Seizure of cash in transit

Seizure of cash in transit due to the implementation of the election code has become a daily routine. After the election code came into force, so far Rs 20 crore in aggregate were seized at various places in Tamil Nadu. The seizures came about since the persons carrying cash could not give proper explanation as regards the source or the purpose for which the cash was carried by them. The seized cash were passed on to the Income-tax Department for dealing with the same, in accordance with law.

Section 69A says that where a person is found to be the owner of any money, bullion, jewellery or other valuable article or thing and it is not recorded in the books of account, it would be treated as the income of that person, if he does not offer any explanation about the nature and source thereof. The treatment envisaged in the law is to treat such money as income in the year in which it was found. The law, however, does not empower seizure of cash.

Section 132 meant for search and seizure empowers the tax department to seize cash or any other valuable article or thing found as a result of search, if it does not form part of stock in trade of the business.

Treatment of seized cash

The cash in transit seized in the recent times due to the election code of conduct could not be taken as seizure envisaged in Section 132 and therefore the consequent assessment proceedings prescribed in Sections 153A to 153C would not apply.

Hence, the taxpayers either have to prove the source of cash or admit the seized cash as income.

Once it is accepted as income, the amount seized would be adjusted towards tax liability and only the balance if any, would be eligible for refund.

Also, appropriate explanation about the source of cash could be offered before the Assessing Officer at the time of assessment and refund of the same could be obtained.

This however, would take some time. The best remedy, however, would be to have a document in support for carrying the cash, in which case the seizure of cash could be avoided.

Consequence

The recent vigil in respect of carrying cash, though meant for implementing election code, seems to have resulted in the public being cautious about cash transactions.

This is a welcome move and if such a vigil is maintained on a regular basis, taxpayers would be compelled to route their transactions through banking channels which leave some trail as well for the tax gatherers for effective assessments.

This could also be a deterrent against cash dealings which is sought to be discouraged by provisions such as Sections 40A(3), 269SS and 269T of the Income-tax Act.

(The author is an Erode-based chartered accountant.)

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