Wp(C)/620/2012 Of Joshi P.mathew v. The Deputy Commissioner Of Income Tax Central Circle-I

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC WEDNESDAY, THE 5TH DAY OF DECEMBER 2012/14TH AGRAHAYANA 1934 WP(C).No. 620 of 2012 (B) ------------------------------------ PETITIONER(S): ------------------------ JOSHI P.MATHEW, AGED 36 YEARS PANTHAMPLACKAL HOUSE, KIZHAKKAMBALAM BY ADV. SRI.RAMESH CHERIAN JOHN RESPONDENT(S): -------------------------- 1. THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-I ERNAKULAM - 682018 CENTRAL CIRCLE-I ERNAKULAM - 682018 2. COMMISSIONER OF INCOME TAX(APPEALS)-I SANJUAN TOWERS, OLD RAILWAY STATION ROAD ERNAKULAM NORTH-682018 OLD RAILWAY STATION ROAD ERNAKULAM NORTH-682018 3. THE COMMISSIONER OF INCOME TAX (CENTRAL) KOCHI-682016 KOCHI-682016 R1 TO R3 BY ADV. SRI. JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 05-12-2012, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 620 of 2012 (B) APPENDIX PETITIONER(S) EXHIBITS :- EXHIBIT P1: COPY OF THE PANCHANAMA WITH LIST OF INVENTORY. EXHIBIT P2: COPY OF THE PANCHANAMA. EXHIBIT P3: COPY OF THE PANCHANAMA WITH LIST OF INVENTORY. EXHIBIT P4: COPY OF THE ORDER U/s. 153 A READ WITH 143(3) OF THE ACT DATED 28/12/2009 FOR THE ASSESSMENT YEAR 2002-03.DATED 28/12/2009 FOR THE ASSESSMENT YEAR 2002-03. EXHIBIT P5: COPY OF THE ORDER U/s. 153 A READ WITH 143(3) OF THE ACT DATED28/12/2009 FOR THE ASSESSMENT YEAR 2003-04.28/12/2009 FOR THE ASSESSMENT YEAR 2003-04. EXHIBIT P6: COPY OF THE ORDER U/s. 153 A READ WITH 143(3) OF THE ACT DATED 28/12/2009 FOR THE ASSESSMENT YEAR 2004-05.DATED 28/12/2009 FOR THE ASSESSMENT YEAR 2004-05. EXHIBIT P7: COPY OF THE ORDER U/s. 153 A READ WITH 143(3) OF THE ACT DATED 28/12/2009 FOR THE ASSESSMENT YEAR 2005-06.DATED 28/12/2009 FOR THE ASSESSMENT YEAR 2005-06. EXHIBIT P8: COPY OF THE ORDER U/s. 153 A READ WITH 143(3) OF THE ACT DATED 28/12/2009 FOR THE ASSESSMENT YEAR 2006-07.DATED 28/12/2009 FOR THE ASSESSMENT YEAR 2006-07. EXHIBIT P9: COPY OF THE ORDER U/s. 153 A READ WITH 143(3) OF THE ACT DATED 28/12/2009 FOR THE ASSESSMENT YEAR 2007-08.DATED 28/12/2009 FOR THE ASSESSMENT YEAR 2007-08. EXHIBIT P10: COPY OF THE LETTER DATE 16/12/2011. EXHIBIT P11: COPY OF THE LETTER DATED 20/12/2011. EXHIBIT P12: COPY OF THE INTERIM ORDER IN WP(C) NO. 346655/2011 DATED 22/11/2011.22/11/2011. EXHIBIT P13: COPY OF THE LETTER DATED 26/12/2011. EXHIBIT P14: COPY OF THE LETTER DATED 26/12/2011. EXHIBIT P15: COPY OF THE COVERING LETTER DATED 28/12/2011 ISSUED BY THE 1ST RESPONDENT. 1ST RESPONDENT. EXHIBIT P16: COPY OF THE ORDER OF THE 3RD RESPONDENT DATED 18/03/2011. EXHIBIT P17: COPY OF THE JUDGMENT IN WPC.NO. 34869/2008(A) DATED 19/08/2009. 19/08/2009. DCS WP(C).No. 620 of 2012 (B) RESPONDENTS EXHIBITS ' :- EXHIBIT R1(A): COPY OF THE SATISFACTION RECORDED BY THE ASSESSING OFFICER DATED 18.01.2010 OFFICER DATED 18.01.2010 EXHIBIT R1(B): COPY OF THE APPROVAL OF THE COMMISSIONER OF INCOME TAX, DATED 22.01.2010 TAX, DATED 22.01.2010 EXHIBIT R1(C): COPY OF THE PROCEEDINGS DATED 10.02.2012 EXHIBIT R1(D): COPY OF THE PROCEEDINGS OF THE COMMISSIONER OF THE INCOME TAX (CENTRAL) DATED 13.03.2012 INCOME TAX (CENTRAL) DATED 13.03.2012 EXHIBIT R1(E): COPY OF THE LETTER DATED 24.04.2012 EXHIBIT R1(F): DETAILS OF THE COPIES TAKEN FROM THE SEIZED RECORDS BY THE ASSESSEES OF THIS GROUP THE ASSESSEES OF THIS GROUP /TRUE COPY/ P.A TO JUDGE DCS ANTONY DOMINIC,J -------------------------------- W.P.(C)No.620 of 2012 ------------------------------------- Dated this the 05[th] day of December, 2012 JUDGMENT The petitioner is an assessee under the Income Tax EXHIBIT R1(B): COPY OF THE APPROVAL OF THE COMMISSIONER OF INCOME TAX, DATED 22.01.2010 TAX, DATED 22.01.2010 EXHIBIT R1(C): COPY OF THE PROCEEDINGS DATED 10.02.2012 EXHIBIT R1(D): COPY OF THE PROCEEDINGS OF THE COMMISSIONER OF THE INCOME TAX (CENTRAL) DATED 13.03.2012 INCOME TAX (CENTRAL) DATED 13.03.2012 EXHIBIT R1(E): COPY OF THE LETTER DATED 24.04.2012 EXHIBIT R1(F): DETAILS OF THE COPIES TAKEN FROM THE SEIZED RECORDS BY THE ASSESSEES OF THIS GROUP THE ASSESSEES OF THIS GROUP /TRUE COPY/ P.A TO JUDGE DCS ANTONY DOMINIC,J -------------------------------- W.P.