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P. Kandiah Thevar v. Third Income-Tax Officer, Tirunelveli And Another

Madras High Court

Apr 3, 1963

Judgment

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Summary of the Legal Opinion (Srinivasan, J.)

Factual and Procedural Background

This is an application under Article 226 seeking a writ of mandamus to direct the Income-tax Officer, Tirunelveli, to grant a certified copy of a statement made by the second respondent (an assessee) in the course of assessment proceedings.

The second respondent had earlier filed O.S. No. 130 of 1961 in the District Munsif's Court, Shencottah, claiming ownership of a property. During his income-tax assessment proceedings the second respondent allegedly admitted that the property did not belong to him; the petitioner was also examined and asserted his title to the property.

The petitioner applied under Section 137 of the Income-tax Act, 1961 for certified copies of his own deposition and of the second respondent's statement. The Income-tax Officer granted the petitioner's deposition but refused to grant a copy of the second respondent's statement on the ground that Section 54 of the Indian Income-tax Act, 1922 prohibited such disclosure.

The petitioner contended that the 1961 Act permits disclosure of such statements and that the Income-tax Officer was unjustified in refusal. The Income-tax Officer stated he had no objection to granting the copy if it was legally permissible, but maintained that the 1922 Act's prohibition continued to apply to assessment proceedings that concluded before the 1961 Act came into force (1-4-1962). The second respondent admitted the ownership suit had been disposed of in favour of the petitioner and argued that the petition was therefore infructuous; he also contended the assessment proceedings pre-dated the 1961 Act and so the 1922 Act governed disclosure.

Legal Issues Presented

Whether the relaxation in Section 137(3)(xxi) of the Income-tax Act, 1961 (permitting disclosure of particulars that are evidence that property does not belong to the assessee but belongs to another person, where the assessee was examined) applies to statements made in assessment proceedings conducted under the repealed Indian Income-tax Act, 1922.
Whether the repeals and savings provision (Section 297 of the 1961 Act) and the general rule in Section 6 of the General Clauses Act preserve the prohibition against disclosure contained in Section 54 of the 1922 Act so that the 1961 relaxation cannot be applied to pre-1961 proceedings.
Whether, having regard to the dismissal of the civil suit between the parties, the extraordinary writ jurisdiction should be exercised now to compel production of the certified copy.

Arguments of the Parties

Petitioner's Arguments

The petitioner relied on Section 137(3)(xxi) of the Income-tax Act, 1961 to obtain a certified copy of the second respondent's statement because it admitted that the property did not belong to the second respondent but belonged to the petitioner.
The petitioner asserted that the 1961 Act's provision permitting disclosure is not prohibited and that the Income-tax Officer was unjustified in refusing the copy.

Income-tax Officer / Department's Arguments

The Income-tax Officer indicated no objection to granting the copy provided it was legally permissible, but relied on Section 54 of the Indian Income-tax Act, 1922 to justify refusal for statements made before 1-4-1962.
The Department argued that the 1961 Act is not retrospective and that Section 54's prohibition continued to operate in respect of proceedings that had terminated under the repealed Act, invoking Section 297(2) of the 1961 Act (repeals and savings).
Additionally, it was argued under Section 6 of the General Clauses Act that rights or privileges secured under the repealed Act (i.e., the protection against disclosure) cannot be affected by the repeal unless a different intention appears.

