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Dharamahi Polabhai Vs. Ramjibhai Jivabhai and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtGujarat High Court
Decided On
Case NumberCivil Revision Application No. 498 of 1970
Judge
Reported in[1975]98ITR85(Guj)
ActsIncome Tax Act, 1961 - Sections 33, 137, 137(1), 137(2), 137(5), 138, 138(1), 138(2), 280(1), 297, 297(1) and 297(2); General Clauses Act - Sections 6
AppellantDharamahi Polabhai
RespondentRamjibhai Jivabhai and anr.
Appellant Advocate Suresh M. Shah, Adv.; K.H. Kaji, Adv.
Respondent Advocate D.U. Shah, Adv.
Cases ReferredHamilton Gell v. White and Abbot
Excerpt:
direct taxation - applicability - sections 137 and 138 of income tax act, 1961 and section 6 of general clauses act, 1897 - obligation been incurred by public servant in view of provisions of two acts prior to omission of section 137 of act of 1964 - corresponding right accrued in favour of person who disclosed information - no attempt made to destroy rights - section 6 of act applicable. - - 1), has urged that in view of the provisions of section 138 of the income-tax act, 1961 (which will be hereinafter referred to as 'the act of 1961'), which came into force on 1st april, 1962, the documents produced in an assessment proceeding before the income-tax authority prior to the coming into force of that act as well as subsequent to the date of the coming into force of that act, and in.....j.m. sheth, j.1. this revision petition is filed by original defendant no. 1, against the order passed by the learned civil judge, senior division, amreli, in special civil suit no. 5 of 1968, filed by the plaintiff (opponent no. 1), against the petitioner and opponent no. 2 (original defendant no. 2), dismissing the application, exhibit 45. that application was filed on behalf of the defendants of the suit raising objection against the prayer made by plaintiff-opponent no. 1, summoning a clerk of the income-tax department for production of certain records produced in the income-tax proceedings. * * * *2. the learned trial judge negatived the contention of the defendants and ordered the production of these documents relying upon the decision of a division bench of the madras high court.....
Judgment:

J.M. Sheth, J.

1. This revision petition is filed by original defendant No. 1, against the order passed by the learned Civil Judge, Senior Division, Amreli, in Special Civil Suit No. 5 of 1968, filed by the plaintiff (opponent No. 1), against the petitioner and opponent No. 2 (original defendant No. 2), dismissing the application, exhibit 45. That application was filed on behalf of the defendants of the suit raising objection against the prayer made by plaintiff-opponent No. 1, summoning a clerk of the income-tax department for production of certain records produced in the income-tax proceedings.

* * * *

2. The learned trial judge negatived the contention of the defendants and ordered the production of these documents relying upon the decision of a Division Bench of the Madras High Court in Sivagami Achi v. Ramanathan Chettiar.

3. The learned single judge has referred the matter to a Division Bench, and that is how the matter has come to us.

4. Mr. Suresh M. Shah, appearing for the petitioner (original defendant No. 1), has urged that in view of the provisions of section 138 of the Income-tax Act, 1961 (which will be hereinafter referred to as 'the Act of 1961'), which came into force on 1st April, 1962, the documents produced in an assessment proceeding before the income-tax authority prior to the coming into force of that Act as well as subsequent to the date of the coming into force of that Act, and in spite of the omission of section 137 from the Act of 1961, these documents cannot be permitted to be produced. In support of his argument, he has mainly relied upon the aforesaid decision of the Division Bench of the Madras High Court.

5. Mr. Suresh M. Shah has also alternatively urged that, at any rate, the documents referred to in para. 5 of the trial court's judgment at items Nos. 3 and 4, cannot be permitted to be produced as they are documents for the period prior to 1st April, 1964, when section 137 came to be omitted from the Act of 1961.

6. Mr. D. U. Shah, appearing for plaintiff-opponent No. 1, has urged that, in view of the omission of section 137 from the Act of 1961, under which there was prohibition as regards the production of such documents by public servant or an income-tax authority and there was also prohibition regarding the power of the court to call for such documents, that prohibition having been removed by the omission of section 137 from the statute book, the learned trial judge was fully justified in passing the impugned order.

7. Mr. K. H. Kaji was permitted to intervene on behalf of the income-tax department as per his request, as he had a similar matter before a single judge of this court, wherein he had filed his appearance and a similar question arises for consideration in that case. Mr. Kaji has invited our attention to the latest decision of the Punjab High Court in Amar Singh Lamba v. Sewa Sigh, and submitted that on pages 11 and 12 of the said report, propositions emerging have been noted and, in his submission, those propositions are correctly laid down.

8. Before we advert to the authorities cited at the Bar, we first propose to set out the relevant provision to understand the rival contentions urged at the Bar. In order to decide the controversy in this case, it is necessary to refer to certain provisions of the Indian Income-tax Act, 1922 (which will be hereinafter referred to as 'the Act of 1922'), and the Act of 1961. Sub-sections (1) and (2) of section 54 of the Act of 1922, which are relevant, read as under :

'54. (1) All particulars contained in any statement made, return furnished or accounts or documents produced under the provisions of this Act, or in any evidence given, or affidavit or deposition made, in the course of any proceedings under this Act other than proceedings under this Chapter, or in any record of any assessment proceeding, or any proceeding relating to the recovery of a demand, prepared for the purpose 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.

(2) If a public servant discloses any particulars contained in any such statement, return, accounts, documents, evidence, affidavit, deposition or record, he shall be punishable with imprisonment which may extend to six months, and shall also be liable to fine.'

