2022 (3) TMI 1358 - HC - Income Tax

Search and seizure proceedings - Documents seized during a search and seizure Retained by the Department - Revenue argued that Documents are retained due to proceedings pending before the Supreme Court - period beyond 30 days from the date of order of assessment u/s 158BC - HELD THAT - The word proceeding is a term of wide importance and it includes the original proceedings as well as the appellate proceedings as it is trite law that an appeal is a continuation of the original proceedings (see the decision in State of Tamil Nadu and Others v. S. Subramaniam 1996 (1) TMI 480 - SUPREME COURT . In the context in which the word 'proceedings' appear in section 132(8), it can be held to be used in a very comprehensive sense to include even revisional proceedings, provided the same is invoked under the statutory provisions of the Income Tax Act. Thus an assessment proceeding, appellate proceeding, and even revisional proceeding are all proceedings under this Act . Proceedings under this Act expired by the disposal of the appeal by this Court. Thereafter, no proceedings under this Act are in existence. On the contrary, the special leave petition having been filed under Article 136 of the Constitution of India cannot be regarded as a proceeding under this Act. As a taxing statute, strict interpretation is to be adopted and that being so, recourse by the assessee to the provisions of the Constitution by filing a special leave petition before the Supreme Court cannot be regarded as 'a proceeding under this Act'. The statutory authority lost its power to grant further authorisation to retain the documents. Therefore, even on this count, the respondents are not authorised or justified in retaining the documents of title seized by them under section 132 of the Act. Petitioner is entitled to succeed in this writ petition. Accordingly, while quashing Ext.P13 proceedings issued by the first respondent, this Court directs the first and second respondents to return to the petitioner the originals of document all executed before the Sub-Registrar's Office, Ernakulam, as expeditiously as possible, at any rate, within a period of 30 days from the date of receipt of a copy of this judgment.

Summary

Issues Involved:
1. Legality of the retention of title deeds by the Income Tax Department.
2. Compliance with Section 132(8) of the Income Tax Act, 1961.
3. Communication of orders permitting retention of documents.
4. Definition and scope of "proceedings under this Act."

Issue-wise Detailed Analysis:

1. Legality of the retention of title deeds by the Income Tax Department:
The petitioner challenged the prolonged retention of title deeds by the Income Tax Department, which had been held for over twenty-two years following a search and seizure operation conducted under Section 132 of the Income Tax Act, 1961. The petitioner sought directions for the return of the original documents, arguing that the retention was contrary to law.

2. Compliance with Section 132(8) of the Income Tax Act, 1961:
The petitioner argued that the retention of documents beyond 30 days from the date of the assessment order under Section 158BC was illegal unless reasons were recorded in writing and approval was obtained from the appropriate authorities. The petitioner contended that no such order was communicated as required under Section 132(8), and the documents should have been returned by 31-01-2004. The respondents claimed that the Principal Commissioner of Income Tax had approved the retention up to 28-02-2022, but failed to provide sufficient evidence of compliance with statutory requirements.

3. Communication of orders permitting retention of documents:
The petitioner argued that none of the orders permitting retention were communicated, rendering the retention invalid. The court noted that the statutory provisions and judicial precedents, including CIT, West Bengal-III v. Oriental Rubber Works and Joshi P. Mathew v. Deputy Commissioner of Income Tax, mandated the communication of such orders to the assessee. The respondents failed to provide proof of communication, leading the court to conclude that the retention beyond 30 days of the assessment order was illegal.

4. Definition and scope of "proceedings under this Act":
The court examined the term "proceedings under this Act" within the context of Section 132(8). It held that the term includes original, appellate, and revisional proceedings under the Income Tax Act. However, the court clarified that a Special Leave Petition filed before the Supreme Court under Article 136 of the Constitution does not constitute a proceeding under the Act. Since the statutory proceedings concluded with the High Court's disposal of the appeals, the authority to grant further retention ceased.

Conclusion:
The court found the retention of documents by the respondents beyond the statutory period to be illegal due to non-compliance with Section 132(8) and lack of communication of the orders. Consequently, the court quashed the impugned order and directed the respondents to return the original documents to the petitioner within 30 days. The writ petition was allowed in favor of the petitioner.