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Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Mrs. Justice Ruma Pal
Acts
  • provisions of Section 132(8) of the Income-tax Act, 1961 (referred to as "the Act" hereafter). 3. Section 132(8)
  • Indian Income-tax Act, 1922 (11 of 1922), or this Act
  • Section 114(e) of the Evidence Act,
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Mrs. Justice Ruma Pal
Acts
  • provisions of Section 132(8) of the Income-tax Act, 1961 (referred to as "the Act" hereafter). 3. Section 132(8)
  • Indian Income-tax Act, 1922 (11 of 1922), or this Act
  • Section 114(e) of the Evidence Act,
See more information ...
Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

On December 23, 1981, a search and seizure took place at the petitioner's premises. Various documents, share scrips and Rs. 90,000 in cash were seized. The petitioner filed a writ application for the return of the documents and share scrips.

The petitioner contended that the respondent authorities had no authority to retain the documents and share scrips under Section 132(8) of the Income-tax Act, 1961. Section 132(8) (as quoted in the opinion) restricts the period for which books of account or other documents seized under Section 132(1) or (1A) may be retained unless reasons are recorded in writing and approval of the Chief Commissioner or Commissioner is obtained; it also contains a proviso limiting further retention after completion of proceedings relevant to the years for which the material is relevant.

The respondents stated that after the December 23, 1981 seizure the Assessing Officer applied to the Commissioner (by letter dated June 4/7, 1982) recording reasons; the Commissioner approved retention by an order dated June 15, 1982 (served on the petitioner on June 18, 1982) and permitted retention till June 30, 1983. The respondents further asserted that subsequent Commissioner orders dated June 23, 1983, June 21, 1984, and June 18, 1985 extended retention until March 31, 1987 and that those orders were communicated to the petitioner. The writ petition had been filed on December 10, 1985.

The court scrutinised the respondents' records and found no reliable evidence of service of the Commissioner's orders dated June 23, 1983 and June 21, 1984. The despatch register relevant to the period could not be produced by the respondents. The court directed return of the seized material, appointed and later discharged a special officer charged with custody of the share scrips and other seized items, and made related directions concerning handover and payment to the special officer.

Legal Issues Presented

  1. Whether the respondents were legally entitled to retain the petitioner's seized books of account, documents and share scrips under Section 132(8) of the Income-tax Act, 1961.
  2. Whether the statutory preconditions for retention under Section 132(8) — specifically (a) recording of reasons by the Assessing Officer, (b) approval by the Commissioner, and (c) communication to the assessee of both the recorded reasons and the Commissioner's approval — had been satisfied in the petitioner's case.
  3. Whether the petitioner was obliged to exhaust or invoke the remedy under Section 132(10) of the Act instead of filing the writ petition.
  4. Whether the respondents were entitled to the benefit of the presumption under Section 114(e) of the Evidence Act (that judicial and official acts have been regularly performed) to establish service and regularity of official steps.
  5. Whether alleged suppression by the petitioner (receipt of the Commissioner's order dated June 18, 1985) disentitled him from relief.

Arguments of the Parties

Petitioner's Arguments

  • The petitioner argued that he was entitled to the return of the documents and share scrips because the respondent authorities had no authority to retain them under Section 132(8) of the Income-tax Act, 1961.
  • The petitioner asserted that the last two statutory preconditions for retention (communication of the Assessing Officer's recorded reasons and the Commissioner's approval) were missing at least after June 30, 1983.
  • The petitioner relied on the absence of service of the recorded reasons and certain Commissioner orders to show that retention was unlawful.