9. Sub-section (3) of section 54 of the Act of 1922 provided for cases in which the record mentioned in sub-section (1) of section 54 could be disclosed or produced. But we are not concerned in the instant case with those eventualities. Sub-section (4) of section 54 of the Act of 1922 made an exception in regard to the production by a public servant before a court of any document, declaration or affidavit filed, or the record of any statement or deposition made in a proceeding under section 25A or section 26A, or to the giving of evidence by a public servant in respect thereof.

10. By section 9 of the Taxation Laws (Amendment) Act (XXVIII of 1960), section 59B was inserted in the Act of 1922 with effect from April 1, 1960, which reads as under :

'59B. Where a person makes an application to the Commissioner in the prescribed form and after payment of the prescribed fee for information as to the amount of tax determined as payable by any assessee in respect of any assessment made on or after the 1st day of April, 1960, the Commissioner may, notwithstanding anything contained in section 54, if he is satisfied that there are no circumstances justifying its refusal, furnish or cause to be furnished the information asked for.'

11. The Act of 1922 was repealed by the Act of 1961, which came into force with effect from 1st April, 1962. Section 137 of the Act of 1961 related to 'disclosure of information prohibited' and was substantially in identical terms as section 54 of the Act of 1922. Change made in that section was to include certain more categories of cases in the exceptions. Furthermore, by Sub-section (5) of that section 137, prohibition relating to voluntary disclosure of any particulars referred to in sub-section (1) by the person by whom the statement was made, the return furnished, the accounts or documents produced, the evidence given or the affidavit or deposition made, as the case may be, was removed. The Explanation read :

'In sub-sections (1) and (2) and (4), 'public servant' means any public servant employed in the execution of this Act.'

12. Section 138 of the Act of 1961 provided for disclosure of information respecting amount of tax payable and read as under :

'138. Where a person made an application to the Commissioner in the prescribed form and pays the prescribed fee for information as to the amount of tax determined as payable by any assessee in respect of any assessment made either under this Act, or the Indian Income-tax Act, 1992 (XI of 1922), on or after the 1st day of April, 1960, the Commissioner may, notwithstanding anything contained in section 137, if he is satisfied that there are no circumstances justifying its refusal to furnish or cause to be furnished the information asked for.'

13. It is thus apparent that sections 137 and 138 of the Act of 1961 corresponded to sections 54 and 59B of the Act of 1922, respectively.

14. By section 32 of the Finance Act, 1964, section 137 of the Act of 1961 was omitted and by section 33 thereof section 138 was substituted as under :

'138(1) Where a person makes an application to the Commissioner in the prescribed form for any information relating to any assessee in respect of any assessment made either under this Act or the Indian Income-tax Act, 1922 (XI of 1922), on or after the 1st day of April, 1960, the Commissioner may, if he is satisfied that it is in the public interest so to do, furnish or cause to be furnished the information asked for in respect of that assessment only and his decision in this behalf shall be final and shall not be called in question in any court of law.

(2) Notwithstanding anything contained in sub-section (1) or any other law for the time being in force, the Central Government may, having regard to the practices and usages customary or any other relevant factors, by order notified in the Official Gazette, direct that no information or document shall be furnished or produced by a public servant in respect of such matters relating to such class of assesses or except to such authorities as may be specified in the order.'

15. By Finance (No. 2) Act, 1967, sub-section (1) of section 138 was substituted by the following sub-section :

'138. Disclosure of information respecting assessees. - (1) (a) The Board or any other income-tax authority specified by it by a general or special order in this behalf may furnish or cause to be furnished to -

(i) any officer, authority, or body performing any functions under any law relating to the imposition of any tax, duty or cess, or to dealings in foreign exchange as defined in section 2(d) of the Foreign Exchange Regulation Act, 1947 (VII of 1947); or

(ii) such officer, authority or body performing functions under any other law as the Central Government may, if in its opinion it is necessary so to do in the public interest, specify by notification in the Official Gazette in this behalf,

any such information relating to any assessee in respect of any assessment made under this Act or the Indian Income-tax Act, 1922 (XI of 1922), as may, in the opinion of the Board or other income-tax authority, be necessary for the purpose of enabling the officer, authority or body to perform his or its functions under that law.

(b) Where a person makes an application to the Commissioner in the prescribed form for any information relating to any assessee in respect of any assessment made under this Act or the Indian Income-tax Act, 1922 (XI of 1922), on or after the 1st day of April, 1960, the Commissioner may, if he is satisfied that it is in the public interest so to do, furnish or cause to be furnished the information asked for in respect of that assessment only and his decision in this behalf shall be final and shall not be called in question in any court of law.'

16. From the provisions of law set out above, it is evident that under section 54 of the Act of 1922 and section 137 of the Act of 1961, all particulars contained in the records of assessments before the income-tax authorities as mentioned therein were to be treated as confidential and no public servant was permitted to disclose them to any person, authority or court, except to the extent provided in sub-section (3) and (4) of the said section. In view of those provisions no court could call upon the income-tax authorities to produce any record relating to an assessment but that policy was changed when section 137 was omitted from the Act of 1961 with effect from 1st April, 1964. Prior thereto with effect from 1st April, 1960, when section 59B, inserted in the Act of 1922, came into force, an exception was made to the extent that the Commissioner of Income-tax was authorised to disclose information, to any person applying for it, as to the amount of tax determined as payable by any assessee in respect of any assessment made on or after April 1, 1960, if he was satisfied that there was no circumstance justifying its refusal.

