Cw/5513/2012 Of Smt. Bhawana Lodha v. Director General Of Income Tax & Ors

S.B. Civil Writ Petition No.5513/2012 1/10 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPURORDER S.B. Civil Writ Petition No.5513/2012 Smt. Bhawna Lodha Vs. Director General of Income Tax & Ors. thDate of order::::28 January, 2013 PRESENT HON'BLE DR. JUSTICE VINEET KOTHARI REPORTABLE Mr. Dinesh Mehta, for the petitioner.Mr. K.K. Bissa, for the respondents. -- BY THE COURT (ORAL) 1.The writ-petitioner has made the following prayer/s in the present writ petition: - “(i) the impugned communication dated16/4/2012 (Annexure 17) issued by the Respondent No.3may be quashed. (ii) respondents may be directed to release1004.8 gms of gold ornaments seized from thepetitioner during the course of search on 18/1/2007. (iii) an exemplary cost of Rs.1,00,000/- may beawarded to the petitioner and same may be directed tobe recovered personally from the erring officers. (iv) Any other order or direction which this 2/10 Hon'ble Court deems just and proper may kindly bepassed.” 2.A search u/s 132 of the Income Tax Act, 1961, wasconducted at the residential house of the petitioner on 18.01.2007and inter-alia, 1004.8 grams gold jewellery was seized during thecourse of said search. After search, the block assessment wascompleted for the years 2001-02 to 2006-07 by the AssessingAuthority vide assessment order dated 31.10.2008; and certaindemands of tax and penalty was raised against the petitioner. In theappeals filed by the petitioner-assessee, the assessee got certainrelief/s in the additions made in the declared income of the petitioner-assessee vide Annex.6 order of the appellate authority dated22.11.2010. The assessee has given summary of the demands andappeal effect, which shows that after deposit of disputed demand withinterest and penalty amount as per orders passed by the AssessingAuthority, the assessee became entitled to a refund of Rs.1,20,874/-with interest from the Income Department. The petitioner-assesseealso filed an appeal before the Income-tax Appellate Tribunal againstthe order of penalty passed against her under Section 271 (1) (c) ofthe Income-tax- Act vide order dated 07.03.2012 imposing penalty ofRs.72,300/-, which is still pending. 3.The assessee has admittedly paid even the amount ofpenalty also as stated in para 13 of the writ petition. In para 13, thepetitioner has categorically stated that entire amount of demandraised in the assessment orders was deposited by her and the 3/10 appeals of the petitioner also came to be allowed giving substantialrelief/s to the petitioner; and only one of the aforesaid appeal againstpenalty is pending before the Income-tax Appellate Tribunal.However, the respondent authorities of the Income-tax Departmenthave not yet released the gold ornaments/jewellery seized at the timeof search conducted on the residential place, which includes her'Stridhan' and personal jewellery, even though there is no existingdemand of tax against the petitioner-assessee. 4.A reply to the writ petition has also been filed on behalf ofthe Income-tax Department and in reply to Para/s 13 to 15 of the writpetition, the respondents' reply is as under: - “13-15. That in reply to the averments made inpara nos. 13 to 15 of the writ petition, it is respectfullyreiterated that at present, penalty matters were pendingwith the answering respondents-department and hence,the seized jewellery could have been released only inaccordance with the provisions and procedure providedunder the relevant rules/circulars issued by theGovernment of India.” 5.The respondents have also relied upon a Circular issuedby the Central Board of Direct Taxes (Annex.8) dated 21[st] January,2009, which is also quoted below: - F. No.286/6/2008-IT (Inv.II)Government of IndiaMinistry of FinanceDepartment of RevenueCentral Board of Direct TaxesRoom No.254, North BlockNew Delhi, the 21[st] January, 2009 “13-15. That in reply to the averments made inpara nos. 13 to 15 of the writ petition, it is respectfullyreiterated that at present, penalty matters were pendingwith the answering respondents-department and hence,the seized jewellery could have been released only inaccordance with the provisions and procedure providedunder the relevant rules/circulars issued by theGovernment of India.” 5.The respondents have also relied upon a Circular issuedby the Central Board of Direct Taxes (Annex.8) dated 21[st] January,2009, which is also quoted below: - F. No.286/6/2008-IT (Inv.II)Government of IndiaMinistry of FinanceDepartment of RevenueCentral Board of Direct TaxesRoom No.254, North BlockNew Delhi, the 21[st] January, 2009 All Chief Commissioners of Income Tax (CCA)All Chief Commissioners of Income Tax (Central)All Directors General of Income Tax (Inv/Intell.) Sir/Madam, Sub:- Search and Seizure Cases- Release of Seized Assets otherthan Cash-Regarding. Reference is invited to Board's Instruction No.11/2006 in F.No.F. No.286/138/2006-IT (Inv.II) dated 1.12.2006 whereincertain issues relating to the release of cash deposits in the PDAccounts were dealt with. In respect of release of seized assets,other than cash, there is need to modify the existing instructions for redressal of public grievances. 2.In this regard, Board had issued directions videF.No.286/217/98-IT (Inv.II) dated 02.02.1999 and F.No.286/97/2003-IT (Inv.II) dated 03.03.2004. In supersession of allinstructions on the subject of release of seized assets, other thancash, the following instruction is hereby issued. In this instructionhereinafter reference to seized assets may be construed asreference to seized assets, other than cash. 3.