Respondents' Arguments

  • The respondents maintained that the Assessing Officer had applied for approval (letter June 4/7, 1982) recording reasons and that the Commissioner approved retention by order dated June 15, 1982 (served June 18, 1982) permitting retention till June 30, 1983.
  • They asserted that by subsequent Commissioner orders dated June 23, 1983, June 21, 1984, and June 18, 1985, the retention period was extended to March 31, 1987 and that these orders had been communicated to the petitioner.
  • The respondents contended the court should not decide disputed questions of fact regarding service because respondent No.1 had sworn an affidavit asserting service (i.e., that the question of service was disputed).
  • The respondents argued that the petitioner should be relegated to the remedy under Section 132(10) (an application to the Board) rather than being granted relief by the writ court.
  • They urged that the presumption under Section 114(e) of the Evidence Act favoured them, particularly because the first and second Commissioner orders were admittedly served and later orders referred to earlier approvals; the petitioner’s long silence was, they argued, consistent with communication having occurred.
  • Finally, they submitted that the petitioner had deliberately suppressed receipt of the June 18, 1985 Commissioner order, which was said to have been received prior to filing the writ petition, and that such suppression disentitled the petitioner to relief.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
CIT v. Oriental Rubber Works Part of a series of judicial decisions establishing that seized books and documents may be retained under Section 132(8) only when: (i) reasons are recorded by the Assessing Officer seeking Commissioner's approval; (ii) Commissioner approves retention; (iii) both the recorded reasons and the Commissioner's approval are communicated to the assessee; and (iv) the communication is made as expeditiously as possible. The court applied this rule as the standard for lawful retention and examined whether the recorded reasons and the Commissioner's approvals had been communicated to the petitioner; finding the communication requirements unmet for certain orders, the court concluded retention was unlawful.
Thanthi Trust v. CIT Same series of authority cited for the fourfold preconditions required for lawful retention under Section 132(8) (see above). Used as part of the binding standard on communication and approval requirements; supported the court's insistence on proof of communication of recorded reasons and approvals.
Jorawar Singh Baid v. Asst. CIT Same series of authority cited for the fourfold preconditions required for lawful retention under Section 132(8) (see above). Relied upon collectively with other decisions to affirm that absence of communication of recorded reasons and approvals vitiates continued retention.
Rasiklal Amritlal Doshi v. A. Nundy, Addl. ITO [1961] 42 ITR 35 (Bom) Established that the presumption under Section 114(e) of the Evidence Act (that judicial and official acts have been regularly performed) does not extend to situations where the performance of the act itself is in question; and that any such presumption is rebuttable. The court relied on this authority to reject the respondents' reliance on Section 114(e) to prove service and regularity. The court found sufficient positive evidence to rebut any presumption of regular performance and service.

Court's Reasoning and Analysis

The court proceeded by reference to the statutory text of Section 132(8) and the established judicial requirements (drawn from a series of decisions) that lawful retention under that provision requires:

  1. That the Assessing Officer record reasons in writing seeking the Commissioner's approval;
  2. That the Commissioner actually approve the retention;
  3. That both the recorded reasons of the Assessing Officer and the Commissioner's approval be communicated to the assessee; and
  4. That such communication be made as expeditiously as possible.

Applying these principles to the facts, the court examined the respondents' affidavits and the departmental records. The respondents admitted service of the Commissioner's order dated June 15, 1982 (with record of service on June 18, 1982) but asserted service of later orders dated June 23, 1983 and June 21, 1984. The court found the respondents' averments of service for those two orders to be vague and unsupported by the records: unlike the orders of June 15, 1982 and June 18, 1985, there was no receipt or entry on the order sheet documenting service of the 1983 and 1984 orders.

The court directed production of the relevant despatch register; the respondents contended the despatch register was not traceable. Given the absence of credible documentary proof of service and the lack of an affidavit from the officer who actually effected service, the court concluded that the Commissioner's orders dated June 23, 1983 and June 21, 1984 had not been served on the petitioner.

In addressing the respondents' arguments:

  • The court rejected the submission that the question of service was a disputed matter for resolution because the record positively supported a finding of non-service for the two orders in question.
  • It held that Section 132(10) (remedial application to the Board against approval under subsection (8)) presupposes that the assessee received the approval; where approval was not received at all, an application under Section 132(10) was not an effective alternative remedy and did not bar writ relief.
  • On the respondents' reliance upon the presumption under Section 114(e) of the Evidence Act, the court noted (following Rasiklal Amritlal Doshi) that the presumption does not apply where performance of the act itself (i.e., service) is in question and, in any event, is rebuttable. The court found sufficient positive evidence to rebut any such presumption here.
  • Concerning the respondents' contention of suppression by the petitioner (receipt of the June 18, 1985 order), the court observed that even assuming service of that last order, the non-service of the recorded reasons of the Income-tax Officer meant the petitioner would have succeeded regardless.

On these bases, the court concluded that retention of the books, documents and share scrips could not be sustained under Section 132(8) because the statutory preconditions — in particular communication of the recorded reasons and approvals — had not been fulfilled and proven.

Holding and Implications

Core Ruling: The application is allowed and the respondents are directed to return the seized documents, books, and share scrips to the petitioner.

Specific Orders and Direct Consequences:

  • The respondents were directed to return the seized documents, books, etc., to the petitioner within one week from the date of service of the operative portion of the judgment upon them.
  • The Special Officer (previously appointed to take charge of the seized share scrips and, per a later correction, also the books of account and documents identified in annexure-A) was to hand over the share scrips, books and documents in his custody to the petitioner within the same period and would stand discharged thereafter.
  • There was to be no order as to costs.
  • In addition, the petitioner was ordered to pay the Special Officer a further 100 G. Ms. in full and final settlement of his dues as noted in the later order.
  • All parties (including the Special Officer and the Department) were to act on signed copies of the operative part/minutes of the order on the usual undertaking; xerox copies of the judgment were to be made available on usual terms and upon undertaking to apply for certified copies.

