Search and seizure – Release of seized assets – Ss. 132A and 132B(1)(i) – Time limit for disposing application – If no decision taken within time department cannot wait for outcome of assessment but bound to release asset –

The Department seized cash from the petitioner while he was travelling on March 25, 2014. The petitioner applied for release of cash under petition dated April 14, 2014 which was filed on April 17, 2014. The application was rejected on 20/07/2015 on the ground that the cash could be released only when its source was explained to the satisfaction of the Assessing Officer and release of seized assets could be considered only after the final assessment of the tax and penalty proceedings. The contention of the petitioner that this decision should have been taken within the time envisaged under further proviso to clause (i) of sub-section (10) of section 132B of the Income-tax Act, 1961 was rejected by the Assessing Officer.

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

“i) The second proviso to clause (i) of sub-section (1) of section 132B puts a time limit within which a seized asset must be released. The question of not releasing the asset would arise only upon the decision on an application that may have been made by the person concerned being taken by the Assessing Officer. If no decision is taken, necessarily, the option of the Assessing Officer to adjust such seized assets would be confined to the existing liabilities.

ii) It is in this context the legislature requires the Assessing Officer to follow the time limit scrupulously. In other words if the person concerned has made an application for release of the assets within the prescribed time, the authority can refuse such request on the ground of not being satisfied about the source of acquisition. But if no such decision is taken within the time envisaged in the further proviso, releasing of the asset becomes imminent.

iii) The action of the Assessing Officer was not sustainable. The impugned order dated July 20,2015 is set aside. The seized cash shall be released in favour of the petitioner with interest as per the statute.”