Stock-in-Trade Recorded in Books and Supported by Contemporaneous Evidence Not Liable to Seizure

The Bombay High Court held that stock-in-trade of a jeweller, duly recorded in the books of account and explained through contemporaneous documentary evidence, cannot be seized or retained under Sections 132 or 132A of the Income-tax Act, 1961, and is liable to be released unconditionally.

In the present writ petition, the principal relief sought was the release of gold jewellery weighing 4698.81 grams (gross weight) and 4370.280 grams (net weight), comprising various gold ornaments and forming part of the stock-in-trade of the assessee. The jewellery was initially seized by the Railway Police on 10.12.2024 and subsequently requisitioned by the Income-tax Department under Section 132A vide panchnama dated 18.12.2024.

The Revenue rejected the assessee’s application for release on the ground that the stock register did not contain item-wise details and that the assessee failed to establish one-to-one correlation between the seized jewellery and the stock recorded in the books of account.

The assessee explained that, in the jewellery trade, stock is consistently maintained on a weight basis, considering the fungible nature of gold and prevailing industry practices, and that neither the Income-tax Act nor any other law mandates maintenance of item-wise stock records. The assessee produced extensive contemporaneous evidence, including purchase invoices for bullion, sales and purchase registers, vouchers, and audited financial statements. The Court noted that none of these documents were disputed by the Revenue as false or fabricated. It was further observed that the exact net weight of the seized jewellery matched the stock register entry recorded on the same date, including the movement of stock handed over to a partner for business purposes, thereby establishing ownership and disclosure.

The High Court emphasized that the proviso to Section 132(1)(iii) expressly prohibits seizure of stock-in-trade and permits only preparation of an inventory. The Court held that this statutory protection equally applies where assets are requisitioned under Section 132A. Since the jewellery was prima facie established to be disclosed stock-in-trade, its seizure and continued retention were held to be impermissible in law.

The Court also rejected the Revenue’s contention that release should be conditional upon furnishing a bank guarantee, clarifying that such conditions may arise only where assets are validly seized or remain unexplained. Where disclosed and explained stock-in-trade is wrongly seized, any form of conditional release would be contrary to the statutory scheme.

Reliance was placed on CBDT Instruction dated 16.10.2023 and the coordinate bench decision in H. K. Jewels (P) Ltd. v. Assistant Director of Income Tax (Investigation).

Accordingly, the Court directed unconditional release of the seized jewellery within two weeks, while granting liberty to the Revenue to examine the taxability, if any, of the jewellery in regular assessment proceedings.

Result: Decision in favour of the assessee.
Case: Mahavir Jewellers NX LLP & Another v. Deputy Director of Income Tax (Inv.)
Date of Judgment: 08.12.2025 (Bom.)