"_G.LT. WEST BENGAL~III & ORS. BTC. ORIENTAL RUBBER WORKS ETC.
. November. 15, 1983" :
VD, TULZAPURKAR, V. . BALAKRISHNA ERADI ano DP. Mapon, a)
Income Tax Act, 196!—See. 132—Interpretation of -Sub-sec. (1)—Seizure
- of books of account and documents —Sub-sec.(8) retention of books beyond 180
“days of seizure—Read with sub-secs, (10)” & (12)—Impose statutory obligation on
. Revenue to ‘communicate Commissioner's approval and recorded reasons of the authorised officer to person entitled for return of books. Retention of books— * ...
Without such communication- “unlanefal ft
‘The Revénue who had seized the books of account and documents of the assessee under sec. 132(1) of the Income Tax Act, 1961 did not return the same to the assessee after'a period of 180 days of the seizure. The -assessee filed a
. ” writ petition in the High Court inter alia praying for a direction to the Revenue to return the said books of account. The assesee submitted that the retention ” of the seized books of accounts and documents beyond the period of 180 days . was illegal arid invalid indsmuch as sieither the approval accorded by the.
" Commissioner of Income Tax for such “extended retention nor the recorded reasons of the Income Tax Officer on which such approval was based had been -.
communicated to him. A single Judge of the High Court held that the retention ‘of the books and documents beyond’ 180 days. was unlawful, A-
_* . Division Bench dismissed the Revenue’s appeal. In these appeals, the Revenue submitted that sec, 132(8) of the Act did not impose’ any obligation on'the Revenue to communicate the approval of the commissioner or the recorded reason of fhe Income Tax Officer on which it is based to the person from whose
“ custody the books of accounts and documents: had been seized: ;
. Dismissing the appeals,
- HELD: - It is true that sub-sec.(8) of séc, 132 of the Income Tax Act,
1961 does not in terms provide that the Commissioner's approval of the recorded reasons on which it might be based should be communicated to the
-concerned person but since the ‘person concerned is bound to be materially - 7 - prejudiced in the enforcement of his right to have, such books and documents _ ' retutned to him by being kept ignorant about the factum of fulfilment of either of ihe two conditions laid down’ therein it is obligatory upon the Revenue to communicate the Commissioner's approval-as also the recorded reasons to the person concerned. In the absence of such communication the Commissioner's decision according his approval will not become effective. (823 H; 824 Al
Moreover, sub-sec, (10) of sec.132. confers upon the Person legally entitled to the return of ‘the seized books and documents a. right to object to the |
818 ©. SUPREME COURT REPORTS {1984} 1 scx.
‘approval ‘given by the Cornmissiéner under sub-sec.(8) by making an appli ’ cation to the Central Board stating therein the reasons for such objection and under sub-séc.(12) of sec.132 it is provided that the Central Board may, after giving the applicant an opportunity of being heard pass such orders as it thinks fit. Itis obvious that without the knowledge of the factum of the Commissioner’s approval as also of the recorded reasons on the basis of which such approval has been obtained. it will not be possible for the person to whom the seized books or documents belong to make any effective objection to the approval before the Board and get back his books or documents. (824 B-C} :
The scheme of sub-secs.(8), 410) and (12) of sec, 132 makes it amply clear that there is a statutory obligation on the Revenue to communicate to the person concerned not merely the Commissioner’s approval but the recorded reasons on which the same has been obtained and that such communication must be made as expeditiously as possible after the passing of the order of a approval by the Commissioner and in default of such expeditious communication any further retention of the seized books or documents would become
+ invalid and unlawful. It is obvious that such obligation arises in regard to every approval of the Commissioner that might have been accorded from time to time. [824 D-F] .
; Civ Arpatuare JURISDICTION 7% Civil Appeal No. 1652 ‘of. 1973. *,
Appeal by Special leave from the Judgment and Order dated the 25th June, 1973 of the. Calcutta. High Court in Appeal’ No, 233 of 1970.
WITH Givil,Appeal Nos.’ 759-760 of 1973
From the Judgment and Order dated the 2nd June, 1972 of the . Calcutta High Court in Appeal fr from Original Order Nos. 155 & 158 -of 1970.
~~ AND "Civil Appeal No: 661 of 1975
From the Judgment and Order dated the 15th March, 1974. of : | the Calcutta High Court.in Appeal No. 96 of 1972,
VS. Desai, BB. Ahuja and Miss A, Subhashin for the Ape lant, in CA, 1652 of 1973, eo
Gat. ¥. ORIENTAL RUBBER WORKS (Tulzapurkar, J) 819
S.T. Desai, Miss A. ‘Subhashini for the Appellants in CA, Nos. 759-760 of 1973 & 661 of 1975.
