Wp(C)/12849/2021 Of Udaya Sounds v. The Principal Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMAS THURSDAY, THE 24 DAY OF MARCH 2022 / 3RD CHAITHRA, 1944 WP(C) NO. 12849 OF 2021 PETITIONER: UDAYA SOUNDS PULLEPPADY, CHITTOOR ROAD, KOCHI-682035, REPRESENTED BY ITS MANAGING PARTNER, K.K.YOUSUF, RESIDING IN KARUVELITHUNDIL HOUSE, LISSIE HOSPITAL ROAD, SOUTH END, ERNAKULAM-682018.BY ADVS.SRI.K.I.MAYANKUTTY MATHERSRI.R.JAIKRISHNA SMT.UTHARA ASOKAN RESPONDENTS: 1THE PRINCIPAL COMMISSIONER OF INCOME TAXCENTRAL REVENUE BUILDING, IS PRESS ROAD, ERNAKULAM NORTH P.O., KOCHI-682018.CENTRAL REVENUE BUILDING, IS PRESS ROAD, ERNAKULAM NORTH P.O., KOCHI-682018. ERNAKULAM NORTH P.O., 2ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-1, CENTRAL REVENUE BUILDING, IS PRESS ROAD, ERNAKULAM NORTH P.O., KOCHI-682018.BY ADVS. SRI.P.K.RAVINDRANATHA MENON (SR.)JOSE JOSEPH, SC, FOR INCOME TAX W.P.(C) No.12849/21 -:2:- THIS WRIT PETITION (CIVIL) HAVING COME UP FORADMISSION ON 24.02.2022, THE COURT ON 24.03.2022 DELIVEREDTHE FOLLOWING: W.P.(C) No.12849/21 “C.R.” BECHU KURIAN THOMAS, J. -------------------------------- W.P.(C) No.12849 of 2021 -------------------------------- Dated this the 24[th] day of March, 2021 JUDGMENT Title deeds of the petitioner are retained by the Income Tax department under the colour of a search and seizure for thelast more than twenty-two years. Alleging that the retention ofthe said documents are contrary to law, petitioner hasapproached this Court seeking directions to return the originalsof seven documents of title. 2. On 19-12-2001, a search was conducted in the businessplace as well as in the residence of the Managing Partner of thepetitioner under section 132 of the Income Tax Act, 1961 (forshort, 'the Act'). During the search, title deeds were seized bythe Income Tax Officers. Consequent to the search and seizure,block assessment proceedings for the period 01-04-1995 to19-12-2001 were launched against the petitioner as per section W.P.(C) No.12849/21 -:4:- 158BC of the Act. On 31-12-2003, the assessment proceedingswere completed reckoning undisclosed income in the hands ofthe assessee. On appeal, the quantum of undisclosed incomewas reduced, thereby allowing the appeal in part. The secondappeal preferred by the revenue ended in dismissal, while thatfiled 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 Courtdirected the assessing officer to refix the undisclosed income at25% of the originally assessed figure. Petitioner has preferred aSpecial Leave Petition before the Supreme Court and it is stillpending. 3. In the meantime, petitioner alleges that though no orderhas been recorded by any of the officers as contemplated undersection 132(8) of the Act, still, the respondents are retaining theseized documents of title for periods beyond 30 days withoutauthority of law. Despite repeated requests of the petitioner andeven after several representations, no response could be elicitedfrom the respondents and the documents of title continued toremain with the respondents. In such circumstances, a petitionwas filed as Ext.P7, seeking a direction to release the originals of W.P.(C) No.12849/21 -:5:- the seven documents. Thereafter, an application was filed under the Right to Information Act, 2005, in which a reply was giventhat the documents are retained due to proceedings pendingbefore the Supreme Court. Since petitioner could not obtainrelease of the title deeds, this writ petition was preferred seekinga direction to release/return the originals of the seizeddocuments or to compel the respondents to take a decision onthe representations filed by the petitioner seeking release of thedocuments. 4. A statement was filed by the respondents contending W.P.(C) No.12849/21 -:5:- the seven documents. Thereafter, an application was filed under the Right to Information Act, 2005, in which a reply was giventhat the documents are retained due to proceedings pendingbefore the Supreme Court. Since petitioner could not obtainrelease of the title deeds, this writ petition was preferred seekinga direction to release/return the originals of the seizeddocuments or to compel the respondents to take a decision onthe representations filed by the petitioner seeking release of thedocuments. 4. A statement was filed by the respondents contending that as per the provisions of section 132(8) of the Act, thedocuments seized by the Department can be retained beyond 30days, if the reasons for retaining the documents are recorded bythe assessing officer and the same is approved by the PrincipalChief Commissioner/Chief Commissioner or other officersmentioned in the said provision. It was further pleaded that asper order dated 26-02-2021, the Principal Commissioner ofIncome Tax had accorded permission to retain theseizedmaterial till 28-02-2022 and that the special leave petitionpreferred by the petitioner is still pending before the Supreme Court and hence the assessment proceedings had not becomefinal. 