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Seth Brothers Vs. Commissioner of Income-tax and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberCivil Misc. Writ Nos. 3302, 3380, 3381 and 3382 of 1963
Judge
Reported in[1971]80ITR693(All)
ActsIncome Tax Act, 1961 - Sections 132, 132(1) and 132(8); Income Tax (Amendment) Act, 1965 - Sections 6; Finance Act, 1964
AppellantSeth Brothers
RespondentCommissioner of Income-tax and ors.
Appellant AdvocateK.L. Misra, ;S.C. Khare and ;P.N. Pachauri, Advs.
Respondent AdvocateB.L. Gupta and ;R.R. Misra, Advs.
Excerpt:
- - by virtue of section 6, they would be deemed to have been made 'in accordance with the provisions of that sub-section as amended by this act as if those provisions were in force on the day the search was made'.the language is neither happy nor accurate. if the search is to be deemed to be a search made under the said section 132(1) then clearly section 132(8) in terms will come into play......kept in the custody of the supremecourt, and on may 9, 1964, effect was given to the order by the income-officer when he deposited the documents in the supreme court. theappeal in the supreme court was disposed of on july 15, 1969, and, as wehave already said, the cases were remanded to this court. on august 1,1969, upon application made by the petitioners, this court made an ex parteinterim order directing the income-tax officer 'not to open the trunkscontaining the documents in question arid not to examine them'. theapplication was finally heard oh march 18, 1970, and the following orderwas made: 'we have heard learned counsel for the parties. in our opinion, it is in the interest of justice that none of the parties to these petitions shouldhave access to the documents contained in.....
Judgment:

Pathak, J.

1. In this and the connected writ petitions, the petitioners have challenged the validity of proceedings relating to the search and seizure of their account books and other documents under Section 132(1) of the Income-tax Act, 1961.

2. Purporting to act under Section 132(1) of the Income-tax Act, 1961, the officers of the income-tax department raided the premises of the petitioners at Meerut on June 7 and 8, 1963, and seized and removed a large number of account books and other documents ....

3. These petitions were filed on August 23, 1963. They were allowed by a Bench of this court on March 27, 1964, on the ground that the action taken by the income-tax authorities and officers constituted an abuse of power and was, therefore, mala fide.

4. The Income-tax Officer appealed to the Supreme Court. The Supreme Court did not agree with the view taken by this court. It observed that the allegations of the petitioners had been denied by the income-taxauthorities, and if this court was of the view that an investigation should be made it should have directed evidence, to be taken viva voce. The Supreme Court allowed the appeals and remanded the cases to this court for the decision of the question which remained undecided.

5. The cases have now come before us on remand. A number of applications have been made by the petitioners praying that permission be granted to produce certain witnesses and also praying that the deponents of the counter-affidavit filed in these petitions earlier should be summoned for cross-examination. While considering these applications, the question was raised whether the income-tax department could retain the account books and other documents any longer having regard to the provisions, of Section 132(8) of the Act. Learned counsel for the income-tax department was given time to ascertain what was the the position in this regard, and affidavits have been filed before us in the matter by the parties. We, accordingly, proceed to consider whether the account books and other documents can be retained any longer by the income-tax department.

6. The search and seizure was effected in June, 1963. The proceeding was taken under Section 132(1) of the Income-tax Act, 1961, as it stood then. Under that provision an Income-tax Officer, specially authorised by the Commissioner in this behalf, was empowered to enter and search any building or place where he had reason to believe that any account books or other documents useful for or relevant to any proceedings under the Act may be found and to seize such account books and other documents. There was no provision then limiting the period for which the account books or documents could be retained by the Income-tax Officer,

7. Thereafter, Parliament enacted the Finance Act of 1964 (No. 5 of 1964), with effect from April 1, 1964, and Section 30 thereof substituted for the original provision in the Income-tax Act, 1961, a detailed provision respecting the powers of search and seizure. The power to search a building or place and to seize account books and other documents was detailed in Sub-section (1) of the new Section 132, and Sub-section (2) provided :

'2. The books of account or other documents seized under Subsection (1) shall not be retained by the Inspecting Assistant Commissioner or the Income-tax Officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same are recorded by him in writing and the approval of the Commissioner for such retention is obtained :

Provided that the Commissioner shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed.'

Subsequently, the Income-tax (Amendment) Act of 1965 (No. 1 of 1965) was enacted with effect from March 12, 1965, and still more detailed provision was made by substituting entirely new provisions in the Income-tax Act in place of Section 132. Sub-section (1) of Section 132 now enacted contained fuller provision conferring powers in respect of search and seizure on specified officers, including the Inspecting Assistant Commissioner and the Income-tax Officer, who were now referred to as authorised officers. Sub-section (8) of the section provided :

'(8). The books of account or other documents seized under subsection (1) shall not be retained by the authorised officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same are recorded by him in writing and the approval of the Commissioner for such retention is obtained :

Provided that the Commissioner shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income-tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed.'

