Law Web: Can the Income Tax department refuse to release documents to the assessee if SLP is pending Supreme court?

Even otherwise, the statute confers authority to grant

authorisation for retaining the documents beyond the order of

assessment only till the proceedings under the Act is completed.

The word “proceedings under this Act” is a clear indication that

the power of the officers empowered to grant authorisation is

available only till the statutory proceedings are completed. Once

the statutory proceedings are completed, the authorities under

the statute are denuded of the power to grant further

authorisation. {Para 20}

21. The word proceeding is a term of wide importance and

it includes the original proceedings as well as the appellate

proceedings as it is trite law that an appeal is a continuation of

the original proceedings (see the decision in State of Tamil

Nadu and Others v. S. Subramaniam [(1996) 7 SCC 509]. In

the context in which the word ‘proceedings’ appear in section

132(8), it can be held to be used in a very comprehensive sense

to include even revisional proceedings, provided the same is

invoked under the statutory provisions of the Income Tax Act.

Thus an assessment proceeding, appellate proceeding, and even

revisional proceeding are all “proceedings under this Act”.

22. The proceedings under this Act expired by the disposal

of the appeal by this Court, as evidenced by Ext.P4 judgment

dated 08-01-2010. Thereafter, no proceedings under this Act are

in existence. On the contrary, the special leave petition having

been filed under Article 136 of the Constitution of India cannot

be regarded as a proceeding under this Act. As a taxing statute,

strict interpretation is to be adopted and that being so, recourse

by the assessee to the provisions of the Constitution by filing a

special leave petition before the Supreme Court cannot be

regarded as 'a proceeding under this Act'. Thus by the disposal

of the appeal filed before the High Court in I.T.A. No.819 of 2009

and I.T.A. No.1326 of 2009, the statutory authority lost its power

to grant further authorisation to retain the documents.

Therefore, even on this count, the respondents are not

authorised or justified in retaining the documents of title seized

by them under section 132 of the Act.

IN THE HIGH COURT OF KERALA AT ERNAKULAM

WP(C) NO. 12849 OF 2021

UDAYA SOUNDS Vs THE PRINCIPAL COMMISSIONER OF INCOME TAX

PRESENT

MR. JUSTICE BECHU KURIAN THOMAS

24TH DAY OF MARCH 2022

Title deeds of the petitioner are retained by the Income

Tax department under the colour of a search and seizure for the

last more than twenty-two years. Alleging that the retention of

the said documents are contrary to law, petitioner has

approached this Court seeking directions to return the originals

of seven documents of title.

2. On 19-12-2001, a search was conducted in the business

place as well as in the residence of the Managing Partner of the

petitioner under section 132 of the Income Tax Act, 1961 (for

short, 'the Act'). During the search, title deeds were seized by

the Income Tax Officers. Consequent to the search and seizure,

block assessment proceedings for the period 01-04-1995 to

19-12-2001 were launched against the petitioner as per section

158BC of the Act. On 31-12-2003, the assessment proceedings

were completed reckoning undisclosed income in the hands of

the assessee. On appeal, the quantum of undisclosed income

was reduced, thereby allowing the appeal in part. The second

appeal preferred by the revenue ended in dismissal, while that

filed by the assessee was partly allowed. On appeal to this Court,

in I.T.A. No.819 of 2009 and I.T.A. No. 1326 of 2009, this Court

directed the assessing officer to refix the undisclosed income at

25% of the originally assessed figure. Petitioner has preferred a

Special Leave Petition before the Supreme Court and it is still

pending.

3. In the meantime, petitioner alleges that though no order

has been recorded by any of the officers as contemplated under

section 132(8) of the Act, still, the respondents are retaining the

seized documents of title for periods beyond 30 days without

authority of law. Despite repeated requests of the petitioner and

even after several representations, no response could be elicited

from the respondents and the documents of title continued to

remain with the respondents. In such circumstances, a petition

was filed as Ext.P7, seeking a direction to release the originals of

the seven documents. Thereafter, an application was filed under

the Right to Information Act, 2005, in which a reply was given

that the documents are retained due to proceedings pending

before the Supreme Court. Since petitioner could not obtain

release of the title deeds, this writ petition was preferred seeking

a direction to release/return the originals of the seized

documents or to compel the respondents to take a decision on

the representations filed by the petitioner seeking release of the

documents.