Second Respondent's Arguments

The second respondent admitted the civil suit on title existed but stated it had been dismissed in favour of the petitioner, making the present petition infructuous because no necessity remains for the certified copy in the civil court.
He further argued that since the assessment proceedings and the statement pre-dated the 1961 Act, disclosure (or its refusal) must be governed by Section 54 of the repealed 1922 Act and the Income-tax Officer was under no legal duty to grant a copy.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Shama Rao v. Motiram, 1934-2 ITR 436 (AIR 1934 Nag 181)	The intention underlying Section 54 is to encourage an assessee to make a full and true disclosure to the department by ensuring statements made will not subsequently be used against him; an assessee may object to answering on grounds of privilege.	The court relied on this authority to explain the protective purpose of confidentiality provisions in income-tax law and to underscore why disclosure provisions are to be construed with care.
Charu Chandra v. Gurupada Ghosh, 1961-43 ITR 83 (AIR 1962 SC 1119)	Section 54's prohibition on disclosure is absolute and is not negated by any waiver by the assessee.	The court cited this Supreme Court decision to illustrate the stringency of the non-disclosure rule under the old statute and to frame the tension between that rule and the later statutory relaxation in the 1961 Act.
Rama Rao v. Venkataramanayya, 1940-8 ITR 450 (AIR 1940 Mad 768)	Considered whether a record of assessment is a "public document" within Section 74 of the Evidence Act and the admissibility of certified copies under Section 65(c); focused on rights of persons concerned with the assessment to obtain copies for their assessment-related matters.	The court noted this Full Bench decision to clarify that earlier authorities addressed limited questions about admissibility and access in relation to assessment documents and did not broadly override confidentiality protections.
Muniammal v. 3rd Addl. Income-tax Officer, 1960-38 ITR 664 (AIR 1960 Mad 366)	Where there is a plurality of legal representatives, all should concur in applying for inspection or copies of statements made to the Income-tax Officer; allowing one alone to inspect could defeat the purpose of confidentiality.	The court relied on this Bench decision as indicative of how stringently Section 54(3) should be enforced and the care courts must take before permitting access to assessment material.

Court's Reasoning and Analysis

The court began by acknowledging the shared principle in both the 1922 and 1961 Acts that statements, returns, accounts and documents produced or given in assessment proceedings are to be treated as confidential and are not to be compelled into production by courts, except as expressly permitted by statute.

It identified that Section 54(3) of the 1922 Act contained specified exceptions largely limited to official or statutory proceedings (prosecution, proceedings involving the Government or Income-tax authority, taxation investigation commission, Comptroller and Auditor General, enquiries into departmental conduct, proceedings under the Indian Stamp Act, etc.). These exceptions related primarily to official uses.

The 1961 Act introduced, among other relaxations, clause (xxi) of Section 137(3), which permits disclosure "of so much of such particulars to any person as is evidence of the fact that any property does not belong to the assessee but belongs to such person; provided that the assessee had, prior to such disclosure, been examined by the Income-tax Officer, in respect of his right to such property."

The petitioner relied on that clause to obtain the second respondent's statement. The respondents countered that the clause could not apply to statements made before the 1961 Act came into force because Section 297 of the 1961 Act repealed the 1922 Act and saved certain proceedings, and Section 6 of the General Clauses Act protects rights or privileges accrued under a repealed enactment.

The court examined legislative intention. It observed that the 1961 Act was not merely a repealing measure but also re-enacted the law and introduced a new class of permissible disclosures. Section 6 of the General Clauses Act does not protect accrued rights against a different legislative intention. The court questioned whether the legislature had such a different intention in enacting clause (xxi).

Analysing the nature of statements covered by clause (xxi) (assesssee's disavowal of ownership and admission that property belongs to another), the court concluded that such statements operate between private persons and that the confidentiality principle does not justify withholding them from the person whose rights are directly affected. The court reasoned that if an assessing authority accepted the assessee's statement that property belonged to another, the department could not properly assess or take steps against that other person without disclosing the statement; thus, the disclosure in such circumstances does not offend the general confidentiality principle.

On that basis the court held there was a contrary legislative intention in the 1961 Act with respect to statements of the nature described in Section 137(3)(xxi), and that the relaxation applied even to statements made in proceedings under the old 1922 Act. Consequently, the respondents' contention that the new Act had no application to pre-1961 statements was rejected.

Despite reaching that interpretive conclusion, the court declined to issue the writ. It noted that the second respondent's civil suit on title had been dismissed in favour of the petitioner, so there was no present necessity for production of the certified copy in the civil court. The court considered but rejected the petitioner's contention that a possible future appeal by the second respondent justified immediate extraordinary relief. The court emphasized that speculative or contingent future needs did not warrant invoking the extraordinary jurisdiction of the High Court; the petitioner could apply to the Income-tax Officer for the copy if and when a pressing need arose, and in light of the court's interpretation, the Income-tax Officer would be hard-pressed to refuse then.

