Smt. Surinder Kaur And Amrik Singh ... vs Union Of India (Uoi) And Ors.
2000 Latest Caselaw 414 Del

JUDGMENT

1. In a search conducted at the residential premises of the petitioner by the authorities under the Foreign Exchange Regulation Act (for short, "the FERA") on August 15, 1997, cash amounting to Rs. 1,18,00,000 was seized. Thereafter proceedings under the FERA were initiated against Amrik Singh, petitioner. The proceedings are continuing. Shri Amrik Singh as well as his wife, Smt. Surinder Kaur, have challenged the action of the respondents by way of the present petitions.

2. Rule D. B. was issued vide order dated January 19, 2000. The petitioners in both the writ petitions have moved the present applications praying that the seized amount be released to them subject to the petitioners furnishing bank guarantee(s) for refund of the amount. The applications have been mainly contested on behalf of the Income-tax Department. So far as learned counsel appearing for the Director of Enforcement is concerned, his main concern has been that in the event of order of confiscation being passed in the adjudication proceedings against the petitioner, Amrik Singh, the case property which happens to be the said amount of cash should be available to the Department. Learned counsel argued that if the amount is ordered to be released to the petitioner at this stage, the money may not be available to the Department and the entire proceedings will get frustrated. So far as this objection on the part of the FERA authorities is concerned, the petitioners have agreed to furnish bank guarantees to the satisfaction of the Director of Enforcement and, therefore, such fears of the Department can be fully taken care of.

3. Coming to the objections advanced on behalf of the Income-tax Department, the main contention is based on the provisions of Section 132A of the Income-tax Act. Learned counsel for the Revenue submits that the authorisation under the said provision was issued to the FERA authorities for remittance of the seized amount to the Income-tax Department and on

receipt of the said amount from the FERA authorities, block assessment proceeding's are to be initiated, which may result in creation of demands against the petitioners. According to the Income-tax Department since the money seized has to come to them in any event, it should not be released to the petitioners. This argument is sought to be met by learned counsel for the petitioners by drawing our attention to the counter affidavit filed on behalf of the Income-tax Department wherein at a couple of places it has been stated that Section 132A of the Income-tax Act is not attracted. Secondly, learned counsel for the petitioner has also pointed out that the authorisation issued under Section 132A of the Income-tax Act was returned by the Directorate of Enforcement vide its order dated August 22, 1997. A copy of this order has been placed on record by learned counsel for the Income-tax Department along with the reply to the present application.

4. Learned counsel for the petitioners has also drawn our attention to the fact that as of today there is no demand existing against the petitioners so far as the Income-tax Department is concerned in respect to the money in question. As a matter of fact the assessment for the assessment year 1998-99 is admittedly still pending. Learned counsel for the Revenue was unable to dispute the fact that as of today no demand is pending with respect to this amount. About the applicability of Section 132A, learned counsel submits that the statements made in the counter affidavit filed by the Income-tax Department are being read out of context. So far as the question of return of the authorisation by the FERA authorities is concerned, it is submitted that whether they return it or not, the fact remains that the authorisation has been issued by the Income-tax Department and it is still in force.

5. We have considered the rival contentions of learned counsel for the parties. We are of the considered view that it will be in the interest of justice that the seized amount is returned to the petitioners subject to their furnishing bank guarantee(s) for refund of the said amount. The bank guarantee(s) have to be furnished to the satisfaction of the Director of Enforcement. The fact that admittedly there is no demand by the Income-tax Department with respect to this amount as of today has weighed with us most in reaching this conclusion. Secondly, we are also mindful of the fact that the entire money is safe and will be available in case it is required in view of the fact that bank guarantee(s) are being furnished by the petitioners to the satisfaction of the Department concerned.

6. It is clarified that in the event of the FERA proceedings being decided in favour of the petitioner, Amrik Singh, in the adjudication proceedings, the question of discharge of the bank guarantee may arise. In such a situation, the bank guarantee will not be discharged without seeking permission of this court. We feel this will secure the interests of the Income-tax Department.

7. Mr. Khanna, appearing for the Income-tax Department, has submitted that a demand of Rs. 19,75,186 is pending against Shri Amrik Singh pursuant to an order passed under Section 143(1) of the Income-tax Act with respect to the assessment year 1998-99. Learned counsel for the petitioners objects to this on the ground that now regular assessment proceedings under Section 143(3) having been initiated the demand created pursuant to an order passed under Section 143(l)(a) of the Act does not stand. Without going into this question, we leave it to the Income-tax Department to take whatever action may be available to them in law to realise the pending demand, if any.

8. The result of the above discussion is that respondents Nos. 1 and 3 are directed to release the amount seized by them under the search and seizure operation conducted on August 15, 1997, to the petitioners subject to the petitioners furnishing bank guarantee(s) to the satisfaction of the Director of Enforcement. On the bank guarantee(s) being furnished, the amount will be released within one week.

9. Both the applications stand disposed of.

10. Copies of the order be given dasti to counsel for the parties.