Case: Commissioner Of Income-Tax Vs. Jawahar Lal Rastogi

Seth Brothers, (1969) 74 ITR 836 = (AIR 1970 SC 292 ) and on the account the judgment under appeal is liable to be set aside. In Seth Brothers case, (1969) 74 ITR 836 = (AIR 1970 SC 292 ) this Court examined the scheme of S. 132 in some detail and observed:"The condition for entry into and making search of any building or place is the reason to believe that any books of account or other documents which will be useful for, or relevant to, any proceeding under the Act may he found. If the Officer has reason to believe that any books of account or other documents would be useful for, or relevant to, any proceedings under the Act, he is authorised by law to seize those books of account or other documents, and to place marks of identification therein, to make extracts or copies therefrom and also to make a note or an inventory of any articles or other things found in the course of the search. Since by the exercise of the power a serious invasion is made upon the rights, privacy and freedom of the taxpayer, the power must be exercised strictly in accordance with the law and only for the purposes for which the law authorises it to be exercised x x x x x If the conditions for exercise of the power are not satisfied the proceeding is liable to be quashed, x x xThe Act and the Rules do not require that the warrant of authorisation should specify the particulars of documents and books of account a general authorisation to search for and seize documents and books of account relevant to or useful for any proceeding complies with the requirements of the Act and the Rules. It is for the officer making the search to exercise his judgment and seize or not to seize any documents or books of account. x x x xThe aggrieved party may undoubtedly move a competent court for an order releasing the documents seized. In such a proceeding the Officer who has made the search will be called upon to prove how the documents seized are likely to be useful for or relevant to a proceeding under the Act. If he is unable to do so, the court may order that those documents be released. But the circumstance that a large number of documents seized is not a ground for holding that all documents seized are irrelevant or the action of the officer is mala fide."It must, however, be stated that the findings that the action of the Commissioner of Income-tax and the Income-tax Officer amounted to "indiscriminate search" and was beyond the "legitimate scope of S. 132" depends upon the evidence in each case and no general rule can be laid down in that behalf.6. In the present case the High Court has noticed two important circumstances: (1) that whereas the notice dated September 14, 1964, required the assessee to furnish statements relating to the four assessment years ending on March 31, 1960,the Commissioner of Income-tax authorised search for a period of nine assessment years even before the period fixed by the notice had expired;and (2) that contrary to the plain terms of Section 132 (8) the Income-tax Officer retained with him the books of account for a period exceeding 180 days.7. Section 132 (2) as in force on the date on which the search and seizure took place stood as follows:"The books of account or other documents seized under sub-section (1) shall not be retained by the Inspecting Assistant Commissioner or the Income-tax 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 Commissioner for such retention is obtained:Provided x x x"By the Finance Act of 1965, sub-section (2) was re-enacted as sub-s. (8) with the modification that for the words "Inspecting Assistant Commissioner or the Income-tax Officer" the words "authorised officer" be substituted.8. In the present case the premises of the assessee were searched on September 21 and 22, 1964, and the documents were retained till May 1966, i.e. for a period of 19 months. Our attention has not been invited to any order of the authorities recording reasons for retaining the documents seized after the expiry of 180 days, nor is there any approval of the Commissioner for retaining such documents. The retention of the documents without complying with the requirements of the statute after expiry of the period of 180 days would be plainly contrary to law.9. The Solicitor-General said that it was not urged before the High Court that because the authorised officer did not record reasons and the Commissioner did not approve the retention of the documents after 180 days, the revenue authorities were bound to release the documents. Counsel submitted that failure to produce evidence on a matter nor put in issue may not be regarded as a ground in support of an order releasing documents. But the High Court has found that the documents seized during the raid were detained by the authorised officer for 19 months before the application was filed. If it was the case of the Department that detention of the documents after the expiry of 180 days was supported by good and adequate reasons recorded by the Income-tax Officer and the approval of the Commissioner as required by the Act was obtained, such record of reasons and approval would have been tendered in evidence. It cannot be said that the attention of the parties was not directed to the circumstance that the Income-tax Officer had failed to comply with the requirements of the Act.10.The order recorded by the High Court must be sustained on the ground that the documents taken possession of were retained without authority of law for a period exceeding 180 days contrary to the terms of Section 132 (8) as amended by the Income-tax (Amendment) Act, 1965.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]6. In the present case the High Court has noticed two important circumstances: (1) that whereas the notice dated September 14, 1964, required the assessee to furnish statements relating to the four assessment years ending on March 31, 1960,the Commissioner of Income-tax authorised search for a period of nine assessment years even before the period fixed by the notice had expired;and (2) that contrary to the plain terms of Section 132 (8) the Income-tax Officer retained with him the books of account for a period exceeding 180 days.In the present case the premises of the assessee were searched on September 21 and 22, 1964, and the documents were retained till May 1966, i.e. for a period of 19 months. Our attention has not been invited to any order of the authorities recording reasons for retaining the documents seized after the expiry of 180 days, nor is there any approval of the Commissioner for retaining such documents. The retention of the documents without complying with the requirements of the statute after expiry of the period of 180 days would be plainly contrary to law.9. The Solicitor-General said that it was not urged before the High Court that because the authorised officer did not record reasons and the Commissioner did not approve the retention of the documents after 180 days, the revenue authorities were bound to release the documents. Counsel submitted that failure to produce evidence on a matter nor put in issue may not be regarded as a ground in support of an order releasing documents. But the High Court has found that the documents seized during the raid were detained by the authorised officer for 19 months before the application was filed. If it was the case of the Department that detention of the documents after the expiry of 180 days was supported by good and adequate reasons recorded by the Income-tax Officer and the approval of the Commissioner as required by the Act was obtained, such record of reasons and approval would have been tendered in evidence. It cannot be said that the attention of the parties was not directed to the circumstance that the Income-tax Officer had failed to comply with the requirements of theorder recorded by the High Court must be sustained on the ground that the documents taken possession of were retained without authority of law for a period exceeding 180 days contrary to the terms of Section 132 (8) as amended by the Income-tax (Amendment) Act, 1965.