(a) Where the nature and source of acquisition of seizedassets is explained by the assessee to the satisfaction of theassessing officer, such seized assets should be released subject torecovery of outstanding arrear demand and fulfillment of otherrequirements contained in sub-section (1) of Section 132B of theIncome Tax Act (hereinafter called the 'Act'). (b)Where the seized asset are not released under sub-section(1) of section 132B of the Act, such seized assets should bereleased within one month of passing of the last search andseizure assessment orders u/s 153A/153C, 143 (3), 148 or158BC/158BD of the Act. The seized assets should be released onlywith the prior approval of Commissioner of Income Tax or ChiefCommissioner of Income. However, no approval should be givenfor release of: 5/10 (i) that part of the seized assets, the value of which is sufficient toadjust any existing liability and the amount of liabilitydetermined on completion of the search and seizureassessments; and alsoadjust any existing liability and the amount of liabilitydetermined on completion of the search and seizureassessments; and also (ii)that part of seized assets which is sufficient to meet the expectedliability on account of the penalty imposable in cases wherepenalty proceeding connected with search assessments havebeen initiated. liability on account of the penalty imposable in cases wherepenalty proceeding connected with search assessments havebeen initiated. (c) Whereas assessee is in appeal against search assessmentorders and the penalty has not been imposed up to the date of theorder of the CIT (Appeals), the position regarding the seized assetslying with the department should be reviewed at the time of givingeffect to the order of the CIT (Appeals). Only that part of theseized assets should be retained which is sufficient to meet thedemand outstanding against the assessee for any assessment year(including non-search assessment years) after giving effect toorder of the CIT (A) and the expected amount of penalty imposableon the search assessments as revised after appeal effect. Theremaining seized assets should be released within one month aftergiving effect to appeal order u/s 250 of the Act. (c) Whereas assessee is in appeal against search assessmentorders and the penalty has not been imposed up to the date of theorder of the CIT (Appeals), the position regarding the seized assetslying with the department should be reviewed at the time of givingeffect to the order of the CIT (Appeals). Only that part of theseized assets should be retained which is sufficient to meet thedemand outstanding against the assessee for any assessment year(including non-search assessment years) after giving effect toorder of the CIT (A) and the expected amount of penalty imposableon the search assessments as revised after appeal effect. Theremaining seized assets should be released within one month aftergiving effect to appeal order u/s 250 of the Act. (d)The seized assets can also be released, at any time, with theapproval of the Commissioner of Income Tax or ChiefCommissioner of Income Tax provided: (i) the assessee unconditionally accepts the ownership and thevaluation of the seized assets determined at the time of searchand seizure operation; andvaluation of the seized assets determined at the time of searchand seizure operation; and (ii)makes a written request to release the seized assets andprovides unconditional and irrevocable bank guarantee to theextent of the value of seized assets.provides unconditional and irrevocable bank guarantee to theextent of the value of seized assets. (e)The Board is also aware of the fact that some assesseeshave great attachment to the seized assets and are willing toexchange such seized assets for an equivalent amount of cash. Thereplacement of seized assets with cash also makes it easier for the Order dt: 28/01/2013 6/10 Department to adjust this cash against tax liability. Hence, it hasbeen decided that the seized assets can also be released at anytime, with the approval of the CIT or CCIT provided that: (i) the assessee accepts unconditionally the ownership of the seized assets and also the valuation of the seized assets, determined atthe time of search and seizure operation;the time of search and seizure operation; (ii)makes a request in writing requesting release of seized assets against equivalent amount of cash to be provided by him (iii)pays to the CIT a draft of an amount equal to the value of theseized assets and seized assets and (iv)Agrees in writing that the amount may be deposited in the PDaccount and may be used for adjustment against tax liability inaccordance with the provisions of section 132B of the Act. account and may be used for adjustment against tax liability inaccordance with the provisions of section 132B of the Act. Such amount should be deposited in the P.D. account anddealt in the manner laid out in Board Instruction No.11/2006. (f)Notwithstanding anything contained in above paragraphs,(except in para 3 (a) above) where the valuation or the ownershipof any particular seized assets is disputed or where the specificitems of seized assets have evidentiary value in prosecutionproceedings, such assessment or penalty or prosecutionproceedings, whichever is later. 4.All DGsIT/CCsIT/CsIT should review the status of seizedassets lying with the department in view of the guidelinesmentioned above. It may be noted that any violation in this regardshall be viewed seriously by the Board. 5.This Instruction may be brought to the knowledge of allIncome-Tax Authorities working in your Region. Yours faithfully Sd/- (Aarsi Prasad)21/01/2009Under Secretary (IV.II & III)” 7/10 (f)Notwithstanding anything contained in above paragraphs,(except in para 3 (a) above) where the valuation or the ownershipof any particular seized assets is disputed or where the specificitems of seized assets have evidentiary value in prosecutionproceedings, such assessment or penalty or prosecutionproceedings, whichever is later. 