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

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberCivil Writ No. 1514 of 1971
Judge
Reported in[1973]90ITR191(P& H)
ActsIncome Tax Act, 1961 - Sections 132; Income Tax (Amendment) Act, 1965 - Sections 6 and 132(8)
AppellantSeth Brothers
RespondentCommissioner of Income-tax and anr.
Appellant Advocate Bhagirath Dass,; S.K. Hirajee and; B.K. Jhingan, Adv
Respondent Advocate D.N. Awasthi, Adv.
Cases ReferredSeth Brothers v. Commissioner of Income
Excerpt:
.....the legislature in enacting section 6 and the interpretation put by the learned counsel for the respondents is accepted as correct, then the result would not only cause injustice but would also lead to anomalous and absurd situation, that is to say, in the case of a search carried out under the principal act the documents and the account books seized could be. it clearly provides that any search purported to have been made under 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 kashmir, at patiala, in form no. 45 given in the rules framed under the income-tax act. the account books and other documents which were lying in the premises of the mill were packed in gunny bags and were removed from there. some details, with which we are not concerned, are given in the petition about the proceedings which the petitioners took thereafter ; but the only fact that needs mention is that all the documents which had been seized from the premises of the imperial flour mills at ambala, between 7th of june, 1963, and 11th of june, 1963, barring the current books and those which were returned voluntarily by the department, have not yet been returned to the petitioners. it is this action of the respondents which has been challenged by way of this petition on various.....
Judgment:

Prem Chand Jain, J.

1. M/s. Seth Brothers through Manmohau Nath, one of the partners of the said concern, have filed this petition under Articles 226 and 227 of the Constitution of India for the issuance of a writ in the nature of mandamus requiring the respondents to return the books seized between the dates 7th of June, 1963, to llth of June, 1963, from the premises of the Imperial Flour Mills, Ambala City.

2. The petitioner is a registered partnership firm and at the relevant time was constituted by Vishwa Nath, Baikunth Nath, Mrs. Rama Rani and Mrs. Prem Lata, Manmohan Nath and Mrs. Sushila Devi. The firm was started with effect from 1st of April, 1957, with its head office at Meerut, in Uttar Pradesh, and was being assessed by the Income-tax Officer, Meerut, under G.I.R.No. 137-G. The sole business of the firm was to run the Imperial Flour Mills, Ambala City, which was being run between the period 1st of April, 1956, to the 31st of March, 1957, constituted by five partners except Mrs. Prem Lata, referred to above. This firm had its head office at Ambala and was being assessed by the Income-tax Officer, Ambala,under G.T.R. No. 133-B. The petitioner-firm ceased to carry on the business after 31st of March, 1965, and up to March 31, 1965, all the returns were filed from the 1st of April, 1957, to the end of the assessment year 1965-66.

3. It is further averred that on 7th of June, 1963, the Income-tax Officer, ' C ' Ward, Ambala, the Income-tax Officer, Special Investigation Circle, Ambala, the Income-tax Officer, ' A' Ward, Ambala, and the Income-tax Officer, Ambala, visited the Imperial Flour Mills, Ambala, under the directions of the Commissioner of Income-tax, Punjab, Himachal Pradesh and Jammu and Kashmir at Patiala, along with six inspectors and a posse of police and after surrounding the Imperial Flour Mills, served the letter of authorisations which had been issued in favour of these officers by the then Commissioner of Income-tax, Punjab, Himachal Pradesh, Jammu and Kashmir, at Patiala, in Form No. 45 given in the Rules framed under the Income-tax Act. The account books and other documents which were lying in the premises of the mill were packed in gunny bags and were removed from there. Some details, with which we are not concerned, are given in the petition about the proceedings which the petitioners took thereafter ; but the only fact that needs mention is that all the documents which had been seized from the premises of the Imperial Flour Mills at Ambala, between 7th of June, 1963, and 11th of June, 1963, barring the current books and those which were returned voluntarily by the department, have not yet been returned to the petitioners. It is this action of the respondents which has been challenged by way of this petition on various grounds stated in the petition.

4. Written statement has been filed by Shri T. N. Sharma, Income-tax Officer, ' B ' Ward, Ambala, in which the material allegations made in the petition have been controverted.

5. It was earnestly contended by Mr. Btiagirath Dass Seth, learned counsel for the petitioners, that the provisions of Sub-section (8) of Section 132 of the Income-tax (Amendment) Act, 1965, were retrospective in effect and that before retaining the books of account beyond a period of 180 days from the date of seizure, it was obligatory on the authorised officer to record reasons in writing for doing so and obtain the approval of the Commissioner for such retention. In support of his contention, reliance was placed by the learned counsel on Section 6 of the Income-tax (Amendment) Act, 1965, which is in the following terms :

' 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 provisionswere 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-tax Officer 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 concerned when the search was authorised under the said sub-section.'

The learned counsel also sought support from a Division Bench decision of the Allahabad High Court in Seth Brothers v. Commissioner of Income-tax, [1971] 80 I.T.R. 693 (All.).. On the other hand, it was contended by Mr. D. N. Awasthi, learned counsel for the respondents, that Section 6 had nothing to do with retrospectivity, that it was only a curing section and that it had been enacted in order to obviate two attacks against searches in which :

(a) the authorised officer had associated with himself an unauthorised officer ; and

(b) where no proceedings were pending against the assessee either under the 1922 Act or under the 1961 Act (as amended by the 1964 Act).

The learned counsel also contended that the decision of the Allahabad High Court in Seth Brothers' case, did not lay down the correct law.

6. After giving my thoughtful consideration to the entire matter, I am of the view that there is considerable force in the contentions of the learned counsel for the petitioners.

