Release of Seized Assets Due to Time-Barred Assessment (Section 132B)

By | March 25, 2026
0 Comment

Release of Seized Assets Due to Time-Barred Assessment (Section 132B)

Facts

  • The Seizure: In March 2008, during a search and seizure operation, the Revenue seized jewellery valued at Rs. 40.34 lakhs belonging to the Petitioner.

  • The Assessment: An assessment was originally framed for AY 2008-09, making an addition for the value of the seized jewellery.

  • The ITAT Order: In 2016, the ITAT set aside the assessment and remanded the matter to the Assessing Officer (AO) to decide the issue of the jewellery afresh.

  • The Revenue’s Inaction: Following the ITAT’s directions, the Revenue failed to pass a fresh assessment order. Nearly nine years passed without any compliance or communication from the Department.

  • The Dispute: The Petitioner applied for the release of the jewellery under Section 132B. Receiving no response, the Petitioner filed a writ petition, arguing that since the fresh assessment was now time-barred, the Revenue had no legal authority to retain the assets.

Decision

The Court ruled in favor of the Petitioner, directing the immediate release of the jewellery based on the following legal reasoning:

  • Expiration of Statutory Time Limits: Under Section 153(3), when an assessment is set aside or cancelled by an order of the ITAT, the fresh assessment must be made within a specific timeframe. The Court found that this statutory limit had long expired.

  • Loss of Authority to Retain: Once an assessment becomes time-barred, the Revenue loses the legal “peg” upon which it can hang a demand. Without a valid assessment order or an existing tax liability, there is no “existing liability” under Section 132B(1)(i) against which the assets can be adjusted.

  • Inordinate Delay: The Court noted the lapse of almost nine years. The Revenue cannot indefinitely withhold the private property of a citizen while failing to perform its own statutory duty of passing an assessment order.

  • Final Verdict: Since the Revenue failed to comply with the ITAT’s directions within the allowed time, the retention of the jewellery was deemed unauthorized by law.

Key Takeaways

  • Section 153(3) as a Shield: Taxpayers should strictly monitor the timelines for “remand” proceedings. If the AO fails to pass a fresh order within the time prescribed after an ITAT/Court set-aside, the entire proceeding lapses, and the Department cannot recover any tax for that year.

  • Right to Property: Seized assets are not the property of the State; they are held as security against potential tax dues. If the process of determining those dues fails due to the Department’s negligence, the assets must be returned.

  • Writ Jurisdiction: When the Revenue ignores applications for the release of assets under Section 132B, a Writ Petition is the appropriate remedy to compel the Department to act, especially where statutory timelines have been breached.

  • Asset Release Procedure: After a favorable appellate order, if no fresh demand is raised within the limitation period, the Assessee should formally move an application for release under Section 132B before the Principal Commissioner (PCIT) to create a record for potential litigation.

