TMI Blog2023 (10) TMI 377X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to in this clause may be recovered out of such asset and the remaining portion, if any, of the asset may be released with the prior approval of the certain authorities, as mentioned in the provisions, to the person from whose custody the asset was seized. The proviso clause further provides that such asset or any portion thereof is referred to in the first proviso shall be released within a period of one hundred and twenty days from the date on which the last date of the authorizations for search under Section 132 or for requisition under Section 132A, as the may be, was executed. Recently in Mangilal Agarwal vs. Deputy Director of Income Tax (Investigation-1) [ 2023 (8) TMI 1358 - RAJASTHAN HIGH COURT] this Court considering the statement made by the counsel appearing for the respondents upon instructions from the respondent authorities submitted that no order has been passed by the competent authority under section 132B of the Income Tax Act. On the basis of such statement, the Court observed that the goods including gold bullion, which were taken in possession, have to be released and the respondents counsel therein informed that in case the petitioner approaches ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trade and are duly accounts in the books of accounts and accordingly the petitioners are entitled to retain the same. Writ petition deserves to be allowed and is therefore allowed. The respondent authorities are directed to return the gold bullion 3773.52 gm. seized by them in the course of search on 15/16.02.2020 forthwith to the petitioners after complying with the requirement provided i.e. making a note of inventory. - HON'BLE MR. JUSTICE GANESH RAM MEENA For the Petitioner : Mr. Siddharth Ranka , Mr. Rohan Chatter , Ms. Satwika Jha , Ms. Shivangi Mewal , Ms. Apeksha Bapna For the Respondent : Mr. R. D. Rastogi, ASG with Mr. Akshay Bhardwaj , Mr. Chandra Shekhar Sinha ORDER 1. The factual matrix of the case in brief is that the official respondents conducted a search operation at the business premises of the petitioners on 15.02.2020/ 16.02.2020. During such search operations, gold bullion of 3773.52 gm. was seized along-with other articles like electronic devices mobile phones, hard disk etc. 2. The petitioners filed instant writ petition stating that they are engaged in the business of trade of gold bullion and the petitioner firm is duly r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e denied the allegations leveled in the petition and stated that all the seizure proceedings have been conducted as per the procedure given under the law. 4. In rejoinder to the reply to writ petition, the petitioners have also stated that Section 37 of the FEMA read with Sections 132 and 132B of the Income Tax Act, 1961 (for short the Act of 1961 ) provides that where a person makes an application to the Assessing Officer within thirty days from the end of the month in which the asset was seized, for release of asset and nature and source of acquisition of any such asset is explained to the satisfaction of the Assessing Officer, such asset or any portion thereof shall be released within a period of one hundred and twenty days from the date on which the last of the authorizations for such search under Section 132 or for requisition under Section 132A, as the case may be, was executed. He further submitted that the gold bullion seized by the respondent authorities during the search was stock in trade and the petitioners are entitled to retain the same. Therefore, the petitioners after seizure of this 3773.52 gm. gold bullion, made a representation on 19.02.2020 to the respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in (2010) 15 SCC 647, which is quoted as under:- 1. By consent the impugned order is set aside. However, we wish to make it clear that as far as possible the High Court should not interfere at the stage when the Department has issued the summons. This is not one of those exceptional cases where the High Court should have interfered at the stage of issuance of the summons. It may be mentioned that all other questions on merits are expressly kept open. We have not examined the merits of the case. The Department is entitled to proceed in accordance with law. The appeals are accordingly disposed of. In the aforesaid judgment the Hon ble Apex Court has observed that except in exceptional cases the High Court should not interfere at the stage of issuance of the summons. In the present case the petitioners are not stressing upon the challenge to the issuance of summons under the FEMA which are required to be issued for contravention and penalties. The petitioners in the writ petition have stated that after search and seizure, they submitted a representation to the respondents on 19.02.2020 showing their credentials for retaining the gold bullion seized which is stock in tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of cause of action, has arisen in the territory of State of Rajasthan. This Court finds that initially the petitioner had filed writ petition against show cause notice in the Punjab and Haryana High Court at Chandigarh and after an order being passed