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TMI Blog1991 (8) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... and Messrs. Marcandy Prasad Radhakrishna Prasad Private Limited (the applicant in Case No. RN-79 of 1990) are at 65, Grand Trunk Road, Salkia, Howrah. The applicants in all these four cases are registered dealers under the Bengal Finance (Sales Tax) Act, 1941 (hereinafter called "the Act of 1941"). For the sake of convenience, the case of the applicant in RN-79 of 1990 is being first taken up. 3.. The case of the applicant in Case No. RN-79 of 1990 is that on January 17, 1990, four persons including the Commercial Tax Officer, Salkia Charge came to 65, Grand Trunk Road, Salkia, Howrah, and demanded the books of accounts, documents and registers of Messrs. Marcandy Prasad Radhakrishna Prasad Private Limited, for inspection. As the dealing clerk was absent, Mr. Om Prakash Jaiswal, one of the directors of the company requested the Commercial Tax Officer and his men to come on any other day on prior notice so that the dealing clerk could be present to explain and make available the necessary books, documents and registers. Thereafter, on January 22, 1990, without any prior notice, the Commercial Tax Officer, Mr. L.B. Bhutia along with others came again to 65, Grand Trunk Road, Salki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in RN-79 of 1990 has challenged this search and seizure on January 24, 1990, as illegal, invalid, void and without authority. It is alleged that the Commercial Tax Officer, Salkia Charge, refused to issue road permit to the applicant on January 29, 1990, unless particulars of consignment and invoice number were mentioned in the application form No. XXX, though Messrs. Marcandy Prasad was all along obtaining road permits regularly without mentioning these particulars. It is further alleged that three blank permits sent to the Commercial Tax Officer, Salkia Charge, have not been extended. It is contended that no declaration form has been issued to Messrs. Marcandy Prasad in spite of an application before the Commercial Tax Officer on January 29, 1990. 5.. The further case of Messrs. Marcandy Prasad is that two notices of demand dated January 25, 1990, were issued by the Commercial Tax Officer to the respondent Nos. 8 and 9, the Branch Manager, Central Bank of India, Howrah Branch, and Financial Adviser and Chief Accounts Officer, South Eastern Railway, respectively, under section 11B of the Act of 1941, whereby the respondents Nos. 8 and 9 were directed to deposit a fictitious su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 6, 1986. Subsequently, on January 24, 1990, about twenty persons headed by the respondent No. 1, an Inspector of Commercial Taxes raided the office of Messrs. Marcandy Prasad at 65, G.T. Road, Howrah. Mr. Ratan Prakash Jaiswal, a Director of Messrs. Marcandy Prasad, was also a Director of Messrs. J.D. Casting. Some files and documents of Messrs. J.D. Casting had been brought to the office of Messrs. Marcandy Prasad for his perusal. While Mr. Ratan Prakash Jaiswal was perusing the files of Messrs. J.D. Casting, a search of the office premises of Messrs. Marcandy Prasad at 65, G.T. Road was conducted by these persons. It is alleged that at that time one of the Inspectors of Commercial Taxes snatched the letterhead of Messrs. J.D. Casting from Mr. Ram Chandra Jaiswal, one of the employees of Messrs. J.D. Casting and prepared a report purporting to incorporate therein the reasons for the search and got that report signed by Mr. Gulap Chand Jaiswal, an employee of Messrs. Marcandy Prasad under duress and threat. A seizure-receipt was prepared. Messrs. J.D. Casting has challenged the search and seizure on January 24, 1990, as illegal and without jurisdiction. It is alleged that an appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f some particulars in the application form No. XXX, though Messrs. Kona Iron was previously getting road permits without mentioning particulars of consignments in that form. It is also alleged that on January 29, 1990, the respondent No. 3 declined to issue declaration form to Messrs. Kona Iron. Messrs. Kona Iron has challenged these actions of the respondent No. 3 and has prayed for direction for issuance of road permits and declaration forms. 8.. The case of Messrs. Prakash Engineering Works, the applicant No. 1 in Case No. RN-78 of 1990 ("Messrs. Prakash Engineering", in short) is that at about 2 p.m. on January 24, 1990, twenty persons headed by the respondent No. 1, Inspector of Commercial Taxes raided its registered office at 65, G.T. Road and terrorised Mr. Jai Prakash Jaiswal, one of its partners. At about 9.30 p.m. one of the Inspectors snatched the letterheads of Messrs. Prakash Engineering from one of its employees and prepared a report, purporting to incorporate the reasons for the search and had that report signed under duress and threat by Mr. Marcandy Prakash Pandey, an employee of Messrs. Prakash Engineering. Various papers and documents were then seized on prepar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce sheet for the periods of four quarters ending on 14 K.B. 2043 samvat year and four quarters ending on 14 K.B. 2044 samvat year. All the books of accounts and other documents could not then be produced by Mr. R.P. Jaiswal on the plea that the accounts clerk was not present. The Commercial Tax Officer, Salkia Charge, then asked Mr. R.P. Jaiswal