Gujarat High Court Seized Jewellery Order:
Nayanaben Hasmukhbhai Patel & Ors. vs. Revenue [Special Civil Application No.14635 of 2024]
Background of the Case
A search and seizure operation conducted by the Income Tax Department at the premises of petitioner no. 3, Anandkumar Hasmukhbhai Patel. During the proceedings, jewellery worth Rs. 77.82 lakh was discovered, of which Rs. 42.86 lakh was accepted under CBDT Instruction No.1916 as belonging to his family members and not seized. However, the remaining jewellery worth Rs. 34.96 lakh along with Rs. 7 lakh in cash was seized under Section 132 of the Income Tax Act. Subsequently, the jewellery was subjected to scrutiny during the assessment for AY 2014–15. Though a partial relief of ₹15 lakh was granted, the Assessing Officer added Rs. 19.96 lakh to the taxable income of petitioner no. 3.
This addition was later deleted in full by the CIT(A) on 02.04.2019, a decision that reached finality as no appeal was filed by the department. Despite this, the Income Tax Department did not release the entire seized jewellery, prompting the petitioners to approach the Gujarat High Court under Article 226 of the Constitution.
Arguments by the Appellant
The appellant argued that once the addition had been deleted by the CIT(A), and the penalty amount under Section 271(1)(c) had been duly paid, there remained no outstanding tax liability for AY 2014–15. They contended that the Department’s continued retention of jewellery worth Rs. 16.33 lakh, especially after releasing a portion worth Rs. 18.63 lakh to petitioner no.1, was unjustified. It was also emphasized that the jewellery in question was not owned by petitioner no.3, but by his wife and mother, as evidenced by a joint affidavit submitted on 07.11.2024.
The petitioners invoked Section 132B of the Income Tax Act, asserting that the seized assets could only be retained against liabilities pertaining to the relevant assessment year, and not for future demands. Relying on both statutory provisions and precedents, they pleaded for the immediate release of the remaining seized jewellery and sought interest compensation for the undue retention.
Respondent’s Response
The respondent, Revenue argued that a substantial outstanding demand of Rs. 3.36 crore existed against petitioner no.3 for subsequent assessment years, and that the remaining jewellery was being rightfully retained to safeguard recovery of these dues. The Department took the stand that despite the relief granted for AY 2014–15, the assets were lawfully being adjusted against the petitioner’s overall liability. Thus, they sought validation of the order dated 12.11.2024, through which the partial release of jewellery had been made, while the remainder was retained as security for future recoveries.
Court Findings and Decision
The Gujarat High Court held that the Income Tax Department could not retain jewellery seized for one assessment year against liabilities arising from other assessment years, especially when the assessment in question had concluded without any outstanding demand. The Court noted that the CIT(A)’s order had attained finality and that there was no pending liability for AY 2014–15. Furthermore, the department’s reliance on general instructions could not override the specific statutory limitations of Section 132B as it stood at the relevant time. The Court directed the respondents to release the remaining jewellery and dismissed the justification for withholding the same against unrelated tax dues.
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