Dia Gold Jewels Private Limited vs Principal Commissioner Of Income Tax … on 7 April, 2025

Calcutta High Court (Appellete Side)

Dia Gold Jewels Private Limited vs Principal Commissioner Of Income Tax … on 7 April, 2025

Author: Rajarshi Bharadwaj

Bench: Rajarshi Bharadwaj

                   IN THE HIGH COURT AT CALCUTTA
                  CONSTITUTIONAL WRIT JURISDICTION
                                 (Appellate Side)


Present:     THE HON'BLE JUSTICE RAJARSHI BHARADWAJ


                                         W.P.A 7637 of 2023
                                              With
                                         CAN 1 of 2024


                                         Reserved on  : 20.01.2025
                                         Pronounced on: 07.04.2025



     Dia Gold Jewels Private Limited
                                                             ...Petitioner

                                       -Vs-


     Principal Commissioner of Income Tax Kolkata-2 & Ors.
                                                   ...Respondents

Present:-

Mr. Ranjit Kumar Murarka
Mr. Vivek Murarka
Mr. Pramod Kumar Saraf
Mr. Dibanath Dey
… for the petitioner
Mr. Aryak Dutt
Mr. Soumen Bhattacharya
… … for respondents

Rajarshi Bharadwaj, J:

1. In this writ petition, the petitioner challenges the disputed search and

seizure of the gold ornaments in question, reportedly conducted by respondent

no. 3 on November 14, 2022, at Ranchi Railway Station.

2. The petitioner, a Private Limited Company, operates under the Company

Law, specializing in the design, craftsmanship and sale of fine gold and

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studded stone jewellery. It has been a regular assessee under the Income Tax

Act, 1961 (hereinafter referred to as the “said Act”) since 2000, bearing PAN-

AABCD3414B. The petitioner is registered with GST in West Bengal and

Maharashtra under Registration Numbers 19AABCD3414B1Z9 and

27AABCD3414B1ZC, respectively.

3. The petitioner operates showrooms at the following locations: (i) No. 4,

Lee Road, Sumangal Apartment, Kolkata-700020, (ii) City Centre Mall, Shop

No. C002, Block DC, Sector-1, Salt Lake, Kolkata-700064 and (iii) Sukhsagar

Building, Shop No. 11, Ground Floor, N.S. Patkar Marg, Hughes Road,

Mumbai-400007. The petitioner frequently participates in jewellery shows,

exhibitions and displays across various cities in India, including Ranchi,

Guwahati, Delhi and Lucknow as these exhibitions serve dual purposes of

showcasing crafted jewellery and taking orders for custom-made jewellery.

4. Similar jewellery shows were held in 2021 and 2022 include venues

such as Saket Nagar in Ranchi, Apsara Banquet Hall in Guwahati, Hotel

Ambassador-IHCL in Delhi and Taj Hotel in Lucknow, detailed of which

including schedules of these exhibitions, dates of goods movement and

exhibition timings, were maintained by the petitioner for records and

verification.

5. The petitioner has been consistent in filing income tax returns and has

been assessed regularly under the said Act by Respondent No. 2. For financial

years from 2016-17 to 2021-22, the petitioner reported turnovers ranging

from ₹6.85 crores to ₹13.33 crores and paid taxes accordingly. Assessment

orders under Sections 143(3) and 143(1) of the said Act were passed for these

years.

6. In November 2022, the petitioner planned an exhibition in Ranchi in

association with one Devika Dhanuka, scheduled for November 14-15, 2022,

at Dhanuka House, Saket Nagar, Kanke Road, Ranchi. For this purpose, two

employees, Mr. Abhijit Pal and Mrs. Kirti Bazaz, were deputed to travel by

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train from Kolkata to Ranchi on November 13, 2022, carrying 241 pieces of

jewellery along with requisite documents, including transfer memos and

certificates.

7. Upon arrival at the Ranchi Railway Station on November 14, 2022, the

employees were intercepted by two individuals claiming to be RPF personnel.

