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Judgment
Gokulkrishnan, J.—One K. Raju is the petitioner in both the writ petitions. W.P. No. 181 of 1983 is for the issue of a writ of mandamus
directing the respondents, in particular, the 7th respondent, to return all the seized materials to the petitioner immediately including the fixed deposit
receipts, etc., covered by the prohibitory orders to the banks. W.P. No. 182 of 1983 is for the issue of a writ of prohibition prohibiting the
respondents from passing any order in respect of the search and seizure effected on March 3, 1982, and March 4, 1982, at the premises of the
petitioner at No. 2/D, S. V. Lingam Street, K. K. Nagar, Madras-78, at the work-shops at (i) H.I.G. Flat Site, Ashok Pillar Road, K. K. Nagar,
Madras-78, and (ii) Open Plot in Jeevanandam Street, K. K. Nagar, Ashok Nagar, Madras-83, and at Seelanaickenpatti, Salem.
The writ petitioner is a building contractor and a regular Income Tax assessee from the assessment year 1972-73. On March 3, 1982, the 7th
respondent, under the purported instruction of respondents Nos. 5 and 6, made a search under s. 132 of the I.T. Act (hereinafter referred to as
the Act"") simultaneously at No. 2/D, S. V. Lingam, Salai, K. K. Nagar, Madras-78, H.I.G. Flat Site, Ashok Pillar Road, K. K. Nagar, Madras-
78, and at the open plot in Jeevanandam Street, K. K. Nagar, Ashok Nagar, Madras-83. In respect of the seizure, a panchnama was prepared
and givens to the petitioner. While searching the premises at No. 2/D, S. V. Lingam, Salai, K. K. Nagar, Madras-78, the 7th respondent had
locked up one room with the petitioner''s records and served a prohibitory order on the petitioner under s. 132(3) of the Act. Similarly, the
residence of the petitioner at Seelanaickenpatti, Salem, was searched and in that house, a steel almirah was sealed and a prohibitory order under s.
132(3) of the Act was given to the petitioner. After the search, a panchnama was prepared and the same was served upon the petitioner. The 7th
respondent had further served a prohibitory order under s. 132(3) of the Act to the various banks whereby the petitioner was not allowed to
operate either the savings bank account or any other account the petitioner is having with the respective banks. Correspondingly, similar
prohibitory orders were issued under s. 132(3) of the Act on the petitioner also. It is further alleged by the petitioner that on his representation to
the 7th respondent stating that his business is being paralysed by such prohibitory orders, the 7th respondent by his order dated March 6, 1982,
released a sum of rupees one lakh and had also pointed out therein that the prohibitory order for the balance of Rs. 3,78,498.90 in S.B. Account
No. 11078 shall continue to be in force. It is further alleged by the petitioner that by subsequent representation made by the petitioner, the 7th
respondent had lifted the prohibitory order issued to some other banks also. The petitioner was writing letters to the 7th respondent to release
certain documents seized from him. On August 20, 1982, the petitioner wrote a letter to the 7th respondent pointing out that not withstanding the
fact that originally the search was commenced on March 3, 1982, and completed on that day itself, rooms had been locked and sealed by the 7the
respondent and he having taken the key with him, nothing had been done thereafter, and that, therefor, the 7th respondent should release the fixed
deposit receipts and other documents so that the petitioner could deal with the same. On November 2, 1982, and November 8, 1982, the
petitioner wrote to the 7th respondent requesting for lifting of prohibitory order and also pointing out that the order had not been passed by the 7th
respondent in time. The petitioner also wrote to various respondents herein to release the fixed deposit receipts and other documents. The
petitioner has further specifically alleged that he was seriously prejudiced in so far as his fixed deposit receipts had been seized along with several
other documents, that prohibitory orders had been issued whereby the moneys belonging to the petitioner were seized and, as such, the petitioner
has been deprived of the use of the money which he could have lawfully used for his business, and that his business has practically come to a
standstill by reason of the improper attitude of the respondents herein. The petitioner has further alleged that the authorities concerned have failed
to pass orders under s. 132(5) of the Act within 90 days of the seizure of the documents and, as such, the seizure has become ineffective. Under s.
132(9A) of the Act, according to the petitioner, respondents Nos. 5 to 7, who had seized the materials, should be handed over all these materials
seized from the petitioner within 15 days of such seizure. In this case, the documents and assets seized from the petitioner have not been handed
over by the 7th respondent to the 1st respondent within 15 days from March 4, 1982. The seizure of the documents and other records having
been made on March, 3, 1982, and March 4, 1982, the retention of the documents any further has become illegal since the authorities concerned
ought to have passed orders under s. 132 of the Act within 90 days from March 4, 1982. Even assuming that the seizure was completed on
September, 30, 1982, the petitioner submits, there is a clear violation of s 132(5) of the Act. The petitioner has further contended that as per s.
