Madhya Pradesh High Court
Sequel Logistics Private Limited ... vs Principal Commissioner Of Income Tax I on 18 August, 2025
Author: Vivek Rusia
Bench: Vivek Rusia
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W.P. No.6810 of 2024 & Others
IN THE HIGH COURT OF MADHYA PRADESH
AT I N D O R E
BEFORE
HON'BLE SHRI JUSTICE VIVEK RUSIA
&
HON'BLE SHRI JUSTICE BINOD KUMAR DWIVEDI
WRIT PETITION No. 6810 of 2024
ARIHANT JEWELLERS
Versus
PRINCIPAL COMMISSIONER OF INCOME TAX I AND OTHERS
WITH
WRIT PETITION No. 6850 of 2024
MR. AMIT SHARMA
Versus
PRINCIPAL COMMISSIONER OF INCOME TAX 1 AND OTHERS
WRIT PETITION No. 15169 of 2024
SEQUEL LOGISTICS PRIVATE LIMITED THROUGH ITS
AUTHORIZED PERSON/ SIGNATORY JITENDRA PATIDAR
Versus
PRINCIPAL COMMISSIONER OF INCOME TAX I AND OTHERS
Appearance:
Shri Ajay Bagadia, learned Senior Counsel assisted by Shri Amit Pal,
learned counsel for the petitioner in W.P. No.6810 of 2024.
Shri P. M. Choudhary, learned Senior Counsel assisted by Shri Amit Pal,
learned counsel for the petitioner in W.P. No.6850 of 2024.
Shri Jai Kansara, learned counsel for the petitioner in W.P. No.15169 of
2024.
Shri Harsh Parashar along with Ms. Yashika Bondwal, learned counsel for
the respondent / Income Tax Department.
Shri Bhuwan Gautam, learned Government Advocate for the respondents /
State.
Signature Not Verified
Signed by: RAVI PRAKASH
Signing time: 18-08-2025
19:02:42
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W.P. No.6810 of 2024 & Others
Shri Jai Kansara, learned counsel for the respondent / Sequel Logistics.
Reserved on : 15th July, 2025
Delivered on : 18th August, 2025
ORDER
Per : Justice Vivek Rusia
The present three writ petitions are filed under Article 226 of the
Constitution of India raise interconnected questions of facts and law
arising out of the seizure of jewelry in 37 consignments on 23.10.2023
by the Static Surveillance Team, (SST) Ratlam by the District Election
Officer during the enforcement period of Model Code of Conduct during
the Madhya Pradesh State Assembly Elections and thereafter
proceedings initiated under the Income Tax Act, 1961 (in short 'the IT
Act') and the consequential action taken by the respondent authorities.
02. Since the factual matrix and legal questions involved are
substantially common and interlinked across all the writ petitions, with
the joint request of the parties, they are analogously heard and are being
disposed of together by this common judgment.
03. Admittedly, the petitioners have sought common relief in these
three writ petitions and there is no conflict of interest between them.
There are no allegations and counter-allegations against each other.
They all agree on a series of actions taken by the respondents.
FACTS OF THE CASE IN BRIEF
04. On 23.10.2023, during the enforcement of the Model Code of
Conduct in connection with the Legislative Assembly Elections in
Madhya Pradesh, a Bolero Vehicle bearing registration No.MP 09 ZR
5319 (hereinafter called as 'Vehicle') operated by Sequel Logistics
Private Limited was intercepted by the Static Surveillance Team (SST),
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Ratlam. At the time of interception, Mr. Amit Sharma, an employee
acting in his official capacity as Custodian Officer at the Indore office of
Sequel Logistics, was present in the Vehicle along with the driver.
4.1. The SST was operating under the directions of the Election
Commission of India in accordance read with the Standard Operating
Procedure for seizure and release of cash and valuable items issued by
the Central Board of Direct Taxes (CBDT) vide Regulation No.
464/Seizure/GE-Las/2021/EPPS dated 19.08.2021 read with Instruction
No. 76/Instructions/EEPS/2015 dated 29.05.2015.
4.2. Upon interception, the SST seized 37 sealed and tamper-proof
jewellery consignments valued at over Rs.6.00 crore, as per
accompanying documents. These consignments belong to various clients
of Sequel Logistics booked for transportation to the different locations.
The petitioner M/s Arihant Jewellers, one of them, booked the
consignment, which allegedly contained approximately 1785.120 grams
of gold jewellery valued at Rs.1,06,36,500/-.
4.3. Following the seizure, summons dated 25.10.2023 under
Section 131 of the IT Act were issued to Mr. Amit Sharma in his
personal capacity by the Income Tax Department and he was asked to
appear before them on the same day itself. Subsequently, on his arrival,
his statement was recorded wherein he disclosed that he was not the
owner of any of the consignments and was acting purely in his official
capacity as a custodian employee of Sequel Logistics and that the goods
belonged to different clients of Sequel Logistics, but the same was not
accepted or believed.
4.4. The District Grievance Committee for Ratlam, constituted by
the District Election Officer under the instruction of the Election
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Commission of India, comprising the Chief Electoral Officer, the Nodal
Officer of Expenditure Monitoring and the District Treasury Officer on
26th October, 2023, issued a communication to the Income Tax
Department acknowledging its request for requisition of seized
consignments. Pursuant to this a warrant of authorization under Section
132A(1) of the Income Tax Act was issued on 27.10.2023 by the
Principal Director of Income Tax (Investigation), Bhopal authorizing the
Deputy Director of Income Tax (Investigation) to requisition the seized
consignments and accordingly consignments and supporting documents
were handed over on 28.10.2023 by Shri Durgesh Sirolia, SST
Magistrate, Ratlam.
4.5. Subsequently, on 29.12.2023, a notice was issued by the
Principal Commissioner of Income Tax-1, Indore, to Mr. Amit Sharma,
informing him that his assessment case has been transferred to the
jurisdiction of the Deputy Commissioner of Income Tax (Central)-2,
Indore under Section 127 of the Income Tax Act. Meanwhile, M/s
Arihant Jewellers submitted a formal representation dated 10.01.2024 to
the Additional and Deputy Commissioners of Income Tax (Central),
Indore, asserting legal ownership of the seized goods and requesting
immediate release of the goods. Sequel Logistics also submitted similar
representations on behalf of its clients whose consignments were seized.
4.6. On 12.01.2024, Mr. Amit Sharma also submitted a letter to the
Deputy Commissioner of Income Tax (Central) - 2, Indore reiterating
that he had no proprietary interest in the seized consignments and that
the goods belonged to different entities who had availed of the services
of Sequel Logistics and also requested for the certified copy of his
statement recorded on 25th October, 2023. Thereafter, three notices
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under Section 148 of the Act were issued on 16.01.2024 to Mr. Amit
Sharma for the assessment years 2020-21, 2021-22 and 2022-23 by the
Assistant Commissioner of Income Tax (Central Circle) - 2, Indore.
4.7. By Communication dated 29.01.2024, M/s Arihant Jewellers
was informed that the consignments had been requisitioned under
Section 132A and that jurisdiction had been transferred to the Central
Circle. The Communication also stated that assessment proceedings
against Mr. Amit Sharma have been ongoing and that any release of the
goods would be subject to further examination. On the same date, Mr.
Amit Sharma also addressed a letter to Deputy Commissioner of Income
Tax (Central) - 2, reiterating that he had no proprietary interest in the
consignments and sought the supply of the seizure memo, panchnama
and related documents.
4.8. Meanwhile, All India Gem & Jewellery Domestic Council,
Mumbai received a Communication on 31.01.2024 from the Officer on
Special Duty (OSD), Election Cell, CBDT, clarifying that seizure of
jewellery or bullion is not needed if the goods are accompanied with
valid documentation, including tax invoices, stock statements,
authorization letters and ID cards.
4.9. However, disregarding the above, the Income Tax Department
issued a communication dated 08.02.2024 to M/s Arihant Jewellers and
other consignors/consignees stating that Mr. Amit Sharma had been held
to be the owner of the goods during requisition proceedings and that
only his case had been centralized. A CBDT instruction dated
16.02.2023 was also cited to state that the respondent authorities did not
have jurisdiction over claims of the consignors or consignees. Similar
responses were also given to the subsequent representations filed by
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Sequel Logistics and other consignors/consignees.
