Kerala H.C : Has the civil Court jurisdiction to summon assessment orders made under the IT Act for the years 1974-75 and 1975-76 ?

Counsel Appeared

Dandapani, for the Petitioner : None, for the Respondent

BHASKARAN NAMBIAR, J.:

Has the civil Court jurisdiction to summon assessment orders made under the IT Act for the years 1974-75 and 1975-76 ? This is the main question that arises for determination in this civil revision petition under s. 115, CPC. Short facts alone are required.

2. The defendant in a suit on accounts is the revision petitioner. The plaintiff alleged that a partnership business was conducted with the defendant, that the defendant did not account for the profits he earned and thus did not pay the plaintiff his share. The suit was, therefore, laid to direct the defendant to render accounts and to pay the plaintiff his half share of the profits and for consequential relief. The defendant refuted his liability, filed his written statement and then moved an independent application to summon the ITO to produce the assessment orders of the plaintiff for the years 1974-75 and 1975-76. He stated that it was difficult for him to obtain the certified copy of the order of assessment and that the order would show the amount realised by the plaintiff from his partnership business.

The lower Court held that the civil Court had no jurisdiction to summon the income-tax assessment order and that in any case, the defendant could get the certified copies from the IT Department itself and thus there was no necessity to issue any summons for the production of the document.

3. A question of jurisdiction arises and, therefore, it is necessary to refer to the statutory provisions, the legislative history and the relevant decisions of other Courts.

4. The Indian IT Act, 1922, in s. 54 declared that the particulars in any record of any assessment proceeding prepared for the purposes of the IT Act shall be treated as confidential and that, notwithstanding anything contained in the Evidence Act, no Court, except as provided in that Act, “be entitled to require any public servant to produce before it any such return, accounts, documents or record or any part of such record, or to give evidence before it in respect thereof”. Any disclosure contrary to the Act was punishable with imprisonment. This position continued till 1st April, 1962, when the IT Act, 1961, came into force repealing the 1922 Act. The relevant provisions were contained in ss. 137 and 138 of the new Act and s. 137 read thus : “137. Disclosure of information prohibited.—(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 Chapter XXII, or in any record of any assessment proceeding, or any proceeding relating to recovery of a demand, 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. (2) No public servant shall disclose any particulars contained in any such statement, return, accounts, documents, evidence, affidavit, deposition or record. (3) Nothing in this section shall apply to the disclosure—… (iv) of any such particulars to a civil Court in any suit or proceeding to which the Government or any IT authority is a party, which relates to any matter arising out of any proceeding under this Act or under any other law for the time being in force authorising any IT authority to exercise any powers thereunder; or…” Sec. 137 was, however, deleted by the Finance Act, 1964 (5 of 1964). Sec. 138 was substituted and it underwent a further amendment by the Finance Act, 1967. From then on, s. 138 reads thus: “138. Disclosure of information respecting assessees.—(1) (a) The Board or any other IT 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 s. 2(d) of the Foreign Exchange Regulation Act, 1947 (7 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 IT Act, 1922 (11 of 1922), as may, in the opinion of the Board or other IT 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 CIT in the prescribed form for any information relating to any assessee in respect of any assessment made under this Act or the Indian IT Act, 1922 (11 of 1922), on or after the 1st day of April, 1960, the CIT 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-s. (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 assessees or except to such authorities as may be specified in the order.” Thus, s. 54 of the 1922 Act statutorily recognised and declared the confidential nature of assessment proceedings and prohibited the production of those documents in any Court. The Supreme Court in Charu Chandra Kundu vs. Gurupada Ghosh (1961) 43 ITR 83 (SC) : TC 69R.781 held thus : “It is manifest that disclosure of information given to public servants in the course of IT proceedings has by a comprehensive provision been prohibited. The IT authorities are directed by the provision to treat the information disclosed, evidence given, and documents produced as confidential; the Courts are prohibited from requiring any public servant to produce the documents or the records and even to give evidence in respect thereof, and the public servants disclosing the particulars of the evidence, documents or record are penalised.” Sec. 137 of the 1961 Act did not effect any change in this statutory concept and this position continued till 1964 when the entire section was deleted. We are not, in this case, concerned with any assessment made before 1964, but with assessments made in 1974 and thereafter. Sec. 138 consists mainly of three parts. Firstly, where it is necessary to enable an officer, authority or body to perform his or its functions, under the Act, the Board or any authorised authority may furnish— (a) to any officer or authority or body performing any functions under any law relating to the imposition of any tax, duty or cess, or dealing in foreign exchange, or (b) to any officer, authority or body functioning under any other law as may be specified by the Central Government in public interest in an appropriate notification, any information relating to any assessee in respect of any assessment made under the Act [s. 138 (1)(a)(i) and (ii)]. Secondly, the CIT may furnish or cause to be furnished any information asked for relating to any assessee in respect of any assessment under the Act provided (a) an application is made in the prescribed form, and (b) the CIT is satisfied that it is in public interest so to do [s. 138(1)(b)]. Thirdly, the Central Government may direct by notification in the Gazette that no information or document shall be furnished or produced (a) in respect of such matters relating to any specific class of assessees, and (b) except to the authorities specified in the notification, having regard to practices and usage’s customary or any other relevant factors [s. 138(2)].