7. The short question that requires determination on the respective contentions of the learned counsel for the parties is whether, by virtue of Section 6, the provisions of Section 132(1) of the Income-tax Act of 1965 are retrospective in effect, and whether to the searches which were carried out under the provisions of the Income-tax Act, 1961, the provisions of Sub-section (8) of Section 132, are applicable.

8. The search and seizure in the instant case were carried out on June 7, 1963, under Section 132(1) of the Income-tax Act, 1961 (hereinafter referred to as the ' principal Act '), which is in the following terms:

' 132. (1) Subject to any rules made in this behalf, any Income-tax Officer specially authorised by the Commissioner in this behalf may,--

(i) enter and search any building or place where he has reason to believe that any books of account or other documents which in his opinion will be useful for, or relevant to, any proceeding under this Act, may be found, and examine them, if found ;

(ii) seize any such books of account or other documents ; (iii) place marks of identification on any such books of account or other documents or make or cause to be made extracts or copies therefrom ;

(iv) make a note or an inventory of any articles or things found in the course of any search under this section which in his opinion will be useful for, or relevant to, any proceedings under this Act. '

Thereafter, Parliament enacted the Finance Act of 1964 (Act No. 5 of 1964) with effect from April 28, 1964, and Section 30 thereof substituted a new section for Section 132 of the principal Act, respecting the powers of search and seizure. Sub-section (2) of the substituted section reads as under :

' 132. (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 tbe proceedings under the Indian Income-tax Act, 1922 (XI of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed. '

Again, Parliament enacted the Income-tax (Amendment) Act, 1965 (Act No. 1 of 1965) (hereinafter referred to as ' the Income-tax Act 1965 '), with effect from April 12, 1965, which replaced Section 132 by a more detailed provision. Sub-section (8) with which we are concerned reads as under :

' 132. (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 (XI of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed. '

Under Section 132(1) of the principal Act, an Income-tax Officer specifically 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 might be found and to seize such account books and other documents and no time limit was prescribed for retaining the account books by the Income-tax Officer. Thereafter, by virtue of the Finance Act, 1964, Section 132 was amended. Under the amended section, Sub-section (2) was added which provided that the account books or other documents seizedtinder Sub-section (1) shall not be retained by the Inspecting Assistant Commissioner or the Income-tax Officer for a period exceeding 180 days from the date of the seizure unless reasons for retaining the same were recorded by him in writing and the approval of the Commissioner for such retention was obtained. However, at the time of enacting the Finance Act, 1964, searches and seizures made under the principal Act were not adverted to and dealt with. The result was that there was no time limit for retaining the documents or the account books seized under the principal Act while according to the terms of Section 132(2) of the Finance Act, 1964, a definite period was fixed. This was clearly a lacuna in the Finance Act, 1964, and was removed in the Income-tax Act, 1965, by adding Section 6 and thereby uniformity was achieved with regard to searches carried out either previous to or after the enactment of the Income-tax Act, 1965. If such had not been the intention of the legislature in enacting Section 6 and the interpretation put by the learned counsel for the respondents is accepted as correct, then the result would not only cause injustice but would also lead to anomalous and absurd situation, that is to say, in the case of a search carried out under the principal Act the documents and the account books seized could be. kept for unlimited period while in the case of a search carried out under the Income-tax Act, 1965, the account books could not be retained beyond a period 6i 180 days unless reasons for retaining the same were recorded by the appropriate authority and approval for such retention was obtained.

9. The language of Section 6 is clear and unambiguous. It clearly provides that any search purported to have been made under 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. The true effect and scope of Section 6 seems to be 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. If I accept the contention of the learned counsel for the respondents that Section 6 had nothing to do with retrospectivity and that it was only a curing section and had been enacted in order to obviate two attacks against searches mentioned in Clauses (a) and (b) of that section, then the words ' 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 ' would become redundant. Thus, viewed from any angle, I find no escape from the conclusion that the provisions of Sub-section (8) of Section 132 are applicable to the searches which were carried out under the provisions of the principal Act and that the Income-tax Officer cannot retain the books of account without recording reasons in writing for doing so and without obtaining the approval of the Commissioner ior such retention. The view I have taken is fully supported by the Division Bench decision of the Allahabad High Court in Seth Brothers ' case wherein it was held that Section 6 of the Income-tax (Amendment) Act, 1965, laid down that a search made under Section 132(1) of the principal Act was to be deemed to have been made in accordance with Section 132(1) as substituted ; that Section 6 being a curative or validating provision, must be comprehensively construed and that all searches made before the commencement of the Amendment Act, 1965, must be considered included within its scope.

10. Faced with this situation it was argued by Mr. Awasthi, learned counsel for the respondents, that the petitioners were debarred from filing this petition in view of the undertaking given by them to the effect that all writ petitions which had been filed by them before various High Courts and which were pending, would be withdrawn by them before 30th March, 1965, and that fresh petitions would not be filed. I am afraid, I am unable to agree with this contention of the learned counsel. The respondents have not placed any material to show before whom such an agreement was entered into by the petitioners and what that agreement is. It is also not clear as to which were the proceedings in which such an agreement was arrived at. Moreover, such an agreement which precludes a party from asserting his legal right, even if entered into, would be ineffective. The income-tax authorities are expected to act in accordance with law and it does not look proper for them to set up such a plea in order to save their illegal action.

11. No other point was argued on either side. For the reasons recorded above I allow this petition and direct the respondents to return the account books and documents seized from the premises of the petitioners between the dates 7th June, 1963, to 11th June, 1963, within two months from today. In the circumstances of the case, I make no order as to costs.


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