2013 (3) TMI 126 - HC - Income Tax

Search u/s 132 - 1004.8 gms of gold ornaments seized - demanding the bank guarantee for the entire value of the jewellery seized - Held that - A bare perusal of the Circular issued by CBDT(Annex.8) dated 21st January, 2009 indicates that detention of the assets has been provided and permitted only so long as there is some outstanding demand of tax and penalty against an assessee or expected liability of such tax or penalty, obviously to safeguard the interest of Revenue for the realization or recovery of such demand of tax, interest and penalty. But, in the present case, admittedly there is no demand of tax, interest and penalty outstanding against the petitioner for the period in question, for which the assessment orders were passed, there is no justification for detention of seized assets particularly jewellery, which includes her personal Stridhan for which more than five years have lapsed by now. At the same time, the demand of bank guarantee to the extent of full value of said jewellery vide the impugned communication dated 16.04.2012 also does not appear to be justified in these circumstances. The continued detention and retention of these Gold ornaments and jewellery of petitioner - assessee by the respondent- Income-tax Department is without any valid reason - in favour of assessee.

Summary

Issues:
1. Release of seized gold ornaments and jewellery
2. Interpretation of Circular issued by Central Board of Direct Taxes
3. Justification for demanding bank guarantee

Analysis:

Issue 1: Release of seized gold ornaments and jewellery
The petitioner sought the quashing of a communication dated 16/4/2012 and requested the release of 1004.8 grams of gold ornaments seized during a search conducted on 18/1/2007. The petitioner had paid all outstanding demands raised by the Assessing Authority, including tax and penalty. Despite this, the gold ornaments and jewellery were not released by the Income-tax Department. The petitioner argued that the Circular dated 21.01.2009 does not prohibit the release of seized assets if all demands have been paid. The respondent authorities insisted on a bank guarantee for the value of the jewellery. The court noted that there was no existing demand against the petitioner, and the continued detention of the assets without valid reason was unjustified. The court ordered the immediate release of the gold ornaments and jewellery to the petitioner.

Issue 2: Interpretation of Circular issued by Central Board of Direct Taxes
The Circular issued by the Central Board of Direct Taxes provided guidelines for the release of seized assets other than cash. It outlined conditions under which seized assets should be released, including the satisfaction of outstanding demands and approval from tax authorities. The petitioner argued that since all demands had been paid, the jewellery should be released without the need for a bank guarantee. The court agreed that the detention of assets without any outstanding demand was unjustified, as per the Circular's provisions.

Issue 3: Justification for demanding bank guarantee
The respondents demanded a bank guarantee for the full value of the seized jewellery, citing the pending appeal on a penalty amount. The petitioner contended that since all demands had been paid, there was no justification for the bank guarantee. The court agreed, stating that with no outstanding demand against the petitioner, the demand for a bank guarantee was not justified. The court ordered the immediate release of the jewellery to the petitioner, emphasizing that the continued detention without valid reason was unwarranted.

In conclusion, the court allowed the writ petition, quashed the impugned order, and directed the release of the gold ornaments and jewellery to the petitioner. The court highlighted that the detention and retention of the assets by the Income-tax Department without a valid reason were unjustified, especially considering the absence of any outstanding demand against the petitioner.