Seized gold jewellery, bullion and forex during search: assets ordered released after deposit of advance/self-assessment tax u/s158BC

Where gold jewellery, bullion and cash/forex were seized during a search on the allegation that they represented undisclosed income, the HC considered whether continued retention was justified despite the Department not having finalised block assessment proceedings under s. 158BC and the petitioners asserting that the seized assets were explained/explainable. Balancing protection of Revenue with the petitioners' hardship, the HC accepted a conditional release mechanism by directing deposit of a specified amount as advance/self-assessment tax to secure any probable tax liability. Upon deposit and production of proof, the Department was directed to release the entire seized jewellery, bullion and cash/forex within seven days, and the writ petitions were allowed and disposed of.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the seized movable assets (gold jewellery, bullion, and cash/forex) should be directed to be released pending completion/finalisation of proceedings under Section 158BC of the Income Tax Act, 1961, and on what conditions such release could be ordered to protect the Revenue's interests.

(ii) Whether directing deposit of a quantified amount as self-assessment tax/advance tax, adjustable against any future demand, is an appropriate condition for release of the seized assets.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Conditional release of seized jewellery, bullion and cash/forex pending Section 158BC proceedings

Legal framework (as discussed): The Court noted that the seizure occurred during a search by the Income Tax Department and that proceedings under Section 158BC had not been finalised. The Court did not adjudicate the legality of seizure or the merits of the "undisclosed income" allegation, and expressly left such merits open.

Interpretation and reasoning: The Court balanced the petitioners' request for release-supported by the assertion that the seized items were explained/explainable and the stated personal need for jewellery-against the Department's objection focused on safeguarding potential tax recovery. The Court considered the circumstances of the petitioners (including age-related considerations) and accepted a solution ensuring protection of the Revenue while enabling release of the assets.

Conclusions: The Court allowed the petitions and directed release of the entire seized jewellery, bullion, and cash/forex, but only after compliance with specified financial conditions and production of proof of deposit, with a time-bound direction for release within seven days thereafter.

Issue (ii): Deposit of specified sums as self-assessment/advance tax as a condition for release and protection of Revenue

Legal framework (as discussed): The Court addressed the Department's request that petitioners be required to deposit an amount equal to probable tax liability as advance tax/self-assessment tax for the relevant assessment year, so the Revenue's interest would remain protected in the event of a demand.

Interpretation and reasoning: The Court accepted the petitioners' consented proposal to deposit fixed amounts, treating such deposit as self-assessment/advance tax and permitting adjustment against any demand that may later be raised. This was adopted as an equitable arrangement because it secured the Revenue while avoiding continued retention of assets.

Conclusions: The Court directed two petitioners to deposit specified amounts by a fixed date as self-assessment/advance tax; upon deposit and production of challans to the designated income-tax authority, the Department was directed to release the seized assets within seven days. The Court further clarified that it made no findings on whether the seized assets were duly explained, leaving all parties free to raise their respective pleas at the appropriate stage.

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