COMMISSIONER OF INCOME TAX WEST BENGAL 111 COMMISSIONER OF INCOME TAX WEST BENGAL COMMISSIONER OF INCOME TAX WEST BENGAL COMMISSIONER OF INCOME TAX WEST BENGAL Vs. ORIENTAL RUBBER WORKS:BHIKAM CHAND SETHIA:C K WADHWA:CHANDRA NATH BANIK

JUDGEMENT

(1.) All these appeals, at the instance of the Commissioner of Income-tax, raise a common question whether the Revenue is under a statutory obligation to communicate to person (from whose custody books of account and documents have been seized under Section 132 (1) of the Income-tax Act, 1961) the approval obtained from the Commissioner of Income-tax and the recorded reasons of the Authorised Officer/Income-tax Officer 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 under Section 132 (8) of the Income-tax, Act, 1961.

(2.) Since in all these appeals the facts giving rise to aforesaid question are almost similar, it will suffice to indicate briefly the facts obtaining in M/s. Oriental Rubber Works' case (Civil Appeal No. 1652 of 1973). Under a proper authorisation issued in that behalf under Section 132 (1) of the Act, on 17th February, 1965 a search was conducted by the Income-tax Department in the factory premises at Kantalia as well as the offices and godown at Mahatma Gandhi Road Calcutta belonging to the respondent-assessee and various books of account and documents were seized from the aforesaid premises. After lawfully carrying out the aforesaid search and seizure, the respondent-assessee was given opportunity to inspect the seized books and documents as also to make copies of the entries. The concerned Income-tax Officer then issued a notice to the respondent assessee under Section 142 (1) of the Act in connection with its assessment for the assessment year 1964-65 and after giving several hearings which were attended by the respondent-assessee or its representative the assessment for the said year was completed under Section 143 (3) of the Act on 5th February, 1969. Notwithstanding the passing of such assessment order on 5th February, 1969, the respondent-assessee on 27th February, 1969 moved the Calcutta High Court by way of a writ under Article 226 of the Constitution inter alia praying (a) for a direction to the Commissioner of Income-tax and the concerned Authorized- Officer/Income-tax Officer to return forthwith the said books of account, documents and papers etc., seized as aforesaid and to cancel or rescind the warrant of authorisation issued under Section 132 (1) of the Act and (b) for a mandamus commanding the concerned Income-tax Officer not to proceed with the assessment for the assessment year 1964-65 until the return of documents seized on 17th February, 1965. The main submission of the respondent-assessee was that the retention of the seized books of account and documents beyond the period of 180 days from the date of the seizure (17th February, 1965) was illegal and invalid inasmuch as neither the approval accorded by the Commissioner of Income-tax for such extended retention nor the recorded reasons of the Authorized Officer/ Income-tax Officer on which such approval was based had been communicated to the respondent/assessee and that without the return of the seized books of account and documents, no assessments, for the concerned assessment year 1964-65 could be proceeded with or made. On behalf of the Revenue it was pointed out that the concerned Income-tax Officer had recorded his reasons seeking approval of the Commissioner of income-tax for extended retention of the seized books of account and documents and had obtained approval of the Commissioner of Income-tax for such extended retention from time to time and therefore such retention of the seized books and documents beyond 180 days was perfectly legal and valid, that there was no obligation under Section 132 (8) of the Act to communicate the Commissioner's approval for such extended retention or the recorded reasons of the Income-tax Officer therefore to the respondent-assessee and that in any event due inspection of the seized books and documents was afforded to the respondent-assessee who was also permitted to take copies of the entries in the books and after giving proper hearing to the respondent-assessee the assessment for the year- 1964-65 had been vaildly completed on 5th February, 1969 long before the respondent-assessee approached the Court and obtained a Rule Nisi. A learned single Judge of the High Court held that the seized books of account and other documents could not be retained beyond the period of 180 days without a complete and effective order of approval for such extended retention of the said books and documents and that since the approval of the Commissioner and the recorded reasons therefor had not been communicated to the respondent- assessee, the retention of the books and documents beyond 180 days was unlawful. The learned Judge, therefore, ordered the issuance of a mandamus directing the Commissioner and the concerned Income-Tax Officer to return all the seized books and documents and he further ordered that the concerned Income-tax Officer shall be at liberty to complete the assessment for the year 1964-65 after the return of the said books and documents and after issuing afresh statutory notices 'under Section 142 (1)/143 (2) of the Income-tax Act to the respondent-assessee. In rendering the aforesaid decision, the learned Judge followed two earlier decisions of his own High Court in Mahabir Prosad Poddar's case decided by T. K. Basu, J. and his own decision in C. K. Wadhwa's case (which is the subject matter of the Companion Civil Appeal No. 760 of 1973 before us). At the instance of the Commissioner of Income-tax, an appeal was preferred to the Division Bench of the High Court being Appeal No. 233 Of 1970. The self-same contentions were urged on behalf of the Revenue in the appeal and it was specifically submitted that the assessment for the assessment year 1964-65 having been completed on 5th Feb., 1969 long before the rule nisi had been issued, the direction given by the learned single Judge with regard to the liberty to complete the assessment for the said assessment year had become infructuous. The Division Bench, however, negatived all the contentions and dismissed the appeal affirming all the directions given by the learned trial Judge. The Revenue has come up in appeal to this Court.

(3.) Counsel for the Revenue urged two points before us in support of this appeal. In the first place the counsel urged that Section 132 (8) of the Income-tax Act, which deals with the extended retention of the seized books and documents in excess of the period of 180 days from the date of the seizure merely provides that for such extended retention the Authorised officer/the concerned Income-tax Officer has to record his reasons in writing in that behalf and has to obtain the approval of the Commissioner of Income-tax for such extended retention and there is no obligation imposed by the said sub-section to communicate the approval of the Commissioner or the recorded reasons of the I. T. O. on which it is based to the person from whose custody the books and documents have been seized or to the person legally entitled to such books and documents and therefore the High Court erroneously held that such extended retention of the seized books and documents without communicating the Commissioner's approval and the reasons on which it is based was unlawful or illegal. Secondly, the counsel contended with in any event since proper opportunity to inspect the seized books and documents and to make copies of the entries was given to the respondent/assessee and since after issuing proper notices and giving hearing to the respondent-assessee, the assessment for the assessment year 1964-65 had been completed long before the issuance of the rule nisi, the same ought to have been upheld as binding on the respondent-assessee. In other words, according to the counsel for the Revenue, the unauthorised retention of the seized books and documents beyond 180 days, if any, could not render the assessment for the year 1964-65 properly made invalid. Counsel further pointed out that the respondent-assessee had even preferred appeals to higher authorities challenging the said assessment on merits. It may be stated that Counsel for the respondent-assessee in this appeal conceded that in all the circumstances of the case the assessment already made on 5th February, 1969 should be allowed to stand subject of course to the result of the appeals that have been preferred by the respondent-assessee against it. In this view of the matter, the second contention urged by Counsel for the Revenue in this appeal has to be accepted and the assessment for the assessment year 1964-65 made on 5th February, 1969 subject as aforesaid to be upheld. That leaves for consideration the first contention, which as we have indicated earlier, is common to all the appeals.