HIGH COURT OF RAJASTHAN
Smt. Bhawna Lodha
Director General of Income-tax
S.B. CIVIL WRIT PETITION NO. 5513 OF 2012
Date of pronouncement 28.01.2013
1. The writ-petitioner has made the following prayer/s in the present writ petition: -
“(i) the impugned communication dated 16/4/2012 (Annexure 17) issued by the Respondent No.3 may be quashed.
(ii) respondents may be directed to release 1004.8 gms of gold ornaments seized from the petitioner during the course of search on 18/1/2007.
(iii) an exemplary cost of Rs.1,00,000/- may be awarded to the petitioner and same may be directed to be recovered personally from the erring officers.
(iv) Any other order or direction which this Hon’ble Court deems just and proper may kindly be passed.”
2. A search u/s 132 of the Income Tax Act, 1961, was conducted at the residential house of the petitioner on 18.01.2007 and inter-alia, 1004.8 grams gold jewellery was seized during the course of said search. After search, the block assessment was completed for the years 2001-02 to 2006-07 by the Assessing Authority vide assessment order dated 31.10.2008; and certain demands of tax and penalty was raised against the petitioner. In the appeals filed by the petitioner-assessee, the assessee got certain relief/s in the additions made in the declared income of the petitioner-assessee vide Annex.6 order of the appellate authority dated 22.11.2010. The assessee has given summary of the demands and appeal effect, which shows that after deposit of disputed demand with interest and penalty amount as per orders passed by the Assessing Authority, the assessee became entitled to a refund of Rs. 1,20,874/-with interest from the Income Department. The petitioner-assessee also filed an appeal before the Income-tax Appellate Tribunal against the order of penalty passed against her under Section 271 (1) (c) of the Income-tax- Act vide order dated 07.03.2012 imposing penalty of Rs. 72,300/-, which is still pending.
3. The assessee has admittedly paid even the amount of penalty also as stated in para 13 of the writ petition. In para 13, the petitioner has categorically stated that entire amount of demand raised in the assessment orders was deposited by her and the appeals of the petitioner also came to be allowed giving substantial relief/s to the petitioner; and only one of the aforesaid appeal against penalty is pending before the Income-tax Appellate Tribunal. However, the respondent authorities of the Income-tax Department have not yet released the gold ornaments/jewellery seized at the time of search conducted on the residential place, which includes her ‘Stridhan’ and personal jewellery, even though there is no existing demand of tax against the petitioner-assessee.
4. A reply to the writ petition has also been filed on behalf of the Income-tax Department and in reply to Para/s 13 to 15 of the writ petition, the respondents’ reply is as under: -
“13-15. That in reply to the averments made in para nos. 13 to 15 of the writ petition, it is respectfully reiterated that at present, penalty matters were pending with the answering respondents-department and hence, the seized jewellery could have been released only in accordance with the provisions and procedure provided under the relevant rules/circulars issued by the Government of India.”
5. The respondents have also relied upon a Circular issued by the Central Board of Direct Taxes (Annex.8) dated 21st January, 2009, which is also quoted below: -
F. No.286/6/2008-IT (Inv.II)
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Room No.254, North Block
New Delhi, the 21st January, 2009
All Chief Commissioners of Income Tax (CCA)
All Chief Commissioners of Income Tax (Central)
All Directors General of Income Tax (Inv/Intell.)
Sub:- Search and Seizure Cases- Release of Seized Assets other than Cash-Regarding.
Reference is invited to Board’s Instruction No.11/2006 in F. No.F. No.286/138/2006-IT (Inv. II) dated 1.12.2006 wherein certain issues relating to the release of cash deposits in the PD Accounts were dealt with. In respect of release of seized assets, other than cash, there is need to modify the existing instructions for redressal of public grievances.