to approach the respondents by giving a detailed and comprehensive representation, the Authorities have finally adjudicated the issue of violation of Foreign Exchange and order dated 26.04.2019 has been passed. The submission of learned counsel for the petitioners that the petitioners are residents of Jodhpur and further, they are having their business operations in the State of Rajasthan and as such, this Court has ample jurisdiction to entertain the writ petition, suffice it to say by this Court that the residence of the petitioners or their place of carrying business, cannot constitute as part of cause of action. The other reason with regard to maintainability of writ petition before this Court on account of violation of principle of natural justice, suffice it to say by this Court that if the petitioner has any grievance in respect of violation of any provisions of Rules of 2000 or the Act of 1999, the Appellate F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropriate application before the Appellate Tribunal showing their difficulty in their business and claiming exemption from depositing the penalty as pre-deposit for filing appeal. Accordingly, this writ petition is dismissed on account of alternative, statutory remedy available to the petitioners as well as on the ground of lack of cause of action arisen before this Court. Again the order passed in the aforesaid case is not in regard to the consideration and decision on the representation submitted by the petitioners under the provisions of Section 132 and 132B of the Act of 1961 read with Section 37 of the FEMA. 10. Counsel for the petitioners has submitted that the respondents should have decided the representation of the petitioners and on a satisfactory explanation given by them the respondents should have released the seized gold bullion and thereafter the respondents could have proceeded against them for contravention and penalties under the FEMA as per procedure given under law. In view of the above, the preliminary objections of alternative remedy of appeal available to the petitioners raised by the learned ASG appearing for the respondents is not sustainab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 020. The petitioners in the memo of petition have also stated the facts in regard to submitting the representation and the explanation that the seized gold bullion is stock in trade and duly accounted in the books of accounts. The relevant documents and the representation were also enclosed by the petitioners with the memo of petition. In the rejoinder the petitioners have merely quoted the provisions of the FEMA and the Act of 1961 in regard to filing and disposal of the representation. 13. Pointing out the facts and enclosing the relevant documents along-with the petition and thereafter pointing out the relevant provisions related to the representation and its disposal in the rejoinder, does not amount to a new plea taken. Therefore, the said objection of the learned ASG appearing for the respondents is not sustainable. 14. The counsel appearing for the petitioners submitted that after the seizure of gold bullion and other valuable belongings during the search made on 15.2.2020/ 16.02.2020, the petitioners submitted a detailed representation on 19.02.2020 to the concerned authority, as mentioned in the provisions of the Act of 1961, stating that the seized gold bullion b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a result of such search: Provided that buillion, jewelleery or other valuable article or thing, being stock-intrade of the business, found as a result of such search shall not be seized but the authorised officer shall make a note or inventory of such stock-in-trade of the business; 132B(1) The assets seized under section 132 or requisitioned under section 132A may be dealt with in the following manner, namely:- (i) The amount of the existing liability under this Act, the Wealth-tax Act, 1957 (27 of 1957), the Expenditure-tax Act, 1987 (35 of 1987), the Gift-tax Act, 1958 (18 of 1958) and the Interest-tax Act, 1974 (45 of 1974), and the amount of the liability determined on completion of the assessment [under section 153A and the assessment of the year relevant to the previous year in which search is initiated or requisition is made, or the amount of liability determined on completion of the assessment under Chapter XIV-B for the block period, as the case may be] (including any penalty levied or interest payable in connection with such assessment) and in respect of which such person is in default or is [deemed to be in default, or the amount of liability arisin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s submitted on 22.05.2020 wherein additionally other documents including PAN Card, GST Registration Certificate, Income Tax Return for the year 2018-19, GST return for the year 2019-20 and Bank statements from January 2020 to March 2020 of M/s Maha Pragya Jewellers were also submitted. It was also informed that some stock of the petitioner/s was left with his brother-inlaw Siddharth Baid at Mumbai who was engaged in the same business while travelling from Jaipur to Kolkata and Kolkata to Mumbai. The challan relating to the stock for the said period was also produced. 