AMORE JEWELS PVT LTD AND ANR V. PRINCIPAL COMMISSIONER OF INCOME TAX ORS

CW/17508/2017

AI Insights

The case involves Amore Jewels Private Limited and its employee Anuj Ajmera, who were intercepted at the New Delhi Airport with jewelry intended for business purposes. The Income Tax Department seized the jewelry under Section 132 of the Income Tax Act, 1961, suspecting it to be undisclosed income. The petitioners argued that the jewelry was part of the company's stock-in-trade, supported by various documents. The respondents, however, rejected the application for the release of the jewelry, citing ongoing assessments and unresolved questions about the ownership of the jewelry. The court found that the respondents had not adequately considered the petitioners' submissions and that the seizure was not justified under the circumstances.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 750900 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 27-04-2018
• Assessment Year: misc
• Other Referred Cases: Diomondstar Exports Ltd. And Others V. Director General of Income-Tax (Investigation) And Others, Shri Kamal Mohan Gupta & Anr. Versus Additional Director Income Tax & Ors., Director General of Income Tax (Investigation), Pune And Others Vs. Spacewood Furnishers Private Limited And Others, CIT Versus Vindhya Metal Corporation
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ANUROOP SINGHI; SAURABH JAIN
• Assessee Lawyers: N RAMACHANDRAN; VIJAY CHOUDHARY
• Keywords: Income Tax; Jewelry; Quashing of order; Search and seizure; Stock-in-Trade
• Section: 132; 132B; 131(1)(A)

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR S.B. Civil Writs No. 17508/2017 1. Amore Jewels Private Limited, No. 3A, Pandit Motilal Nehru Marg, ITT Bhatti, Behind Patel Aluminum, Goregaon (E), Mumbai-400063, Through Its Director Shri Shantilal Barmecha, S/o Late Bhanwarlal Barmecha. 2. Anuj Ajmera, Son Of Shri Anil Ajmera, R/o 24, Chaudhary Charan Singh Park, Tonk Road, Jaipur And Marketing Sales Executive Of Amore Jewels Pvt. Ltd. No. 3A, Pandit Motilal Nehru Marg, Eint Bhatti, Behind Patel Aluminum, Goregaon (E), Mumbai-400063. ----Petitioners Versus 1. Principal Commissioner Of Income Tax, Jaipur-1, Income Tax Department, New Central Revenue Building, Statue Circle, Jaipur. 2. Principal Director Of Income Tax (Investigation), Income Tax Department, ARA Centre, E-2, Jhande Walan Extension, New Delhi 110 055. 3. Assistant Director Of Income Tax (Investigation), Income Tax Department, Air Intelligence Unit & Unit-8(1), ARA Centre, E-2, Jhandewalan Extension, New Delhi 110055. 4. The Assistant Commissioner Of Income Tax, Circle 1, Income Tax Department, Room No. 11 Ground Floor, New Central Revenue Building, Statue Circle, Jaipur. ----Respondents For Petitioner(s) : Mr. N. Ramachandran, Adv. Mr. Vijay Choudhary, Adv. For Respondent(s) : Mr. Anuroop Singhi, Adv. Mr. Saurabh Jain, Adv. HON'BLE MR. JUSTICE SANJEEV PRAKASH SHARMA Order Judgment reserved on 10 th April, 2018 Judgment pronounced on 27 th April, 2018 (2 of 12) [CW-17508/2017] 1. The petitioners by way of this writ petition seeks quashing and setting aside the order dated 19.07.2017 passed by the Assistant Commissioner (Income Tax) Circle-1, Jaipur under Section 132 B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’) and further pray to direct the respondents to release 583 pieces of jewelry seized by them. 2. The brief facts need to be noted are that the petitioner No.2- Anuj Ajmera (hereinafter referred to as ‘AA’) alongwith two other sales executive of petitioner No.1-Company, allegedly undertook a business tour from New Delhi to Agra for marketing and sale of jewellery products on 17.11.2016 and carried with them 643 items/pieces of jewelry. A search and seizure action was carried out at the Indira Gandhi International Airport on 24.11.2016 whereby AA, the petitioner No.2 was intercepted at the New Delhi Airport by the Assistant Director of Income Tax (Inv.) Air Intelligence Unit, New Delhi. He was found to be in possession of jewelry weighing around 3 KG gold. He was examined under Section 131(1)A of the Act of 1961 with a view to establish genuineness and source of ownership of gold jewelry i.e Bracelets, ear rings, rings, pendants, cufflinks, bangles, etc. In his statement, AA stated that he is an employee of petitioner No.1- company and the said jewelry is stock-in-trade of the company. In order to verify his statement, the authorities of the Income Tax Department tried to contact the Managing Director of the company but his mobile remained unanswered and as AA could not produce any books of accounts or documentation to explain that it was stock-in-trade of the petitioner No.1, the provisions under Section 132 of the Act of 1961 were invoked and the jewelry was seized. (3 of 12) [CW-17508/2017] 3. It is stated that chartered accountant acting on directions of petitioner No.2 i.e. AA, submitted detailed representation for releasing seized goods and an application under Section 132B of the Act of 1961 on 06.02.2017 alongwith enclosures