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2023 (10) TMI 377 - HC - FEMAOffence under FEMA - gold bullion of 3773.52 gm. was seized along-with other articles like electronic devices mobile phones, hard disk etc during search operations - HELD THAT - The provisions of Section 37 of the FEMA read with Sections 132 and 132B of the Act of 1961 including its proviso clauses clearly speak that bullion, jewellery or other valuable article or thing, being stock-in-trade of the business, found as a result of such search shall not be seized but the authorized officer shall make a note or inventory of such stock-in-trade of the business. Further, where the person concerned makes an application to the AO within thirty days from the end of the month in which the asset was seized, for release of asset and the nature and source of acquisition of any such asset is explained, to the satisfaction of the AO, the amount of any existing liability referred to in this clause may be recovered out of such asset and the remaining portion, if any, of the asset may be released with the prior approval of the certain authorities, as mentioned in the provisions, to the person from whose custody the asset was seized. The proviso clause further provides that such asset or any portion thereof is referred to in the first proviso shall be released within a period of one hundred and twenty days from the date on which the last date of the authorizations for search under Section 132 or for requisition under Section 132A, as the may be, was executed. Recently in Mangilal Agarwal vs. Deputy Director of Income Tax (Investigation-1) 2023 (8) TMI 1358 - RAJASTHAN HIGH COURT this Court considering the statement made by the counsel appearing for the respondents upon instructions from the respondent authorities submitted that no order has been passed by the competent authority under section 132B of the Income Tax Act. On the basis of such statement, the Court observed that the goods including gold bullion, which were taken in possession, have to be released and the respondents counsel therein informed that in case the petitioner approaches the competent authority for release of the Gold Bullion, the same shall be accordingly released. Finally the writ petition was disposed of as having become infructuous in view of the fact that the gold bullion was released to the petitioner therein. The judgments cited by the counsel for the petitioners as a whole speak that the respondent authorities are under an obligation to consider the representation of the petitioners including all the relevant documents submitted along-with the same explaining that the gold bullion seized during the search is stock in trade and are duly accounted in the books of accounts. The aforesaid inaction on the part of respondents in failing to consider and decide the representation of the petitioners in not releasing the seized gold bullion, is illegal and contrary to the provisions of Section 132(1) and 132B of the Act of 1961. The provision of Section 132B of the Act of 1961 mandates the respondent authorities to take a call on the application/ representation submitted by a person and after consideration such asset or any portion thereof seized during the search of which nature and source of acquisition is explained, the same should have been released within one twenty days. The respondent authorities are under an obligation to abide by the law in force but in the present case the respondent authorities have failed to act upon the representation submitted by the petitioners on 19.02.2020 which led to miscarriage of justice. Respondent authorities in view of the mandate of Section 132B were under an obligation to consider the application/ representation of the petitioners submitted on 19.02.2020 showing the credentials and explaining that the gold bullion seized during the search was stock-in-trade and are duly accounted in the books of accounts which were based on the documents enclosed along-with the representation which have been placed on record before this Court also. The respondent authorities have not cared to consider the representation and the documents submitted by the petitioners and to hold that the gold bullion seized during the search was not stock-in-trade. Therefore, this Court on consideration of the documents submitted along-with the petition without there being otherwise decision of the respondent authorities, does not hesitate to hold that the gold bullion seized during the search was stock-in-trade and are duly accounts in the books of accounts and accordingly the petitioners are entitled to retain the same. Writ petition deserves to be allowed and is therefore allowed. The respondent authorities are directed to return the gold bullion 3773.52 gm. seized by them in the course of search on 15/16.02.2020 forthwith to the petitioners after complying with the requirement provided i.e. making a note of inventory.
Issues Involved:
1. Legality of the seizure of gold bullion and other articles. 2. Non-cooperation allegations against the petitioners. 3. Consideration of the petitioners' representation for the release of seized assets. 4. The applicability of Section 132 and 132B of the Income Tax Act, 1961, and Section 37 of the FEMA. Summary of Judgment: Issue 1: Legality of the Seizure The petitioners argued that the gold bullion seized during the search operation on 15.02.2020/16.02.2020 was stock-in-trade and duly recorded in their books of accounts. They contended that under the law, such stock-in-trade cannot be seized. The respondents, however, claimed that the seizure was conducted lawfully based on inputs about smuggled gold transactions and that various incriminating documents and unaccounted assets were found. Issue 2: Non-cooperation Allegations The respondents alleged that the petitioners were not cooperating with the ongoing investigation despite multiple summons issued under FEMA. The petitioners did not challenge the issuance of summons but focused on the non-consideration of their representation for the release of the seized gold. Issue 3: Consideration of Representation The petitioners submitted a representation on 19.02.2020, explaining that the seized gold bullion was stock-in-trade and requested its release. Despite the statutory obligation under Section 132B of the Income Tax Act, 1961, to decide on such representations within 120 days, the respondents failed to act on it. The court noted that the respondents' inaction led to a miscarriage of justice. Issue 4: Applicability of Relevant Legal Provisions The court highlighted that under Section 132 and 132B of the Income Tax Act, 1961, and Section 37 of the FEMA, stock-in-trade found during a search should not be seized but inventoried. The court cited various judgments reinforcing that the seizure of stock-in-trade is illegal and that the authorities are mandated to release such assets if satisfactorily explained by the petitioners. Conclusion: The court found the respondents' failure to consider the petitioners' representation and release the seized gold bullion as contrary to the law. The court directed the respondents to return the 3773.52 gm. of gold bullion to the petitioners after making a note of the inventory, thus allowing the writ petition.
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