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The Allahabad High Court has held the Income Tax Department (IT Dept) responsible for the disappearance of jewellery worth over ₹90 lakh that had been seized during a tax raid and stored in a nationalised bank locker. The court directed the department to pay compensation to the taxpayer, Mr Jain, with interest, while also allowing the department to recover the amount from the bank if it so wishes.
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Theft from Custody Raises Alarming Questions
During a tax investigation, Mr Jain’s gold jewellery, reportedly valued at more than ₹90 lakh, was seized after he failed to account for its ownership. The items were locked in a bank’s safe custody under the IT Dept’s oversight — but were later reported stolen. Mr Jain filed a writ petition (WRIT TAX No. 4160 of 2025) asserting that although the underlying seizure may have been valid, the department had failed to safeguard the assets in its care. The High Court found that since the IT Dept had initiated the seizure, any loss in the chains of custody rested with it.
Court Orders Compensation and Sets Penalties
The judgement dated September 25 2025 directed the IT Dept to verify the petitioner’s valuation dated July 30 2025 and settle the amount within four weeks. If payment is delayed, interest at 12% per annum will apply from the date of seizure. The department was informed that it could seek recovery from the respondent bank but cannot delay compensation to the taxpayer. Further, the court criticised the department’s delay in processing a prior settlement and ordering return of assets, attributing fault to institutional inertia.
Wider Implications for Seizure and Custody Protocols
Legal and tax-policy experts say the ruling serves as a warning to authorities about custody responsibility for seized assets. When government agencies seize property, they assume a fiduciary duty to ensure secure storage and receipt by the rightful party. Failure to do so exposes them to compensation liability. This case may prompt revisions of storage protocols, stricter chain-of-custody controls and enhanced audit trails in asset-seizure processes. For taxpayers, it underscores the importance of judicial recourse even after a seizure, notably when the property is lost or mis-handled by authorities.
The Allahabad High Court’s decision illustrates that seizure does not end the state’s obligation — custody matters. The taxpayer may now receive his compensation, but the incident raises deeper questions about accountability in the system of income tax enforcement.