4.10. Despite repeated communications dated 13.02.2024 and
05.03.2024 by M/s Arihant Jewellers and on 04.03.2024 by Sequel
Logistics addressed to the Income Tax Authorities and the District
Committee, Ratlam, asserting ownership by the respective traders and
violation of applicable SOPs, no action was taken by the respondent
authorities.
4.11. According to the petitioners, during the 2024 General Elections,
a similar incident occurred on 25 April 2024 when another vehicle of
Sequel Logistics was intercepted by the Static Surveillance Team,
Deendayalnagar, Ratlam and on this occasion, nine consignments were
seized despite being accompanied by complete documentation.
However, in this case, after the representative of Sequel Logistics
appeared before the District Election Officer with all requisite records
upon verification of documents, the District Election Monitoring
Committee passed an order on 29.04.2024 directing the release of
consignments, finding that the seizure had been unjustified.
4.12. Being aggrieved by the action and inaction of the
respondent/authorities, the petitioners have now approached this court
under Article 226 of the Constitution, challenging the legality of seizure,
requisition and consequential assessment proceedings. The petitioners
contend that the impugned actions are arbitrary, contrary to the
prescribed procedural safeguards provided in the Income Tax Act and
relevant CBDT instructions and further prayed for appropriate reliefs in
each of their cases including a declaration that the seizure and
requisition were bad in law as done without authority of law and
contrary to the statutory safeguards as provided by law.
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05. After filing the reply by respective respondents, the petitioners
have filed a detailed rejoinder, written submissions and a compilation of
case laws in support of their case.
SUBMISSION OF PETITIONER / ARIHANT JEWELLERS
06. Shri Ajay Bagadiya, learned Senior Counsel appearing on behalf
of this petitioner, advanced detailed submissions assailing the legality of
the seizure and continued retention of the petitioner's jewellery
consignment. That the entire action commencing from the interception
by the SST to the requisitioning of the goods under Section 132A of the
Income Tax Act, 1961, is without jurisdiction and contrary to the
binding Standard Operating Procedure (SOP) framed by the ECI.
6.1. At the outset, learned Senior Counsel submitted that the
Petitioner is a registered and established entity engaged in the lawful
business of manufacturing and trading of jewellery. The petitioner in the
ordinary course of business had procured 2050 grams of gold from M/s
Creative Gold and had in accordance with standard industry practice
instructed the seller to deliver the said gold directly to M/s Subhas
Mondal a craftsman in Mumbai to manufacture jewellery who had to
upon completion of the work dispatch the finished jewellery in a
consignment to the petitioner at Ratlam through Sequel Logistics Pvt.
Ltd, with whom the petitioner had entered into a logistics agreement
dated 15.12.2020 for the transportation of high-value goods.
6.2. Learned Senior Counsel submitted that the consignment
belonging to the petitioner was one of 37 consignments which was
seized by the SST, Ratlam despite having necessary documents
including tax invoice dated 21.10.2023 issued by M/s Subhas Mondal
and further submitted that the above transactions were duly recorded in
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the regular books of account of the petitioner which are available on
record.
6.3. Learned Senior Counsel submitted that when the said vehicle
was intercepted by the SST, Ratlam Mr. Amit Sharma showed all proper
documents for each consignment however the SST without giving any
valid reason seized all the goods and later handed over them to the
Income Tax Department which they were not authorized under the SOP
to take custody in such a manner.
6.4. Learned Senior Counsel submitted that the SOP issued by the
Election Commission particularly Circular No. 464/Seizure/GE-
Las/2021/EPPS dated 19.08.2021 read with Instruction No.
76/Instructions/EEPS/2015 dated 29.05.2015 clearly states that the SST
is empowered to seize cash or valuables only upon a clear finding that
such items are being used or intended to be used for electoral purposes
or are linked to a candidate, political party or electoral inducement and
that in the present case since there was absence of any such linkage the
SST had no authority to carry out seizure.
6.5. Learned Senior Counsel submitted that Clause 8 of the SOP
specifically provided that in cases where valuables are accompanied
with proper documentation and there is no electoral linkage, the SST
shall not seize the cash but may pass on the information to the Income
Tax Department for necessary action. That in the present case, there was
no political linkage found, and as proper documentation was available
establishing the nature, origin and destination of the goods, the SST had
no ground to seize them and subsequently transfer them to the Income
tax department.
6.6. Learned Senior Counsel submitted that Clause 9 of the SOP
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further mandates that in the event of suspicion of an offence it is binding
upon the SST to get an FIR or a complaint registered in the police
station or court having jurisdiction within 24 hours however in the
present case no such FIR or complaint was registered against the
petitioner nor any finding was recorded by the SST or the District Level
Committee establishing any irregularity or criminality done by the
petitioner thereby making the entire seizure illegal.
6.7. So far as the actions of Income Tax Department are concerned,
learned Senior Counsel argued that the requisition made under Section
132A of the IT Act against Amit Sharma in respect of property of the
petitioner is void ab initio and liable to be quashed as the provision
empowered the authorized officer to requisition articles only where he
has "reason to believe" that such articles represent income not disclosed
or likely to be suppressed for the purposes of assessment. That in the
present case, no such belief can be said to have validly arisen as the
department had before it the tax invoice, docket, declaration and the
statement of Mr. Sharma which all clearly indicated that the
consignment was lawful stock-in-trade of the petitioner which was being
transported as per the normal course of commercial transit involved in
such businesses.
6.8. Learned Senior Counsel submitted that the requisition was
effected without any notice or opportunity of hearing to the petitioner
thereby violating the principles of natural justice and further submitted
that the department had wrongly presumed the custodian of the
consignment to be the owner whereas the actual ownership rested with
the petitioner which was evident from the documentary record as well as
the statement recorded by the Department itself.
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6.9. Learned Senior Counsel Shri Bagadia further submitted that the
subsequent transfer of the case under Section 127 of the Income Tax Act
to another jurisdiction without giving an opportunity of hearing to the
petitioner and without recording reason in writing for such transfer
shows the malafide intention of the IT department and further submitted
that the centralization of the case of Amit Sharma has been done merely
to avoid scrutiny before this court and to distance the officer who had
requisitioned the goods from further accountability.
6.10. Learned Senior Counsel submitted that the continued retention
of the consignment by the Income Tax Department is in clear violation
of the mandate of Section 132B of the Act as the provision lays down a
strict timeline of 120 days from the date of requisition within which the
Assessing Officer is required to complete the assessment or determine
liability and appropriate the seized assets accordingly and in absence of
such determination, the assets are liable to be released forthwith. That in
the present case, the requisition was made long back and no
determination has still been made long after the expiry of the stipulated
period, thus the continued retention is totally arbitrary and unlawful.
6.11. Learned Senior Counsel submitted that despite repeated
representations made supported with all relevant documents, no
adjudication has been made on merits and further pointed out that the
applications submitted during the pendency of the writ proceedings were
also rejected without addressing the core issue of ownership or validity
of requisition on the ground that the matter had been centralized and
thus the authority has no jurisdiction/power to deal with the case.
6.12. In support of his submissions, learned Senior Counsel has
supplied copies of the several judgments of Apex Court and of different
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High Court delivered in the cases of State of Punjab v/s Davinder Pal
Singh Bhullar reported in (2011) 14 SCC 770, Badrinath v/s
Government of Tamil Nadu reported in (2000) 8 SCC 395, CIT v/s
Vindhya Metal Corporation reported in (1997) 5 SCC 321, Indian
Traders v/s State of Bihar reported in (2019) 417 ITR 95 (Patna),
Khem Chand Mukim v/s Pr. DIT (Investigation) reported in (2020)
423 ITR 129 (Del.), Biaora Constructions (P.) Ltd. V/s Director of
Income Tax (Investigation) reported in (2006) 281 ITR 247 (MP),
Pushpa Ranjan Sahoo v. Assistant Director of Income Tax reported in
2012 SCC OnLine Ori 428, Harshvardhan Chhajed v/s DGIT
(Investigation) reported in (2021) 438 ITR 68 (Raj.), Ashish Jayantilal
Sanghavi v/s ITO reported in (2022) 444 ITR 457 (Bom.), Mitaben R.