7. By virtue of the powers conferred under s. 138(2), two notifications have been issued, in S.O. No. 2048 dt. 23rd June, 1965, and in S.O. No. 1043 dt. 30th March, 1966, and these notifications apply only to the assessees, being banking companies, under the Banking Regulation Act or the Banking Companies Act. This is supported by authority (See B.A. Bajaj vs. Gulam Mohiuddin M. Sayyed (1983) 140 ITR 460 (Bom). The assessment particulars of these banking-companiesassessees cannot be summoned by the civil Courts except where the Government or the IT Department is a party. There is thus no other notification which prohibits information or documents relating to an assessee under the IT Act being furnished to a Court. A statutory notification under s. 138(2) armed the Government to oust or restrict the civil Court’s jurisdiction to summon assessment proceedings under the IT Act. It is, therefore, implicit that without any such notification, the powers of the Court to summon those documents cannot be affected. The deletion of s. 137 w.e.f. 1964 and the absence of any notification under s.

138(2), thus lead to the irresistible conclusion that the jurisdiction of the civil Court to compel the IT authorities to produce the assessment records has not been expressly or impliedly taken away by the IT Act, 1961, or any notification issued thereunder so far. The civil Courts have jurisdiction to summon the authorities to produce the IT assessment orders for the years 1974-75 and 1975-76. This is the view taken in Trilok Chand Jain vs. Dagi Ram Pindi Lall (1974) 95 ITR 34 (Del) : TC 69R.882 by the Full Bench of the Delhi High Court, in Pentakota Surya Appa Rao vs. Pentakota Seethayamma (1976) 103 ITR 222 (AP) : TC 69R.845 by the Andhra Pradesh High Court, in Amar Singh Lamba vs. Sewa Singh (1973) 90 ITR 1 (P&H) : TC 69R.819 by the Full Bench of the Punjab and Haryana High Court, in H.N. Malak vs. Aziz S. Yusuf (1974) 94 ITR 276 (Bom) : TC 69R.940 by the Bombay High Court and in Dharamahi Polabhai vs. Ramjibhai Jivabhai (1975) 98 ITR 85 (Guj) : TC 69R.829 by the Gujarat High Court.

Even then, it does not automatically follow that the Court is always bound to summon the assessment proceedings whenever a demand is made in the Court. The Court has jurisdiction to summon or not to summon and has, therefore, to exercise a judicial discretion. The question is whether the IT Act has provided any statutory guidance in the exercise of this discretion by the civil Courts. Different High Courts have approached this question from different angles.

8. In Trilok Chand Jain vs. Dagi Ram Pindi Lall (supra), the Full Bench of the Delhi High Court observed thus : “The complete omission of the declaration of the confidential nature of the documents, records, etc., and the removal of the ban on Courts and public servants, no doubt, suggests that the power of a Court under the general law to summon such documents, records, etc., relevant to the case before it has been restored. But, at the same time, the legislature which empowered the CIT to furnish the information if he is satisfied that it is in the public interest so to do, made the decision of the CIT final and unquestionable in a Court of law. When two powers are thus vested in two legal authorities, neither of them can be ignored, and both of them have to be reconciled and given effect to. In the case of the two powers under consideration, it has to be noted that the power to summon which vests in a Court is under the general law, while the power of the CIT has been conferred upon him by a special law and has, therefore, to prevail over the former. In view of the same, it has to be held that while it is open to a Court to summon the documents, records, etc., from the CIT, it is equally open to the CIT on receiving the summons to consider whether the production/furnishing of the documents, records, etc., would be in the public interest, and submit the same to the Court in answer to the summons”.

