2006 (3) TMI 110 - HC - Income Tax

Search and seizure - Appellant had filed the writ petition seeking a declaration that search of the premises and seizure of gold bullion was without any authority of law and null and void and a direction upon the respondent authorities to hand over the seized goods and cash of Rs. 6.5 lakhs to him - assessee in the instant case having failed to explain the source to the satisfaction of the Assistant Commissioner there is no occasion for release of the seized gold. As a matter of fact the occasion for release under section 132B may arise only after completion of the assessment proceeding - we do not find any merit in this assesee s appeal which is accordingly dismissed

Issues Involved:
1. Validity of the search and seizure of gold bullion.
2. Determination of ownership and the status of the gold as stock-in-trade.
3. Jurisdiction and procedural propriety under Article 226 of the Constitution.
4. Applicability and interpretation of Section 132 and Section 132B of the Income-tax Act.

Issue-wise Detailed Analysis:

1. Validity of the search and seizure of gold bullion:
The appellant challenged the search and seizure of 54 kgs of gold bullion, arguing that it was without authority of law and thus null and void. The gold was seized at Santacruz Airport, Mumbai, from the appellant and two others traveling under fake names. The appellant claimed the gold as stock-in-trade of his business, M/s. Rajguru Bullion. The Assistant Commissioner of Income-tax, after considering the facts and materials, concluded that the appellant was not the actual owner of the bullion but a carrier and front man for someone else. The court observed that the crux of the matter lies in whether the gold is stock-in-trade of the appellant, which would exempt it from seizure under the proviso to clause (iii) of subsection (1) of Section 132 of the Income-tax Act.

2. Determination of ownership and the status of the gold as stock-in-trade:
The Assistant Commissioner found that the appellant was not the actual owner of the gold and was acting as a carrier for someone else. The gold was not considered stock-in-trade of the appellant's business. This finding was based on various inquiries and evidence, including statements from the appellant's son and the appellant himself, which indicated that the appellant did not have the capacity or source to conduct such a large-scale business. The court noted that this finding of fact by the Assistant Commissioner cannot be upset in a proceeding under Article 226 of the Constitution.

3. Jurisdiction and procedural propriety under Article 226 of the Constitution:
The appellant filed a writ petition seeking the release of the seized gold, which was disposed of by the learned single judge, directing the appellant to apply for release before the Assessing Officer. The appellant complied and filed an application under Section 132B of the Act, which was rejected. The court observed that the learned single judge's order was not illegal or without jurisdiction, as it involved several disputed questions of fact best addressed by the income-tax authorities. The court emphasized that the proper course for the appellant was to prefer revision against the order of the Assistant Commissioner.

4. Applicability and interpretation of Section 132 and Section 132B of the Income-tax Act:
Section 132 of the Act empowers authorities to search and seize if they have reason to believe that a person possesses undisclosed income or property. The appellant argued that the gold bullion, being stock-in-trade, should not have been seized under the proviso to clause (iii) of subsection (1) of Section 132. However, the Assistant Commissioner concluded that the gold was not stock-in-trade, thus justifying the seizure. Section 132B deals with the disposal of seized assets and allows for their release if the source and acquisition are satisfactorily explained. The appellant's application under this section was rejected as he failed to explain the source satisfactorily. The court held that the seized asset could only be released if the source and acquisition were satisfactorily explained to the Assessing Officer, which was not the case here.

Conclusion:
The court dismissed the appeal, upholding the findings of the Assistant Commissioner and the procedural propriety of the learned single judge's order. The appellant's failure to satisfactorily explain the source and acquisition of the gold bullion justified the seizure and the rejection of the application for its release. The court emphasized that the findings of fact by the Assistant Commissioner could not be set aside in a proceeding under Article 226 of the Constitution.

← Previous Next →