Sanjay Bhattacharya, Rathindas and K. Kathazarika for the Respondent i in CA. No. 1652 of 1973. ; .
. ; Y.B. Saharya for the Respondent in CA. No. 759 of 1973.
N.S. Das Behl for the Respondent in CA, No. 760 of 1973. D.N. Mukherjee for the Respondent in CA. No. 66F of 1975. ‘The J udgment of the Court was delivered by
TULzaPuRKAR, J. All these appeals, at the ‘instance of the
-Commissioner-of Income-tax, raise a common’ question whether the
Revenue is under a. statutory obligation to comimunicate to the’
“person (from - whose custody books of account and documents have been seized under section 132(1). of the Income-tax Act, 1961) the approval obtained from the Commissioner of Income-tax and the recorded reasons of the Authorised ’ Officer/Income Tax Officer on which such approval is based for the retention of the seized books of account and documents by the Department for ‘a period exceeding {80 days from the date of seizure under sec. 132 (8) ° of the Income-tax Act, 196i 2
Since in all these ‘appeals ‘the facts giving rise to. aforesaid question are almost similar, it will suffice to indicate briefly the. facts obtaining in M/s. Oriental Rubber Work’s case (Civil Appeal No.
~~" 1652 of 1973). Under a proper.authorisation issued in that behalf under sec. 132(i) of the Act, on 17th February, 1965 a search was conducted by the Income-tax Department in the factory premises at
Kantalia as well as the offices'and godown at Mahatma Gandhi Road
Calcutta belonging to the raspondent-assessee and various books of actount and documents were seized from the aforesaid premises,
After lawfully carrying out the aforesaid search and seizure, the .
'_ respondent-assessee was given opportunity ‘to inspect the seized books and documents as also to make- copies of the entries. The concerned ~
Income Tax Officer then issued a notice to the respondent assessee
~ under Sec. 142(1) of the Act in connection with its assessment for’ . the assessment: year 1964-65 and after giving ‘several hearings which’
were attended by the respondent-assessee or its representative the assessment for the said year was, completed under section 143(3) of
=
Bo , a oe SUPREME COURT REPORTS : * sa is S.GR the Act on 5th Febiuary, 1 1969. Notwithstanding. the passing of such a ‘assessment order on Sth February, 1969,. the respondent-assessee | on 27th February, 1969 moved the Calcutta High Court by way of a ~Wwrit under Art. 226 of the Constitution inter alia praying (a) for a
" direction to the Commissioner of. Income-tax and the concerned — Authorized Officer/Income Tax Officer to return forthwith the said
_ books. of account, documents and papers -etc. seized as aforesaid.and to cancel or rescind the, warrant of. authorisation issued’ under sec, ,
. 132(1) of ‘the Act and (b) for a mandamus commanding the concer-
" ned Income. Tax Officer. not to proceed with the assessment, for the assessment’ year 1964- 65 until the return of documents . seized. on 17th February, 1965, The main submission of the: respondent- 7 assessee was that the retention of the séized books of account and , documents beyond’ the period of 180 days from the date of the - ' seizure (17th February, 1965) was illegal and invalid inasmuch as neither the’ approval accorded by the .Commissioner of Income-tax for such extended ‘retention nor the recorded reasons of the Autho-.
rized Officer/Income Tax Officer on which such approval. was based had been communicated to the respondent/assessee and that without the return, of the seized books of account and documents,’ no assess-.
. ment for the concerned assessment year 1964- 65 could be proceeded with ot made. On behaif of - the Revenue it was pointed out’, that the concerned Income’Tax Officer had recorded his reasons seeking . .
approval of the Commissioner of Incomé-tax for extended retention of the seized books ‘of. account and. documents and had obtained’
approval, of the Commissioner of Income-tax for such extended retention from time to time and therefore such retention of the seized .
