P. Shanmugam, J.
1. Notice.
2. 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 exhibit P-2 by accepting immovable property security.
3. The petitioner is a partnership firm doing money-lending business. They have filed the above original petition challenging the order of the first respondent, authorised officer passed under Section 132(1) of the Income-tax Act. They also prayed for a direction to return the gold ornaments and other articles seized under exhibit P-2 order.
4. A search was conducted at the business premises of the petitioner on January 6, 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 Section 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.
5. By the time the matter came up for hearing on February 16, 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 proceeded to argue the matter.
6. The main submission made by learned counsel for the petitioner is that the gold jewellery seized from the petitioner does not belong to the 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 first respondent has no jurisdiction to pass assessment orders and, therefore, he cannot assess the value for the release of the jewellery.
7. 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 the Madras High Court in Madras Pawn Brokers Association v. State of Tamil Nadu [1995] 98 STC 457, while dealing with pawners' right, held as follows (headnote) :
'While pledging an article with a licensed pawnbroker, 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 the 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.
8. Chapter XIV-B of the Income-tax Act provides for special procedure for assessment of search cases. Section 158BE sets out time limit forcompletion of procedure for assessment. There is no assessment done. They have only given the approximate value of the jewellery seized.
9. Learned standing counsel for the Income-tax 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 at 17% siphonedaway during the assessment years 1992-93 to 1994-95
19,98,750
Interest income siphoned away during current financial year up to 7-1-1997
2,53,395
Unaccounted investment in gold loan business as on 7-1-1997
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 comes 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 of assessment and that therefore they are only unaccounted assets. The petitioner would be given sufficient opportunity as per the special procedure set out with reference to assessment of such cases.
10. Taking into account all the facts and circumstances of the case, there will be a conditional order of interim direction. Accordingly, I direct the first respondent to release and hand over the gold ornaments and pledge forms and applications immediately on the petitioner furnishing bank guarantee for a sum of Rs. 47,53,000 to the satisfaction of the first respondent.