(C)No.620 of 2012 ------------------------------------- Dated this the 05[th] day of December, 2012 JUDGMENT The petitioner is an assessee under the Income Tax Act. A search under Section 132 of the Act was conductedin his business and residential premises on 10.01.2008 and11.01.2008. During the search, certain documents wereseized as per Exts.P1 to P3 mahazars. Subsequently,assessment was completed under Section 153A of the Actfor the years 2002-2003 to 2007-2008 and Exts.P4 to P9assessment orders were issued on 28.12.2009. Thepetitioner is prosecuting his grievances regarding theassessment orders before the statutory forums. 2. Seeking to return documents seized as per Exts.P1 to P3 mahazars, the petitioner submitted Ext.P14application dated 26.12.2011. Immediately thereafter, hereceived Ext.P15 letter dated 28.12.2011 from the first W.P.(C).No.620 of 20112 respondent enclosing Ext.P16, by which, on account ofthe pendency of appeal and penalty proceedings, approvalwas granted by the third respondent for the continuedretention of the documents upto 31.03.2012 or for periodof 30 days after all the proceedings under the Act arecompleted, whichever is earlier. On receipt of Exts.P15and P16, this writ petition was filed relying on Section 132(8) of the Income Tax Act and seeking an order requiringthe respondents to return the documents seized as perExts.P1 to P3 Mahazars. 3. A statement has been filed on behalf of therespondents. Along with the statement, they haveproduced as Ext.R1(a), the request made by the firstrespondent seeking approval of the third respondentunder Section 132(8) of the Act for the continuedretention of the documents seized. This document isdated 18.01.2010. They have also produced Ext.R1(b),the proceedings of the third respondent dated 22.01.2010 W.P.(C).No.620 of 20112 whereby the approval has been granted as sought for inExt.R1(a) till 31.03.2011 or for a period not exceeding 30days after the termination proceedings under the IncomeTax Act, whichever is earlier. 4. Relying on Exts.R1(a) and R1(b), it is contended that the first respondent having recorded the reasons forthe continued retention of the documents and obtainedapproval of the third respondent, the petitioner is notentitled to have the documents returned to him. It is alsostated that on the expiry of the period mentioned inExt.R1((b), by Ext.P16 and later by Ext.R1(d) approval forretaining the documents till 31.03.2013 or for a periodnot exceeding 30 days after the termination of theproceedings under the Income Tax Act, whichever isearlier, have been granted by the third respondent. 5. The entitlement of the petitioner for return of thedocuments will have to be decided in the light of Section132(8) of the Act which reads thus: “The books of account or otherdocuments seized under sub-section(1) shallnot be retained by the authorised officer for aperiod exceeding (thirty days from the date ofthe order of assessment(under Section 153Aor clause(c) of section 158BC)) unless thereasons for retaining the same are recordedby him in writing and the approval of the(Chief Commissioner, Commissioner, DirectorGeneral or Director) for such retention isobtained: 5. The entitlement of the petitioner for return of thedocuments will have to be decided in the light of Section132(8) of the Act which reads thus: “The books of account or otherdocuments seized under sub-section(1) shallnot be retained by the authorised officer for aperiod exceeding (thirty days from the date ofthe order of assessment(under Section 153Aor clause(c) of section 158BC)) unless thereasons for retaining the same are recordedby him in writing and the approval of the(Chief Commissioner, Commissioner, DirectorGeneral or Director) for such retention isobtained: Provided that the (Chief Commissioner,Commissioner, Director General or Director)shall not authorise the retention of the booksor account and other documents for a periodexceeding thirty days after all the proceedingsunder the Indian Income Tax Act, 1922(11 of1922), or this Act in respect of the years forwhich the books of account or otherdocuments are relevant are completed.” 6. As per this provision, the books of account seized under sub-section (1) shall not be retained by theAuthorized Officer for a period exceeding thirty days from W.P.