Seized jewellery and gold after search: 120-day rule in Section 132B held directory; release left to AO, writ denied.

The dominant issue was whether Section 132B(1)(i) mandates automatic release of seized jewellery/gold on expiry of 120 days. The HC held the 120-day stipulation is directory, not mandatory, because Section 132B(4) provides the legislative consequence for delayed release through interest liability (up to 18% p.a.), indicating non-compliance does not invalidate continued retention. The second issue was whether, in writ jurisdiction, the HC could direct release despite the AO being seized of the matter; the HC declined, holding factual satisfaction as to explanation of acquisition and liability determination must be undertaken by the AO, with release possibly considered on an application (including against bank guarantee). The writ was refused.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the 120-day period in the second proviso to Section 132B(1)(i) of the Income Tax Act, 1961 mandates automatic release of seized jewellery/gold on expiry of 120 days from execution of the last search authorisation.

(ii) Whether, in exercise of jurisdiction under Article 226, the Court should direct release of seized jewellery/gold when the Assessing Officer has not yet completed assessment and has recorded non-satisfaction regarding explanation of the nature and source of acquisition for purposes of Section 132B(1)(i).

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Mandatory vs directory nature of the 120-day timeline under Section 132B(1)(i)

Legal framework (as discussed by the Court): The Court examined Section 132B(1)(i), including (a) the first proviso requiring an application within 30 days from the end of the month of seizure and an explanation of the nature and source to the Assessing Officer's satisfaction, and (b) the second proviso stating that the asset/portion "as is referred to in the first proviso" shall be released within 120 days from execution of the last search authorisation. The Court also considered Section 132B(4), providing for interest consequences linked to expiry of 120 days.

Interpretation and reasoning: The Court rejected the submission that expiry of 120 days compels release of seized assets regardless of the Assessing Officer's satisfaction. It held that the 120-day stipulation is directory because the statute itself provides a consequence for delay through Section 132B(4) (interest), indicating legislative contemplation that decisions may not always be completed within that time. The Court agreed with the approach that the second proviso operates in relation to assets "referred to in the first proviso", i.e., assets for which the Assessing Officer is satisfied about nature and source and after addressing existing liability, and that the statute does not create any deemed satisfaction or automatic release mechanism merely due to passage of time.

Conclusions: The Court held that the 120-day period in the second proviso to Section 132B(1)(i) is not mandatory and does not require automatic release of seized jewellery/gold upon its expiry; delay attracts interest consequences, not forfeiture of the Department's power to retain pending statutory satisfaction/liability determination.

Issue (ii): Whether the Court should order release of seized jewellery/gold on merits in writ jurisdiction

Legal framework (as discussed by the Court): The Court proceeded on the structure of Section 132B(1)(i), which conditions release on explanation of nature and source to the Assessing Officer's satisfaction, and addressed the limits of Article 226 review as confined to decision-making process rather than substituting the statutory authority's merits determination, particularly where matters require examination by the Assessing Officer.

Interpretation and reasoning: The Court noted that the assessment had not yet been completed. It also noted the competing stands: the assessees relied on prior disclosures/returns and valuation material; the Revenue relied on the statement recorded during search and asserted absence of satisfactory documentary justification, disputing the reliability and reconciliation of valuation materials and raising verification needs (including the claimed source/partition-related explanations). The Court held that whether the seized jewellery/gold is "explained" with proper evidence is a matter for the Assessing Officer to examine and decide, and the High Court cannot act as the Assessing Officer by itself evaluating factual sufficiency and releasing assets on that basis. In such circumstances, a writ direction for release was found inappropriate.

Conclusions: The Court declined to direct release of the seized jewellery/gold in writ jurisdiction, holding that the explanation and supporting evidence must be assessed by the Assessing Officer in accordance with Section 132B(1)(i), and that the Court should not substitute its assessment for the statutory authority's satisfaction at this stage. The petition was dismissed.

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