4. A statement was filed by the respondents contending

that as per the provisions of section 132(8) of the Act, the

documents seized by the Department can be retained beyond 30

days, if the reasons for retaining the documents are recorded by

the assessing officer and the same is approved by the Principal

Chief Commissioner/Chief Commissioner or other officers

mentioned in the said provision. It was further pleaded that as

per order dated 26-02-2021, the Principal Commissioner of

Income Tax had accorded permission to retain the seized

material till 28-02-2022 and that the special leave petition

preferred by the petitioner is still pending before the Supreme

Court and hence the assessment proceedings had not become

final.

5. After the statement was filed by the respondents,

petitioner amended the writ petition and challenge was raised

against the order permitting retention of documents up to

28-02-2022. Petitioner pleaded that the order permitting

retention of documents were never communicated and no

proceedings under the Act are pending, warranting continued

retention of the documents by the respondents. It was also

pleaded that the mandatory DIN (Document Identification

Number) is glaringly absent in the records produced by the

respondent which rendered such communication invalid.

6. Subsequent to the amendment, an additional statement

was filed by the second respondent pleading that the orders

directing retention of the documents were communicated to the

petitioner and also that the tax liability of the petitioner has not

attained finality.

7. I have heard Adv.Uthara Asokan, learned counsel for the

petitioner and Sri.Jose Joseph, learned Standing Counsel for the

respondents.

8. Adv.Uthara Ashokan contended that, as per the

provisions of section 132(8) of the Act, the documents seized

during a search and seizure can be retained by the Department

only for a period beyond 30 days from the date of order of

assessment under section 158BC of the Act, unless, the reasons

for retaining the same are recorded in writing and the approval

of any of the officers mentioned in the sub-section is obtained.

According to the learned counsel, since the order of assessment

is dated 31-12-2003, the seized documents could not have been

retained by the respondents beyond 31-01-2004. The learned

counsel further pointed out that, the authorisation to retain

documents cannot under any circumstances continue beyond 30

days after all proceedings under the Act are completed as

specified in the proviso to section 138(8) of the Act.

9. According to Adv.Uthara Asokan, none of the orders

permitting retention of the documents beyond the period

specified in section 132(8) of the Act were ever communicated to

the petitioner and further, that, even if Ext.P13 is assumed to be

issued, the same was beyond the jurisdiction of the Principal

Commissioner of Income Tax. The learned counsel contended

that the impugned order Ext.P13 does not even bear the

signature of the Principal Commissioner of Income Tax apart

from it having never been communicated to the petitioner. The

learned counsel further argued that the document produced as

Ext.P13 is issued 17 years after the date prescribed under

section 132(8) of the Act and the authenticity of the document is

doubted due to the absence of the document identification

number (DIN), which is mandatory as per Ext.P10 Circular dated

14-08-2019. The learned counsel further contended that the

seized documents were never utilised or even referred to in the

block assessment proceedings and indicating that the said

documents were not required for the department to pursue any

further proceedings against the assessee. She relied upon the

decision in Joshi P. Mathew v. Deputy Commissioner of

Income Tax, Ernakulam and Another (2013 (1) KHC 288).

10. Sri.Jose Joseph, the learned Standing Counsel for the

respondents contended that approval for detention of documents

was granted by the authorised officer and hence the contention

to the contrary had no basis. The learned Standing Counsel

further submitted that, though proceedings under the Act had

already been completed, since the assessee had preferred

Special Leave Petition before the Supreme Court, the

respondents were justified in authorising the retention of

documents.

11. While appreciating the rival contentions, it is necessary

to advert to the statutory provisions. Section 132(8) of the Act

reads as below:

“S.132(8). The books of account or other documents

seized under sub-section (1) or sub-section (1A) shall

not be retained by the authorised officer for a period

exceeding 30 days from the date of the order of

assessment under section 153A or clause (c) of section

158BC unless the reasons for retaining the same are

recorded by him in writing and the approval of the

Principal Chief Commissioner or Chief Commissioner,

Principal Commissioner or Commissioner, Principal

Director-General or Director-General or Principal Director

or Director for such retention is obtained:

Provided that the Principal Chief Commissioner or

Chief Commissioner, Principal Commissioner or

Commissioner, Principal Director-General or Director-

General or Principal Director or Director shall not

authorise the retention of the books of account and other

documents for a period exceeding 30 days after all the

proceedings under the Indian Income-tax Act, 1922 (11

of 1922) or this Act in respect of the years for which the

books of account or other documents are relevant are

completed.”