Shah v/s Deputy CIT reported in (2011) 331 ITR 424 (Guj.), M/s
Bhagwati Jewellers v/ Directorate of Enforcement in SB Civil Writ
Petition No. 10226/2021 (Raj.) and Nadim Dilipbhai Panjvani v/s
Income Tax Officer Ward-3 in Special Civil Application No. 13374 of
2015 (Guj.).
6.13. Shri Ajay Bagadia, learned Senior Counsel, in conclusion,
submitted that the seizure was without authority under the SOP, the
requisition under Section 132A was illegal for want of valid satisfaction
and notice and that the continued retention beyond 120 days is contrary
to Section 132B and accordingly prayed that the impugned requisition
and all consequential proceedings be quashed and a direction be issued
to the respondents to forthwith release the petitioner's consignment.
SUBMISSIONS OF PETITIONER / AMIT SHARMA
07. Shri P. M. Choudhary, learned Senior Counsel appearing for the
petitioner - Mr. Amit Sharma submitted that the entire action taken
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against the petitioner under the Income Tax Act, 1961, is without
jurisdiction, suffers from non-application of mind and is based on a
fundamental misunderstanding of the petitioner's role in the entire
episode. That the petitioner is merely an employee of M/s Sequel
Logistics Pvt. Ltd., a fact admitted by the respondents themselves, and
he was in lawful possession of the consignments solely in his capacity
as a custodian for transportation purposes for its employer.
7.1. Learned Senior Counsel submitted upon being intercepted by
SST, Ratlam the petitioner immediately produced all relevant documents
relating to the consignments and on finding no political link or illegality,
the SST released the petitioner on 24.10.2023 but despite there being no
illegality did not return the consignments to the petitioner and instead
handed them over to the income tax department which was without
authority and contrary to the SOP guidelines as it restricts such transfer
unless there is a link to an electoral candidate or suspicion of an offence
none of which were found or recorded in this case. The basic
intelligence and application of mind are expected from the government
officials.
7.2. Learned Senior Counsel submitted that the Income Tax
Department summoned the petitioner, and his statements were recorded
wherein he disclosed his identity as an employee of Sequel Logistics
and explained that he was only transporting the goods in his capacity as
the custodian of the company. During the statement, specific questions
regarding each document were asked. The answers to questions 5, 6, 9,
11, 12, 15, 16, 19, 22 and 26 in the statement are particularly relevant
for the consideration of ITO, who failed to understand them.
7.3. Learned Senior Counsel submitted that despite disclosure of all
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facts by the petitioner, a warrant of authorisation/ requisition under
Section 132A (1) (c) was illegally issued by the department on the belief
that the goods in question are part of the undisclosed income of the
petitioner. This requisition by the income tax authority is totally
unsustainable in law, as there is no basis whatsoever to form such a
belief, especially in light of the statement of the petitioner and the
accompanying documents.
7.4. Learned Senior Counsel submitted that the continued belief by
IT that the petitioner is the owner is wholly misconceived, which will
lead them nowhere. The expectations from an employee to establish the
ownership of consignments who is merely discharging his assigned
duties is totally misplaced, as he had only limited knowledge regarding
the contents of the consignment and his responsibility was limited to
only that which is of a bailee. The absence of e-way bills does not vitiate
the transportation in this case, as the movement of jewellery is exempt
under Rule 138(14)(a) of the CGST Rules, 2017.
7.5. Learned Senior Counsel submitted that the department had
obtained a No Objection Certificate (NOC) from the Local Grievance
Committee on 26.10.2023, that is, even before any formal order under
Section 132A was issued, which shows that the department had acted
first and tried to justify it later, which is not permissible in law. Learned
senior counsel objected to the presumption taken by the department
under Section 132(4A) and submitted that such presumptions arise in
case of lawful seizure and also do not apply to a person acting as a
carrier without any ownership interest.
7.6. Lastly, learned Senior Counsel submitted that multiple notices
under Section 148 of IT Act have been issued to the petitioner in his
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capacity without prior opportunity of hearing and without initiating any
action against the actual owners despite communications from them and
the employer further his case was also subsequently centralized under
Section 127 of the IT Act without granting any opportunity of hearing.
7.7. In support of the aforesaid contentions, learned Senior Counsel
supplied photocopy of several judgments of Apex Court and of different
High Court in the cases of CIT v/s Vindhya Metal Corporation reported
in (1997) 224 ITR 614 (SC), Vindhya Metal Corporation v/s CIT
reported in (1985) 156 ITR 233 (All), DGIT (Inv.) v/s Spacewood
Furnishers Pvt. Ltd. reported in (2015) 374 ITR 595 (SC), Ajit Jain v/s
Union of India reported in (2000) 242 ITR 302 (Del) affirmed in
(2003) 260 ITR 80 (SC), D.N. Singh v/s CIT reported in (2023) 454
ITR 595 (SC), ITO v/s Lakhmani Mewal Das reported in (1976) 103
ITR 437 (SC), Ganga Saran & Sons P. Ltd. v/s ITO reported in (1981)
130 ITR 1 (SC), ITO v/s Seth Brothers reported in (1969) 74 ITR 836
(SC), Biora Construction (P) Ltd. v/s DIT (Inv.) reported in (2006) 281
ITR 247 (MP), Tejram Omprakash (HUF) v/s DIT (Inv.) reported in
(2013) 262 CTR 82 (MP), MECTEC v/s DIT (Inv.) reported in (2021)
433 ITR 203 (Telangana HC), Khemchand Mukim v/s PDIT (Inv.)
reported in (2020) 423 ITR 129 (Del), Prakash Jaichand Shah v/s DIT
(Inv.) reported in (2013) 350 ITR 336 (Guj), Samta Construction Co.
v/s DDIT (Inv.) reported in (2000) 244 ITR 845 (MP), Smt. Rewati
Singh (Late) v/s ACIT reported in (2017) 397 ITR 512 (All), H.L. Sibal
v/s CIT reported in (1975) 101 ITR 112W (P&H), Garg Trading Co.
v/s Sales Tax Officer reported in (1983) 16 VKN 10, and Tejram
Omprakash (HUF) v/s Director of Income Tax (Investigation) & Ors
reported in (2013) 262 CTR 82 (MP).
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7.8. Learned Senior Counsel lastly submitted that the IT authorities
are still erroneously proceeding with the case of the petitioner, treating
him as the owner of the jewellery and prayed that the entire proceedings
initiated against him in his personal capacity be quashed and that
appropriate direction be issued for the release of the consignments to
their rightful owners.
SUBMISSIONS OF PETITIONER / SEQUEL LOGISTICS
PRIVATE LIMITED
08. Shri Jay Kansara, learned counsel for the petitioner Sequel
Logistics submitted that it is a where a specialized logistics company
engaged in the secure transportation of high-value consignments such as
bullion, diamonds, and jewellery and operating on a business-to-
business model the company provides door-to-door secured logistics
solutions to authorized traders, manufacturers, and retailers across the
country including reputed business and government institutions such as
the Reserve Bank of India and several nationalized banks.
8.1. Learned counsel submitted that the petitioner functions under
formal logistics agreements with its clients wherein sealed consignments
are transported strictly as per instructions, accompanied by requisite
documents including tax invoices, transport dockets, authorisation
letters and client declarations specifying the nature and value of the
goods being transported. Under these agreements, the company is not
permitted to open or inspect the sealed packages, and its role is confined
to transporting them without any claim of ownership over the contents.
8.2. Learned counsel submitted that the consignments in question
belonged to bona fide jewellery traders like Arihant before this court and
manufacturers across the country and were supported by complete
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documentation, including tax invoices, entries in books of accounts,
transport dockets and agreements with the petitioner.
8.3. Learned counsel submitted that the employee of the company,
Mr. Amit Sharma, had furnished all such documents before the
respondent authorities and has also placed them on record through the
present proceedings. Additionally, income tax returns of the consignors
and consignees for the years 2020-21, 2021-22 and 2022-23 have also
been submitted to support their case.
