TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1117
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....ons are filed under Article 226 of the Constitution of India raise interconnected questions of facts and law arising out of the seizure of jewelry in 37 consignments on 23.10.2023 by the Static Surveillance Team, (SST) Ratlam by the District Election Officer during the enforcement period of Model Code of Conduct during the Madhya Pradesh State Assembly Elections and thereafter proceedings initiated under the Income Tax Act, 1961 (in short 'the IT Act') and the consequential action taken by the respondent authorities. 02. Since the factual matrix and legal questions involved are substantially common and interlinked across all the writ petitions, with the joint request of the parties, they are analogously heard and are being disposed of together by this common judgment. 03. Admittedly, the petitioners have sought common relief in these three writ petitions and there is no conflict of interest between them. There are no allegations and counter-allegations against each other. They all agree on a series of actions taken by the respondents. FACTS OF THE CASE IN BRIEF 04. On 23.10.2023, during the enforcement of the Model Code of Conduct in connection with the Legislative Ass....
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.... Tax (Investigation), Bhopal authorizing the Deputy Director of Income Tax (Investigation) to requisition the seized consignments and accordingly consignments and supporting documents were handed over on 28.10.2023 by Shri Durgesh Sirolia, SST Magistrate, Ratlam. 4.5. Subsequently, on 29.12.2023, a notice was issued by the Principal Commissioner of Income Tax-1, Indore, to Mr. Amit Sharma, informing him that his assessment case has been transferred to the jurisdiction of the Deputy Commissioner of Income Tax (Central)-2, Indore under Section 127 of the Income Tax Act. Meanwhile, M/s Arihant Jewellers submitted a formal representation dated 10.01.2024 to the Additional and Deputy Commissioners of Income Tax (Central), Indore, asserting legal ownership of the seized goods and requesting immediate release of the goods. Sequel Logistics also submitted similar representations on behalf of its clients whose consignments were seized. 4.6. On 12.01.2024, Mr. Amit Sharma also submitted a letter to the Deputy Commissioner of Income Tax (Central) - 2, Indore reiterating that he had no proprietary interest in the seized consignments and that the goods belonged to different entities who had a....
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.... on 25 April 2024 when another vehicle of Sequel Logistics was intercepted by the Static Surveillance Team, Deendayalnagar, Ratlam and on this occasion, nine consignments were seized despite being accompanied by complete documentation. However, in this case, after the representative of Sequel Logistics appeared before the District Election Officer with all requisite records upon verification of documents, the District Election Monitoring Committee passed an order on 29.04.2024 directing the release of consignments, finding that the seizure had been unjustified. 4.12. Being aggrieved by the action and inaction of the respondent/authorities, the petitioners have now approached this court under Article 226 of the Constitution, challenging the legality of seizure, requisition and consequential assessment proceedings. The petitioners contend that the impugned actions are arbitrary, contrary to the prescribed procedural safeguards provided in the Income Tax Act and relevant CBDT instructions and further prayed for appropriate reliefs in each of their cases including a declaration that the seizure and requisition were bad in law as done without authority of law and contrary to the statut....
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..../EPPS dated 19.08.2021 read with Instruction No. 76/Instructions/EEPS/2015 dated 29.05.2015 clearly states that the SST is empowered to seize cash or valuables only upon a clear finding that such items are being used or intended to be used for electoral purposes or are linked to a candidate, political party or electoral inducement and that in the present case since there was absence of any such linkage the SST had no authority to carry out seizure. 6.5. Learned Senior Counsel submitted that Clause 8 of the SOP specifically provided that in cases where valuables are accompanied with proper documentation and there is no electoral linkage, the SST shall not seize the cash but may pass on the information to the Income Tax Department for necessary action. That in the present case, there was no political linkage found, and as proper documentation was available establishing the nature, origin and destination of the goods, the SST had no ground to seize them and subsequently transfer them to the Income tax department. 6.6. Learned Senior Counsel submitted that Clause 9 of the SOP further mandates that in the event of suspicion of an offence it is binding upon the SST to get an FIR or a c....