Implications for precedent: The decision applied established legal principles regarding retention under Section 132(8) and the limits of presumptions under Section 114(e) of the Evidence Act. The opinion ordered the return of the seized material in the particular facts of the case; it did not purport to set out a new legal principle beyond applying existing authorities and statutory interpretation to the facts.

Show full summary ...

    Rajendra Prasad Agarwalla v. Inspecting Assistant Commissioner Of Income Tax And Ors.

    1. On December 23, 1981, there was a search and seizure at the petitioner's premises. Various documents, share scrips and Rs. 90,000 in cash were seized. This writ application has been filed for return of the documents and share scrips.

    2. The only point argued by the petitioner is that he is entitled to the return of the documents and share scrips because the respondent authorities have no authority to retain them under the provisions of Section 132(8) of the Income-tax Act, 1961 (referred to as "the Act" hereafter).

    3. Section 132(8) reads :

    "(8) The books of account or other documents seized under Subsection (1) or Sub-section (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 Commissioner or Commissioner for such retention is obtained :

    Provided that the Chief Commissioner or Commissioner 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 Income-tax 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."

    4. A series of judicial decisions have held that books and documents seized in a search conducted under Section 132 of the Act may be retained by the Assessing Officer under sub-section (8) of that section only : when

    (i) reasons are recorded in writing by the Assessing Officer seeking the Commissioner's approval ; (ii) the Commissioner in fact approves the retention ; (iii) both the recorded reasons of the Assessing Officer as well as the Commissioner's approval are communicated to the assessee concerned ; and (iv) the communication is made as expeditiously as possible, (See CIT v. Oriental Rubber Works ); Thanthi Trust v. CIT and Jorawar Singh Baid v. Asst. CIT .

    5 According to the petitioner, the last two preconditions to the retention of the petitioner's books, share scrips and documents were missing at least after June 30, 1983.

    6. According to the respondents, after the seizure under Section 132(1) on December 23, 1981, by letter dated June 4/7, 1982, the Assessing Officer (then known as the Income-tax Officer), had applied for approval to the Commissioner for retention of the documents seized recording his reasons in the letter for such request. The Commissioner approved the retention by an order dated June 15, 1982. Retention was permitted till June 30, 1983. The Commissioner's order dated June 15, 1982, was served on the petitioner on June 18, 1982.

    7. It is said by the respondents that by subsequent orders dated June 23, 1983, June 21, 1984, and June 18, 1985, the Commissioner had extended the period for the retention of the documents under Section 132(8) of the Act till March 31, 1987, and on all occasions the orders had been communicated to the petitioner. The writ petition had been filed on December 10, 1985. It is, therefore, submitted that the retention of the books, documents, etc., was lawful.

    8. The submission of the respondents even on the admitted facts is . unacceptable. As has been already noted, it was incumbent on the respondents not only to serve the petitioner the orders of the Commissioner but also the reasons recorded by the Assessing Officer. Nowhere in the affidavit of the respondents has it been said that this had been done.

    Even assuming that the Commissioner's approval alone had to be served, the averment of service of the Commissioner's orders dated June 23, 1983, and June 21, 1984, are absolutely vague. Nothing has been said as to how the service was effected or when such service was made. This may be contrasted with the averment relating to service of the Commissioner's order dated August 18, 1985, (sic) where the date of service has been specifically mentioned.

    9. Besides, the averments of service have been affirmed by respondent No. 1 as based on information received from the records. I have scrutinised the records. The records certainly do not support the case of service of the orders dated June 23, 1983, or June 21, 1984, on the petitioner. There is no receipt as there is in the case of the orders dated June 15, 1982, and June 18, 1985. There is no reference in the order sheet to these orders of the Commissioner let alone to their service. However, I did not let the matter rest there. I directed the respondents to produce the despatch register relevant to the period in question to show service. The respondents said that the despatch register was not traceable.

    10. In this state of evidence of service, the respondents contended that this court should not decide the question of service. It was said that respondent No. 1 had pledged his oath to the service. Therefore, the question was a disputed one.

    11. Secondly, it was said that the petitioner should be relegated to the remedy available to him under Section 132(10) of the Act.