12. The above statutory provision mandates that the books

of accounts or other documents seized during a search and

seizure cannot be retained beyond 30 days from the date of the

order of assessment under section 153A or section 158BC of the

Act, without recording reasons in writing by the officers specified

therein. The statute further mandates that retention of the

documents shall not be authorised beyond 30 days after

proceedings under the Income Tax Act, 1961 are completed.

13. Title deeds are the choicest of possessions of an

owner since ownership of property and its absolute dominion are

reflected in the possession of such deeds. When the owner is

denuded of its choicest possession, under the facade of statutory

prescriptions, such provisions must scrupulously be adhered to.

14. Section 158BC of the Act provides for the procedure

for block assessment. In the instant case, admittedly the order

under section 158BC was issued on 31-12-2003. Therefore, the

respondents are bound to adhere to the provisions strictly and

substantiate that, reasons were recorded by the authorised

officer to retain the documents and the approval for such

retention was also obtained from the officers mentioned in the

sub-section.

15. However except for a statement that as per the

impugned order dated 26-02-2021, the Principal Commissioner

of Income Tax-I, Kochi had approved the continued retention of

the books of account and other documents impounded/seized up

to 28-02-2022, and further that on earlier occasions, the

Principal Commissioner of Income Tax-I, Kochi approved the

continued retention of books of account and other documents

from time to time, nothing is produced to substantiate that

orders were issued permitting continued retention. Though

details of earlier orders passed under section 132(8) were

mentioned in a tabular column as below, the same does not

satisfy the requirment of strict adherence to the statutory

prescriptions. The tabular column provided was as follows:

Item No. Order u/s. Dated Retention upto

1 132(8) 31-03-2017 28-02-2018

2 132(8) 26-02-2018 28-02-2018

3 132(8) 27-02-2017 28-02-2020

4 132(8) 26-02-2020 28-02-2021

16. Further, except for mentioning that the copies of the

earlier orders under section 132 have all been duly dispatched to

the assessee either through the office of the Principal

Commissioner of Income Tax or through the assessing officer,

there is nothing on record to substantiate such an averment.

The manner in which the orders were dispatched to the assessee

has not been specified nor has the acknowledgements produced

for consideration of this Court. Thus there is nothing on record

to assume that orders were issued directing continued retention

of the documents from the date of the order under section 158-

BC of the Act, till 2018.

17. There is an added obligation upon the Department to

communicate the orders to the assessee to enable retention of

documents beyond 30 days’ period specified in section 132(8) of

the Act. In the decision in CIT, West Bengal-III and Others v.

Oriental Rubber Works [(1984) 1 SCC 700], the Supreme

Court held that though sub-section (8) of Section 132 of the Act

does not in terms provide that the approval or the recorded

reasons on which the retention is based should be communicated

to the concerned person, since the person concerned is bound to

be materially prejudiced in the enforcement of his right to have

such books and documents returned to him being kept ignorant

about the factum of fulfillment of either of the conditions, it was

obligatory upon the revenue to communicate the Commissioner’s

approval as also the recorded reasons to the person concerned.

It was further held that in the absence of such communication,

the order granting approval will not become effective.

18. A learned Single Judge of this Court also had, in the

decision in Joshi P. Mathew v. Deputy Commissioner of

Income Tax, Ernakulam and Another (2013 (1) KHC 288),

held that non-communication of the orders recording the reasons

and the grant of approval to the assessee renders the retention

of the documents beyond 30 days of completion of the

assessment as illegal.

19. Thus, there was a bounden duty upon the Department

to establish that the orders recording the reasons and grant of

approval were communicated to the assessee. No such

communication has been produced for consideration of this

Court. Except for vague averments, that too, in the form of a

statement instead of an affidavit, that orders were

communicated to the assessee, nothing has been produced to

convincingly prove that the orders for retention were

communicated to the petitioner. In such a view of the matter,

retention of documents beyond 30 days of the order of

assessment is illegal.

20. Even otherwise, the statute confers authority to grant