BISHAN NARAIN, J. - This petition for revision is directed against the order of the Senior Subordinate Judge by which he has required the Income-tax Officer, Ambala, to produce certain documents and to give evidence relating to them. As the question involved was considered to be of some importance by Kapur, J., the case has come before this Division Bench for consideration.
Two suits had been filed by different parties for recovery of damages against the defendants. Both these suits are being tried together. The plaintiffs allegation is that the defendants made defamatory statements in certain applications. The passage objected to is :
'He, i.e., Indar Singh, is among the directors of the Khalsa Nirbhai Transport Company Limited, Ludhiana, who has been hauled up by the Indian Income-tax Department for submitting false account, and suppressing and not showing income of their company to the extent of about Rs. 2 3/4 lakhs. He being Edda in-charge of the said company was mostly responsible for this action......'
The defence taken is that the statement was true and had been made in public interest. The defendants called upon the petitioner as a witness requiring him to produce the original complaints filed against the plaintiffs by certain persons with regard to concealment of income. The defendants asked him the following question in regard to these complaints :
(1) Whether any action was taken on these complaints against the plaintiffs ?
(2) Whether as a result of that action and enquiry, any concealment was found proved And with what result ?
(3) Whether any reply was sent to the complainants promising reward ?
The petitioner claimed privilege under section 54 of the Income-tax Act, but the trial court rejected this claim by order dated 6th October, 1955, and the Income-tax Officer concerned has filed this petition in this court.
Admittedly, the petitioner had been assessing income of the Khalsa Nirbhai Transport Company (plaintiff in one of the two suits). The nature of the document required to be produced obviously is information given to the assessing officer with regard to the concealment of income alleged to have been made by the plaintiffs. The three questions asked relate to the steps taken by the Income-tax Officer concerned in respect of these complaints. The question arises whether the petitioner was justified in treating these matters as confidential under section 54 of the Income-tax Act.
It is argued by the Advocate-General in support of this petition that the required documents and information are contained in a record of assessment and must be treated as confidential and that no court is entitled to require the Income-tax Officer to produce them or to give any evidence in respect thereof. The relevant portion of section 54(1) on which the Advocate-General relies reads :
'All particulars contained.... in any record of any assessment proceeding...... prepared for the purposes of this Act, shall be treated as confidential and notwithstanding anything contained in the Indian Evidence Act, 1872 (1 of 1872), no court shall save as provided in this Act, be entitled to require any public servant to produce before it any such return, accounts, documents or record or any part of any such record or to give evidence before it in respect thereof.'
There is force in the contention of the learned Advocate-General. Obviously, the complaints sent to the Income-tax Officer related to matters dealt with under section 34 of the Income-tax Act, and if any action was taken or if any consequences followed, then they would relate to proceedings under the Income-tax Act and would form part of the assessment proceedings under the Act. These documents would properly form part of proceedings under the Income-tax Act. It is well recognised that an Income-tax Officer is entitled to act on material which may not be accepted as evidence in a court of law : vide Dhakeswari Cotton Mills Limited v. Commissioner of Income-tax. Under section 34 of the Income-tax Act an Income-tax Officer is required under sub-clause (1) to have reason to believe and under sub-clause (2) to have in consequence of information received reason to believe that income has escaped assessment, etc., before issuing notice under section 22(2) of the Income-tax Act. A communication to the Income-tax officer to the effect that an assessee has concealed income is a matter of information on which he is entitled to issue notice under section 22(2) within the provisions of section 34 of the Act. It is, however, argued by the learned counsel for the defendants that such a document or information cannot form part of any assessment proceedings till a notice is issued and there is no evidence that the Income-tax Officer in the present case issued such a notice. I am unable to accept this contention. Whether the Income-tax Officer acts on such a communication or information or not is immaterial as in any case it must properly form part of the proceedings under the Income-tax Act. For these reasons it must be held that the documents required in the present case must be held to be part of the assessment proceedings. The petitioner has been called upon to produce these documents from a record which is in his possession in his official capacity as an Income-tax Officer who has been dealing with assessment of the plaintiffs income. I am therefore of the opinion that the communication required to be produced by the trial court was confidential and it was not entitled to require the petitioner to produce the same before it. The three questions that are sought to be put to the petitioner obviously relate to matters which form part of the record of assessment proceedings and therefore the petitioner cannot be required to answer these questions.
It was then argued on behalf of the defendants that the present case is covered by section 54(3)(m) which is an exception to the provisions of section 54(1) of the Act. This argument is without any force whatsoever. The exception relates only to disclosure of any information to the effect as to whether a person has in fact been assessed to income-tax in any particular year or years or not. In the present case admittedly the information required does not relate to this matter but to the concealment of the income, its extent and the consequence that followed from such a concealment. Section 54(3)(m) does not relate to the amount of income-tax levied but only to the factum of assessment to income-tax and therefore this exception does not apply to the present case.
For all these reasons I am of the opinion that the trial court was not justified in calling upon the petitioner to produce the documents mentioned by the defendants nor the information required by the defendants in the present case relating to these documents. Accordingly this petition is accepted and the order of the trial court in suits Nos. 98 and 99 of 1954-55 dated 6th October, 1955, so far as it relates to the privilege claimed by the petitioner is et aside. There will be no order as to costs of this petition.
GROVER, J. - I agree.