A recent decision of the Supreme Court has highlighted the perils and hazard of passengers carrying large amounts of cash and large quantities of gold, jewellery and other valuables while travelling. A case came up before the apex Court where an air passenger taking a flight from Hyderabad to Chennai was carrying a large amount of currency notes as part of his personal baggage.

He was an honest citizen who had withdrawn a large amount of money from his bank account which he was required to carry in order to pay the seller of a property which he proposed to purchase. The traumatic experience which he went through is described in the judgment of the Supreme Court before whom a writ petition was filed by the passenger challenging the action of the authorities.

At the Hyderabad airport, the passenger disclosed to the personnel who checked his baggage that he was carrying cash amounting to Rs.65 lakhs. On reaching Chennai, officers of the income-tax investigation wing, alongwith police officers, apprehended him and was interrogated about the cash which he was carrying.

The passenger showed them the cash and the bank certificates evidencing the withdrawals and explained that the amount was part of his legitimate declared earnings. The officers of the tax department suspected him of carrying the money illegally, seized the amount and gave him a receipt. He was also detained for about fifteen hours at the airport.

The tax intelligence officers gave this information out to the press and it was promptly reported. Ultimately, after two months of investigation, the seized money was returned without interest because nothing irregular was found.

The passenger then filed a writ petition in the Andhra Pradesh High Court seeking action against the tax officials and also asking for directions from the Court to streamline the procedure in similar circumstances. The High Court dismissed the petition on the ground that it could not entertain it because the seizure took place in Chennai. The petitioner, therefore, went on special leave petition to the Supreme Court.

The apex Court admitted the petition on the ground that part of the cause of action clearly arose in Hyderabad. Further, the consequential income-tax proceedings were also initiated in Hyderabad. Therefore, the writ petition was maintainable. The Solicitor-General of India who appeared for the tax department argued before the apex Court that the action taken by the intelligence officials at Hyderabad and Chennai airports was in the course of performing their duties.

He submitted that a legitimate suspicion was created in the mind of the officers on account of the appellant carrying an unusually large sum of money in cash. Even though the bank certificates were produced to prove the withdrawal, they had to be verified. The Solicitor-General stated that the explanation given by the appellant was contradictory and the carrying of large amount of cash raised a genuine suspicion. Hence, the detention of the passenger and seizure of cash pending investigation was inevitable.

On the other hand, the appellant contended that there was no justification for detaining him for fifteen hours at the airport and for seizing the money that was carried by him because the amount was drawn from his bank account and formed part of his legitimate earnings. He further contended that there was no law which made it illegal for him to carry a large amount of money.

After considering the arguments on both sides, the Supreme Court held in Civil Appeal No.7914 of 2009, reported in 320 I.T.R. at Page 1, that while a person is free to carry money in the absence of any prohibition by law, the purpose for which the money is carried has to be ascertained by intelligence officers either of the tax department or any other agency. According to the Court, money which is drawn from a bank and legitimately belonging to a person may still be used for an illegal purpose, for example, to pay for a crime or to fund an act of terrorism.

Such amount may also be used as part payment for purchasing a property, as stated by the appellant. However, this would result in evasion of stamp duty, registration charges and capital gains tax in the hands of the seller, apart from creation of black money.

The Supreme Court came down heavily on this practice of carrying cash, even if it is withdrawn from a bank account, and observed that the intelligence officers are entitled to satisfy themselves not only that the money is from a legitimate source, but also that it is being carried for a legitimate purpose. This is necessary in the interest of preventing crimes and offences. Therefore, though the passenger is not guilty of any offence in carrying the money, the seizure of such amount is warranted and legitimate so that the investigating officers can determine that it is not intended for committing an offence or crime.

The apex Court, therefore, held that hardship and inconvenience in such cases is inevitable and the passenger should accept it with grace, patience and discipline. However, the Supreme Court held that the investigating officers were not right in disclosing this seizure to the media pending the investigation. According to the Court, ?such crude attempts to claim credit for imaginary investigational breakthroughs should be curbed?.

The Court requested the Solicitor-General to have suitable guidelines issued by the tax authorities, so that any undue harassment or inconvenience to passengers is mitigated. Accordingly, the Central Board of Direct Taxes has issued a circular dated 18th November, 2009 setting out the procedure to be followed where action under section 131/132/133-A of the Income-tax Act, 1961 is contemplated.

According to this circular, inquiry could be held at the airport itself at the time of check-in if sufficient time is available before departure of the flight. If that is not so, information should be passed on to the Air Intelligence Unit at the airport of destination so that the passenger could be interrogated on arrival. If the information obtained on interrogation is sufficient to lead to the inference that the assets are unaccounted or represent black money, a warrant of authorization to seize the assets may be issued.

Further, the statement of the passenger should be recorded in the language which he understands. The statement should be read to him before he is made to sign it. He should be given full opportunity to go through the statement and make amendments under his signature if there is any variation in what he has said and what has been recorded. The circular further states that no coercion should be used while recording the statement. However, the statement may be recorded after administering an oath.

The proceedings of the inquiry and subsequent action should be completed expeditiously. In case of seizure of bullion, jewellery or other valuable articles, the report of an approved valuer should be obtained expeditiously. During the interrogation, the passenger should be provided with drinking water, tea, snacks and food. Further, medical assistance should also be given where necessary. On conclusion of the search, the passenger should be dropped in a Government vehicle at the place he desires.

Finally, the circular states that adequate precautions and steps should be taken to ensure that the investigation undertaken at the airport is kept confidential. Disclosure to the media should be avoided.

In view of the aforesaid circular being issued, the Supreme Court disposed of the special leave petition after recording the apology tendered by the investigation officer in the aforesaid case.

To conclude, the aforesaid decision highlights the risks involved in carrying large amounts of cash, jewellery and other valuable articles. Even if a passenger is doing so for a bona fide purpose, he runs the risk of being interrogated at the airport and investigation being made subsequently. If it is found that he is carrying the money or assets for an illegal purpose, including making cash payments which would result in tax evasion, he would be held accountable for the same, or at least for abetting in the offence of tax evasion

Author is a Supreme Court Advocate