. c.I.T. WEST BENGAL~III & ORS. ETC. v. ORIENTAL RUBBER WORKS ETC .

• 817 • . c.I.T. WEST BENGAL~III & ORS. ETC. A v. ' ORIENTAL RUBBER WORKS ETC .

. November 15, 1983 .

(V.D. TULZAPURKAR, V. BALAKRISHNA BRAD! !'ND D.P. MADON, JJ.}

Income Tax Act, l961-Sec.132-1nterpret'ation of-Sub-sec.(1)-Seizure of books of account and documents-Sub·sec.(8) rete11tion of books beyond l 80 days of seizure-Read with sub-secs, (10)"& (12)-lmpose .statutory obligation on c· . R~venue to ·communicate ·Commissioner's appr.oVat and recorded .reasons ofth1 .authorisf!d officer to person en{itled for return of books. Retention of books-·• Without such conununicati<;n-un/awfut:. ..

• The Revenue wh~ had seiz~d the books of accoun't and documents of the· assessee under sec. 132(1)'ofthe Income Tax AC(.1961 tlid not return the SamC to the assessee after·a,period ·or 180 days of the seizure. The· ·assessce _fi1ed (:\. D writ petition in the High Court inter a/la praying for a direCtion to the Revenue fo return thC said book~ of acc<?unt. The assesee submitt~d that i11e retention · of the seized books .of accounts and documents bey,ond."the period of 180 days. was illeg8.l arid in~alid illasmuch as neither the approval accOrded by the. COmmissioner or' In;ome TaX for si.tCh ·extended reteiltioi:i nor the recorded reasons of the Income Tax Offic"er on which. -such approval wa~ based had been E .communicated to him. A s_ingle Judge of the High Cqurt held t\lat the retention ··of the books and .documents beyond' 180 days.was unlawful. A Division Berich ·dismissed.the Re".'ehue's appeal. In these appeals. the Revenue submitted that sec. 132(8) of the Act cl.id not impose· any obltgatiOn -On·the ~evenue to communicate the· approval° of the cOmmiSsioner "or the recorded reason of the Income Tilx Officer on which it is based, to the pCrson from whose Custody the books of accounts and doc~me:nts had been Geized; ' ·, F. J?ismissing the app_ea_ls,

818 SUPREME COURT REPORTS . (198'\) 1 S.C.R •.

·approval· given· by the Commissioner under sub:sec.(8) by makinll an llPPli· A · cation to the G'el11:ral Board.stating therein the reason~ for such o6jcctiorl and under sub-sec.(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 1it. It is obvious that without the knowledge of the factuin of thC Commis- sioner's approval as also of the recorded reasons ori the basis or"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 eJfective objection to the .B approval before the Board and get back his books 'or documents. [824 B-C] ·

The scheme of,sub-secs.(8), (10) and (12) of sec.132 makes it amply clear that there is a s~atutory obligation on the Reven.ue to Communicate to the person concerned not merely the Coinmissioner's approval but the recorded reasons on which the same has been obtained and that Such communication c must be made as expeditiously as possible after tbe passing of the order of • apprOVat by the Coinmissioner and in default qf such ·expeditious .conimuni~ catiOn any further retention of the seized books or documeiits would bCcome .. invalid and unlawful. It is obyious that such obligation arises in .regard to every approval of the Commissioner that might ·have been accorded from time to time. [824 D-FJ D

Appeal by Special leave from the Judgment and Order dated the 25th June, 1973 of the Calcutta. High Court in· App~ar · E No. 233 of 1970.

WITH

Civil.Appeal Nos. 759-760of1973 F . . From the Judgment and Order dated the 2nd June, 1972 of the Calcutta High Court in Appeal from Original Order Nos. 155 & 158 of 1970.

AND G Civil Appeal Nd: 661 of )975

From the Judgment and Order dated the 15th March, 1974 of the Calcutta High Court in Appeal No. 96 of 1972.

