V. Bhargava, J.:— Messrs Kanodia Brothers filed this petition under Article 226 of the Constitution seeking issue of several writs of mandamus directing the opposite party the Income-tax Officer, Central Circle 1, Kanpur, to return to the petitioner firm various books of account of the petitioner firm which were in the possession of the opposite party having been received by him in three different ways. Some of the books of account were seized by the Anti-Corruption Department in May, 1956 and then went into the possession of the Authorised Official of the Income-tax Investigation Commission. Some books of account were produced by the petitioner firm before the Authorised Official of the Income-tax Investigation Commission. All these books of account came into possession of the opposite party from the Authorised Official of the Income-tax Investigation Commission.
2. The third set of books of account were those which the opposite party was retaining in has possession in connection with the assessment proceedings under Section 34 of the Income-tax Act in respect of assessment year 1948-1949 and assessment proceedings under Section 23 of that Act in respect of the assessment year 1951-1952. In addition to these writs of mandamus there was a prayer for a writ of prohibition directing the opposite party not to continue assessment proceedings against the petitioner firm for the assessment years 1943-1944 to 1948-1949 and 1951-1952 until the lapse of reasonable time after the return of the account books to the petitioner firm. Lastly there was a prayer for a writ of prohibition directing the opposite party not to continue the proceedings relating to cancellation of the registration of the petitioner firm. When this petition came up for hearing, we were informed by learned counsel for the parties that assessment proceedings for the year 1951-1952 had already been completed and the books of account of that year had been returned to the petitioner firm. The prayer relating to the return of the books of account for that year and restraining the continuance of assessment proceedings for that year has become in fructuous. In respect of the year 1948-1949, we were told that assessment proceedings are still pending but the opposite party was quite willing to return the books of account at once if those books of account are still in possession of the opposite party. In view of this undertaking by the opposite party, we do not think any writ in respect of this should issue. The petitioner can obtain the books of account from the opposite party in pursuance of this assurance.
3. With regard to the cancellation of the registration of the petitioner firm, Mr. Gopal Behari, learned counsel for the opposite party, made a statement on-instructions from the opposite party that the Department no longer proposes to cancel any registration of this firm for the years in question and does not propose to continue proceedings in pursuance of the notice issued to show cause as to why the registration should not be cancelled. In the circumstances the prayer relating to the notice of cancellation of registration is also now infructuous. This leaves before us the petition in so far as it relates to the non-return of the books of account for the assessment years 1943-1944 to 1947-1948 and further in so far as it relates to the assessment proceedings to be taken for those years.
4. The case now being confined to the assessment years 1943-1944 to 1947-1948, it appears that the books of account in question are all those books of account which the opposite party obtained from the Secretary or the Authorised Official of the Income-tax Investigation Commission. These books of account included two sets of books viz., those which were seized by the Anti-Corruption Department and those which were produced before the Income-tax Investigation Commission by the petitioner firm. We are in this petition not concerned with the validity of the seizure of those books by the Anti-Corruption Department or the validity of the retention of those books of account by the Officials of the Income-tax Investigation Commission or of the other books of account which were produced by the petitioner.
5. What we have to examine is the propriety and legality of their retention by the opposite party, the counter-affidavit filed by the opposite party with the supplementary counter-affidavit shows that initially proceedings for assessment years 1943-1944 to 11947-1948 were pending before the Income-tax Officer District (ii) Kanpur; and by an order of the Central Board of Revenue dated 8-2-1955 those proceedings were transferred to the opposite party, the Income-tax Officer, Central Circle, I, Kanpur. It was subsequent to the transfer of those proceedings to him, that the opposite party issued an order to the Secretary, Income-tax Investigation Commission to hand over those books of account to the opposite party. That order was issued on 10-2-1955 and was complied with the same day.
6. Thereafter, the opposite party kept the books of account in has possession and on 16-2-1955 sent a report to the Commissioner of Income-tax requesting for has permission for retention of those books of account for a period exceeding 15 days. Such permission was granted by the Commissioner of Income-tax on 26-2-1955. These are the facts relied upon by the opposite party to urge that has possession of those books of account is valid and in accordance with law. It, however, appears that, in the procedure for taking those books of account in has possession, the opposite party committed a breach of one mandatory provision of law. Section 37(2) of the Income-tax Act, as it was applicable in the year 1955 when these books of accounts were seized, was to the following effect:
“(2) Subject to any rules made in this behalf, any authority referred to in sub-s. (1) may impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act:
Provided that an Income-tax Officer shall not—
(a) impound any books of account or other document without recording has reasons for so doing; or
(b) retain in has custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Commissioner therefor.”
