1985 (1) TMI 47 - HC - Income Tax

Summary

Issues Involved:
1. Legality of retention of impounded account books and documents beyond 15 days without the approval of the Commissioner.
2. Requirement of communication of the Commissioner's approval to the petitioner.
3. Validity of ex post facto approval by the Commissioner.
4. Entitlement of the petitioner to certified copies of Daily Collection Reports (DCRs) and deposition of the Assistant Commercial Tax Officer (A.C.T.O.).

Detailed Analysis:

1. Legality of Retention Beyond 15 Days Without Approval:
The primary issue was whether the Inspectors of Income-tax could legally retain the impounded account books and documents beyond the prescribed period of 15 days without the Commissioner's approval under Section 131(3) of the Income Tax Act, 1961. The court emphasized that the retention of books beyond 15 days without the Commissioner's approval is illegal and unauthorized. The statutory provision mandates that the Income-tax Officer (ITO) must obtain the Commissioner's approval within the 15-day period, failing which the retention becomes unlawful. The court referenced the Supreme Court decision in CIT v. Oriental Rubber Works [1984] 145 ITR 477 (SC) to support this conclusion.

2. Requirement of Communication of Approval:
The second issue was whether the approval of the Commissioner needed to be communicated to the petitioner. The court held that while obtaining approval within 15 days is mandatory, communicating this approval to the petitioner within the same period is not obligatory. However, it is desirable for the ITO to inform the petitioner that such approval has been obtained. The court clarified that the petitioner has no statutory right to file objections under Section 131(3), unlike under Section 132(10). Therefore, non-communication of the approval does not vitiate the proceedings, but the petitioner can seek information regarding the approval.

3. Validity of Ex Post Facto Approval:
The third issue was whether the approval of the Commissioner could be granted ex post facto, i.e., after the expiry of the 15-day period. The court ruled that ex post facto approval is not valid. It must be a "prior approval" as mandated by the statute. The court again referred to the Supreme Court's reasoning in Oriental Rubber Works' case, which emphasized that statutory conditions must be fulfilled before extended retention becomes permissible. The court also cited rulings from other High Courts, including Hyderabad Vanaspathi Ltd. v. ITO [1985] 152 ITR 1 (AP), which supported the view that ex post facto approval is invalid.

4. Entitlement to Certified Copies of DCRs and Deposition:
The final issue was the petitioner's entitlement to certified copies of the Daily Collection Reports (DCRs) seized by the sales tax authorities and the deposition of the A.C.T.O. The court directed that in the interests of justice and fair play, the respondent should furnish the certified copy of the A.C.T.O.'s deposition and the substance of the DCRs seized from the distributors by the entertainment tax authorities. This directive ensures that the petitioner has access to necessary documents for the assessment proceedings.

Conclusion:
The writ petition was allowed to the extent that the retention of the impounded books beyond 15 days without the Commissioner's prior approval was declared illegal. The court directed the return of the books to the petitioner and ordered the respondent to provide the certified copy of the A.C.T.O.'s deposition and the substance of the DCRs. No order as to costs was made.