8.4. Learned counsel submitted that multiple communications were
sent to the department by the petitioner on behalf of all consignees
claiming ownership of the goods and requesting their release. However,
the authorities have not taken any steps under Section 132B of the Act,
and since the 120-day statutory period for retention has long lapsed, the
continued possession is unlawful.
8.5. Learned counsel submitted that the arbitrary action by
respondents had not only caused financial damage but had also affected
their reputation as well as credibility, causing a lasting impact on the
petitioner company and prayed that the seizure, requisition and retention
be declared illegal and that directions be issued for their release to the
rightful owners.
SUBMISSIONS OF RESPONDENT / STATE AUTHORITIES
09. Shri Bhuwan Gautam, learned Government Advocate appearing
on behalf of the answering respondents No. 4 to 6, 8 and 9 submitted
that the seizure of the consignments containing jewelleries in question
was carried out strictly in discharge of statutory duties assigned to the
Static Surveillance Team (SST) as part of election related enforcement
mechanisms mandated by the Election Commission of India.
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9.1. Learned Government Advocate submitted that following the
announcement of the Madhya Pradesh Assembly Elections on
21.10.2023 and the consequent enforcement of the Model Code of
Conduct the District Election Officer, Ratlam had constituted various
surveillance teams including the concerned SST through a revised order
dated 05.10.2023 authorizing designated officers to conduct checks to
prevent the movement of unaccounted cash, jewellery and other
valuables capable of influencing the electoral process.
9.2. That on 23.10.2023, while discharging routine surveillance duty
near the Shalakhedi check-post, the SST intercepted a private vehicle
bearing registration no. MP-09-ZR-5319, which was found to be
carrying 37-38 sealed boxes containing what appeared to be gold and
silver ornaments. At the time of interception, neither the driver nor Mr.
Amit Sharma, who was present, was able to produce any invoice, bill,
consignment note or other document establishing the lawful ownership
or source of the goods. In the absence of supporting documentation, the
SST proceeded to seize the goods in accordance with the SOP dated
07.08.2023 and a seizure memo was duly prepared on the spot. And
subsequently, a Panchanama was drawn on 24.10.2023 when certain
documents were produced about a part of the consignment.
9.3. Learned Government Advocate submitted that as per the
applicable SOPs, any seizure of cash or valuables exceeding Rs.10.00
lakhs during election enforcement operations must be reported to and
transferred to the Income Tax Department or the appropriate authority
within seven days of polling. In the present case, given the high value of
the goods and the absence of complete documentation, the matter was
referred to the District Grievance Committee for further verification.
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9.4. Learned Government Advocate submitted that the committee
had, after examining the documents subsequently submitted, found
invoices supporting only part of the seized articles, specifically silver
weighing approximately 112.11 kg, which were accordingly released
vide order passed by the Committee. However, the remainder of the
articles for which no proper documentation of claim of ownership was
furnished were formally handed over to the Income Tax Department in
accordance with the prescribed protocol.
9.5. Learned Government advocate submitted that since appropriate
proceedings have already been initiated by the Income Tax Department,
it is open to the petitioners and other concerned parties to approach the
said authority for redressal, including the release of goods. The role of
the SST and the District Grievance Committee was confined to
administrative compliance with directions issued by the Election
Commission, and the action taken was neither arbitrary nor mala fide.
That no allegations of personal bias or improper conduct have been
levelled by the petitioners against the officials concerned.
9.6. Learned Government Advocate finally submitted that the writ
petitions are not maintainable in law as the petitioners have an
alternative and efficacious statutory remedy under the Income Tax Act,
as writ jurisdiction under Article 226 cannot be invoked without
exhausting the remedy available and prayed that the petitions be
dismissed.
COMMON SUBMISSIONS OF INCOME TAX DEPARTMENT
10. Shri Harsh Parashar, learned counsel appearing on behalf of
respondent Nos 1, 2 and 3 / IT department, submitted that all three writ
petitions are misconceived, filed with substantial delay and without
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exhausting the adequate and efficacious statutory remedies available
under the Income Tax Act, 1961. That the seizure of assets on
23.10.2023 by the Static Surveillance Team (SST), subsequent
requisition under Section 132A of the IT Act and reassessment
proceedings under Section 148 of the IT Act were all validly undertaken
in accordance with statutory mandate and after satisfaction of requisite
legal thresholds.
10.1. Learned counsel submitted that the requisition of assets was
carried out lawfully under Section 132A of the IT Act, 1961, pursuant to
credible information received by the department from a concerned state
government official during electoral surveillance and that the
department had not acted suo motu but had intervened only after
receiving information. The decision of requisition was based on credible
and cogent material supported by a "reason to believe" as required under
the statute.
10.2. Learned counsel submitted that an independent enquiry was
conducted by summoning the person found in possession under Section
131(1A) the IT Act, 1961 whose statement revealed significant
inconsistencies and since the documents provided by Amit Sharma were
vague, incomplete and failed to explain the source or valuation of the
high-value consignments the statutory presumption under Section
132(4A) was drawn against him. That even if a seizure is held to be
illegal, the evidentiary value of the seized material remains intact, and
the department is entitled to proceed with assessment or reassessment
based on such material.
10.3. Learned counsel submitted that Section 132B of the IT Act,
1961, provides a complete and specific mechanism for any person
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claiming ownership of the seized assets to seek release thereof, subject
to satisfying the competent Assessing Officer regarding the nature and
source of acquisition. Despite being advised, none of the petitioners
made any valid or complete application under Section 132B of the IT
Act, 1961, within the statutory period of 30 days from the end of the
month in which the assets were seized. All three petitioners have
consciously avoided invoking the statutory remedy under Section 132B
of the IT Act, 1961, presumably to evade scrutiny of their financial
affairs and the requirement to explain the source and ownership of the
gold and silver items.
10.4. Learned Counsel finally concluded the submissions that the
satisfaction note prepared for the purpose of requisition is protected
from disclosure under the proviso to Section 132A of the IT Act, 1961
and cannot be the subject of judicial scrutiny. Those questions relating to
ownership, source of acquisition and justification for the transport of
high-value jewellery require inquiry into facts and evidence which
cannot be undertaken by this Court in writ jurisdiction.
SPECIFIC SUBMISSION OF MR. PARASHAR FOR EACH CASE
11. With respect to the case of M/s Arihant Jewellers in W.P. No.
6810 of 2024, learned counsel submitted that the petition has been filed
by Arihant Jewellers without first making a proper application for the
release of the seized assets under the prescribed procedure of Section
132B of the IT Act, 1961. A vague representation in January 2024
seeking release of the gold without explaining the source of the assets or
the delay in filing the same cannot be treated as a valid application
under Section 132B of the Act, as it did not meet the statutory
requirements.
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11.1. Learned counsel submitted that the Department has rejected the
representation as no assessment or proceedings were pending against the
petitioner before the concerned officer. These orders have not been
challenged in the present writ petition and therefore stand unopposed.
Under the scheme of the IT Act, 1961, only the jurisdictional Assessing
Officer of the person claiming ownership of the seized assets can accept
and decide such applications under Section 132B of the IT Act, 1961,
after verifying existing tax liabilities and other relevant details. Learned
counsel submitted that since the officer who handled the requisition in
this case is not the Assessing Officer of M/s Arihant Jewellers, he had no
authority to adjudicate its claim.
11.2. Mr. Harsh learned counsel emphasised that the seizure records
show three packets bearing the name "Arihant", yet the petitioner has
sought release of only one and has not provided an explanation
regarding the other two packets, raising serious doubt about the claim of
ownership by the petitioner. The petitioner has not challenged the
rejection of its earlier representations; instead, it is seeking to invalidate
the entire seizure, hoping that all proceedings that followed will fall.
The petitioner cannot bypass the statutory process merely by raising a
challenge to the seizure and prayed that the petition be dismissed.
