Search and seizure- Cash seized from third person- Third person stating that cash belonged to asessee and assessee admitting it- Amount included in return filed by assessee- Request to adjust tax dues and return balance to assessee- Request cannot be refused on ground that cash had been seized from third person-

In February 2012, Rs. 26 lakhs in cash were seized by the Department from one VS. VS stated that the cash did not belong to him but to the assessee. Such statement of VS was also confirmed by the assessee. The assessee filed his return for the A. Y. 2012-13 declaring total income of Rs. 27,52,100 including the income declared of Rs. 21,73,000 on account of unexplained cash. The assessee filed an application to the Assessing Officer to adjust the tax liability from the seized amount. Thereafter the asessee filed an application for release of the balance of the seized amount along with interest after adjusting the demand. By a communication, the Assessing Officer informed the assessee that the Department is not in a position to issue the refund until completion of assessment of the VS.

The Gujarat High Court allowed the writ petition filed by the assessee and held as under:

“i) The fact as emerging from the record clearly revealed that in proceedings u/s. 132A of the Income-tax Act, 1961, VS from whom the cash had been seized had clearly stated that it belonged to the assessee and the assessee had also in proceedings u/s. 153C admitted this.

ii) The Department had treated the cash as belonging to the assessee. There was no dispute as regards the title to the seized assets (cash). The Department was, therefore, not justified in not releasing the balance amount to the assessee on the ground that the cash had been seized from VS.

iii) The Department is directed to forthwith refund the balance amount after adjusting the tax dues of the petitioner with interest.”