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1966 Supreme(Del) 29
High Court Of Delhi
PLYCAST (DELHI) PRIVATE LIMITED - Appellant
Versus
I.T.O., COMPANY CIRCLE - Respondent
Civil 1699 of 1985
Decided On : 02/27/1966
The ITO must record reasons for impounding the documents and obtain the approval of the Commissioner for retention beyond 15 days.
Headnote:
INCOME TAX ACT, 1961 - SECTION 131 - Retention of documents - Conditions - Interpretation - Validity of order - Petitioner entitled to return of documents.
Fact of the Case:
The petitioner challenged an order passed under Section 131 of the Income-Tax Act, 1961, retaining certain documents for an indefinite period. The petitioner contended that the documents could only be retained for 15 days without prior approval of the Commissioner of I.T. and that the documents were required for reference by the petitioner Company.
Finding of the Court:
The court held that the order retaining the documents was invalid as it did not comply with the provisions of Section 131(3) of the Income-Tax Act, 1961. The court held that the ITO must record reasons for impounding the documents and obtain the approval of the Commissioner for retention beyond 15 days. The court also held that the petitioner was entitled to have the documents returned.
Issues: 1. Whether the ITO had the power to retain the documents indefinitely. 2. Whether the ITO had complied with the provisions of Section 131(3) of the Income-Tax Act, 1961. 3. Whether the petitioner was entitled to have the documents returned.
Ratio Decidendi: The court held that the ITO did not have the power to retain the documents indefinitely and that the order retaining the documents was invalid as it did not comply with the provisions of Section 131(3) of the Income-Tax Act, 1961. The court also held that the petitioner was entitled to have the documents returned.
Final Decision: The court granted the writ and directed the return of the vouchers mentioned in the order under Section 131 forthwith, unless there was an order to the contrary by any criminal or other Court.
( 1 ) THIS petition was heard after a show cause notice was issued to respondents. On considering the reply we found that the petition could be disposed of without any further pleadings or affidavits. We accordingly heard both the learned counsel. We also found that the disposal of the petition could not be delayed.
( 2 ) WE issue Rule D. B. and proceed to deal with the short point involved in the petition. The petitioner has challanged an order passed U/s 131 of the Income-Tax Act, 1961 op 23. 9. 82. The operative part of the order is that certain documents are retained in exercise of powers U/s 131. The documents are : "journal Vouchers---Bank Voucher---"
( 3 ) THE order was passed over three years ago. The poipt for decision is whether these documents can indefinitely be retained or whether there is a time limit. It is also claimed that the documents could have been retained only for 15 days without obtaining prior approval of the Commissioner of I. T. Yet another contention is that these vouchers pertain to sales and purchases made by the petitioner Company from and to suppliers and customers and these documents are required for reference. A parallel was also drawn with S. 132 of the Act and the judgment of Supreme Court in C. I. T. vs Oriental Rubber Works ( 1984 ) 145 TR 477 where conditions for retaining the seized documents were considered.
( 4 ) IN the affidavit filed in reply to the petition, it was contended that the petition was very much belated as almost 3 years had passed without any challenge to the relention of the documents. It was further claimed on the merits, that the case was before an Inspecting Asstt. Comm. of, I. T. and hence the proviso to S. 131 was not applicable. It was further claimed that a further retention of documents was absolutely necessary in this case. One of the reasons for retaining the documents was that a criminal procecution had been launched and penalty proceedings were also pending. Those documents were required for completing the proceedings. One fact which was mentioned was that the Additional Chief M. M. had already ordered filing of these documents. It was claimed that filing of this writ petition was misconceived and an abuse of the process of law designed only to get the documents back and thus keep them from the criminal court or for being used in the penalty case.
( 5 ) ONE other point was taken, namely, that it was not necessary to record any reasons for retaining the documents or communicate the same to the petitioner. This would frustrate the very object of retaining the documents.
( 6 ) NOW, turning to the points involved in this case, we think we need not go into the question that the documents are required by the I. T. Authority but have to confine ourselves to to the interpretation of S. 131 of the Income- tax Act. [ S. 131 is theh reproduced ]
( 7 ) IT will be seen that the sub-section (I) of S. 131 gives to the Income Tax Officer. and other authorities the same power as are vested in any court for compelling the production of books of accounts and other documents and for discovery and inspection etc. Therefore, as far as this Section is concerned, we may treat the Income Tax Officer. as a kind of Court. Naturally, when books of account and other documents are produced in Court it will be necesssary for the Court to have power to use these documents for the purpose of recording evidence and so on. There is a procedure for retaining copies and returning the original. We feel that the normol procedure would to be followed for retaining a copy and returning the original. The relevant provision regarding retention of the original appears to be contained in sub-section (3) of this Section and that is the provision relied upon by the respondents. This provision is that the Income Tax Officer. may impound and retain in custody any beoks of account or other documents which may be produced before him. Thus, the order under this provision would have to be one