11.3. With respect to the case of Mr. Amit Sharma in W.P. No.6850 of
2024, Mr. Harsh learned counsel submitted that he is the primary person
from whom the gold and silver Jewelleries were seized and pursuant to a
requisition under Section 132A his case was centralized and
reassessment proceedings are underway however the petitioner has not
been cooperative in the assessment proceedings and despite multiple
notices under Section 142(1) and Section 133(6) the IT Act, 1961 has
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failed to provide adequate information.
11.4. Learned counsel submitted that once a notice under Section 148
the IT Act, 1961 has been issued and proceedings under the IT Act, 1961
are ongoing the proper remedy for the assessee is to participate in those
proceedings, file objections and avail the appellate remedies as may
arise from the final assessment order rather than invoke the
extraordinary jurisdiction of this court. It is submitted that the petitioner
has not explained the delay in filing the writ petition and has also not
challenged the centralization order or jurisdiction of the Assessing
Officer, and thus the petition is premature and misconceived, and the
petitioner must be relegated back to the statutory authority to avail the
remedy of appeal.
11.5. With respect to the case of Sequel Logistics in W.P. No. 15169
of 2024, Mr. Parashar learned counsel submitted that that their entire
claim rests on a vague assertion that Mr. Amit Sharma has been their
employee and the consignment was being carried on behalf of
consignors/consignees however no credible documentation was
furnished to support this claim either during the course of requisition
proceedings or thereafter.
11.6. Learned Counsel appearing for the IT department submitted that
no application for release was filed by Sequel Logistics either within the
prescribed time or even after the advisory letter was issued to them by
the Department, and that the petition suffers from delay. The petitioner
lacks locus to seek release of the seized assets or to challenge the
requisition proceedings, particularly when it has not taken steps to
demonstrate either ownership or source.
11.7. Learned counsel placed reliance upon several judgments of
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Apex Court and other High Courts in the cases of Pooran Mal v/s
Director of Inspection reported in (1974) 93 ITR 505 (SC), Kusum
Lata v/s CIT reported in (1990) 51 Taxman 300 (SC), GKN Drive
Shafts (India) Limited v/s Income Tax Officer reported in (2002) 125
Taxman 963 (SC),Commissioner of Income Tax v/s Chhabil Das
reported in (2014) 1 SCC 603, Seema Gupta v/s Income Tax Officer
reported in [2023] 153 taxmann.com 583, BMN Steel Emporium,
Chennai v/s Deputy Commissioner of Income Tax reported in [2023]
155 taxmann.com 623 (Madras), Leo Charitable Trust v/s
PCIT(Investigation) reported in [2023] 152 Taxmann.com 441
(Madras), DGIT v/s Spacewood Furnishers Pvt. Ltd. reported in
(2015) 2 SCC 179, M/s N.K. Jewellers & Another v/s CIT reported in
(2018) 12 SCC 627 and Deepak Kumar Agarwal v. Assessing Officer &
Others reported in (2024) SCC OnLine ALL 2878.
11.8. In view of the foregoing submissions, learned counsel sum
upped that the petitions are premature, barred by availability of a
statutory remedy, involving disputed facts not fit for writ adjudication,
seeking to bypass the process of verification and assessment envisaged
under the Income Tax Act, 1961, and thus prayed that all three writ
petitions be dismissed.
APPREICIATION & CONCLUSION
12. Sequel Logistics Private Limited filed W.P. No.15169 of 2024
seeking reliefs to the extent of issuance of writ in the nature of
mandamus/order holding that the action of Static Surveillance Team,
Ratlam, of seizure/detaining of consignments on 23.10.2023 for the
lawful possession of its representatives was arbitrary, illegal and without
any basis. The petitioner is also seeking a declaration that requisition of
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goods and seizure of consignments by the authorities under the
provisions of the Income Tax Act is arbitrary, illegal and bad in law.
13. W.P. No.6850 of 2024 has been filed by an employee of Sequel
Logistics seeking relief of quashment of proceedings initiated by the
Income Tax Department and also quashment of notice issued under
Sections 132A & 148 of the Income Tax Act for the Assessment Year -
2020 - 21, 2021 - 22 & 2022 - 23.
14. M/s Arihant Jewellers has filed W.P. No.6810 of 2024 seeking
writ in the nature of mandamus or order, holding that the action of SST
for seizure of goods and assignment of the petitioner is illegal, arbitrary
and bad in law. The petitioner is further seeking direction to release the
consignment relating to them from the custody of the Income Tax
Department.
15. For adjudication of these writ petitions, the following issues
have emerged for consideration: -
Issue No.1. Whether the action of the SST is justified in detaining /
seizing the consignments and handing over to the Income Tax
Department ?
Issue No.2. Whether the action of the Income Tax Department is
justified in initiating the proceedings under Section 148 against Mr.
Amit Sharma upon a prima facie believe that the consignment
belongs to him ?
Issue No.3. Whether Arihant Jewellers is entitled to get back the
jewellries belonging to them ?
ANSWER TO ISSUE NO.1
16. Facts of the case are not in dispute to the extent that Sequel
Logistics is a company registered under the provisions of the Companies
Act and engaged in the business pertaining to logistics, logistics
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solutions for precious goods and securities such as diamonds, jewellery
items, bullion, cash, etc. The petitioner is also the registered partner of
all the bullion banks nominated by the Reserve Bank of India, having
operations in around 130 countries and 500 cities in India, with 100
branches and 3500 employees. The petitioner pays the tax of around 70
to 80 crores; however, the same is not relevant in this matter.
17. The Sequel Logistics is not disputing about its relationship of
employee - employer with Mr. Amit Sharma. Under the agreement of
consignor/consignee, 37 consignments were being carried by Mr. Amit
Sharma to deliver to different consigners from Indore to Ralam on
23.10.2023 in a Bolero Vehicle.
18. The aforesaid Vehicle was intercepted by the SST at or around
4:30 pm on 23.10.2023. According to Mr. Amit Sharma, he provided all
the necessary documents for each and every consignment, such as the
docket, consignor/consignee's tax invoice, delivery challan, relevant
certificates, etc. The details as reproduced in the memo of writ petition
are reproduced as under:-
Sr. No. Docket Consignees Consignors
Number
1 16357 South India Jewellers Nidhi Jewellers
2 18866 Dhiraj Jewellers Mokes Gold
3 43766 Anmol Ratnam Madhab G. Maji
4 11961 Midas Diamonds Private Limited Midas Diamonds Private Limited
5 43226 Kataria Dhulchand Pannalal Jewellers Gkd Jewels Pvt. Ltd.
Private Limited
6 41363 Arihant Jewellers Swarn Shilp Chains & Jewellers
Pvt. Ltd.
7 10060 Kgk Creations (Inida) Private Limited Kgk Creations (India) Pvt. Ltd.
8 43766 Anmol Ratnam Qizil Jewels Private Limited
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9 10718 Emerald Jewel Industry India Ltd. Emerald Jewel Industry India Ltd.
10 41363 Arihant Jewellers M/s Subhas Mondal
11 41726 Golden Carat Private Limited Golden Carat Private Limited
12 10481 Mani Jewel Mani Jewel
13 18886 Dhiraj Jewellers Hemratna Jewellers
14 10056 Mehta Gold Private Limited Mehta Gold Private Limited
15 10603 J.P. Exports J.P. Exports
16 41741 Priyesh Kailash Chandra Sharma Anokhi Bangles
17 11187 Kp Sanghvi Jewels Pvt. Ltd. Kp Sanghvi Jewels Pvt. Ltd.
18 41741 Priyesh Kailash Chandra Sharma Biswajit Jyotindera Nath Bera
19 10895 Creative Jewel Creative Jewel
20 10189 R.S. Diamonds Pvt. Ltd R.S. Diamonds Pvt. Ltd
21 41214 Siddhi Jewels Siddhi Jewels
22 14963 Matra Smruti Jewels Matra Smruti Jewels
23 40318 M.U. Jewellers Ltd. Sajjanlal Gajendra Kumar
24 41190 Aujasa Samta Jewel Llp
25 10769 Hemratna Jewellers Hemratna Jewellers - Mumbai
26 41196 Jain Chain Ahmedabada Llp Jain Chain Ahmedabada Llp
27 12380 Mark Bullion Commodities Private Mark Bullion Commodities
Limited Private Limited
28 11983 Shri Vardhman Ornaments Pvt. Ltd. Shri Vardhman Ornaments Pvt.