Section 6 of the Amendment Act, 1965, which appears to us relevant, declared :

'6. Validation of certain searches made.--Any search of a building or place by an Inspecting Assistant Commissioner or Income-tax Officer purported to have been made in pursuance of Sub-section (1) of Section 132 of the Principal Act before the commencement of this Act shall be deemed to have been made in accordance with the provisions of that sub-section as amended by this Act as if those provisions were in force on the day the search was made and shall not be called in question before any court of law or any other authority merely on the ground-

(i) that the Inspecting Assistant Commissioner or the Income-taxOfficer made such search with the assistance of any other person; or

(ii) that no proceeding under the Indian Income-tax Act, 1922,(11 of 1922), or the principal Act was pending against the person concernedwhen the search was authorised under the said sub-section.'

Section 6 refers to all searches made by an Income-tax Officer before the commencement of the Amendment Act, that is, before March 12, 1965. They are searches which are purported to have been made under Sub-section (1) of Section 132 of the Principal Act. By virtue of Section 6, they would be deemed to have been made 'in accordance with the provisions of that sub-section as amended by this Act as if those provisions were in force on the day the search was made'. The language is neither happy nor accurate. Section 132(1) was not amended in the usual sense of that word. It was completely replaced. It was repealed and re-enacted. More accurately what Section 6 intends to say is that a search made under Section 132(1) of the principal Act is: to be deemed to have been made in accordance with Section 132(1) as now substituted. The principal Act referred to is the Income-tax Act, 1961, and there can be no dispute, we think, that the search made in June, 1963, was a search under Section 132(1) of that Act, Section 6 of the Amendment Act, 1965, is a curative or validating provision and should, therefore, be comprehensively construed. It refers to searches made before the commencement of the Amendment Act, 1965, and, therefore, all searches made before that date must be considered included within its scope. It could never have been intended, when Section 6 was framed that some searches should be governed by the newly enacted provisions of Section 132 while others should not. As we shall presently show, one consequence of Section 6 is to limit the time for which the account books and documents can be retained by the Income-tax Officer. Could it at. all have been intended that the account books and documents seized in some searches should be retained only for a limited period while those seized in other searches could be retained indefinitely. We think not. Accordingly, the searches made in June, 1963, must now be deemed to have been made in accordance with the new Section 132(1) as brought in by the Amendment Act, 1965. The search must be treated as if that provision was in force on the date when the search was made. If the search is to be deemed to be a search made under the said Section 132(1) then clearly Section 132(8) in terms will come into play. The operation of the legal fiction makes, it a search under the said Section 132(1) for all purposes, and Section 132(8) specifically deals with such searches.

8. It is contended on behalf of the income-tax department that Section 132(8) of the Act, as amended in 1965, cannot be invoked. It is urged that Section 132(8) is not retrospective and, therefore, will not apply to a search made in June, 1963. In our opinion, it is not necessary that Section 132(8) should operate retrospectively in order to cover the account books and documents in question before us. Section 132(8) is concerned with the present retention of account books and documents, and it is immaterial that those articles were seized in a search made before Section 132(8) came into force. The date of search is relevant in so far only that it must be a search under Section 132(1). Since by virtue of Section 6 . of the Amendment (Act, 1965, the search must be deemed to be a search under the said Section 132(1), there is little difficulty in holding that Section 132(8) is attracted to the present account books and documents.

9. It is then urged that section 132(8) necessarily contemplates that theapproval of the Commissioner should be sought and obtained by theauthorised officer before the period of 180 days has expired, and inasmuchas, in the present case, that period expired long before the AmendmentAct of 1965 was enacted, Section 132(8) would be unworkable in the present case and, therefore, it should .be held that it did not apply. It is not right to say, in our opinion, that the approval of the Commissioner must be sought before the period of 180 days expires. The sub-section does not require that the approval should be taken prior to the expiry of that period. The language is sufficiently wide to enable the authorised officer to seek and obtain the approval of the. Commissioner even after the expiry of 180 days. The approval of the Commissioner granted even after the expiry of that period would be sufficient to sanction and validate the further retention of the books beyond that period.

