1970 (5) TMI 6 - SC - Income Tax

Search on September 21 and 22 1964 and the documents were retained till May 1966 i.e. for a period of 19 months - validity of the search - HC hold that CIT and ITO acted beyond the legitimate scope of section 132 - order recorded by the High Court must be sustained on the ground that the documents taken possession were retained without authority of law for a period exceeding 180 days contrary to the terms of section 132(8) - revenue appeal dismissed

Summary

Issues:
1. Validity of search conducted by income-tax authorities under section 132 of the Income-tax Act, 1961.
2. Legitimacy of the seizure of documents and books of account during the search.
3. Compliance with the statutory requirements for retention of seized documents.
4. Interpretation of section 132(8) of the Income-tax Act, 1961 regarding the retention period of seized documents.

Analysis:

Issue 1: Validity of search
The case involved a Hindu undivided family engaged in money-lending and various businesses. The Income-tax Officer conducted a search on the premises of the assessee based on an authorisation by the Commissioner of Income-tax. The High Court found that the search was indiscriminate and beyond the legitimate scope of section 132 of the Income-tax Act, 1961, as it covered a broader period than initially specified. The High Court relied on a previous judgment to support its conclusion.

Issue 2: Legitimacy of seizure
The High Court observed that the raid resulted in the seizure of a large number of documents, including some that were irrelevant for assessment purposes. It was noted that the Income-tax Officers failed to place marks of identification on the seized documents as required. The High Court concluded that the actions of the income-tax authorities constituted an abuse of power under section 132 of the Act.

Issue 3: Compliance with retention requirements
The High Court highlighted two crucial points: first, the search authorisation period exceeded the notice period provided to the assessee, and second, the Income-tax Officer retained the seized books of account for more than 180 days, contrary to the statutory provision of section 132(8). The retention of documents beyond the specified period without recording reasons and obtaining approval from the Commissioner was deemed unlawful.

Issue 4: Interpretation of section 132(8)
The Court emphasized that the retention of seized documents for over 180 days without compliance with the statutory requirements was in violation of the law. The Solicitor-General argued that the failure to produce evidence regarding the retention of documents after 180 days was not raised as an issue before the High Court. However, the Court held that the non-compliance with the statutory provisions was sufficient to sustain the High Court's order to release the documents.

In conclusion, the Supreme Court upheld the High Court's decision, dismissing the appeal and emphasizing the importance of adhering to the statutory provisions governing the search, seizure, and retention of documents under the Income-tax Act, 1961.