http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7  

PETITIONER: C.I.T. WEST BENGAL - III & ORS. ETC.

       Vs.

RESPONDENT: ORIENTAL RUBBER WORKS ETC.

DATE OF JUDGMENT15/11/1983

BENCH: TULZAPURKAR, V.D. BENCH: TULZAPURKAR, V.D. ERADI, V. BALAKRISHNA (J) MADON, D.P.

CITATION:  1984 AIR  230            1984 SCR  (1) 817  1984 SCC  (1) 700        1983 SCALE  (2)682

ACT:      Income Tax  Act, 1961-  Sec.132- Interpretation of Sub- sec.(1) -Seizure  of books  of  account  and  documents-Sub- sec.(8) retention  of books  beyond 180 days of seizure-Read with sub-secs.  (10) &  (12) -Impose statutory obligation on Revenue to  communicate Commissioner’s approval and recorded reasons of  the authorised  officer to  person entitled  for return   of   books.   Retention   of   books-Without   such communication-unlawful.

HEADNOTE:      The Revenue  who had  seized the  books of  account and documents of  the assessee  under sec.  132(1) of the Income Tax Act,  1961 did not return the same to the assessee after a period  of 180  days of  the seizure. The assessee filed a writ petition  in the  High Court  inter alia  praying for a direction to  the  Revenue  to  return  the  said  books  of account. The  assessee submitted  that the  retention of the seized books  of accounts and documents beyond the period of 180 days  was illegal  and invalid  inasmuch as  neither the approval accorded by the Commissioner of Income Tax for such extended retention  nor the  recorded reasons  of the Income Tax Officer  on which  such  approval  was  based  had  been communicated to  him. A  single Judge of the High Court held that the  retention of  the books  and documents  beyond 180 days was  unlawful. A Division Bench dismissed the Revenue’s appeal. In  these appeals  the Revenue  submitted that  sec. 132(8) of  the Act  did not  impose any  obligation  on  the Revenue to  communicate the  approval of the commissioner or the recorded reason of the Income Tax Officer on which it is based to the person from whose custody the books of accounts and documents had been seized.      Dismissing the appeals, ^      HELD: It  is true  that sub-sec.(8)  of sec. 132 of the Income Tax  Act, 1961  does not  in terms  provide that  the Commissioner’s approval  of the recorded reasons on which it might be  based should  be  communicated  to  the  concerned person but  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 by being kept

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7  

ignorant about the factum of fulfilment of either of the two conditions laid  down therein  it  is  obligatory  upon  the Revenue to  communicate the  Commissioner’s approval as also the recorded reasons to the person concerned. In the absence of such  communication the Commissioner’s decision according his approval will not become effective. [823 H; 824 A]      Moreover, sub-sec.(10)  of  sec.132  confers  upon  the person legally  entitled to  the return  of the seized books and documents a right to object to the 818 approval given  by the  Commissioner  under  sub-sec.(8)  by making an  application to  the Central Board stating therein the reasons  for such  objection and  under sub-sec.(12)  of sec.132 it  is provided  that the  Central Board  may, after giving the applicant an opportunity of being heard pass such orders as  it thinks  fit. It  is obvious  that without  the knowledge of  the factum  of the  Commissioner’s approval as also of  the recorded  reasons on  the basis  of which  such approval has  been obtained  it will not be possible for the person to  whom the seized books or documents belong to make any effective objection to the approval before the Board and get back his books or documents. [824 B-C]      The scheme  of sub-secs  (8), (10)  and (12) of sec.132 makes it amply clear that there is a statutory obligation on the Revenue  to communicate  to  the  person  concerned  not merely the  Commissioner’s approval but the recorded reasons on  which   the  same   has  been  obtained  and  that  such communication must  be made  as  expeditiously  as  possible after  the   passing  of   the  order  of  approval  by  the Commissioner   and    in   default   of   such   expeditious communication any  further retention  of the seized books or documents would  become invalid  and unlawful. It is obvious that such  obligation arises  in regard to every approval of the Commissioner  that might have been accorded from time to time. [824 D-F]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 1652 of 1973.      Appeal by  Special leave  from the  Judgment and  Order dated the  25th June,  1973 of  the Calcutta  High Court  in Appeal No. 233 of 1970.                             WITH              Civil Appeal Nos. 759-760 of 1973      From the Judgment and Order dated the 2nd June, 1972 of the Calcutta  High Court  in Appeal from Original Order Nos. 155 & 158 of 1970.                             AND                 Civil Appeal No. 661 of 1975      From the  Judgment and Order dated the 15th March, 1974 of the Calcutta High Court in Appeal No. 96 of 1972.      V.S. Desai,  B.B. Ahuja  and Miss A. Subhashini for the Appellant, in CA. 1652 of 1973. 819      S.T. Desai,  Miss A.  Subhashini for  the Appellants in CA. Nos. 759-760 of 1973 & 661 of 1975.      Sanjay Bhattacharya,  Rathindas and  K. Kathazarika for the Respondent in CA. No. 1652 of 1973.      V.B. Saharya for the Respondent in CA. No. 759 of 1973.      N.S. Das Behl for the Respondent in CA. No.760 of 1973.      D.N. Mukherjee  for the  Respondent in  CA.  No.661  of 1975.      The Judgment of the Court was delivered by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7  

