Mr. Anil Agarwal V. Director of Income Tax (Investigations), 9th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad and Others

WP/19326/2011

AI Insights

The case involves Mr. Anil Agarwal, a jeweler, challenging the seizure of his stock by the Income Tax Department on grounds of it being arbitrary and illegal. The seizure occurred during a survey under Section 133A of the Income Tax Act, 1961, where the jewelry was inventoried and valued. Mr. Agarwal argued that the seizure of his stock in trade was contrary to the provisions of the Act, specifically Section 133A(4), which prohibits the seizure of such items unless under a search warrant as per Section 132. The respondents contended that the search and seizure were justified as they had not received sufficient evidence proving the jewelry belonged to Mr. Agarwal. The court found that Mr. Agarwal had an effective alternative remedy under Section 132B of the Act and thus dismissed the writ petition, advising the petitioner to pursue this statutory route.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 796825 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 20-07-2011
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: S R ASHOK
• Assessee Lawyers: S RAVI
• Keywords: Arbitrary and Illegal; Income Tax; Jewellery business; Search and seizure; Seizure of stock; Release of stock
• Section: 132; 133A; 132B

Judgement Text

"THE HON'BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.19326 of 2011 Dated:20.07.2011 Between: Mr.Anil Agarwal. … Petitioner And Director of Income Tax (Investigations), 9th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad, and others. ... Respondents THE HON'BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN WRIT PETITION No.19326 of 2011 ORDER: (Per Hon’ble Sri Justice Ramesh Ranganathan) The action of respondent Nos.1 to 3 in seizing the stock, allegedly belonging to the petitioner, on 28.06.2011 is under challenge in this writ petition as being arbitrary and illegal. A consequential direction is sought to the first respondent to release the stock seized, and to handover custody of the same, to the petitioner. The petitioner claims to be engaged in the business of sale of jewellery. is his case that they maintain regular stock of jewellery in their premises; every piece of jewellery has a tag which indicates the gross weight of the ornament, net weight of the carat value of the stones etc.; they also keep photographs of each and every piece of jewellery/ornaments which is in their stock; to sell the jewellery in the market they send these items with trusted employees to other dealers of ornaments in the city; respondent Nos.6 and 7 are two such employees who have been regularly carrying petitioner’s ornaments to other dealers in the twin cities for the purpose of sale; on 27.06.2011 the petitioner had sent 41 sets of ornaments along with respondent Nos.6 and 7; the total weight of the gold ornaments was 2548.710 grams, the total caratage of the diamonds was 416.09 carats, and the weight of coloured stones, rubies etc., was 203.003 carats; the petitioner had handed over a certificate to respondent Nos.6 and 7 on 25.06.2011; and the fifth respondent had intercepted respondent Nos.6 and 7, and had addressed a letter to the fourth respondent resulting in the third respondent seizing the stock from respondent Nos.6 and 7 on 28.06.2011. According to the petitioner, he received summons from the third respondent informing that a survey would be conducted under Section 133A of the Income Tax Act, 1961 (the Act); pursuant thereto the entire jewellery in the petitioner’s stock had been inventorised, and a complete report of the valuation of jewellery had been prepared; and a copy of the said valuation report was left in the premises of the petitioner. It is petitioner’s case that, despite submitting a representation to respondent Nos.1 to 3, no action was taken though respondent Nos.6 and 7 had specifically stated that the jewellery seized from them belonged to the petitioner; and they were his employees. A counter affidavit is filed by the respondents to which a reply affidavit is also filed by the petitioner. Sri S.Ravi, learned Counsel for the petitioner, submits that it is only in the course of search under Section 132 of the Act were the respondents entitled to seize the goods; even in such cases Section 133A(4) of the Act prohibited the stock of jewellery being seized; and, in as much as jewellery seized from respondent Nos.6 and 7 constituted the petitioner’s stock in trade, both the search carried on respondent Nos.6 and 7, and the seizure of 41 items of jewellery from them, was contrary to the provisions of the Act and hence illegal. Learned Counsel would also submit that the respondents had not even furnished copies of the statements recorded from him, and respondent Nos.6 and 7, despite repeated requested by him that the copies thereof be furnished. Sri S.R.Ashok, learned Senior Counsel appearing on behalf of Income Tax Department, would rebut the said contentions and submit that it is wholly unnecessary that the search should be carried out only in the premises of the petitioner; the search carried out on respondent Nos.6 and 7 at Aaykar Bhavan also fell within the ambit of Section 132 of the Act; and, in the absence of acceptable evidence that the 41 items of jewellery belonged to the petitioner, and not to respondent Nos.6 and 7, the third respondent was justified in seizing the said items of jewellery. Learned Senior Counsel would submit that the petitioner has an effective alternative remedy by way of application to the assessing authority under Section 132B of the Act without availing which, the petitioner had needlessly invoked the jurisdiction of this Court under Article 226 of the Constitution. The proviso to Section 132B(1) of the Act enables the person concerned to make an application to the assessing authority, within thirty days from the end of the month in which the asset was seized, seeking release of the asset and to explain the nature and source of the acquisition of such asset and, if the assessing authority is satisfied, it is open to him to either release the assets in their entirety or such part thereof as would remain after securing the asset to the extent of the existing liability. Since the petitioner has an effective alternative statutory remedy under the proviso to Section 132B(1) of the Act, we relegate him to such a remedy. Needless to state that it is open to the petitioner to raise all such contentions, as have been raised in this writ petition, before the assessing authority who shall, within two months from the date of receipt of the representation, pass orders thereupon in accordance with law. It is also open to the petitioner to make a representation requesting that the statements recorded from him, and from respondent Nos.6 and 7, be furnished. We have no reason to doubt that, on such a representation being made, the assessing authority shall pass orders thereupon, in accordance with law, expeditiously. The writ petition is accordingly disposed of. However, in the circumstances, without costs. ________________ (V.V.S. RAO, J _______________________________ (RAMESH RANGANATHAN, J 20.07.2011 vs "