1988 (2) TMI 17 - HC - Income Tax

Summary

Issues Involved:
1. Legality of retention of seized account books beyond 180 days without Commissioner's approval.
2. Legality of taking and retaining photostat copies of seized books beyond 180 days.
3. Whether the petitioners can be directed to attest the photostat copies.

Issue-wise Detailed Analysis:

1. Legality of Retention of Seized Account Books Beyond 180 Days Without Commissioner's Approval:
The petitioners argued that the retention of the account books beyond 180 days without the Commissioner's approval was illegal under sub-section (8) of section 132 of the Income-tax Act, 1961. The court agreed with the petitioners, stating that the respondents had no legal right to retain the seized books of account for more than 180 days without obtaining the Commissioner's approval. The respondents conceded to this point, and the court had already directed the respondents to return the books and papers seized on January 15, 1987.

2. Legality of Taking and Retaining Photostat Copies of Seized Books Beyond 180 Days:
The petitioners contended that the retention of photostat copies of the seized books beyond 180 days was equally illegal. The court examined whether sub-section (8) of section 132 or any other provision in the Act prohibited making copies/extracts from the books seized after the expiry of 180 days but before their return. The court concluded that sub-section (8) merely created a limitation for retaining the account books and did not impose a statutory limitation for making or retaining copies/extracts from the seized books. The court emphasized that the right of retention of copies should not be mixed up with their admissibility as evidence under the Evidence Act, which is not applicable to income-tax proceedings. The court cited the Supreme Court's decision in Dr. Pratap Singh v. Director of Enforcement, Foreign Exchange Regulation Act [1985] 155 ITR 166, where it was held that evidence collected during an illegal search could still be used in assessment proceedings.

3. Whether the Petitioners Can Be Directed to Attest the Photostat Copies:
The court addressed the issue of whether a writ of mandamus could be issued against the respondents directing them to return the photostat copies and whether the petitioners could be directed to attest the photostat copies. The court found no inherent disability or illegality in the Department obtaining copies of account books after 180 days, even though no order of extension had been obtained from the Commissioner. The court held that the Department could retain photostat copies of the seized books for use in assessment proceedings, as there was no statutory limitation for making or retaining copies. However, the court did not find it necessary to appoint an advocate commissioner to attest the copies, as the petitioners were directed to attest the photostat copies themselves.

Separate Judgment by R. M. Sahai J.:
R. M. Sahai J. disagreed with the view that the Department could obtain photostat copies of account books after the expiry of 180 days without the Commissioner's approval. He emphasized that the retention of account books beyond 180 days without approval was invalid and unlawful, as held in CIT v. Oriental Rubber Works [1984] 145 ITR 477 (SC). He argued that the exercise of power to obtain copies depended on the existence of the power to retain the books, which ceased after 180 days. Therefore, he concluded that the Department could not obtain photostat copies after 180 days and directed the return of the account books forthwith, with the petitioners attesting the photostat copies of diaries made within 180 days.

Separate Judgment by K. C. Agrawal J.:
K. C. Agrawal J. agreed with the view that the retention of account books beyond 180 days without the Commissioner's approval was illegal. He also agreed that photostat copies obtained after 180 days were not returnable and no mandamus could be issued to the Revenue in this regard. However, he found no legal authority for directing the petitioners to attest the photostat copies or extracts taken by the Department. He emphasized the importance of the Department obtaining the Commissioner's approval within the stipulated time and suggested that the Central Government investigate the lapse.

Conclusion:
The court concluded that the retention of seized account books beyond 180 days without the Commissioner's approval was illegal and directed their return. The court allowed the retention of photostat copies for use in assessment proceedings but did not mandate the appointment of an advocate commissioner for attestation. The judgments highlighted the importance of adhering to statutory limitations and the admissibility of evidence collected during an illegal search.