(C).No.620 of 20112 the date of order of assessment passed under Section153A. However, this Section enables retention of theseized documents beyond the aforesaid period, if theAuthorised Officer records in writing his reasons for thesame and the approval of the Chief Commissioner,Director General or Director, as the case may be, forsuch retention is obtained. Relying on these provisions ofthe Act it was contended by the learned standing counselfor the respondents that reasons were recorded and thatby Ext.R1(b) approval was obtained within the 30 daysperiod specified in the Section. According to him, thesubsequent orders, viz., Ext.P16 and R1(d) were issuedextending the period also. On this basis, the counselcontended that the petitioner is not entitled to the reliefsought for. 7. However, the counsel for the petitioner contendedthat the respondents not only had the obligation to recordthe reasons and obtain approval, but also had the W.P.(C).No.620 of 20112 : 6 : obligation to communicate within the 30 days periodthose reasons and the approval to the petitioner. Insupport of this contention, learned counsel for thepetitioner relied on the Apex Court judgment in CentralIncome Tax v. Oriental Rubber Works(SC) (1984145 ITR 477). This judgment was rendered in thecontext of Section 132(8) as it stood prior to theamendment in 2002 and the relevant portion of thejudgment reads thus: “4. In order to decide the aforesaid contention it will be desirable to set out thematerial provisions of Section 132 of the Act,namely, sub-secs. (8), (10) (12) thereof,which run as follows: "132 (8) The books of account or otherdocuments seized under sub-section (1) orsub-section (1A) shall not be retained by theauthorised officer for a period exceeding onehundred and eighty days from the date of theseizure unless the reasons for retaining thesame are recorded by him in writing and theapproval of the Commissioner for such retention is obtained: Provided that the Commissioner shallnot authorise the retention of the books ofaccount and other documents for a periodexceeding thirty days after all theproceedings under the Indian Income-tax Act,1922 (XI of 1922), or this Act in respect ofthe years for which the books of account orother documents are relevant are completed. (10) If a person legally entitled to thebooks of account or other documents seizedunder sub-section (1) or sub-section (1A)objects for any reason to the approval givenby the Commissioner under sub-section(8),he may make an application to the Boardstating therein the reasons for such objectionand requesting for the return of the books ofaccount or other documents. retention is obtained: Provided that the Commissioner shallnot authorise the retention of the books ofaccount and other documents for a periodexceeding thirty days after all theproceedings under the Indian Income-tax Act,1922 (XI of 1922), or this Act in respect ofthe years for which the books of account orother documents are relevant are completed. (10) If a person legally entitled to thebooks of account or other documents seizedunder sub-section (1) or sub-section (1A)objects for any reason to the approval givenby the Commissioner under sub-section(8),he may make an application to the Boardstating therein the reasons for such objectionand requesting for the return of the books ofaccount or other documents. (12) On receipt of the application undersub-section (10) the Board ... may, aftergiving the applicant an opportunity of beingheard, pass such orders as it thinks fit." On a plain reading of the aforesaidprovisions it will be clear that ordinarily thebooks of account or other documents thatmay be seized under an authorisation issued under sub-section (1) of Section 132 can beretained by the authorised officer or theconcerned Income-tax Officer for a period ofone hundred and eighty days from the date ofseizure, whereafter the person from whosecustody such books or documents have beenseized or the person to whom such books ordocuments belong becomes entitled to thereturn of the same unless the reasons for anyextended retention are recorded in writing bythe authorized officer/the concerned Income-tax Officer and approval of the Commissionerfor such retention is obtained. In other wordstwo conditions must be fulfilled before suchextended retention becomes permissible inlaw: (a) reasons in writing must be recordedby the authorised officer or the concernedIncome-tactOfficerseekingtheCommissioner's approval and (b) obtaining ofthe Commissioner's approval for suchextended retention and if either of theseconditions is not