17. With effect from April 1, 1964, however, the provision with regard to keeping the record of assessment as confidential was deleted and the Commissioner of Income-tax was authorised to furnish or cause to be furnished any information asked for by any person, by making an application to him in the prescribed form, relating to any assessee in respect of any assessment made under the Act of 1922 or the Act of 1961 on or after April 1, 1960, if he is satisfied that it is in the public interest so to do and his decision in that behalf is final and cannot be called in question in any court of law. With effect from that very day the Central Government had been given the power to direct, by order notified in the Official Gazette, that no information or document shall be furnished or produced by a public servant in respect of such matters relating to such class of assessees and in respect of such authorities as may be specified in the order.

18. It appears that an order was notified in the year 1965 with regard to the assessment of banking companies to the effect that no record of assessment qua them could be produced in any court not could any information be disclosed on the basis thereof.

19. With effect from 1st April, 1967, the Board or any other income-tax authority specified by it has been authorised to furnish information from the assessment records of the income-tax department to certain classes of officers mentioned in sub-clauses (i) and (ii) of clause (a) of section 138(1). The officers mentioned in these sub-clauses do not include a court of law and, therefore, the provisions of these clauses do not apply in this case. However, strong reliance is placed by Mr. Suresh M. Shah on clause (b) of sub-section (1) of section 138 in support of his plea that even when the court requisitions any record from the income-tax authorities, the matter has to be decided by the Commissioner of Income-tax as to whether that record should be allowed to be produced or not. We will consider this contention of his at an appropriate stage.

20. After setting out the relevant provisions which required consideration, we will now consider the authorities cited at the Bar in support of their submissions. We will first refer to the decision of the Delhi High Court in Daulat Ram v. Somnath. Khanna J. (as he than was), after referring to the relevant provisions at pages 782 and 783, observes :

'The application by the petitioners for summoning the clerk of the Income-tax department with the records in question was made in the present case in 1966, long after the Indian Income-tax Act of 1922 had been repealed and section 137 of the Income-tax Act of 1961 had been omitted. There was, at the time of the application, no provision corresponding to section 54 of the Act of 1922 and section 137 of the Act of 1961, about the ban on production of the records in question by the income-tax authorities. The case set up on behalf of the department is that the relevant records, relating to the years 1950 to 1954, were filed when section 54 of the Act of 1922 was in force and as under that section there existed a privilege against the production of those documents in court, the same could not be affected even though the aforesaid section was subsequently repealed.'

21. That contention was accepted relying upon the provisions of section 6(c) of the General Clauses Act, 1897 (10 of 1897). In our opinion, that section is very material for our purposes. It reads as under :

'6. Where this Act, or any Central Act or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not....

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed.'

22. Mr. D. U. Shah, appearing for plaintiff - opponent No. 1, has submitted that these provisions contained in section 6(e) of the General Clauses Act, 1897, cannot have any application, as the present case could not be said to be a case where any right, privilege, obligation or liability was acquired, accrued or incurred under the repealing provisions, i.e., provisions contained in section 137 which came to be omitted from the Act of 1961 with effect from 1st April 1964. It was submitted by Mr. D. U. Shah that there was only a procedural ban under section 54 of the Act of 1922 as well as under section 137 of the Act of 1961. There was no right or privilege conferred by the statute on any individual person. There is no obligation also cast upon the income-tax authority or any public servant. It was only for the internal and proper administration of the income-tax department that there was such a procedural ban imposed under the provisions of those sections. By omission of section 137 of the Act of 1961 and the repeal of the Act of 1922, in view of the provisions contained in section 297 of the Act of 1961, that ban was removed. Mr. D. U. Shah has, therefore, contended that even though there may be a veil of secrecy attached to those documents when they are produced or filed, the ban having been removed on account of the omission of section 137 from the Act of 1961, these documents could be called for by the court in the exercise of its own powers from the income-tax authorities. Mr. D. U. Shah has submitted that it could not be said that there was any such vested right in the assessee or there was privilege conferred upon the assessee or any person who had lodged such information and such a right or privilege had accrued under the repealing provisions. Mr. D. U. Shah has also submitted that it could not be said that there was any obligation incurred by the income-tax authority or a public servant which could be saved in view of the aforesaid provisions contained in section 6(c) of the General Clauses Act, 1897.

23. Such an argument was advanced before Khanna J. and he has negatived that contention observing :

'The prohibition created by the provision contained in sub-section (1) of section 54 of the Act of 1922, is of a comprehensive nature and absolute in terms, and covers all kinds of documents including those the like of which were summoned in this case. Sub-section (2) of it provides that, if a public servant discloses any particulars contained in any statement, return, accounts, documents, evidence, affidavit, depositions or record, he would be punishable with imprisonment which may extend to six months, and would also be liable to fine.'

24. At page 784, it is observed :

'As a privilege existed in respect of the production of the documents in question at the time they were filed before the income-tax authorities in the present case, the aforesaid privilege could not be affected because of the repeal of section 54 of the Act of 1922, in view of the plain language of clause (c) of section 6 of the General Clauses Act.'