2. In this regard, Board had issued directions vide F.No.286/217/98-IT (Inv.II) dated 02.02.1999 and F.No.286/97/ 2003-IT (Inv.II) dated 03.03.2004. In supersession of all instructions on the subject of release of seized assets, other than cash, the following instruction is hereby issued. In this instruction hereinafter reference to seized assets may be construed as reference to seized assets, other than cash.
3. (a) Where the nature and source of acquisition of seized assets is explained by the assessee to the satisfaction of the assessing officer, such seized assets should be released subject to recovery of outstanding arrear demand and fulfilment of other requirements contained in sub-section (1) of Section 132B of the Income Tax Act (hereinafter called the ‘Act’).
(b) Where the seized asset are not released under sub-section (1) of section 132B of the Act, such seized assets should be released within one month of passing of the last search and seizure assessment orders u/s 153A/153C, 143 (3), 148 or 158BC/158BD of the Act. The seized assets should be released only with the prior approval of Commissioner of Income Tax or Chief Commissioner of Income. However, no approval should be given for release of:
(i) that part of the seized assets, the value of which is sufficient to adjust any existing liability and the amount of liability determined on completion of the search and seizure assessments; and also
(ii) that part of seized assets which is sufficient to meet the expected liability on account of the penalty imposable in cases where penalty proceeding connected with search assessments have been initiated.
(c) Whereas assessee is in appeal against search assessment orders and the penalty has not been imposed up to the date of the order of the CIT (Appeals), the position regarding the seized assets lying with the department should be reviewed at the time of giving effect to the order of the CIT (Appeals). Only that part of the seized assets should be retained which is sufficient to meet the demand outstanding against the assessee for any assessment year (including non-search assessment years) after giving effect to order of the CIT (A) and the expected amount of penalty imposable on the search assessments as revised after appeal effect. The remaining seized assets should be released within one month after giving effect to appeal order u/s 250 of the Act.
(d) The seized assets can also be released, at any time, with the approval of the Commissioner of Income Tax or Chief Commissioner of Income Tax provided:
(i) the assessee unconditionally accepts the ownership and the valuation of the seized assets determined at the time of search and seizure operation; and
(ii) makes a written request to release the seized assets and provides unconditional and irrevocable bank guarantee to the extent of the value of seized assets.
(e) The Board is also aware of the fact that some assessees have great attachment to the seized assets and are willing to exchange such seized assets for an equivalent amount of cash. The replacement of seized assets with cash also makes it easier for the Department to adjust this cash against tax liability. Hence, it has been decided that the seized assets can also be released at any time, with the approval of the CIT or CCIT provided that:
(i) the assessee accepts unconditionally the ownership of the seized assets and also the valuation of the seized assets, determined at the time of search and seizure operation;
(ii) makes a request in writing requesting release of seized assets against equivalent amount of cash to be provided by him
(iii) pays to the CIT a draft of an amount equal to the value of the seized assets and
(iv) Agrees in writing that the amount may be deposited in the PD account and may be used for adjustment against tax liability in accordance with the provisions of section 132B of the Act.
Such amount should be deposited in the P.D. account and dealt in the manner laid out in Board Instruction No.11/2006.
(f) Notwithstanding anything contained in above paragraphs, (except in para 3 (a) above) where the valuation or the ownership of any particular seized assets is disputed or where the specific items of seized assets have evidentiary value in prosecution proceedings, such assessment or penalty or prosecution proceedings, whichever is later.
4. All DGsIT/CCsIT/CsIT should review the status of seized assets lying with the department in view of the guidelines mentioned above. It may be noted that any violation in this regard shall be viewed seriously by the Board.