The jewellery and accompanying documents were confiscated and taken to the

RPF office. Subsequently, Respondent No. 6 informed the Income Tax

Department, leading to further interrogation and seizure.

8. The Income Tax Department officials, led by Respondent No. 3, arrived

at the RPF office and interrogated the petitioner’s employees. Summons under

Section 131(1A) of the said Act were served and the jewellery was taken to the

Income Tax office at Ranchi. The employees were detained separately, with

Mrs. Kirti Bazaz accommodated at Crystal Residency Hotel and Mr. Abhijit Pal

kept in the Income Tax office overnight.

9. On November 15, 2022, a government-approved valuer assessed the

jewellery at ₹4.71 crores. A purported search warrant under Section 132 of the

said Act was shown but not provided to the employees. The valuation and

seizure were documented in a Panchnama, which incorrectly stated the

valuation was done at the RPF office rather than the Income Tax office. The

jewellery was eventually sealed at the RPF office in the early hours of

November 16, 2022.

10. The petitioner’s representatives, including one Mrs. Varda Goenka,

visited the Income Tax office on November 15, 2022, to produce documents

and clarify the legitimate nature of the jewellery. Despite providing

manufacturing vouchers, stock registers and other records, the respondents

refused to release the seized jewellery, causing significant prejudice and loss

to the petitioner.

11. The petitioner submitted letters on November 21, 2022, December 1,

2022 and January 5, 2023, requesting the release of the seized jewellery.

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Respondent No. 3, lacking jurisdiction, issued a notice on February 2, 2023,

seeking additional details about the petitioner’s Mumbai showroom. The

petitioner responded in good faith on February 11, 2023.

12. On February 27, 2023, the petitioner informed Respondent No. 2 of the

unlawful seizure and requested the release of the jewellery and copies of

interrogation statements and other relevant documents were also sought for

clarity and records.

13. In the interrogations, Mrs. Kirti Bazaz and Mr. Abhijit Pal provided

detailed explanations regarding the purpose of their visit, stock records and

the legitimacy of the jewellery. Despite their cooperation, the respondents

refused to provide copies of their statements. The incident was widely

publicized in a local newspaper, “Dainik Bhaskar,” including photographs of

the seized jewellery, causing reputational damage to the petitioner.

14. The seized jewellery remains in the respondents’ possession without

any lawful justification. The petitioner has provided all necessary documents

to establish the legitimacy of the jewellery as stock-in-trade for its business

operations. Thus, being aggrieved by the act of the respondent authorities, the

present petition has been preferred.

15. The Learned Counsel for the petitioner submits that the seizure of its

jewellery was arbitrary, unlawful and in violation of the provisions of the

Income Tax Act, 1961. The jewellery in question is stock-in-trade and was

being transported for a legitimate business purpose, supported by requisite

documents.

16. The petitioner contends that Respondent No. 3 had no jurisdiction to

seize the jewellery without proper authorization under Section 132A of the

said Act. Furthermore, Respondent No. 6 (RPF) ‘s involvement in the seizure

process was beyond its legal authority.

17. The petitioner asserts that the government-approved valuer’s valuation

of the jewellery and the subsequent Panchnama are procedurally flawed. The

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discrepancies in the location of the valuation and the preparation of the

Panchnama highlight the irregularities in the process.

18. The petitioner emphasizes that the prolonged detention and

interrogation of its employees caused undue harassment and mental distress.

The confiscation of their mobile phones and the refusal to provide copies of

their statements further violated their rights.

19. The petitioner submits that the refusal of Respondents No. 3 and 4 to

release the seized jewellery, despite multiple representations and the

submission of supporting documents, constitutes a grave miscarriage of

justice. The petitioner has been deprived of its stock-in-trade, resulting in

significant financial loss and reputational damage.

20. The petitioner contends that the actions of the respondents have

tarnished its reputation, as evidenced by the publication of the incident in

local media. Such unwarranted publicity has adversely affected the

petitioner’s goodwill and business operations.