25. It is further observed therein :

'The contention raised that, as the provisions of section 54 of the Act of 1922, as well as its corresponding provision, viz., section 137 of the Act of 1961, have been repealed, this fact would reveal 'a different intention' mentioned in section 6 of the General Clauses Act, was found to be not well founded. Repeal of an enactment by itself and, in the absence of any other additional circumstances, cannot show that the legislature has intended that the rights, privileges, obligations or liabilities acquired, accrued or incurred are affected or set at naught. The acceptance of this contention would be tantamount to making a dead letter of clause (c) of section 6 of the General Clauses Act. The plain inference from clause (c) of section 6 necessarily is that the repeal of an enactment would not affect the rights, privileges, obligations or liabilities acquired, accrued or incurred under the enactment so repealed, unless there appears a different intention. Something more than repeal simpliciter of the enactment would be essential in order to substantiate a plea of 'different intention'. It is true that the repeal of the Act of 1922 was simultaneously accompanied by fresh legislation on the subject but the fresh legislation, in my opinion, does not manifest and intention to destroy the privilege which had already accrued in respect of the documents which were filed at the time section 54 of the Act of 1922 was in force. No doubt, there has been some kind of erosion of the privilege which was in existence under section 54 of the Act of 1922, after the repeal of the aforesaid Act, but the privilege still exists substantially in some form or the other and has not been altogether effaced. The privilege was allowed to continue by section 137 of the Act of 1961, and it was only in respect of certain matters enumerated in sub-section (3) of that section that the bar to disclosure was removed. After section 137 too was repealed by the Finance Act, 1964 (5 of 1964), section 138, as it exists at present, was enacted, and according to sub-section (1) of that section, the Commissioner of Income-tax is made the sole authority to decide as to whether it is in public interest to furnish or cause to be furnished the information asked for in respect of any assessment. It is obvious that, in view of the above provisions, if the Commissioner of Income-tax decides not to furnish the information in question, the same cannot be supplied. It also cannot be said that the prohibition about the supply of information, in case the Commissioner of Income-tax decides not to supply such information, can be set at naught by summoning a clerk of the income-tax department with the documents containing that Information, therefore, find it difficult to hold that the subsequent legislation reveals an intention to destroy the privilege which had accrued in respect of documents filed at the time section 54 of the Act of 1922 was enforced. The provisions of section 6(c) of the General Clauses Act were considered in State of Punjab v. Mohar Singh Pratap Singh.'

26. We would like to refer to that Supreme Court decision at this stage, which is reported in A. I. R. 1955 S. C. 84. The Supreme Court has observed :

'Whenever there is a repeal of an enactment, the consequences laid down in section 6 of the General Clauses Act will follow unless, as the section itself says, a different intention appears. In the case of a simple repeal there is scarcely any room for expression of a contrary opinion. But when the repeal is followed by fresh legislation on the same subject the court would undoubtedly have to look to the provisions of the new Act, but only for the purpose of determining whether they indicate a different intention. The line of inquiry would be, not whether the new Act expressly keeps alive old rights and liabilities, but whether it manifests an intention to destroy them. The court cannot, therefore, subscribe to the broad proposition that section 6 of the General Clauses Act is ruled out when there is repeal of an enactment followed by a fresh legislation. Section 6 would be applicable in such cases also unless the new legislation manifests an intention incompatible with or contrary to the provisions of the section. Such incompatibility would have to be ascertained from a consideration of all the relevant provisions of the new law and the mere absence of a saving clause is by itself not material. The provisions of section 6 of the General Clauses Act will apply to a case of repeal even if there is simultaneous enactment unless a contrary intention can be gathered from the new enactment.'

27. In State of Kerala v. N. Sami Iyer, the Supreme Court has reaffirmed that test and has made the following pertinent observations :

'It was held that by virtue of section 4(c) of the Travancore and Cochin General Clauses Act, 1125, corresponding to section 6(c) of the Indian General Clauses Act, the dealer (assessee) continued to be liable to taxation under the Madras General Sales Tax Act in respect of the disputed turnover at the purchase point. For example, if for some reason he had not been assessed before Act 12 of 1957 (which repealed the Madras General Sales Tax Act in Malabar area), came into force, he would have been assessed under the Madras Act at the purchase point because a liability within the meaning of section 4(c) would have been incurred by him. To this liability would be attached a right; the right being that he would not be liable to be taxed in respect of any sale of goods which had been the subject-matter of a purchase and taxation under the Madras Act. In other words, he was liable to be assessed under the Madras Act in respect of the purchase of goods but he had also a right not to be taxed again in respect of any sale of the same goods effected by him. There was no intention in Act 12 of 1975 to destroy the rights and liabilities acquired or incurred under the Madras General Sales Tax Act.'

28. In our opinion, the Delhi High Court has correctly applied the test laid down by the Supreme Court in the aforesaid decisions and has rightly followed the decision of Venkataraman J. in S. V. Ramakrishna Mudaliar v. Mrs. Rajabu Fathima Bukari. After referring to the provisions of section 6(c) of the General Clauses Act, it was observed that the rights and obligations of the Commissioner of Income-tax in respect of the Claim of privilege to the production of documents would continue by virtue of section 6(c) of the General Clauses Act. Although section 137 of the Act of 1961, had been repealed, it was observed :

'According to the criterion of the Supreme Court in State of Punjab v. Mohar Singh the limited prohibition contained in the notification under section 138(2) cannot be taken as destroying the prohibition under the old law, namely, section 137 of the Act of 1961. Rather, the correct view would be that, in addition to the old law, the notification under section 138(2) also contains a prohibition in respect of particular documents specified. As for section 138(1), that too cannot be taken as in any way destroying the prohibition contained in section 137 of the Income-tax Act of 1961. Section 138(1) deals only with what the Commissioner may do when a party applies to him, and does not touch the sphere covered by section 137(1) of the Act of 1961, which lays down the prohibition of evidence or documents being tendered in court by the officer.'

