Full Judgment Text
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PETITIONER:
COMMISSIONER OF INCOME-TAX
Vs.
RESPONDENT:
JAWAHAR LAL RASTOGI
DATE OF JUDGMENT:
07/05/1970
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
HEGDE, K.S.
GROVER, A.N.
CITATION:
1970 AIR 1651 1970 SCR (1) 581
1969 SCC (2) 227
ACT:
Income tax Act, 1961, as amended by Finance Act 1965, s.
132(8)-Seizure of documents and retention beyond 180 days-No
record of reasons by I.T.O. or approval of Commissioner of
such retention--Legality of retention.
HEADNOTE:
On September 14, 1964 the Income tax Officer called upon
the assessee to furnish within 10 days statements relating
to four assessment years ending on March 31, 1960. The
assessee did not furnish the information by the 19th and on
that date on the report of the Income-tax Officer, the
commissioner authorised the Income tax officer to search the
premises of the. On September 21st and 22nd the premises
were searched and a large number of documents were seized
and retained till May 1966, that is, for a period of 19
months.
In a writ petition field by the, assessee, the High Court,
following its own.decision in Seth Bros. v. C.I.T., 62
I.T.R. 44 held that the search was ’indiscriminate and
beyond the scope of s. 132 of the Income-tax Act. 1961.
In appeal to this Court,
HELD : (i) The decision relied on by the High Court was
overruled by,this Court in I.T.O. v. Seth Bros., 74 I.T.R.
836, but it was held that the power of search must be
exercised strictly in accordance with the law and only for
the purposes for which the law authorises it to be exer-
cised. Whether the action of the Commissioner in a
particular case amounted to indiscriminate search and beyond
the scope of s. 132 would depend on the evidence in the case
[583 E; 584 E-F]
(2)In the present case, there was no order of the
authorities recording reasons for retaining the documents
seized beyond 180 days, nor was there any approval of the
Commissioner for such retention. Therefore the retention
was contrary to the terms of s. 132(8) of the Act as amended
’by the Income-tax (Amendment) Act, 1965. [585 C-D]
(3)Though failure to record reasons by the I.T.O. and want
of approval by the Commissioner for retaining the documents
beyond 180 days were not urged before the High Court as
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grounds for release of the documents, when it was found that
the documents were retained for 19 months, the department
should have tendered evidence of such record of reasons or
approval by the Commissioner if it was the case of the
department that the retention of the documents could be
supported by such reasons or approval. [585 E-C]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: ’Civil Appeal No. 16 of 1970.
Appeal by special leave from the judgment and order dated
May 22, 1969 of the Allahabad High Court in Civil Misc.
Writ No. 588 of 1966.
582
Jagadish Swarup, Solicitor-General, R. N. Sachthey, and B.
D. Sharma, for the appellants.
G. C. Sharma and P. K. Mukherjee, for the respondent.
The Judgment of the Court was delivered by
Shah, J. Jawahar Lal Rastogi-hereinafter called ’the
assessee-is a Hindu Undivided Family which carries on the
business of money-lending at Lucknow and is also interested
as a partner in different firms engaged in the business of
manufacturing barbed wire, pharmaceuticals, etc.
On September 14, 1964, the Income-tax Officer, Award, called
upon the assesee to furnish within 10 days certain
information with regard to its income and assets. On
September 17, 1964 the Income-tax Officer submitted to the
Commissioner of Income-tax a report requesting that he be
authorised to enter and search the premises of, the
assessee. The Commissioner by his order dated September 19,
1964, authorised entry and search after recording reasons
for his belief that it was necessary to carry out the
search. On September 21 and 22, 1964, the premises of the
assessee were searched and a large number of documents were
seized and were taken away to the Income-tax Officer. The
Income-tax Officer also prepared inventories of the
ornaments and other goods kept in the premises searched.
After the seizure of the books of account and other
documents the case was fixed for hearing before the Income-
tax Officer on several occasions, but no substantial step
was taken.
In May 1966 the assessee filed a writ petition in the High
Court of Allahabad challenging the validity of the search
made by the Department contending that it "was illegal and
in excess of the power conferred by s. 132 of the Income-tax
Act, 1961" and prayed that the documents seized may be
ordered to be released. The High Court of Allahabad
considered the evidence appearing from the affidavits filed
and observed that in the present case the assessee had
established the following "points" :
(1) The Income-tax Officer was apparently interested in
investigating transactions prior to 1953. On September 14,
1964,- the assessee was directed to furnish statements
relating to four years ending on March 31, 1960, yet the
Commissioner of Income-tax issued letters of authorisation
permitting Income-tax Officer to seize documents relevant to
nine assessment years;
(2)The raid was ordered and organised before the expiry of
the period of the notice;
(3)More than 300 books and registers were seized during
the raid and the Income-tax. Officers carried away
thousands of promissory notes. Some of the documents seized
appear to be
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irrelevant for assessment purposes and some of them were
public documents.
(4)There is reason to believe that all or almost all the
documents found on the premises were seized and carried away
by the Income-tax Officers;
(5)Marks of identification were. not placed on the documents
inspite of-the direction contained in the letters of
authorisation; and
(6)The documents seized during the raid were detained by
the Income-tax Officers for 19 months before, the petition
was filed.
