IMPORTANT POINT
The court ruled that stock-in-trade cannot be seized under Section 132(1)(iii) of the Income Tax Act, 1961, unless proper justification is provided by the assessee.

JUDGMENT :

Per Dr. Pushpendra Singh Bhati, J:

1. This writ petition has been preferred by the petitioner (assessee), claiming the following reliefs:

“It is, therefore, most humbly and respectfully prayed that this writ petition may kindly be allowed with costs throughout, and by an appropriate writ order and/or direction,

a. entire proceedings under Section 131/132 of the Income Tax Act, including the Order impugned dated 13.05.2024 (Annexure-10) and 19.06.2024 (Annexure-11) may kindly be quashed and set aside; and

b. “reasons to believe” under Section 132 of the Income Tax Act, 1961 may kindly be called for, for perusal of this Hon’ble Court;

c. any further, consequential and/or other appropriate writ, order or direction which this Hon’ble Court considers just and proper in the facts and circumstances of the case may kindly be passed in favour of the petitioner.”

2. As the pleaded facts and the record would reveal, the petitioner (assessee) is the Sole Proprietor of the Firm M/s. K.P., and is engaged in the business of wholesale trading of gold jewelry/ornaments with purity of 18 & 22 Carat, since the year 2014, and that, there is nothing on record which could show any irregularities or illegalities on the part of the petitioner (assessee) in the conduct of the said business.

2.1. The gold ornaments so traded by the petitioner’s Firm are very small in nature such as rings, tops, bangles, bracelet, necklace, chains etc., as per the trend and demand prevalent in the market at the relevant time, and therefore, it is not possible and feasible to maintain the stock register item-wise.

2.2. The genesis of the controversy is traceable to the date 22.03.2024, on which the petitioner, traveled from Pali to Bikaner, for the purpose of his business, while carrying the stock of gold ornaments under the cover of valid delivery challans. The petitioner further averred that he also took delivery of some ornaments, which weighed approx. 800 grams, from a courier and issued certain invoices to the buyers/customers, qua which four invoices were also produced. Meanwhile, his vehicle was intercepted by the FST Team No.5 of MLA Area, Bikaner West at 03:30 p.m. and was taken to the Police Station City Kotwali, District Bikaner and a team of GST Department and the Income Tax Department were called upon for verification of the goods.

2.3. The petitioner, in the instant petition, further averred that the authorities of the GST Department, after being satisfied with all the relevant documents produced by the petitioner and the genuineness thereof, in regard to the issue in question, deemed it appropriate not to proceed further in the matter, and accordingly, they left the place without conducting any further proceedings against the petitioner.

2.3.1. However, without duly considering the aforesaid aspect of the matter, the Income Tax Department initiated the proceedings under Section 131 of the Income Tax Act, 1961 (hereinafter referred to as ‘Act of 1961’) and summons were issued to the petitioner in the aforesaid Police Station on 22.03.2024 itself, by the Deputy Director of Income Tax (Investigation), Bikaner, along with the list of seized articles. Panchnama was drawn by the authorized officers and countersigned by the ITO (Assessment) 1(2)(2), Bikaner and the valuation of 398 pieces of ornaments of the stock of gold was conducted by the Registered Valuer.

2.3.2. During such proceedings, the statements of the petitioner were recorded under Section 132(4) of the Act of 1961, wherein, as per the petitioner, he extended his full cooperation.

2.4. As per the petitioner, the stock of Jewelry having gross weight of 4603.110 grams and net weight of 4146.69 grams was seized under Section 132A of the Act of 1961 by the Deputy Director (Investigation), Bikaner, despite the fact that the same was duly supported by the invoices. Thereafter, again on 08.04.2024, the statements of the petitioner were recorded under Section 131 of the Act of 1961.

2.5. Furthermore, as per th