Ltd.
29 44233 Ratnalife Creation Llp Ratnalife Creation Llp
30 41190 Aujasa Unitouch Creation
31 44572 Arpit Kumar Lalit Kumar Chordiya BS Jewellers
32 40318 M.U. Jewellers Pvt. Ltd. Shri Samarth Jewellers
33 41348 Jmd Jewellers Shrishti Gold Pvt. Ltd.
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34 14549 Unique Valley Unique Valley
35 44260 Leo Silver Art Pvt. Ltd. Leo Silver Art Pvt. Ltd.
36 41190 Aujasa Suraj Suresh Chavan
37 14285 Vie ' 90 Jewellery Vie ' 90 Jewellery
19. The documents related to the above 37 consignments revealed
that the value of the entire jewellery in the consignment is Rs.
6,11,51,573/- (Rupees Six Crore Eleven Lakh Fifty One Thousand Five
Hundred and Seventy Three Only). The SST prepared a Panchnama of
seizure of 37 tamper-proof jewellery consignments as per accompanying
documents, one of which M/s Arihant Jewellers claiming return of
approximately 1785.120 grams of jewellery amounting to Rs.
1,06,36,500/-.
20. As per the reply filed by the District Election Officer, Ratlam,
since the Model Code of Conduct had been made applicable w.e.f.
21.10.2023, vide order dated 05.10.2023, the Static Surveillance Team
(SST) was constituted by the Collector and District Election Officer,
Ratlam, under the directions of the Election Commission of India. The
relevant SST who was deputed in Legislative Assembly 219, Ratlam
(Rural), Police Station - Bilpank from period 6:00 am to 2:00 pm,
headed by Shri Ranjeet Singh Bhawar and Assistant Survey Officer,
Ratlam. In order to check the possibility of influencing the voters by the
candidates or their representatives under Section 123 of the
Representation of the People Act, 1951, the Vehicle in question was
intercepted. The SST drew a Panchanama on 23.10.2023. All the 37-38
boxes were opened, and the jewellery weighing 11919.512 grams was
found. The copy of Panchnama has been filed along with the return.
21. The Election Commission of India issued Standard Operating
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Procedure (SOP) for seizure and release of cash and other items vide
Circular dated 07.08.2023 for the State of Chhattisgarh, Madhya
Pradesh, Mizoram, Rajasthan & Telangana. As per this SOP, a
Committee shall be formed comprising three officers of District i.e.
Chief Executive Officer, Jila Panchayat, Nodal Officer of Expenditure &
Monitoring District Election Officer, District Treasury Officer called as
the District Grievance Committee (DGC) to examine each case of
seizure made by Police or SST or FS where no FIR/complaint has been
filed against the seizure or where the seizure is not linked with any
candidate or political party or any election campaign. The DGC shall
immediately pass an order for the release of such cash to such person
from whom the cash was seized. It further provides that if the release of
cash is more than Rs. 10,00,000/-, the Nodal Officer of Income Tax shall
be kept informed before the release is affected. It further provides that in
no case the matter relating to seizure/cash / valuable shall be kept
pending in Malkhana or Treasury for more than seven days after the date
of poll, unless any FIR or complaint has been filed. The contents of the
Circular /SOP are reproduced below:-
''I am directed to refer to the Commission's letter
no.76/Instructions/EEPS/2015/Vol.II, dated 29th May, 2015,
forwarding therewith Standard Operating Procedure for seizure
and release of cash and other items, and to draw your attention
to the instructions laid in 'Para 16-Release of Cash' and to
request your to ensure compliance of the instructions in letter
and spirit during election process.
2. There are instances of keeping cash and valuables in
Treasury/Malkhana without any FIR/Complaint. The
Commission is concerned about the grievances of public and
hence, it is reiterated that as per instruction lai din 'Para 16-
Release of Cash', in order to avoid inconvenience to the public
and genuine person and also for redressal of their grievances, if
any, a Committee shall be formed comprising three officers of
the District, namely, (i) CEO, Zila Parishad/CDO-PD, DRDA,
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(ii) Nodal Officer of Expenditure Monitoring in the District
Election Office (Convenor) and (iii) District Treasury Officer.
Name of such committee will be 'District Grievance
Committee', who shall suo-moto examine each case of seizure
made by the Police or SST or FS and where the Committee
finds that no FIR/Complaint has been filed against the seizure
or where the seizure is not linked with any candidate or
political party or any election campaign etc., as per SOP dated
29th May, 2015, it shall take immediate step to order release of
such cash etc. to such persons from whom the cash was seized
after passing speaking order to that effect. If the release of cash
is more than Rs.10 (Ten) Lac, the nodal office of Income Tax
shall be kept informed before the release is effected.
3. It is to be ensured that functioning of 'District Grievance
Committee' should be given wide publicity, including telephone
number of the Convenor of the Committee. The procedure of
appeal against seizure should be mentioned in the seizure
document and it should also be informed to such persons at the
time of seizure of cash. It is also to be ensured that during
election process the 'District Grievance Committee' headed by
CEO, Zila Parishad/CDO/PD, DRDA will meet once in 24
hours at a predeclared place and time. All the information
pertaining to release of cash shall be maintained by the Nodal
Officer of Expenditure Monitoring in a register, serially date
wise with the details regarding amount of Cash
intercepted/seized and date of release to the person(s)
concerned.
4. In no case, the matter relating to seized cash/valuables shall
be kept pending in Malkhana of Treasury for more than 7
(seven) days after the date of poll, unless any FIR/Complaint is
filed. However, 'District Grievance Committee' should not delay
in taking decision and keep pending any case unnecessarily
upto 7th day of date of poll. It shall be the responsibility of the
Returning Officer to bring all such cases before 'District
Grievance Committee' and to release the cash/valuables as per
order of the Committee.
5. Your are requested to bring it ti notice of all DEOs, ROs,
election authorities concerned including Observers, all Nodal
Officers of various enforcement agencies involved in Election
Expenditure Monitoring for necessary compliance.''
[Emphasis Supplied]
22. The main grievance of the petitioners, Sequel Logistic and Amit
Sharma, is that this Circular has been grossly violated by the District
Grievance Committee. The contention of counsel appearing for the State
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as well as Income Tax Department is that since the jewelleries worth
more than Rs. 10,00,000/- were seized, the Income Tax Officer was
called, and the jewelleries were handed over. But it is not in dispute that
to date, no FIR has been registered in this matter.
23. In an identical manner, the District Grievance Committee vide
order dated 30.10.2023 during the relevant period had released the
jewellery weighing 121 kg. According to the reply filed by the District
Election Officer, at the time of seizure, there was no appearance of
documents or bills presented by a person in whose custody the material
was there, therefore, the matter was brought to the knowledge of District
Grievance Committee and when the documents were presented before
the District Grievance Committee regarding bills of 112.11 kg silver, the
same was released.
24. It is further submitted that as per the letter dated 09.10.2023, it
was made clear by the Collector, Ratlam, that any material found
without a proper document shall be seized and handed over to the
concerned Department. The District Election Officer has not filed any
document in the reply to show that the DGC took any decision for not
releasing these consignments either to Mr. Amit Sharma or Sequel
Logistics, and passed an order for handing over the same to the Income
Tax Department.
