Whether Income Tax Department Can Seek Custody Of Seized Currency From Magistrate: Kerala High Court Refers To Division Bench

Justice Thomas noted that a Single Bench in Union of India v State of Kerala and Another had held that interim custody should be given to the Income Tax Department to complete the procedures mentioned in Sections 132A, 132B, 153A of the Income Tax Act. Even if the amount is released to the income tax department, the individual can claim it under the Income Tax Act. However, if the amount is released to the individuals, the department would have difficulty in implementing the provisions of Income Tax Act.

However, in R. Ravirajan and Others v State of Kerala, the Court held that Section 132A of the Income Tax Act does not empower the department to requisition the Magistrate under Section 451 of Code of Criminal Procedure. The Court held that the department can request the court in whose custody the money remains only for the purpose of meeting the tax due from an assessee. This also can be done only after the tax due has been determined after an assessment.

A Special Leave Petition was filed against the decision in Ravirajan. The Supreme Court dismissed the petition observing that they are not inclined to interfere with the impugned judgment. The High Court held that since the petition was dismissed by a non-speaking order, the principle of merger is not attracted.

Merger is a principle of precedent which dictates that when a finding which acts as precedent is ultimately decided by a superior forum, the decision of the superior forum acts as the precedent, the Court had said.

Considering that these two benches had come up with divergent views, the Court found it best to refer the matter to a Division Bench rather than siding with any one view.

The Court noted that if the interim custody is with a police station, the tax official has power to requisition under Section 132 A of the Income Tax Act. The Court also noted that there is no law against barring an individual from holding currency notes.

The Court observed that this is an important issue to be decided considering that a large number of currency notes are being seized from individuals.

The present issue arose when a number of cases came up before the court in which police seized large amounts of currency notes from individuals. The seizure was intimated or the notes were produced before the Magistrate under Section 102 of the Code of Criminal Procedure. The individuals from whom the currency had been seized filed for an interim custody on the basis of ownership. The Income Tax Department claimed custody for the purpose of verification and assessment.

The Court emphasized on the importance of precedent and having certainty of law.

“In this context, it is necessary to mention that certainty of law is an essential facet of the rule of law. Certainty renders efficacy for compliance and nurtures continuity. Ambiguity can create confusion and prejudice. Hence the doctrine of precedents has to be followed without dilution.”

The Court directed the Registry to place the case before the Chief Justice for appropriate orders for constituting the Division Bench.

Counsel for Petitioner: Advocates P Reghunath, Bonny Benny, vishnu

Counsel for Respondents: Additional Solicitor General of India ARL Sundaresan assisted by Advocate Navneeth N Nath for Income Tax Department, Public Prosecutor Renjith T R

Case Titile: Ankush and Another v Income Tax Department and Another

Case Number: Crl.M.C. 1742/ 2024, Crl. M.C. 2495/2024, Crl.M.C. No. 2516/2024 & Crl.M.C. 7060/2023

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