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....of the Act as the provision lays down a strict timeline of 120 days from the date of requisition within which the Assessing Officer is required to complete the assessment or determine liability and appropriate the seized assets accordingly and in absence of such determination, the assets are liable to be released forthwith. That in the present case, the requisition was made long back and no determination has still been made long after the expiry of the stipulated period, thus the continued retention is totally arbitrary and unlawful. 6.11. Learned Senior Counsel submitted that despite repeated representations made supported with all relevant documents, no adjudication has been made on merits and further pointed out that the applications submitted during the pendency of the writ proceedings were also rejected without addressing the core issue of ownership or validity of requisition on the ground that the matter had been centralized and thus the authority has no jurisdiction/power to deal with the case. 6.12. In support of his submissions, learned Senior Counsel has supplied copies of the several judgments of Apex Court and of different High Court delivered in the cases of State of....
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....n 24.10.2023 but despite there being no illegality did not return the consignments to the petitioner and instead handed them over to the income tax department which was without authority and contrary to the SOP guidelines as it restricts such transfer unless there is a link to an electoral candidate or suspicion of an offence none of which were found or recorded in this case. The basic intelligence and application of mind are expected from the government officials. 7.2. Learned Senior Counsel submitted that the Income Tax Department summoned the petitioner, and his statements were recorded wherein he disclosed his identity as an employee of Sequel Logistics and explained that he was only transporting the goods in his capacity as the custodian of the company. During the statement, specific questions regarding each document were asked. The answers to questions 5, 6, 9, 11, 12, 15, 16, 19, 22 and 26 in the statement are particularly relevant for the consideration of ITO, who failed to understand them. 7.3. Learned Senior Counsel submitted that despite disclosure of all facts by the petitioner, a warrant of authorisation/ requisition under Section 132A (1) (c) was illegally issued by....
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....ITR 302 (Del) affirmed in (2003) 260 ITR 80 (SC), D.N. Singh v/s CIT reported in (2023) 454 ITR 595 (SC), ITO v/s Lakhmani Mewal Das reported in (1976) 103 ITR 437 (SC), Ganga Saran & Sons P. Ltd. v/s ITO reported in (1981) 130 ITR 1 (SC), ITO v/s Seth Brothers reported in (1969) 74 ITR 836 (SC), Biora Construction (P) Ltd. v/s DIT (Inv.) reported in (2006) 281 ITR 247 (MP), Tejram Omprakash (HUF) v/s DIT (Inv.) reported in (2013) 262 CTR 82 (MP), MECTEC v/s DIT (Inv.) reported in (2021) 433 ITR 203 (Telangana HC), Khemchand Mukim v/s PDIT (Inv.) reported in (2020) 423 ITR 129 (Del), Prakash Jaichand Shah v/s DIT (Inv.) reported in (2013) 350 ITR 336 (Guj), Samta Construction Co. v/s DDIT (Inv.) reported in (2000) 244 ITR 845 (MP), Smt. Rewati Singh (Late) v/s ACIT reported in (2017) 397 ITR 512 (All), H.L. Sibal v/s CIT reported in (1975) 101 ITR 112W (P&H), Garg Trading Co. v/s Sales Tax Officer reported in (1983) 16 VKN 10, and Tejram Omprakash (HUF) v/s Director of Income Tax (Investigation) & Ors reported in (2013) 262 CTR 82 (MP). 7.8. Learned Senior Counsel lastly submitted that the IT authorities are still erroneously proceeding with the case of the petitioner, treating hi....
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....y statutory period for retention has long lapsed, the continued possession is unlawful. 8.5. Learned counsel submitted that the arbitrary action by respondents had not only caused financial damage but had also affected their reputation as well as credibility, causing a lasting impact on the petitioner company and prayed that the seizure, requisition and retention be declared illegal and that directions be issued for their release to the rightful owners. SUBMISSIONS OF RESPONDENT / STATE AUTHORITIES 09. Shri Bhuwan Gautam, learned Government Advocate appearing on behalf of the answering respondents No. 4 to 6, 8 and 9 submitted that the seizure of the consignments containing jewelleries in question was carried out strictly in discharge of statutory duties assigned to the Static Surveillance Team (SST) as part of election related enforcement mechanisms mandated by the Election Commission of India. 9.1. Learned Government Advocate submitted that following the announcement of the Madhya Pradesh Assembly Elections on 21.10.2023 and the consequent enforcement of the Model Code of Conduct the District Election Officer, Ratlam had constituted various surveillance teams including the c....
