THE DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION), HASSAN vs. M/S. MECTEC

CRL.P/10150/2026HC KarnatakaKAHC01046939202628 August 2026Author: M.NAGAPRASANNA5 pages

AI SummaryAllowed

What did the High Court hold?

The High Court of Karnataka allowed the criminal petition. It held that the conditions imposed by the Principal Civil Judge and JMFC, Virajpet, in its order dated 05.03.2026, for the release of the seized cash of Rs.3,99,05,000/- to the Income Tax Department were unsustainable. The Court reasoned that Section 132(b) of the Income Tax Act, 1961, deals with the custody of assets seized during a search and permits the Department to hold such assets without any conditions. The imposed conditions, namely the execution of an indemnity bond for Rs.4,00,00,000/- and an affidavit undertaking to produce the amount as and when directed, were found to be contrary to the established legal provisions governing such seizures under the Income Tax Act. Consequently, the Court quashed the said conditions while leaving the remainder of the lower court's order undisturbed. The operative direction was to quash the conditions imposed.

What were the facts?

The Deputy Director of Income Tax (Investigation), Hassan (the petitioner/Department) filed a criminal petition under Section 482 of the Cr.PC seeking modification of an order dated 05.03.2026 passed by the Principal Civil Judge and JMFC, Virajpet. The original order concerned Crime No.108/2025. During a search, cash amounting to Rs.3,99,05,000/- was seized by the Circle Inspector of Police, Virajpet Rural Police Station. This seizure was reported to the court, and a PF No.159/2025 was drawn on 16.10.2025. The Income Tax Department filed an application seeking custody of the seized amount, arguing that it had not disclosed the income and the search yielded the seizure. The court allowed the Department's application for release of the amount but imposed conditions: an indemnity bond for Rs.4,00,00,000/- and an affidavit undertaking to produce the amount when directed. The Department is aggrieved by these conditions.

What were the issues?

1. Whether the conditions imposed by the Principal Civil Judge and JMFC, Virajpet, for the release of seized cash to the Income Tax Department are legally sustainable, specifically concerning the execution of an indemnity bond and an undertaking to produce the amount as and when directed by the Court, under Section 482 of the Cr.PC? The petitioner (Income Tax Department) argued that Section 132(b) of the Income Tax Act, 1961, governs the custody of assets seized during a search and allows for custody by the Department without any conditions. Therefore, the conditions imposed by the lower court run counter to the provisions of the Income Tax Act and are required to be quashed. The respondent (State) did not record any specific arguments against the petitioner's plea in the provided judgment text.

Which sections of the Income-tax Act were involved?

Section 482, Section 132(b)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 28TH DAY OF AUGUST, 2026 BEFORE THE HON'BLE MR. JUSTICE M.NAGAPRASANNA CRIMINAL PETITION NO. 10150 OF 2026 BETWEEN:

THE DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION), HASSAN AAYAKAR BHAVAN, BELUR ROAD, VIJAYANAGAR, HASSAN - 573 201. …PETITIONER (BY SRI. Y.V. RAVI RAJ, ADVOCATE) AND:

M/S. MECTEC A PROPRIETORSHIP CONCERN, HAVING ITS RESIDENCE-CUM BRANCH OFFICE AT G. SHIVAJI HOUSE, GROUND FLOOR, BAUGODU, KARNATAKA, REP. BY ITS SOLE PROPRIETOR, SMT. NEENA KAMALESH, REP. BY HER POWER OF ATTORNEY HOLDER, SRI. KAMALESH SHAH S/O. RAJENAIKANTH SHAH, AGED ABOUT 63 YEARS, R/A A.P 06, SURAMYA PART-II, GANDHINAGAR DISTRICT, GUJARATH.

