings of reopening of assessment pending before the Income Tax Department.
5. The petitioner states that it has business transactions in the State of Telangana also and that it entrusted a sum of Rs. 5.00 Crores to its employee Vipul Kumar Patel for its business purposes.
6. The said individual had come to Hyderabad with friends, and on 23.08.2019 their car a Maruti Ciaz car bearing No. TS09FA 4948 was intercepted by the Task Force Police of the State of Telangana.
7. According to the petitioner, the said employee, his friends, the cash of Rs. 5.00 Crore together with the above vehicle and another car and two wheeler were detained illegally from 23.08.2019 onwards by the Telangana State Police.
8. The GPA holder of the petitioner filed on 27.8.2019 a Habeas Corpus Petition for release of the said persons, the cash and vehicles in the High Court of Telangana.
9. The Task Force Police filed a counter affidavit in the said Writ Petition claiming that the discovery of cash with the said persons was made on 26.08.2019 and that the police had handed over the detenues along with cash to the Principal Director of Income Tax, Ayakar Bhavan, Hyderabad for taking further action against them.
10. Admittedly, the Task force Police addressed a letter under Ex. P5 letter dt. 26.08.2019 to the Principal Director of Income Tax, Ayakar Bhavan, Hyderabad stating that he is handing over both the cash and the detenus to the latter and the Deputy Director of Income Tax, Unit 1(3), Hyderabad (2nd respondent in W.P. No. 23023 of 2019) acknowledged receipt of the letter on 27.08.2019 and put his stamp thereon.
11. However, a panchanama was prepared by the 2nd respondent on 28.08.2019 (Ex. R8) as if a search was organized by a search party consisting of 8 persons who are employees of the Income Tax Department including the 2nd respondent (without mentioning the place where the alleged search was to be conducted in the panchanama); that there were also 2 panch witnesses, one from Nalgonda District, Telangana and another from Dabilpura, Hyderabad who witnessed the search at the place of alleged search; that a warrant of authorization dt. 28.08.2019 was issued to the 2nd respondent under Section 132 of the Income-tax Act, 1961 to search the place (whose location was not mentioned in the panchanama) by the Principal Director of Income Tax (Inv), Hyderabad; the search warrant was shown at 9.00 AM on 28.08.2019 to Vipul Kumar Patel who was present at the alleged place (not mentioned specifically); that a search was conducted at the place (not mentioned specifically in the panchanama); and allegedly the cash of Rs. 5.00 Crore was seized at that time from his custody.
12. Counsel for the petitioner contends that authorization for search has to be given prior to the seizure of the cash by the officials of the Income Tax Department under Section 132 of the Income-tax Act, 1961; when the Task Force Poli
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