    TULZAPURKAR, J.  All these  appeals, at the instance of the Commissioner  of Income-tax,  raise  a  common  question whether the  Revenue is  under  a  statutory  obligation  to communicate to  the person  (from  whose  custody  books  of account and  documents have been seized under section 132(1) of the  Income-tax Act, 1961) the approval obtained from the Commissioner of  Income-tax and  the recorded reasons of the Authorised Officer/Income Tax Officer on which such approval is based  for the  retention of  the seized books of account and documents  by the  Department for a period exceeding 180 days from  the date  of seizure  under sec.  132 (8)  of the Income-tax Act, 1961 ?      Since in  all these  appeals the  facts giving  rise to aforesaid question  are almost  similar, it  will suffice to indicate briefly the facts obtaining in M/s. Oriental Rubber Work’s case  (Civil Appeal No. 1652 of 1973). Under a proper authorisation issued in that behalf under sec. 132(1) of the Act, on  17th February,  1965 a  search was conducted by the Income-tax Department in the factory premises at Kantalia as well as  the offices  and  godown  at  Mahatma  Gandhi  Road Calcutta belonging  to the  respondent-assessee and  various books  of   account  and  documents  were  seized  from  the aforesaid  premises.   After  lawfully   carrying  out   the aforesaid search  and seizure,  the respondent-assessee  was given opportunity  to inspect the seized books and documents as also  to make copies of the entries. The concerned Income Tax Officer  then issued a notice to the respondent assessee under  Sec.  142(1)  of  the  Act  in  connection  with  its assessment for  the assessment year 1964-65 and after giving several hearings  which were  attended  by  the  respondent- assessee or  its representative  the assessment for the said year was completed under section 143(3) of 820 the Act  on 5th  February, 1969. Notwithstanding the passing of  such   assessment  order  on  5th  February,  1969,  the respondent-assessee  on   27th  February,   1969  moved  the Calcutta High  Court by  way of a writ under Art. 226 of the Constitution inter  alia praying  (a) for a direction to the Commissioner of  Income-tax  and  the  concerned  Authorized Officer/Income Tax  Officer to  return  forthwith  the  said books of  account,  documents  and  papers  etc.  seized  as aforesaid  and   to  cancel   or  rescind   the  warrant  of authorisation issued  under sec.  132(1) of  the Act and (b) for a  mandamus commanding  the concerned Income Tax Officer not to  proceed with  the assessment for the assessment year 1964-65  until  the  return  of  documents  seized  on  17th February, 1965.  The  main  submission  of  the  respondent- assessee was  that the  retention of  the  seized  books  of account and documents beyond the period of 180 days from the date of  the seizure  (17th February,  1965) was illegal and invalid inasmuch  as neither  the approval  accorded by  the Commissioner of  Income-tax for  such extended retention nor the recorded  reasons of  the Authorized  Officer/Income Tax Officer  on   which  such   approval  was   based  had  been communicated to the respondent/assessee and that without the return of  the seized  books of  account  and  documents  no assessment for  the concerned  assessment year 1964-65 could be proceeded  with or  made. On behalf of the Revenue it was pointed out  that  the  concerned  Income  Tax  Officer  had recorded his reasons seeking approval of the Commissioner of Income-tax for  extended retention  of the  seized books  of account and  documents and  had  obtained  approval  of  the Commissioner of  Income-tax for such extended retention from time to  time and  therefore such  retention of  the  seized books and  documents beyond 180 days was perfectly legal and

