The Madhya Pradesh High Court (Indore Bench) has quashed the reopening proceedings under Section 148 of the Income Tax Act against an employee of Sequel Logistics, holding them to be baseless. The case arose after a vehicle carrying 37 sealed jewellery consignments worth over ₹6 crore was intercepted by the Static Surveillance Team (SST) during enforcement of the Model Code of Conduct for the Legislative Assembly elections.
A Division Bench of Justice Vivek Rusia and Justice Binod Kumar Dwivedi declared both the SST seizure and subsequent Income Tax requisition illegal, citing violations of the Election Commission’s Standard Operating Procedures (SOPs) and statutory provisions. The Court directed the Deputy Commissioner of Income Tax to release the consignments to their rightful owners upon verification, and further imposed costs of ₹50,000 on each petitioner, payable jointly and severally by the concerned department officers.
Reviewing the SOP, the Bench noted that cash or valuables may only be seized when there is a clear nexus with electoral misuse. In this case, neither the SST nor the District Grievance Committee (DGC) recorded any satisfaction that the jewellery was intended to influence voters, nor was it linked to any political party, candidate, or election campaign. The Court observed that once no electoral offence or FIR is registered, seizures cannot be prolonged and valuables must be promptly returned.
The Bench pointed out that even the Income Tax Department admitted that the vehicle was neither carrying unaccounted nor election-related valuables, and all necessary documentation was available, further establishing that SST and DGC’s actions did not satisfy legal thresholds for seizure or statutory transfer. Thus, the Bench added that the mere high value of the consignment was wrongly made the basis for seizure and handover to the Income Tax Department, rather than any legal suspicion or evidence of illegality.
The Bench went on to observe that the goods were kept with the SST for nearly a week, contrary to the explicit SOP bar against keeping valuables in Malkhana/Treasury for more than seven days without FIR, and without paperwork documenting the chain of custody. There were also discrepancies in the number and value of consignments as recorded by the SST and by the I-T Department, casting further doubt on the legitimacy of the procedures followed.
The Bench also observed that the Respondent Authorities wrongly treated Amit Sharma, the custodian-employee of Sequel Logistics, as the owner of the consignments, despite overwhelming documentary evidence and his own statements that he had only a bailee’s responsibilities, and was performing official duties for his employer during lawful logistics operations. Not even an FIR was lodged against any party regarding the incident, negating justification for treating the valuables as case property under criminal suspicion or property used for electoral offences.
Speaking for the Bench, Justice Rusia emphasised that requisition under Section 132A and reopening proceedings under Section 148 were carried out in the absence of any credible “reason to believe” of non-disclosure of income. Moreover, the Bench clarified that the absence of e-way bills was not fatal, as transportation of jewellery is expressly exempt under Rule 138(14)(a) of the CGST Rules, 2017, and thus could not serve as a basis for suspicion or adverse inference.
The Bench added that despite the clear statutory framework in Section 132B for making applications for release of seized assets, including a binding 120-day limit for the AO to conclude proceedings or release assets, no determination or adjudication was made within time, which was blatantly arbitrary, unlawful, and against statutory mandate.
Briefly, during the Madhya Pradesh Assembly Elections in October 2023, the Static Surveillance Team (SST) in Ratlam intercepted a vehicle operated by Sequel Logistics Private Limited, seizing 37 sealed jewellery consignments valued at over Rs. 6 crores, which were being transported by one of its employees. The consignments, belonging to various jewellers including Arihant Jewellers, were handed over to the Income Tax Department under Section 132A of the Income Tax Act, despite accompanying documents like tax invoices and dockets. The IT Department initiated reassessment proceedings against Amit Sharma, treating him as the owner, while Arihant Jewellers and Sequel Logistics sought release of the goods, claiming the seizure violated Election Commission SOPs and Income Tax procedures.
Cases Relied On:
CIT v. Vindhya Metal Corporation (1997) 5 SCC 321
DGIT (Investigation) v. Spacewood Furnishers Pvt Ltd. (2015) 374 ITR 595 (SC)
Harshvardhan Chhajed v. DGIT (Investigation) (2021) 438 ITR 68 (Raj)
State of Punjab v. Davinder Pal Singh Bhullar (2011) 14 SCC 770
Badrinath v. Government of Tamil Nadu (2000) 8 SCC 395
Appearances:
Senior Advocates Ajay Bagadia & P.M. Choudhary, along with Advocates Amit Pal and Jai Kansara, for the Petitioner/ Taxpayer
Advocates Harsh Parashar, Yashika Bondwal, and Bhuwan Gautam, for the Respondents/ Revenue