29. A Division Bench of the Punjab High Court in O. P. Aggarwal v. State has, at page 167, observed :

'The assessment in question, which related to the year 1947-48, was completed in the year 1957, and there is no dispute that till the date of completion the veil of secrecy attached to all the particulars contained in the assessment file as mentioned in sub-section (1) of section 54. The object of the protection as stated in various authorities referred to at page 609 of volume 1 of the Law and Practice of Income Tax by Kanga and Palkhivala (fifth editor), was to enable people to feel that they could 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 to others.'

30. After referring to the relevant provisions of the two Acts - the Act of 1922 and the Act of 1961 - and the changes made in those relevant sections, the test laid down by the aforesaid Supreme Court decisions has been referred to, and thereafter, at page 170, it is observed :

'Keeping in view the above test, it must be held that there is nothing in the Income-tax Act, 1961, which manifests an intention that the protection from and prohibition of disclosure of assessment records as afforded by section 54 would not be applicable to assessments which had been completed before the 1st day of April, 1962, which was the date on which the Income-tax Act, 1961, came into force. On the other hand the indications are that the legislature has been careful to keep that protection alive and subsisting with regard to assessments completed before that date such as the present one which was, as mentioned above, completed on the 14th February, 1957.'

31. Submission made that there were contrary indications and they were furnished by clause (e) of sub-section (2) of section 297, was ruled out.

32. A single judge of the Allahabad High Court in Raghubir Saran v. O. P. Jain has also taken the same view and has in terms dissented from the view taken by a Division Bench of the Madras High Court, to which we will make reference at an appropriate stage. At pages 488 and 489, Gulati J. has observed :

'This now brings me to the next question as to whether section 54 created any right, privilege or obligation as would be prescribed by section 6(c) of the General Clauses Act. I am of the opinion that it clearly did so.

The object behind the enactment of section 54 clearly was to induce the assessee to make a true and full disclosure before the income-tax authorities of facts relating to their income by affording them a protection against the disclosure of such facts to anybody else - including a court. Under the cover of protection granted by section 54 people felt free to state facts involving confidential matters relating to their business and property without fear of such information being used against them in any other proceedings or inquiry. This undoubtedly created a right or a privilege in favour of assesses and other people concerned and in order to made that right or privilege effective, the legislature, in its wisdom, imposed an absolute ban on the income-tax authorities not to disclose any document filed or statement made before them during the course of such assessment and went further to impose a restriction on the power of the courts to compel the disclosure of any information contain in the income-tax records. Another thing that should be kept in mind while deciding this question is that the proceedings under the Income-tax Act have been declared confidential in the sense that no one except the assessee or his authorised representative can take part in those proceedings or even be present when such proceedings are under way. In the case of a personal assessment of an assessee who happens to be a partner in a firm, the Income-tax Officer would not be justified in allowing even the assessee's partner to be present at and to take part in the assessment proceedings. (Dinshaw Darabshaw Shroff v. Commissioner of Income-tax. This ban is clearly intended for the benefit of the assessees and confers a right upon them to insist that no unauthorised person would be allowed to be present at the time when their assessments take place and a similar right extends to them insist the nothing which is brought on their assessment record by way of statement, returns, documents and evidence would be revealed to anybody including a court. In this background, it is not possible to say that section 54 merely imposes an obligation upon the income-tax authorities without creating any corresponding right in favour of any particular person.'

33. He relies upon the decision of a Division Bench of the Punjab High Court in O. P. Aggarwal v. State and also upon the decision of a single Judge of the Madras High Court in P. Kandaiah Thevar v. Third Income-tax Officer, Tirunelveli. He thereafter refers to the decision of a Division Bench of the Madras High Court in the case of Sivagami Achi, which has taken a contrary view, and in that behalf observes at page 489 :

'The learned judges have expressed the opinion that section 54 of the old Acts as also section 137 of the new Act did not create any right, privilege or obligation contemplated by section 6(c) of the General Act, for the persons already indicated above, and with great respect to the learned judges of the Madras High Court, I am unable to accept their view. I am of the firm opinion section in the old and the new Acts, viz., section 54 and 137, respectively, were intended to create a right and a privilege in favour of the assessee and other persons concerned and it was for the preservation of that right or privilege that an absolute obligation was imposed upon the income-tax authorities never to divulge to anybody including a court any information from the assessment records.'

34. In our opinion this reasoning employed by Gulati J. is sound reasoning and we are in full agreement with that reasoning and was we adopt it. The circumstance that the disclosure of such information by an Income-tax Officer or a public servant is made punishable at law, is a very strong circumstance suggesting the soundness of the reasoning employed by Gulati J. He also refers to section 6(c) of the General Clauses Act, 1897, and observes :

'Whether section 54 created any right or privilege or not, it certainly did create an obligation of an absolute nature which could not be waived even by an assessee (see Charu Chandra Kundu v. Gurupada Ghosh).'

35. It is significant to note at this stage that in the Act of 1961, in view of the provision of sub-section (5) of section 137, the assessee has been given a right disclose such information voluntarily.

36. In Shiv Narain v. Jiwan Lal the learned Chief Justice of the Punjab High Court has taken the same view and observed :

'Documents in respect of all assessments, which had been completed prior to the repeal of section 137 of the Income-tax Act, 1961, would be protected, in so far as they fell within the purview of section 54 of the Act of 1922 and section 137 of the Act of 1961, but there is no prohibition against the summoning of such documents in respect of assessments which were completed after April, 1, 1964, when section 137 of the Act of 1961 was repealed.'

