Calcutta High Court
Jorawar Singh Baid vs Assistant Commissioner Of Income-Tax ... on 23 April, 1990
Equivalent citations: [1991]192ITR502(CAL)
JUDGMENT Shyamal Kumar Sen, J.
1. On March 30, 1990, an order allowing the appeal was passed in the following terms :
"For the reasons to be recorded in the judgment to be delivered hereafter, the appeal succeeds and is allowed. The judgment and order under appeal are set aside. The writ petition is allowed and the concerned respondent is directed to release and return to the appellant the books of account and documents referred to in the seizure lists, dated March 16/17 and 21 of 1989. Let this order be complied with forthwith upon the production of a signed copy of the minutes of this order before the concerned respondents.
All parties to act on a signed copy of the minutes of this order on the usual undertaking."
2. The reasons for passing the aforesaid order are recorded in the judgment which follows :
The appellant is a practising advocate, having his chamber at No. 33/1, Netaji Subhas Road, Calcutta. He is also the karta of a Hindu undivided family, consisting of himself and his three sons which carries on business in the name and style of "Jorawar Singh Baid and Sons".
3. On March 16, 1989, some Officers of the Income-tax Department conducted a search at the residence and also at the chamber of the appellant situated at No. 33/1, Netaji Subhas Road, Calcutta. On March 21, 1989, the income-tax authorities searched another chamber of the appellant situated at No. 44B, Kali Krishna Tagore Street, Calcutta. In the course of the said searches carried out on March 16, 1989, and March 21, 1989, various papers, documents, briefs, share scrips, etc., were seized.
4. On April 28, 1989, the appellant, being aggrieved, challenged the legality and validity of the said search and seizure proceedings and also connected proceedings relating to the said search and seizure in the constitutional writ jurisdiction of this court. An ad interim order of injunction was passed in terms of prayer (g) of the petition. The said prayer (g) is set but hereinbelow :
"Interim order of injunction restraining the respondents and each of them and their servants and agents from giving any effect to and/or taking any step or further steps or any proceedings or further proceedings whatsoever on the basis of and/or in furtherance of the said purported search and seizure and the said purported proceedings under section 132(3) and section 132(5) of the said Act and the said purported proceedings under section 131 and all purported proceedings relating thereto and/or thereunder and/or in pursuance thereunder and from passing any order under section 132(5) and/or from taking any step whatsoever under the said Act."
5. On July 26, 1989, the earlier order dated April 28, 1989, was vacated and, instead thereof, an interim order was passed ; the material portion thereof reads as follows :
"Having heard the learned advocates appearing for the parties and considering the facts and circumstances of this case, I vacate the interim order earlier passed and instead thereof, I pass the following order ;
'Any proceeding initiated pursuant to the impugned search and seizure may continue and final orders may be passed therein but the same should not be given effect to without the leave of this court. The petitioner may deposit any amount in the accounts referred to in annexure 'J' to the writ petition but the petitioner should not operate those accounts.'"
6. The appellant preferred an appeal against the said order dated July 26, 1989, and this court, after hearing the parties, passed an interim order on November 22, 1989, the material portion whereof is as follows :
"Interim relief confining the implementation and operation of the order under appeal only to the proceedings under section 132 of the Income-tax Act, 1961, and it is clarified that no further action shall be taken so far as the proceedings under section 131 alone are concerned."
7. The appellant, thereafter, moved another writ petition challenging the retention of the seized documents, briefs, etc., beyond the statutory period. It was the contention of the appellant that the cause of action with respect to the second writ petition was altogether different from the cause of action of the first writ petition. It was also his contention that, according to the relevant statutory provisions, books of account and other documents could not be retained beyond the statutory period of 180 days from the date of seizure unless reasons thereof have been recorded in writing and the approval from the concerned authorities has been obtained and both are communicated to the assessee as expeditiously as possible. Since the seizure took place on March 16, 1989, and 180 days expired on September 16, 1989, and the authorities had not communicated the recorded reasons and the order of approval, if any, they had no power, authority or jurisdiction to retain the said books and documents beyond the said period.
8. The learned single judge, by his order dated February 15, 1990 (see Jorwar Singh Baid v. Asst. CIT [1990] 183 ITR 664), referring to the orders passed in the'first writ petition as also to the order passed in appeal therefrom, held that there was no fresh cause of action to entertain the second writ petition. He further found that the reasons were duly recorded for the retention of the books, documents, etc., and that its communication had not been effected "due to certain confusion and in view of the fact that the court is in seisin of the matter" and that "there is no failure on the part of the income-tax authorities to comply with the statutory provision". In the light of these findings, the writ petition was disposed of with a direction to the Revenue authorities to communicate the reasons and the order of approval within a week from date.
9. Hence, the present appeal.
10. It may be stated that, on or about February 21, 1990, the Assistant Commissioner of Income-tax served upon the appellant a copy each of the order of approval and the recorded reasons in compliance with the directions issued by the learned single judge on February 15, 1990. The reasons appear to have been recorded on September 6, 1989, and the approval appears to have been granted on September 12, 1989. These documents are found annexed (annexure 'C' collectively) to the application for interim relief.
