Law:

Section:

Section 132, read with section 132B, of the Income-tax Act, 1961 - Search and seizure - Assessment years 1989-90 to 1995-96 - First respondent conducted search at premises and clinic of assessee which led to seizure of cash, Indira Vikas Patras (IVPs) and promissory note - After adjusting seized cash retained by department, respondents encashed IVPs as and when same matured and adjusted proceeds thereof towards assessee's tax liability - Whether in view of section 132(5) cash available or cash recovered by department by encashment of IVPs of assessee could be adjusted only towards existing liability or towards liability determined after assessment or reassessment - Held, yes - Whether since in respect of assessment year 1994-95, tax was recovered by encashment of IVPs before completion of assessment and before assessee became a defaulter, said action of department was contrary to section 132B(1)(i) - Held, yes FACTS As a result of search conducted by the first respondent (R-1) upon the assessee-petitioner on 30-12-1994, certain amount of cash, Indira Vikas Patras (IVPs) and promissory notes were seized. The assessee made a total disclosure of Rs. 1.46 crores for the financial years 1989-90 to 1994-95 under section 132(4). The respondent No. 1 initiated proceeding under section 132(5) estimating the income, tax thereon, interest and penalty for the purpose of retaining the seized assets for appropriation after determi-nation of the assessee's tax liability. Since after search, there was still time to remit the last instalment of advance tax for 1995-96, the assessee, after referring to his statement, furnished under section 132(4), on 4-1-1995, declared an income of Rs. 66,86,800 for that year and requested the Asstt. Commissioner (R-2) to appropriate Rs. 26,74,720 out of said seized cash and IVPs, towards advance tax. Subsequent thereto he revised said return on 15-12-1995, declaring an income of Rs. 75 lakhs. After adjusting the seized cash retained by the department, the respondent Nos. 1 and 2 encashed the IVPs as and when the same matured and adjusted the proceeds thereof towards the petitioner's tax liability for 1995-96 and credited some amount towards…

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