25. As per the SOP, there has to be satisfaction by the SST or the
DGC that the seized cash, articles or goods are being transported or in
possession of a person concerned belonging to any candidate of the
election and brought for influencing the voters. There is absolutely no
such satisfaction recorded either by SST or by the District Grievance
Committee. As discussed above, no FIR was registered against Mr. Amit
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Sharma, Sequel Logistics or any other candidates. Therefore, as per this
SOP, these consignments ought to have been released to Mr. Amit
Sharma, from whom it was seized, instead of being handed over to the
Income Tax Department. As the SOP only provides information that is
liable to be given to the Income Tax Department in respect of the release
of cash more than ₹10,00,000
26. The Income Tax Department filed a reply admitting certain
important facts in paragraph 5.2 and the same is reproduced below:-
''5.2. With respect of paragraph no.5.4 & 5.6 of the
Petition, the contents therein are correct and affirmed. It is not
the case that supporting documents explaining the source and
details of the consignment in question were not carried by the
petitioner. Further, it is correctly stated that the consignments or
even Respondent No.5 has no linkage whatsoever to any
candidate / his or her agent / a party worker, etc, nor was the
Vehicle carrying any unaccounted cash, election posters,
election materials, drugs, arms, etc." It is pertinent to mention
that it is not even the case of SST or any of the Respondent
authorities that the Vehicle was carrying any such items
connected with the election of any candidates. It is submitted
that, as mentioned in these paragraphs, till date, no basis or
reason to seize the consignments or for transferring the
consignments to the Respondent authorities has been provided.
It is submitted that multiple representations have been made by
Respondent No.5 as well. However, no explanations or
documents have been provided to Respondent No.5 as well.''
27. The Income Tax Department has also admitted that Mr. Amit
Sharma is indeed an employee of SLPL appointed to the post of
Custodian Officer at Indore Office, which is evident from the
communication dated 12.01.2024 and the statement recorded on
25.10.2023. Therefore, the SST and District Grievance Committee did
not consider the important facts that the Vehicle was not carrying any
unaccounted cash, election posters, election materials, drugs, arms, etc.,
except these consignments, which could create suspicion leading to
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seizure and handing over to the IT department. It is also not the case
with the SST that the Vehicle does not belong to Sequel Logistics, which
is a logistics company. The valuation of the consignment or jewellery,
which is more than Rs.6,00,00,000/- became the basis of seizure and
information to the IT department.
28. As per the list of dates in chronological events submitted by the
parties, especially the Income Tax Department, on 23.10.2023, SST,
Ratlam City 220, seized the gold and silver jewellery from the
possession of Mr. Amit Sharma. On 24.10.2023, this information was
shared with the Income Tax Officer - I, Ratlam, who subsequently
shared the information with the Deputy Director, Investigation Wing - I,
Indore, relating to each of 38 packets containing gold and silver
ornaments. On 25.10.2023, Income Tax Officer - I issued a summons
under Section 131(1)(d) of the IT Act to Mr. Amit Sharma for
examination about the nature and source of gold and silver ornaments.
On 27.10.2023, a warrant of authorisation was issued under Section
132A(1) of the IT Act by the Principal Director of Income Tax
Investigation, Bhopal. It is also a case of the Income Tax Department
that during the proceedings under Section 132A, Mr. Amit Sharma
claimed that the seized consignments belong to Sequel Logistics.
Finally, on 28.10.2023, the gold and silver ornaments worth Rs.5.87
crore were taken from the SST by the Income Tax Department. From
23.10.2023 to 28.10.2023, these consignments worth Rs 5.87 crore were
in the custody of SST, Ratlam, which is also in violation of the SOP
dated 07.08.2023 because, as per Clause 4, in no case, the matter
relating to seized cash/valuables shall be kept pending in Malkhana or
Treasury for more than seven days. There is no such document to show
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that these valuable consignments were sent to the Malkhana or Treasury.
There is a contradiction in the number of consignments and the value of
the jewellery in the documents of the SST and Income Tax Department.
Therefore, the action of the SST and District Grievance Committee is
wholly illegal in keeping the valuable consignments with them for seven
days and not recording the satisfaction and thereafter, handing over to
the Income Tax Department.
29. In view of the above detailed discussion, issue No.1 is hereby
answered against the respondents and in favour of the petitioners.
ANSWER TO ISSUE NO.2
30. As per the return filed by the Income Tax Department, the gold
and silver ornaments were seized by the SST, Ratlam City 220, on
23.10.2023 from the possession of Mr. Amit Sharma in a total of 38
packets. This information was shared with Income Tax Officer - I on
24.10.2023, who further shared it with the Deputy Director of Income
Tax (Investigation) - I, Indore. On receipt of such information, a
Commission under Section 131(1)(d) of the Income Tax Act was issued
on 24.10.2023 to the Income Tax Officer, Ratlam, to conduct an enquiry
from Mr. Amit Sharma with further direction to carry out the
investigation and submit the enquiry report. The Income Tax Officer - I
conducted an enquiry and submitted a detailed report on 25.10.2023,
which contains the statement of Mr. Amit Sharma on oath disclosing the
nature and source of purchase of gold jewellery weighing 12121.51
grams, inclusive of packing documents. The statement of Mr. Amit
Sharma was recorded on oath under Section 131(1) of the Income Tax
Act. Mr Sharma also disclosed that he is working as a Custodian of
SLPL. He works to deliver the gold and silver ornaments from
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consignors and various clients like Chennai, Mumbai, Surat, etc., to
different consignees located in nearby Indore City and Ratlam. Upon
demand, Mr. Amit Sharma produced the documents relating to gold and
jewellery seized by SST, like the docket, delivery challan, labour
receipts, etc. He was confronted with each tax invoice bill, delivery
challan, labour bill, docket, bilti provided by SLPL relating to each 38
packets.
31. After examining the report submitted by the Income Tax Officer
- I, Ratlam, the Deputy Director of Income Tax (Investigation) - I,
Indore has reached to the conclusion that item of gold and silver carried
by Mr. Amit Sharma in all 38 packets remained as unexplained with
angle of purchase, ownership and stock moment as Mr. Amit Sharma
could not furnish necessary documentary evidence and failed to give the
necessary reply. The Principal Director of Income Tax recorded its
satisfaction that the gold and silver ornaments weighing 12121.51 gram,
either wholly or partly, income and property or assets has not been
disclosed for the purpose of Income Tax Act and the same is liable to
requisitioned from SST Magistrate, Ratlam 220, Station Road, Police
Station - Ratlam within the meaning of Section 132A(1)(c) of the
Income Tax Act and accordingly, the further proceedings have been
initiated from 28.10.2023 by issuing notice under Section 132A of the
Income Tax Act. The case of Mr. Amit Sharma was centralized vide
order dated 29.12.2023 from Income Tax Officer - 5 (1), Indore, to
Deputy Commissioner of Income Tax (Central - 2) Indore by Principal
Commissioner of Income Tax, Indore - 1.
32. According to the respondents / Department, in the present case,
the seizure was not done by the Income Tax Authorities; it was done by
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SST, Ratlam. Hence, it is not a case under Section 132 of the IT Act, but
falls squarely under Section 132A. Thereafter, a notice was issued under
Section 148 of the IT Act in the case of Mr. Amit Sharma for the
Assessment Years 2020-21, 2021-22, and 2022-23, and as of today, the
proceedings are pending.
33. Mr. Amit Sharma approached this Court by way of W.P.
No.6850 of 2024, questioning the income tax proceeding against him
solely on the ground that these assets do not belong to him. Sequel
Logistics Private Limited has also filed W.P. No.15169 of 2024 before
this Court, although no action has been taken against it either under the
Income Tax Act or under the IPC. The company has come to this Court
as a responsible consignor to protect the consignments of its clients and
goodwill. Moreso, the company also filed a case before this Court to
protect its employee, Mr. Amit Sharma, from these proceedings. This is
a bona fide act on the part of Sequel Logistics by approaching this
Court; otherwise, they have no reason to file a petition by spending so
much money. We don't know whether individual goldsmiths and
jewellers have approached Sequel Logistics to claim their goods.
Therefore, Sequel Logistics is before this Court only to protect its
employee and reputation in the market, which shows that these goods
were handed over to Sequel Logistics under the consignee-consignor
agreement for delivery, not related to any election purpose.
