Karnataka High Court
Sri Venkateshwara Tourist Home (P.) ... vs Assistant Director Of Income-Tax ... on 27 March, 1998
Equivalent citations: ILR1998KAR2875, [1998]233ITR736(KAR), [1998]233ITR736(KARN)
JUDGMENT V.K. Singhal, J.
1. The petitioner has prayed for quashing the order dated April 19, 1991, passed under Section 131(3) of the Income-tax Act, 1961, restraining the respondent from proceeding further in pursuance of the notice issued. A prayer is also made for return of the documents which are stated to be illegally seized in the proceedings under Section 133A of the Act.
2. The facts of the case are :
That two officers of the Income-tax Department came for survey in the business premises of the petitioner on April 19, 1991, around 10.30 a.m. and certain documents were sorted out by them. The petitioner was served with a notice under Section 131 of the Act at 5.30 p.m. on the same day to appear before the said authority at 7 p.m. asking to bring the books of account of the years ending March 31, 1989, to March 31, 1991 besides various items for which inventory was produced.
The contention which has been raised before me is that the action of the authority in seizing the books of account in the garb of the power under Section 131(3) of the Act is misuse of the provisions of Section 133A of the Act. A number of other contentions have also been raised which I do not think it proper to consider at this stage.
3. Section 133A of the Income-tax Act reads thus :
"133A. (1) Notwithstanding anything contained in any other provision of this Act, an income-tax authority may enter-
(a) any place within the limits of the area assigned to him, or
(b) any place occupied by any person in respect of whom he exercises jurisdiction, at which a business or profession is carried on, whether such place be the principal place or not of such business or profession, and require any proprietor, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession--
(i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place.
(ii) to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein, and
(iii) to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act.
Explanation.--For the purposes of this Sub-section, a place where a business or profession is carried on shall also include any other place, whether any business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of his books of account or other documents or any part of his cash or stock or other valuable article or thing relating to his business or profession are or is kept.
(2) An income-tax authority may enter any place of business or profession referred to in Sub-section (1) only during the hours at which such place is open for the conduct of business or profession and, in the case of any other place, only after sunrise and before sunset.
(3) An income-tax authority acting under this Section may-
(i) if he so deems necessary, place marks of identification on the books of account or other documents inspected by him and make or cause to be made extracts or copies therefrom,
(ii) make an inventory of any cash, stock or other valuable article or thing checked or verified by him.
(iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act.
(4) An income-tax authority acting under this Section shall, on no account, remove or cause to be removed from the place wherein he has entered, any books of account or other documents or any cash, stock or other valuable article or thing."
4. Chapter XIII of the Act deals with different powers specified in different Sections. Section 131 deals with the power regarding discovery, production of evidence, etc. Section 132 deals with search and seizure. Section 132A deals with power to requisition books of account, etc. Section 132B provides for application of assets retained under Section 132(5). Section 133 confers power to call for information and Section 133A deals with power of survey, Section 133B deals with power to collect certain information. Section 134 deals with power to inspect registers of companies. Section 135 deals with power of the Director-General or Director, Chief Commissioner or Commissioner and Deputy Commissioner and Section 136 says that proceedings before the income-tax authorities are to be considered as judicial proceedings. Various Sections of the Chapter confer different powers and they are not overlapping each other. Section 133A with which the present controversy has to be adjudicated deals with power of survey. Power to survey is different from that of seizure under Section 132. Seizure is taking possession contrary to the wishes of the owner of the property, whereas in survey the possession remains with the owner and only the right of inspection of those books of account or documents could be exercised by the authorities having the power. Power of search implies an exploratory examination or probing into or seeking out something which is hidden, sealed, suspected and not open, exposed or demonstrated. The power of survey is restricted only with the place where the business or profession is carried out.
5. Sub-section (2) of Section 133A empowers the income-tax authority to enter any place of business or profession. Explanation to Sub-section (1) of Section 133A also covers a place, whether a business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of the books of account or other documents, etc., are kept. Under Sub-section (3) of Section 133A the income-tax authority may place some marks of identification on the books of account or other documents inspected by him or to have the extracts or copies therefrom ; make inventory of cash, stock., etc. He can also record the statement of any person. There is a specific provision under Sub-section (4) that the books of account or other documents or any cash, etc., shall not be removed by the income-tax authority. In Sub-section (5) functions and ceremonies can also be the subject-matter of survey. Under Sub-section (6) there is an obligation on the person affording facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or any other valuable articles, etc., and to furnish any information or to have his statement recorded. If he refuses or evades to do so, then the income-tax authority shall have all the powers conferred under Section 131(1) for enforcing compliance with the requirement. It is not in dispute that there was any refusal or evasive action on the part of the petitioner. It may also be observed that the authorities have been conferred with the power to place marks of identification on the documents or to have extracts or copies of any document. This Section does not confer any power to impound, seize or even to remove the documents from the business premises. A thing which cannot be done directly cannot be allowed to be done indirectly.
