TRILOK CHAND JAIN Vs. DAGI RAM PINDI LALL

JUDGEMENT

(1.) This reference to the Full Bench has been made by Avadh Behari Rohatagi, J. under Rule 2 (as amended) of the Original Side Rules. 1967, in Suit No. 64 of 1969 instituted on the Original Side of this Court. The questions referred to by the learned Judge for the opinion of the Full Bench relate to the scope and effect of the provisions in sections 54 and 59B of the Indian Income-tax Act, 1922, and sections 137 and 138 of the Income-tax Act, 1961.

(2.) The facts which have occasioned the reference are briefly the following. The plaintiff, Trilok Chand Jain, instituted the suit referred to above for recovery of Rs. 1,39,722.86 from the defendants M/s. Dagi Ram Pindi Lall, its three partners Pindi I all, Bishamber Nath and Dagi Ram and Smt. Budh Wanti, wife of Pindi Lall. While evidence was being recorded in the Suit, the plaintiff obtained summons from the Court requiring the Income-tax Department to produce in Court the records relating to the income-tax of M[s. Dagi Rani Pindi Lall for the years 1964-65 to 1971-72. The Income-tax Officer, District II(XI), New Delhi, sent a letter, dated November 1, 1972, to the Court claiming that the said records relating to Mis. Dagi Ram Pindi Lall were privileged under section 137 of the Income-tax Act, 1961, in view of the decision of H. R. Khanna, J. (as his lordship then was) in Daulat Ram and others v. Som Nath and others, (l968) 68, I.T.A. 779(1). The Income-tax Officer, however, sent the records in a sealed cover through an Inspector in compliance with the summons of the Court. The plaintiff again applied for and obtained summons requiring the Income-tax Officer to produce the income-tax records relatins: to m/s. Horizon Industrial Products (P) Ltd. and Bishamber Nath Kaul. By a letter, dated January 4, 1973, the Income-tax Officer, Companies' Circle-VIII, New Delhi, claimed privilege under section 138 of the Income-tax Act, 1961. It was submitted in the letter that no disclosurs of information regarding income-tax pertaining to income-tax assessees could be made, and that if any information was required, the party should apply to the Commissioner of Inane-tax under section 138(1) of the Income-tax Act, 1961, read with Rule 113 of the Income-tax Rules, 1962, in Form No. 46. The officer, however, sent the records in a sealed cover to the Court. The plaintiff also filed in the Court a number of certified copies of the accounts of the defendants which he had been able to obtain from the Income-tax authorities, and wanted to tender the certified copies in evidence. The defendants in their turn wanted to summon certain records relating to the plaintiff from the Income-tax Department, but the plaintiff opposed the same relying, inter alia, on the decision in Daulat Ram's case (supra).

(3.) At that stage, arguments were addressed before the learned Judge on the question of privilege. The counsel for the plaintiff relied, inter alia, upon the decision in Daulat Ram's case (supra), while the counsel for the defendants argued that the said decision needed re-consideration in view of a decision of a Division Bench of the High Court of Madras inVe V. Sivagami Achi v. Vr. Ve. Vr. Ramanathan Chettiar & others, (1967) 64 I.T.R. 36(2). A number of decisions of other High Courts including a decision of a Full Bench of the Punjab High Court in Amar Singh Lamba v. Sewa Singh and another, I.L.R. 1972(2) Punjab 202(F.B)(3), were cited before the learned Judge. On a consideration of the various decisions, the learned Judge was inclined to take a view different from the view taken in Daulat Ram's case (supra) and in some of the Other decisions cited before him. The learned Judge observed that the derived some support for his view from the decision of the Supreme Court in Lalji Raja & Sons v. Firm Hans Raj NathuRam, AIR 1971 Supreme Court 974(4). However, since the question of privilege claimed by the Income-tax officers was likely to arise requently on the Original Side in the course of trial of suits, the learned Judge considered that the said question should be settled by a Full Bench of this Court, and accordingly made the present reference suggesting that the question of privilege may be examined under the following three heads: