High Court Of Punjab & Haryana
Spring Dale Education Society vs. Union Of India & Ors.
Sections 132(8), 132(10)
G.S. Singhvi & Nirmal Singh, JJ.
Civil Writ Petn. No. 9287 of 1999
14th September, 2000
A.K. Mittal, for the Petitioner : R.P. Sawhney with Rajesh Bindal, for the Respondents
G.S. SINGHVI, J. :
This is a petition for directing the respondents to release the assets, the books of account and the documents seized by the authorities of the IT Department in pursuance of search and seizure operation carried out on the premises of the petitioner on 21st May, 1998. The petitioner has also prayed for quashing of the order Annexure P10, dt. 11th June, 1999, vide which the CIT, Chandigarh, transferred its case from the Jt. CIT, Special Range-II, Chandigarh, to the Jt. CIT, Special Range-I, Chandigarh.
Before adverting to the facts necessary for deciding the writ petition, we deem it proper to mention that after the issuance of notice of motion, the CIT, Chandigarh, vide order dt. 26th/28th July, 1999, cancelled the transfer of the petitionerâs case and in pursuance of the order dt. 23rd Feb., 2000, passed by the Court, the FDRs seized during the search operation have been released by the Department and the only issue which survives for consideration is whether the continued retention of the books of account and other documents seized during the search operation is ultra vires to s. 132(8) of the IT Act, 1961 (for short, the 1961 Act).
The petitioner is a society registered under the Societies Registration Act, 1860, and also under ss. 11/12 of the 1961 Act. In the search and seizure operation conducted on 21st May, 1998, on the premises of Spring Dale Senior Secondary School, which is managed by the petitioner, the authorities concerned seized the books of account, FDRs and other documents. After about 10 days, the petitioner through its advocate submitted representation Annexure P1, dt. 2nd June, 1998, for releasing the FDRs seized during the search operation. This request was repeated vide letters Annexure P2, dt. 6th June, 1998. Annexure P4, dt. 3rd July, 1998, and Annexure P5, dt. 10th Aug., 1998. In the last mentioned representation, the petitionerâs advocate sought release of all the documents in accordance with s. 132(9A) of the Act. In reply, the ADI (Inv) I, Amritsar, vide letter dt. 19th/20th Aug., 1998, informed the petitioner’s advocate that the seizure and retention of documents was in accordance with law. Thereafter, the petitioner filed C.W.P. No. 11706 of 1998, for grant of a declaration that the search and seizure operation carried out by the Department was illegal. The same was disposed by a Division Bench of this Court on 18th Feb., 1999, in the following terms : “The premises of the petitioners in these three writ petitions (viz) Civil Writ Petition Nos. 11706, 14048 and 14096 of 1998 were raided by the Department of Income-tax. Aggrieved by the raid, the petitioners have approached this Court primarily with the complaint that the action was illegal and beyond the provisions of s. 132 of the IT Act, 1961 (for short, the Act). The petitioners pray that the search and seizure operations be declared illegal and quashed. They also pray for the release of the articles seized during the raid. Respondents have controverted the claim made by the petitioners. It has been submitted that the raid was conducted after the provisions of s. 132 of the Act were fully satisfied. The respondents pray that the writ petition be dismissed.
We have heard learned counsel for the parties at considerable length. It has been contended on behalf of the petitioners that the raid and proceedings are vitiated by bias and mala fides. The counsel for the respondents contests this.
In the circumstances of the case, we feel that the interests of both sides should be protected. The citizen must have a fair trial before an important authority. At the same time the interest of the Revenue should not be jeopardised on account of an apprehension in the mind of the assessee. Thus, without going into the merits of the controversy, we feel that it would be in the larger public interest that the proceedings which have been initiated by the respondents in pursuance of the raid be transferred to an authority at Chandigarh. We direct that the records of the cases of the petitioners in these three petitions shall be transferred to the Jt. CIT, Sector 17, Chandigarh, who has the duty of framing assessments. In case, there are more than one Jt. CIT, the seniormost officer shall handle these cases.