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....h directions issued by the Election Commission, and the action taken was neither arbitrary nor mala fide. That no allegations of personal bias or improper conduct have been levelled by the petitioners against the officials concerned. 9.6. Learned Government Advocate finally submitted that the writ petitions are not maintainable in law as the petitioners have an alternative and efficacious statutory remedy under the Income Tax Act, as writ jurisdiction under Article 226 cannot be invoked without exhausting the remedy available and prayed that the petitions be dismissed. COMMON SUBMISSIONS OF INCOME TAX DEPARTMENT 10. Shri Harsh Parashar, learned counsel appearing on behalf of respondent Nos 1, 2 and 3 / IT department, submitted that all three writ petitions are misconceived, filed with substantial delay and without exhausting the adequate and efficacious statutory remedies available under the Income Tax Act, 1961. That the seizure of assets on 23.10.2023 by the Static Surveillance Team (SST), subsequent requisition under Section 132A of the IT Act and reassessment proceedings under Section 148 of the IT Act were all validly undertaken in accordance with statutory mandate and aft....
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....en by this Court in writ jurisdiction. SPECIFIC SUBMISSION OF MR. PARASHAR FOR EACH CASE 11. With respect to the case of M/s Arihant Jewellers in W.P. No. 6810 of 2024, learned counsel submitted that the petition has been filed by Arihant Jewellers without first making a proper application for the release of the seized assets under the prescribed procedure of Section 132B of the IT Act, 1961. A vague representation in January 2024 seeking release of the gold without explaining the source of the assets or the delay in filing the same cannot be treated as a valid application under Section 132B of the Act, as it did not meet the statutory requirements. 11.1. Learned counsel submitted that the Department has rejected the representation as no assessment or proceedings were pending against the petitioner before the concerned officer. These orders have not been challenged in the present writ petition and therefore stand unopposed. Under the scheme of the IT Act, 1961, only the jurisdictional Assessing Officer of the person claiming ownership of the seized assets can accept and decide such applications under Section 132B of the IT Act, 1961, after verifying existing tax liabilities and....
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....credible documentation was furnished to support this claim either during the course of requisition proceedings or thereafter. 11.6. Learned Counsel appearing for the IT department submitted that no application for release was filed by Sequel Logistics either within the prescribed time or even after the advisory letter was issued to them by the Department, and that the petition suffers from delay. The petitioner lacks locus to seek release of the seized assets or to challenge the requisition proceedings, particularly when it has not taken steps to demonstrate either ownership or source. 11.7. Learned counsel placed reliance upon several judgments of Apex Court and other High Courts in the cases of Pooran Mal v/s Director of Inspection reported in (1974) 93 ITR 505 (SC), Kusum Lata v/s CIT reported in (1990) 51 Taxman 300 (SC), GKN Drive Shafts (India) Limited v/s Income Tax Officer reported in (2002) 125 Taxman 963 (SC),Commissioner of Income Tax v/s Chhabil Das reported in (2014) 1 SCC 603, Seema Gupta v/s Income Tax Officer reported in [2023] 153 taxmann.com 583, BMN Steel Emporium, Chennai v/s Deputy Commissioner of Income Tax reported in [2023] 155 taxmann.com 623 (Madras), Le....