to produce books of accounts and other relevant documents before him for inspection immediately. He then drew up a report which was duly countersigned by Mr. R.P. Jaiswal. On scrutinising the report drawn up on January 17, 1990 and the balance sheet, a lot of descrepancies was noticed between the returns submitted by the dealer and the computerised sales register and the balance sheet. The dealer did not comply with the request of the Commercial Tax Officer, Salkia Charge, to appear before him with books of accounts and other documents, as directed on January 17, 1990. As such, the Commercial Tax Officer, Salkia Charge, along with other officers went to the dealer's place of business on January 22, 1990 and conducted query in presence of Mr. O.P. Jaiswal, stated to be another director of Messrs. Marcandy Prasad. On scrutinising the papers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On January 24, 1990, the officers and Inspectors of the Directorate of Commercial Taxes went to 65, G.T. Road North, Salkia, Howrah, to examine the books of accounts on the basis of that information. The books of accounts of Messrs. J.D. Casting were discovered at that place. On examination of the computerised sales register and other books of accounts and documents, it was revealed that sales shown in the computerised sales register were more than the sales shown in the quarterly return. As such, the seizure was made of the books of accounts and other papers on January 24, 1990, strictly in accordance with law for unearthing the evasion of tax made by the dealer. It is alleged that the road permits were not issued as the dealer failed to produce relevant documents as required under rule 89(3) of the Bengal Sales Tax Rules, 1941. As for declaration forms, the case of the respondents is that declaration forms are issued in Salkia Charge on Tuesday, Thursday and Friday and not on Monday. The application for issuance of declaration forms, according to Messrs. J.D. Casting, was made on January 29, 1990, which was a Monday. As such, the question of refusal to issue declaration forms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents is that the notice was issued as the dealer evaded payment of tax to the tune of Rs. 1,63,489 (with interest) during the period from the quarter ending on September, 1989. 13.. The applicants in these four cases have filed separate affidavitsin-reply wherein the material allegations by the respondents have been denied. 14.. The common prayers in all these four cases are: (a) direction for issuance of road permits; (b) direction for issuance of declaration forms (c) return of the seized documents; and (d) an order commanding the respondents to forbear from looking into the seized books and documents and utilising the same in any manner for the purpose of making any assessment or any proceeding under the Act of 1941 until the return of these documents. In Cases Nos. RN-78 of 1990 and RN-79 of 1990 there are prayers for prohibiting the respondents from giving effect to the purported notices demanding security under section 7(4a)(i) of the Act of 1941. In Case No. RN-79 of 1990, there is a further prayer for prohibiting the respondents from giving effect to the notices issued under section 1 1B of the Act of 1941. So far as the notices dated January 25, 1990, iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal Rubber Works [1984] 145 ITR 477; [1984] 1 SCC 700 that for retention of seized books of accounts and other documents beyond statutory period, there is an obligation on the Revenue to communicate to the person concerned not only the Commissioner's approval but also the recorded reasons on which such approval has been obtained and that such communication must be made as expeditiously as possible after the passing of the order of approval by the Commissioner. It has been held in that case that in default of such expeditious communication, any further retention of the seized books of accounts or documents would become invalid and unlawful. It has also been held in that case that such obligation arises in respect of every approval of the Commissioner that might have been accorded from time to time. That case was under the Income-tax Act, 1961. The principles enunciated in that case will apply in these cases. Under clause (a) of the proviso to section 14(3A) of the Act of 1941, there cannot be extended retention of accounts, registers or documents seized under section 14(3) of that Act for a period exceeding one year from the date of seizure, unless reasons in writing for such extend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned by the Commercial Tax Officer, Salkia Charge, for being sent under Memo No. 464, dated February 12, 1991. The reason for obtaining sanction for extended retention in the case of Messrs. Prakash Engineering was the same as in the case of Messrs. Kona Iron. It can thus be seen that no order for extended retention was communicated to any of the applicants in any of these four cases within one year from the date of seizure on January 24, 1990, or shortly thereafter. In view of the ratio of the decision of the Supreme Court in the case of Commissioner of Income-tax v. Oriental Rubber Works [1984] 145 ITR 477 ; (1984) 1 SCC 700 referred to by Mr. Bhattacharya, the learned Senior Advocate for the applicants, retention of the seized books of accounts and documents beyond the prescribed period of one year without proper