18. In case of Sri Puspa Ranjan Sahoo Vs. Assistant Director Income Tax (Investigation), Bhubaneshwar reported in 2012 (9) TMI 432, the Division Bench of Orissa High Court has held as under:- 27. In view of the above, we are of the view that the seizure of jewellery being stock-intrade by the authorized officer is wholly without authority of law and contrary to the statutory provision contained in proviso to Section 132 (1) (iii) and third proviso to Section 132 (1) (v). Therefore, the opposite parties- Income Tax Department are directed to return the jewellery (gold and silver ornaments) seized by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en then we would say - it is evident that the officer in question has completely misdirected himself and acted in an arbitrary manner. The proviso to Section 132(1)(iii) and 3rd proviso of Section 132 (1) (v) of the Act deals with bullion, jewellery or other valuable article or things being stock-intrade of business found as a result of search shall not be seized. The words in the statute are precise and unambiguous, and we are bound to uphold and expound these words in the natural and ordinary sense. The officer was already aware that the jewellery found in the Petitioner‟s possession was his stock-in-trade and, consequently, he was entitled to the protection provided in the proviso appearing after sub clause (iii) to sub Section (1) of Section 132 of the Act. The officer failed to take this provision into consideration. Further, sub Section (v) of sub Section (1) of Section 132 of the Act, additionally provides that the officer is only required to inventorize money, bullion, jewellery or other valuable article or thing which is found during the course of search and seizure. This was also ignored. The proviso to Section 132(1)(iii) has been added with effect from 01.06.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability referred to under Section 132B(1)(i) may be recovered out of such asset and the remaining portion, if any, of the seized asset may be released with the prior approval of the Principal Chief Commissioner/Commissioner, to the person from whose custody the asset is seized. The second proviso provides a deadline of 120 days from the date of authorization for search under Section 132 or requisition under Section 132A, as the case may be, was executed. 24. Further, the Manual of Office Procedure Volume -II Chapter 3 Assessment Procedure (Search and Seizure) provides under clause 3(ii), also mandates the release of assets within 120 days, which is reproduced hereunder: 3. Custody and release of seized material: the following points have to be borne in mind with regard to custody and release of seized material: - i. XXX ii. U/s 132B, the explained assets except those required to meet any existing liability should, with the prior approval of the prescribed authority, be released within 120 days from the, date of the search. The AO should give the assessee adequate opportunity to furnish his explanation and evidence in support thereof. 26. Obviously, when ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other valuable article or thing, being stock- in-trade of the business, found as a result of such search shall not be seized but the authorized officer shall make a note or inventory of such stock-in-trade of the business. Therefore, even if the Authorized officer is of the view that any bullion, jewellery or other valuable article or thing which is in form of stock-in-trade either wholly or partly represents the undisclosed income or property of the person/ assessee searched, he cannot seize the same. But he shall make a note or an inventory of such stock-in-trade of business. 18. Prior to insertion of proviso to Section 132 (1)(iii) with effect from 01.06.2003 stock in trade can be seized at the time of seizure if it represents either wholly or partly the undisclosed income or property of the person/assessee searched. However, after insertion of the proviso with effect from 01.06.2003 it shall not be seized but a note or inventory of such stock in trade shall be prepared. The obvious purpose is to use it at the time of assessment and for other follow up actions. 27. In view of the above, we are of the view that the seizure of jewellery being stock-in-trade by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after the completion of such proceedings, question of release of seized asset can be considered. The Assessing Officer did not accept the contention of the petitioner that such decision should have been taken within the time envisaged under further proviso to Clause (i) of sub-section (1) of Section 132B of the Act. The judgement of this Court in case of Mitaben R. Shah v. Deputy Commissioner of Income Tax and anr. (supra) was distinguished. Decision in case of Jinkal Dineshbhai Virvadiya v. Commissioner of Income Tax reported in , 367 ITR 713 was cited, in which, when it was found that the petitioner failed to satisfy the authority about the source of the asset, rejection of the request for release of the same was upheld. 