132(8) of the Act, the books of account and other documents seized shall not be retained for a period exceeding 180 days from the date of seizure
unless the reasons for retaining the same are recorded in writing by the officer who seized the same and the approval of the Commissioner for such
retention is obtained. No order has been communicated to the petitioner so far regarding any extension that has been granted is accordance with s.
132 of the Act. Hence, the documents seized cannot be retained by the authorities concerned any further and such a retention is clearly illegal since
the seized documents are with them for over 180 days. It is further contended by the petitioner that the respondents have not communicated any
order passed for extension. According to the petitioner, the respondents also have not conformed to rules 112, 112A, 112B, 112C and 112D of
the I.T. Rules. Since the provisions of the Act and the Rules have not been complied with, the petitioner has stated that the respondents are bound
to return the materials, documents and moneys seized to the petitioner. The attitude of the respondents in keeping these documents beyond the
period of limitation prescribed under the Act is violative of the freedom of profession, trade and occupation guaranteed under art. 19(1)(g) of the
Constitution of India. In these circumstances, the petitioner submitted that the retention of the materials seized from him and the continuance of the
prohibitory orders as against him by the respondents herein are clearly outside their powers and jurisdiction and that they cannot hereafter pass any
order and if such orders are passed, they would be void, illegal, a nullify and not-est. With these allegations, the petitioner has prayed for the issue
of a writ of mandamus and a writ of prohibition, as stated in the beginning of the judgment.
The respondents herein have filed a common counter-affidavit denying every one of the allegations made by the petitioner in his common
affidavit except those that were admitted by them in the counter-affidavit. The respondents have stated out of a total sum of Rs. 18,10,564, which
was initially subjected to the prohibitory orders, a sum of Rs. 6,28,639 was released to the assessee and the balance amount alone was kept under
the prohibitory orders as investigation is pending. The respondents have further alleged that the petitioner has not submitted correct accounts and
has failed to declare his return properly, which forced the authorities to resort to seizure and prohibitory order by virtue of s. 132 of the Act. This
was necessitated because of the fact that the authorities, on an appraisal, believe that a sum of rupees thirty-five lakhs will be the concealed income
from 1973 to 1983. The respondents then stated that they have released the fixed deposit receipts which were kept under the prohibitory orders,
and that the prohibitory order issued with regard to the almirah at the petitioner''s native place was lifted on March 4, 1982, itself. The respondents
have further stated that the petitioner has been given adequate opportunity to inspect the records and the petitioner cannot insist on all the
documents and records seized from him to be released forthwith because they are required for further scrutiny in the course of investigation. That is
why, according to the respondent, the Commissioner of Income Tax has been periodically extending the time-limit for keeping the documents and
papers seized in the custody of the Department. It is further contended by the respondents that the delay in the matter of investigation and enquiry
is wholly due to the petitioner''s delaying tactics and wanton non-co-operation with the Department and his refusal to furnish the requisite
particulars. The current account of the petitioner was not put under prohibitory orders and the petitioner was allowed to operate the same. The
petitioner was given the fullest opportunity to inspect the records and he cannot have any grievance regarding the inspection of the records for the
purpose of submitting Income Tax returns. The respondents have further stated that the petitioner cannot insist on the return of all the documents
and records seized from him because they are required for further scrutiny in the course of investigation and that it is only in those circumstances,
the Commissioner of Income Tax has been periodically extending the time-limit for keeping the seized papers and records under the powers
conferred on him. It has been specifically stated by the respondents that if the seized documents and papers are released, the petitioner will tamper
with them and thereby jeopardise the investigation by the Department. The respondents have further stated that the assets of the petitioner were
not seized except freezing certain bank accounts by issue of a prohibitory order under s. 132(3) of the Act. In the circumstances, s. 132(5) of the
Act is not attracted to the facts of the case. It is further submitted by the respondents that during the courses of search and further investigations,
funds/investments to the extent of Rs. 43 lakhs were found in the name of the petitioner and/or his close relations and members of his family. All
along, the petitioner was submitting Income Tax returns on an estimate basis and was assessed as such. His statement that he was not maintaining
books of account is a falsehood as several books and documents have been seized. Hence, according to the respondents, these facts justify the
action of the Department under s. 132 of the Act. Section 132(5) of the Act is not attracted when action is initiated under s. 132(3) of the Act, as
in this case. It is further submitted by the respondents that these time-limit prescribed under s. 132(5) of the Act is not applicable to the present
facts of the case, and further, the petitioner himself is responsible for the delay in the completion of the investigation. Further, the investigation could
