Mahesh Jagabandhu Roy vs. Central Board Of Direct Taxes

NEUTRAL CITATION NO. 2025:MPHC-IND:11084 -1- WP No.2888/2025 IN THE HIGH COURT OF MADHYA PRADESH AT INDORE B E F O R E HON'BLE SHRI JUSTICE VIVEK RUSIA & HON'BLE SHRI JUSTICE GAJENDRA SINGH ON THE 25TH OF APRIL, 2025 WRIT PETITION No. 2888 of 2025 MAHESH JAGABANDHU ROY AND OTHERS Versus CENTRAL BOARD OF DIRECT TAXES AND OTHERS Appearance: Shri Ajay Shrivastav – Advocate for petitioners. Shri Harsh Parashar(through V.C.) – Advocate for respondents. ORDER Per: Justice Vivek Rusia 1. Petitioners have filed this present petition seeking the following reliefs:- “(i) It is therefore, prayed to quash the warrant of authorization issued on 17.7.2017, order dated 4.12.2024 rejecting the handing over of stock in trade jewellery and follow up action including search and seizure (requisition), assessment order against the petitioner No.1 & 2 as unconstitutional being without jurisdiction and contrary to third proviso to Section 132(1) of the Income Tax Act, 1961 r/w 132A(3) of the said Act and Signed by: TRILOK SINGH SAVNER Signing time: 29-Apr-25 5:31:24 PM Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:11084 -2- WP No.2888/2025 (ii) Direction for return of the seized stock in trade jewellery to the petitioner with compensation after setting aside the rejection order dated 24.12.24; (iii) Any other writ order or direction may also kindly be passed.” The facts of the case, in short, are as under:- 2. On 12.7.2017 around 6.30 p.m. to 7.00 p.m. the GRP, Ratlam Police Station intercepted the petitioners and searched. From the possession of petitioners, 112 pieces of gold jewellery weighing 6010.3 Grams were seized. The petitioners were arrested under Section 41-1(a) & 102 of Cr.P.C. by registering Crime No.3/2017 at P.S. – GRP, Ratlam. Respondent No.1 took the police remand of the petitioners till 16.7.2017 from the Court of Special Railway Magistrate, Ratlam. On 16.7.2017 the petitioners moved an application for release on bail along with an application under Section 451/457 of Cr.P.C. for temporary release of the said jewellery on Supurdnama. The petitioners also submitted the necessary documents of ownership. The Income Tax Department submitted an objection before the trial Court as the matter is related to the tax evasion produced by the warrant of authorization under Section 132-A(1)(c) of the Income Tax Act. The learned trial Court rejected the bail application and sent the petitioners to the judicial remand till 19.7.2017. The Income Tax Department filed an application dated 24.7.2017 before the Magistrate seeking direction to the P.S. GRP, Ratlam to hand over the seized gold jewellery to the Income Tax Department based on warrant of authorization. The said application was opposed by the petitioners. The learned Magistrate passed an order directing Signed by: TRILOK SINGH SAVNER Signing time: 29-Apr-25 5:31:24 PM Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:11084 -3- WP No.2888/2025 P.S. GRP, Ratlam to hand over the gold jewellery after due verification to the Income Tax Department. 3. The petitioner No.1 was served the summon under Section 131 of the Income Tax Act on 15.11.2017. Thereafter the petitioner No.2 was also served the summon under Section 131 of the Income Tax Act on 17.11.2017. On 12.9.2017 respondent No.1 handed over the safe custody of the seized jewellery to respondent No.2. 4. After the issuance of the summon, a notice under Section 142(1) of the Income Tax Act dated 9.9.2019 was issued to the petitioners calling for the return of income tax for the assessment year 2018-19. Thereafter, notice under Section 143(2) of the IT Act was issued and thereafter final assessment order was passed on 24.12.2019. The petitioner challenged the assessment order by way of appeal before the CIT(A)-47, Mumbai. Vide order dated 12.10.2023 the appeal has also been dismissed. Against the said order, the petitioners have a remedy to approach the ITAT but has not been availed yet. 5. The petitioners approached this Court by way of MCRC No.54662/2023 u/s 482 of the Cr.P.C. seeking quashment of entire proceedings of Crime No.3/2017 registered at Police Station – GRP, Ratlam and seizure memo No.3/2017 with a direction to release the gold jewellery forthwith. Vide order dated 19.3.2024 the learned Single Bench of this Court has quashed the proceedings of the Crime No.3/2017 (P.S. GRP, Ratlam Vs. Mahesh and others) under Section 41 and 102 of Cr.P.C. The learned Single Bench has declined to pass any order in respect of the income tax proceedings which are separate and so far as the interim custody of gold Signed by: TRILOK SINGH SAVNER Signing time: 29-Apr-25 5:31:24 PM Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:11084 -4- WP No.2888/2025 ornaments is concerned. The petitioners have been granted liberty to claim the same from the Income Tax Authority, who already have the interim custody of the gold ornaments in accordance with the law. 6. After the aforesaid order, the petitioners applied Section 452 of Cr.P.C. before the Railway Court, which came to be dismissed on 28.5.2024. Thereafter the petitioners again approached this Court by way of Criminal Revision No.3258/2024 challenging the order dated 28.5.2024 passed by the Magistrate. Vide order dated 9.8.2024 the criminal revision has been dismissed as being devoid of merit. 7. Thereafter the petitioners applied for the release of the gold ornaments, which has been rejected vide impugned order dated 4.12.2024 on account of 1.08 Crore demand is pending against the petitioners as per the assessment order dated 24.12.2019 passed by the AO under Section 143(3) of the Income Tax Act. 8. Learned counsel for the petitioners submits that the petitioners by way of this petition are challenging the warrant of authorization issued on 17.7.2017 and the order dated 4.12.2014 rejecting the application for handing over the stock-in-trade jewellery for which the writ remedy is an appropriate remedy available to him. 9. Shri Harsh Parashar, learned counsel appearing for the respondents on advance notice submits that the petitioners have challenged the assessment order before the Commissioner, Income Tax Appeal and vide order dated 12.10.2023 the appeal has been dismissed. The petitioner’s claim for the release of gold/jewellery was rejected on 4.12.2024. Therefore, unless the Signed by: TRILOK SINGH SAVNER Signing time: 29-Apr-25 5:31:24 PM Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:11084 -5- WP No.2888/2025 demand order and the appellate order are set aside, there cannot be release of gold/jewellery. We have heard learned counsel for the parties and perused the record. 10. Based on the warrant of authorization, respondent No.2 took the custody of gold jewellery worth Rs.1,07,70,042/- from the Court of Magistrate. The petitioners did not challenge the said order by filing a revision. By way of a petition under Section 482 of Cr.P.C., the petitioners sought quashment of the entire proceedings of Crime No.3/2017 and seizure memo 3/2017 dated 12.7.2017. However, the petitioners claimed the release of seized gold jewellery, but a letter dated 11.9.2017 has been written by Special Railway Magistrate to GRP, Ratlam for handing over the jewellery to the Principal Director of Investigation. Vide order dated 19.3.2024 the Single Bench of this Court has only quashed the proceedings of Crime No.3/2017 and declined to pass any order regarding release of gold ornaments. Para 7, 8, 9 & 10 of order dated 19.3.2024 are reproduced below:- “7. In view of the aforesaid submissions, this Court is inclined to allow the present petition and it is directed that the Crime No.03/2017 (P.S. GRP Ratlam Mahesh and others) pending in the court of Ld. Special Railway Magistrate, Ratlam against the petitioners under Sections 41 and 102 of the Code of Criminal Procedure, 1973 is hereby quashed. 8. So far as the Income Tax proceedings are concerned, since it is a separate proceeding no order in this regard is being passed by this Court. 9. So far as the interim custody of the gold ornaments is concerned, the petitioners shall be free to claim the same from the Signed by: TRILOK SINGH SAVNER Signing time: 29-Apr-25 5:31:24 PM Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:11084 -6- WP No.2888/2025 Income Tax Authorities, who already have the interim custody of the gold ornaments, in accordance with the law. 10. With the aforesaid, petition stands allowed and disposed of.” 11. The aforesaid order has attained finality. Despite the aforesaid order, the petitioners again filed an application before the Magistrate for the release of gold ornaments, which came to be dismissed vide order dated 28.5.2024. Again the petitioners filed a Criminal Revision before this Court, which has been dismissed vide order dated 9.8.2024. After the seizure, the petitioners were served with the notice under Section 142(1) of the Income Tax Act dated 9.9.2019, thereafter notice under Section 143(2) was issued and thereafter final assessment order was passed on 24.12.2019. Petitioners challenged the said assessment order by way of appeal and the appeal has been dismissed. Therefore, the Income Tax Authority has rightly dismissed the application for release of the gold ornaments because of the pending demand of Rs.1.08 Crores. Therefore, the only remedy available to the petitioners to challenge the order passed by the PCIT (Central), Mumbai is before the Income Tax Appellate Tribunal in view of Section 132-B of the Income Tax Act, which is reproduced below:- “S.132B. Application of seized or requisitioned assets. – (1) The assets seized under section 132 or requisitioned under section 132- A may be dealt with in the following manner, namely:- (i) the amount of any existing liability under this Act, the Wealth-tax Act, 1957 (27 of 1957), the Expenditure-tax Act, 1987 (35 of 1987), the Gift-tax Act, 1958 (18 of 1958) and the Interest- tax Act, 1974 (45 of 1974), and the amount of the liability