High Court Refers Mandatory Release of Seized Assets After 120 Days to Larger Bench

1. Core Facts & Background

• The department initiated an inquiry following information received from law enforcement authorities and subsequently executed a search warrant.
• During the search operations conducted at the premises of a third-party firm, a significant quantity of cash was seized by the authorities.
• Subsequent proceedings initiated under anti-benami property laws were dropped after the assessee’s ownership of the seized cash was established.
• The assessee filed an application and a reminder under statutory provisions requesting the immediate release of the seized cash.

2. Revenue / Department’s Action

• Revenue withheld the seized cash and failed to act upon the assessee’s application seeking the release of the funds.
• The department contended that statutory provisions do not contemplate an automatic release of seized assets simply because liability remains unquantified at that stage.
• Revenue argued that the application was premature and unfit for consideration as assessment proceedings against the searched firm had not concluded.
• The department asserted that the applicant was a third party to the primary search proceedings, precluding immediate asset release.

3. Assessee’s Defense & Arguments

• The assessee argued that the statutory period of 120 days from the authorization of the search had lapsed, rendering further retention illegal and without jurisdiction.
• The assessee submitted that under the statutory provisos, failure by the Assessing Officer to decide on the application within the prescribed timeline makes asset release imminent and mandatory.
• The assessee relied upon prior coordinate bench rulings establishing that seized assets must be released if no adverse determination occurs within 120 days.
• The assessee maintained that established ownership over the funds entitled them to possession irrespective of pending assessments of third parties.

4. Final Ruling & Outcome

• The High Court held that the phrase ‘person concerned’ encompasses third parties whose assets are seized during search proceedings on another entity.
• The bench observed that asset release cannot be automatic without the Assessing Officer recording satisfaction regarding the explained nature and source of acquisition.
• The Court noted that statutory provisions mandate the payment of interest by the government beyond 120 days, suggesting that retention consequences are compensatory rather than rendering release strictly mandatory.
• Disagreeing with earlier coordinate bench decisions, the Court formally referred the question of whether the 120-day release timeline is mandatory or directory to a Larger Bench.