VINODBHAI JAYANTILAL ZAVERI Vs. DIRECTOR OF INSPECTION INVESTIGATION

JUDGEMENT

(1.) THE petitioner is running a proprietorial business in articles made of precious metals and precious stones. On 2nd Feb., 1965, there was a search by the Central Excise Authority on the petitioner when the Central Excise Authority seized 22 carats gold ornaments weighing 967.650 gms. worth Rs. 1,74,177 and alloy gold studded with diamond weighing 152.500 gms. worth Rs. 1,01,440. Both the types of above ornaments were lying with the Central Excise Department. The Central Excise Authority also found cash amounting Rs. 1,60,000 which the Director of Inspection in pursuance of authorisation under S. 132A of the IT Act took possession from the Central Excise Deptt. After holding the enquiry, an order under S. 132(5) of the IT Act, 1961, was passed on 24th June, 1985, estimating undisclosed income in the summary manner to the best of its knowledge and calculated the amount of tax on the income so estimated and also determined other liabilities likely to arise in respect of such undisclosed assets and ordered for retention of Rs. 1,60,000. In estimating the petitioner's undisclosed income and calculating the tax liability likely to come into existence as a result of such undisclosed income, the aforesaid ornaments and jewellery were also taken into account. Regular assessment in respect of the asst. year 1985 86 was completed on 30th March, 1988. As the assessee was found in possession of the aforesaid jewellery and ornaments and cash on 25th Feb., 1985, question whether these assets represented undisclosed income of the assessee was also dealt with during the course of regular assessment for the asst. year 1985 86 in terms of S. 69A of the IT Act. The ITO on the basis of the material before it, came to the conclusion that the possession of the aforesaid assets of which he was found in possession during the course of search conducted on 25th Feb., 1985, was duly explained by the assessee and the same cannot be treated as income from undisclosed sources.

(2.) IT further appears that the Central Excise Authority also found possession of gold ornaments and jewellery by the assessee as lawful and released the same on 25th Feb., 1989. Immediately on release of the aforesaid articles by the Central Excise Authorities, by order Exh. 'B' dated Nil, the Asstt. CIT seized the same and issued the impugned notice in the present petition for passing appropriate order under S. 132(5) for the retention of those articles. It is this action of the respondent which is under challenge in this petition before this Court.

(3.) IT was urged on behalf of the respondents that the gold ornaments and jewellery, being not the subject matter of the seizure which took place earlier, could have been seized on their being released by the Customs Authorities and the order under S. 132(5) of the Act could have been passed in respect of those seized articles for retaining the same inasmuch as the order of the ITO finding possession of those articles as explained was made subject matter of revision under S. 263 by the CIT and the same was pending.