    12. Thirdly, it was contended that the respondents were entitled to the benefit of the presumption under Section 114(e) of the Evidence Act particularly when the first and second orders of the Commissioner had been admittedly served and the last order referred to the earlier order of approval. It is urged that the silence of the petitioner for several years after receipt of the first order of the Commissioner was in keeping with the respondents' case that the orders had in fact been communicated to him.

    13. Finally it is contended that the writ petitioner was not entitled to any relief as he had deliberately suppressed the receipt of the last order of the Commissioner dated June 18, 1985, which had been received by him prior to the filing of the writ petition.

    14. None of the aforesaid contentions of the respondents is acceptable. The officer who has affirmed the affidavit on behalf of the respondents was not the officer who served the orders. The deponent has not stated that he had anything to do with the service of the orders of the Commissioner except for the last order. As far as the orders dated June 23, 1983, and June 21, 1984, are concerned, the Officer has affirmed the affidavit on the basis of the records. The absence of the affidavit of the Officer claiming that in fact he effected service on the petitioner coupled with the fact that the records do not support the averments made in the affidavit, the court can certainly come to a finding that the two orders in question, namely, of June 23, 1983, and June 21, 1984, had not been served on the petitioner at all. The question cannot be said to be a disputed one.

    15. The second contention of the respondent is unacceptable because Section 132(10) envisages an application to the Board from the approval of the Chief Commissioner or Commissioner under Sub-section (8). This pre-supposes that the approval had been received by the petitioner. The grievance of the petitioner in this writ petition is that the approval was not received at all. This is not a matter in respect of which an application could have been made to the Board, and the remedy under Section 132(10) cannot be considered to be an alternative remedy at all.

    16. As far as the third contention of the respondents is concerned, the presumption under Section 114(e) of the Evidence Act, namely, that judicial and official acts have been regularly performed does not extend to a situation where the performance of the act itself is in question and not the regularity of the act (see Rasiklal Amritlal Doshi v. A. Nundy, Addl. ITO [1961] 42 ITR 35 (Bom)). Even assuming that a presumption could be raised under Section 114(e) of the Evidence Act, it is well-established that such a presumption is a rebuttable one. There is sufficient positive evidence on record to rebut the presumption, if any, in this case.

    17. In any event, this presumption is not available as far as the requirement of service of the recorded reasons of the Income-tax Officer is concerned.

    18. As far as the last contention of the respondents on this aspect is concerned, suppression of a fact would be sufficient to disentitle a writ petitioner from any relief, provided the suppression is such as to make a material difference to the outcome of the case. In the case before me irrespective of the service of the Commissioner's order dated June 18, 1985, in view of the finding of the court regarding the non-service of the recorded reasons of the Income-tax Officer on the petitioner, the petitioner would have succeeded in any case.

    19. For the reasons stated, the retention of the books and documents by the respondents cannot be sustained. It may be mentioned here that after the writ application was moved, an order was passed on February 6, 1986, by Khastgir J., appointing a special officer for taking charge of the seized share scrips and for holding the same until further order of this court. If the share scrips are treated as documents, they would be covered by the reasoning in this judgment and must be returned. If they are not treated as documents, they must be returned by virtue of the fact that the order under Section 132(5) which was passed in 1982 after the search and seizure only permits retention of Rs. 90,000 seized and nothing else.

    20. The application is accordingly allowed and the respondents are directed to return the seized documents, books, etc., to the petitioner within one week from the date of service of the operative portion of this judgment upon them. The Special Officer will stand discharged after handing over the share scrips in his custody to the petitioner also within such period. There will be no order as to costs.

    21. All parties concerned are to act on a signed copy of the operative part of this judgment on the usual undertaking.

    September 14, 1993 :

    22. It appears that subsequent to the order dated February 6, 1986, an order was passed on February 20, 1986, by Khastgir J., as His Lordship then was, correcting the order dated February 6, 1986, by directing the special officer to take possession not only of the share scrips but also of the books of account and documents set out in annexure-A to the petition.

    23. Accordingly, in addition to the return of the share scrips the special officer will also return the books of account and documents taken possession of by him.

    23. The petitioner shall pay the special officer a further 100 G. Ms. in full and final settlement of his dues.

    24. Let this order be incorporated in the judgment and order passed by this court on September 13, 1993.

    25. All parties concerned including the special officer and the Department are to act on a signed copy of the minutes of this order on the usual undertaking.

    26. Let xerox copies of the judgment dated September 13, 1993, duly signed by the Assistant Registrar of this court be given to the parties upon their undertaking to apply for the certified copy of the judgment and on payment of usual charges.

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    Comments

    Rajendra Prasad Agarwalla v. Inspecting Assistant Commissioner Of Income Tax And Ors.
    (Sep 13, 1993)