2016 (5) TMI 401 - HC - Income Tax

Release of seized ornaments - Recovery of the outstanding dues - Held that - The seized ornaments have been got valued through the Government approved valuer and it is not the case of the Department that the valuation made by the approved valuer at the instance of the Department is not proper. The ornaments have been lying with the Department since 1996, however, till date, no steps have been taken to auction them to recover the outstanding dues, which lends support to the submission advanced by the learned counsel for the petitioner that the Department thought it wiser to call upon the petitioner to pay the market price of the ornaments instead of auctioning the same. It can, therefore, be safely presumed that auctioning the seized ornaments does not appear to be a very feasible option to the Department. In these circumstances, when the circular dated 21st January, 2009 provides that replacement of the seized assets with cash makes it easier for the Department to adjust the cash against the tax liability and also provides for release of ornaments subject to payment of the price as per the valuation of the assets, it would be in the interest of the revenue to retain the amount and release the ornaments, inasmuch as, at least to that extent, the dues of the petitioner would stand recovered. Otherwise, the ornaments would keep lying in distraint with the Department without getting any revenue therefrom. Thus, though the above referred steps have been taken by the respondents on a misunderstanding of the instructions of the Commissioner of Income Tax-III, no prejudice would be caused to the revenue if the ornaments are released and the equivalent amount paid by the petitioner is appropriated towards the outstanding dues of the petitioner. The petition succeeds and is accordingly allowed. The respondents are directed to forthwith hand over the seized ornaments to the petitioner as expeditiously as possible. A grievance has been raised by the Department that the petitioner is not duly cooperating with the revenue authorities in recovery of the outstanding dues. It is hoped and expected that the petitioner will extend full cooperation to the Department in this regard.

Summary

Issues:
Petition seeking release of seized ornaments under Article 226 of the Constitution of India.

Analysis:
The petitioner, an income-tax assessee, had gold ornaments seized during a search under section 132 of the Income Tax Act, 1961. The petitioner requested release of the ornaments by paying an equivalent amount based on a valuation report. After delays and requests for extension, the petitioner paid the amount on 10th February, 2016. Despite this, the ornaments were not released, leading to the petitioner filing a petition for their release.

The petitioner's counsel argued that the Department should honor its promise to release the ornaments after payment, as per the valuation report. The Department had initially considered auctioning the ornaments but opted for the petitioner to pay the market price instead. The petitioner complied with the payment request, following all procedures and approvals.

In response, the Department claimed a misunderstanding in requesting payment for the ornaments' release. They suggested only returning the amount paid by the petitioner. However, the Court noted that the Department had already valued the ornaments and accepted the payment, indicating a commitment to release the ornaments.

Considering the Circular on the release of seized assets, the Court found that retaining the amount paid by the petitioner while releasing the ornaments would serve the revenue's interest. Auctioning the ornaments may not be a viable option, and releasing them would help recover the petitioner's dues.

The Court directed the Department to return the seized ornaments to the petitioner promptly. It also emphasized the petitioner's cooperation with revenue authorities in settling outstanding dues. The petition was allowed, with no costs imposed, emphasizing the importance of cooperation between the parties in resolving financial matters.