2022 (3) TMI 527 - HC - Income Tax

Unaccounted purchases of jewellery - search u/s 132 - Entitlement to claim back the seized articles i.e. the gold jewellery - HELD THAT - CIT(A) recorded a finding that the writ applicant herein had purchased gold from M/s. Parv Kundan and Diamonds Private Limited vide the bill dated 26th October 2017 and had also made payment through the banking channels. There is a finding of fact recorded by the CIT(A) which has attained finality as the Revenue not thought fit to challenge the order passed by the CIT(A) before the appellate Tribunal that the purchases were duly accounted in the books of account of the assessee i.e. the writ applicant herein. CIT(A) further recorded that even if the version of M/s. Parv Kundan and Diamonds Private Limited as regards the transaction with the writ applicant herein before the DDIT (Investigation) Delhi was to be accepted as true still it would not make any difference because the purchase has been recorded in the books of account of the writ applicant and payment has been made by the writ applicant through banking channel. CIT(A) came to the conclusion that the said purchase cannot be termed as unaccounted. In view of the aforesaid findings recorded by the CIT(A) and such findings having attained finality as the order of CIT(A) has not been challenged further by the Revenue before the appellate Tribunal we are left with no other option but to accept the case put up by the writ applicant that he had purchased the gold in question from M/s. Parv Kundan and Diamonds Private Limited and had also accounted for the same in his books of account. In such circumstances the Revenue cannot withhold the seized gold jewellery weighing 524.500 grams. It has got to be released in favour of the writ applicant.

Summary

Issues:
- Seizure of gold jewelry by the Revenue
- Addition of seized gold jewelry to the total income of the assessee
- Claim for release of the seized gold jewelry by the writ applicant

Seizure of Gold Jewelry by the Revenue:
The case involved a writ application under Article 226 of the Constitution of India where the petitioner, an assessee engaged in the business of Gold Jewelry, sought the release of seized gold jewelry weighing 524.500 grams. The seizure was based on a search carried out in the case of another individual, leading to the petitioner being treated as the consignee of the gold jewelry dispatched by a consignor. The Revenue added the value of the seized jewelry to the total income of the petitioner, resulting in a dispute over the ownership and entitlement to the gold jewelry.

Addition of Seized Gold Jewelry to Total Income:
The assessment proceedings under Section 153C of the Income Tax Act led to the addition of the seized gold jewelry to the total income of the petitioner. The Revenue contended that the petitioner, as the receiving party, was not entitled to claim back the jewelry as the addition was made on a protective basis due to the seizure. The consignor, M/s. Parv Kundan and Diamonds Private Limited, faced a demand and penalty based on the seized jewelry, leading to a significant outstanding amount. However, the CIT(A) allowed the appeal filed by the petitioner, highlighting that the purchases were duly accounted for in the petitioner's books of accounts and the payments were made through banking channels. The CIT(A) concluded that the purchases could not be termed as unaccounted, thereby questioning the basis for the addition to the petitioner's income.

Claim for Release of Seized Gold Jewelry:
The judgment favored the writ applicant, accepting the findings of the CIT(A) that the petitioner had purchased the gold jewelry from M/s. Parv Kundan and Diamonds Private Limited, and the transactions were duly recorded and accounted for. As the Revenue did not challenge the CIT(A) order before the appellate Tribunal, the court directed the Revenue to release the seized gold jewelry weighing 524.500 grams in favor of the writ applicant. The court emphasized that in light of the conclusive findings regarding the purchase and accounting of the jewelry, the Revenue had no grounds to withhold the seized jewelry, thereby granting the relief sought by the petitioner in the writ application.