Release of seized jewellery/gold u/s 132B within 120 days is directory not mandatory

Stipulation of 120 days for release of seized jewellery/gold u/s 132B is directory not mandatory – Delhi High Court

In a recent judgment, Hon’ble Delhi High Court has held that in view of section 132B(4), the stipulation of 120 days for release of seized jewellery/gold is directory not mandatory.

ABCAUS Case Law Citation:
4963 (2025) (12) abcaus.in HC

In the instant case, the assessee had filed a Writ Petition challenging the order passed by the Assessing Officer (AO) rejecting the application for release of gold/jewellery seized u/s 132 of the Income Tax Act, 1961 (the Act).

It was contended that as per the second proviso to Section 132 B(1)(i) of the Act, it was incumbent upon the Income Tax Department to release the seized gold/jewellery within 120 days from the date of search.

It was submitted that as per the statute, when the person concerned makes an application within 30 days from the end of the month in which assets were seized and furnishes explanation to the satisfaction of the AO subject to the existing liability, the assets may be released.

It was contended that even after the lapse of 120 days after appellant made application u/s 132B, no action was taken by the Department and the documents placed by the petitioners were completely ignored.

It was submitted that after the direction of the Hon’ble High Court to decide the application for release of the jewellery within a period of one week, the impugned order was passed only 11 days after the date of the order of the High Court, dismissing the application filed by the petitioners under section 132B of the Act and rejecting the release of jewellery/gold on completely perverse and frivolous grounds.

The Petitioner placed reliance on a decision of the Bench to substantiate her argument that as per Section 132B(1)(i), the jewellery should not have been retained after the lapse of 120 days. Also, reliance was placed on the decision of the Gujarat High Court to say that withholding of assets seized, beyond the period of 120 days is not tenable in law. Similarly, the Petitioner highlighted the decision of Guwahati High Court which expressed agreement with the judgment of the Gujarat HC observing that the said decision was not challenged by the Revenue Department before the Supreme Court.

On the contrary, the Revenue stated that although Section 132B(1)(i) of the Act contemplates the release of assets, once the nature and source of their acquisition is wholly explained, however, the provision does not stipulate any automatic release. The second proviso which prescribes the release of assets within 120 days from the last authorization of search, as per him, does not waive the requirement of the satisfaction of the AO with respect to the nature/source of the seized assets.

The Revenue further contended that Section 132B(4) of the Act provides for payment of interest on the seized items on the expiry of 120 days as provided in the second proviso to Section 132B(1)(i). Therefore, where the law provides for a certain consequence on the happening of an event, no other consequence can be read in.

The Hon’ble High Court observed that the judgment of the Bench relied upon by the Petitioner was distinguishable in as much as the question which fell for consideration in that petition before this Court was the date from which the Income Tax Department is liable to pay interest on the amount of money /assets seized from the petitioner.

The Hon’ble High Court noted that the Allahabad High Court has interpreted the words ‘shall release’ under Section 132B(1) (i) of the Act to decide as to whether the words display a mandatory or a directory intent. The Court held that the consequence of non-compliance of Section 132B(1)(i) of the Act is by way of payment of interest at the highest rate provided by the legislature, i.e. 18% per annum. Hence, by imposing the levy of interest on the Revenue, the legislature itself contemplated the cases where the order is yet to be passed by the AO within the timeline provided under the said sub section. As such, the time line prescribed was held to be not mandatory.

The Hon’ble High Court also observed that the appeal filed against the judgment of Allahabad High Court was dismissed by the Supreme Court, keeping the question of law open. However, the Apex Court has not conclusively decided the issue.

The Hon’ble High Court noted that the Petitioner had relied on a judgment of the Bench to contend that the issue whether the provisions of Section 132B of the Act got triggered once period of 120 days from the date of last authorization for search under Section 132 expired. However, the said judgment did not consider the effect of Section 132B(4) of the Act, which aspect had been considered and dealt with by the Allahabad High Court.

The Hon’ble High Court following the conclusion drawn by the Allahabad and Rajasthan High Courts held that in view of Section 132B(4), the stipulation of 120 days for release of seized jewellery/gold shall not be mandatory. 

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