2015 (6) TMI 215 - HC - Income Tax

Refusal to release jewellery seized - Held that - Circular/Instruction dated 21 January 2009. Clause 3(d)inter alia, provides for release of the seized jewellery in case the ownership of the seized jewellery is accepted and the assessee concerned provides an unconditional and irrevocable bank guarantee to the extent of the value of seized jewellery. The revenue would not be prejudiced in any manner, if the jewellery is released on the bank guarantee furnished by the Individual, as according to the revenue he is the person who is owner of the seized jewellery and he undertakes through his counsel that the bank guarantee be encashed to meet the dues on the seized jewellery of any of the three petitioners. We set aside the two orders of the Commissioner of Income Tax dated 17 October 2014 and direct him to release the seized jewellery to the Individual upon satisfaction of its valuation and on the Individual furnishing unconditional and irrevocable bank guarantee of a Nationalised Bank. Needless to state that the Commissioner of Income Tax would dispose of the petitioners applications for release of the seized jewellery in terms of this order, as expeditiously as possible and preferably before 10 December 2014, keeping in view the marriage in family is scheduled on 15 December 2014.The aforesaid bank guarantee of Nationalised Bank wold be valid for a period of four months from today. The petitioners undertake to return the seized jewellery to the revenue at the end of the period of three months.

Summary

Issues:
1. Seizure of jewellery by revenue during search proceedings in 2005 and 2013.
2. Dispute over ownership of seized jewellery between revenue and petitioners.
3. Rejection of applications for release of jewellery by Assessing Officer and Commissioner of Income Tax.
4. Petitioners seeking release of jewellery for marriages in the family.
5. Legal provisions regarding release of seized assets and bank guarantee.
6. Argument of petitioners' counsel regarding bank guarantee not prejudicing revenue.
7. Revenue's opposition to the release of seized jewellery to the Individual.
8. Court's decision on releasing seized jewellery to Individual with a bank guarantee.

Analysis:
The judgment concerns the dispute over the ownership and release of jewellery seized by the revenue during search proceedings in 2005 and 2013. The petitioners, comprising a larger HUF, a smaller HUF, and an individual who is the Karta of both HUFs, sought the release of the jewellery for family marriages. The revenue claimed the jewellery belonged to the Individual, while the petitioners asserted ownership by the HUFs. The Assessing Officer and Commissioner of Income Tax rejected the release applications, prompting the petitioners to approach the High Court.

The petitioners argued that providing a bank guarantee for the seized jewellery would not harm the revenue and cited a Circular/Instruction allowing such releases. In contrast, the revenue contended that the jewellery could only be released to the owner, who, in this case, did not admit ownership. The court noted the petitioners' applications for release and the impending marriage, finding support in the Circular/Instruction of 2009 allowing release upon ownership acceptance and bank guarantee provision.

Despite the ownership dispute, the court decided to release the jewellery to the Individual upon valuation satisfaction and the Individual furnishing an unconditional bank guarantee. The court emphasized that the revenue would not be prejudiced as the Individual undertook to secure the revenue through the bank guarantee. The court also directed the Commissioner of Income Tax to expedite the process before the scheduled marriage date, allowing a four-month validity for the bank guarantee and specifying the return of jewellery to discharge the guarantee.

In conclusion, the court set aside the previous orders and instructed the release of the seized jewellery to the Individual with conditions, ensuring the revenue's interests were safeguarded. The judgment highlighted the importance of balancing the rights of the parties involved and adhering to legal provisions while resolving ownership disputes over seized assets.