Commissioner Of Income Tax, W. B. vs Oriental Rubber Works: Bhikam Chand Sethia: C. K. Wadhwa: Chandra Nath Banik

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1983 Supreme(SC) 374

SUPREME COURT OF INDIA
V.D. TULZAPURKAR, V. BALKRISHNA ERADI AND D.P. MADON, JJ.
C. I. T., W.B.-III and others, Appellants
Versus
M/s. Oriental Rubber Works, Respondent.
Civil Appeal Nos. 1652, 759 & 760 of 1973 and 661 (N-T) of 1975
Decided on 15-11-1983.
AND
C. I. T., W.B. and others, Appellants
Versus
Bhikram Chand Sethia, Respondent.
AND
C. I. T., W.B. and others, Appellants
Versus
C. K. Wadhwa, Respondent.
AND
C. I. T., W.B. and others, Appellants
Versus
Chandra Nath Banik and others, Respondents.

Advocates:
A.SUBASHINI, A.Subhashini, B.B.Ahuja, D.N.MUKHERJI, K.Kathazarika, N.S.DAS BEHL, RATHIN DAS, S.T.DESAI, SANJAY BHATTACHARYA, V.B.SAHARYA, V.S.DESAI

Headnote:
Constitution of India,1950 - Article 226 - Income-tax Act, 1961 - Section 132 (1), 132 (8) and 143 (3) - Indian Income-tax Act, 1922 - Income-tax - Seized books of account and documents - Search was conducted by Income-tax Department in factory premises at Kantalia as well as offices and godown at Mahatma Gandhi Road Calcutta belonging to respondent-assessee and various books of account and documents were seized from aforesaid premises - After lawfully carrying out aforesaid search and seizure, respondent-assessee was given opportunity to inspect seized books and documents as also to make copies of entries - Concerned Income-tax Officer then issued a notice to respondent assessee under Section 142 (1) of Act in connection with its assessment for assessment year and after giving several hearings which were attended by respondent-assessee or its representative assessment for said year was completed - Respondent-assessee moved Calcutta High Court by way of a writ under Article 226 of Constitution inter alia praying (a) for a direction to Commissioner of Income-tax and concerned Authorized- Officer/Income-tax Officer to return forthwith said books of account, documents and papers etc., seized as aforesaid and to cancel or rescind warrant of authorisation issued – Held, self-same contentions were urged on behalf of Revenue in appeal and it was specifically submitted that assessment for assessment year having been completed on long before rule nisi had been issued, direction given by learned single Judge with regard to liberty to complete assessment for said assessment year had become infructuous - It is obvious that without knowledge of factum of Commissioners approval as also of recorded reasons on basis of which such approval has been obtained it will not be possible for person to whom seized books or documents belong to make any effective objection to approval before Board and get back his books or documents - In Court view scheme of sub-sections (8), (10) and (12) of Section 132 makes it amply clear that there is a statutory obligation on Revenue to communicate to person concerned not merely Commissioners approval but recorded reasons on which same has been obtained and that such communication must be made as expeditiously as possible after passing of order of approval by the Commissioner - Civil Appeal No. assessment order passed is upheld subject to result of appeals that may have been preferred against it - In Civil Appeal No. it is directed that assessment orders passed for concerned assessment years would be subject to appeals already preferred if any or such as might be preferred in accordance with law against same -Appeals dismissed.

Judgement Key Points

Certainly. Based on the provided legal document, here are the key points:

The core issue concerns whether the Revenue is legally obligated to communicate to the person from whom books of account and documents have been seized the approval obtained from the Commissioner of Income-tax and the recorded reasons for such approval, especially when the retention exceeds 180 days (!) (!) .
The relevant statutory provisions specify that books of account or other documents seized under law shall not be retained beyond 180 days unless the reasons for extended retention are recorded in writing and approved by the Commissioner (!) .
For extended retention beyond 180 days, the authorized officer or Income-tax Officer must record written reasons and obtain the Commissioner's approval. However, the law does not explicitly require that this approval and the reasons be communicated to the person from whom the documents were seized (!) (!) .
Despite the absence of a statutory obligation to communicate such approval and reasons, the courts have held that the person concerned is materially prejudiced if unaware of the approval or reasons, as this impairs their ability to make effective objections and seek return of their documents. Therefore, it is an implied obligation to communicate this information to safeguard the rights of the person concerned (!) (!) .
Failure to communicate the approval and recorded reasons renders the continued retention of seized documents unlawful and invalid, which in turn affects the validity of any assessments made based on such documents if the retention was beyond the permissible period without proper approval (!) (!) .
In the specific case discussed, the assessment conducted before the seizure period expired was upheld, but the court emphasized that the assessment's validity is contingent upon proper adherence to statutory procedures concerning the retention and communication of approval for documents seized (!) (!) .
The orders directing the return of seized books and documents are confirmed, and the appeals are dismissed, reinforcing that the retention beyond 180 days without proper communication of approval and reasons is unlawful (!) (!) .
The scheme of the law indicates a statutory obligation on the Revenue to communicate the approval and reasons for extended retention to the person concerned as expeditiously as possible, and failure to do so invalidates further retention and any subsequent proceedings based on such documents (!) .

Please let me know if you require further analysis or specific legal advice based on these points.

JUDGMENT

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 communicate to 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 180 days from the date of seizure under Section 132 (8) of the Income-tax, Act, 1961.

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 Works case (Civil Appeal No. 1652 of 1973). Under a proper authorisation issued in that behalf under Section 132 (1) 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 respondent-assessee and various books of account 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 Section 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 the Act on 5th February, 1969. Notwithstanding the passing of such assessment order on 5th February, 1969, the respondent-assessee on 27th February, 1969 moved the Calcutta High Court by way of a writ under Article 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 Section 132 (1) of the Act and (b) for a mandamus commanding the concerned 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-assessee was that the retention of the seized 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 Authorized 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 assessments, for the concerned assessment year 1964-65 could be proceeded with or made. On behalf of the Revenue it was pointed out that the concerned Income-tax Officer had recorded his reasons seeking approval of the Commissioner of income-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 Section 132 (8) of the Act to communicate the Commissioners approval for such extended retention or the recorded reasons of the Income-tax Officer therefore to the respondent-assessee and that in any event due inspection of the seized books and documents was afforded to the respondent-assessee who was also permitted

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