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7  

valid that  there was no obligation under sec. 132(8) of the Act to  communicate the  Commissioner’s  approval  for  such extended retention  or the,  recorded reasons  of the Income Tax Officer  therefor to the respondent-assessee and that in any event  due inspection  of the seized books and documents was  afforded  to  the  respondent  assessee  who  was  also permitted to  take copies  of the  entries in  the books and after giving  proper hearing  to the respondent-assessee the assessment for  the year  1964-65 had been validly completed on 5th  February, 1969  long before  the respondent-assessee approached the  Court and  obtained a  Rule Nisi.  A learned Single Judge of the High Court held that the seized books of account and other documents could not be retained beyond the period of 180 days without a complete and effective order of approval for  such extended  retention of the said books and documents and that since the approval of 821 the Commissioner  and the recorded reasons therefore had not been communicated  to the respondent-assessee, the retention of the books and documents beyond 180 days was unlawful. The learned Judge, therefore, ordered the issuance of a mandamus directing the  Commissioner and  the  concerned  Income  Tax Officer to  return all the seized books and documents and he further ordered  that the concerned Income Tax Officer shall be at  liberty to complete the assessment for the year 1964- 65 after  the return  of the  said books  and documents  and after  issuing   afresh  statutory   notices  under  section 142(1)/143(2) of  the  Income-tax  Act  to  the  respondent- assessee. In  rendering the  aforesaid decision, the learned Judge followed  two earlier  decisions of his own High Court in Mahabir  Prasad Poddar’s  case decided  by T. K. Basu, J. and his  own decision  in C.  K. Wadhwa’s case (which is the subject matter  of the companion Civil Appeal No.760 of 1973 before us).  At the  instance of the Commissioner of Income- tax, an  appeal was  preferred to  the Division Bench of the High Court  being Appeal  No. 233  of  1970.  The  self-same contentions were  urged on  behalf of  the  Revenue  in  the appeal and it was specifically submitted that the assessment for the assessment year 1964-65 having been completed on 5th February, 1969  long before  the rule  nisi had been issued, the direction  given by the learned Single Judge with regard to the  liberty to  complete the  assessment  for  the  said assessment year  had become infructuous. The Division Bench, however, negatived  all  the  contentions  a  dismissed  the appeal affirming  all the  directions given  by the  learned trial Judge.  The Revenue  has come  up in  appeal  to  this Court.      Counsel for  the Revenue  urged two points before us in support of  this appeal.  In the  first place,  the  counsel urged that section 132(8) of the Income-tax Act, which deals with  the   extended  retention  of  the  seized  books  and documents in  excess of the period of 180 days from the date of the  seizure  merely  provides  that  for  such  extended retention the  Authorised Officer/the  concerned Income  Tax Officer has  to record his reasons in writing in that behalf and has  to obtain  the  approval  of  the  Commissioner  of Income-tax for  such extended  retention  and  there  is  no obligation imposed  by the  said sub-section  to communicate the approval  of the Commissioner of the recorded reasons of the I.T.O.  on which  it is  based to  the person from whose custody the  books and  documents have been seized or to the person legally  entitled to  such books  and  documents  and therefore the High Court erroneously held that such extended retention  of   the  seized   books  and  documents  without communicating the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7  

822 Commissioner’s approval and the reasons on which it is based was unlawful  or illegal.  Secondly, the  counsel  contended that in  any event  since proper  opportunity to inspect the seized books and documents and to make copies of the entries was given to the respondent/assessee and since after issuing proper  notices   and  giving  hearing  to  the  respondent- assessee, the assessment for the assessment year 1964-65 had been completed  long before  the issuance  of the rule nisi, the same  ought to  have  been  upheld  as  binding  on  the respondent  assessee.  In  other  words,  according  to  the counsel for  the Revenue,  the unauthorised retention of the seized books  and documents  beyond 180  days, if any, could not render the assessment for the year 1964-65 properly made invalid. Counsel  further pointed  out that  the respondent- assessee had  even preferred  appeals to  higher authorities challenging the  said assessment on merits. It may be stated that Counsel  for the  respondent-assessee  in  this  appeal conceded that  in all  the circumstances  of  the  case  the assessment already  made on  5th February,  1969  should  be allowed to  stand subject  of course  to the  result of  the appeals that  have been preferred by the respondent assessee against  it.   In  this  view  of  the  matter,  the  second contention urged  by Counsel  for the Revenue in this appeal has to  be accepted  and the  assessment for  the assessment year 1964-65 made on 5th February, 1969 subject as aforesaid to be  upheld.  That  leaves  for  consideration  the  first contention, which as we have indicated earlier, is common to all the appeals.      In order  to decide the aforesaid contention it will be desirable to  set out  the material provisions of sec.132 of the Act,  namely, sub-secs.(8), (10) and (12) thereof, which run as follows:           "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 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 that the Commissioner shall not authorise      the  retention  of  the  books  of  account  and  other      documents for  a period exceeding thirty days after all      the proceedings  under the  Indian Income-tax Act, 1922      (XI of 1922), or this Act in respect of the years for 823      which the  books of  account  or  other  documents  are      relevant are completed.           (10) If  a person legally entitled to the books of      account or other documents seized under sub-section (1)      or sub-section  (1A) objects  for  any  reason  to  the      approval given  by the  Commissioner under  sub-section      (8), he  may make  an application  to the Board stating      therein the  reasons for  such objection and requesting      for the  return  of  the  books  of  account  or  other      documents.           (12) On  receipt of  the  application  under  sub-      section (10)  the Board may, after giving the applicant      an opportunity  of being  heard, pass such orders as it      thinks fit."      On a  plain reading of the aforesaid provisions it will be clear  that ordinarily  the books  of  account  or  other documents that  may be  seized under an authorisation issued under  sub-sec.(1)   of  sec.132  can  be  retained  by  the authorised officer or the concerned Income-tax officer for a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7  