6. In United Chemical Agency v. R. K. Singh, ITO , it was observed :
"Section 133A authorises an Income-tax Officer to use his powers under Sub-sections (1) and (2) of Section 131 of the Act for the named purpose. Under Sub-sections (1) and (2) of Section 131 there is no power to impound any document. That power is conferred by Sub-section (3) to Section 131. But Sub-section (2) of Section 133A, while specifically conferring powers under Sub-sections (1) and (2) of Section 131, significantly omits to include the powers conferred by Sub-section (3) to Section 151. Evidently, the Legislature did not clothe the Income-tax Officer with the powers under Sub-section (3) of Section 131 while he was conducting a survey under Section 133A, to impound any document. The omission from Sub-section (2) to Section 133A, of subjection (3) to Section 131 could have no other meaning. This is corroborated by the fact that even the power under Sub-sections (1) and (2) to Section 131 has been conferred upon the surveying officer only to enforce compliance of the requirements made, and for no other purpose. The power to impound books of account or documents mentioned in Sub-section (3) to Section 131 could have no possible relation or relevance for enforcing compliance with the requirements of either facilitating the inspection or placing of the identification marks or ca-using extracts to be made from the account books or documents. The action of the first respondent in impounding and taking away the books of account or other documents belonging to the petitioner-firm was without the authority of law. They must return them."
7. The Punjab and Haryana High Court in Gheru Lal Bal Chand v. ITO [1982] 137 ITR 190, at page 194, observed thus :
"It is clear that the Income-tax Officer is debarred from removing the books of account or other documents et cetera from the business premises of the assessee under Sub-section (4) during the survey under Section 133A. The Income-tax Officer can, however, resort to powers under Sub-sections (1) and (2) of Section 131 of the Act, in case the asses-see, refuses or evades to co-operate in terms of Sub-section (6) of Section 133A. It is undisputed that the petitioner neither refused nor evaded to co-operate on April 11, 1978. Under these circumstances, the Income-tax Officer had no jurisdiction to resort to the powers under Sub-sections (1) and (2) of Section 131 of the Act while surveying the accounts of the petitioner under Section 133A on llth April, 1978."
8. In the case of N. K. Mohnot v. Deputy CIT , the Madras High Court has also taken the view that documents cannot be impounded under Section 133A of the Act. It was observed at page 283 thus :
"If any person connected with the business or profession at the time of such survey refuses or evades to provide the required assistance or information to the authority, then the authority is entitled to exercise all the powers conferred by Sub-section (1) of Section 131 for enforcing compliance with the requirement made by the authority for the purpose pf the survey. Such requirement can only be for the purpose of inspection of the books of account or any other document ; checking or verifying any cash, stock or valuable article or thing ; or furnishing of any information or recording of the statement of the persons connected with the business or profession and present at the time of survey. The wide powers so conferred on the income-tax authority for the purpose of carrying out the survey is subject to the limitation expressly spelt out in Sub-section (4) of Section 133A. The authority acting under this Section shall 'on no account' remove or cause to be removed from the place wherein he has entered, any books of account or other documents or any cash, stock or other valuable article or thing.
Learned counsel for the petitioner submitted that the power to conduct a survey can be exercised only during business hours and the continuance of the survey after the business hours is wholly impermissible under Section 133A and, therefore, illegal. Though the submission so made appears plausible, such an interpretation of the provision would defeat the object of the provision and has to be rejected."
It was observed at page 285E thus :
"Sub-section (6) of Section 133A does not authorise the income-tax authority to impound any of the documents found in the course of survey. That Sub-section incorporates within itself the provision of Section 131(1) for the limited purpose of enforcing compliance with the requirement made by the authority with regard to the matters enumerated at (i), (ii) and (iii) of Section 133A(1). It is for this limited purpose the powers conferred on the officers referred to in Section 131(1), namely, the same powers, as are vested in a court under the Code of Civil Procedure while trying a suit in respect of (a) inspection and discovery, (b) enforcing the attendance of any person and examining him on oath, and (c) compelling the production of books of account and other documents, and (d) issuing of commissions, are also conferred on the income-tax authority while carrying out a survey, if the persons connected with the business or profession present at the time of survey, refuse or evade complying with the requisitions made in respect of the matters referred to in Section 133A(1). The contents of Section 131(1) are incorporated into Section 133A(6) by reference. By such incorporation the other Sub-sections of Section 131 are not engrafted into Section 133A(6). Parliament has taken particular care to avoid any reference to Section 131(3) which empowers the authority before whom books and accounts are produced to impound the same, in view of the express and emphatic bar imposed by Section 133A(4), against removal by the income-tax authority, of the books of account, documents, cash or other valuable article or thing found during the course of survey.
