Undisclosed funds in someone else's account can be seized: HC

The I-T department had raided the premises of a Delhi-based businessman and after following the money trail, seized unexplained funds lying in different bank accounts.

NEW DELHI: The Delhi high court on Monday upheld the validity of one of the first post-demonetisation raids and seizures carried out by Income Tax authorities in the capital this year. 

A bench of Justices S Muralidhar and Chander Shekhar also said the department had powers to seize unexplained funds lying in bank accounts not owned by the person who has been raided if the money trail leads there. 

The I-T department had raided the premises of a city businessman and after following the money trail, seized unexplained funds lying in different bank accounts of eight companies and an associate of the man. 

Money parked in a bank account is “certainly a valuable thing,“ the bench observed, referring to the I-T Act and noted that “a sum in a bank account is not outside the ambit of Section 132(1) of the Act and can be subject to search and seizure“ as a “person could be in possession of undisclosed income not only in his or her own account but in someone else's account.“ 

In January , intensifying its drive against black money post demonetisation, the I-T wing had raided the premises of Mohnish Mohan Mukkar, accusing him of controlling a number of paper entities. 

The department told HC that most of these companies did no substantial operations but merely lent funds to each other to mask the real source of funds and evade taxes. After examining bank records and detailed cash trail, the I-T department traced Rs 24 crore lying in eight bank accounts of several companies and one account of a woman employee. 

Against this seizure, the affected people approached HC challenging the action of the department. Senior advocate P Chidambaram defended the eight companies whose bank accounts had been frozen. But HC imposed costs of Rs 1 lakh each on the companies and one individual petitioner for trying to mislead it.The bench also ordered their prosecution for filing false affidavits where they tried to hide that forged documents were presented before the department during post-search enquiries. 

“It is sought to be suggested by Chidambaram that the writ petitions were drafted in a hurry . However, if that were true then in the rejoinder affidavits filed by both sets of petitioners some attempt ought to have been made to justify their missing out the material facts in the main petition. On the contrary , both rejoinders only serve to confirm the deliberate suppression of material facts by both sets of petitioners,“ the bench noted, asking the registrar to start prosecution.

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