9. In Pentakota Surya Appa Rao vs. Pentakota Seethayamma (supra), a Division Bench of the Andhra Pradesh High Court held thus : “As the s. 138 now stands, the CIT can furnish any information only if he is satisfied that it is in the public interest so to do. A dispute between two private parties cannot be called ‘public interest’. It may be in the interest of justice—justice between the plaintiff and the defendant—but it cannot be called ‘public interest’. So, as we understand cl. (b) of new s. 138(1), the CIT’s power to furnish any information to any assessee is limited only where public interest is concerned. In private disputes, necessarily, the provisions of the Evidence Act should apply as the non obstante clause does no more exist. On a reading of the provisions, we are of the opinion that there is no prohibition against Courts requiring any public servant or public officer to produce any records relating to the assessment of an assessee. It is of course left to the judicial discretion of the Court which should be exercised in accordance with the provisions of the Evidence Act”.

10. In H.N. Malak vs. Aziz S. Yusuf (supra), a learned single judge of the Bombay High Court held thus : “Sec. 138, as is enacted, no doubt provides for a procedure for getting information in this behalf, but in my opinion, the above provision has no application to the production of documents or giving of evidence before the Court of law. That provision merely enables the IT authorities to furnish certain information to certain officers, authorities or bodies or persons specified in the said section. That provision has no reference to the power of the Court to summon any IT authority for producing certain documents before the Court. On the contrary, from the deletion of s. 137 from the statute book and the re-enactment of s. 138 in the present form, it is quite clear that it was not the intention of the legislature to afford strict secrecy about the IT proceedings.

The powers of the civil Court regarding issue of summons, etc., are governed by the CPC. This power is independent and is not restricted either by express words used in the IT Act or even by implication. In the absence of any such provision, in my opinion, it cannot be held that the civil Court has no authority, power or jurisdiction to issue summons in this behalf.”

The learned judge followed a decision of the Mysore High Court in Rikhabchand vs. R.V. Subramanayam (1972) 1 Mys LJ 619.

11. In G.N. Singh vs. S.A. Dhandhania (1983) 144 ITR 866 (Pat) : TC 69R.916, the Patna High Court held thus (p. 870): “Secs. 54 and 59B of the 1922 Act and the corresponding ss. 137 and 138 of the next Act were not overlapping and dealing with the same matter. One laid down the principle relating to the Court’s power to call for evidence for the purpose of a particular litigation and the other in regard to the right of a person not necessarily a party to a case seeking certain information. Although the matters dealt with are allied, the sections cover separate fields. In neither case, the right of a person in regard to calling for the tax documents of another or seeking information was or is, at any point of time, uncontrolled. In one case, the discretion of the CIT has been expressly mentioned in the section and in the other the discretion of the Courts is implied. It must be presumed that a Court shall not grant a prayer where it amounts to an abuse of the process of the Court. Of course the discretion of the two authorities has to be exercised differently in accordance with the scope and purpose. It is, therefore, futile to suggest that in substance although the embargo on the Court’s power has been lifted by repeal of s. 137, the repeal should be ignored and not given effect to on the strength of the provisions of s. 138. I, accordingly, hold that the Court could pass appropriate orders in accordance with the provisions of the CPC and the Evidence Act without taking into account the limitation which s. 137 of the IT Act, 1961, had placed earlier”.