sanction and communication of such sanction to the applicants is improper and unauthorised. Mr. Bhattacharya also referred to the decision of the Calcutta High Court in State of West Bengal v. Sarda Sons [1977] 40 STC 419. This Tribunal has already held in the case of Ram Kumar Roshanlal v. C.T.O. reported in [1992] 87 STC 465 supra; (1990) 23 STA 244 that non-communi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r using the result of the investigation on the basis of the books of accounts, records and documents seized on January 24, 1990, though the respondents were given the liberty to proceed with the investigation in respect of the same. Let it be contended, as it was sought to be contended, that the respondents should not use the result of their investigation, on the basis of the books of accounts, records and documents seized on January 24, 1990, even after the disposal of these cases, when these seizures are illegal and the books of accounts, records and documents are to be returned to the applicants, we propose to discuss, in brief, the propriety of the seizures made on January 24, 1990, in these cases before adverting to the question of further user of these books of accounts, records and documents, after the return of these books of accounts, records and documents to the applicants. 18.. The applicants in these four cases have challenged search and seizure on the grounds that the conditions precedent to the exercise of the power under section 14(3) and section 14(4) of the Act of 1941 did not exist. Some other ground, challenging the seizures on January 24, 1990, are also mentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R.P. Jaiswal, one of the directors. For the second visit on January 22, 1990, another report was drawn up, which was also signed by Mr. O.P. Jaiswal, another director. When suppression of sale and short payment of tax came to light from the dealer's own books of accounts, it cannot be at all stated that the Commercial Tax Officer, Mr. L.D. Bhutia, had no reason to suspect that Messrs. Marcandy Prasad was attempting to evade payment of tax under the Act of 1941. Reasons for the seizure are mentioned in the report drawn up on January 24, 1990, to the effect that the officers have reason to believe that the dealer was evading taxes, as there was a lot of difference between figures in the returns and in the books of accounts. A case has been made out in the affidavit-in-reply that when an assessee has a liberty to revise the current returns at any time before the assessment, for which the time-limit is four years, the charge of suppression of sale is wholly unwarranted. A case has been made out in the affidavit-in-reply in each of the four cases and it has been argued that when an assessee can revise his return, it cannot be at all stated that there can be reason to suspect attempted e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search and seizure of the books of accounts of Messrs. Kona Iron cannot be stated to be in violation of the provisions of section 14(3) of the Act of 1941. 22.. The seizure in the case of Messrs. Prakash Engineering (RN-78 of 1990) was preceded by a visit to the office of Messrs. Prakash Engineering on January 17, 1990 when a report was drawn up showing the figures of sale on the basis of computerised ledger of Messrs. Prakash Engineering. That report was signed by an accountant of Messrs. Prakash Engineering. Thereafter, before preparation of the seizure-receipt under section 14(3) of the Act of 1941 on January 24, 1990, another report was drawn up on January 24, 1990, giving out the reason for believing that the dealer was evading taxes. The reason mentioned in that report was that the returns filed by the dealer did not agree with the figures of sales as per books of accounts. In the circumstances, the seizure of the books of accounts of Messrs. Prakash Engineering on January 24, 1990, cannot be stated to be in violation of the provisions of section 14(3) of the Act of 1941. 23.. Mr. Sanjay Bhattacharya, the learned Senior Advocate for the applicants, referred to several ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be no order in restraint of such user of such documents. 25.. Coming now to the prayers in the cases of Messrs. Marcandy Prasad (RN-79 of 1990) and Messrs. Prakash Engineering (RN-78 of 1990) for prohibiting the respondents from giving effect to the purported notices, demanding security under section 7(4a)(i) of the Act of 1941, it is to be stated that the decision of the Supreme Court in the case of Nand Lal Raj Kishan v. Commissioner of Sales Tax [1961] 12 STC 324 is that for proper payment of tax, security can be demanded. In that decision of the Supreme Court, section 7(4a)(i) of the Act of 1941 has been discussed. The Supreme Court approved of the view that the power to levy a tax included the power to impose reasonable safeguards in collecting it, and demanding security for proper payment of the tax payable under the Act. In the impugned notices dated January 30, 1990, in the case of Messrs. Marcandy Prasad and Messrs. Prakash Engineering, these applicants have been requested to appear before the Assistant Commissioner of Commercial Taxes, Bally Circle, to show cause why security to the tune of Rs. 50,00,000 in the case of Messrs. Marcandy Prasad and security to the tune o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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