High Court upholds Income Tax Dept's action of seizing Rs 1 crore from CPM

KOCHI: The Kerala High Court has dismissed a petition filed by former CPM Thrissur District Secretary M.M. Varghese, challenging the actions of the Income Tax Department, including the seizure of Rs 1 crore withdrawn from the CPM Thrissur District Committee's bank account.

Justice Bechu Kurian Thomas stated that there was no malicious intent in the actions of the Income Tax Department and that they were legally valid. The court also noted that there was no need for intervention at this stage.

The petition was related to an account at the Bank of India’s Thrissur branch. The amount in question was seized on April 30, 2024, during the Lok Sabha election period. The Income Tax Department had frozen the CPM’s account and issued a directive prohibiting the expenditure of funds, citing a violation of the election model code of conduct following the withdrawal. Although the withdrawn Rs 1 crore was brought back to the bank, the Income Tax Department attached the amount and did not allow it to be credited back to the account.

In the petition, M.M. Varghese had demanded a stay on the summons and further proceedings, along with the return of the seized money. However, the court noted that, based on the letters provided by the bank, the party had not filed a tax return for the account so far. The court also clarified that the freeze order on the account is not valid beyond 60 days, and therefore, there was no need for judicial interference on that matter.

PAN not linked, KYC not provided
According to the Income Tax Department, the action was initiated based on information that unaccounted money was present in the CPM’s bank account. They further argued that the account was not linked to a PAN and that the documents submitted by the CPM did not mention details about the account.

The petitioner claimed that the failure to link the account to the PAN was due to a typographical error and was the bank’s mistake. However, the court observed that the bank had been requesting KYC documents since 2010 and had repeatedly directed the CPM to link the account to a PAN. The CPM had not complied with this requirement.

It was revealed that Rs 1 crore had been withdrawn from a current account that had a balance of Rs 4.81 crore. The department stated that the presence of undisclosed funds in the account indicated the need for further investigation.