Mr. Sawhney states that the respondents have no objection to this order, but he prays that the cases of the petitioners may be sent to one of the officers of the Central Circle who alone deals with the raid cases. In the circumstances of these cases, we think it would be proper that the cases are examined by a senior officer against whom nobody is able to raise a little finger and has any apprehension. Therefore, we do not find any justification for accepting the request. In view of the above. Mr. Mittal, learned counsel for the petitioner, prays that the writ petitions may be disposed of as having been withdrawn. He further states that the interim order may be vacated and each of the petitioners be given a reasonable time to file the income-tax returns in pursuance of the impugned notices. The income-tax returns shall be filed within one month from today.
The writ petitions are, accordingly, disposed of as having been withdrawn. No costs.” However, in the apparent violation of the statement made by the counsel for the Department, the petitionerâs case was transferred vide order, dt. 11th June, 1999, which, as mentioned above, was, later on, cancelled.
The petitioner has challenged the continued retention of the documents mainly on the ground of violation of s. 132(8) of the 1961 Act as interpreted by the Supreme Court in CIT & Ors. vs. Oriental Rubber Works (1984) 38 CTR (SC) 154 : (1984) 145 ITR 477 (SC) : TC 62R.172. It has averred that in terms of s. 132(8), the books of account and documents seized during search operation cannot be retained beyond a period of 180 days without fulfilling the conditions enumerated in that section and as no approval to the extended retention has been granted by the CIT and no communication to this effect has been sent to it, retention of the documents should be declared illegal.
The respondents have filed two written statements. In the short written statement filed on their behalf on 4th Aug., 1999, it was averred that the documents have been retained beyond 180 days by virtue of the approval granted by the CIT (Central), Ludhiana, vide order No. 2183, dt. 16th Nov., 1998. In the detailed written statement filed on 17th Dec., 1999, an objection has been raised to the maintainability of the writ petition on the ground that the previous writ petition filed by the petitioner was disposed of because the High Court did not find any merit in it and for grant of the similar relief, the second petition is not maintainable. On merits, it has been averred that books of account, documents and FDRs were seized during the search operation and the representative of the petitioner as well as its accountant could not give any satisfactory explanation about the same. According to the respondents, the CIT (Central), Ludhiana, had granted approval to the reasons recorded by the Dy. CIT (Investigation)-I, Amritsar, for retention of the documents up to 31st Dec., 1999, or upto a period of 30 days after the conclusion of the proceedings under the 1961 Act and, therefore, the retention beyond 180 days cannot be treated as violative of s. 132 (8). About non-communication of the order of approval, the respondents have averred that it had happened due to oversight and the same was communicated to the petitioner on 23rd Sept., 1999, through speed post.
Shri A.K. Mittal relied on the decisions of Oriental Rubber Works (supra), Survir Enterprises vs. CIT & Ors. (1985) 46 CTR (Del) 4 : (1986) 157 ITR 206 (Del) : TC 62R.132, Nutan Sahkari Avas Samiti Ltd. vs. Director of Income-tax (Investigation) & Ors. (1994) 208 ITR 843 (All) : TC 62R.128, Rajendra Prasad Agarwalla vs. IAC & Ors. (1994) 209 ITR 784 (Cal) : TC 62R.184 and Dr. George Philip Modavil vs. Asstt. CIT & Anr. (1998) 149 CTR (Ker) 262 : TC S62.4522 and argued that the failure of the concerned authority to communicate the approval allegedly granted by the CIT (Central), Ludhiana, has the effect of rendering the retention of the books of account and the documents unlawful and, therefore, the respondents should be directed to release the same. Learned counsel stated that the assessment proceedings have been finalised during the pendency of the writ petition and, therefore, the retention of the documents would serve no purpose and a direction similar to the one issued by the Kerala High Court in the case of Dr. George Philip Modayil may be issued in this case. Shri R.P. Sawhney, Senior Advocate appearing for the Department, argued that the retention of the documents beyond the period of 180 days was necessitated before the assessment proceedings were pending and this has been done with proper approval of the competent authority. Learned counsel conceded that the order containing the approval of the CIT (Central), Ludhiana, was not communicated to the petitioner till 23rd Sept., 1999, but argued that this technical defect should not be made a ground for directing the release of documents. He then argued that the Department should be allowed to retain the documents till the conclusion of proceedings under the 1961 Act, else the petitioner may tamper with them and taken advantage of the same in the appeal or reference.
