Jewellery Recovered From Company's Bank Locker Can't Be Presumed To Belong To Any Director: Punjab & Haryana HC Criticises Seizure By IT Dept

Calling the action of Income Tax Authorities as "arbitrary, illegal", the Punjab & Haryana High Court has directed it to release the jewellery of a company seized from bank locker during search operation.The Court noted that as per Section 132 Income Tax Act, there is a bar to seize the stock in trade, which is found as a result of search, and the only authority available with the officer is to make a note and inventory of such stock in trade of the business.Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisht said, "respondents have acted in an arbitrary, illegal and unjustified manner in seizing the stock in trade of the petitioner company. Any jewellery recovered from the locker belonging to the company, would have to be presumed to be that of the company and it cannot be allowed to contend that the jewellery belongs to any individual director. If such an attempt is allowed to be accepted, dispute would arise regarding the stock of the company itself."The Court added that at the same time, the company's assets cannot be claimed by any individual director. "However, the action of the IT department would result in the company's assets being claimed by the individual director also, which cannot be allowed."These observations were made while hearing the plea filed by M/s Dillano Luxurious Jewels Limited, seeking directions to the IT authorities to release the jewellery seized from its bank locker in July 2023.After examining the submissions, the bench highlighted that Section 132 (1)(B)(iii) of the Income Tax Act bars the seizure of such stock in trade."There was no occasion for the respondents to have seized the said jewellery and diamonds which were recovered from the concerned locker and upon the demand letter, the same should have been released to the company which is engaged in the business of jewellery," added the Court.Speaking for the bench Justice Sanjeev Prakash Sharma opined that the "adamancy being shown" by the IT authorities for not releasing the jewellery was wholly unwarranted."An inventory could always be taken, which has already been done and the revenue could have proceeded to do the necessary assessments Physical withholding of gold jewellery, which is part of stock in trade is, found to be wholly warranted," added the Court.It further pointed that Section 132B of the IT Act lays down the procedure for releasing of the assets which have been recovered in normal search and seizure, even if they are not part of the stock in trade.The bench noted that the IT authorities have not come out with any reason as to why no order was passed by them for not releasing the gold, jewellery and diamond, which they had seized during the search operation. "We do not approve such inaction," it said.Stating that action if seizure was unauthorised, the Court added that, "keeping in view the provisions of Section 132B(1)(i) and the proviso thereto, the respondents were obliged to pass orders for releasing the jewellery. In this case, no orders were passed, therefore, the petitioner company was entitled to release of the assets of the company which had been seized."In light of the above, the writ was allowed.Citation: 2024 LiveLaw (PH) 412Ms. Radhika Suri, Senior Advocate, assisted by Mr. Abhinav Narang, Advocate and Ms. Pranika Singla, Advocate, for the petitioner.Mr. Saurabh Kapoor, Senior Standing Counsel with Ms. Pridhi Sandhu, Junior Standing Counsel and Ms. Muskaan Gupta, Advocate, for the respondents.Title: M/s Dillano Luxurious Jewels Limited v. Deputy Director Income Tax, Investigation, Bathinda and anr.Click here to read/download the order

Jewellery Recovered From Company's Bank Locker Can't Be Presumed To Belong To Any Director: Punjab & Haryana HC Criticises Seizure By IT Dept

Aiman J. Chishti

Tags