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.... Issue No.3.Whether Arihant Jewellers is entitled to get back the jewellries belonging to them ? ANSWER TO ISSUE NO.1 16. Facts of the case are not in dispute to the extent that Sequel Logistics is a company registered under the provisions of the Companies Act and engaged in the business pertaining to logistics, logistics solutions for precious goods and securities such as diamonds, jewellery items, bullion, cash, etc. The petitioner is also the registered partner of all the bullion banks nominated by the Reserve Bank of India, having operations in around 130 countries and 500 cities in India, with 100 branches and 3500 employees. The petitioner pays the tax of around 70 to 80 crores; however, the same is not relevant in this matter. 17. The Sequel Logistics is not disputing about its relationship of employee - employer with Mr. Amit Sharma. Under the agreement of consignor/consignee, 37 consignments were being carried by Mr. Amit Sharma to deliver to different consigners from Indore to Ralam on 23.10.2023 in a Bolero Vehicle. 18. The aforesaid Vehicle was intercepted by the SST at or around 4:30 pm on 23.10.2023. According to Mr. Amit Sharma, he provided all the necessary d....
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....y Vie ' 90 Jewellery 19. The documents related to the above 37 consignments revealed that the value of the entire jewellery in the consignment is Rs. 6,11,51,573/- (Rupees Six Crore Eleven Lakh Fifty One Thousand Five Hundred and Seventy Three Only). The SST prepared a Panchnama of seizure of 37 tamper-proof jewellery consignments as per accompanying documents, one of which M/s Arihant Jewellers claiming return of approximately 1785.120 grams of jewellery amounting to Rs. 1,06,36,500/-. 20. As per the reply filed by the District Election Officer, Ratlam, since the Model Code of Conduct had been made applicable w.e.f. 21.10.2023, vide order dated 05.10.2023, the Static Surveillance Team (SST) was constituted by the Collector and District Election Officer, Ratlam, under the directions of the Election Commission of India. The relevant SST who was deputed in Legislative Assembly 219, Ratlam (Rural), Police Station - Bilpank from period 6:00 am to 2:00 pm, headed by Shri Ranjeet Singh Bhawar and Assistant Survey Officer, Ratlam. In order to check the possibility of influencing the voters by the candidates or their representatives under Section 123 of the Representation of the Peo....
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....mely, (i) CEO, Zila Parishad/CDO-PD, DRDA, (ii) Nodal Officer of Expenditure Monitoring in the District Election Office (Convenor) and (iii) District Treasury Officer. Name of such committee will be 'District Grievance Committee', who shall suo-moto examine each case of seizure made by the Police or SST or FS and where the Committee finds that no FIR/Complaint has been filed against the seizure or where the seizure is not linked with any candidate or political party or any election campaign etc., as per SOP dated 29 th May, 2015, it shall take immediate step to order release of such cash etc. to such persons from whom the cash was seized after passing speaking order to that effect. If the release of cash is more than Rs.10 (Ten) Lac, the nodal office of Income Tax shall be kept informed before the release is effected. 3. It is to be ensured that functioning of 'District Grievance Committee' should be given wide publicity, including telephone number of the Convenor of the Committee. The procedure of appeal against seizure should be mentioned in the seizure document and it should also be informed to such persons at the time of seizure of cash. It is also to be ensu....
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....Collector, Ratlam, that any material found without a proper document shall be seized and handed over to the concerned Department. The District Election Officer has not filed any document in the reply to show that the DGC took any decision for not releasing these consignments either to Mr. Amit Sharma or Sequel Logistics, and passed an order for handing over the same to the Income Tax Department. 25. As per the SOP, there has to be satisfaction by the SST or the DGC that the seized cash, articles or goods are being transported or in possession of a person concerned belonging to any candidate of the election and brought for influencing the voters. There is absolutely no such satisfaction recorded either by SST or by the District Grievance Committee. As discussed above, no FIR was registered against Mr. Amit Sharma, Sequel Logistics or any other candidates. Therefore, as per this SOP, these consignments ought to have been released to Mr. Amit Sharma, from whom it was seized, instead of being handed over to the Income Tax Department. As the SOP only provides information that is liable to be given to the Income Tax Department in respect of the release of cash more than Rs.10,00,000 26....