5. This Instruction may be brought to the knowledge of all Income-Tax Authorities working in your Region.
Under Secretary (IV.II & III)”
6. Mr. Dinesh Mehta, learned counsel for the petitioner urged that said Circular dated 21.01.2009 (Annex.8) nowhere prohibits the release of seized assets of the assessee, if the entire demand has been paid by the assessee in pursuance of impugned assessment orders; and therefore, the reliance placed by the respondents on the said Circular for still retaining the Gold ornaments and jewellery of the petitioner, is mis-placed and the assessee’s jewellery including her ‘Stridhan’ deserve to be released to the petitioner forthwith. He also submitted that pendency of one of the appeals before the learned Income-tax Appellate Tribunal against the penalty of Rs.72,300/-, which amount has also been paid by the petitioner even if rejected, does not cause any prejudice to the respondent- Department and on the other hand if such appeal is allowed in favour of assessee, the assessee would be entitled to the refund of penalty amount already deposited by her.
7. On factual matrix, there is no dispute from the side of the respondents, even in their reply and during the course of arguments also made by the learned counsel for the respondent- Revenue, Mr. K.K. Bissa. He further submitted that though the amount of tax and penalty has already been deposited however, in view of pendency of the appeal of the aforesaid assessee, as stated in para 13 to 14 of the reply, the said release of Gold ornaments and jewellery has not been made under the impugned order Annex.17 dated 16.04.2012. He, therefore, submitted that assessee was asked to give the bank guarantee for the value of the assessee’s jewellery for its release.
8. In rejoinder to this, learned counsel for the petitioner submitted that there is no justification for demanding the bank guarantee for the entire value of the jewellery seized, which was not justified in the first instance but the entire demand of tax and penalty having been paid by the assessee, the release thereof cannot be withheld by the respondents authorities unnecessarily and arbitrary and the same has caused serious prejudice to the assessee besides lot of mental agony and deprivaty.
9. A bare perusal of the said Circular indicates that detention of the assets has been provided and permitted only so long as there is some outstanding demand of tax and penalty against an assessee or expected liability of such tax or penalty; obviously to safeguard the interest of Revenue for the realization or recovery of such demand of tax, interest and penalty. But, in the present case, admittedly there is no demand of tax, interest and penalty outstanding against the petitioner for the period in question, for which the assessment orders were passed. On the contrary, the assessee is claiming refund of excess tax paid in pursuance of appeal effect given by respondent authority. So far as the jewellery seized at the time of search is concerned, the identification whereof was not disputed by the respondents authorities. Therefore, the detention and retention of such assets for prolonged period unnecessarily without any valid rhyme or reason, cannot be justified and that has made the petitioner to approach this Court by way of present writ petition.
10. Admittedly, there is no existing outstanding demand against the petitioner of tax, interest and penalty due now for the said period. Mere pendency of appeal before the Income-tax Appellate Tribunal on the issue of penalty of Rs.72,300/-, which is already deposited by her, can only result in further relief to petitioner to the extent, which may be allowed by the Income-tax Appellate Tribunal if such appeal is allowed by the said Tribunal. Since there is no outstanding demand of tax and penalty against the petitioner due to be recovered from her, there is no justification for detention of seized assets particularly jewellery, which includes her personal ‘Stridhan’ for which more than five years have lapsed by now. At the same time, the demand of bank guarantee to the extent of full value of said jewellery vide the impugned communication dated 16.04.2012 (Annex.17) also does not appear to be justified in these circumstances.
11. Therefore, it appears that the continued detention and retention of these Gold ornaments and jewellery of petitioner-assessee by the respondent- Income-tax Department is without any valid reason.
12. Learned counsel for the respondents, Mr. K.K. Bissa fairly submitted that there is no outstanding demand against the present petitioner-assessee.
13. In these circumstances, this writ petition deserves to be allowed and the same is, accordingly, allowed. The impugned order dated 16.04.2012 (Annex.17) is quashed. The respondents are directed to release the gold ornaments and jewellery of the present petitioner weighing about 1004.8 grams, seized on 18.01.2007 and identification whereof is not in dispute to the petitioner forthwith. In the circumstances at this stage, the costs of litigation are to be borne by the parties respectively. A copy of this order be sent to both the parties forthwith.