5. After the statement was filed by the respondents,petitioner amended the writ petition and challenge was raisedagainst the order permitting retention of documents up to28-02-2022. Petitioner pleaded that the order permittingretention of documents were never communicated and noproceedings under the Act are pending, warranting continuedretention of the documents by the respondents. It was alsopleaded that the mandatory DIN (Document IdentificationNumber) is glaringly absent in the records produced by therespondent which rendered such communication invalid. 6. Subsequent to the amendment, an additional statementwas filed by the second respondent pleading that the ordersdirecting retention of the documents were communicated to thepetitioner and also that the tax liability of the petitioner has notattained finality. 7. I have heard Adv.Uthara Asokan, learned counsel for thepetitioner and Sri.Jose Joseph, learned Standing Counsel for therespondents. W.P.(C) No.12849/21 8. Adv.Uthara Ashokan contended that, as per the provisions of section 132(8) of the Act, the documents seizedduring a search and seizure can be retained by the Departmentonly for a period beyond 30 days from the date of order ofassessment under section 158BC of the Act, unless, the reasonsfor retaining the same are recorded in writing and the approvalof any of the officers mentioned in the sub-section is obtained.According to the learned counsel, since the order of assessmentis dated 31-12-2003, the seized documents could not have beenretained by the respondents beyond 31-01-2004. The learnedcounsel further pointed out that, the authorisation to retaindocuments cannot under any circumstances continue beyond 30days after all proceedings under the Act are completed asspecified 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 periodspecified in section 132(8) of the Act were ever communicated tothe petitioner and further, that, even if Ext.P13 is assumed to beissued, the same was beyond the jurisdiction of the PrincipalCommissioner of Income Tax. The learned counsel contended W.P.(C) No.12849/21 -:8:- 9. According to Adv.Uthara Asokan, none of the orders permitting retention of the documents beyond the periodspecified in section 132(8) of the Act were ever communicated tothe petitioner and further, that, even if Ext.P13 is assumed to beissued, the same was beyond the jurisdiction of the PrincipalCommissioner of Income Tax. The learned counsel contended W.P.(C) No.12849/21 -:8:- that the impugned order Ext.P13 does not even bear thesignature of the Principal Commissioner of Income Tax apartfrom it having never been communicated to the petitioner. Thelearned counsel further argued that the document produced asExt.P13 is issued 17 years after the date prescribed undersection 132(8) of the Act and the authenticity of the document isdoubted due to the absence of the document identificationnumber (DIN), which is mandatory as per Ext.P10 Circular dated14-08-2019. The learned counsel further contended that theseized documents were never utilised or even referred to in theblock assessment proceedings and indicating that the saiddocuments were not required for the department to pursue anyfurther proceedings against the assessee. She relied upon thedecision in Joshi P. Mathew v. Deputy Commissioner ofIncome Tax, Ernakulam and Another (2013 (1) KHC 288). 10. Sri.Jose Joseph, the learned Standing Counsel for therespondents contended that approval for detention of documentswas granted by the authorised officer and hence the contentionto the contrary had no basis. The learned Standing Counselfurther submitted that, though proceedings under the Act had W.P.(C) No.12849/21 -:9:- already been completed, since the assessee had preferredSpecial Leave Petition before the Supreme Court, therespondents were justified in authorising the retention ofdocuments. 