Kerala High Court
Ankush vs Income Tax Department on 12 June, 2024
Author: Bechu Kurian Thomas
Bench: Bechu Kurian Thomas
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS
Wednesday, the 12th day of June 2024 / 22nd Jyaishta, 1946
CRL.MC NO. 2516 OF 2024
CRIME NO.0/0 OF VALANCHERY POLICE STATION, MALAPPURAM
CMP 2324/2022 OF JUDICIAL MAGISTRATE OF FIRST CLASS, TIRUR
PETITIONER(S)/RESPONDENTS 2 & 3:
1. ANKUSH, AGED 39 YEARS, POTTAKKAL HOUSE, VENGOLA, ALLAPARA(PO),
PERUMBAVOOR, ERNAKULAM, PIN-683556
2. DEEPA ANKUSH, AGED 37 YEARS, W/O ANKUSH, POTTAKKAL HOUSE, VENGOLA,
ALLAPARA (PO), PERUMBAVOOR, ERNAKULAM, PIN - 683556
RESPONDENT(S)/PETITIONER AND RESPONDENT 1:
1. INCOME TAX DEPARTMENT, REP DEPUTY DIRECTOR OF INCOME
TAX(INVESTIGATION), 8 TH FLOOR AAYAKAR BHAVAN, KOZHIKODE, PIN -
673001
2. STATE OF KERALA, REPRESENTED BY INSPECTOR OF POLICE, VALANCHERY
POLICE STATION, PIN - 676552
This Criminal Misc. case again coming on for orders, upon persuing
the petition and this Court's order dated 14.03.2024, upon hearing the
arguments of SRI. BONNY BENNY, Advocate for the petitioners and PUBLIC
PROSECUTOR for R2, the court passed the following:
Crl.M.C. No.1742/24 & Conn. Cases -:1:-
BECHU KURIAN THOMAS, J.
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Crl.M.C Nos.1742, 2495, 2516 of 2024
& 7060 of 2023
--------------------------------------------
Dated this the 12th day of June, 2024
REFERENCE ORDER
The issue that requires resolution, which is common in all these
cases, is about the procedure to be adopted when currency notes, seized
by the police are produced before or reported to the Magistrate and
divergent claims arise for interim custody under section 451 or 457 of the
Code of Criminal Procedure 1973 (for short Cr.P.C). The individual from
whom the currency notes are seized, claims interim custody on the basis
of ownership while the Income Tax Department claims custody for the
purpose of verification and assessment.
2. The facts involved in these four cases are not required to be
stated herein since the question to be resolved is legal in nature.
However, it has to be mentioned that in Crl.M.C.No.1742/2024 an amount
of Rs.140 lakhs was seized from two persons while they were travelling in
a train and in Crl.M.C.No.7060/2023 an amount of Rs.19.95 lakhs was
seized by the Excise Department. In Crl.M.C.No.2495/2024 and Crl.M.C.
No.2516 of 2024 an amount of Rs.1.85 crores was seized by the police at
Valanchery, from under the carpet of a car while it was being transported
from Salem. Thus, large amounts of currency notes were seized from
individuals by the police and under section 102 of the Cr.P.C, they have
been intimated/produced before the jurisdictional Magistrates in
accordance with law.
3. I have heard Sri. A.R.L. Sundaresan, the learned Additional
Solicitor General of India assisted by Sri.Navaneeth N.Nath, on behalf of
the Income Tax Department, Sri. P.Reghunath, the learned counsel for the
petitioner and Sri. Renjith T.R., the learned Public Prosecutor. I have also
heard Sri. Vishnu Narayanan and Sri. Bony Benny on behalf of some of
the petitioners.
4. At the outset itself, it needs to be borne in mind that in a
proceeding under Section 451 or Section 457 Cr.P.C, the Court only
examines the person who is best entitled to the possession of the property
and at that stage, cannot settle any right to ownership. Thus in a petition
for interim custody, what must weigh with the court is not just about the
ownership but who should be the rightful claimant as a temporary
measure. Factors like the safety of the property, and the possibility of
retrieving it without damage are all obvious considerations and the
arrangement is done only for the preservation of the property until the
conclusion of the trial. Reference to the decision in V.Prakashan v. K.P.
Pankajakshan and Another 1985 (Cri. LJ 951) is relevant in this context.
5. During the course of arguments, the learned counsel placed for
consideration the decision in Union of India v. State of Kerala and
Another (2022) 443 ITR 117) decided on 10.01.2022. wherein a learned
Single Judge of this Court held that the Magistrate has to order release of
the currency notes to the Income Tax Department to enable the parties to
undergo the procedure contemplated under Sections 132A, 132B or 153A
of the Income Tax Act, 1960 (for short the 'IT Act'). It was also observed
that even if the amount is released to the income tax department, it is
possible for the individual to claim the amount under the IT Act. On the
other hand, if the amount is released to the individual it may cause
difficulties in implementing the provisions of the Income Tax Act, observed
the learned Single Judge. On the above basis the Court directed the
currency notes seized by the police to be released to the Income Tax
Department on certain conditions.
6. However, another learned Single Judge of this Court in
R.Ravirajan and Others v. State of Kerala (2023 SCC Online Ker. 8444)
took a contrary stance and held, after a detailed analysis, that, Section
132A of the Income Tax Act 1960 would not empower the department to
requisition the Magistrate under Section 451 Cr.P.C, since the revenue can
apply to the court in whose custody money remains, only for meeting the
tax due from an assessee. It was further held that such power can be
exercised only when the tax has already been determined to be due after
a completed assessment under the Act. The learned Single Judge also
observed that there is no provision in the IT Act that prohibits a person
from carrying currency notes. The judgment in Union of India's case
(supra) was distinguished in Ravirajan's case (supra) by observing that
the said judgment applied to the facts of the said case alone.
