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RAJASTHAN HIGH COURT BENCH AT JAIPUR
Sanjeev Prakash Sharma, J.
Harshvardhan Chhajed & Ors. - Appellants
Versus
Director General of Income Tax (Investigation) & Ors. - Respondents
S.B. Civil Writ Petition No. 6097/2020
Decided On : 07-09-2021
Seizure - Income Tax Act - [132(1)(iii), 132(4), 132B] - The court interpreted provisions regarding the seizure of stock-in-trade, emphasizing that such goods should not be seized without clear evidence of undisclosed income, leading to the decision to release the seized jewellery.
Fact of the Case:
The petitioners sought the release of jewellery seized by Income Tax Authorities during a search at the airport, claiming it was part of their stock-in-trade. They provided various documents to support their claim.
Finding of the Court:
The court found that the seizure was unjustified as the petitioners had provided sufficient documentation proving the jewellery was stock-in-trade, and the authorities failed to establish that the goods were undisclosed income.
Issues: Whether the seizure of jewellery as stock-in-trade was justified under the Income Tax Act, and if the petitioners were entitled to its return.
Ratio Decidendi: The court held that seizure under Section 132(1)(iii) requires clear evidence of undisclosed income, which was not present in this case, thus the seizure was illegal.
Result: The writ petition is allowed, and the seized jewellery must be returned to the petitioners within two weeks.
JUDGMENT
1. The petitioners by way of this writ petition have prayed that the respondents be directed to release the attached stock-in-hand belonging to petitioner Nos.1 and 2 respectively and quash and set aside the wrongful action taken against the petitioners.
2. Brief facts to be noticed are that on 24.02.2020 the petitioner No.3-Kantivardhan Pradeep Choraria was intercepted and searched at Jaipur Airport during his journey from Mumbai to Jaipur while he was carrying jewellery and diamonds, by the Income Tax Authorities. The said jewellery found in his possession was seized in terms of Section 132 of the Income Tax Act, 1961 (hereinafter referred to as "the Act of 1961").
3. The petitioner No.1 and 2 who are the Proprietor of M/s Daha Dimon and M/s Maha Pragya Jewellers and are brother-in-law have submitted that apart from jewellery two challans were seized which had been issued by M/s Maha Pragya Jewellers and M/s Daha Dimon in relation to jewellery and the entire jewellery was part of stock-in-trade and stock-in-hand with petitioner No.3 who was employer of petitioner No.2.
4. Learned counsel for the petitioners submits that the challan bearing No.1050 in the name of M/s Maha Pragya Jewellers had been issued on 24.02.2020 and it stated that the goods are being sent to Jaipur.
5. A letter was sent by the petitioner No.1 on 26.02.2020 to release the stock attached and explained the stock details, purchase details, sales details, challans issued, stock register, audit reports, income tax return, air ticket bills and certificate from Charted Accountants etc. and justification of goods found from the possession of petitioner No.3 were also explained. Similarly, petitioner No.2 also sent a letter on 18.03.2020. Another application was submitted on 22.05.2020 wherein additionally other documents including PAN Card, GST Registration Certificate, Income Tax Return for the year 2018-19, GST return for the year 2019-20 and Bank statements from January 2020 to March 2020 of M/s Maha Pragya Jewellers were also submitted. It was also informed that some stock of the petitioner/s was left with his brother-in-law Siddharth Baid at Mumbai who was engaged in the same business while travelling from Jaipur to Kolkata and Kolkata to Mumbai. The challan relating to the stock for the said period was also produced.
6. Learned counsel for the petitioners submitted that statement of petitioner No.3 was recorded under Section 132(4) of the Act of 1961, who has stated that the goods are stock-in-trade of both the firms and the challan approval memos were also submitted to the authorities.
7. Learned counsel for the petitioners submits that the Department valuer, who conducts the valuation sheet, has valued the stock on a very higher side. It is stated that the goods mentioned from serial No.1 to 24 belonged to M/s Maha Pragya Jewellers while goods mentioned from serial No.25 to 49 were stocks belonging to M/s Daha Dimon. The petitioners also appeared before the investigation wing of the Income Tax Department and produced all the relevant papers and the jewellery had been purchased through proper banking channel and therefore the petitioners submitted that the stock-in-trade ought to be delivered back to the petitioners.
8. Learned counsel submits that the provisions of the Income Tax Act do not allow seizure in terms of proviso to Section 132(1)(iii) of the Act of 1961 and therefore the goods ought to be returned to the petitioners. Learned counsel has relied on the judgments passed in case of Amore Jewels Pvt. Ltd, Anuj Ajmera v. Principal Commissioner of Income Tax & Ors. reported in 2018 (5) TMI 263- Rajasthan High Court, Kehm Chand Mukim v. Principal Director of Income Tax (Inv.)-2, AIU & Ors. reported in 2020 (1) TMI 1114- Delhi High Court, Diamondstar Exports Ltd & Ors. v. Director General of Income Tax (Investigation) & Ors. reported in 2004 (12) TMI 74- Bombay High Court, Mul Chand Malu (HUF) & 3 Ors. v. Assistant/Deputy Commissioner of Income Tax &
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