THE STATE BY VIRAJPET RURAL

Digitally signed by PADMAVATHI B K Location: High Court of Karnataka

POLICE STATION, SPP OFFICER HIGH COURT BUILDING BENGALUIRU - 560 001. …RESPONDENTS (BY SRI. B.N. JAGADEESHA, SPP-I A/W SMT. DEEPTHI ALVA, HCGP FOR R1)

THIS CRL.P IS FILED U/S 482 OF CR.PC (FILED U/S 528 BNNS) PRAYING TO MODIFY THE ORDER DATED 05.03.2026 PASSED BY THE PRL.CIVIL JUDGE AND JMFC VIRAJPET IN CRIME NO.108/2023 BY ALLOWING THE ABOVE PETITION BY DIRECTING TO RELEASE OF SEIZED CASH OF RS. 3,99,,05,000/- IN FAVOUR OF THE PETITIONER WITHOUT IMPOSING ANY CONDITIONS.

THIS PETITION, COMING ON FOR ORDERS, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE M.NAGAPRASANNA

ORAL ORDER

The petitioner/Department of Income Tax is before the Court seeking modification of the order dated 05.03.2026 passed by the Principal Civil Judge and JMFC, Virajpet in Crime No.108/2025 in imposing conditions while releasing the seized cash of Rs.3,99,05,000/- in favour of the Department.

Heard Sri. Y.V. Ravi Raj, learned counsel appearing for the petitioner and Sri. B.N. Jagadeesha, learned State Public

Prosecutor-I along with Smt. Deepthi alva, learned High Court Government Pleader appearing for respondent No.2

Facts, in brief, germane are as follows: -

During a search conducted cash amounting to Rs.3,99,05,000/- comes to be seized by the Circle Inspector of Police, Virajpet Rural Police Station, Kodagu District. The same comes to be reported to the concerned Court and a PF in PF No.159/2025 is drawn on 16.10.2025. An application comes to be filed by the petitioner under Section 497 read with Section 503 of the BNSS on the score that after receipt of information from the Police, the petitioner had not disclosed the income, the search has yielded to the said result of seizure. Therefore, the Department is wanting custody of the amount. The concerned Court in terms of its order dated 05.03.2026 allows the application and directs that the amount be released in favour of the Income Tax Department while declining to accept the plea of the applicant-M/s Mectec to get the amount released in its favour by the following order:

"36. Point No.3: In view of my finding to point Nos. 1 and 2, I proceed to pass the following:

ORDER

The application filed by the petitioner No.1 by name M/s Mectec Firm, represented by its sole proprietress Smt. Neena Kamalesh W/o Kamalesh Shah under Section 497 and 503 of BNSS is hereby dismissed.

The application filed by the petitioner No.2/rival claimant the Deputy Director of Income Tax department, Hassan under Section 497 and 503 of BNSS is hereby allowed.

The investigation officer is directed to release seized amount to the interim custody of petitioner No.2 i.e., the Deputy Director of Income Tax Department, Hassan with the following:

CONDITIONS

The petitioner No.2 shall execute an indemnity bond for a sum of Rs.4,00,00,000/- (Rupees four crores) along with one surety for like sum.

The authorized person of petitioner No.2 shall file an affidavit before the Court under taking to produce the said amount as and when directed by the Court.”

The Department is not aggrieved by the entire order, but the conditions imposed in the order that the Department has to execute an indemnity bond for Rs.4/- crores and an affidavit of undertaking to produce the amount as and when directed by the Court. The plea of the petitioner/Department stands to reason that such conditions cannot be imposed as Section 132(b) of the Income Tax Act, 1961 deals with seizure of

assets during the search to be in custody of the Department without any condition. In that light, the said conditions imposed by the concerned Court runs counter to law. They are, therefore, required to be quashed.

For the aforesaid reasons, the following:

O R D E R

(i) Criminal petition is allowed. (ii) The order dated 05.03.2026 passed by the Additional Civil Judge and JMFC, Virajpet in Crime No.108/2025 stands quashed qua conditions imposed in the order. (iii) Reminder of the order is left undisturbed.

Sd/- (M.NAGAPRASANNA) JUDGE

JY List No.: 2 Sl No.: 8

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