UNION OF INDIA Vs. KANAKARATHNAM M

JUDGEMENT

(1.) THIS revision petition raises a question of the applicability of section 54 of the Indian Income-tax Act. The petitioner is the Union of India represented by the Income-tax Officer, Nagapattinam, who instituted the suit, O. S. No. 82 of 1951, on behalf of the general body of creditors of defendants Nos. 1 and 2 for a declaration that the sale deed dated 9th May, 1947, executed by defendants Nos. 1 and 2 in favour of defendant No. 3, the father-in-law of defendant No. 1, of the suit properties is null and void and not binding on the plaintiff as being sham or in fraud of creditors and made with an intention to defeat or delay the creditors of defendants Nos. 1 and 2. Defendants Nos. 1 and 2 were brothers and were carrying on business in partnership. For the financial year 1942-43, defendants Nos. 1 and 2 as partners were assessed to income-tax, etc., in the sum of Rs. 36,833-5-0. The assessment was completed by March, 1947, and a notice of demand was served on them on 1st April, 1947, calling upon them to pay the tax in two installments. The assessees appealed to the Appellate Assistant Commissioner of Income-tax and pending the appeal they applied to the Income-tax Officer by a letter dated 25th April, 1947, for time. THIS application was rejected and the assessees applied to the inspecting Assistant Commissioner for a similar relief. The inspecting Assistant Commissioner passed an order that if the assessees paid a sum of Rs. 10,000 forthwith and gave an undertaking not to create any charge over or alienate their properties in British India until the Income-tax dues were paid, time would be granted till the disposal of the appeal. Further time was asked for complying with the condition as to payment and on 15th May, 1947, the first defendant applied for extension of time to pay the amounts undertaking that himself and the other partner will not create any charge over or alienate the properties. An undertaking signed by defendants Nos. 1 and 2 was filed before the Inspecting Assistant Commissioner. The assessees paid only a sum of Rs. 5,000 and failed to pay the balance. In the meanwhile on 9th May, 1947, they brought into existence the sale deed in question in favour of defendant 3. The plaintiffs case is that the suit properties formed the bulk of the properties belonging to the assessees and except for a few small items they have practically alienated their, entire estate with a view to defeat and delay the creditors including the Government. When the suit was taken up for trial and when the plaintiff intended to use as evidence certain documents on his side, objection was taken as to their admissibility in evidence, the objection being founded on section 54 of the Indian Income-tax Act.

(2.) THE documents which the plaintiff sought to use in support of his case are demand notices for the tax due for 1942-43, applications by the first defendant or his authorised agent for time for payment of the tax for 1942-43, the communication by the first defendant to the Income-tax authority promising to file an undertaking and asking for time, the undertaking itself filed by defendants Nos. 1 and 2, the letter of the first defendant asking for still further time and the appeal petition filed by the first defendant against the order of assessment. THE contention is that these documents formed part of the record of the assessment proceeding which under section 54 of the Income-tax Act should be treated as confidential and therefore could not be produced in evidence in the suit. Section 54 (1) says :

(3.) THIS revision is allowed with costs. Advocates fee Rs. 100.