2022 (6) TMI 243 - HC - Income Tax

Survey proceedings - documents impounded under Section 131(3) - Power to retain documents of title impounded/seized by them under Section 131(3) - HELD THAT - The document in question was seized on 17.02.2010. The respondent has no case that petitioner has any liability in respect of the assessment years prior to 2009-10. The learned Standing Counsel for the Income Tax Department fairly conceded that there is no provision under the Act to retain the documents of title as security for any tax liability that may arise in the future. In the absence of any such statutory provision, the respondents cannot retain documents of title impounded/seized by them under Section 131(3) of the Act. Apart from the above, under Section 131(3) of the Act, the documents impounded can be retained in the custody of the respondents beyond 15 days only after obtaining approval of the Principal Chief Commissioner or other officers named in the said subsection. There is no case for the respondents that any such approval had been obtained by the department from any of the officers mentioned in Section 131(3) of the Act. Therefore the respondents cannot under any circumstances retain the documents of title of the petitioner. Respondents have acted illegally and with material irregularity in retaining the documents of title belonging to the petitioner. Accordingly, the respondents are directed to return the original Sale Deed bearing No.3561/2008 executed before the Sub Registrar's office, Ernakulam to the petitioner within an outer period of 30 days from the date of receipt of a copy of this judgment.

Summary

Issues:
Petitioner seeking return of original document impounded under Section 131(3) of the Income Tax Act, 1961. Allegation of respondents not returning the impounded documents. Dispute over outstanding tax amount and its relation to the retention of impounded documents. Legal arguments regarding the legality of retaining documents as security for future tax liabilities. Compliance with procedural requirements under Section 131(3) for retaining impounded documents beyond 15 days.

Analysis:

1. The petitioner sought the return of the original document of title impounded under Section 131(3) of the Income Tax Act, 1961. The petitioner alleged that despite clearing all income tax dues in the year 2010, the respondents did not return the impounded documents, causing undue delay and inconvenience. The petitioner argued that the continued retention of the documents was illegal and contrary to the principles of equality enshrined under Article 14 of the Constitution of India.

2. The respondents, in their statement, acknowledged that the document was initially misplaced due to repeated shifting of Assessing Officers but was later traced. They contended that an outstanding amount against the firm, in which the petitioner was a partner, needed to be settled before releasing the impounded documents. The respondents justified the retention of documents as necessary to safeguard the revenue's interests, citing substantial tax arrears due from the firm.

3. The petitioner, in response, asserted that all tax liabilities had been cleared, including fines and penalties, and highlighted that the firm in question was wound up in 2012. The petitioner argued that there was no legal provision allowing the retention of documents of title as security for alleged amounts due, especially after the tax liability had been settled.

4. The Court, after hearing arguments from both parties, examined the legal provisions under Section 131(3) of the Act. It was observed that there was no provision to retain documents of title as security for future tax liabilities. Additionally, it was noted that documents could only be retained beyond 15 days with the approval of designated officers, which the respondents failed to obtain in this case.

5. Referring to a previous decision, the Court emphasized the obligation on the department to communicate orders to the assessee for retaining documents beyond the specified period. The Court concluded that the respondents had acted illegally and with material irregularity in retaining the documents. Consequently, the Court directed the respondents to return the original Sale Deed to the petitioner within 30 days from the date of the judgment.

6. The judgment, allowing the Writ Petition, highlighted the illegal actions of the respondents in withholding the impounded documents and mandated the return of the specific document to the petitioner within the specified timeframe, emphasizing compliance with legal provisions and procedural requirements under the Income Tax Act.

This comprehensive analysis of the judgment provides a detailed overview of the issues involved, the arguments presented by both parties, and the Court's reasoning leading to the final decision.