34. So far as the action of the Income Tax Department is concerned,
much stress has been given by Shri Parashar, learned counsel, that there
is a satisfaction note by the authority to believe that these consignments
are undisclosed income and property of Mr. Amit Sharma. The basis of
this satisfaction is that these ornaments were recovered from the
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possession of Mr. Amit Sharma, and he has failed to furnish a valid
explanation and the necessary documents. As discussed above, there is
no dispute about the employer-employee relationship between Sequel
Logistics and Mr. Amit Sharma and the seizure of 37-38 consignments
by the SST, during the election period, from the Vehicle of Sequel
Logistics, in which Mr. Amit Sharma was travelling. There is no
satisfaction note by SST or by the District Grievance Committee about
the relationship between these articles and the election. The SST or
District Grievance Committee was only required to inform the Income
Tax Department about the release of these articles. Therefore, handing
over of these articles to the Income Tax Department is, per se, illegal.
35. According to the Income Tax Department, these cases fall under
Section 132A of the Income Tax Act. Under Section 132A(1)(c), where
the Income Tax Officer in consequence of information in his possession
has reason to believe that any assets represent either wholly or partly
income or property which has not been disclosed for the purpose of
Income Tax Act by any person in whose possession and control such
assets have been taken into custody by officers under any other law for
the time in force. The Authority is required to record the reasons to
believe that such assets belong to a person from whose possession they
were taken into custody; however, such reasons to believe shall not be
disclosed to any person, authority or tribunal, as held by the Apex Court
in the cases of Spacewood Furnishers Pvt. Ltd. & M/s N.K. Jewellers
(supra). We are of the considered opinion that when it is a case of Mr.
Amit Sharma, he is an employee of Sequel Logistics and transporting
these 37-38 jewellery boxes from the consignor of Indore to the
consignees of Ratlam, then he is not supposed to disclose, either wholly
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or partly, his income or property. The documents which were in his
possession relating to transportation, viz, bills and invoices, etc, were
produced. Much emphasis has been given with respect to the non-
production of the e-way bill by Amit Sharma. The absence of e-way
bills does not vitiate the transportation in this case, as the movement of
jewellery and the same is exempt under Rule 138(14)(a) of the CGST
Rules, 2017. The Income Tax Authority ought to have called these 38
consignees/jewellers to explain their income relating to these assets.
Interview of the world, we are of the considered opinion that there is
absolutely no basis for proceeding against Amit Sharma under section
148 of the Income Tax Act. Hence, all the proceedings initiated under
section 148 of the IT Act against Amit Sharma are hereby quashed.
However, the IT Department shall be at liberty to initiate the
proceedings against 37 jewellers or consigners based on the information
collected so far, especially the statement of Amit Sharma. The Issue
No.2 is answered in favour of the petitioner, Shri Amit Sharma.
36. M/s Arihant Jewellers filed an application for the release of
jewellery weighing 1785.12 grams valued at Rs. 1.06 crore, claiming
ownership of such assets. The said application was not considered
because it was liable to be filed before the concerned Assessing Officer,
and accordingly, some advice was given to him vide letter dated
08.02.2024. In support of the aforesaid stand, Shri Parashar, learned
counsel for the Income Tax Department, has produced a copy of
Circular dated 16.10.2023 and submits that it must be read along with
Section 132B of the Income Tax Act. It is also submitted that such a
request must be made within thirty days from the date of seizure under
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the scheme of the Act; therefore, the application has rightly not been
entertained.
37. When the case of Mr. Amit Sharma was centralized, then all the
applications submitted by others relating to the case of Amit Sharma
ought to have been entertained by the same Assessing Officer, i.e.
Deputy Commissioner of Income Tax, Central - 2, Indore, in order to
avoid any conflict of orders. The Deputy Commissioner of Income Tax,
Central - 2 while dealing with the seizure of these consignments on a
believe that these consignments belong to Mr. Amit Sharma and he has
denied the ownership, then whosoever claiming the ownership is liable
to intervene in the same proceedings before the Centralized Officer for
entertaining any application for release or deciding the claim of the
ownership. The CIT of the Income Tax Department has enough power to
centralise any proceeding of any assessee under Section 127 of the
Income Tax Act.
38. The application, which was filed by M/s Arihant Jewellers,
ought to have been entertained by the Assessing Officer under
authorisation under Section 127 of the Income Tax Act for the release of
the goods. The Arihant Jewellers was ready to give the bank a guarantee
for the release of the jewellery.
39. Shri Bhuwan Gautam, learned Government Advocate has placed
reliance upon a judgment delivered by the Apex Court in the case of
Pooran Mal v/s Director of Inspection reported in (1974) 93 ITR 505
(SC), in which the Apex Court has held that whether even though, where
search and seizure were in contravention of provision of Section 132,
material seized would liable to be sued against the person from whose
custody it was seized. It is permissible under Section 132, but, as per the
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Income Tax Authority, the present cases fall under Section 132A and not
Section 132 of the Income Tax Act. Second proviso to Section 132B
says that the asset or any portion thereof as referred in the first proviso
shall be released within a period of one hundred and twenty days from
the date on which the last of the authorizations of search under Section
132 or for requisition under Section 132A, as the case may be, was
executed. As per the first proviso where the person concerned makes an
application to the Assessing Officer within thirty days from the end of
the month in which the asset was seized, for release of asset, therefore,
the words 'Assessing Officer' means the same Assessing Officer who is
dealing with the seized asset, not the Assessing Officer of the person
concerned. The Assessing Officer of person concerned may not have
any material or record pertaining to the seizure, therefore, they would
not be in a position to pass an effective order and if such Assessing
Officer passes an order for release and the Assessing Officer, who is
dealing with the asset under Section 132 or 132A of the Income Tax Act
is of the opinion that such asset belongs to the person from whose
possession it has been recovered and not liable to be released till
conclusion of the proceedings under Section 148, then there would be a
conflicting verdict. As per the first proviso to sub-section (i) of Section
132B(1), the person concerned has to make an application to the
Assessing Officer who is dealing with the asset and in whose possession
the assets are. Therefore, the application filed by the Arihant Jewellers
was liable to be considered by the Assessing Officer, i.e. Deputy
Commissioner of Income Tax, Central - 2. Apart from Arihant
Jewellers, whoever is the consignee claiming ownership and release,
may submit an application before the same Assessing Officer.
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40. So far as Arihant Jewellers has filed W.P. No.6810 of 2024 after
recording the statement of Mr. Amit Sharma in which he denied the
ownership then Assessing Officer than ITO ought to have sent this
information to all those persons/jewellers, whose names were disclosed
by Mr. Amit Sharma, with the valid documents in order to verify the
actual ownership, they only they can submit an application for release
within thirty days. The other consignees may not have the knowledge
about the centralization of the case of Amit Sharma. The limitation will
start from the date of knowledge, and this provision nowhere says that if
this application is not filed within thirty days, the same shall not be
considered later on. The proceedings are liable to be concluded within
120 days; otherwise, the Income Tax Authorities are liable to pay the
interest under sub-section (4) of Section 132B of the Income Tax Act on
the amount of money seized, if not released.
41. So far as the centralization is concerned, there is a provision and
Circular dated 12.03.2018 for centralization of the cases relating to the
search/survey proceedings which have been entered in the ITBA
System. The present case has not been entered into an ITBA System;
therefore, the application by Arihant Jewellers has not been properly
dealt with and considered. Had this been a case referred to ITBA, the
application would have been considered by the Deputy Commissioner of
Income Tax, Central - 2, dealing with the case of search and seizure.
Therefore, the approach of the Income Tax Authority in the present
cases cannot be appreciated and since the last two years, the valuable
jewellery has been lying with the Income Tax Department; the
proceedings under Section 148 have not been concluded till date. Issue
No. 3 is answered in favour of Arihant Jewellers.
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42. In view of the detailed discussion above, these Writ Petitions are
allowed with a direction to the Deputy Commissioner of Income Tax,
Central - 2. (Centralized) to release the jewellery consignments. The
SST of the Election Commission of India, the District Election Officer,
and the Director General of Income Tax have not conducted the
proceedings in accordance with SOP / Circulars issued by the Election
Commission of India, which has led to the seizure of these
consignments and caused losses to the owners as well as consignors.
The cost of Rs.50,000/- is awarded in favour of all the writ petitioners
payable by the respondents severally and jointly.
Let a copy of this order be kept in the connected writ petitions
also.
(VIVEK RUSIA) (BINOD KUMAR DWIVEDI)
JUDGE JUDGE
Ravi