fulfilled such extendedretention will become unlawful and theconcerned person (i. e. the person fromwhose custody such books or documentshave been seized or the person to whom those belong) acquires a right to the return ofthe same forthwith. It is true that sub-section(8) does not in terms provide that theCommissioner's approval or the recordedreasons on which, it might be based shouldbe communicated to the concerned personbut in our view since the person concerned isbound to be materially prejudiced in theenforcement of his right to have such booksand documents returned to him by being keptignorant about the factum of fulfilment ofeither of the conditions it is obligatory upontheRevenuetocommunicatetheCommissioner's approval as also the recordedreasons to the person concerned. In theabsence of such communication theCommissioner's decision according hisapproval will not become effective. Moreover, sub-section (10) confersupon the person legally entitled to the returnof the seized books and documents a right toobject to the approval given by theCommissioner under sub-section (8) bymaking an application to the Central Boardstating therein the reasons for such objectionand under sub-section (12) it is provided that Moreover, sub-section (10) confersupon the person legally entitled to the returnof the seized books and documents a right toobject to the approval given by theCommissioner under sub-section (8) bymaking an application to the Central Boardstating therein the reasons for such objectionand under sub-section (12) it is provided that the Central Board may, after giving theapplicant an opportunity of being heard, passsuch orders as it thinks fit. It is obvious thatwithout the knowledge of the factum of theCommissioner's approval as also of therecorded reasons on the basis of which suchapproval has been obtained it will not bepossible for the person to whom the seizedbooks or documents belong to make anyeffective objection to the approval before theBoard and get back his books or documents.In our view the scheme of sub-sections (8),(10) and (12) of Section 132 makes it amplyclear that there is a statutory obligation onthe Revenue to communicate to the personconcerned not merely the Commissioner'sapproval but the recorded reasons on whichthe same has been obtained and that suchcommunicationmustbemadeasexpeditiously as possible after the passing ofthe order of approval by the Commissionerand in default of such expeditiouscommunication any further retention of theseized books or documents would becomeinvalid and unlawful. It is obvious that suchobligation arises in regard to every approval of the Commissioner that might have beenaccorded from time to time. 8. Although, learned counsel for the Revenue attempted to persuade me not to rely on this judgmentfor the reasons that the Section was substantiallymodified by an amendment, a close perusal of theprovision as it stood prior to the amendment and as itstands now, show that there is no substantial differenceatleast insofar as this case is concerned. Both under theunamended provision and the amended provision, theobligation to record reasons and to obtain the approval ofthe Commissioner for retention of the documents beyondthe permissible period is provided in identical terms. It isinterpreting this provision which is similar in all receiptsthat the Apex Court has held that within the periodspecified in the Section the reasons should not only berecorded and the approval obtained, but also that itshould be communicated to the assessee. In this case W.P.(C).No.620 of 20112 even the respondents have no case that Exts.R1(a) or (b) were communicated to the assessee. If that be so, therequirement of Section 132(8) is not satisfied and inwhich event, the retention of the documents beyond 30days period of completion of the assessment was illegal. 9. For that reason, the petitioner is entitled tosucceed. The writ petition is therefore, disposed ofdirecting the respondents to return the documents seizedfrom the petitioner under Exts.P1 to P3 mahazars. Thisshall be done as expeditiously as possible, at any rate,within four weeks of receipt of a copy of this judgment. Needless to say that this judgment shall not preventthe respondents from retaining the copies of thedocuments. Writ petition is disposed of as above. Sd/- ANTONY DOMINIC, JUDGE