37. In Smt. Rama Gouri Devi v. Harish Chandra Chaturdas a single judge of the Patna High Court has observed :

'After the repeal of section 137 of the Income-tax Act, 1961, by Act V of 1964, there cannot be any impediment in the way of a civil court in directing production of documents which were filed before an Income-tax Officer.'

38. An argument was advanced before that single judge of the Patna High Court as has been done by Mr. Suresh M. Shah for the petitioner, relying upon the provisions of section 138(1)(b) of the Act of 1961. It is observed in that behalf :

'Learned counsel for the opposite party pointed out that section 138 as amended by Act 5 of 1964 has been further amended and substituted by Act 20 of 1967. On the basis of this amended provision, it was suggested that there is a prohibition, although not explicit but by necessary implication, so far as calling for production of documents by the court is concerned. Reliance was placed on section 138(1)(b) of the Act I do not find any prohibition explicit or implicit in that provision. The provision only enables the Commissioner to give copies of certain documents, provided the grant of it is in public interest. This sub-clauses does not apply where a party wants the document for furtherance of private interest. Moreover, the mere fact that, in certain circumstances, the Commissioner may grant copies of certain documents, cannot affect the jurisdiction of the court so fat as its powers in respect of production of document under the Civil Procedure Code are concerned. I may also point out that, if the interpretation put by the learned counsel on section 138(2) is accepted, the position now will be that even in respect of a prosecution under the provisions of the Indian Penal Code, the court will not be in a position to obtain relevant documents. This clearly could not be the intention of the legislature. I am thus of the view that the court below refused to exercise jurisdiction vested in it by law under the erroneous view that it had no such jurisdiction.

The court below has referred to the case, Chinnammal v. Kumidhini, in support of its view. This case is clearly distinguishable. The documents whose production was sought for in that case related to a period prior to the repeal of section 137 of the Act. In those circumstances, the General Clauses Act was held to be applicable. Here, production is sought for in respect of documents which were filed by the defendant before the income-tax authority after the repeal of section 137 of the Act.'

39. This decision had, therefore, to consider the question only regarding the documents produced before the income-tax authority after the repeal of section 137 of the Act of 1961. In that behalf, in our opinion, it lays down the correct ratio.

40. In the same volume, at page 564, there is a decision of the Kerala High Court in Chandrasekhara Mandian v. Income-tax Officer. A single judge of the Kerala High Court has followed the decision of the Delhi High Court in Daulat Ram v. Som Nath and also the decision of the Punjab High Court, and observed :

'Where an Income-tax Officer was asked to produced returns filed by an assessee during the period 1957 to 1969 and the Income-tax Officer claimed privilege with regard to records to the period between 1957 to March 31, 1964, it was held that the privilege was available in respect of the returns.'

41. The latest decision on this question is the decision of a Full Bench of the Punjab and Haryana Court in Amar Singh Lamba v. Sewa Singh. Most of the decisions referred to above have been referred to by the Full Bench and it is observed at page 11 :

'The provisions of section 54 of the 1922 Act, therefore, continue to have effect in respect of the assessment, made there under, whether before or after the coming into force of the 1961 Act, irrespective of its repeal by section 297(1) of the 1961 Act. A fortiori all assessments under the 1961 Act up to the 31st day of March, 1964 will continue to be governed by the provisions of section 137 of that Act irrespective of its repeal with effect the 1st day of April, 1964, as the obligation to keep the records mentioned in that section as confidential and not to disclose any information relating thereto or derived therefrom was incurred on the date or dates when the assessment records were prepared prior to April, 1, 1964, and that obligation cannot be said to have been done away with by the repeal of section 137. Therefore, no information from the assessment records of an assessee prepared before April 1, 1964, under the provisions of the 1961 Act can be disclosed by the income-tax authorities or any public servant nor can the records of those assessment be produced in a court of law or before any officer of the Government except to the extent permitted by section 137 or section 138 as existed prior to April 1, 1964. But the assessment records of an assessee prepared after April 1, 1964, under the 1961 Act will not be immune from production in a court of law and the disclosure of any information from that record can also be made by the Commissioner of Income-tax to any person making an application therefore under section 138(1)(b) of the 1961 Act.'

42. That decision in terms states that the case of O. P. Aggarwal v. State, i.e. the decision of Division Bench of the Punjab High Court, was correctly decided. At pages 11 and 12, the propositions that emerge have been noted in these terms :

'From the above discussion, the following propositions emerge :

1. In the case of assessment completed under the 1922 Act at any time, the matter relating to disclosure of information from the assessment records or the production of those records in a court of law will be government by the provisions of section 54 of the 1922 Act, and no court shall except as provided in that section, be entitled to required the production of any return, accounts, documents affidavits and other records mentioned therein or any part of such record or require or allow any public servant to give any evidence in respect thereof or to disclose any information derived therefrom. This privilege as to secrecy, with the assessee had acquired under section 54 of the 1922 Act, has remained unimpaired by the repeal of that Act with effect from April 1, 1962, or the deletion of section 137 of the 1961 Act with effect from April 1, 1964.

2. In the case of assessment completed after the 1st day of April 1960, under the 1922 Act, the information regarding the tax determined as payable by an assessee can only be disclosed as provided in section 59B of the 1922 Act read with rule 50 of the Indian Income-tax Rules, 1922, framed under that Act or as provided in section 138(1)(b) of the 1961 Act.

3. In respect of all assessment made under the 1961 Act prior to the 1st day of April, 1964, the provisions of section 137 of that Act will continue to apply notwithstanding its repeal by the Finance Act, 1964.

