Punjab & Haryana High Court Bars Higher Bank Guarantee Demand For Delay In Releasing Seized Jewellery

The Punjab and Haryana High Court on 18 February, directed the Income Tax Department to immediately release jewellery seized from the Sanjeet Singh and other petitioners, holding that the department cannot demand a higher bank guarantee due to an increase in gold prices when the delay in release was solely attributable to administrative lapses of the authorities.

A Division Bench of Justice Deepak Sibal and Justice Lapita Banerji allowed a writ petition which sought the release of jewellery seized during a search operation at the residential premises and bank lockers of Singh.

The Bench held:

“Admittedly, the delay in such release is not attributed to the petitioners. Rather, such delay is accepted by the respondent authorities on account of 'administrative reasons,' which remain unexplained and arbitrary.”

During the search, the Income Tax authorities seized jewellery alleged to be undisclosed. The petitioners contended that 901.030 grams of the seized jewellery belonged to petitioner nos. 3 and 4 and had already been disclosed in wealth tax returns filed prior to the search. The remaining jewellery comprised wedding jewellery, inherited ornaments, gifts, and items purchased over time.

In the assessment order, the assessing officer accepted that the 901.030 grams belonged to petitioner nos. 3 and 4 but treated the remaining jewellery as unexplained, adding its value to the income of petitioner no.1. While the assessment order was under appeal, the petitioners sought release of the seized jewellery under the CBDT Circular dated 16 October 2023, which prescribes timelines and procedures for release against a bank guarantee.

The Income Tax authorities revalued the jewellery at Rs. 1.20 crore. Petitioner no.1 furnished a bank guarantee of Rs. 1.25 crore, which was approved by the Principal Commissioner of Income Tax (Central), Gurugram. Despite this, the jewellery was not released; instead, the department demanded a higher bank guarantee of Rs. 1.54 crore citing an increase in gold prices, prompting the petitioners to approach the High Court.

The Court noted that the CBDT Circular, issued under Section 119 of the Income Tax Act, mandates release of assets within prescribed timelines once a bank guarantee is accepted. It added:

"Such delay is also beyond the timelines prescribed in the CBDT circular dated 16.10.2023 which would at least be binding on the respondent authorities. Therefore, for the increase in the market value of the jewellery in question during the afore period of delay, the petitioners cannot be put to prejudice", added the bench.

The Court directed the release of the 33 jewellery items against the bank guarantee already furnished in January 2025, subject to affidavits regarding ownership and no-objection from petitioner no.2.

Accordingly, the writ petition was allowed.

For Petitioner: Senior Advocate, Radhika Suri with Advocates, Parnika Singla and Abhinav Narang

For Respondent: Senior Panel Counsel, Ranvijay Singh