Seized Jewellery Cannot Be Released Before AO Gives Effect To Appellate Orders: Karnataka High Court

The Karnataka High Court has held that seized gold, silver, and diamond jewellery cannot be released before the Assessing Officer passes an order giving effect to the relief granted by the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal.

Justice B.M. Shyam Prasad observed that the Assessing Officer must be allowed the time prescribed under the Income Tax Act, 1961, to pass such consequential orders and that the Court cannot impose any restriction on the statutory timeline.

The Court was hearing six connected writ petitions filed by family members whose gold, silver, and diamond jewellery had been seized during Income Tax searches conducted under Section 132 of the Income Tax Act.

During the pendency of the petitions, the petitioners secured substantial relief from the CIT(A) and the ITAT. However, the Assessing Officer had not yet passed orders giving effect to those appellate decisions. The Revenue also retained the option of filing an appeal against the Tribunal's order.

The petitioners sought release of the seized jewellery, contending that no tax liability would remain once the appellate orders were given effect to. They also requested the Court to direct the Assessing Officer to pass the consequential orders within a definite timeline.

The Revenue submitted that the seized jewellery could be released subject to the Assessing Officer's decision on giving effect to the appellate orders and the provisions of Section 132B of the Act. It also suggested that the petitioners could approach the Principal Commissioner of Income Tax seeking release of the seized articles.

The Court observed that until the Assessing Officer passes an order giving effect to the appellate decisions, there could be no direction for release of the seized gold, silver and diamonds, particularly when the Revenue retained the statutory right to enforce recovery against the seized articles under Section 132B.

"..This Court must observe that until there is a “giving effect to” order by the Assessing Officer there cannot be any direction to release the seized gold, silver, and diamonds especially with the liberty to enforce the seized articles under Section 132B of the IT Act..", it said.

The Court further clarified that where the statute provides a specific timeline to the Assessing Officer for passing orders giving effect to appellate decisions, that timeline must be made available to the Assessing Officer. The Court held that no restriction could be imposed on the statutory timeline.

"..if the statute allows the Assessing Officer a timeline to pass “giving effect to” orders that must be available to the Assessing Officer. There cannot be a restriction on this timeline..", it said.

However, considering the substantial relief already granted to the petitioners by the CIT(A) and the ITAT, the Court permitted them to approach the Principal Commissioner of Income Tax, Central, Bengaluru, seeking release of the seized jewellery to the extent that it may no longer be required for enforcement under Section 132B.

The Court directed the Principal Commissioner to consider such applications in light of the relief granted by the appellate authorities and the extent to which the Revenue remained aggrieved by those decisions.

If the petitioners file applications within one week from the date of receipt of a certified copy of the order, the Principal Commissioner must consider them and communicate the decision within two months from receipt of the certified copy.

The Court also granted liberty to the petitioners to submit a certified copy of the order before the jurisdictional Assessing Officer for passing the consequential orders giving effect to the appellate decisions.

Accordingly, the six writ petitions were disposed of.

For Petitioners: Advocate T.M. Shivakumar,

For Respondents: Advocate Y.V. Raviraj, Senior Standing Counsel, assisted by M. Dilip