4. Section 138 of the 1961 Act, as amended from time to time, only enables the Commissioner of Income-tax to disclose certain information to (a) public officers, and (b) Any other person as specified therein and this section does not apply to the power of the courts to require the production of the assessment records or the disclosure of any information therefrom. Of course, the Commissioner of Income-tax or any other competent authority shall be free to claim privilege under sections 123 and 124 of the Indian Evidence Act, 1872, which will be determined by the court.

5. It is open to the Central Government to grant protection to any class of assessees, etc., under section 138(2) of the 1961 Act by an order notified in the Official Gazette, from disclosure of any information derived from their assessment records or production thereof before a court, or any other officer or authority.'

43. Some of these propositions enunciated by the Full Bench of the Punjab High court relying upon the provisions of section 297(1) of the Act of 1961 are debatable questions. We do not express any opinion in respect of them, as they do not arise for decision in this case. In the instant case, we are not concerned with case of return filed when the Act of 1922 was in force and in such an assessment proceeding, some documents came to be produced before the income-tax authority after the repeal of section 137 from the Act of 1961. We only decide that documents produced before the income-tax authorities in an assessment proceeding under the date Act No. 5 of 1964 by which section 137 of the Act of 1961 was omitted, came into force, are entitled to protection. The documents filed subsequent to March 31, 1964, the date of the coming into force of the aforesaid Act, will not receive such protection in view of the repeal of the provisions contained in section 137 of the Act of 1961, by its omission from the Act of 1961.

44. We will now refer to the decision of a Division Bench of the Madras High Court in Sivagami Achi v. Ramanathan Chettiar, which has taken a contrary view. At page 40, the question posed is :

'The question is what precisely is the effect of the omission of section 137 from the Income-tax Act. 1961, by the Finance Act, 1964 The effect of a repeal - and we proceed on the assumption that omission of a section from the statute book is tantamount to a repeal - is, generally speaking, as if the repealed Act never existed except as to things completed or closed. But in view of this effect, the Indian legislature enacted the General Clauses Act, 1897, which has been more or less modelled on the provision of the English Interpretation Act, Section 6 of the Indian Act, which corresponds to section 38 of the Interpretation Act, defines the effect of the repeal....'

45. After referring to the decision of the Supreme Court in State of Punjab v. Mohan Singh and after referring to the decision of Sadasivam J. in Income-tax Officer Central Circle, Madras v. Ramaratnam, wherein the view contrary to the view taken by another single judge, Venkataraman J., was taken, it is observed at page 41 :

'The learned judge observed :

'Though section 137 of the Income-tax Act, 1961, is repealed by the Finance Act of 1964, there is modified restriction by virtue of section 138, clause (2), introduced by the same Act.'

This, according to the learned judge, is an indication of the intention to the contrary rending section 6 of the General Clauses Act inapplicable.

Venkataraman J. was, however, of a different view in Ramakrishna Mudaliar v. Rajabu Fathma Bukari. He considered that section 138(2) was not incompatible or inconsistent with the effect of section 137 being continued notwithstanding its omission by reason of section 6 of the General Clauses Act. The learned judge took note of the fact that actually, as far as he was informed, there was no notified order under section 138(2). The learned judge went further and thought that the matter covered by section 137 would fall within the ambit of section 6(c) of the General Clauses Act. He observed that the Income-tax Officer incurred an obligation when documents were filed before him and that obligation continued until repeal of that section, and that this obligation of the Income-tax Officer was to be correlated to the corresponding right of the assessee concerned to forbid the Income-tax Officer from giving evidence in relation to the documents filed before him.'

46. Even the Division Bench observes at Page 41 :

'In our opinion, Venkataraman J. was right when he said that section 138(2) does not contain any intention so as to eliminate the application section 6. It is possible that partial or total prohibition against disclosure of stated particulars in specified documents filed before the Income-tax Officer under section 138(2) may be consistent or compatible with section 137(1) of the Income-tax Act, 1961.'

47. It is significant to note at this stages that the notification issued by the Government in exercise of its powers under section 138(2) of the Act of 1961 is only in relation to banking companies. The Division Bench, at page 42, observes :

'The question them is whether at all, having regard to the character of the implications of section 137(1) and (2) of the Income-tax Act, 1961, section 6(c) of the General Clauses Act can be applied to its repeal. This question does not appear to have been argued either before Sadasivam J. or Venkataraman J. ...'

48. After referring to the decision in O. P. Aggarwal, Income-tax Officer v. State, it is observed :

'Likewise in that decision, section 6 was applied but no consideration appears to have been given to its applicability.'

49. It is further observed :

'In our opinion, section 137 of the 1961 Act like its predecessor, section 54 of the Indian Income-tax Act, 1922, neither created an obligation nor privilege or right which could be properly regarded as having been incurred, acquired or having accrued. Disclosure or non-disclosure appears to us to be a matter of public policy in public interest, especially from the standpoint of the revenue. Venkataraman J. himself noticed in the case cited that the prohibition against disclosure was enacted in public interest to enable a full and true disclosure to be made by the assessee. The same idea is to be found also in P. Kandiah Thevar v. Third Income-tax Officer, Tirunelveli. Now what is it that section 137(1) says It merely declares that the particulars specified should be treated as confidential. To our minds that in itself does not create any liability or right or privilege. We think that the declaration is not from the point of view of any particular individual. Such a declaration does not confer a right to impose an obligation on any specified person. No particular person can, by virtue of this declaration, be said to have incurred an obligation to acquired a right or privilege. The confidence is directed to be kept in respect of the particulars not by any particular officer but it is attached to the very particulars. Likewise, the second part of sub-section (1), as it seems to us, contains but a bar on courts from summoning for the specified particulars. So, too sub-section (2) enjoins a prohibition against any public servant disclosing such particulars. Neither a mere bar on the court or on the scope of its jurisdiction nor the prohibition against any public servant from disclosing the particulars may be itself amount to an obligation incurred. We are inclined to think that not every obligation, however abstract, necessarily involves a corresponding right also in the abstract. The bar on courts really relates to the power of the court and the prohibition against any public officer disclosing such particulars is no more than forbidding him from divulging the particulars. To our minds, neither the bar nor the prohibition can be regarded at all as an obligation, in any case as an obligation incurred within the meaning of section 6(c) of the General Clauses Act. Where the court contravenes the bar, no particular person including the assessee, in whose assessment proceedings the particulars have been placed before the particular Income-tax Officer, has a cause of action against it. All that any one like the assessee may do in such a case would be to bring it to the notice of court that it has contravened.'

