Authorities must retain seized cash during tax assessments; claimants can only recover amounts post-assessment through appropriate legal channels.

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.

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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.

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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 :-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 :-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