and documentation to prove that the jewellery which was seized belonged to the petitioner company and the petitioner No.2 i.e. AA was carrying them and the same were part of stock-in-trade of the petitioner No.1. As the goods were not released, the writ petition being No.6359/2017 was preferred before this Court wherein this Court directed the respondents to hear and decide the application filed by both the petitioners within a period of two months from the date of passing of the order i.e. 11.05.2017. Another application is stated to have been preferred by the petitioners with request to release 583 items of jewelry seized by it. The respondent No.4 vide his order dated 19.07.2017 has rejected the applications and has treated the jewelry as not liable to be released. As against the same the present writ petition has been filed. 4. Learned counsel for the petitioners submits that once the petitioners have submitted before the authorities that concerned jewelry seized was part of stock-in-trade. The petitioner No.1- company which is a manufacturer of jewelry goods and the petitioner No.2 is the employee/marketing executive of it and was authorized to carry in his possession the goods in question for sale while travelling on a tour within India for marketing and sale of its products and an affidavit in this regard has been filed by the Authorised Officer of the employer company. There was no occasion for the respondents to have withheld the seized goods. It (4 of 12) [CW-17508/2017] is submitted that the 583 items contains serial numbers and several copies of tax invoice were also filed. The transaction memos carrying petitioner No.1 Company’s name duly corroborating business transacted by petitioner No.2 during the visit, were also placed. The boarding pass of Jet Airways for petitioner No.2 having travelled from Jaipur to New Delhi was also filed. The Block Insurance Policy covering risk attached with the regular transfer of goods was also filed. In the circumstances, when he was travelling from Jaipur to New Delhi after having delivered 62 items of jewellery on approval basis to different customers in Agra and Jaipur, when he was travelled from Jaipur to Delhi, he was waylaid at the Airport by the Income Tax Authorities and information conveyed by CISF. 5. Learned counsel submits that stand of the petitioner No.2 has always been that the seized goods were part of stock-in-trade of the employer company. The petitioner No.1 have also claimed the said goods being their stock-in-trade, documents in this regard has also been duly submitted. However, the respondents have illegally passed the order dated 19.07.2017 rejecting the application under Section 132 B. Learned counsel has taken this Court to the provisions of the Act of 1961 to contend that there was no reason for the respondents to withhold the seized goods. The submission is further that the authority has on the basis of presumptions and assumptions wrongfully rejected the application. Certain doubts which have been raised by the concerned authority while rejecting the application are in no manner related to the issue. It is their submissions that the material placed before the Authority was not adverted to. It is (5 of 12) [CW-17508/2017] submitted that there was no case for the jewellery being unaccounted nor there was any ground for assuming that the petitioners were escaping assessment. 6. It is further submitted that after lapse of period of 60 days, the authorized officer has lost the jurisdiction to deal with goods and the entire proceedings were vitiated. It is further submitted that procedure adopted was wholly illegal and irregular. The witnesses who have signed the ‘panchnama’ were not present during the course of search and the petitioners were not allowed to cross examine the DIT and ADIT, New Delhi nor the concerned witness Ms. Anjali was brought for cross examination. The learned counsel has relied on the law laid down by the Bombay High Court in the case of Diomondstar Exports Ltd. And Others V. Director General of Income-Tax (Investigation) And Others, reported in [2005] 278 ITR 36 (Bom) wherein it has been held that merely because there is an intimation that a person is with possession of certain jewelry or ornaments was not sufficient ground for purpose of action under Section 132 and seizure was held to be invalid. Learned counsel also relied on judgment passed by the Coordinate Bench of this Court in S.B.C.W.P. No.8900/2014 (Shri Kamal Mohan Gupta & Anr. Versus Additional Director Income Tax & Ors.), decided on 23rd February, 2017, to support his submissions. 