not be proceeded with because of the stay of the proceedings granted by this Hon''ble court. The documents, according to the respondents, and
papers seized have been handed over to the first respondent within 15 days from the date of seizure as he is authority having jurisdiction to assess
the petitioner, that as the said documents were again required to co-ordinate further investigations under s. 132 of the Act, they were taken back
from the ITO for that purpose, and that, consequently, there is no infringement of the provisions of s. 132(9A) of the Act as alleged by the
petitioner. The respondents have further reiterated that the time-limit of 90 days provided under s. 132(5) of the Act when assets are actually
seized under s. 132(1) or s. 132(1A) of the Act will not apply to this case. It has been specifically averred by the respondents in their counter-
affidavit that the approval of the Chief Commissioner of Income Tax has been taken for the retention of the books, from time to time. As the
investigation has been impeded by the action of the petitioner and/or the non-co-operation of the petitioner and/or the interlocutory orders of this
Hon''ble court, according to the respondents, the petitioner cannot make any grievance by raising the question of retention of the books in excess
of the specified period. According to the respondents, if the seized books and records are handed over to the petitioner at this stage, there is every
reason to apprehend that the petitioner will either tamper with them or cause them to disappear. Finally, the respondents have alleged that prima
facie the estimate of undisclosed income of the petitioner comes to nearly Rs. 35 lakhs, that it is not advisable to return the records and documents,
which will be very necessary to investigate into such undisclosed assets and that these entire process of investigation and assessment can be
completed at an early date if the petitioner co-operates with the Department. For all these reasons, the respondents prayed for the dismissal of
both the writ petitions.
The petitioner has also filed a reply affidavit, inter alia, contending that he is not maintaining regular books of account, that the documents seized
will show that only mere jottings were made for the purpose of memory, that the returns were filed immediately after getting the clarification
regarding the person before whom they had to be filed and that the petitioner has written a number of letters requesting respondents Nos. 4 and 7
to finalise the matter. The petitioner has denied in his reply affidavit that he had invested in business to the extent of Rs. 10,10,590 as also the
allegation that there was an investment in jewellery to the extent of Rs. 15,250. The petitioner has also flatly denied the allegation of the
respondents to the effect that there are unaccounted investments to the extent of Rs. 35 lakhs and asserted that he is always ready and willing to
co-operate for the completion of the case as early a possible. It is further contended by the petitioner that periodical extension of time by the
Commissioner of Income Tax will not any way make the retention of the documents legal and even assuming for the purpose of argument that such
extension of time is warranted, it will have to be done at least under notice or information to the petitioner and that, in the instant case, no notice of
information has been given to the petitioner. Hence, the petitioner submitted that any extension alleged to have been made in invalid and has to be
considered as non set in law. It is then contended that the entire procedure adopted by the 7th respondent is illegal inasmuch as the extension of
time ought to have been asked for only by the concerned ITO and not by the 7th respondent. As regards the allegation of undisclosed asset, the
petitioner has contended that the assets could not be taken as they are without considering the liabilities. He further contended that the present
value of the assets cannot be taken into consideration but their value as on the date of their acquisition alone has to be taken into consideration and
that if the matter is looked at from that angle, there cannot be any question of excess investment. Finally, the petitioner prayed that the writ petitions
may be allowed since there is an inordinate delay in competing the assessment.
W.P. No. 181 of 1983 is for the issue of a writ of mandamus directing the respondents to return all the seized materials to the petitioner
immediately including the fixed deposit receipts, etc., covered by the prohibitory orders to the banks. The facts of the case clearly reveal that the
seizure was made as early a March 3, 1982, and March 4, 1982. It is necessary to repeat the facts of the case once over again since I have
already extracted them in paragraphs supra. Section 132(5) deals with the procedure as to how any money, bullion, jewellery or other valuable
article or thing is to be seized under sub-s. (1) or (1A) of s. 132 of the Act. Here, the seized materials will not fall under the category mentioned in
s. 132(5) but will came under s. 132(8) of the Act. Section 132(8) of the Act reads a follows :
The books of account or other documents seized under sub-section (1) or sub-section (1A) shall not be retained by the Authorised Officer for a
period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same are recorded by him in writing
and the approval of the Commissioner for such retention is obtained :
Provided that the Commissioner shall not authorise the retention of the books of account and other documents for a period exceeding thirty days
after all the proceeding under the Indian Income Tax Act, 1922, (XI of 1922), or this Act in respect of the years for which the books of account
or other documents are relevant are completed.
