The Punjab and Haryana High Court recently condemned the Income Tax authorities for their arbitrary actions in seizing and refusing to return jewellery belonging to a luxury jewellery company, as discussed in the case of Dillano Luxurious Jewels Limited v. Deputy Director Income Tax Investigation Bathinda and another.
The Division Bench, comprising Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth, highlighted that Section 132 (1)(B)(iii) of the Income Tax Act prohibits the seizure of such stock in trade.
The Court emphasized that no assumption could be made that the jewellery found in a bank locker belonging to the company belonged to an individual director rather than being part of the company’s inventory. Accepting such a notion could pave the way for individual directors to claim the company’s assets, which the Court deemed unacceptable.
The judges concluded that the IT Department had acted in an arbitrary, illegal, and unjustified manner by seizing the company’s stock in trade in 2023.
“Any jewellery recovered from the locker belonging to the company should be presumed to be the company’s property, and the IT Department cannot be permitted to argue that it belongs to any individual director. If this argument is permitted, it could lead to disputes concerning the stock of the company itself … We find the refusal to release the jewellery entirely unwarranted,” the Court stated.
The Court was considering Dillano Luxurious Jewels’ request for the release of jewellery seized from its bank lockers in Delhi by the Income Tax (IT) Department.
Dillano Luxurious Jewels, which specializes in the sale and purchase of jewellery and ornaments, challenged the IT Department’s seizing of two lockers at South Indian Bank in Punjabi Bagh, following a search and seizure operation at their premises.
In defense, the IT department argued that the lockers were seized because it could not determine whether the items inside were part of the company’s stock or were held by the directors in their personal capacity.
Finding the IT Department’s actions illegal, the Court asserted that the Income Tax Act prevents the seizure of stock in trade identified during a search. Authorities are only permitted to make notes and inventory of such stock used in trade.
The Court concluded that, since the locker was in the company’s name, it was logical to consider the jewellery within it as belonging to the company.
“There was no justification for the respondents to seize the jewellery and diamonds retrieved from the locker. Upon the issuance of a demand letter, these should have been returned to the company engaged in the jewellery business,” the Court remarked.
Consequently, the Court granted Dillano’s request and instructed the IT Department to promptly release the jewellery.
Senior Advocate Radhika Suri, along with advocates Abhinav Narang and Pranika Singla, represented Dillano Luxurious Jewels, while Senior Standing Counsel Saurabh Kapoor, Junior Standing Counsel Pridhi Sandhu, and advocate Muskaan Gupta represented the IT Department. source
Dillano_Luxurious_Jewels_Limited_vs_Deputy_Director_Income_Tax_Investigation_Bathinda_and_another (1)Download