What is expressly prohibited by Section 133A(4) cannot be circumvented and the prohibition nullified by resorting to Sub-section (3) of Section 131. The provisions of the Act have to be read harmoniously giving full effect to all the provisions. Had it been the intention of Parliament to permit impounding of documents, valuables and things found during the course of a survey, whenever the persons connected with the business or profession carried on at that place refused to or evaded complying with the requirements of the authority conducting the survey, a proviso permitting such impounding in these circumstances would have been incorporated in Sub-section (4) of Section 133A. The prohibition contained in Sub-section (4) of Section 133A is absolute and unqualified.
The powers conferred on the authority constituted under the Act are to be exercised having due regard to the nature of the proceeding, and all the powers conferred by statute cannot be exercised in all proceedings under the Act. Though Section 132 authorises search and seizure and Section 131(3) enables the authorities to impound documents produced before them in any proceeding under the Act, those powers cannot be read into the power to carry out survey under Section 133A. The object of survey is not the same as of search or seizure under Section 132. The power of survey also does not include the power to impound documents' as the object of the survey is only to ascertain the existence, nature and contents of documents and valuables kept at the place of survey and to obtain information from persons connected with the business or profession and present at the time of survey."
9. It was observed that the object of conducting survey is to secure things for which even prior notice is not necessary. The documents removed during the survey were directed to be returned to the petitioner.
10. It may also be observed that in the case of CCT v. Ramkishan Shrikis-han Jhaver , the question regarding validity of search was considered and the safeguard under Section 165 of the Criminal Procedure Code, was considered sufficient. The seizure of the documents could be only after search which is provided under Section 132 and impounding is permissible in a case where inspection is carried on. That inspection may be by any survey or whenever books are produced under Section 131 before the income-tax authority. The power of impounding under Section 133A could not be exercised unless there is non-co-operation as stated above.
11. The statement of objections filed by the respondent disputed the factual position and referred to a scuffle in respect of certain incriminating papers between the chairman of the petitioner company and the inspector. It is stated that the said papers were placed before him on the table for further inspection and there was no seizure and there was non-cooperation on the part of the petitioner. It is also stated that there were certain transactions which were not accounted for in the books of account and annexure-A is only a list of books of account and documents found during survey under Section 133A. List of inventory was prepared at 3.15 p.m. and since the transactions were not explained nor statements were given, the petitioner was required to appear in the office on the same day after issuing notice at 5.30 p.m.
12. From the facts narrated above, it is evident that the list of the books was prepared in advance and in order to impound the books notice was issued on the same day. Various contentions which have been raised in the objection statement have not been supported by any document. If it was a case of non-co-operation on the part of the petitioner, then definitely action could have been taken by the respondent, but it has not come on record. It is also not on record that the respondent had taken any step for putting any mark of identification and getting the extract of the copy of the statement for which it is stated that the petitioner was non-co-operative. If that was the position, it should have come on record. For the purpose of exercising the power of impounding or seizure of the books of account as mentioned above, the provisions of Section 133A could be of little assistance to the authorities. If there was any definite information regarding evasion of tax or some incriminating documents, then the respondent should have taken permission under Section 132 from the authorised authority. It is possible that during the course of survey certain incriminating documents are found. In that situation also, if it is possible, permission under Section 132 could be obtained from the authorised authority and if it is not possible, then the other options which have been mentioned in Section 133A could be exercised, namely, taking extracts or copies of documents and recording the statement. If the-person concerned is not co-operating in giving statement or providing copies of documents concerned, then under Section 133A(6) the power could be exercised at that stage but for that purpose it must come on record that there was non-co-operation on the part of the petitioner. Since nothing has come on record to substantiate that contention, the contention which has been raised by the petitioner appears to be correct that without following the procedure provided under Section 133A the respondent was in a mood to impound the documents and for that purpose list was prepared at the spot and the formalities under Section 131 were just shown to have been done. The action of the authorities cannot be considered as justified in accordance with the provisions of law. Since the documents have already been returned to the petitioner by an interim order of this court, I do not consider it proper to give any further direction.
13. The petition is disposed of with the above observation.