The Delhi High Court has refused to stay an Income Tax Appellate Tribunal order directing release of about Rs 17.66 crore in cash seized during a search. In Pr. Commissioner of Income Tax-Central-1 v. Kapoor Industries Limited (ITA 671/2026), reported on 31 August 2026, a Division Bench of Justice Dinesh Mehta and Justice Rajneesh Kumar Gupta held that the Department cannot keep seized cash once the charge under Section 132B has come to an end.
What was decided
The cash had been seized from lockers of two searched persons. The assessment of the searched person was completed on 27 March 2026. The company, which was not a searched person and against which no warrant of authorisation had been issued, claimed the cash as self-assessment tax for Assessment Year 2024-25. The Department relied on reassessment proceedings under Section 148 to justify continued retention.
The Court held that once the searched person’s assessment was made, the Section 132B charge ended, and the cash could not be withheld through proceedings against a different entity. It directed the Assessing Officer to release the amount within 30 days after adjusting a tax liability of about Rs 3.74 crore, with interest to be computed and kept in an interest-bearing deposit pending a Larger Bench decision on interest. The Department’s appeal was admitted on two questions, including whether the seized cash could be claimed as self-assessment tax.
Why it matters
After a search, seized cash and jewellery often remain with the Department for long periods, sometimes linked to proceedings against related persons. This ruling confirms that Section 132B is a specific statutory mechanism with limits: seized assets may be applied against the liabilities of the person concerned, but retention is not open-ended.
Searches initiated after 1 April 2026 fall under the Income-tax Act, 2025, subject to its transitional provisions, while this ruling was rendered under the 1961 Act. Groups in Delhi NCR with multiple entities should track which entity’s assessment governs each seized asset.
Practical points
- Maintain a clear record of what was seized, from whom, and under which warrant.
- Apply in writing for release or adjustment of seized assets as soon as the relevant assessment is completed.
- Where seized cash is claimed as tax payment, record that claim in the return and in correspondence.
- If retention continues on the basis of another entity’s proceedings, examine whether the statutory conditions are actually met.
Sources: LiveLaw Biz, 31 Aug 2026.
For a confidential discussion on search, seizure and release of seized assets, see Income-tax Search & Seizure Lawyer.
General legal information only; not legal advice or solicitation.