21. The petitioner prays for the immediate release of the seized jewellery, as

its continued detention serves no purpose and is contrary to the principles of

natural justice. The petitioner also seeks compensation for the financial losses

and reputational damage suffered due to the respondents’ unlawful actions.

22. The petitioner respectfully submits that it has acted in compliance with

all legal and regulatory requirements. The respondents’ actions, on the other

hand, have been high-handed, arbitrary, and devoid of any legal basis.

23. Learned Counsel appearing for the respondent authorities submits that

on 14th November 2022, the office of the Additional Director of Income Tax

(Investigation), Ranchi, received information from one Suman Kumar Jha,

Post Commander, RPF, S.E. Railways, Ranchi, herein the respondent no.6

that two railway passengers were detained by RPF, Ranchi, for carrying a

substantial quantity of gold ornaments and other valuable jewellery.

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24. The detained individuals stated in their recorded statements under

Section 131(1A) of the said Act, that the jewellery belonged to Dia Gold Jewels

Pvt. Ltd., the petitioner herein and they were employees of the company. They

claimed that the items were being transported to Ranchi for a private

exhibition at Dhanuka House, Saket Nagar, Kanke Road. However, they could

only produce a letter dated November 12, 2022 issued by the company

accountant and five transfer invoices, which were insufficient to substantiate

their claim.

25. The detained individuals, one Kirti Bajaj and one Abhijit Pal, failed to

provide stock registers, books of accounts or any written communication with

Ms. Devika Dhanuka regarding the exhibition. They also admitted to not

carrying a bill book or any mechanism to generate cash memos for the private

exhibition.

26. The absence of a bill book or alternative billing mechanism heightened

suspicion, as it indicated that sales could not be appropriately recorded in the

company’s books of accounts.

27. To ensure a fair and thorough investigation, an order under Section

131(1)(d) of the said Act, was issued, transferring the investigation to the

jurisdiction of the DDIT (Investigation), Unit 6(1), Kolkata, herein respondent

no. 4 where Dia Gold Jewels Pvt. Ltd. is headquartered.

28. The, respondent no. 4 issued summons to Dia Gold Jewels Pvt. Ltd.

Accountant one Dinesh Bajoria appeared on 14th November 2022 and claimed

that the detained jewellery was recorded in the company’s books. However, he

failed to reconcile the seized goods with the company’s stock registry, stating

that the company director, Ms. Varda Goenka, would address the discrepancy.

29. On 15th November 2022, one Ms. Varda Goenka produced some

registers, including the purchase, sales, manufacturing, and stock registers,

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but requested additional time to reconcile the jewellery. Despite being given

two days, she could not provide sufficient evidence to match the seized items

with the company’s stock.

30. The detained individuals and company representatives claimed the

jewellery weighed 4307 grams. However, upon verification, the actual gross

weight of the seized gold was found to be 5441 grams, revealing a significant

discrepancy.

31. Due to the failure to reconcile the jewellery with the company’s accounts

and the evident discrepancies, a warrant of authorization under Section

132(1)(c) of the said Act, was issued by the Principal Director of Income Tax

(Investigation), Patna. Subsequently, the bags were opened in the presence of

witnesses, and the jewellery was valued by a government-approved valuer.

32. It was alleged that the petitioner manufactured a chart submitted

during the present litigation, which was not presented to the authorities

earlier. All four individuals associated with the petitioner company maintained

that the total weight of the gold was 4307 grams.

33. The petitioner company failed to provide proof of registration under

Section 27 of the GST Act as a Casual Taxable Person or Non-Resident

Taxable Person in Jharkhand.

34. The petitioner alleged that the jewellery was seized on 16th November

2022, but relevant documents were only sent by email on 17th November

2022 at 11:30 PM. This delay further justified the respondents’ belief that the

jewellery was unexplained at the time of seizure.

