Chandigarh, December 17:
The Punjab and Haryana High Court recently took a strong stance against the Income Tax (IT) Department for its arbitrary seizure of jewellery from a luxury jewellery company’s bank lockers and its subsequent refusal to return the items. The case, titled Dillano Luxurious Jewels Limited v. Deputy Director Income Tax Investigation Bathinda and another, brought to light significant lapses in procedure by the IT Department.
The Division Bench, comprising Justice Sanjeev Prakash Sharma and Justice Sanjay Vashisth, emphasized that Section 132(1)(B)(iii) of the Income Tax Act explicitly bars the seizure of stock in trade. It noted that the jewellery recovered from a bank locker registered in the company’s name should be considered part of its stock in trade, rather than being attributed to any individual director. The Bench highlighted that treating the company’s assets as personal belongings of a director could lead to disputes regarding ownership of the company’s stock.
The Court deemed the IT Department’s actions of seizing the jewellery in 2023 as unlawful, arbitrary, and unjustifiable. It pointed out that the Income Tax Act permits authorities to inventory and document stock in trade found during a search but not to seize it.
The matter arose when Dillano Luxurious Jewels Limited, a company dealing in jewellery and ornaments, filed a plea to secure the release of jewellery seized from its lockers at the South Indian Bank in Punjabi Bagh, Delhi. The company contended that the IT Department’s action violated legal provisions, as the lockers were in the company’s name and contained its stock.
The IT Department, however, argued that it could not ascertain whether the jewellery in question was part of the company’s stock or owned personally by its directors. The Court rejected this reasoning, asserting that items stored in the company’s locker must be presumed to belong to the company unless proven otherwise.
Observing that the IT Department had no justification for withholding the jewellery, the Court allowed Dillano’s plea and directed the immediate release of the seized items.
Dillano Luxurious Jewels was represented by Senior Advocate Radhika Suri, along with advocates Abhinav Narang and Pranika Singla. Representing the IT Department were Senior Standing Counsel Saurabh Kapoor, Junior Standing Counsel Pridhi Sandhu, and advocate Muskaan Gupta.
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