7. Thus there are two conflicting decisions of two learned Single
Judges of this Court. Nevertheless, in Ravirajan's case (supra) the
Department filed a special leave petition before the Supreme Court as
SLP No.16409/2023 which was dismissed by order dated 15.12.2023, in
the following words.
"Heard the counsel and Mr.Vikramjith Banerjee and Additional
Solicitor General appearing for the petitioner at length. We
are not inclined to interfere with the impugned judgment and
order.
The Special Leave Petition is accordingly dismissed. Pending
applications, if any, shall also stand disposed of."
8. If an order disposing of a special leave petition is by a non-
speaking order, the principle of merger, is not attracted. The order refusing
leave will not be substituted in place of the order under challenge.
Reference to Kunhayammed and Others v. State of Kerala and
Another [(2000) 6 SCC 359] and Khoday Distilleries Ltd. and Others v.
Sri Mahadeshwara Sahakara Sakkare Karkhane Ltd., Kollegal [(2019)
4 SCC 376] are appropriate.
9. In view of the above principle, since the dismissal of SLP
preferred against the judgment in Ravirajan's case (supra) is not by a
speaking order, the doctrine of merger does not apply and the judgment of
the learned Single Judge is not substituted by the Supreme Court order.
As noted earlier, the decision in Ravirajan's case (supra) had not declared
the law laid down in Union of India's case (supra) as per incuriam but had
only observed that it was rendered on the facts of that case. Therefore
both decisions continue to govern the field, which can lead to confusion,
especially before the trial courts where such claims for custody regularly
arise.
10. Apart from the above referred two judgments another learned
Single Judge of this Court had an occasion to consider a case relating to a
notice issued under section 148 of the IT Act in respect of cash seized by
the Police and produced before the Magistrate. In Muhammed v.
Assistant Commissioner of Income Tax [2024 (2) KLT 570], it was
observed that the production of currency notes in court "does not take
away the fact that the department had initiated proceedings under Section
132A of the 1961 Act to requisition the amount from the Station House
Officer, Nilambur Police Station." (emphasis supplied). The above
observation hints at the availability of the power of requisition under
Section 132A of the IT Act to requisition the assets from the custody of the
Station House Officer.
11. Further, in the decision in Abdul Khader v. Sub Inspector of
Police and Others (1999) 240 ITR 489 (Ker), there is an observation that,
though 'the officer or authority' in section 132A of the IT Act will not take in
the court, "it is open for the Income Tax Officer to apply to the Magistrate
for the release of the assets in their favour." Of course, the aforesaid
judgment was noticed by the learned Single Judge in Ravirajan's case
(supra) but did not follow the aforenoted observation.
12. The issue involved in the cases on hand is of significance,
especially since, large amounts of currency notes are being seized from
individuals, despite the policy of the legislature to reduce unaccounted
money transactions. Of course, the court is mindful that no provision was
brought to its knowledge which restricts the right of an individual to hold
currency notes. Be that as it may, when the seizure is effected by a police
officer, law enjoins upon him a duty to report to the jurisdictional
Magistrate as per section 102(3) Cr.P.C. The currency notes need not
necessarily be transmitted to the court, but can even be retained and a
report of seizure be given to the Magistrate. When the currency notes are
not produced but its seizure alone is reported, an application for custody is
to be filed under section 457 Cr.P.C, while, when the currency notes are
actually produced in court, the application ought to be under section 451
Cr.P.C. The issue thus relates to the entitlement to claim interim custody of
the currency notes from the court. Incidentally, a question also arises
whether, if in the meantime, a requisition is issued under section 132A of
the IT Act, can it not enable those Officers or even the investigating officer
to seek interim custody of the currency notes from the Court.
13. 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. When two co-ordinate Benches have taken differing views, it is
not open for another co-ordinate Bench to pick one amongst the two as
more appropriate. Such a course will lead to further confusion and
ambiguity. In Acharya Maharajshri Narendra Prasadji Anandprasadji
Maharaj and Others v. State of Gujarat and Others [(1975) 1 SCC 11] it
was held that even when the strength of two differing Benches consisted
of the same number of Judges, it was not open to one Division Bench to
decide the correctness or otherwise of the views of the other.
14. Due to the divergent views on the subject it is not proper for this
Court to pick and choose one amongst the two and decide the
correctness. Law mandates that in such circumstances the issue be
considered by a larger Bench. Further, both judgments have not
considered the question regarding the power of the income tax department
to requisition the money under section 132A of the IT Act from the Police
Officer and thereafter seek custody under section 451 or 457 of Cr.P.C, as
the case may be. Thus, this Court is of the view that an authoritative
pronouncement is required.
15. Hence, I deem it appropriate to refer to a Division Bench for an
authoritative pronouncement on the correctness of the decisions in Union
of India v. State of Kerala and Another (2022) 443 ITR 117) and that of
R.Ravirajan and Others v. State of Kerala (2023 SCC Online Ker. 8444).
The Division Bench may also consider the question regarding the authority
of the income tax department to issue a requisitioning order under section
132A of the IT Act and thereafter to claim custody from the court either
under section 451 Cr.P.C or 457 Cr.P.C.
The Registry shall place these cases at the earliest, before the Hon'ble
the Chief Justice, for appropriate orders for constituting the Division
Bench.
Ordered accordingly.
Sd/-
BECHU KURIAN THOMAS
JUDGE
vps
