Court rules in favor of applicant under Section 132B, orders release of seized diamonds.

The court ruled in favor of the writ applicant, finding that they had met the requirements of Section 132B by timely applying and adequately explaining the source of the seized diamonds. The Income Tax Officer's failure to respond within the statutory period rendered the continued retention of the diamonds illegal. The court ordered the release of the diamonds to the applicant within four weeks, emphasizing the mandatory nature of the statutory time limit under Section 132B and the necessity of complying with it.

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Issues Involved:
1. Legitimacy of the seizure of diamonds.
2. Compliance with Section 132B of the Income Tax Act.
3. Mandate of the statutory time limit for retaining seized assets.
4. Entitlement of the writ applicant to the release of seized diamonds.

Detailed Analysis:

Legitimacy of the Seizure of Diamonds:
The writ applicant, engaged in the diamond business under the proprietary concern "M/s. Vir Impex," sold polished diamonds valued at Rs. 92,09,550/- to "Akash Diamonds Pvt. Ltd." On 8th August 2019, during a search at Akash Diamonds Pvt. Ltd., the applicant's employee, Parin N. Sheth, was found with the diamonds and the corresponding invoice. The diamonds were seized, and the applicant requested their release, asserting ownership and explaining the business transaction.

Compliance with Section 132B of the Income Tax Act:
The writ applicant made multiple requests for the release of the diamonds under Section 132B(1)(i) of the Income Tax Act, which allows for the release of seized assets if the nature and source of acquisition are satisfactorily explained. Despite these requests, the Income Tax Officer did not respond. The applicant argued that the statutory time limit of 120 days for retaining seized assets had expired, citing the case of Nadim Dilipbhai Panjvani vs. Income Tax Officer, which emphasizes adherence to the time frame provided under Sections 132A and 132B.

Mandate of the Statutory Time Limit for Retaining Seized Assets:
The court highlighted the mandatory nature of the time limit under Section 132B. The first proviso to clause (i) of sub-section (1) of Section 132B states that if an application for release is made within 30 days and the source of acquisition is satisfactorily explained, the asset should be released within 120 days. The court referenced the Nadim Dilipbhai Panjvani case, which underscores the importance of the statutory time limit and the illegality of retaining seized assets beyond this period without a decision.

Entitlement of the Writ Applicant to the Release of Seized Diamonds:
The court found that the writ applicant had complied with the requirements of Section 132B by making timely applications and satisfactorily explaining the source of the diamonds. The Income Tax Officer's failure to respond within the statutory period rendered the continued retention of the diamonds illegal. The court ordered the release of the diamonds to the writ applicant within four weeks, allowing the assessment proceedings against Parin N. Sheth or the writ applicant to continue as per law.

Conclusion:
The court allowed the writ application, directing the respondents to release the seized diamonds to the writ applicant within four weeks, emphasizing the mandatory nature of the statutory time limit under Section 132B and the illegality of retaining seized assets beyond this period without a decision.

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