2026 (3) TMI 1194 - SCH - Income Tax

Standard Operating Procedure non-compliance invalidates seizure and requires release to the person from whom goods were seized.

Non-compliance with the prescribed Standard Operating Procedure during the Model Code of Conduct vitiated the SST seizure and handing over of ... Action of the SST/ Static Surveillance Team in detaining/seizing the consignments and handing over to the Income Tax Department - Violation of Standard Operating Procedure for seizure during Model Code of Conduct - Notice u/s 148 against a courier employee lacking ownership - Claims to seized goods to be adjudicated u/s 132B Violation of Standard Operating Procedure for seizure during Model Code of Conduct - Lawfulness of the SST seizure and its handover to the Income Tax Department - HELD THAT: - The Court upheld the High Court's finding that the SST did not follow the SOP applicable during the Model Code of Conduct, and there was no requisite satisfaction that the articles were being transported to influence voters or belonged to candidates. Documents and statements established the consignments were in transit with a courier and not liable to be detained; therefore the seizure and subsequent requisition to Revenue were vitiated and the High Court's findings on this aspect require no interference. The Court modified the relief to direct release in favour of the person from whom the goods were seized (the courier), consistent with the SOP. [Paras 10, 16, 19] Seizure was in violation of the SOP and the High Court's findings on the illegality of the seizure and handover are sustained; seized articles to be released to Sequel Logistics as the person from whom they were seized. Validity of notice u/s 148 against a courier employee lacking ownership -Claims to seized goods to be adjudicated u/s 132B - HELD THAT: - The Court agreed with the High Court that Amit Sharma was merely an employee/custodian of the courier and had not claimed ownership of the consignments. Initiating Section 148 proceedings against him on a prima facie presumption of ownership was arbitrary. Given the absence of materials to treat him as owner or as possessing undisclosed income represented by the seized goods, the High Court's quashing of such proceedings was sustained. [Paras 11, 16] Proceedings under Section 148 against Amit Sharma were manifestly arbitrary and the High Court's view quashing such action is upheld. Entitlement of Arihant Jewelers to release of seized jewelry and forum for determination of ownership - Claims to seized goods to be adjudicated under Section 132B - HELD THAT: - The Court held that, because the seizure ought to have been dealt with under the SOP (return to the person from whom seized) and the High Court had decided Issues Nos. 1 and 2 on that basis, the High Court should not have proceeded to adjudicate a third party's ownership claim in writ proceedings. The appropriate remedy for claimants disputing ownership of requisitioned/seized articles is to invoke the procedure under Section 132B of the Act before the tax authority; therefore Arihant Jewelers' writ was not maintainable in that forum. [Paras 17, 18, 19] Writ by Arihant Jewelers dismissed as not maintainable; ownership claims to be pursued under Section 132B before the appropriate authority. Final Conclusion: The appeals are partly allowed: the High Court's findings that the seizure violated the SOP and that proceedings under Section 148 against the courier employee were arbitrary are sustained; the relief is modified to order release of the seized articles to Sequel Logistics, Arihant Jewelers' writ is dismissed as not maintainable, and claimants remain free to seek relief under Section 132B. 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.