12. In Sabrose Finance Corporation vs. Haryana State (1985) 46 CTR (P&H) 57 : (1985) 154 ITR 890 (P&H) : TC 69R.953, the Punjab and Haryana High Court observed thus : “A plain reading of that provision makes it clear that the Central Government may, 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 assessees or except to such authorities as may be specified in the order. The Central Government alone is the judge in that regard and is to regulate the provision of privilege by manifesting its intention in the Official Gazette, the regulating basis for the purpose being that it must keep regard to the practices and usages customary or any other relevant factors while making such order. In other words, the provision envisages the Central Government to be alive to the needs of the time which may require furnishing or withholding of any information or document pertaining to a particular class of assessees or from a particular class of authorities. Unless and until such an order is made, no such absolute privilege as claimed by the ITO can be conceded to him on the mere existence of the aforequoted provision. The ITO would have to further justify his stance by disclosing the particulars of the notified order of the Central Government whereunder privilege is claimed. There is no such omnibus power with him to withhold information or document. The impugned order prima facie does not disclose that the Court was made wiser about it. Here as well, this Court has not been made wiser in that direction despite notice being issued to the concerned ITO for the purpose. The parties’ counsel were, of course, left groping in the dark. Thus, there is no option but to remit the matter back to the Court directing it to get in communication with the ITOs asking them under what specific order of the Central Government have they claimed privilege under s. 138(2) of the Act. On receipt of such information, the Court would be required to reconsider the matter afresh in accordance with law”.

13. The assessment proceedings under the IT Act are personal to the assessees. These are not documents available for public scrutiny in the ordinary course. IT proceedings postulate a sense of confidence being reposed in the authorities, and a disclosure of confidential matters connected with the income and assets of the assessees in the sure belief that the information so supplied will not be disclosed to others persons. The confidentiality of the proceedings before the IT authorities existed even before the statute declared that they have to be treated as confidential. The provision in s. 137 corresponding to s. 54 of the 1922 Act was thus merely declaratory of an existing state of affairs and did not create new rights or privileges for the first time. A declaration under the IT Act that these documents have to be treated as confidential was required only to statutorily prohibit a Court from summoning these documents. More than that, s. 137 did not achieve. The fact that the IT return or the assessment under the Act was a confidential document did not prevent the maker of the return or the assessee from producing them in Court. At one time, there was a doubt whether the authorities under the Act could grant copies of the proceedings and the assessment orders. The Calcutta High Court in Promatha Nath Pramanick vs. Nirode Chandra Ghose AIR 1940 Cal 187 : (1939) 7 ITR 570 (Cal) : TC 69R.870, held that the assessee “has no right to demand a certified copy of it under the section”. Similarly in Devidatt Ramniranjandas vs. Shriram Narayandas, AIR 1932 Bom 291, it was held thus (head note); “An ITO is prohibited under s. 54 to give certified copies of IT returns or of assessment orders even to the assessee on demand. Nor has the assessee a right to inspect these original documents from the custody of the ITO”.

14. In Promatha Nath Pramanick vs. Nirode Chandra Ghose (supra), it was also held thus : “Under s. 76, every public officer having the custody of a public document which any person has the right to inspect, shall give that person on demand copy of it on payment of the legal fee therefor together with a certificate of its correctness. There is no provision under the IT Act which gives an assessee a right to inspect the records of the IT Department. It is true that under the instructions in the Manual he can obtain a copy of the assessment order although nothing is said as to such copy being certified. As the Special Referee himself points out, the Departmental instructions in the IT Manual have of themselves no statutory authority and even assuming this particular instruction to be legally unobjectionable, it does not purport to give the assessee a right to inspect the original assessment order and compare with the copy. Therefore, the assessment order does not, in my opinion, fall within the ambit of s. 76 and it follows that if the assessee has no right to inspect it, he has no right to demand a certified copy of it under the section”. This view was expressly dissented from in Suraj Narain vs. Jhabbu Lal, AIR 1944 All 114 : (1945) 13 ITR 13 (All) : TC 69R.810, where one of the learned judges expressed thus: “I have, therefore, no doubt in my mind that an IT assessment order is a public document under s. 74, Evidence Act, and a certified copy would be admissible under s. 65 of the same Act”. Varadachariar, J., speaking for the Madras High Court, interpreting s. 54 of the 1922 Act observed thus in Pentapathi Venkataramana vs. Varahalu, AIR 1940 Mad 308 : (1939) 7 ITR 560 (Mad) : TC 69R.802 : “Even assuming that the strict view taken in Anwar Ali vs. Tafozal Ahmed, AIR 1925 Rang 84 : 2 Rang 391, is correct, it is difficult to see anything illegal in the grant of copies of such documents to the assessee himself. The use of the word ‘disclosure’ in cl. (2) of s. 54, IT Act implies that the disclosure must be to a stranger and not to the party who made the statement. Where one partner makes a statement on behalf of the partnership, we do not think it reasonable to hold that the grant of copies of that statement to other members of the partnership is illegal”.