Holding and Implications

Holding: The court held that, for the specific category of statements described in Section 137(3)(xxi) of the Income-tax Act, 1961 (statements by an assessee disowning property and admitting that it belongs to another, where the assessee was examined), there is a contrary legislative intention such that the relaxation in the 1961 Act applies even to statements made in assessment proceedings under the repealed Indian Income-tax Act, 1922.

Final Disposition: PETITION DISMISSED.

Implications:

The immediate consequence is that the writ petition is dismissed and no certified copy is ordered to be produced now; there is no order as to costs.
The court's interpretation means that where a statement of the nature described in Section 137(3)(xxi) exists, disclosure to the person shown by the statement to be the owner is permitted under the 1961 Act even if the statement was made under the 1922 Act; accordingly, in future the Income-tax Officer "can hardly refuse" to grant such a copy when a genuine need arises.
The court declined, however, to exercise extraordinary jurisdiction on the basis of potential future contingencies; the petitioner must seek the copy when a concrete necessity exists (for example, on appeal), at which time the statutory position as interpreted by the court will apply.

JG/RMG/R.G.D

Order: Petition dismissed.

Show all summary ...

Srinivasan, J.:— This is an application under Article 226 praying for the issue of a writ of mandamus to direct the Income-tax Officer, Tirunelveli, to grant a certified copy of a statement made by the second respondent, an assesses of the Income-tax department, in the course of his assessment proceedings.

2. The second respondent filed a suit O.S No. 130 of 1961, District Munsif's court, Shencottah against the petitioner claiming ownership of a certain property. In the course of the assessment proceedings of the second respondent, certain statements were made both by the petitioner and the second respondent. It is stated by the petitioner that the second respondent in those income-tax proceedings admitted that the property does not belong to him. In these proceedings the petitioner was also examined wherein he set up his title to the property. The petitioner claimed that the statement made by the second respondent was necessary for being marked in evidence in the trial of the suit and accordingly applied under Section 137 of the Income-tax Act, 1961, for grant of copies of his own deposition as well as that of the second respondent; The Income-tax Officer granted copy of the petitioner's own deposition, but he refused to grant a copy of statement made by the second respondent on the ground that Section 54 of the Indian Income-tax Act of 1922 prevented the grant of such a copy. The petitioner claims that under the Act of 1961, the grant of a copy of a statement made by an assessee wherein he disowned ownership of certain property and admitted the ownership of another person is not prohibited and that the Income-tax Officer was not justified in refusing him the grant of the copy. It is in these circumstances that the petitioner invokes the special jurisdiction of this court to direct the Income-tax Officer to grant the copy in question. On behalf of the Income-tax Officer, it is stated that the Income-tax Officer has no objection to the grant provided it is held to be permissible under the law. It is however claimed that under S. 54 of the Act of 1922, which was in force till the 31st March, 1962, as statements made before the Income-tax Officer in assessment proceedings are confidential and the income-tax authorities are prohibited from granting any certified copy of the statement in question to the petitioner. It is claimed that the Income-tax Act of 1961 came into force on 1-4-1962, and the provision upon which the petitioner relies is, according to the Department, not retrospective in its nature and that the prohibition contained in S. 54 will continue to operate even after the passing of the Act of 1961.

3. On behalf of the second respondent, it is admitted that there is a suit regarding the ownership of the property, but it is stated that suit has since been disposed of in favour of the petitioner. On this ground it is claimed that the need for the grant of a copy of the statement no longer exists and that the writ petition has really become infructuous. The further point taken is that since the assessment proceedings in which this statement was made related to a period long prior to the coming into force of the Act of 1961, the grant of a copy or the refusal thereof must be governed by S. 54 of the repealed Act and further that the Income-tax Officer is under no legal duty to grant a copy of the statement.

4. The question that calls for decision in this writ petition is not free from difficulty. Both under the Act of 1922 and the Act of 1961, all particulars contained in any statement made, return furnished or accounts or documents produced under the provisions of the Act or in any evidence given, or affidavit or deposition made in the course of any proceedings under the Act shall be treated as confidential. Except as provided, no court shall be entitled to require any public servant to produce before it any such return, accounts, documents or record or any part of such record. Under S. 54(3) of the Act of 1922, certain exceptions were provided. Disclosure of information contained in the records of income-tax proceedings was permitted for the purpose of prosecution, for proceedings under the Taxation of income Investigation Commission Act, in proceedings to which the Government or the Income-tax authority is a party and where any matter arising out of the proceedings under the Act was involved. The prohibition was also relaxed in cases of particulars to be supplied to the Comptroller and Auditor General or the Central Board of Revenue or in the course of enquiry into the conduct of an official of the income-tax department and into charges of misconduct against a lawyer or chartered accountant, for the purpose of proceeding under the Indian Stamp Act etc. All the classes of exemptions, if they may be so called, of the prohibition contained in S. 54(1) of the Act, practically relate to what may be called official proceedings conducted by an appropriate statutory authority.