books and’documents beyond 180 days was perfectly legal and valid ‘that there was no obligation | under -sec. 132(8) of the Act to commu-
* nicate the Commissioner’s approval for such ‘extended retention: or -— ' the ‘recorded reasons of the Income Tax -Officer- therefor to the respondent-assessee and that i in any event due inspection of the - °
‘seized -books. and documents was. afforded to the ‘respondent-_ - assessee who was also permitted'to take copies of the entries in the | books’ and after giving proper hearing to the respondent-assessee the assessment for the year 1964-65" had: ‘been validly completed on Sth February, 1969 long before the respondent- assessce approached the Court and obtained a Rule Nisi: A learned Single Judge of the. ~ High Court teld that the seized. books of account and other. docu- ments could not be retained beyond the period of 180 days without a complete and effective order of approval for such extended retention “of the said books and documents and that since . the approval of
ELT. P onTENTAL RUBBER won (Tulzapurkar, 1) 82
‘the Commissioner and the recorded reasons therefor had not been communicated to the respondent-assessee, ‘the retention of the books
- and documents beyond 180 days was unlawful. The learned Judge,- therefore;-ordered the issuance of a mandamus directing the Cominis- - sioner and the concerned Income Tax Officer--to return all the seized books and documents: and ‘he further ordered that the concerned” Income Tax Officer shall be at liberty to complete the assessment
" for the year 1954-55 after the retara_of the said books and documents and after issuing afresh statutory ‘notices under section 142(1)/143(2) of the Income-tax Act to the réspondent-assessee. In rendering the aforesaid decision, the learned Judge followed-two earliér decisions . * of his owa High Court in Mahabir Prasad Poddar’s case decidied by ‘T. K. Basu, J. and his own decision in C, K. Wadhwa’s case (which ‘is the subject matter of the companion Cavil Appeal No.760 of 1973. ° before us). At the instance of the Commissioner of Income-tax, an appeal was preferred to the Division Berich of the High Court being Appeal No. 233 of 1970. The self-same contentions were urged on, behalf of the Revenue in. the appeal and it was specificaily submitted. that the assessment for the assessment year 1964-65 having been
, _ completed on 5th February, | 1969 long before the rule nisi had been issued, the direction given ‘by. the learned Single Judge with regard to the liberty t complete the assessment for the said assessment year jhad become infructuous. -The ‘Division’ Bench, however, negatived ‘all the contentions a dismissed the ‘appeal affirming all the directions given by the learned trial Judge. The Revenue has come > up in appaal to this Court.
Counsel for the Revenue urged two points before us in support. of this appeal. In-the first place, the ‘counsel urged that section: 132(8) of the Income-tax Act, which deals with the extended retention.
' of the seized books and documents i in excess of the -period of 180°
*
. days from the date of the seizure merely provides that for such exten- ded retention the Authorised Officer/the. concerned Income Tax |
Officer has to record his reasons in writing in that behalf and has to obtain the approval of the Commissioner. of ‘Income-tax | for such extended . retention and there is-no obligation imposed by the said sub-section to communicate the approval of the Commissioner or the recorded reasons of the LT.O. on which it is based to the person’ from whose custody the books and documents have been seized or td the person legally entitled to such books and documents and . therefore thé High Court erranéously held that such extended reten-
- tion of the ° seized books and documents without cammunic¢ating the |
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Cc
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822 "” SUPREME cout REPORTS cc) isck
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' Commissioner’s -approval and the reasons on which it is based was unlawful or illegal. Secondly, the counsel contended that in’ any event since proper opportunity to inspect the seized books and docu-
_ ments and to make copies of the entries was given to the respondent/ _assessee and since after issuing proper notices and giving hearing to - _ the respondent-assessee, the assessment for the assessment ‘year 1964-65 had been completed long before the issuance of the rule nisi, . _ the same ought to have been. upheld as binding on the respondent- assessee. In other words,. according to the counsel for the Revenue, the unauthorised retention of the seized books and documents beyond 180 days, if any, could not render the assessment for the year 1964-65 properly made invalid. Counsel further pointed out that the respondent-assessee had even preferred appeals to higher authorities challenging the said assessment on merits. It may be stated that Counsel for the respondent-assessee in this appeal conceded that in
' -ali the circumstances of the case the assessment already made on.
5th February, 1969° should be allowed to stand subject of course to the result of the. appeals that have been preferred-by the respondent- assessee against it. In this view of the matter, the second contention urged by Counsel for the Revenue in this appeal has to be accepted andthe assessment for the assessment year 1964-65 made on Sth
February, 1969 subject as aforé-said to be upheld. ~ That leaves for. - consideration. the first contention, which’ as we have indicated earlier, s is common to all the appeals. 2 ; o
In order to decide the aforesaid contention it will be desirable to set out the material provisions of sec.132 of ‘the Act, namely, sub-secs.(8), (10) and (12) thereof, which run as follows :
“432 (8y The books: of account or other documents
_ geized under sub-section (1) or sub-section (1A) shall not be retained by the authorised officer for a period exceed- ing one hundred: and eighty days from the date of the seizure unless the reasons | for retaining the same are recorded by him in writing and the approval of the Commissionér for such retention is. obtained: +
Provided that the Commissioner shall not authorise _ the.. retention of the books‘of account .and other docu- ‘ments fora period exceeding thirty days after all the : proceedings under the Indian Income-tax Act, 1922 xh of 1922), or this Act jn respect of the years” for vty
Tr
CLF. v. ORIENTAL RUBBER. WORKS (Puleapurkar, J y 823 .