4.All DGsIT/CCsIT/CsIT should review the status of seizedassets lying with the department in view of the guidelinesmentioned above. It may be noted that any violation in this regardshall be viewed seriously by the Board. 5.This Instruction may be brought to the knowledge of allIncome-Tax Authorities working in your Region. Yours faithfully Sd/- (Aarsi Prasad)21/01/2009Under Secretary (IV.II & III)” 7/10 6.Mr. Dinesh Mehta, learned counsel for the petitionerurged that said Circular dated 21.01.2009 (Annex.8) nowhereprohibits the release of seized assets of the assessee, if the entiredemand has been paid by the assessee in pursuance of impugnedassessment orders; and therefore, the reliance placed by therespondents on the said Circular for still retaining the Gold ornamentsand jewellery of the petitioner, is mis-placed and the assessee'sjewellery including her 'Stridhan' deserve to be released to thepetitioner forthwith. He also submitted that pendency of one of theappeals before the learned Income-tax Appellate Tribunal against thepenalty of Rs.72,300/-, which amount has also been paid by thepetitioner even if rejected, does not cause any prejudice to therespondent- Department and on the other hand if such appeal isallowed in favour of assessee, the assessee would be entitled to therefund of penalty amount already deposited by her. 7.On factual matrix, there is no dispute from the side of therespondents, even in their reply and during the course of argumentsalso made by the learned counsel for the respondent- Revenue, Mr.K.K. Bissa. He further submitted that though the amount of tax andpenalty has already been deposited however, in view of pendency ofthe appeal of the aforesaid assessee, as stated in para 13 to 14 ofthe reply, the said release of Gold ornaments and jewellery has notbeen made under the impugned order Annex.17 dated 16.04.2012.He, therefore, submitted that assessee was asked to give the bankguarantee for the value of the assessee's jewellery for its release. 8/10 8.In rejoinder to this, learned counsel for the petitionersubmitted that there is no justification for demanding the bankguarantee for the entire value of the jewellery seized, which was notjustified in the first instance but the entire demand of tax and penaltyhaving been paid by the assessee, the release thereof cannot bewithheld by the respondents authorities unnecessarily and arbitraryand the same has caused serious prejudice to the assessee besideslot of mental agony and deprivaty. 9.A bare perusal of the said Circular indicates thatdetention of the assets has been provided and permitted only so longas there is some outstanding demand of tax and penalty against anassessee or expected liability of such tax or penalty; obviously tosafeguard the interest of Revenue for the realization or recovery ofsuch demand of tax, interest and penalty. But, in the present case,admittedly there is no demand of tax, interest and penalty outstandingagainst the petitioner for the period in question, for which theassessment orders were passed. On the contrary, the assessee isclaiming refund of excess tax paid in pursuance of appeal effect givenby respondent authority. So far as the jewellery seized at the time ofsearch is concerned, the identification whereof was not disputed bythe respondents authorities. Therefore, the detention and retention ofsuch assets for prolonged period unnecessarily without any validrhyme or reason, cannot be justified and that has made the petitionerto approach this Court by way of present writ petition. 10.Admittedly, there is no existing outstanding demand 9/10 10.Admittedly, there is no existing outstanding demand 9/10 against the petitioner of tax, interest and penalty due now for the saidperiod. Mere pendency of appeal before the Income-tax AppellateTribunal on the issue of penalty of Rs.72,300/-, which is alreadydeposited by her, can only result in further relief to petitioner to theextent, which may be allowed by the Income-tax Appellate Tribunal ifsuch appeal is allowed by the said Tribunal. Since there is nooutstanding demand of tax and penalty against the petitioner due tobe recovered from her, there is no justification for detention of seizedassets particularly jewellery, which includes her personal 'Stridhan' forwhich more than five years have lapsed by now. At the same time,the demand of bank guarantee to the extent of full value of saidjewellery vide the impugned communication dated 16.04.2012(Annex.17) also does not appear to be justified in thesecircumstances. 11.Therefore, it appears that the continued detention andretention of these Gold ornaments and jewellery of petitioner-assessee by the respondent- Income-tax Department is without anyvalid reason. 12.Learned counsel for the respondents, Mr. K.K. Bissafairly submitted that there is no outstanding demand against thepresent petitioner-assessee. 13.In these circumstances, this writ petition deserves to beallowed and the same is, accordingly, allowed. The impugned orderdated 16.04.2012 (Annex.17) is quashed. The respondents aredirected to release the gold ornaments and jewellery of the present DJ/- S.B. Civil Writ Petition No.5513/2012Smt. Bhawna Lodha Vs. Director General of Income Tax & Ors. Order dt: 28/01/2013 10/10 petitioner weighing about 1004.8 grams, seized on 18.01.2007 andidentification whereof is not in dispute to the petitioner forthwith. Inthe circumstances at this stage, the costs of litigation are to be borneby the parties respectively. A copy of this order be sent to both theparties forthwith. (DR. VINEET KOTHARI), J.