8. Further proviso to Clause (i) of Subsection (1) of Section 132B of the Act provides that such asset or any portion thereof, as is referred to in the first proviso shall be released within a period of 120 days from the date on which the last of the authorizations for search under Section 132 or for requisition under Section 132A, as the case may be, was executed. This further proviso, therefore, has to be viewed and interpreted in the background of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely directory. Any such view would substantially water down the rigors of the statutory provisions and would give an unlimited authority to the Assessing Officer to retain the seized assets awaiting finalization of future possible liability for indefinite period without deciding the application of the person concerned who may be perfectly legitimately in a position to explain the source of the asset so seized. 12. Facts, noted above, are rather glaring. The application of the petitioner for the purpose of releasing of the seized asset, which was made on 17.04.2014, came to be decided only on 20.07.2015 i.e. over one year later. In the meantime, the petitioner had sent two reminders. Action of the Assessing Officer cannot be countenanced. Impugned order dated 20.07.2015 is set aside. The seized cash shall be released in favour of the petitioner alongwith interest as per the statute. He also referred para 18 of the judgment delivered by Gujarat High Court in Mitaben R. Shah Vs. Deputy Commissioner of Income-Tax, reported in 2010 (2) TMI 684, which are reproduced thus:- 18. Having heard the learned advocates appearing for the parties and having considered their ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paragraphs No.9, 13 and 16 of the judgment delivered by Delhi High Court in Gauri Shanker Vs. Union of India anr. (Writ Petition (Civil) 3908 of 2008, decided on 10.12.2010, which are reproduced thus:- 9. The panchnama dated 11th July 2005 recorded the fact that during the course of the search, one Tulsi Ram s/o Moolgi Bhai entered the premises and as a result of his personal search Indian currency in the sum of Rs. 5,50,000/- and documents in five loose sheets were recovered. This explains how a total sum of Rs. 6,99,000/- (i.e. Rs. 1,49,000/- seized from the Petitioner‟s business premises and Rs. 5,50,000/- seized from Mr. Tulsi Bhai) was handed over by the ED to the IT Department on 31st August 2009. As regards the business premises of the Petitioner, the presence of Shri Shankar Lal Goel as well as the Petitioner who happens to be his brother is shown. The Panchnama has been signed by Shri Shankar Lal Goel in the presence of the witnesses. The panchnama also shows the seizure of the six bars of gold and cash of Rs. 1,49,000/-. A copy of the letter dated 19th July 2006 written by the Petitioner Gauri Shankar to the Assistant Director, ED has been placed on record i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law abiding Officers and having respect to the Court proceedings, refrained from disposing of the representation of the petitioners because of pendency of this petition. He also submitted that the petitioners who are gold smugglers, are not entitled for any relief from this Court. He further submitted that the statements of the employees of the petitioner firm recorded during the search operation also substantiate the allegations of gold smuggling against the petitioners. 17. The provisions of Section 37 of the FEMA read with Sections 132 and 132B of the Act of 1961 including its proviso clauses clearly speak that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorized officer shall make a note or inventory of such stock-in-trade of the business. Further, where the person concerned makes an application to the Assessing Officer within thirty days from the end of the month in which the asset was seized, for release of asset and the nature and source of acquisition of any such asset is explained, to the satisfaction of the Assessing Officer, the amount of any existing liabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should have been released within one twenty days. The respondent authorities are under an obligation to abide by the law in force but in the present case the respondent authorities have failed to act upon the representation submitted by the petitioners on 19.02.2020 which led to miscarriage of justice. 20. The respondent authorities in view of the mandate of Section 132B of the Act of 1961 were under an obligation to consider the application/ representation of the petitioners submitted on 19.02.2020 showing the credentials and explaining that the gold bullion seized during the search was stock-in-trade and are duly accounted in the books of accounts which were based on the documents enclosed along-with the representation which have been placed on record before this Court also. The respondent authorities have not cared to consider the representation and the documents submitted by the petitioners and to hold that the gold bullion seized during the search was not stock-in-trade. Therefore, this Court on consideration of the documents submitted along-with the petition without there being otherwise decision of the respondent authorities, does not hesitate to hold that the gold bul ..... X X X X Extracts X X X X X X X X Extracts X X X X
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