Income Tax Dept. Can Inspect Seized Jewellery Without Disclosing Reasons During S. 263 Proceedings: Calcutta High Court

The Calcutta High Court has ruled that the Income Tax Department is not required to disclose the information or reasons prompting inspection of seized jewellery and bullion, so long as such inspection is undertaken “for any of the purposes of the Income Tax Act.” The Court dismissed a writ petition challenging inspection notices issued during pending revisionary proceedings under Section 263 of the Income Tax Act, 1961. The bench of Justice Om Narayan Rai observed that the information or reasons prompting inspection are merely triggers and not evidence, and there is no statutory requirement to disclose them before inspection. The presence of the assessee during inspection is intended to ensure transparency and prevent apprehensions of tampering, not to convert the inspection notice into a reasoned or adjudicatory order. The case arose from a search and seizure operation conducted in June 2022 at the residence, office, and bank lockers of the petitioner and his family members under Section 132 of the Act. During the search, jewellery, gold bars, and other valuables were seized, inventoried, valued by approved valuers, sealed, and deposited in the custody of the Income Tax Department in accordance with prescribed procedures. Subsequently, the petitioner filed his return of income for Assessment Year 2023–24, which was initially processed under Section 143(1) and later taken up for scrutiny. In the assessment order passed in March 2024, the Assessing Officer partly accepted the explanation regarding the seized assets and made additions treating a portion as unexplained. The petitioner challenged this assessment in appeal, which remains pending before the appellate authority. While the appeal was pending, the Principal Commissioner of Income Tax initiated revisionary proceedings under Section 263, alleging that the assessment order was erroneous and prejudicial to the interests of revenue due to inadequate inquiry into the source of the seized jewellery and bullion. During these proceedings, the department issued notices in October and November 2025 proposing inspection of the seized assets kept in sealed packages in the department’s strong room. The petitioner objected to the proposed inspection, citing medical inability to attend, absence of statutory basis, lack of disclosed purpose, and risk to the chain of custody. It was also argued that since the issue of seized assets was already under appeal, the Commissioner was barred from revisiting the matter under Section 263. The petitioner further contended that any inspection under Rule 112(13 of the Income Tax Rules, 1962 must be supported by disclosed reasons and information. Rejecting these arguments, the High Court held that Rule 112(13) permits reopening of sealed packages of seized valuables whenever required “for any of the purposes of the Act,” after giving reasonable notice to the person concerned. The Court clarified that unlike search and seizure, inspection of already seized assets is not an invasive act and does not require “information” or “reason to believe” as jurisdictional facts. On the linkage with Section 263 proceedings, the Court held that the Principal Commissioner has wide powers to make or cause to be made any inquiry deemed necessary. Inspection of seized assets can legitimately form part of such inquiry, even if the precise relevance becomes clear only after inspection. Relying on Supreme Court precedent, the Court emphasized that the revisional authority is not confined to issues expressly mentioned in the show-cause notice. Addressing concerns over disturbance of chain of custody, the Court noted that inspection would take place in the strong room itself, in the presence of the petitioner, and in accordance with statutory safeguards. Mere apprehension could not invalidate an otherwise lawful inspection. Consequently, the Court upheld the validity of the impugned inspection notices and dismissed the writ petition. However, since the dates mentioned in the notices had already lapsed, the Court granted liberty to the Income Tax Department to issue fresh inspection notices strictly in accordance with law, if deemed necessary. A short stay of seven days on the operation of the judgment was granted after pronouncement. Case Details Case Title: Shri Miraj Digvijay Shah Vs. The Assistant Commissioner of Income Tax Case No.: WPA 25602 of 2025 Date: 28.01.2026 Counsel For Petitioner: J. P. Khaitan, Sr. Adv. Counsel For Respondent: Dhiraj Kumar Trivedi, Ld. DSGI Click Here To Read Order Read More: GST Writs Dismissed Citing Alternate Remedy Despite Alleged Non-Service of SCN, Denial of Personal Hearing: Rajasthan HC

Income Tax Dept. Can Inspect Seized Jewellery Without Disclosing Reasons During S. 263 Proceedings: Calcutta High Court

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