TaxTMI 
TaxTMI 
2025 (8) TMI 1117
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....RDER Per : Justice Vivek Rusia The present three writ petitions 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 enforc....
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....f the Income Tax Act was issued on 27.10.2023 by the Principal Director of Income 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 i....
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....1. According to the petitioners, during the 2024 General Elections, a similar incident occurred 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 se....
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....sel submitted that the SOP issued by the Election Commission particularly Circular No. 464/Seizure/GELas/ 2021/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....
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.... continued retention of the consignment by the Income Tax Department is in clear violation of the mandate of Section 132B 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 Cou....
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....all relevant documents relating to the consignments and on finding no political link or illegality, the SST released the petitioner on 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 desp....
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....3 (All), DGIT (Inv.) v/s Spacewood Furnishers Pvt. Ltd. reported in (2015) 374 ITR 595 (SC), Ajit Jain v/s Union of India reported in (2000) 242 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). ....
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....ing ownership of the goods and requesting their release. However, the authorities have not taken any steps under Section 132B of the Act, and since the 120-day 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....
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....oach the said authority for redressal, including the release of goods. The role of the SST and the District Grievance Committee was confined to administrative compliance with 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 ....
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.... Those questions relating to ownership, source of acquisition and justification for the transport of high-value jewellery require inquiry into facts and evidence which cannot be undertaken 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 Asses....
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....sel submitted that that their entire claim rests on a vague assertion that Mr. Amit Sharma has been their employee and the consignment was being carried on behalf of consignors/consignees however no 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) ....
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....partment ? Issue No.2.Whether the action of the Income Tax Department is justified in initiating the proceedings under Section 148 against Mr. Amit Sharma upon a prima facie believe that the consignment belongs to him ? 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....
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....Vardhman Ornaments Pvt. Ltd. 29 44233 Ratnalife Creation Llp Ratnalife Creation Llp 30 41190 Aujasa Unitouch Creation 31 44572 Arpit Kumar Lalit Kumar Chordiya BS Jewellers 32 40318 M.U. Jewellers Pvt. Ltd. Shri Samarth Jewellers 33 41348 Jmd Jewellers Shrishti Gold Pvt. Ltd. 34 14549 Unique Valley Unique Valley 35 44260 Leo Silver Art Pvt. Ltd. Leo Silver Art Pvt. Ltd. 36 41190 Aujasa Suraj Suresh Chavan 37 14285 Vie ' 90 Jewellery 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 o....
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....9; and to request your to ensure compliance of the instructions in letter and spirit during election process. 2. There are instances of keeping cash and valuables in Treasury/Malkhana without any FIR/Complaint. The Commission is concerned about the grievances of public and hence, it is reiterated that as per instruction lai din 'Para 16- Release of Cash', in order to avoid inconvenience to the public and genuine person and also for redressal of their grievances, if any, a Committee shall be formed comprising three officers of the District, namely, (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 t....
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.....10.2023 during the relevant period had released the jewellery weighing 121 kg. According to the reply filed by the District Election Officer, at the time of seizure, there was no appearance of documents or bills presented by a person in whose custody the material was there, therefore, the matter was brought to the knowledge of District Grievance Committee and when the documents were presented before the District Grievance Committee regarding bills of 112.11 kg silver, the same was released. 24. It is further submitted that as per the letter dated 09.10.2023, it was made clear by the 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 th....
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....to the IT department. It is also not the case with the SST that the Vehicle does not belong to Sequel Logistics, which is a logistics company. The valuation of the consignment or jewellery, which is more than Rs.6,00,00,000/- became the basis of seizure and information to the IT department. 28. As per the list of dates in chronological events submitted by the parties, especially the Income Tax Department, on 23.10.2023, SST, Ratlam City 220, seized the gold and silver jewellery from the possession of Mr. Amit Sharma. On 24.10.2023, this information was shared with the Income Tax Officer - I, Ratlam, 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 Sect....
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....rent consignees located in nearby Indore City and Ratlam. Upon demand, Mr. Amit Sharma produced the documents relating to gold and jewellery seized by SST, like the docket, delivery challan, labour receipts, etc. He was confronted with each tax invoice bill, delivery challan, labour bill, docket, bilti provided by SLPL relating to each 38 packets. 31. After examining the report submitted by the Income Tax Officer - I, Ratlam, the Deputy Director of Income Tax (Investigation) - I, Indore has reached to the conclusion that item of gold and silver carried by Mr. Amit Sharma in all 38 packets remained as unexplained 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 accord....
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....ssary documents. As discussed above, there is no dispute about the employer-employee relationship between Sequel Logistics and Mr. Amit Sharma and the seizure of 37-38 consignments by the SST, during the election period, from the Vehicle of Sequel Logistics, in which Mr. Amit Sharma was travelling. There is no satisfaction note by SST or by the District Grievance Committee about the relationship between these articles and the election. The SST or District Grievance Committee was only required to inform the Income Tax Department about the release of these articles. Therefore, handing over of these articles to the Income 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 rec....
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....Act; therefore, the application has rightly not been entertained. 37. When the case of Mr. Amit Sharma was centralized, then all the applications submitted by others relating to the case of Amit Sharma ought to have been entertained by the same Assessing Officer, i.e. Deputy Commissioner of Income Tax, Central - 2, Indore, in order to avoid any conflict of orders. The Deputy Commissioner of Income Tax, Central - 2 while dealing with the seizure of these consignments on a believe that these consignments belong to Mr. Amit Sharma and he has denied the ownership, then whosoever claiming the ownership is liable to intervene 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 ....
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....So far as Arihant Jewellers has filed W.P. No.6810 of 2024 after recording the statement of Mr. Amit Sharma in which he denied the ownership then Assessing Officer than ITO ought to have sent this information to all those persons/jewellers, whose names were disclosed by Mr. Amit Sharma, with the valid documents in order to verify the actual ownership, they only they can submit an application for release within thirty days. The other consignees may not have the knowledge about the centralization of the case of Amit Sharma. The limitation will start from the date of knowledge, and this provision nowhere says that if this application is not filed within thirty days, the same shall not be considered later on. The proceedings are liable to be concluded within 120 days; otherwise, the Income Tax Authorities are liable to pay the interest under sub-section (4) of Section 132B of the Income Tax Act on the amount of money seized, if not released. 41. So far as the centralization is concerned, there is a provision and Circular dated 12.03.2018 for centralization of the cases relating to the search/survey proceedings which have been entered in the ITBA System. The present case has not been....