7. Per contra, learned counsel for the respondent has taken this Court to the order and submits that the goods were seized from custody of petitioner No.2 and the manner in which the business was conducted by the company i.e. petitioner No.1 left many questions unanswered and no conclusion can be drawn as to (6 of 12) [CW-17508/2017] whether the jewellery belonged to the petitioner No.2 or to the petitioner No.1 and prays that the same can be finalized only after the assessments are finalized. The Authority has rightly taken a decision not to release the seized assets. It is submitted that the assessment of petitioner No.2 is pending under Section 153A and it would be prejudicial to the interest of revenue to release the seized jewellery before the assessments proceedings are completed. Learned counsel has also submitted that there is a CBDT instructions dated 1st December, 2006. He also relies on judgment passed by Supreme Court in the case of Director General of Income Tax (Investigation), Pune And Others Vs. Spacewood Furnishers Private Limited And Others, reported in (2015) 12 Supreme Court Cases 179 to submit that a warrant of authorization for search and seizure is on the basis of satisfaction of the authorities and the same cannot be faulted. The Supreme Court has laid down the principles in this regard and thus it cannot be said that the seizure was wrongful. 8. Having noted the submissions, the question involved for determining in the present case is, whether the decision not to release the seized jewellery to petitioner No.1/petitioner No.2 was justified or not. In view of the aforesaid judgment in the case of Director General of Income Tax (Investigation), Pune And Others (supra), the Supreme Court has held as under:- “4. The “classical’ notion of the extent of power that the High Court would have in the exercise of its writ jurisdiction to cause such interference is formulated in ITO v. Seth Bros. And Pooranmal v. Director of Inspection (Investigation). The (7 of 12) [CW-17508/2017] parameters of permissible interference as laid down in the aforesaid two decisions have stood the test of time and continue to hold the field even today. We may, therefore advert to ITO v. Seth Bros. in the first instance.” 5. Considering the scope of Section 132 of the Act in ITO v. Seth Bros this Court ITR at p.843 held that:(SCC pp. 329-30, paras 8-9) “8. The section does not confer any arbitrary authority upon the Revenue Officers. The Commissioner or the Director of Inspection must have, in consequence of information, reason to believe that the statutory conditions for the exercise of the power to order search exist. He must record reasons for the belief and he must issue an authorisation in favour of a designated officer to search the premises and exercise the powers set out therein. The condition for entry into and making search of any building or place is the reason to believe that any books of account or other documents which will be useful for, or relevant to, any proceedings under the Act may be found. If the Officer has reason to believe that any books of account or other documents would be useful for, or relevant to, any proceedings under the Act, he is authorised by law to seize those books of account or other documents, and to place marks of identification therein, to make extracts or copies therefrom and also to make a note or an inventory of any articles or other things found in the course of the search. Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with the law and only for the purposes fro which the law (8 of 12) [CW-17508/2017] authorises it to be exercised. If the action of the officer issuing the authorisation, or of the designated officer is challenged the officer concerned must satisfy the Court about the regularity of his action. If the action is maliciously taken or power under the section is exercised for a collateral purpose, it is liable to be struck down by the Court. If the conditions for exercise of the power are not satisfied the proceeding is liable to be quashed. But where power is exercised bona fide, and in furtherance of the statutory duties of the tax officers any error of judgment on the part of the Officers will not vitiate the exercise of the power. Where the Commissioner entertains the requisite belief and for reasons recorded by him authorises a designated officer to enter and search premises for books of account and documents relevant to or useful for any proceeding under the Act, the Court in a petition by an aggrieved person cannot be asked to substitute its own opinion whether an order authorising search should have been issued. Again, any irregularity in the course of entry, search and seizure committed by the officer acting in pursuance of the authorisation will not be sufficient to vitiate the action taken, provided the officer has in executing the authorisation acted bonafide. 9. The Act and the Rules do not require that the warrant of authorisation should specify the particulars of documents and books of accounts a general authorisation to search for and seize documents and books of account relevant to or useful for any proceeding complies with the requirements of the Act and the Rules. It is for the officer (9 of 12) [CW-17508/2017] making the search to exercise his judgment and seize or not to seize any documents or books of account. An error committed by the Officer in seizing documents which may ultimately be found not to be useful for or relevant to the proceeding under the Act will not by itself vitiate the search, nor will it entitle the aggrieved person to an omnibus order releasing all documents seized.” 