11. While appreciating the rival contentions, it is necessary to advert to the statutory provisions. Section 132(8) of the Actreads as below: “S.132(8). The books of account or other documentsseized under sub-section (1) or sub-section (1A) shallnot be retained by the authorised officer for a periodexceeding 30 days from the date of the order ofassessment under section 153A or clause (c) of section158BC unless the reasons for retaining the same arerecorded by him in writing and the approval of thePrincipal Chief Commissioner or Chief Commissioner,Principal Commissioner or Commissioner, PrincipalDirector-General or Director-General or Principal Directoror Director for such retention is obtained: Provided that the Principal Chief Commissioner orChief Commissioner, Principal Commissioner orCommissioner, Principal Director-General or Director-General or Principal Director or Director shall notauthorise the retention of the books of account and otherdocuments for a period exceeding 30 days after all theproceedings under the Indian Income-tax Act, 1922 (11of 1922) or this Act in respect of the years for which thebooks of account or other documents are relevant arecompleted.” 12. The above statutory provision mandates that the books of accounts or other documents seized during a search and W.P.(C) No.12849/21 seizure cannot be retained beyond 30 days from the date of theorder of assessment under section 153A or section 158BC of theAct, without recording reasons in writing by the officers specifiedtherein.The statute further mandates that retention of thedocuments shall not be authorised beyond 30 days afterproceedings under the Income Tax Act, 1961 are completed. 13. Title deeds are the choicest of possessions of anowner since ownership of property and its absolute dominion arereflected in the possession of such deeds. When the owner isdenuded of its choicest possession, under the facade of statutoryprescriptions, such provisions must scrupulously be adhered to. of accounts or other documents seized during a search and W.P.(C) No.12849/21 seizure cannot be retained beyond 30 days from the date of theorder of assessment under section 153A or section 158BC of theAct, without recording reasons in writing by the officers specifiedtherein.The statute further mandates that retention of thedocuments shall not be authorised beyond 30 days afterproceedings under the Income Tax Act, 1961 are completed. 13. Title deeds are the choicest of possessions of anowner since ownership of property and its absolute dominion arereflected in the possession of such deeds. When the owner isdenuded of its choicest possession, under the facade of statutoryprescriptions, such provisions must scrupulously be adhered to. 14. Section 158BC of the Act provides for the procedurefor block assessment. In the instant case, admittedly the orderunder section 158BC was issued on 31-12-2003. Therefore, therespondents are bound to adhere to the provisions strictly andsubstantiate that, reasons were recorded by the authorisedofficer to retain the documents and the approval for suchretention was also obtained from the officers mentioned in thesub-section. 15. However except for a statement that as per the W.P.(C) No.12849/21 -:11:- impugned order dated 26-02-2021, the Principal Commissionerof Income Tax-I, Kochi had approved the continued retention ofthe books of account and other documents impounded/seized upto 28-02-2022, and further that on earlier occasions, thePrincipal Commissioner of Income Tax-I, Kochi approved thecontinued retention of books of account and other documentsfrom time to time, nothing is produced to substantiate thatorders were issued permitting continued retention. Thoughdetails of earlier orders passed under section 132(8) werementioned in a tabular column as below, the same does notsatisfy the requirment of strict adherence to the statutoryprescriptions. The tabular column provided was as follows: 16. Further, except for mentioning that the copies of theearlier orders under section 132 have all been duly dispatched tothe assessee either through the office of the PrincipalCommissioner of Income Tax or through the assessing officer, W.P.(C) No.12849/21 -:12:- there is nothing on record to substantiate such an averment.The manner in which the orders were dispatched to the assesseehas not been specified nor has the acknowledgements producedfor consideration of this Court. Thus there is nothing on recordto assume that orders were issued directing continued retentionof 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 tocommunicate the orders to the assessee to enable retention ofdocuments beyond 30 days’ period specified in section 132(8) ofthe Act. In the decision in CIT, West Bengal-III and Others v.Oriental Rubber Works [(1984) 1 SCC 700], the SupremeCourt held that though sub-section (8) of Section 132 of the Actdoes not in terms provide that the approval or the recordedreasons on which the retention is based should be communicatedto the concerned person, since the person concerned is bound tobe materially prejudiced in the enforcement of his right to havesuch books and documents returned to him being kept ignorantabout the factum of fulfillment of either of the conditions, it wasobligatory upon the revenue to communicate the Commissioner’s W.P.