In the view of the High Court the circumstances of the case
indicated that the Commissioner of Income-tax and the
Income-tax Officers acted beyond "the legitimate scope of s.
132 of the Act and-there was force in the complaint of the
assesse that the Allahabad High Court in Seth Brothers’
Case(1) was overtituted abuse of power conferred on Income-
tax authorities by s. 132 of the Act". In reaching its
conclusion, the High-.Court relied upon the judgment of the
Allahabad High Court in Seth Brothers v. Commissioner of
Income-tax(1).
In this appeal filed by the Commissioner of Income-tax with
special leave, the Solicitor-General contends that the
decision of the Allahabad High Court in Seth Brothers’
Case(1) was overruled by this Court in Income-tax Officer,
Special Investigation Circle "B", Meerut v. Seth Brothers &
Ors.(2) and on , that account the judgment under appeal is
liable to be set aside. In Seth Brothers’ case (2) this
Court examined the scheme of s. 132 in some detail and
observed
"The condition for entry into and making
search of any building or place is the reason
to believe that any books of account or other
documents which will be useful for,. or
relevant to, any proceeding under the Act may
be found. If the Officer has reason to
believe that any books of account or other
documents would be useful for, or relevant
to, any proceedings under. the Act, he is
authorised by law to seize those books of
account or other documents, and to place marks
of identification therein, to make extracts
or. copies, therefrom and also to make a note
or an, inventory of any articles or other
things found in the course of the search.
Since by the exercise of the power a serious
invasion is made upon the rights, privacy and
freedom of the taxpayer, the power must be
(1) 62 I.T.R. 44.
584
exercised strictly in accordance with the law
and only for the purposes for which the law
authorises it to be exercised............. If
the conditions for exercise of the power are
not satisfied the proceeding liable to be
quashed.............
The Act and the. Rules do not require that
the warrant of authorisation should specify
the particulars of documents and books of
account : a general authonsation to search for
and seize documents and books of account
relevant to or useful for any proceeding
complies with the requirement of the Act and
the Rules. It is for the officer making the
search to exercise his judgment and seize or
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not to seize any documents or books of
account.
The aggrieved party may undoubtedly move a
competent court for an order releasing the
documents seized. In such a proceeding the
Officer who has made the search will b
e called
upon to prove how the documents seized are
likely to be ’useful for or relevant to a
proceeding under the Act. 1 If he is unable to
do so, the court may order that those
document$ be released. But the circumstance
;hat a large number of documents seized is not
a ground for holding that all documents seized
are irrelevant or the action of the officer is
mala fide."
It must, however, be stated that the findings that the
action of the Commissioner of Income-tax and the Income-tax
Officer amounted to "indiscriminate search" and was beyond
the "legitimate scope of s. 132" depends upon the evidence
in each case and no general rule can be laid down in that
behalf.
In the present case the High Court has noticed two important
circumstances: (1) that where as the notice dated September
14, 1964, required the assessee to furnish statements rela-
ting to the four assessment years ending on March 31, 1960,
the Commissioner of Income-tax authorised search for a
period ,of nine assessment years even before the period
fixed by the notice had expired; and (2) that contrary to
the plain terms ,of S. 132(8) the Income-tax Officer
retained with him the books of account for a period
exceeding 180 days.
Under s. 132(2) as in force on the date on which the search
and seizure took place stood as follows :
"The books of account or other documents
seized under sub-section (1) shall not be
retained by the Inspecting Assistant
Commissioner or the Income-tax
585
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.............
By the Finance Act of 1965, sub-s. (2) was re-eracted as
sub-s (8) with the modification that for the words
"Inspecting Assistant Commissioner or the Income-tax
Officer" the words "authorised officer" be substituted.
In the present case the premises of the assessee were
searched on September 21 and 22, 1964, and the documents
were retained till May 1966, i.e. for a period, of 19
months. Our attention has not been invited to any order of
the authorities recording reasons for retaining the
documents seized after the expiry of 180 days, nor is there
any approval of the Commissioner for retaining such
documents. The retention of the documents without complying
with the requirements of the statute after expiry of the
period of 180 days would be plainly contrary to law.
The Solicitor-General said that it *as not urged before the
High Court that because the authorised officer did not
record reasons and the Commissioner did not approve
retention of the documents after 180 days, the revenue,
authorities were bound to release the documents. Counsel
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submitted that failure to produce evidence on a matter not
put in issue may not be regarded as a ground in support of
an order releasing documents. But the High Court has found
that the documents seized during the raid were detained by
the authorised officer for 19 months before the application
was filed. If it was the case of the Department that
retention of the documents after the expiry of 180 days was
supported by good and adequate reasons recorded by the
Income-tax Officer and the. approval of the Commissioner as
required by the Act was obtained, such record of reasons and
approval would have been tendered in evidence. It cannot be
said that the attention of the parties was not directed to
the circumstance that the Income-tax Officer had failed to
comply with the requirements of the Act.
The order recorded by the High Court must be sustained on
the ground that the documents taken possession of were re-
tained without authority of law for a period exceeding 180
days contrary to the terms of s. 132(8) as amended by the
Income-tax (Amendment) Act, 1965.
The appeal therefore fails and is dismissed with costs.
V.P.S. Appeal dismissed.
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