The Punjab and Haryana High Court recently condemned the Income Tax (IT) Department for its arbitrary seizure of jewellery from the bank lockers of a luxury jeweller, Dillano Luxurious Jewels Limited. The Court ruled that the jewellery, which was part of the company’s stock in trade, should be immediately returned, stating that the IT Department’s actions were illegal and unjustified.
The Division Bench, comprising Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth, referred to Section 132(1)(B)(iii) of the Income Tax Act, which prohibits the seizure of stock in trade discovered during a search. The Court pointed out that the jewellery found in the bank lockers could not be presumed to belong to any individual director of the company but rather should be treated as the company’s property.
“Any jewellery recovered from the locker belonging to the company, would have to be presumed to be that of the company and it [IT Department] cannot be allowed to contend that the jewellery belongs to any individual director. If such an attempt is allowed to be accepted, dispute would arise regarding the stock of the company itself,” the Court remarked.
The case stems from a search and seizure operation conducted at Dillano Luxurious Jewels’ premises, during which the IT Department seized two bank lockers at the South Indian Bank in Punjabi Bagh, Delhi. The Department argued that it could not ascertain whether the items in the lockers were part of the company’s stock or held personally by the company’s directors.
However, the Court rejected this argument, emphasizing that the lockers were in the name of the company, and as such, the jewellery found inside must logically belong to the company. It also stressed that under the Income Tax Act, stock in trade discovered during searches must only be inventoried, not seized.
The Court concluded its order by stating, “There was no occasion for the respondents to have seized the said jewellery and diamonds which were recovered from the concerned locker and upon the demand letter, the same should have been released to the company which is engaged in the business of jewellery.”
In light of this, the High Court directed the IT Department to immediately release the jewellery to Dillano Luxurious Jewels Limited, underscoring the illegal and unwarranted nature of the seizure.
Case: Dillano Luxurious Jewels Limited vs Deputy Director Income Tax Investigation Bathinda and another – Available on LAWFYI.IO
