JUDGMENT

B.N. MAHAPATRA, J. : This writ petition has been filed with a prayer to quash the warrant of authorization and follow up action including search and seizure of stock-in-trade and stock hypothecated and to declare the seizure of stock-in-trade and stock hypothecated as unconstitutional being without jurisdiction and contrary to 3rd proviso to Section 132(1) of Income Tax Act, 1961 (for short ‘the Act’). The further prayer of the petitioner is for return of the seized stock-in-trade to the petitioner with compensation.

2.The petitioner’s case in a nutshell is that the petitioner is an assessee bearing Permanent Account Number (PAN) AAMHP1514Q in the files of ITO-W-2(4), Khurda, who exercise jurisdiction over the petitioner. The petitioner assessee has been filing his return of income and is assessed to tax regularly. The petitioner started trading in gold and silver jewellery in a retail counter since the year 2000. On 9th September, 2011 basing upon the information provided to the Income Tax department as a routine procedure by the local police a search and seizure operation was conducted at the residential-cum-business premises of the petitioner. Subsequently, panchanamas were prepared and statements were recorded under Section 132(4) of the Act. Inventories were made and jewelleries item bearing serial No.1 to 10 and 13 to 22 i.e. totalling 2 2 items valued at Rs.62,10,585 (Rupees Sixty two lakhs ten thousand five hundred eighty five) have been seized even though the same represented stock-in-trade of the business and stock hypothecated. Hence, the present writ petition.

3.Learned counsel appearing on behalf of the petitioner submitted that statements were recorded under Section 132(4) of the Act with regard to books of Account, other documents or assets found as a result of search and also in respect of all matters relevant for the purpose of investigation. The petitioner who happens to be the Karta of HUF files the returns in his dual capacity, i.e., karta of HUF and individual before the ITO, Ward-2(4), Khurda and is assessed to tax regularly and is not a defaulter so far any income tax is concerned. Neither there has been any non-compliance to summons under Sections 131(1) nor notice under Section 142(1). There existed no apprehension regarding non-cooperation or attempted evasion or avoidance of tax. The petitioner was not in possession of any undisclosed money, billion, jewellery or other valuable articles or thing which can validate the authorization and subsequent issuance of search warrant. Therefore, the entire action under Section 132(1) of the Act was vitiated. The Central Board of Direct Taxes (CBDT), who is empowered by the legislatures to frame rules under Section 132(14) disapproves this kind of search seizure of the present nature vide instruction No.7 of 2003 dated 30.07.2003, the guidelines of which should have been strictly adhered to. The petitioner is running a jewellery business and its part of business is to purchase old gold items, remarking them for trading purpose. Gold is a precious metal, accumulated by people for its monetary value and easy liquidation and anybody in possession of a gold ornament can dispose of the same in the market without any proof of its ownership as a general practice and being a trader in jewellery, the petitioner purchases old ornaments from people in need. Assuming and not admitting for the moment that the search conducted was valid, the seizure of the items in trade cannot be said to be valid. The seizure of stock-in-trade violates the 3rd proviso of Section 132(1) of the Act. Such action of the authority violates the constitutional right guaranteed to the petitioner under the Constitution. The petitioner who traded with silver jewellery and filigree works in his individual capacity also deals with gold jewellery in his HUF business and to finance his HUF business availed a cash credit facility (CC) by hypothecation of stock-in-trade to State Bank of India prior to