8. The principles that can be deduced from the aforesaid decisions of this Court which continue to hold the field without any departure may be summarised as follows: 8.1 The authority must have information in its possession on the basis of which a reasonable belief can be founded that- (a) the person concerned has omitted or failed to produce books of account or other documents for production of which summons or notice had been issued or such person will not produce such books of account or other documents even if summons or notice issued to him or (b) such person is in possession of any money, bullion, jewellery or other valuable article which represents either wholly or partly income or property which has not been or would not be disclosed. 8.2. Such information must be in possession of the authorised official before the opinion is formed. 8.3. There must be application of mind to the material and the formation of opinion must be honest and bona fide. Consideration of any extraneous or irrelevant material will vitiate the belief/satisfaction. (10 of 12) [CW-17508/2017] 8.4. Though Rule 112(2) of the Income Tax Rules which specifically prescribed the necessity of recording of reasons before issuing a warrant of authorisation had been repealed on and from 1-10-1975 the reasons for the belief found should be recorded. 8.5 The reasons, however, need not be communicated to the person against whom the warrant is issued at that stage. 8.6 Such reasons, however, may have to be placed before the Court in the event of a challenge to formation of the belief of the authorised official in which event the court (exercising jurisdiction under Article 226) would be entitled to examine the relevance of the reasons for the formation of the belief though not the sufficiency or adequacy thereof.” From above, it is apparent that the issue involved before the Apex Court was in relation to the satisfaction of the authorities while carrying out seizure. However, in the present case after the High Court had earlier remanded the matter to the respondents for taking a decision relating to release of the goods, it was incumbent upon the respondents to have examined the question only with regard to release and a subjective satisfaction was required to arrived at whether the jewellery was part of stock-in- trade of petitioner No.1 and whether the petitioner No.2 was duly authorized by the petitioner No.1 for the purpose of transaction, selling and putting up for approval. A look at the impugned order, however shows that the authority has proceeded to question in the manner in which the approval and authority was given to petitioner No.2 by petitioner No.1. The authority also questions the manner in which the rates were fixed by the petitioner No.1 (11 of 12) [CW-17508/2017] while selling the articles at higher price then their old price, however, this could not have entail for denying release of goods to the petitioner No.1. There is no finding by the Authority in the impugned order that the jewellery does not belong to petitioner No.1 company. It is also not case of the department that the jewellery items are not mentioned as stock-in-trade of the company, the only variation with regard to the price. It is also not the case that the petitioner No.1 was engaged in tax evasion or that it was not authorized to hold the seized articles or carry on sale of the same. 9. As has been noted above, the petitioner No.2 has placed before the respondents’ documents to show that the jewellery seized was part of their stock-in-trade. Documents to that effect has also been placed to show that the petitioner No.2 was carrying them for the purpose of sale as well as approval, transaction memos and the boarding pass, insurance policy were relevant for the said purpose. However, a look at the impugned order is quite amazing. 10. In view of Section 132B proviso, the jewellery was liable to be released. In the light of the statement made under Section 132(4) by petitioner No.2 and in view of the documents and statements put forward on behalf of the petitioner No.1, there was no occasion to or reason to believe that the jewellery is part of undisclosed income of the petitioner No.2. The officer has apparently not taken into consideration the cited law as noted above. The judgment of Bombay High Court in the case of Diomondstar Exports Ltd. & Ors.(supra) and the judgment passed by the Supreme Court in the case of CIT Versus Vindhya Metal (12 of 12) [CW-17508/2017] Corporation, reported in [1997] 224 ITR 614 (SC) would apply to the facts of the present case. 11. Following the law as noted above, the writ petition is allowed. The order dated 19.07.2017 is quashed and set-aside. The respondents are now directed to release the seized jewellery to the petitioner No.1 within a period of two weeks hereinafter from the date of receipt of a certified copy of this order. 12. No costs. (SANJEEV PRAKASH SHARMA),J R.Vaishnav 52. "