From a reading of the abovesaid section, it is clear that the Authorised Officer should not retain the books seized over and above 180 days from
the date of sassier unless the reasons for retaining the same are recorded by him in writing and the approval of the Commissioner of Income Tax
for such retention is obtained.
Section 132(9A) of the Act deals with cases as to how the Authorised Officer, who has no jurisdiction over the person from whose custody the
books of account and other documents are seized, should hand over within 15 days from such seizure, the seized documents to the ITO having
jurisdiction over such a person.
The objection raised, viz., if the Authorised Officer, who is the 7th respondent herein, has no jurisdiction over the person from whom the
documents were seized and, as such, he ought to have handed over the said documents to the first respondent and that he has no authority to write
to the Commissioner of Income Tax for the purpose of getting his approval to have the documents over an above the period of 180 days, can not
be sustained. The 7th respondent has jurisdiction over the petitioner herein and that he is the Authorised Officer as revealed by D.O. Letter No.
277-N/INV)/66 dated July 21, 1966, printed at page 653 of Part II of Volume XII of the Central Board of Direct Taxes Bulletin. The said bulletin
reads as follows :
The jurisdiction of the Intelligence Wing is, for the present, confined to the Commissioner''s charges in which the various units of the Wing are
located so that they may be able to do intensive work in the limited areas and show results. There is, however, no objection to utilising the officers
of the Intelligence Wing outside the present Commissioner''s charges if an important case arises and it is necessary to do so in the interests of
Revenue. This may be done only when the case is very important and you consider it necessary in the interests of Revenue.
Thus, it is clear that the jurisdiction of the officers of the Intelligence Wing over the persons will be co-extensive with that of the Commissioner''s
charge in which the wing is located. Therefore, when an Assistant Director of Inspection is authorized by the Commissioner under s. 132(1)(a) of
the Act to conduct a search, it would follow that such an Assistant Director of Inspection would also be the Authorised Officer having jurisdiction
over the person subjected to search within the meaning of s. 132(8) of the Act. Hence, the 7the respondent can perform all the functions under
sub-ss. (8) and (9) of s. 132 of the Act in his capacity as the Authorised Officer having jurisdiction over the person referred to in clause (a) or (b)
or (c) of sub-section (1) of s. 132 of the Act without prejudice to the power of the ITO who has jurisdiction under s. 124 of the Act over the
persons objected to search. The Board''s D.O. Letter No. 277-M (INV)/66 dated July 21, 1966, has been incorporated in the I.T. Act as s.
132(1A), with effect from October 1, 1975.
If the Assistant Director of Inspection has reason to suspect that any income has been concealed, or is likely to be concealed, by any person or
class of persons, within his jurisdiction, then for the purpose of making him any enquiry of investigation relating thereto, it shall be competent for
him to exercise the powers conferred under sub-section (1) on the Income Tax authorities referred to in that sub-section notwithstanding that no
proceedings with respect to such person or class of persons are pending before him or any other Income Tax authority.
In view of the above provision, the 7th respondent has jurisdiction to hand over the books of account and other documents to the 1st
respondent and take them back for the purposes of investigation and, hence, the question that the 7th respondent, who is the Authorised Officer in
this case, ought to have handed over the documents to the 1st respondent within a period of 15 days of such seizure, will not arise. In this case, the
Assistant Director of Inspector handed over the seized books to the ITO to facilitate him to conduct certain investigations and enquiry for purposes
of assessment and also for the recording of reasons with reference to the retention of the seized material, reopening completed assessments, issuing
notices under the I.T. Act/W.T. Act, issuing attachment notices in respect of the assets located from the seized material, etc. The documents and
papers seized were handed over to the ITO as he was the person who had jurisdiction to assess the petitioner. The materials were taken back by
the Assistant Director of Inspector from the ITO to pursue the investigation under s. 132 of the Act. Such action of the 7th respondent i quite in
order as per the abovesaid provisions.
