Prakash Jaichand Shah v.DIT (Investigations) (2013) 350 ITR 336/255 CTR 403 (Guj) (High Court)

S.132A:Powers -Requisition of books of account -Cash seized by police authorities, reasonable explanation

regarding cash, no evidence that amount would not be disclosed to income-tax authorities, Order of

requisition held to be not valid.

The assessee, a cotton broker, carried with him cash of Rs. 11 lakhs collected from A in respect of the sale of cotton through him. The cash was seized by the police authorities. The assessee furnished an explanation but the police authorities did not accept the explanation and seized the cash. An order was passed under section 132A and the amount was requisitioned by the income-tax authorities. The income-tax officials recorded the statement of the assessee wherein he stated that the amount had been arranged by RS through a shroff of Kalupur against purchase of cotton. The income-tax officials surveyed the business premises of RS and examined his books of account. RS corroborated the statement of the assessee. RS's accounts showed issuance of five cheques in favour of STC. The accounts of the shroff showed that the five cheques issued by RS had been deposited with them for discounting against which Rs. 11 lakhs in cash had been handed over to the assessee. The assessee requested for release of the cash but this was refused. On a writ petition :

Held, allowing the petition, that in view of the factual background, no reasonable person could have come to the

conclusion that the amount of Rs. 11 lakhs belonged to the assessee or that he would not disclose the amount to the income-tax authorities under the provisions of the Act. In the circumstances, on the basis of the material before him, the Director of Income-tax could not have formed the requisite opinion as required under section 132A of the Act. The warrant of authorisation issued by him, therefore, was vitiated as having been issued without the condition precedent for exercise of powers under section 132A being satisfied. The warrant of authorisation as well as the order under section 132A was liable to be quashed. The assessee was entitled to the seized amount along with interest.