It is in this context that s. 138(1)(b) is relevant for our purpose. It provides that the CIT may furnish any information in respect of any assessment, on any application made by any person, if he is satisfied that it is in the public interest so to do. He cannot thus arbitrarily reject the application and his rejection will have to be supported by reasons to justify that public interest demanded a rejection of the request. When the right to obtain information about an assessment proceeding is granted by the IT Act itself, a party cannot be allowed to bypass the statutory provision and seek to compel the Court to summon the same in Court. Thus, in the exercise of the discretion by Court as to whether summons has to be issued to the IT authority or not, the civil Court will have to consider:

(a) whether the entire proceedings or the whole of the assessment order or any portion of the same is required to be produced in Court; (b) whether the assessee himself is willing to produce or furnish the proceedings, order or necessary information; (c) if the assessee is not willing to produce, has the applicant taken steps to seek information under s. 138(1)(b) of the IT Act; and (d) any other relevant factor.

If the applicant has failed to take steps under s. 138(1)(b), it will, in the usual course, be a good ground to reject his application to summon, just as the refusal to furnish the information in public interest will also afford good reasons for rejecting the claim for their production in the civil Court. The CIT has not been given arbitrary powers to reject an application under s. 138(1)(b). He can do so only in public interest and it is, therefore, his duty to give reasons while he refuses relief under that provision. The decision he takes has a finality conferred by the Act itself, though it is amenable to be challenged under Art. 226 of the Constitution. The refusal to furnish the necessary information under s. 138(1)(b) will foreclose the right to summon that very document which, in public interest, cannot be disclosed. The contention that summons can be issued to the IT authority to produce and he can claim privilege at that stage ignores the relevance of the provision in s. 138 (1)(b) and the remedy available under a special law, the IT Act. Sec. 138(1)(b) will thus enable the CIT to give certified copies of the documents or orders under the Act or any relevant portion of those documents and orders as he deems fit.

15. Lastly, it was contended that the plaintiff and the defendant were partners in the same business and, therefore, the defendant was entitled in law for the production of the assessment records in respect of the joint business conducted by both of them. A similar contention was considered thus by the Calcutta High Court (when s. 54 of the 1922 Act was in force) in Promatha Nath vs. Nirode Chandra (supra) : “It may be that in the case of a sole assessee there is no objection to his using the copy so obtained as evidence in legal proceedings if there are no other objections to its admissibility. It may reasonably be said that the provision that an assessment order shall be treated as confidential is a privilege which an assessee may waive if he thinks it fit to do so. However, it would be a startling thing if a joint assessee were to be permitted to use the copy of such an order to the detriment of his co- assessee in contentions proceedings between them. If a person who has been assessed to income-tax can object to the materials in the possession of the IT Department being disclosed, it is surely a matter of indifference whether the person who desires to make them public is a co-assessee or a stranger”.

The petitioner has no case that he was jointly assessed. The petitioner has no case that he applied under s. 138(1)(b). He files an application to the Court without exhausting his remedies available under the income-tax law. He seems to fish for evidence in support of his claim, by attempting to summon the entire assessment orders of the plaintiff for the years 1974-75 and 1975-76, without even restricting it to the partnership business they jointly conducted. The lower Court was wrong in its conclusion that it had no jurisdiction to summon the documents and was right in its reasoning that, in any case, this was not a fit case for the exercise of discretion in favour of the petitioner.

16. The civil revision petition is, therefore, dismissed, but without any order as to costs and without prejudice to the rights of the petitioner to claim relief under s. 138(1)(b) of the IT Act, 1961, before the appropriate authority and to obtain the certified copy of the assessment order or any portion of the same.

[Citation : 170 ITR 210]