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Issues: (i) Whether the action of the Static Surveillance Team (SST) in detaining/seizing the consignments and handing them over to the Income Tax Department was justified; (ii) Whether initiation of proceedings under Section 148 of the Income-tax Act, 1961 against Amit Sharma upon a prima facie belief that the consignment belonged to him was justified; (iii) Whether Arihant Jewelers was entitled to the return of the jewellery claimed by it.
Issue (i): Whether the SST's seizure/detention and handing over of consignments to the Income Tax Department complied with the applicable Standard Operating Procedure during operation of the Model Code of Conduct.
Analysis: The SOP in force during the Model Code of Conduct required specified steps for seizure, detention and release. The record shows the SOP was not followed, requisite satisfaction about misuse for electoral influence was absent and documents produced established the consignments were in transit with a courier and not liable to seizure. The seizure was reported to Revenue and requisitioned instead of being dealt with under the SOP for release to the person from whom they were seized.
Conclusion: In favour of the assessee.
Issue (ii): Whether proceedings under Section 148 of the Income-tax Act, 1961 against Amit Sharma were justified where he was an employee/custodian and had not claimed ownership of the consignments.
Analysis: The material shows Amit Sharma was an employee of the courier and custodian of consignments; ownership was vested with consignors/consignees as per documents on record. Initiating assessment proceedings under Section 148 against an employee/custodian in the absence of materials to show ownership or undisclosed income was arbitrary in the circumstances and unsupported by the record.
Conclusion: In favour of the assessee.
Issue (iii): Whether Arihant Jewelers was entitled to release of the jewellery claimed by it in writ proceedings.
Analysis: The SOP required returning seized articles to the person from whom they were seized upon production of requisite documents. The High Court, while deciding issues (i) and (ii), had recorded that seizure was from the courier's employee and that the courier was the proper custodian; the claim of a third party to ownership raises contestable factual and statutory questions appropriately determinable under the statutory remedy (Section 132B) rather than by addressing ownership in writ proceedings. The record showed limited claim in respect of one consignment among many and no dispute by the courier that the goods were its custody items; thus the writ was not the appropriate forum to adjudicate ownership.
Conclusion: Against the assessee (Arihant Jewelers' writ dismissed as not maintainable).
Final Conclusion: The appeals are partly allowed by modifying the High Court order: Writ Petition Nos.15169 of 2024 and 6850 of 2024 are allowed and the seized articles are to be released to Sequel Logistics Pvt. Ltd. within three weeks; Writ Petition No.6810 of 2024 is dismissed as not maintainable; the question of ultimate ownership is left open for determination by appropriate forum under statutory procedure.
Ratio Decidendi: Non-compliance with the applicable Standard Operating Procedure during the Model Code of Conduct vitiates seizure and requires release of seized consignments to the person from whom they were seized; disputes on ownership of seized goods must be adjudicated through the statutory remedy under Section 132B of the Income-tax Act, 1961 rather than by writ adjudication of ownership.
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