(C) No.12849/21 -:13:- 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. W.P.(C) No.12849/21 -:13:- 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 thedecision in Joshi P. Mathew v. Deputy Commissioner ofIncome Tax, Ernakulam and Another (2013 (1) KHC 288),held that non-communication of the orders recording the reasonsand the grant of approval to the assessee renders the retentionof the documents beyond 30 days of completion of theassessment as illegal. 19. Thus, there was a bounden duty upon the Departmentto establish that the orders recording the reasons and grant ofapproval were communicated to the assessee. No suchcommunication has been produced for consideration of thisCourt. Except for vague averments, that too, in the form of astatement instead of an affidavit, that orders werecommunicated to the assessee, nothing has been produced toconvincingly prove that the orders for retention werecommunicated to the petitioner. In such a view of the matter,retention of documents beyond 30 days of the order of W.P.(C) No.12849/21 -:14:- assessment is illegal. 20. Even otherwise, the statute confers authority to grant authorisation for retaining the documents beyond the order ofassessment only till the proceedings under the Act is completed.The word “proceedings under this Act” is a clear indication thatthe power of the officers empowered to grant authorisation isavailable only till the statutory proceedings are completed. Oncethe statutory proceedings are completed, the authorities underthe statute are denuded of the power to grant furtherauthorisation. 21. The word proceeding is a term of wide importance andit includes the original proceedings as well as the appellateproceedings as it is trite law that an appeal is a continuation ofthe original proceedings (see the decision in State of TamilNadu and Others v. S. Subramaniam [(1996) 7 SCC 509]. Inthe context in which the word ‘proceedings’ appear in section132(8), it can be held to be used in a very comprehensive senseto include even revisional proceedings, provided the same isinvoked under the statutory provisions of the Income Tax Act.Thus an assessment proceeding, appellate proceeding, and even W.P.(C) No.12849/21 -:15:- revisional proceeding are all “proceedings under this Act”. 22. The proceedings under this Act expired by the disposalof the appeal by this Court, as evidenced by Ext.P4 judgmentdated 08-01-2010. Thereafter, no proceedings under this Act arein existence. On the contrary, the special leave petition havingbeen filed under Article 136 of the Constitution of India cannotbe regarded as a proceeding under this Act. As a taxing statute,strict interpretation is to be adopted and that being so, recourseby the assessee to the provisions of the Constitution by filing aspecial leave petition before the Supreme Court cannot beregarded as 'a proceeding under this Act'. Thus by the disposalof the appeal filed before the High Court in I.T.A. No.819 of 2009and I.T.A. No.1326 of 2009, the statutory authority lost its powerto grant further authorisation to retain the documents.Therefore, even on this count, the respondents are notauthorised or justified in retaining the documents of title seizedby them under section 132 of the Act. 23. In view of the above, the petitioner is entitled tosucceed in this writ petition. Accordingly, while quashing Ext.P13proceedings issued by the first respondent, this Court directs the W.P.(C) No.12849/21 -:16:- 23. In view of the above, the petitioner is entitled tosucceed in this writ petition. Accordingly, while quashing Ext.P13proceedings issued by the first respondent, this Court directs the W.P.(C) No.12849/21 -:16:- first and second respondents to return to the petitioner theoriginals of document No. 2126/2000, document No. 2498/2000,document No.1152/2000, document No.1689/1997, documentNo.1688/1997, document No.1242/1997 and documentNo.432/1997, all executed before the Sub-Registrar’s Office,Ernakulam, as expeditiously as possible, at any rate, within aperiod of 30 days from the date of receipt of a copy of thisjudgment. The writ petition is allowed as above. Sd/- vps BECHU KURIAN THOMAS JUDGE Corrigendum Dated 30.03.2022 The words “Dated this the 24[th] day of March, 2021” in theheader of the judgment shall be read as “Dated this the 24[th] day ofMarch, 2022”. Sd/- vps BECHU KURIAN THOMAS JUDGE W.P.(C) No.12849/21 -:17:- APPENDIX OF WP(C) 12849/2021 W.P.(C) No.12849/21 -:18:- K.K. YOUSUF EXHIBIT P13TRUE COPY OF THE PROCEEDINGS OF THE 1STRESPONDENT. RESPONDENT'S/S' EXHIBITSANN.R2(A)TRUE COPY OF THE COMMUNICATION DATED 12-03-2021