1. According to the evidence given by this witness, there are certain books which have come into his possession, as the Income-tax Officer, he having received them from the Anti-Corruption Branch, C.I.D., Bombay, as against his receipt dated 10th September 1949. Four books being items NOS. 2, 9, 14 and 15 in that receipt are sought to be called for from him as being relevant for the purpose of the inquiry before me. They are rough cash books of defendant 1, for several periods beginning with 5th November 1945, and ending with 17th July 1949. It is alleged by the plaintiff that there are in these books entries with regard to the receipt of rents of the Foras Road property crediting the same to defendant 1 himself even though according to the case as put forward here, the Foras Road property was gold by defendant 1 to defendant 3 by the document dated 15th May 1945. There is no doubt about the relevancy of the entries in these books. The only question that arises foe my consideration is whether the witness, who is the Income-tax Officer concerned in the assessment of defendant 1 and who is in possession, power or custody of these books, can be called upon to produce these books in Court by reason of the provisions of Section 54, Income-tax Act, 1922.
2. A real controversy has ranged round this question. Mr. Peerbhoy for defendant 1 was 1950 B/34 & 35 frank enough to concede that so far as his client was concerned, he would, so far as it lay within his power, call upon the income-tax authorities to make these books available for the purpose of giving inspection of the relevant entries therefrom to the other side, under proper safeguards adopted in that behalf by the income-tax authorities. He had no objection to the disclosure of the relevant entries therefrom to the other side and inspection thereof by them. If, however, the matter was pressed to the production of these books in Court notwithstanding the provisions of Section 54, Income-tax Act, he urged that having regard to the two cases, one of our High Court reported in Emperor v. Osman Chotani : 10ITR429(Bom) , and the other of the Madras High Court reported in M. Rangaswami Naicker v. M. Raju Naicker : 9ITR693(Mad) , the witness, as the Income-tax Officer concerned with this assessment, could not be called upon to produce the same in Court. He particularly relied upon the judgment of Gentle J. in the Madras case above referred to where the books of account of the partnership had been lodged with the Income-tax Officer and a partner of the partnership required the production of these books for the purpose of taking inspection thereof. Normally, each partner would be entitled to claim the partnership books as his own, and he would be entitled as owner thereof to inspection of all the entries therein. The question, however, which arose before the Madras High Court was whether under the provisions of Section 54, Income-tax Act, the Income-tax Officer could be called upon to produce these books even for the purpose of inspection thereof being taken by a partner of the partnership. Gentle J., before whom the matter came up in the High Court, observed that the terms of Section 54, Income-tax Act were mandatory in character and once the books of account were as such produced by the partnership before the Income-tax Officer, they came within the ban of Section 54, being accounts or documents produced before the Income-tax Officer under the provisions of the Act, and being such accounts or documents the Income-tax Officer was entitled to say that he was not bound to produce the same. Mr. M. V. Desai, for the plaintiff, on the other hand, urged before me relying upon the observations of Sir John Beaumont C. J., at p. 772 in Osman Chotani's case: : 10ITR429(Bom) , that the object of the enactment of Section 54, Income-tax Act was to save confidential communications which the assessee may make to the Income-tax Officer in the course of the investigation and therefore not all documents possibly produced by the assessee before the Income-tax Officer were thus saved but only those communications which were produced before the Income-tax Officer and were communicated or brought to his notice in the course of the investigation were to be treated as confidential and would come within the ban of Section 54, Income-tax Act. No doubt, in the ordinary way, the Income-tax Officer not knowing what particular entries or accounts would be relevant for the purpose of the investigation before him in the books of account which he calls the assesses to produce before him would ask the assesses to produce all the books of account and relevant documents, papers and vouchers in support of the statement made before him. Merely because this omnibus demand was made by the Income-tax Officer upon the assessee, that would not make all the books of account, documents, papers and vouchers produced before him by the assessee confidential communications made by the assessee to the Income-tax Officer as a whole. It would be only those accounts or those entries in the books of account which would be really communicated by the assessee to the Income-tax Officer that would come within the ban of Section 54, Income-tax Act. In the observations of Sir John Beaumont C. J., which were relied upon, the learned Chief Justice had made it abundantly clear that all that the section means is that the income-tax authorities are to regard communications made to them for the purpose of the Income-tax Act as being confidential, the object, no doubt, being to enable people to feel that they can freely state the facts relating to their income, facts which may often involve confidential matters relating to their business, without fear of the matters being disclosed. If this is the object of the enactment of the provision of the Section 54, Income-tax Act, the argument is that not all accounts or entries in the books of account produced by the assessee before the Income-tax Officer come within the ban of Section 54 of the Act, but is only those accounts and entries there in which are relevant for the purpose of assessment and which would be communicated by the assessee to the Income-tax Officer in the course of the investigation which would be made by him that, would really come within the ban. To the extent that the decision of Gentle. J, in the Madras case went beyond the ratio which was thus propounded it was urged by Mr. M. V. Desai that that decision was not binding on me.