11. It has been submitted on behalf of the appellant that, under section 132(8) of the Income-tax Act, where books or other documents of an assessee are seized in a search conducted pursuant to an authorisation issued under Sub-section (1) and are retained beyond the period of 180 days from the date of seizure, there is a statutory obligation on the Revenue authorities to communicate to the assessee not merely the Commissioner's approval but also the reasons recorded by the authorized officer on the basis of which the approval has been obtained and such communication must be made as expeditiously as possible after the passing of the order of approval by the Commissioner. In default of compliance with the said conditions, the Commissioner's decision, if any, according to such approval would not be effective. According to the appellant, since neither the reasons recorded on the basis of which the approval was obtained nor the order of approval had been communicated till after the learned single judge gave the impugned direction, the retention of books and documents seized was invalid and unlawful and, as such, the appellant had a right to move the writ court afresh challenging such illegal retention and the trial court fell into an error in not granting the relief.
12. It is an admitted position in the instant case that the statutory period for retention of books and documents, i.e., 180 days from the date of seizure expired on September 16, and/or 21, 1989. There is also no dispute that the recorded reasons for such retention and the order of approval by the authority concerned in terms of section 132 had not been communicated to the appellant till February 21, 1990, and that communication too was pursuant to the order of the learned single judge and long after the reasons were recorded and the approval was accorded.
13. In order to appreciate the submission made on behalf of the appellant against the aforesaid factual background, it is necessary to refer to the relevant statutory provisions, namely, section 132, Sub-sections (8), (10) and (12). As in force at the material time, they read as follows :
"132(8). The books of account or other documents seized under Sub-section (1) or Sub-section (1A) shall not be retained by the authorised officer for a period exceeding 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 Commissioner for such retention is obtained :
Provided that the Commissioner shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed.
(10) If a 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 such objection and requesting for the return of the books of account or other documents.
(12) On receipt 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 At."
14. In CIT v. Oriental Rubber Works , the Supreme Court, while interpreting the aforesaid provisions observed, inter alia, as follows (at pp. 148-149 of Tax LR) ; (at p. 483 of 145 ITR) ;
"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-section (1) of section 132 can be retained by the authorised officer or the concerned 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 Commissioner's approval 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 person from whose custody such books or documents have been seized or the person to whom those belong) acquires a right to the return of the same forthwith. It is true that Sub-section (8) does not in terms provide that the Commissioner's 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 of the conditions, 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.
Moreover, Sub-section (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-section (8) by making an application to the Central Board stating therein the reasons for such objection and under Sub-section (12) it is provided that the Central 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 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. In our view, the scheme of Sub-sections (8), (10) and (12) of section 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 expedi-tiously as possible after the passing of the order of 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."
15. It is thus clear that the power to retain books or documents seized in the course of a search beyond the statutory period of 180 days is exercis-able only upon fulfilment of two conditions : (a) the recording of reasons in writing with a view to seeking the Commissioner's approval, and (b) obtaining the Commissioner's approval for such extended retention, The non-fulfilment of both or either of these conditions impinges upon the power of extended retention, that is, such extended retention becomes unlawful and gives rise to a right in favour of the person from whose custody such books or documents have been seized or the person to whom they belong to the return of the same forthwith. The mere recording of reasons and obtaining of approval is, however, by itself also not sufficient. There is a statutory obligation to communicate the recorded reasons and the Commissioner's approval to the person concerned as expeditiously as possible. Failure so to do also renders any further retention of the seized articles invalid and unlawful.
16. Now, in the present case, the seized books of account and documents, etc., were admittedly retained beyond the statutory period of 180 days. The Commissioner's approval for such extended retention as also the recorded reasons on the basis of which such approval was obtained were on the record of the Revenue authorities. However, they were, admittedly, not communicated soon after the approval was obtained. Indeed, they were not communicated till the court issued the direction which forms part of the impugned judgment. The appellant, was, therefore, justified in moving the court by way of a second writ petition to enforce his right to the return of the seized books and documents, etc. Assuming, without granting, that the non-communication of recorded reasons and approval could be justified in the course of judicial proceedings, the ground which appears to have been put forth on behalf of the Revenue and which appeared to have weighed with the learned single judge cannot be regarded as valid. The pendency of the first writ petition in the court could not have deterred the communication of reasons and approval to the appellant since there was no interim relief operating against such action being taken, In any case, clarification arid/or leave of the court could have been obtained to comply with the statutory requirement of communication. Under the circumstances, there is little scope for holding that there was "confusion" or that seisin of the judicial proceeding absolved the concerned authority from complying with the requirement of communication. Indubitably, therefore, there was non-compliance with section 132 and the appellant was entitled to the grant of relief of the return of seized books and documents, etc. The communication of the recorded reasons and approval in compliance with the learned single judge's order cannot validate or legalise the unauthorised and unlawful extended retention.
17. The foregoing reasons weighed with us in passing the order which is set out at the commencement of the judgment.
P.D. Desai, C.J.
18. I agree.