determined on completion of the assessment [under section 153-A and the assessment of the year relevant to the previous year in Signed by: TRILOK SINGH SAVNER Signing time: 29-Apr-25 5:31:24 PM Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:11084 -7- WP No.2888/2025 which search is initiated or requisition is made, or the amount of liability determined on completion of the assessment under Chapter XIV-B for the block period, as the case may be] (including any penalty levied or interest payable in connection with such assessment) and in respect of which such person is in default or is [deemed to be in default, or the amount of liability arising on an application made before the Settlement Commission under sub- section (1) of section 245C, may be recovered out of such assets]: [Provided that 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 and the nature and source of acquisition of any such asset is explained] to the satisfaction of the Assessing Officer, the amount of any existing liability referred to in this clause may be recovered out of such asset and the remaining portion, if any, of the asset may be released, with the prior approval of the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner, to the person from whose custody the assets were seized: Provided further that such asset or any portion thereof as is referred to 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 authorisations for search under section 132 or for requisition under section 132-A, as the case may be, was executed; (ii) if the assets consist solely of money, or partly of money and partly of other assets, the Assessing Officer may apply such money in the discharge of the liabilities referred to in clause (i) and the assessee shall be discharged of such liability to the extent of the money so applied; (iii) the assets other than money may also be applied for the discharge of any such liability referred to in clause (i) as remains undischarged and for this purpose such assets shall be deemed to be under distraint as if such distraint was effected by the Assessing Officer or, as the case may be, the Tax Recovery Officer under authorisation from the [Principal Chief Commissioner or] Chief Commissioner or [Principal Commissioner or] Commissioner under sub-section (5) of section 226 and the Assessing Officer or, Signed by: TRILOK SINGH SAVNER Signing time: 29-Apr-25 5:31:24 PM Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:11084 -8- WP No.2888/2025 as the case may be, the Tax Recovery Officer may recover the amount of such liabilities by the sale of such assets and such sale shall be effected in the manner laid down in the Third Schedule. (2) Nothing contained in sub-section (1) shall preclude the recovery of the amount of liabilities aforesaid by any other mode laid down in this Act. (3) Any assets or proceeds thereof which remain after the liabilities referred to in clause (i) of sub-section (1) are discharged shall be forthwith made over or paid to the persons from whose custody the assets were seized. (4) (a) The Central Government shall pay simple interest at the rate of [one half per cent for every month or part of a month] on the amount by which the aggregate amount of money seized under section 132 or requisitioned under section 132-A, as reduced by the amount of money, if any, released under the first proviso to clause (i) of sub-section (1), and of the proceeds, if any, of the assets sold towards the discharge of the existing liability referred to in clause (i) of sub-section (1), exceeds the aggregate of the amount required to meet the liabilities referred to in clause (i) of sub-section (1) of this section. (b) Such interest shall run from the date immediately following the expiry of the period of one hundred and twenty days from the date on which the last of the authorisations for search under section 132 or requisition under section 132-A was executed to the date of completion of the assessment [under section 153-A or] under Chapter XIV-B. [Explanation 1]. - In this section,- (i) "block period" shall have the meaning assigned to it in clause (a) of section 158-B; (ii) "execution of an authorisation for search or requisition" shall have the same meaning as assigned to it in Explanation 2 to section 158-BE.] [Explanation 2.—For the removal of doubts, it is hereby declared that the "existing liability" does not include advance tax payable in accordance with the provisions of Part C of Chapter XVII].” Signed by: TRILOK SINGH SAVNER Signing time: 29-Apr-25 5:31:24 PM Signature Not Verified NEUTRAL CITATION NO. 2025:MPHC-IND:11084 -9- WP No.2888/2025 12. Therefore, in view of the above, the petition cannot be entertained at this stage to challenge the warrant of authorization, especially after passing the order of assessment and dismissal of appeal. The petition is misconceived and dismissed. (VIVEK RUSIA) (GAJENDRA SINGH) JUDGE JUDGE trilok Signed by: TRILOK SINGH SAVNER Signing time: 29-Apr-25 5:31:24 PM Signature Not Verified