2000 (9) TMI 55 - HC - Income Tax

Summary

Issues Involved:
1. Release of assets, books of account, and documents seized during a search operation.
2. Quashing of the transfer order of the petitioner's case.
3. Legality of continued retention of books of account and documents beyond 180 days under Section 132(8) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Release of Assets, Books of Account, and Documents Seized:
The petitioner sought the release of assets, books of account, and documents seized by the Income-tax Department during a search operation on May 21, 1998. The court noted that the F.D.Rs. seized during the search operation had already been released in compliance with a court order dated February 23, 2000. The primary issue remaining was the legality of the continued retention of the books of account and other documents.

2. Quashing of the Transfer Order:
The petitioner also challenged the transfer of its case from the Joint Commissioner of Income-tax, Special Range-II, Chandigarh, to the Joint Commissioner of Income-tax, Special Range-I, Chandigarh, vide order dated June 11, 1999. The court observed that the Commissioner of Income-tax, Chandigarh, had already canceled this transfer order on July 26/28, 1999, rendering this issue moot.

3. Legality of Continued Retention of Books of Account and Documents Beyond 180 Days:
The petitioner argued that the retention of the books of account and documents beyond 180 days was in violation of Section 132(8) of the Income-tax Act, 1961, as interpreted by the Supreme Court in CIT v. Oriental Rubber Works [1984] 145 ITR 477. The petitioner contended that no approval for extended retention had been granted by the Commissioner, and no communication to this effect had been sent, making the retention illegal.

The respondents countered by stating that the retention was approved by the Commissioner of Income-tax (Central), Ludhiana, on November 16, 1998, and that the approval was communicated to the petitioner on September 23, 1999. The respondents also raised an objection to the maintainability of the writ petition, arguing that a previous writ petition on similar grounds had been disposed of by the High Court.

The court examined the relevant provisions of Section 132(8) and (10) of the Income-tax Act, 1961, and the legal precedents set by the Supreme Court and various High Courts. The court emphasized the necessity of communicating the approval for extended retention and the reasons for such retention to the concerned person. The court cited the Supreme Court's ruling in Oriental Rubber Works, which mandates that the approval and recorded reasons must be communicated to the person concerned as expeditiously as possible.

The court concluded that the long time-gap between the alleged approval by the Commissioner and its communication to the petitioner (over ten months) rendered the retention of the documents illegal. Consequently, the court directed the Income-tax Department to release the books of account and other documents seized on May 21, 1998, within one month of the presentation of a certified copy of the court's order. The court allowed the Department to retain photostat copies of the documents after getting them signed by the petitioner's representative, who would certify them as true copies. The petitioner was also directed to make the original documents available as and when required by the competent authority or any court.