5. The Income-tax Act of 1961 added certain other cases where the prohibition against disclosure was relaxed and one of these is in S. 137(3)(XXI), which reads thus:

“Nothing in this section shall apply to the disclosure……… (xxi) of so much of such particulars to any person as is evidence of the fact that any property does not belong to the assessee but belongs to such person; provided that the assessee had, prior to such disclosure, been examined by the Income-tax Officer, in respect of his right to such property.”

6. It is upon this provision that reliance has been placed by the petitioner who claims, that in the assessment proceedings of the second respondent, the second respondent did make a statement admitting that he was not the owner of the property but that the petitioner was the owner. This provision would certainly enable the petitioner to obtain a copy of the statement made by the second respondent. But the contention that has been advanced both by the second respondent and the Income-tax Officer, the first respondent, is that this relaxation contained in clause (XXI) can apply only to statements made after the coming into force of the 1961 Act and not to statements made in proceeding under the repealed Act of 1922. In this regard reference has been made to S. 297 of the new Act which is the section enacting repeals and savings. By sub-section (1) of Section 297 the Indian Income-tax Act of 1922 has been repealed. Notwithstanding the repeal, sub-sec. (2) provides for continuance of certain proceedings under the old Act as if the new Act had not been passed. It is urged that in so far as closed proceedings are concerned, that is to say, in proceedings Which had terminated before the coming into force of this Act, the relaxation contained in S. 137(3)(xxi) cannot apply.

7. A further argument advanced by Mr. Ranganathan for the department, is that under Section 6 of the General Clauses Act also, the repeal of the old Act cannot affect any right or privilege which has accrued under the repealed Act. The argument is that the prohibition against disclosure is a right or privilege which has been secured by the assessee under the provisions of the repealed Act and that this right cannot be affected by the repeal of the 1922 Act.

8. The object in prohibiting the disclosure of matters contained in the records of assessment is to encourage an assessee to place all the facts before the department, even confidential matters, for the purpose of assessment. Any documents or material so furnished by the assessee in his assessment proceedings are prohibited from being availed of by third parties to the assessment; but that is solely with a view to enable a proper assessment to be made by the department. If such a protection against the disclosure of statements or other confidential matter furnished by the assessee were not granted, the object of the section would be frustrated. In Shama Rao v. Motiram, 1934-2 ITR 436 : (AIR 1934 Nag 181) it was held that the intention underlying S. 54 is to encourage an assessee to make a full and true disclosure of all relevant facts within his knowledge knowing that any statement made by him will not subsequently be used against him. It was also held that it was open to the assessee to object to answering interrogatories on statements made by him in such proceedings on the ground that they are privileged. The Supreme Court has also held in Charu Chandra v. Gurupada Ghosh, 1961-43 ITR 83 : (AIR 1962 SC 1119) that the prohibition imposed against the disclosure by S. 54 is an absolute one and its operation is not obliterated by any waiver by the assessee. In Rama Rao v. Venkataramanayya, 1940-8 ITR 450 : (AIR 1940 Mad 768) a Full Bench of this court had to examine whether a record of assessment is a public document within the meaning of Section 74 of the Evidence Act, certified copies of which would be admissible under S. 65(c). This decision only went to the extent of examining the right of a person who is concerned with the assessment to obtain copies of the document relevant to his assessment and to the admissibility of such document in evidence under the Evidence Act. In another Bench decision of this Court Muniammal v. 3rd Addl. Income-tax Officer, 1960-38 ITR 664 : (AIR 1960 Mad 366) Ramachandra Iyer J. as he then was, observed thus:

“Where there is a plurality of legal representatives, all of them should concur in applying for the inspection of statements made to file Income-tax Officer or for obtaining certified copies of the same from him. But where they do not agree, one of them alone could not be held to represent the deceased and, therefore, one of them alone could not have an inspection. To recognise such a right might perhaps defeat the very purpose for which the section was enacted.”