_ which the books of account or other documents are relevant are completed. . . ’ * (10) Ifa person legally entitled to the books of
-account or other documents seized under sub-section (1)
or sub-section (1A). objects for. any reason to the approval given by the Commissioner under sub-section (8), he may . make an application ‘to the Board stating therein the - - reasons for suth objection and requesting for the return of the books of account or other documents.
(12) On recei ot of the application ‘under sub-section (10) the Board may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit’ - a
+ es
On a plain reading of the aforesaid provisions it will be clear . that ordinarily the books of account.or, other documents that may be . seized under an authorisation issued under sub-sec. (1) of sec. 132 _ can be retained by the authorised officer or the concérned Income-tax Officer for a period of one hundred and eighty days: from the. date of seizure, whereafter the person from whose custody such books or - documents have been seized or the person to whom such books or documents belong becomes entitled to the.return of the same . unless the reasons for any extended retention are recorded in writing by the. authorised officer/the concerned Income Tax Officer and approval of the Commissioner-for such’ retention is obtained. In.other words* two conditions must be fulfilled before such extended retention becomes permissible in law : (a) reasons in writing must be recorded by the authorised officer or the. concerned Income-tax.Officer seeking _ the-Commissioner’s approval and (b) obtaining of the C ommissioner’sapproval for such extended retention and if either of these conditions is not fulfilled such extended retention will become. unlawful and the . . ‘concerned person (i.e. the petson from’ whose custody such books or | g documents have been seized or the person to whom tlhiese belong) # scquires a right to the return of the same forthwith. It is true that sub-sec.{8) does not in terms provide that the Commissioner’ § approval or the recorded reasons on which it might be based should be communicated to the concerned person. but in our view since the person concerned is bound to be materially prejudiced in the enforcement of his right to have such books and documents returned to him: by being kept ignorant about the factum of fulfilment of either ofthe -
". 824 mo ae ‘SUPREME COURT REPORTS _ . [1984] 1 scr conditions it is obligatory | upon the Reverue to communicate the . Commissioner’s approval as also the recorded reasons to the person : concerned. In the absence of such communication the Commissijoner’s decision according his approval will, not become effective.
Moreover, sub-sec. (10) confers upon the person legally entitled to the return of the seized books and documents a right to object to - ' the approval given by the ‘Commissioner under sub-see.(8) by making an application to the Central Board stating therein the reasons for _ _ ‘such objection and under sub-sec. (12) it is provided that the Céntral - Board may, after giving the applicant an opportunity of being heard pass‘ such orders as it thinks fit: It is “obvious that without the _ knowledge of the factum of the Commissioner's approval as also of the recorded reasons on the basis of which such approval has been obtained it will not be possible. for the person to whora the seized ‘books or documents belong to make any effective objection to the ~ approval before the Board and get back his books’ or documents, - In our view the scheme: of sub-secs. (8), (10) and: (12) of sec.132 makes it amply clear that there is a statutory. obligation on the Revenue to communicate to the person concerned not merely the Commissioner’s approval but the recorded reasons on which the’. * same has been obtained and-that such Communication must be made’ - as expeditiously as possible after the passing of the order of approval _ by the Commissioner and in default, of such expeditious communi- ~ cation any further retention of the seized books or documents would. ‘ b&come invalid and unlawful, It-is obvious that such obligation arises in regard to every approval of the Commissioner that might “have been accorded from time to time.
‘In the result the orders passed. by the High Court directing the return of the’seized books of account and documents to the respon- - dents in each of the appeals ate confirmed and the appeals (subject. to the directions given: below i in 1 tWo of them) are ‘dismissed with 1 no order as to costs. .
In Civil Appeal ‘No. 1652 of 1973 the assessment “order passed
"on Sth February, 1969 is upheld. subject to the result of the appeals®
. _ that may have been preferred against it. In Ciyil Appeal No.66! of. 1975 it is directed that the assessment orders passed for the concerned assessthent years. would be subject to the appeals already preferred if any or such as might be preferred in accordance with law, against, the same.
a
HSK. 7 ne Co, Appeals dismissed.