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...., who subsequently shared the information with the Deputy Director, Investigation Wing - I, Indore, relating to each of 38 packets containing gold and silver ornaments. On 25.10.2023, Income Tax Officer - I issued a summons under Section 131(1)(d) of the IT Act to Mr. Amit Sharma for examination about the nature and source of gold and silver ornaments. On 27.10.2023, a warrant of authorisation was issued under Section 132A(1) of the IT Act by the Principal Director of Income Tax Investigation, Bhopal. It is also a case of the Income Tax Department that during the proceedings under Section 132A, Mr. Amit Sharma claimed that the seized consignments belong to Sequel Logistics. Finally, on 28.10.2023, the gold and silver ornaments worth Rs.5.87 crore were taken from the SST by the Income Tax Department. From 23.10.2023 to 28.10.2023, these consignments worth Rs 5.87 crore were in the custody of SST, Ratlam, which is also in violation of the SOP dated 07.08.2023 because, as per Clause 4, in no case, the matter relating to seized cash/valuables shall be kept pending in Malkhana or Treasury for more than seven days. There is no such document to show that these valuable consignments were s....
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....plained with angle of purchase, ownership and stock moment as Mr. Amit Sharma could not furnish necessary documentary evidence and failed to give the necessary reply. The Principal Director of Income Tax recorded its satisfaction that the gold and silver ornaments weighing 12121.51 gram, either wholly or partly, income and property or assets has not been disclosed for the purpose of Income Tax Act and the same is liable to requisitioned from SST Magistrate, Ratlam 220, Station Road, Police Station - Ratlam within the meaning of Section 132A(1)(c) of the Income Tax Act and accordingly, the further proceedings have been initiated from 28.10.2023 by issuing notice under Section 132A of the Income Tax Act. The case of Mr. Amit Sharma was centralized vide order dated 29.12.2023 from Income Tax Officer - 5 (1), Indore, to Deputy Commissioner of Income Tax (Central - 2) Indore by Principal Commissioner of Income Tax, Indore - 1. 32. According to the respondents / Department, in the present case, the seizure was not done by the Income Tax Authorities; it was done by SST, Ratlam. Hence, it is not a case under Section 132 of the IT Act, but falls squarely under Section 132A. Thereafter, a n....
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....ncome Tax Department is, per se, illegal. 35. According to the Income Tax Department, these cases fall under Section 132A of the Income Tax Act. Under Section 132A(1)(c), where the Income Tax Officer in consequence of information in his possession has reason to believe that any assets represent either wholly or partly income or property which has not been disclosed for the purpose of Income Tax Act by any person in whose possession and control such assets have been taken into custody by officers under any other law for the time in force. The Authority is required to record the reasons to believe that such assets belong to a person from whose possession they were taken into custody; however, such reasons to believe shall not be disclosed to any person, authority or tribunal, as held by the Apex Court in the cases of Spacewood Furnishers Pvt. Ltd. & M/s N.K. Jewellers (supra). We are of the considered opinion that when it is a case of Mr. Amit Sharma, he is an employee of Sequel Logistics and transporting these 37-38 jewellery boxes from the consignor of Indore to the consignees of Ratlam, then he is not supposed to disclose, either wholly or partly, his income or property. The docu....
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....ne in the same proceedings before the Centralized Officer for entertaining any application for release or deciding the claim of the ownership. The CIT of the Income Tax Department has enough power to centralise any proceeding of any assessee under Section 127 of the Income Tax Act. 38. The application, which was filed by M/s Arihant Jewellers, ought to have been entertained by the Assessing Officer under authorisation under Section 127 of the Income Tax Act for the release of the goods. The Arihant Jewellers was ready to give the bank a guarantee for the release of the jewellery. 39. Shri Bhuwan Gautam, learned Government Advocate has placed reliance upon a judgment delivered by the Apex Court in the case of Pooran Mal v/s Director of Inspection reported in (1974) 93 ITR 505 (SC), in which the Apex Court has held that whether even though, where search and seizure were in contravention of provision of Section 132, material seized would liable to be sued against the person from whose custody it was seized. It is permissible under Section 132, but, as per the Income Tax Authority, the present cases fall under Section 132A and not Section 132 of the Income Tax Act. Second proviso to ....