HIGH COURT OF BOMBAY
Shardadevi S. Jhunjhunwala
v.
Income-tax Officer*
B. P. COLABAWALLA and FIRDOSH P. POONIWALLA, JJ.
WRIT PETITION (L) NO. 38475 OF 2025
INTERIM APPLICATION (L) NO. 6068 of 2026
[Assessment year 2008-09]
FEBRUARY  18, 2026
Tanzil Padvekar, Rama B. Waghmare, Advs. and Vasantkumar Takke for the Petitioner. Mamta Omle, Adv. for the Respondent.
ORDER
1. Rule. Respondents waive service. With the consent of parties, Rule made returnable forthwith and heard finally.
2. By this Writ Petition, the Petitioner is challenging the action of the Respondents in withholding jewellery seized at the time of the search, which ought to have been released since the ITAT has set aside the assessment order, and thereafter, there has been no action on the part of the Respondents for eight years. Thus, the Petitioner seeks directions of this Court for release of the said jewellery.
BRIEF FACTS:
3. A search and survey action was conducted in the case of Sudhir Jhunjhunwala (son of the Petitioner) and his associates on 13th March, 2008. During the search, jewellery pertaining to the Petitioner was seized, which was approximately valued at Rs. 40,34,100/- and weighed approximately 3,209.900 grams.Pursuant to the search, an assessment order under Section 143(3) of the Act was passed for A.Y. 2008-09 in the case of the Petitioner by Respondent No. 1, wherein an addition on account of the seized gold was made in the hands of the Petitioner vide Assessment Order dated 30th December, 2009.
4. Being aggrieved by the Assessment Order, the Petitioner filed an appeal before the CIT(A), which was dismissed. Being aggrieved by the order of the CIT(A), the Petitioner filed an appeal before the Income Tax Appellate Tribunal (ITAT), which was numbered as ITA No. 8232/Mum/2010 pertaining to A.Y. 2008-09. The ITAT passed an order dated 05th April, 2016, wherein the Assessment Order and the order of the CIT(A) were set aside on the issue of the addition made in the hands of the Petitioner on account of the seized jewellery. The ITAT, accordingly, directed the Assessing Officer to pass a fresh order by deciding the issue once again/afresh.
5. It is the Petitioner’s case that pursuant to the order of the ITAT, no assessment order was passed in compliance with the directions of the Tribunal. Subsequently, vide application dated 05th May, 2022, the Petitioner requested that the outstanding demand for A.Y. 2008-09 be nullified, since no assessment order has been passed persuant to the order of the ITAT. The Petitioner has also placed on record evidence in the form of an RTI reply received from the ITAT showing that the order of the ITAT was duly served on the concerned PCIT on 9th September, 2016.
6. After all this, vide application dated 2nd December, 2024, the Petitioner asked the Respondents for release of the seized jewellery. A similar application was also made on 18th August, 2025. However, the Petitioner has not received any response, because of which the Petitioner has filed the present Writ Petition.
SUBMISSIONS:
7. Mr. Padvekar, appearing for the Petitioner, submits that pursuant to the order of the ITAT, it was incumbent upon the Respondents to follow the directions of the ITAT and pass an order within the statutory time limit provided under Section 153(3) of the Act. He submits that since the order of the ITAT was received by the Pr. Commissioner on 6th September 2016, the time limit for passing a fresh assessment order under Section 153(3) expired on 31st December, 2017, being nine months from the end of the financial year in which the order was received by the Commissioner.
8. Mr. Padvekar further submitted that Section 132B(1)(i) of the Act provides that the seized jewellery may be applied towards the existing liability as recognised under the Act. He further states that as per Section 132B(3) of the Act, once the liabilities are paid off, any assets or proceeds remaining after the liability is discharged, are required to be handed over to the person from whose custody the assets were seized. Since the assessment order was set aside, and no fresh assessment order is passed till date, the demand or liability ceased to exist, and therefore, the jewellery must be released to the Petitioner. In this regard, the learned Counsel for the Petitioner relied upon the decision of this Court in the case of Lakhpatrai Agarwal v. Assistant Commissioner of Income Tax (Bombay), wherein, under similar circumstances, where the Revenue did not pass a fresh order pursuant to the directions of the ITAT, the jewellery was required to be released.
9. On the other hand, Advocate Mamata Omle, appearing for the Revenue, states on instructions that if this Court directs the Revenue to pass the assessment order in compliance with the order of the ITAT, the same shall be passed within four weeks from today. She further submits that the order could not be passed earlier, but the same shall be passed on the directions of this Court.
CONCLUSION
10. We have heard the Counsel and perused the records.
11. It cannot be disputed that the ITAT, vide its order dated 05th April, 2016, remanded the matter back to the file of the Assessing Officer to adjudicate the issue of seized jewellery afresh. It also cannot be disputed that the said order was served on the Pr. Commissioner on 9th September, 2016, as stated in the reply to the RTI application filed by the Petitioner. Thus, we are in agreement with the submissions of the learned Counsel for the Petitioner that the outer time limit for passing a fresh assessment order in compliance with the directions of the Tribunal was 31st December, 2017, as per Section 153(3) of the Act, which admittedly has not been passed.
12. As far as the submissions of the Revenue are concerned, seeking directions to complete the assessment cannot be acceded to, since the statutory time limit prescribed under Section 153(3) has expired, and therefore, the assessment has become time barred, which cannot be permitted to be extended. This Court, in the case of Lakhpatrai Agarwal (supra), had occasion to deal with a similar issue, wherein it has been held that if the Revenue fails to take steps pursuant to the order of the ITAT, the jewellery seized must be directed to be released.
13. In the present case, there is a lapse of almost nine years on the part of the Revenue, during which it has failed to comply with the order of the ITAT and pass a fresh assessment order. Therefore, we see no good reason for the Revenue to withhold the seized jewellery. It is, therefore, directed that the Respondents shall release the seized jewellery to the Petitioner within a period of six weeks from today.
14. At this stage, Mr. Vasantkumar Takke, brought to our attention that he is appearing for an Intervenor, who is the daughter-in-law of the Petitioner. He brought to our attention that the Intervenor has filed Interim Application (L) No. 6068/2026 not only seeking to intervene in the above matter but also, inter alia, for a direction to the Respondents to hand over the Stridhan i.e. gold and diamond Ornaments belonging to the Applicant/Intervenor, which were seized from the Petitioner.
15. We are afraid that this relief cannot be granted in the present Petition. If the Applicant/Intervenor has any claim to any jewellery against the Petitioner, who is her mother-in-law, she is free to file her independent proceedings in that regard. The Interim Application is therefore dismissed. However there shall be no order as to costs.
16. This order will be digitally signed by the Private Secretary/Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order.