Facts of the Case

A search and seizure operation under Section 132 of the Income-tax Act, 1961 was conducted at the residential and office premises of the petitioners between 09.10.2024 and 11.10.2024. During the search, gold coins and jewellery aggregating to approximately 4,808 grams (converted weight), valued at ₹5.39 crore, were found. Jewellery valued at ₹1.51 crore was released, while jewellery worth ₹3.88 crore was seized.

The petitioners claimed that the entire jewellery was duly disclosed in their Income Tax Returns and Wealth Tax Returns and filed an application dated 25.11.2024 under Section 132B seeking release of the seized jewellery. As no decision was taken within 120 days, the petitioners approached the High Court earlier, pursuant to which the Revenue undertook to decide the application. An order dated 18.07.2025 was thereafter passed rejecting the request for release. Aggrieved, the petitioners filed the present writ petition.

Issues Involved

Whether seized jewellery must be automatically released on expiry of 120 days under the second proviso to Section 132B(1)(i), whether the Assessing Officer is required to mandatorily release assets despite not being satisfied about the nature and source of acquisition, and whether the impugned order rejecting release was arbitrary or illegal.

Petitioners’ Arguments

The petitioners contended that all seized jewellery was duly disclosed in Wealth Tax Returns and Income Tax Returns and that CBDT Instruction No.1916 dated 11.05.1994 prohibited seizure beyond declared limits. It was argued that under the second proviso to Section 132B(1)(i), the Revenue was bound to release the jewellery within 120 days of the search. The petitioners relied on decisions of various High Courts holding that retention beyond 120 days was illegal and submitted that the valuation methodology adopted by the Revenue was erroneous and perverse.

Respondents’ Arguments

The Revenue submitted that release under Section 132B is not automatic and is contingent upon the Assessing Officer being satisfied about the nature and source of acquisition of the seized assets. It was argued that the petitioners failed to provide bills, invoices, or reliable documentary evidence to substantiate acquisition. Reliance was placed on CBDT Instruction dated 16.10.2023 and judicial precedents holding that the 120-day period is directory and that the only consequence of delay is payment of interest, not automatic release.

Court Order / Findings

The Delhi High Court undertook a detailed examination of Section 132B, its provisos, legislative intent, and conflicting judicial precedents. The Court held that the second proviso to Section 132B(1)(i) applies only to assets referred to in the first proviso, namely assets whose nature and source of acquisition have been explained to the satisfaction of the Assessing Officer.

The Court held that the statute does not provide for a deemed satisfaction or automatic release merely on expiry of 120 days. It accepted the reasoning of the Allahabad High Court in Dipak Kumar Agarwal and the Rajasthan High Court in Kanwaljeet Kaur, holding that the 120-day timeline is directory and that the only statutory consequence of delay is payment of interest under Section 132B(4).

The Court further held that the impugned order reflected application of mind, that disputed questions of fact regarding source, valuation, inheritance, and partition could not be adjudicated in writ jurisdiction, and that judicial review under Article 226 is confined to the decision-making process.

Important Clarification

The Court clarified that Section 132B does not contemplate automatic release of seized assets on expiry of 120 days. Release is conditional upon the Assessing Officer recording satisfaction regarding the nature and source of acquisition, and disputed factual issues must be examined during assessment proceedings.

Final Outcome

The writ petition was dismissed. The Delhi High Court upheld the impugned order dated 18.07.2025, held that the seized jewellery was not liable to automatic release under Section 132B, declined to interfere under Article 226, and left it open to the petitioners to pursue their remedies in assessment proceedings in accordance with law.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769503808_RAJESHGUPTAORS.VsASSISTANTCOMMISSIONEROFINCOMETAXCENTRALCIRCLE31DELHIORS..pdf  

 

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