9. This decision also indicates the extent to which the prohibition contained in Section 54(3) of the Income-tax Act should be stringently enforced.

10. The question that we have to consider is nevertheless whether after the re-enactment of the Income-tax Act in 1961, the relaxation contained in S. 137(3)(xxi) will not operate, in respect of statements that were made in assessment proceedings under the repealed Act. The broad statement made by the learned counsel for the respondents that the new Act cannot apply in this regard to proceedings under the old Act is too general to be accepted as it stands. The new enactment is not merely a repealing enactment; it both repeals and re-enacts and has introduced a new class of cases where the prohibition against disclosure has been relaxed. In such circumstances, can the assesee say that he has secured a right under the old Act which cannot be affected by the new Act? It seems to us that the question must depend upon the intention of the legislature. Section 6 of the General Clauses Act does not without any qualification protect the right or the privileges acquired or accrued under the repealed Act. It states that the repeal of the Act shall not affect any right or privilege acquired or accrued under thee enactment so repealed, unless a different intention appears. Would it therefore be correct to say that in enacting this particular provision, clause (xxi) of S. 137(3), the legislature did have a different intention? It may be noticed that the provision only relates to statements made by an assessee disowning any right in an item of property and admitting such right to exist in another person. In so far as the assessee is concerned, the statement so made by him was obviously designed to get out of any taxable incidence in relation to ownership of that property. It would also affect the tax ability of the person in whose favour the right of ownership was conceded by the assessee. If such latter person who is affected by a statement that was made by another either seek to establish his title to the property or even to deny the truth of the statement, we can see no reason why as between those two person a statement made by one should be regarded as confidential. Assuming for a moment that the assessing authorities accepted the statement of the assessee that an item of property did not belong to him but belonged to another, the department could not very well proceed to assess the latter person on the basis of the statement without disclosing that statement to the person who is sought to be assessed. If, therefore, in certain circumstances the disclosure of this statement is necessary and is permitted, it is difficult to see why that other person should not have the benefit of the statement made by the assessee in proceedings other than income-tax proceedings. The intention of the legislature in enacting this provision seems to be that where any right to property was in question in assessment proceedings and statements relevant to that right were made by the assessee in the course of those proceedings, the disclosure of such statements: would not offend the general principle of the confidential nature of the proceedings contained in S. 137(1) and (2). Whatever right might have existed in the assessee in securing a non-disclosure of the statement made by him under the repealed Act, in so far as the statements of the nature mentioned in S. 137(3)(xii) are concerned, the legislature did to our mind liberate such statements from the prohibition against non-disclosure. We are therefore inclined to hold that to this extent there is a contrary intention apparent, and notwithstanding that the statement was made in proceedings under the old Act, its disclosure is permitted under the new Act. To hold otherwise would amount to enabling a person in taking advantage of a statute for a dishonest purpose.

11. We are satisfied therefore that the stand taken by the respondents that the new Act has no application and that the prohibition against disclosure under the old Act must continue cannot be accepted.

12. Nonetheless, we are not inclined to issue a writ in the peculiar circumstances of the case it has been stated, and it is not denied that the second respondent who filed a suit against the petitioner asserting his own title to the property in question has failed in his suit and the suit has been dismissed. No circumstances necessitating the production of a certified copy of the statement before the civil court now exist. But Mr. Balakrishnan for the petitioner, argues that if the second respondent should file an appeal, against the dismissal of the suit, it may become necessary for the earlier statement made by the second respondent in respect of the ownership of the property to be placed before the appellate court. It may be so; but we are not satisfied that the extraordinary jurisdiction of this Court should be invoked or should be exercised in favour of the petitioner solely on the ground that conditions might arise in the future, when this statement might be necessary. It would be open to the petitioner when such a situation arises, to obtain the copy from the Income-tax Officer, which in the light of our interpretation of S. 137(3)(xxi) the Income-tax Officer can hardly refuse. For the reasons, stated above, the petition fails and is dismissed. But there will be no order as to costs.