We have thoughtfully considered the submissions of the learned counsel for the parties. Sec. 132(8) and (10) of the 1961 Act, which has been relied upon by the petitioner for seeking a declaration that the retention of the seized books of account and other documents beyond the period of 180 days is unlawful, reads as under : “132. (1) to (7) xx xx xx xx (8) The books of account or other documents seized under sub-s. (1) or sub-s. (1A) shall not be retained by the authorised officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same are recorded by him in writing and the approval of the Chief CIT, CIT, Director General or Director for such retention is obtained : Provided that the Chief CIT, CIT Director General or Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian IT Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed. (8A) to (9) xx xx xx xx xx (10) If a person legally entitled to the books of account or other documents seized under sub-s. (1) or sub-s. (1A) objects for any reason to the approval given by the Chief CIT, CIT, Director General or Director under sub-s. (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents. (11) to (14) xx xx xx xx xx”
8. In Oriental Rubber Worksâ case (supra), their Lordships of the Supreme Court considered the question as to whether the Revenue is under a statutory obligation to communicate [to the person from whose custody books of account and the documents have been seized under s. 132(1)], the approval obtained from the CIT and the recorded reasons of the authorised officer/ITO on which such approval is based for the retention of the seized books of account and documents by the Department for a period exceeding 180 days from the date of seizure. After analysing sub-ss. (1), (8), (10) and (12) of s. 132 of the Act, their Lordships laid down the following propositions : “On a plain reading of the aforesaid provisions it will be clear that ordinarily the books of account or other documents that may be seized under an authorisation issued under sub-s. (1) of s. 132 can be retained by the authorised officer or the concerned ITO for a period of one hundred and eighty days from the date of seizure, whereafter the person from whose custody such books or documents have been seized or the person to whom such books or documents belong becomes entitled to the return of the same unless the reasons for any extended retention are recorded in writing by the authorised officer/the concerned ITO and approval of the CIT for such retention is obtained. In other words, two conditions must be fulfilled before such extended retention becomes permissible in law; (a) reasons in writing must be recorded by the authorised officer or the concerned ITO seeking the CITâs approval, and (b) obtaining of the CITâs approval for such extended retention and if either of these conditions is not fulfilled such extended retention will become unlawful and the concerned person (i.e., the person from whose custody such books or documents have been seized or the person to whom those belong) acquires a right to the return of the same forthwith. It is true that sub-s. (8) does not in terms provide that the CITâs approval or the recorded reasons on which it might be based should be communicated to the concerned person but in our view since the person concerned is bound to be materially prejudiced in the enforcement of his right to have such books and documents returned to him by being kept ignorant about the factum of fulfilment of either of the conditions, it is obligatory upon the Revenue to communicate the CITâs approval as also the recorded reasons to the person concerned. In the absence of such communication the CITâs decision according his approval will not become effective. Moreover, sub-s. (10) confers upon the person legally entitled to the return of the seized books and documents a right to object to the approval given by the CIT under sub-s. (8) by making an application to the Central Board stating therein the reasons for such objection and under sub-s. (12) it is provided that the Central Board stating therein the reasons for such objection and under sub-s. (12) it is provided that the Central Board may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit. It is obvious that without the knowledge of the factum of the CITâs approval as also of the recorded reasons on the basis of which such approval has been obtained it will not be possible for the person to whom the seized books or documents belong to make any effective objection to the approval before the Board and get back his books or documents. In our view the scheme of sub-ss. (8), (10) and (12) of s. 132 makes it amply clear that there is a statutory obligation on the Revenue to communicate to the person concerned not merely the CITâs approval but the recorded reasons on which the same has been obtained and that such communication must be made as expeditiously as possible after the passing of the order of approval by the CIT and in default of such expeditious communication any further retention of the seized books or documents would become invalid and unlawful. It is obvious that such obligation arises in regard to every approval of the CIT that might have been accorded from time to time.”
