Facts of the Case

·         The petitioner, Shri Shyam Sales, filed a writ petition seeking directions against the respondents for the release of entire seized jewellery valued at ₹52,10,120/-.

·         Alternatively, the petitioner prayed for the release of jewellery worth ₹39,53,726/-, which they asserted was being retained illegally and without justification beyond the total liability determined under the block assessment.

·         At the time of the writ petition, the Settlement Commission under the Income-tax Act, 1961 was already seized of the matter, and an application for the return of the jewellery had been formally submitted to the Commission.

Issues Involved

1.      Whether the Income Tax Department was justified in retaining seized jewellery exceeding the total tax liability created under the block assessment in view of the Proviso to Section 132(1)(iii) of the Income-tax Act, 1961.

2.      Whether the High Court should intervene on the merits of a property release request when the matter is concurrently pending adjudication before the Settlement Commission.

Petitioner’s Arguments

·         The petitioner argued that the Settlement Commission was failing to expeditiously decide the pending application for the return of the seized jewellery.

·         It was contended that considering the total value of the jewellery and the amounts already lying with the Income Tax Department, no further recoveries were warranted or required from the jewellery assets.

·         The petitioner's counsel placed strong reliance on the provisions of Section 245F regarding the exclusive powers and procedures of the Settlement Commission, as well as the Proviso to Section 132(1)(iii) governing the retention of seized assets.

Respondent’s Arguments

·         The respondents, represented by the Income Tax Department, maintained their stance regarding the ongoing proceedings and assessment context, noting that the matter fell within the active jurisdiction of the Settlement Commission.

Court Findings & Order

·         The Delhi High Court, comprising Chief Justice and Justice Badar Durrez Ahmed, chose not to delve into the substantive merits of the property retention claim since the Settlement Commission was already actively seized of the matter.

·         Relying on the procedural mandates of Section 245F and the statutory framework of Section 132(1)(iii), the High Court directed the Settlement Commission to decide the petitioner’s pending application for the return of the jewellery within a strict timeframe of three weeks.

·         The writ petition was accordingly disposed of with no further orders on merits, and direct service (Dasti) was granted.

Important Clarification

·         The judgment clarifies that when a statutory body like the Settlement Commission assumes jurisdiction over an income tax dispute under Chapter XIX-A, procedural requests regarding the release or custody of seized assets ought to be directed to and resolved by the Commission expeditiously rather than through parallel merit-based assessments by the High Court under Article 226.

 Sections Involved

·         Section 132(1)(iii) Proviso of the Income-tax Act, 1961 (Retention and release of seized assets).

·         Section 245F of the Income-tax Act, 1961 (Powers and procedure of the Income Tax Settlement Commission).


Link to download the order-https://delhihighcourt.nic.in/app/case_number_pdf/2004:DHC:17927-DB/BCP29012004CW77372003_145944.pdf

 

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