50. It has referred to two English decisions in Hamilton Gell v. White and Abbot v. Minister for Lands and reached the conclusion that the instant case was not a case where any right can be said to be created in favour of an individual parson. On that reasoning, it is observed :

'But this fact is not peculiar or limited to the assessee, for it is open to any member of the public to bring such a contravention to the notice of the authorities. Hardly can it be said that this phenomenon is based on a right or privilege.'

51. With respect we may say that this reasoning does not appeal to us, On a statutory guarantee given, an assessee or a third discloses the information knowing fully well that there is a veil of secrecy attached to the information conveyed to an Income-tax Officer in an income-tax proceeding. It is not only an assessee who may disclose such information. Even a third party may disclose such information. It is not only that these records were to be maintained as confidential under section 54 of the Act of 1922 or section 137 of the Act of 1961. There was a non-obstante clause. The court, in spite of its powers under the Indian Evidence Act, was precluded from exercising such powers. It was not only that the income-tax authorities or a public servant were precluded from producing them. Their action of such disclosure of information was made punishable at law.

52. Section 280(1) of the Act of 1961 reads :

'(1) If a public servant furnishes any information or produces any document in contravention of the provisions of sub-section (2) of section 138, he shall be punishable with imprisonment which may extend to six months, and shall also be liable to fine.'

53. In our opinion, looking to the entire scheme of those two Acts in this behalf, the view taken by the Delhi High Court as well as the Allahabad High Court to which we have made specified reference earlier is the correct view. The obligation had been incurred by a public servant in view of the relevant provisions in the two Acts prior to the omission of section 137 of Act No. 5 of 1964 and consequently there would be a corresponding right accrued in favour of a person who had disclosed such information at the time when such disclosure of information was to be kept a secret. It could not, therefore, be said, as has been stated by the Division Bench of the Madras High Court, that this was not a case where such right had accrued in favour of an individual person. It was a right accrued in favour of a person disclosing such information to its was a privilege conferred on him. In our opinion, the view taken by the Division Bench of the Madras High Court has been rightly dissented from by the other High Courts. We do not find anything in section 138 or in any other relevant section in the Act of 1961 which shows that such rights were sought to be destroyed. In our opinion, section 6(c) of the General Clauses Act, 1897, is applicable. The Division Bench of the Madras High Court, in our opinion, is not right in reaching the conclusion that it is inapplicable.

54. From the aforesaid discussion, the propositions that emerge are that all such documents filed or produced before the income-tax authorities in assessment proceedings under the Act of 1922 or the Act of 1961 on or before 31st March, 1964, prior to the omission of section 137 from the Act of 1961, received protection and the income-tax authorities or a public documents that are produced subsequent to March 31, 1964, i.e. after the protection and there is no such prohibition and the court can summon the income-tax authority to produce such documents. We do not express any opinion on the question, whether such documents, even though produced subsequent to the omission of that section 137 from the Act of 1961, would receive such protection if those documents are produced in an assessment proceeding, the return of which was filed prior to the repeal of the Act of 1922 by the Act of 1961, in view of the provision of section 297(1) of the Act of 1961.

55. In the instant case, it is evident that the documents referred to in para. 5 of the trial court's order at serial Nos. 1 and 2 have been produced or filed admittedly subsequent to March 31, 1964; they have been said to have been produced on December 31, 1966, or thereafter in the assessment proceeding. We, therefore, find that the learned trial judge was quite justified in summoning a clerk from the income-tax officer to produce those documents. As regards the documents referred to at serial No. 3 are balance-sheet of Samvat years 2017, 2018 and 2019. There is no mention as to when they were produced. No doubt, they appears to be of the years prior to the year commencing from April 1, 1964. Similarly, at serial No. 4, documents referred to are income-tax assessment orders of Samvat years 2017, 2018 and 2019. There is nothing on the record before us to show whether those assessments went completed subsequent to March 31, 1964. We, therefore, direct the trial court that as regards items at serial Nos. 3 and 4, referred to by it in para 5 of the impugned order, to decide about compelling the production of these documents or not on the basis, whether these documents were filed or produced or made or assessment orders completed, as the case mat be subsequent to March 31, 1964, or earlier. If they are filed, etc., on or before March 31, 1964, protection would be available and if they are subsequent to March 31, 1964, they will not be entitled to protection.

56. Revision petition is accordingly partly allowed and the order passed by the trial court is modified accordingly. Rule is modified accordingly. In view of the fact that there is no reported ruling of this court, each party is ordered to bear its own costs in this revision petition. The trial court is directed to hear the suit as expeditiously as possible.


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