@JUDGMENTTAG-ORDER
P. SHANMUGAM, J. :
Notice.
The petitioner has prayed for a direction to the respondents to release and hand over the gold ornaments and pledge forms and applications seized
by order under Ext. P2 by accepting immovable property security.
2. The petitioner is a partnership firm doing money lending business. They have filed the above original petition challenging the order of the 1st
respondent, authorised officer, passed under s. 132(1) of the IT Act. They also prayed for a direction to return the gold ornaments and other
articles seized under Ext. P2 order.
3. A search was conducted at the business premises of the petitioner on 6th January, 1997. It was seen that the firm had been doing unaccounted
gold business advancing amounts in respect of gold pledged. The advances so made comes to Rs. 39,56,630. In the absence of satisfactory
explanation gold weighing 10,802.300 gms. approximately valued at Rs. 47,53,000 were seized under s. 132(1) of the Act. The petitioner
requested for the release of the seized articles on furnishing immovable property security along with the valuation report showing the value of the
property at Rs. 24,45,000. As there was no response from the Department, the original petition was filed.
4. By the time the matter came up for hearing on 16th February, 1997 the second time, while rejecting the request of the petitioner to accept
immovable property security, the petitioner was requested adequate and sufficient security in the form of bank guarantee to cover the value of the
assets seized. Thereafter learned counsel pursued to argue the matter.
5. The main submission made by learned counsel for the petitioner is that the gold jewellery seized from the petitioner does not belong to firm.
They were pledged articles. The assessment of undisclosed income as a result of search would not result in more than 60 per cent. of its value
being assessed as tax and therefore, petitioner is entitled to get the release of the articles on furnishing Rs. 24,45,000 as it would be sufficient to
safeguard the interest of the Department. Learned counsel for the petitioner further submitted that the 1st respondent has no jurisdiction to pass
assessment orders and therefore, he cannot assess the value for the release of the jewellery.
6. The contention of the petitioner is that the pledged articles do not belong to them. Prima facie I cannot accept it. The petitioner-firm as pledgee
is entitled to possession. They have statutory right to realise the money advanced on the security. The right of the pledgee is a special property
right. A Division Bench of Madras High Court in Madras Pawn Brokers Assn. vs. State of Tamil Nadu (1995) 98 STC 457 while dealing
Pawners right held as follows :
While pledging an article with a licensed pawn broker, the pawner not only parts with the possession of the pledged article in favour of the
pawnbroker, but by virtue of such pledge parts with the rights he held to sell the pledged article in case of default of payment and discharge of the
loan or redemption of the article pledged within the time stipulated therefor. Such auction or sale by the pawnbroker does not depend upon any
further consent or permission by the pawner.
Therefore, the action of the Department in seizing the jewels which represented undisclosed investment cannot be held to be illegal.
7. Chapter XIV-B of the IT Act provides for special procedure for assessment of search cases. Sec. 158BE sets out time limit for completion of
procedure for assessment. There is no assessment done. They have only given the approximate value of the jewellery seized.
8. Learned standing counsel for the IT Department while opposing the release of the goods referred to the instructions furnished to him. According
to him, the firm was doing money lending on the security of gold ornaments pledged and was charging interest at 36 per cent. but was accounting
only 24 per cent. The excess interest of 12 per cent. was being noted on a separate sheet of paper and was being shared among the partners who
were using their share for their personal investments. On a preliminary scrutiny of the seized materials, it is seen that the firm by resorting to
understating of its interest income had concealed its real income as indicated below :
Rs.
Interest @ 17% Siphoned away during the asst. yrs. 1992-93 to 1994-95 19,98,750
Interest income Siphoned away during current financial year upto 7th January, 2,53,395
199 ?
Unaccounted investment in gold loan business as on 7th January, 1997 39,56,630
Cash balance on the unaccounted gold loan business 66,548
62,75,323
There is no serious dispute regarding the value of the gold which come to Rs. 47,53,000. It is also not seriously disputed that the business of which
seizure is taking place was not the subject-matter to assessment and that therefore, they are only unaccounted assets. The petitioner would be
given sufficient opportunity as per the special procedure set out in reference to assessment of such cases.
Taking into account all the facts and circumstances of the case, there will be a conditional order of interim direction. Accordingly, I direct the 1st
respondent to release and hand over the gold ornaments and pledge forms and application immediately on the petitioner furnishing bank guarantee
for a sum of Rs. 47,53,000 to the satisfaction of the 1st respondent.