Law:

Section:

Section 226, read with section 132(1), of the Income-tax Act, 1961 - Collection and recovery of tax - Other modes of recovery - Police seized currency notes from respondents on suspicion and reported matter to Magistrate who directed police to hold money subject to further order from him - Police did not require money in connection with any offence - On information given by Police, ITO under authorisation under section 132 seized money without permission of Magistrate - A direction was accordingly issued by Magistrate to ITO to deposit money seized in court - ITO retained so much of money as was sufficient for discharging tax liability of respondents and paid remaining amount in Court of Magistrate concerned - Whether though procedure followed by Income-tax Officer to seize money was no doubt irregular but was not illegal to such an extent that there should be an order for refund of entire amount so as to enable department to make a formal application for payment of money - Held, yes FACTS The police seized currency notes worth Rs. 1,73,230 from the possession of the respondents, while they were in a motor car. The police suspected that the currency notes were connected with the commission of some cognisable offence. After seizing this money, the police reported the matter to the Magistrate concerned for suitable orders with regard to the custody, production and disposal of this amount. Subsequently, a report was made by the police to the Magistrate that the money was no more required by them in connection with any offence. The ITO was informed by the police about the seizure of this money by them and it was consequent upon this information that warrants of authorisation were obtained and the money which under the orders of the Magistrate was kept in the custody of the police, was seized by the ITO. When the Magistrate considered report made by the police about the seizure of the money by the ITO, a direction was given to the police to produce the currency notes for disposal under section 523, Criminal Procedure Code. The police, thereupon, reported their inability to produce the money as it was seized by the ITO. The Magistrate, thereupon, issued notices to…

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