UNION OF INDIA Vs. SHEO SHANKER SITARAM

JUDGEMENT

(1.) THE petition under Article 226 of the Constitution of India has been filed by the Union, of India, the Commissioner of Income-tax, Lucknow, and the Income-tax Officer, Allahabad. It is directed against an order of the Income-tax Appellate Tribunal by which it rejected the claim of privilege raised by the petitioners under Section 124 of the Evidence Act in regard to the production, of certain documents and files.

(2.) THE respondent is the assessee-firm. It carries on business in betel-nuts, etc., at Allahabad. On 21st September, 1964, the income-tax department searched the business and residential premises of the assessee-firm and its partners, and seized certain papers. THE respondent's case is that in order to avoid litigation and loss of reputation and with a view to purchase peace with the department the partners of the firm offered to be assessed on agreed quantums on the basis of materials obtained by the department as a result of the search. THE partners approached the Income-tax Officer, Allahabad, as well as the Inspecting Assistant Commissioner, Varanasi. THE parties held conferences and a settlement was reached. THE departmental authorities assured that no penal action would be taken. This assurance helped the settlement. THE assessee's case is that in the course of settlement proceedings the Income-tax Officer prepared a draft assessment order for the assessment years 1959-60 to 1964-65, on 17th February, 1965, and forwarded it to the Inspecting Assistant Commissioner. THE agreed figures of income for these assessment years were approved by the Commissioner. On 5th March, 1965, the Inspecting Assistant Commissioner drew up a formal order in which it was directed that penalty proceedings would be dropped. He sent this letter to the Commissioner of Income-tax for his approval. Ultimately, the assessee was assessed for these years on the basis of figures agreed to between the parties. In due course the Income-tax Officer drew up penalty proceedings for these years. After hearing the assessee the Income-tax Officer imposed penalties upon it for the aforesaid assessment years. THE assessee went up in appeal but failed. It then filed an appeal before the Tribunal.

(3.) IN response the Finance Secretary filed an affidavit dated 7th March, 1972, claiming privilege in regard to certain notings and files of his Ministry under Section 123 of the Evidence Act on the ground that these are unpublished records in relation to the affairs of the State and that their disclosure will cause injury to public interest. The Tribunal upheld this claim and rejected the prayer for summoning these documents. Learned counsel for the respondent did not challenge this finding before us.