3. On a careful consideration of the rival arguments before me, I have come to the conclusion that the argument of Me. M. V. Desai is correct. The purpose of the enactment of Section 54, Income tax Act, is to save all communications consisting of statements made, returns furnished or accounts or documents produced under the provisions of the Act from disclosure by the Income tax Officer. In the course of the assessment proceedings, the assessee has got to furnish the return to make statements and to produce accounts or documents in order to support the return. The Income-tax Officer has the power for the purposes of the assessment to call upon the assessee to produce such accounts or document as may be relevant for the purpose of arriving at a conclusion whether the return which has been furnished by the assessee is correct. The Income-tax Officer normally at the time when he calls upon the assessee to produce the books of account, documents, papers, vouchers etc, does not know what particular documents, papers or vouchers or what particular entries from the books of account he requires the assessee to produce. He leaves it to the assessee to determine what the assessee would consider relevant for the purpose of production before the Income-tax Officer and to produce whatever documents, papers, vouchers etc. are relevant for the purpose of justifying the return which the assessee has made before the Income-tax Officer in response to the relation made upon him in that behalf. The books of a account which by themselves are bound or written out in the regular course of business so as not to be detachable so far as the particular accounts or the entries therein be concerned, would of necessity be produced by the assesses before the Income-tax Officer as a whole. He may in order to justify his Income-tax return rely on particular entries, but he cannot merely produce them as such though he at the time when the Income-tax Officer is investigating and carrying on investigation in the matter of the assesseement of his Income-tax produces only these relevant accounts and entries therein before him. The normal way in which the assessee would therefore produce the accounts and the entries in the books of account before the Income-tax Officer would be physically producing before him all the books of account in which these relevant account and entries are written. It is therefore futile to urge that once a book of account or a, set of books of account are physically produced before the Income-tax Officer by the assessee the whole contents of these books of account are produced by the assessee before the Income-tax Officer under the provisions of the Act. It is only those accounts and entries in the books of account which are in the course of the investigation produced in the sense that they are communicated by the assessee to the Income-tax Officer and brought to his notice that would really come within the ban of Section 54 of the Act. The other entries in the books of account which are no doubt contained in the books of account but which have no reference whatever to the investigation of the particular case by the Income-tax Officer would certainly not come within this ban.
4. I therefore, uphold the argument which has been advanced by Mr. M. V. Dasai before me. It is open to the Income-tax Officer when he is called into the witness box to produce the books of account in a particular case to tell the Court that the whole of the books of account were produced before him by the assessee in the sense that all the accounts and the entries in those books of account were produced and communicated or brought to his notice by the assessee for the purpose of the assessment which he was conducting. But unless and until the Income-tax Officer is prepared to go to that length, he would be compelled to apply his mind to the question whether particular accounts or particular entries in those books of account were thus brought to his notice by the assessee for the purpose of assessment and eliminating those, produce the rest of accounts and the entries in those books of account which were not at all relevant for the purpose of the inquiry before him. He would be justified in withdrawing from the Court under Section 54, Income-tax Act, those accounts and entries in books of account which were relevant for the purpose of the inquiry before him and which were thus brought to his notice by the assessee. The others he would certainly be bound to produce before the Court. It may involve no doubt the production of the books of account produced by the assessee before him physically but he would be entitled under those circumstances to fold up or to pin and exclude from production before the Court those accounts and entries in the books of account which were thus produced or communicated by the assessee to him in the course of the assessment, he not being entitled to withhold from production before the Court the other books of account and entries therein which were not the subject-matter of the enquiry in the assessment proceedings before him.
5. That being the position in law according to me. I do order that unless and until the witness before me who is an Income-tax Officer investigating the case of defendant 1's firm before him says that any entries from these four books of account being items Nos. 4, 9, 14 and 15 of the list Ex. A before me were produced by the assessee before him under the provisions of the Act and for the purpose of the investigation before him, he would be bound to produce the same. If on the other hand, be comes to the conclusion on perusing the record before him, which is his exclusive pre serve and the Court does not want to pry into it in any manner whatever, that any entries in the books of account were disclosed before him by the assessee in the course of the investigation before him, be would be entitled to fold or pin them and exclude them from the ken of the outsiders including the Court for the purpose of satisfying the provisions of Section 54 Income-tax Act. But barring the exclusion of those particular entries from those four books he would be bound to produce the same, and I direct that the witness do produce those books of account before me. He shall carry out those directions at the next hearing before me.