In Survir Enterprisesâs case (supra) a Division Bench of Delhi High Court held that once the bar set out in s. 132(8) of the 1961 Act operated, the Department had to return the books of account or other seized documents to the person concerned.
In Nutan Sahkari Avas Samiti Ltd.âs case (supra), a Division Bench of the Allahabad High Court relied on the decision of the Supreme Court in the case of Oriental Rubber Works (supra) and of the Delhi High Court in Survir Enterprisesâs case (supra) and held that non-compliance of the requirement of passing of a reasoned order by the authority concerned, approval by the CIT and communication of such approval together with reasons to the assessee would vitiate the retention of the books of account and documents beyond 180 days.
In Rajendra Prasad Agarwallaâs case (supra) a learned singe Judge of Calcutta High Court followed the proposition laid down in Oriental Rubber Workâs case (supra) and proceeded to observe that no presumption can be drawn about the recording of reasons, grant of approval and communication thereof and it is the duty of the Revenue to prove all the three things, namely, recording of reasons in writing by the AO for retention of the documents beyond 180 days, approval of such retention by the CIT and communication of the reasons recorded by the AO as well as the CITâs approval.
In Dr. George Philip Modavilâs case (supra) a learned single Judge of Kerala High Court highlighted the necessity of recording of reasons and communication thereof in the following words : “The object of communicating the order granting approval for retention of the seized records and the reasons recorded by the assessing authority is to enable the petitioner, if he is aggrieved, to file objection to the CIT as contemplated under sub-s. (10) of s. 132. Sub-s. (10) of s. 132 provides that, if a person legally entitled to the books of account or other documents seized under sub-s. (1) or sub-s. (1A) objects for any reason to the approval given by the CIT under sub-s. (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents. Sub-s. (11) provides the procedure also. From the provisions of sub-s. (10) of s. 132 it is clear that it is mandatory that the order granting approval for the continued retention of the seized records together with the reasons recorded by the assessing authority are communicated to the petitioner and that too expeditiously.”
The learned single Judge then examined the petitionerâs plea on merits and held that retention of the books of account and other record seized during search operation was illegal and directed that while returning the documents, the respondents may take photostat copies of the seized record and set the signatures of the petitioner on all the pages of such photostat copies before returning the originals.
13. In the light of the above, it is to be seen whether the retention of books of account and the documents seized during the search operation beyond 21st Nov., 1998, is legally sustainable. The admitted position which emerges from the pleadings of the parties is that the order allegedly passed by the CIT (Central), Ludhiana, granting approval to the proposal for extension of the retention of books of account and the documents was not communicated to the petitioner for a period of more than 10 months. As per the respondents’ version this was done on 23rd Sept., 1999. In our opinion, this long time-gap between the alleged approval by the CIT and communication thereof to the petitioner has the effect of rendering the retention of the documents illegal in view of the law laid down by the Supreme Court and various High Courts and, therefore, a direction deserves to be issued to the respondents to release the documents to the petitioner.
In the result, the writ petition is allowed. The concerned authority of the IT Department is directed to release the books of account and other documents seized on 21st May, 1998, from the premises of the school of the petitioner within one month of the presentation of a certified copy of this order. It will be open to such authority to retain photostat copies of the documents after getting them signed by the representative of the petitioner, who shall certify the same to be true copies. The petitioner shall make available the original documents as and when required by the competent authority or any Court.
[Citation : 247 ITR 409]