7. It appears that after the opposite party had summoned those books of account from the Secretary, Income-tax Investigation Commission he proceeded to take those books of account in has possession without making any order impounding them and without recording any reasons for impounding them. All he did was to make a subsequent report for obtaining approval of the Commissioner for retention of those books of account. The illegality committed by the opposite party was in keeping the books of account in has possession without making any order for impounding in which he should have recorded has reasons for doing so.
8. It was urged by learned counsel for the opposite party that the provision contained in sub-section (2) of Section 37 of the Income-tax Act for recording reasons for impounding books of account or other documents should be held to be of a directory nature, so that, even if it was not complied with, the Court could not hold that the order of impounding or the act of impounding became illegal. We are unable to accept this contention because the language in this provision of law makes it clear that the direction is of a mandatory nature and not merely of a directory nature. There is first the provision empowering the Income-tax Officer to impound and retain in has custody the books of account or other documents. Thereafter comes the proviso which places a limitation on that power by saying that the Income-tax Officer shall not impound any books of account or other documents until he has recorded has reasons for doing so.
9. Put in this form, this proviso clearly takes away the power of impounding any books of account or other documents unless the reasons are first given in writing. If the direction for recording of reasons in writing had been intended to be merely directory, I the language would certainly have been different. It would have been more appropriate to lay down that, when impounding the books of account or other documents, the Income-tax Officer shall record has reasons for doing so or that the Income-tax Officer, may, for reasons to be recorded in writing, impound the books of account or other documents. If such language had been used, it might have been possible to hold that the recording of reasons for impounding was only of a directory nature and the failure to comply with that direction would not invalidate the order and would amount to a mere irregularity.
10. On the other hand, where the exercise of the-power itself is prohibited unless the reasons are recorded, the provision has to be held to be a mandatory one where the power must not be exercised without complying with the requirement of recording reasons; and, if exercised, the exercise of that power could be invalid and against law. It is further to be noticed that this section also confers the power on the Income-tax Officer to retain books of account or other documents in has possession. This power of retaining depends on a prior valid exercise of the power of impounding. It is only documents which are validly impounded that can be retained under this provision of law. On the subsequent act of retention also, a limitation is placed.
11. That limitation is that there is to be no retention for a period exceeding fifteen days without the approval of the Commissioner. This second requirement was no doubt complied with by the opposite party but mere compliance with it will not validate retention when ab initio the retention was invalid because he had illegally impounded the books of account and other documents. In these circumstances, it is clear that these books of account are illegally in the possession of the opposite party and the petitioner firm is entitled to a writ of mandamus directing the opposite party to return those books of account to the petitioner.
12. It was urged by learned counsel for the opposite party that, if such a direction is made by this Court, there is a possibility that there might be loss to revenue because the petitioner will not produce those books of account later when required to do so in accordance with the procedure prescribed under the Income-tax Act. We cannot act on the presumption that the petitioner will not produce the books of account when called upon to do so in accordance with law. In any case the possibility of there being loss to revenue cannot justify this Court. In condoning the illegality committed by the opposite party. An illegal act has to be rectified, though, in the circumstances of this case, it appears to us to be advisable to make directions so that there may not be immediate chance of any loss to the revenue.
13. Further, we also consider that the petitioner should be allowed a certain period of time for filing returns for these five years in question before assessment proceedings are continued by the opposite party in respect of these years. In these circumstances we make an order directing the opposite party to return the books of account and other documents, which were received by him from the Secretary or Authorised Official, Income-tax Investigation Commission on 10-2-1956, to the petitioner on or before 15-4-1959.
14. Before that date, if the opposite party consider? it necessary, he will be at liberty to initial every page of these books of account and also to take, if necessary, notes of data available in those books of account. Thereafter the petitioner can file has return for these years in question on or before 15-6-1959 and, to ensure that this time will be available to the petitioner, we direct that no further proceedings in assessment for these years shall be taken by opposite party up to 15-6-1959.
15. In the circumstances of this case, we direct the opposite party to pay a sum of Rs. 200/- as costs to the petitioner. A copy of this order shall be delivered to learned counsel for either party on payment of proper charges within one week.
V.R.B
16. Order accordingly.