P.S. Desai, B.B. Ahuja and Miss A. Subhashini for the Appel· ' lant; in CA. '1652 of 1973, •

c.1.t. V. OR!E~TAL RUBBllR WORKS (Tu/zapurkar; J,) SJ9

S.T. Desai, Miss A. Subhwshini for the Appellants. in CA. Nos. 759-760 of 1973 & 661 bf 1975.

Sanjay Bhattacharya, Rathindas and K. Kathazarika for the. Respondent in CA. No. 1652 of 1973.

• . V.B. Saharya for th~ Respondent in CA. No. 759 of 1973. B N.S. Das Behl for the Respondent in CA. No. 760 of 1973.

D.N. Mukherjee for the Respondent in CA. No. 66T of 1975.

.The-Judgment of the Court was delivered. by c TULZAPU~KAR, J. All th.ese 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 the ·person (from . who'e custody books of account and documents have been seized under sectfon 132(1). of the Income-tax Act, 1961) tire 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 retentim) of the . seized books· of account and documents by the Department ~ for ·a period exceeding 180 days from the date of seizure under sec. B2. (8) E -of the Income-tax Act, 1961 ? · • Since in all these appeals the facts g1vmg rise to aforesaid question are almost similar, it will suffice to indicate briefly the. facts obtaining in M/s. Oriental Rubbe; Work's case (Civii Appeal 'No. • · i652 of 1973). Under a proper.authorisation issued in that behalf F .\. under sec. 112(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 of!ices·and godown at J\.fahatma Gandhi Road Calcutta belonging to the raspondent-assessee and various books of · ·'. actount and documents were seized from the aforesaid 'premises. After lawfwly carrying out the aforesaid search and ·seizure, the G .respondent-assessee was given opportunity to in;pectthe 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 assess;J,ent for· the assessment-year 1964-65 an!\ after giving ·several hearings which' .H were attended by the respondent-assessee or its representative the . assessment for the said year was. completed unde.r section 143(3) of

820 . suPRmiE c:OURT RBPOaTs , [i984]l s.c.ii.. .the Act on 5th February, 1969. Notwithstanding the passing of such A ·assessment order mi 5th February;'.1969,. the. respondent·assessee on 27th February, 1969• moved the Calcutta High Court by way of a • writ unde_r Art.· 226 of the Constitution inter alia praying (a) fo~ a direc.tiori· to the Commissioner of Income-tax and the concerned Authorized Officer/Income Tax Officer to retu·ra forthwith the said · B books.of account, documents and pap!r~ •etc. seized as aforesaid- and \., to cancel or resci11d the. warrant of.authorilation issued under sec.· . 132(1) or'theAct and (b) for a m1nd1m~' ·commanding the concer~

c ned Income.Tax Officer. not to proceed with th~ assessment.for the asses.sment' year 1964-65 .until the return of docume_nts seized. on 17th February, 1965. The main· submission of the respondent· - assessee was that the retention of the seized books of account and d_ocuments 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 .Commission.er of Income-tax . for such extended retention nor the recorded reasons of the Autho' D rized Officer/Income Tax Officer.on which such approval. was based bad been communicated to the respondent/a•sessee and that without the returri of the seized books of account a'nct . documents; no a'ssess· . . ment for the concerned assessment year 1964-65 could be proceeded ot with made. on behalf of ·the l\e~enue it was pointed ·out . that the concerned In.come-Tax Officer had recorded his .reasons seeking approval of the C.ommissioner of Income-tax for extended retention of the seized books ·of.accoun_t and. documents and had obtained approvar o( the Commissii>!ler of Income-tax for such e·xtended .~ . retention from time to time anCI therefore such retention of the seized books and:documenls beyond iso days was perfectly legal and . valid. · .... that there was no obligation under sec.132(8) of the Act to commu· F nicate the Commissioner's approval for such 'extended retention· or · · the ·recorded reasons of the Income Tax ·Officer· therefor to the resp~no:l~nt·assessee and that i_n any event due ·inspection of the seized .books and documents. was. ,afforded to tlie_ ·respondent· assessee who was also t permitted to take copies . of. the entries . in • the.,.. G books· and after giving propeF hearing t_o the respondent-assessee the assessment for the year l 964·65 · had been validly completed on Sth Fel)ruary;· 1969 long before the respondent·assessce appn:iached the Court and obiained a Rule Nisi: A learned Single Judge of the

H High'_Court ·held that the seized books of account and ·other docu·· ments could not be retained beyond the period of 180 days without a ~ ·. i compleie and em;;tive order of approval for such extended retention 1 · ·of the said books and documents and that since . the approval of \-

· C.I.T. v. ORIENTAL RU.BBER ~OR~ Ctulzapilrkat, J.) 821 • th~ Commissioner and the reecirded reasons therefor had ~ot been communicated to the respondent-assessee, the retention of the books and documents beyond 180 days was unla~ful. The learned Judge, therefore;·ordered the issuance of a ma11damu1 directing the Conimis- . sioner and the ·concerned Income ·Tax Officer ·to return all the seized books and documents and.he further orde.red that the concerned Income Tax Offiocr shall be at liberty to complete the assessment for the year 1954·55 after the .return of the ·said llQoks and documents arid after issuing afresh statutory ·notices u)ider section 142(1)1143(2) ofthe Income-tax Act to the .respondent-assessee. ln rendering the· aforesaid decision, the learned Judge ·followed·two earlier decisions. · · of his own High Court in Mahabir Prasad Poddar's case decidied by · T. K. Ba;u, J. and his owu d~cision in C. K. Wadhwa's case {Which c · is the· subject matter of the ~ompauion Ctvil Appeal Np.760 of 1973 before usi. At the instance of the Commissioner of Income-tax, an appeal was preferred 'to the Division Berich of the High Court being Appeal No. 2.l3of1970. The self:samc content'ions w~re urged on., behalf of the Revenue i'n the appeal and it was speCifically submitted thctt the assessment for th,:· <tsscssment year 1964-65 having been completed oil 5th F<:br.uary, 1969 !Ong before the rule nisi had been ",issued, the direction given by the learned Single Judge .with regard to the liberty to complete tho assessment for the said assessment year ·had· become infructuous. The Division· Bench, however, negatived '· all the cont~ntionsa dismissed the. appeal affirming all the directions given by tli.dearned trial Judge. The Revenue has come up· iu appaal to this Court. . . Counsel for the Revenue. urged two ·points before us in support of this· appeal. ·1n . the first place, the ·counsel urged that section F. "' .. 132(8) of the lnconie-tax Act, which deals with the extended retentfon · of the seized books and documents I . in excess . of - the . .period of 180 .·days from the date· of the seizur.e merely provides that for such exten- ded retention .the Authorised Officer/the concerned Income Tax Officer ha.s to record his reasons in writing in that behalf and has to . obtain the approval of the Commissioner. of income-tax ·for such G ' extended retention .and there is·no obligation imposed by the said sub-section to coinmunicate the approval of the Commissioner or the recorded reasons ofthe I.T.O. on which it is based to the person from whcis.e custody the books and d.ocuments have been seized or .H to the porson. legally entitled to such books and documents and . therefore the High Cour( erraneously held that such extended reten' lion of the s.eized books and documents . without cam.municatiqg the

822 . SUP,REME COIJRT REPOl\'I'S [1984j i s.c.!l• · Commissioner's .approval and the reasons on which it is based was A unlawful .or illegal. Secondly, ·the counsel contended that in any event since proper oppor,tunity 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 B 1964:65 had been completed long before· the issuance of the rule nisi, . the same ought to nave 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, ir'any, could not render the assessment for the year 1964-65 properly made invalid. Counsel further· pointed out that the c respondent-assessee had even preferred appeals to higher autho.rities challenging the said assessment on nierits. It- may be stated ·that Counsel for the respondent-assessee in this appeal conceded that in . all 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- b 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 and ·the assessment for. the assessment y.Car 1964-65 made on 5th February, 1969 subject as afore-said to be upheld. ·That leaves· for consideration the first contention, which as We have indicated earlier, E is common to all the appeals. ' 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), QO) and (12) thereof, which run as follows : "' F "132 (8)· The books of account or other documents ,. seized under sub-section (I} or sub-section (IA) 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 G recor-Oed by ]lim in wdting and the approval of the Commissioner for such retention is-obtained:

Provided that the Commissioner shall not authorise the .. retention of the b.ooks ·of accou11t . and other docu- H , ments for a period exceeding thirty days after all the· . proceedings under the Indian Income-tax Act, 1922 . .(XI of 1922),. or this Act in respect of the years' for

C.t.T. v. ORIENTAL RUBBER WORKS (TulzajJurkar, J.) 823

. which the books _of account or other docume_nts are relevant are completed. A • (10) Ifa person legally entitled to the books of . accouni or other documents seized under sub-section (1) or sub-section (!A). objects. for any reason to the approval given by the Commissioner under sub-section (8), be may B m 1 ke an application ·to the Board stating _therein the · reasons for suth objection and requesting for the return of the books of account .or other doci1ments.

(12) On rccei pt of the application under sub-section c (IO) th~ Board may, after giving the applicant an opportunity of being beard, pass such orders as it t~inks fit." •

On a. plain reading of the aforesaid provisions it will be· clear that ordin;rily the books of account.or.other documen_ts that may be. D ' seized under an authorisation issued under sub-sec.(l) of sec. 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 sei~ure, \Vh~reafter .the pcirson from whose custody. such books or documents have been seized or the person to whorn such books· or documents belong becomes entitled to the-_return of tile same . u_nless 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" tw-0 conditions must be fulfilled before such c~tei1ded retention becomes permissible in law : (a) reasons in writing must be recorded by the authorised officer or the .concerned Inco~e-tax.Officer seeking ·.the·Commissioner's approval and (b} obtaining of the Commissioner's. approval for such extend~d retention and if either· of these conditions is not fulfilled such extended retention will bccomt. unlawful and the ·concerned person (i.e. tbe person frdm whose custody such books or ._documents have been seized or. the. person to whom these belong) G acquires a right to the return of the same forthwith. It is true that sub·sec.(8) does not in terms provide that the Commissioner's appro- val or the recorded reasons on which it might be based should be communicatep to the concerned person . but in our v_iew since the H person concerned is bound _to be inaterially_prejudiced in the enforce- ment of his right to have such books and documentsreturned to ·him by being-kept ignorant about the factum of fulfilment of either ofthe

sµPRili.rn COURT REPORTS [1984j i s.c.R c:Onditions it is obligatory upon the Revenue to communicate the A . 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-sec.(10) confers upon the person legally_ entitled · to the return of the seized books and· documenis a right to object to 8 the' approval given by ihe Commissioner under sub-sec.(8) by making· an application to the Central Board stating therein the reasqns for . ··such objection and under sub-sec.(12) it is provided that the Central - Board may; after givirig the applicant an opportunity of being heard pass· such orders as it thinks fit: It' is· obvious that withbut the knowledge of the factum of the Commissioner's approval as also of·

- the recorded reasons on tiie basis of which such approvai 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 bofore the Board and get. back his books or documents, In our view the scl1em.e of sub-secs. (8); (10) and (12) of sec.132 I) .m.akes it amply clear that tlicre 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' · sa_me has been obtained and that su.ch communicatioIJ must be made· as expeditiously as possible after the passin& of the. order of approval by the Commissioner and in default. of .such. expeditious comniuni- cation any f~rther 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.

.F In the resuli the order< passed by the High Court directing the return of.the --seized books of account ~nd documents t_o the respoU"- dents in each of the appeals are confirmed and the appeals (subject "to"the directions given below in two of them) are'dismissed with no" order as to· costs. · · ·

G In Ci".il Appeal No.1652 of 1973 the assessment order passed · . on 5th-February, 1969 is upheld subject to the result ofthe appeals• · . that may have been preferred against it. In Ci~il Appeal No.661 of- . 1975 it is directed th.at the assessment orders passed for the concerned assessment years- would be subject to the ·appeals aiready preferred ir H any fJf such as might."be preferred in accord_ance· with law, against_ . · the same.

H.S.K:. Appeals. dismissed.