Court quashes gold seizure, directs delivery for investigation. Assessment order challenged. Seizure lacked justification.

The court quashed the seizure of gold bullion and jewelry, directing delivery to the Chief Commissioner of Income Tax, Chennai for further investigation. The assessment order treating the seized gold as undisclosed income was also quashed, granting the petitioner liberty to challenge it before the Appellate Commissioner. The court held that the seizure lacked justification as the gold was for manufacturing purposes and should have been transferred to the Income Tax Officers in Chennai. Ownership of the gold was found to belong to the petitioners, not undisclosed income.

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Issues Involved:
1. Legality of the search and seizure proceedings.
2. Jurisdiction of the court to quash the seizure and assessment order.
3. Ownership and rightful possession of the seized gold bullion and jewellery.
4. Validity of the assessment order treating the seized gold as undisclosed income.

Detailed Analysis:

1. Legality of the Search and Seizure Proceedings:
The petitioners challenged the search and seizure proceedings conducted under Warrant No.8609 dated 1st July 2016, arguing that the 2nd respondent had no authority under Section 132 of the Income Tax Act, 1961, to seize bullion and jewellery as they were stock in trade of the petitioners' business. The petitioners contended that the 2nd respondent was merely bound to make a note or inventory of such stock in trade and return the jewellery items. The court found that the seizure was not justified as the gold was meant for manufacturing and repair/polishing purposes and was handed over to the 4th petitioner by the 2nd petitioner. The 2nd respondent should have transferred the seized gold to the jurisdictional Income Tax Officers at Chennai for further investigation.

2. Jurisdiction of the Court to Quash the Seizure and Assessment Order:
The respondents argued that the writ petition was outside the jurisdiction of the court as the entire cause of action arose in Kolkata. However, the court held that the seizure and the consequential assessment order were intertwined and had their basis from intelligence gathered at Chennai. The court concluded that it had jurisdiction to interfere with the seizure and the assessment order as the basis of the seizure was the tip-off from Chennai, and the ownership was claimed by persons located in Chennai.

3. Ownership and Rightful Possession of the Seized Gold Bullion and Jewellery:
The petitioners consistently maintained that the seized gold belonged to the 1st petitioner and was handed over to the 2nd petitioner for manufacturing and repair purposes. The court found no variance in the statements of the petitioners and concluded that the seized gold could not be treated as undisclosed income of the 4th petitioner. The court directed that the seized gold should be delivered to the Chief Commissioner of Income Tax, Chennai, for further investigation to determine the rightful owner.

4. Validity of the Assessment Order Treating the Seized Gold as Undisclosed Income:
The 5th respondent passed an assessment order on 31.12.2018, treating the seized gold as undisclosed income of the 4th petitioner. The court found that the 5th respondent was not justified in concluding that the seized gold was undisclosed income, as the explanation given by the petitioners was satisfactory. The court quashed the impugned seizure and directed further investigation by the Chief Commissioner of Income Tax, Chennai. The court also granted liberty to the 4th petitioner to take appropriate steps against the assessment order before the jurisdictional Appellate Commissioner within thirty days.

Conclusion:
The court quashed the seizure effected by the 2nd respondent and directed the seized gold to be delivered to the Chief Commissioner of Income Tax, Chennai, for further investigation. The court also provided the 4th petitioner with the liberty to challenge the assessment order before the jurisdictional Appellate Commissioner. The petition was disposed of with these directions, and no costs were awarded.

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