10. Finally, it is contended by learned counsel for the income-tax department that the period of 180 days has not yet expired if account be takenof the period during which successive stay orders made by the SupremeCourt and this court were in operation and by reason of which, it is said,the income-tax department was deprived of the opportunity of examiningthe account books and documents seized. To appreciate this contention, afew facts may be briefly recited. As we have already pointed out, thebooks and documents were seized on June 7 and 8, 1963. The present writpetitions were filed thereafter, and on August 23, 1963, this court made anex parte interim order directing that, although the documents and articleswould remain in the custody of the Income-tax Officer, they would besealed forthwith by him. On March 4, 1964, after hearing the parties, theinterim order was modified in so far that, while the court directed thedocuments seized to remain sealed, it allowed the Income-tax Officer toproceed with the income-tax assessment proceedings. On March 27, 1964,the writ petitions were allowed by this court. Then, on March 31, 1964, apetition was filed in the Supreme Court for special leave to appeal againstthe judgment and order of this court, and the Supreme Court stayed theoperation of the order directing delivery of the seized documents to thepetitioners. On April 17, 1954, the Supreme Court made an interim orderthat the sealed documents should be kept in the custody of the SupremeCourt, and on May 9, 1964, effect was given to the order by the Income-Officer when he deposited the documents in the Supreme Court. Theappeal in the Supreme Court was disposed of on July 15, 1969, and, as wehave already said, the cases were remanded to this court. On August 1,1969, upon application made by the petitioners, this court made an ex parteinterim order directing the Income-tax Officer 'not to open the trunkscontaining the documents in question arid not to examine them'. Theapplication was finally heard oh March 18, 1970, and the following orderwas made:

'We have heard learned counsel for the parties. In our opinion, it is in the interest of justice that none of the parties to these petitions shouldhave access to the documents contained in the sealed steel trunks presently in the custody of the Supreme Court. Parties are restrained accordingly.'

The question is whether upon these facts it can be said that the account books and documents have been retained by the Income-tax Officer for more than 180 days. We are unhesitatingly of opinion that they have been.

11. Section 132(8) is concerned solely with the retention of the account books and documents by the : authorised officer. It is not concerned with the question whether that officer, had any opportunity to examine the account books and documents retained by him. If for any reason it was not possible for the officer to examine them within the period of 180 days, it was always open to him to obtain the approval of the Commissioner for their further retention. Upon the data before us, it seems clear that the account books and documents were retained by the Income-tax Officer all along until they were deposited in the custody of the Supreme Court on May 9, 1964. The interim orders did not deprive the Income-tax Officer of the custody of the account books and documents until the Supreme Court by its order of April 17, 1964, directed that the seized documents should be kept in its custody and they were actually deposited there on May 9, 1964,

12. Then, it is urged, there has been no occasion yet for the Income-tax Officer to seek and obtain the approval of the Commissioner for further retention of the account books and documents. It is pointed out that during the period before. April 1, 1964, there was no provision in Section 132 limiting the time during which the account books and documents could be retained. And the provision which was brought into the Act from that date by the Finance. Act, 1964, did not apply to searches made earlier. By the time the present provision was enacted by the Amendment Act. 1965, the account books and documents had already been, deposited in the custody of the Supreme Court, Now, it may be that during this entire period there was no occasion for the Income-tax Officer to seek and obtain the approval of the Commissioner for retaining the account books and documents. But we notice that after the disposal of the appeal by the Supreme Court on July 15, 1969, when the interim order of the Supreme Court directing the seized document to be kept in its custody must be considered to have come to an end, it was open to the Income-tax Officer to take back the documents. It was open to him to obtain the approval of the Commissioner, and for the Commissioner to grant such approval, extending the period for retaining the account books and documents. While the cases were pending in this court on remand, this court made an order dated August 1, 1969, restraining the Income-tax Officer from opening the trunks containing the documents and from examining them. . That order could have been made only on the basis that it waswithin the power of the Income-tax Officer to open the trunks and examine the documents. There was nothing in that order requiring that the trunks should remain in the custody of the Supreme Court. Then on March 18, 1970, this court made the further order that the parties should not have access to the documents contained in the sealed steel trunks 'presently in the custody of the Supreme Court.' There was no injunction here against the Income-tax Officer taking the steel trunks back from the custody of the Supreme Court. The injunction extended only to the parties having access to the documents contained in those trunks. The phrase 'presently in the custody of the Supreme Court' was employed only for the purposes of referring to and identifying the steel trunks within Which the documents in question are contained. It, therefore, appears to us that from July 15, 1969, it was open to the authorised officer to obtain the approval of the Commissioner for extending the period of retention of the account books and documents and for the Commissioner to approve of such further retention. It is not denied by learned counsel for the income-tax department that no such approval has yet been granted by the Commissioner. In the circumstances, we hold that the petitioners are entitled to the return of the account books and documents.

13. That is the only relief pressed for before us.

14. As, in our opinion, the decision on this question is sufficient to dispose of the writ petitions it is not necessary to express any opinion on the remaining questions nor to consider any further the applications made by the petitioners in connection with the recording of oral evidence.

15. The petitions are allowed. The respondents are directed to return theaccount books and documents seized by them from the premises of the petitioners at Meerut on June 7 and 8, 1963, within six weeks from to-day. Thesealed boxes containing the account books and documents should be openedby a representative of the income-tax department in the presence of arepresentative of the petitioners, and thereupon delivery of the accountbooks and documents should be made forthwith to the representative of thepetitioners.

16. As the decision of this petition has been influenced by the state of the law enacted subsequent to the filing of the petitions, we make no order as to costs.


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