35. The respondents relied on the judgment of the Hon’ble Supreme Court

in CIT v. Laljibhai Kanjibhai Mandalia reported in (2022) 16 SCC 139 to

support their case wherein the Court has emphasised the Wednesbury’s

principle stating:

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“4. Wednesbury’s principle- A decision of a public authority will be liable to be

quashed or otherwise dealt with by an appropriate order in judicial review

proceedings where the court concludes that the decision is such that no

authority properly directing itself on the relevant law and acting reasonably

could have reached it. (Associated Provincial Pictures House Ltd. v. Wednesbury

Corpn., per Lord Greene, M.R)”

36. Further, the petitioner’s audit report for the relevant assessment year

(2023-24) disclosed 22,309 grams of gold as of March 31, 2023, but the

reconciliation and verification of the intercepted jewellery remained

unresolved. Therefore, owing to the lack of supporting documentation,

discrepancies in weight and statements, and failure to establish that the

seized jewellery was accounted for in the company’s books, the jewellery

remains unexplained. The respondent authorities acted within their legal

powers and the investigation is ongoing to determine the appropriate

assessment and computation.

37. Upon a thorough examination of the documents presented to the Court

and taking into account the arguments put forth by the parties, this Court is

of the opinion that the respondent authorities had reasonable grounds to

suspect that the gold ornaments being transported by the petitioner’s

employees were not properly accounted for in the company’s records. Credible

information was received from the Post Commander of the Railway Protection

Force (RPF), Ranchi, which raised justifiable concerns regarding the nature of

the jewellery being carried without the requisite documentation. The absence

of crucial records, such as a bill book or alternative means for generating cash

memos, gave rise to substantial suspicion regarding the legitimacy of the

goods in transit. The respondent authorities, therefore, acted within the scope

of their legal mandate and had valid grounds to believe that the jewellery

might have been unlawfully transported or unaccounted for, justifying the

seizure.

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38. Furthermore, the initial seizure of the jewellery was conducted by the

authority under Sections 131 and 132 of the said Act. The respondents, after

a detailed inquiry, discovered several discrepancies in the petitioner’s

documentation. The detained employees were unable to provide satisfactory

explanations for the absence of stock registers and other essential records.

Furthermore, the discrepancies in the weight of the seized jewellery, as

compared to the petitioner’s claimed quantity, further substantiated the belief

that the goods were not accurately reflected in the petitioner’s books. In

exercising their powers in good faith and within the scope of their legal

authority, the respondent authorities acted justifiably in seizing the jewellery

at that time.

39. Despite being afforded ample opportunity to reconcile the seized

jewellery with its official records, the petitioner failed to do so. The petitioner’s

representative, one Ms. Varda Goenka, was unable to provide sufficient

evidence to substantiate that the jewellery was a part of the petitioner’s

legitimate stock-in-trade. The absence of stock registers and the significant

discrepancies in the weight of the jewellery raised further concerns. The delay

in submitting crucial documents, including a late email submission, only

added to the justification for the seizure. The irregularities in the petitioner’s

documentation warranted the respondent authorities’ continued possession of

the jewellery.

40. The investigation was transferred to the appropriate jurisdiction as

authorized under the said Act and the respondent authorities acted within

their legal rights in continuing the investigation. The petitioner’s failure to

satisfactorily reconcile the seized jewellery with its books of accounts, along

with the substantial discrepancies in the weight of the gold, justified the

ongoing investigation. Consequently, the seizure of the jewellery remains valid

as part of an investigation into potential non-compliance under the said Act.

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41. For the foregoing reasons, given the petitioner’s failure to substantiate

the legitimacy of the jewellery, the discrepancies in documentation and weight

and the reasonable belief of the respondent authorities in potential

wrongdoing, the seizure of the jewellery is found to be valid and in compliance

with the provisions of said Act. The actions of the respondent authorities were

undertaken within their jurisdictional powers and in good faith.

42. All pending applications are accordingly disposed of.

43. There shall be no order as to costs.

44. Urgent Photostat certified copies of this judgment, if applied for, be

supplied to the parties upon fulfilment of requisite formalities.

(RAJARSHI BHARADWAJ, J)

Kolkata
07.04.2025
PA (BS)