1975 (7) TMI 56 - HC - Income Tax

Summary

Issues Involved:
1. Admissibility of income-tax returns and assessment orders as evidence.
2. The effect of the omission of Section 137 of the Income-tax Act, 1961.
3. Application of Section 6 of the General Clauses Act, 1897.
4. The scope and interpretation of Section 138 of the Income-tax Act, 1961.
5. The role of the Commissioner of Income-tax in disclosing information.

Detailed Analysis:

1. Admissibility of Income-tax Returns and Assessment Orders as Evidence:
The plaintiffs in a partition suit sought to introduce income-tax returns and assessment orders from 1956-57 to 1970-71 as evidence. The defendants objected, arguing that these documents could not be proved by P.W. 1, who was not a party to them, and that the proper procedure would be to summon the Income-tax Officer or a subordinate to prove the documents. The trial court overruled the objection, holding that once the original documents were produced by the income-tax department, they could be marked as exhibits without further proof. This decision was challenged, leading to the revision petition.

2. The Effect of the Omission of Section 137 of the Income-tax Act, 1961:
Section 137, which replaced Section 54 of the Indian Income-tax Act, 1922, prohibited the disclosure of information contained in income-tax returns and assessment orders. This section was omitted by the Finance Act, 1964. The omission of Section 137 was interpreted by the court to mean that the previous embargo on courts from summoning such records was lifted. The court concluded that the omission of Section 137 indicated that the legislature intended to remove the prohibition against courts requiring the production of assessment records.

3. Application of Section 6 of the General Clauses Act, 1897:
The learned Advocate-General argued that the prohibition contained in Section 137 still applied to returns and assessment orders prior to 1964 due to Section 6(c) of the General Clauses Act, which states that the repeal of an enactment shall not affect any right, privilege, obligation, or liability acquired under the repealed enactment. The court, however, distinguished between "repeal" and "omission," citing the Supreme Court's ruling in Rayala Corporation (P.) Ltd. v. Director of Enforcement, which held that Section 6 of the General Clauses Act does not apply to omissions. Consequently, the privilege against disclosure was considered to have been taken away prospectively from April 1, 1964.

4. The Scope and Interpretation of Section 138 of the Income-tax Act, 1961:
Section 138, as amended, allows the Commissioner of Income-tax to disclose information relating to any assessee if it is in the public interest. The court examined whether this provision implied that courts could not summon assessment records directly. The court concluded that the omission of Section 137 and the recasting of Section 138 did not imply a continued prohibition against courts summoning such records. The court held that the provisions of the Evidence Act now apply in full, allowing courts to summon records if justified by the circumstances and in accordance with the Evidence Act.

5. The Role of the Commissioner of Income-tax in Disclosing Information:
The court distinguished between the Commissioner's power to furnish information under Section 138(1)(b) and the court's power to summon records. The court held that Section 138(1)(b) is limited to applications made by individuals seeking information and does not extend to court summonses. The court rejected the argument that the Commissioner could decide whether to comply with a court's summons based on public interest considerations.

Conclusion:
The court upheld the trial court's decision to summon income-tax records for the period after April 1, 1964, as they were no longer considered confidential and could be admitted as evidence. However, the court held that records relating to assessment years up to April 1, 1964, remained confidential and could not be summoned. The court also affirmed that income-tax records are public documents and do not require further proof once produced by the income-tax department. The civil revision petition was dismissed to the extent that it challenged the admissibility of records after April 1, 1964, with each party bearing its own costs.