period of  one hundred  and eighty  days from  the  date  of seizure, whereafter the person from whose custody such books or documents  have been  seized or  the person  to whom such books or  documents belong becomes entitled to the return of the same  unless the  reasons for any extended retention are recorded in  writing by the authorised officer/the concerned Income Tax Officer and approval of the Commissioner for such retention is obtained. In other words two conditions must be fulfilled before such extended retention becomes permissible in law:  (a) reasons  in writing  must be  recorded  by  the authorised  officer  or  the  concerned  Income-tax  Officer seeking the Commissioner’s approval and (b) obtaining of the Commissioner’s approval  for such  extended retention and if either of  these conditions  is not  fulfiled such  extended retention will  become unlawful  and  the  concerned  person (i.e. the  person from whose custody such books or documents have been  seized  or  the  person  to  whom  these  belong) acquires a  right to the return of the same forthwith. It is true that  sub-sec.(8) does  not in  terms provide  that the Commissioner’s approval  or the recorded reasons on which it might be  based should  be  communicated  to  the  concerned person but  in our  view 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 by being kept ignorant  about the  factum of  fulfilment of either of the 824 conditions it  is obligatory upon the Revenue to communicate the Commissioner’s  approval as also the recorded reasons to the person  concerned. In  the absence of such communication the Commissioner’s  decision according his approval will not become effective.      Moreover, sub-sec.(10)  confers upon the person legally entitled to  the return  of the seized books and documents a right to  object to  the approval  given by the Commissioner under sub-sec.(8)  by making  an application  to the Central Board stating  therein the  reasons for  such objection  and under sub-sec.(12)  it is  provided that  the Central  Board may, after  giving the  applicant an  opportunity  of  being heard pass  such orders as it thinks fit. It is obvious that without the  knowledge of  the factum  of the Commissioner’s approval as  also of  the recorded  reasons on  the basis of which such  approval  has  been  obtained  it  will  not  be possible  for  the  person  to  whom  the  seized  books  or documents belong  to make  any effective  objection  to  the approval  before  the  Board  and  get  back  his  books  or documents. In our view the scheme of sub-secs. (8), (10) and (12) of  sec.132 makes  it  amply  clear  that  there  is  a statutory obligation  on the  Revenue to  communicate to the person concerned  not merely the Commissioner’s approval but the recorded reasons on which the same has been obtained and that such  communication must  be made  as expeditiously  as possible after  the passing  of the order of approval by the Commissioner   and    in   default   of   such   expeditious communicating any  further retention  of the seized books or documents would  become invalid  and unlawful. It is obvious that such  obligation arises  in regard to every approval of the Commissioner  that might have been accorded from time to time.      In the  result the  orders passed  by  the  High  Court directing the  return of  the seized  books of  account  and documents to  the respondents  in each  of the  appeals  are confirmed and  the appeals  (subject to the directions given below in  two of  them) are  dismissed with  no order  as to costs.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7  

    In Civil  Appeal No.1652  of 1973  the assessment order passed on 5th February, 1969 is upheld subject to the result of the  appeals that  may have been preferred against it. In Civil  Appeal  No.661  of  1975  it  is  directed  that  the assessment orders  passed for the concerned assessment years would be  subject to the appeals already preferred if any or such as  might be  preferred in accordance with law, against the same. H.S.K.                                    Appeals dismissed. 825