120-Day Timeline In S.132B Income Tax Act For Deciding Assessee's Plea To Release Seized Assets Not Mandatory: Delhi High Court

The Delhi High Court has held that the 120-day period prescribed under the second proviso to Section 132B(1)(i) of the Income Tax Act, 1961 for deciding an assessee's request for release of seized assets is not mandatory, and a decision taken beyond the said period does not automatically become invalid.A division bench of Justices V. Kameswar Rao and Vinod Kumar was dealing with a petition challenging the Income Tax Department's refusal to release jewellery seized during search proceedings under Section 132 of the Act.The petitioner had contended that since the Assessing Officer failed to decide the application for release of jewellery within 120 days, as contemplated under the second proviso to Section 132B(1)(i), the continued retention of the seized assets was illegal.Rejecting this submission, the High Court held that the provision does not prescribe any consequence for non-adherence to the 120-day timeline, and therefore cannot be construed as mandatory. “We must hold that in view of Section 132B(4), the stipulation of 120 days for release of seized jewellery/gold shall not be mandatory…It is directory in nature as non-release of seized jewellery/gold within 120 days entails consequences in the nature of interest to be paid.”Section 132B(4) requires the Central Government to pay simple interest on any excess money or assets seized during a search operation that are later determined to be more than the tax liabilities owed.The Court also referred to Dipak Kumar Agarwal v. Assessing Officer & Ors. (2024) where the Allahabad High Court held that the jurisdiction of the Assessing Authority to decide the application for release of seized assets under Section 132B (1)(i) does not abate after a period of 120 days from the date on which the last of the authorizations for search under section 132 or for requisition under section 132-A was executed.The Allahabad High Court had further held that the word “shall” in second proviso to Section 132B (1)(i) is directory in nature as no stipulation is made for the automatic release of goods after the period of 120 days.Similarly, the Rajasthan High Court in Kanwaljeet Kaur & Anr., v. DDIT (2024) held that second proviso to Section 132B would apply only after the Assessing Officer has determined the liability and has come to the conclusion that the nature and source of acquisition has been explained by the person concerned.In view of this, the High Court held that the conclusions previously drawn by it in Kamlesh Gupta vs UOI that jewellery/gold is required to be released after the expiry of 120 days under Section 132B is rendered— per incuriam.On facts, the Court examined whether the seized jewellery was duly disclosed in the Petitioner's income tax and wealth tax records, and whether its retention was justified under Section 132B. Emphasising that nothing precludes the petitioners to seek release of the jewellery/gold against bank guarantee by filing an application before the AO, the Court dismissed the plea.Appearance: For the Petitioners : Ms Kavita Jha, Sr Advocate with Mr Vaibhav Kulkarni and Mr Himanshu Aggarwal, Advocates For the Respondents : Mr. Indruj Singh Rai, SSC Mr. Sanjeev Menon, Mr. Rahul Singh, JSCs and Mr. Gaurav Kumar, Advocate.Case title: Rajesh Gupta & Ors. v. Assistant Commissioner Of Income Tax Central Circle 31 Delhi & Ors.Case no.: W.P.(C) 12433/2025 Click here to read order

120-Day Timeline In S.132B Income Tax Act For Deciding Assessee's Plea To Release Seized Assets Not Mandatory: Delhi High Court

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