HC Upholds Seizure of Jewellery Over Accounting Discrepancies

Case Details: Dia Gold Jewels (P.) Ltd. vs. Principal Commissioner of Income-tax - [2025] 173 taxmann.com 386 (Calcutta)

Judiciary and Counsel Details

• Rajarshi Bharadwaj, J.
• Ranjit Kumar Murarka, Vivek Murarka, Pramod Kumar Saraf & Dibanath Dey for the Petitioner.
• Aryak Dutt & Soumen Bhattacharya for the Respondent.

Facts of the Case

The assessee was a private limited company that designed, crafted, and sold fine gold and studded stone jewellery. It operated showrooms in various locations across India and frequently participated in jewellery shows, exhibitions, and displays in multiple cities.

On the exhibition day, two employees were deputed to carry jewellery and requisite documents, including transfer memos and certificates, to the exhibition location. Upon arrival at the Railway Station, 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.

Further, the Income Tax Department officials interrogated the employees, and jewellery was taken to the Income Tax office. A government-approved valuer assessed the jewellery at a higher price than the assessee claimed. Despite providing manufacturing vouchers, stock registers, and other records, the authorities refused to release the seized jewellery.

The assessee filed the instant petition before the High Court.

High Court Held

The High Court held that the authorities seized the jewellery under sections 131 and 132 of the Act. The authorities had reasonable grounds to suspect that the gold ornaments being transported by the assessee’s employees were not adequately accounted for in the company’s records. It was noted that credible information was received from the Post Commander of the Railway Protection Force (RPF), 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.

Furthermore, the discrepancies in the weight of the seized jewellery, as compared to the assessee’s claimed quantity, further substantiated the belief that the goods were not accurately reflected in the assessee’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.

The assessee failed to reconcile the jewellery with its books of account. The assessee’s representative could not provide sufficient evidence to substantiate that the jewellery was a part of the assessee’s legitimate stock-in-trade. The absence of stock registers and the significant discrepancies in the weight of the jewellery raised further concerns. The assessee’s failure to satisfactorily reconcile the seized jewellery with its books of accounts and 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 Act.

List of Cases Referred to

• Principal DIT (Investigation) v. Laljibhai Kanjibhai Mandalia [2022] 140 taxmann.com 282/288 Taxman 361/446 ITR 18 (SC) (para 35).