As per s. 132(10) of the Act which reads as follows :
If a person legally entitled to the books of account or other documents seized under sub-section (1) or sub-section (1A) objects for any reason to
the approval given by the Commissioner under sub-section (8), he may make an application to the Board stating therein the reasons for such
objection and requesting for the return of the books of account or other documents.
the aggrieved party from whom the documents were seized and who objects to the reason recorded by the Commissioner for extending the time
under s. 132(8) of the Act, may make an application to the Board stating therein the reasons for such objection and requesting for the return of the
books of account or other documents. As far as the present case is concerned, the seizure of the documents was made on March 3, 1982, and
March 4, 1982. The 7th respondent has put in an application to the 4th respondent for the retention of the books and documents impounded for a
period extending 180 days, as per s. 132(8) of the Act. The reason given for obtaining the extension is for conducting a detained investigation. The
4th respondent allowed the retention of the documents until March 31, 1983. In this application made on August 23, 1982, it has been specifically
mentioned that the documents were seized on March 3, 1982. The approval for extension was granted by the 4th respondent on August 27, 1982.
In CIT v. Oriental Rubber Works [1983] 145 ITR 477, a three judges'' Bench of the supreme Court had an occasion to deal with s. 132(8) read
with s. 132(1) of the Act. The Supreme Court, after extracting s. 132(8), (10) and (12) of the Act, held as follows (p. 483) :
On a plain reading of the aforesaid provisions, it will be clear that ordinarily the books of account or other documents that may be seized under an
authorisation issued under sub-s. (1) of s. 132 can be retained by the Authorised Officer or the concerned ITO for a period of one hundred and
eighty days from the date of seizure, whereafter the person from whole custody such books or documents have been seized or the person to whom
such books or documents have been entitled to the return of the same unless the reasons for any extended retention are recorded in writing by the
Authorised Officer/the concerned ITO and approval of the Commissioner for such retention is obtained. In other words, two conditions must be
fulfilled before such extended retention becomes permissible in law : (a) reasons in writing must be recorded by the Authorised Officer or the
concerned ITO seeking the Commissioner''s approval, and (b) obtaining of the Commissioner''s approval for such extended retention and if either
of these conditions is not fulfilled, such extended retention will become unlawful and the concerned person (i.e., the person to whom those belong
acquires a right to the return of the same forthwith. It is true that sub-s. (8) does not in terms provide that the Commissioner''s approval or the
recorded reasons on which it might be based should be communicated to the concerned person but in our view since the person concerned is
bound to be materially prejudiced in the enforcement of his right to have such books and documents returned to him by being kept ignorant about
the factotum of fulfillment of either of the conditions, it is obligatory upon the Revenue to communicate the Commissioner''s approval as also the
recorded reasons to the person concerned. In the absence of such communication, the Commissioner''s decision according his approval will not
become effective.
Moreover, sub-s. (10) confers upon the person legally entitled to the return of the seized books and documents a right to object to the approval
given by the Commissioner under sub-s. (8) by making an application to the Central Board stating therein the reasons for such objection and under
sub-s. (12), it is provided that the Central Board may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit. It is
obvious that without the knowledge of the factotum of the Commissioner''s approval as also of the recorded reasons on the basis of which such
approval has been obtained, it will not be possible for the person to whom the seized books and documents belong to make any effective
objection to the approval before the Board and get back him books or documents. In our view, this scheme of sub-ss. (8), (10) and (12) of s. 132
makes it amply clear that there is a statutory obligation on the Revenue to communicate to the person concerned not merely the Commissioner''s
approval but the recorded reasons on which the same has been obtained and that such communication must be made as expeditiously as possible
after the passing of the order of the approval by the Commissioner and in default of such expeditious communication any further retention of the
seized books or documents would become invalid and lawful. It is obvious that such obligation arises in regard to every approval of the
Commissioner that might have been accorded from time to time.
In the result, the orders passed by the High Court directing the return of the seized books of account and documents to the respondents in each of
the appeals are confirmed and the appeals (subject to the directions given below in two of them) are dismissed with no order as to costs.
It is not the case of the respondents that he approval accorded by the Commissioner for extension of time under s. 132(8) of the Act was
communicated to the petitioner. As per the above-cited Supreme Court decision, inasmuch as the respondents have not communicated the order
extending the further retention of the seized books or documents to the petitioner, the retention of the seized documents any further is invalid and
unlawful. In view of the above Supreme Court decision, there is no need to deal with the other decisions cited at the Bar. The above Supreme
Court decision is enough to allow W.P. No. 181 of 1983, with a direction to the respondents, in particular to the seventh respondent, to return all
the seized materials (seized on March 3, 1982, and March 4, 1982) to the petitioner on or before February 10, 1984. Hence, W.P. No. 181 of
1983, is allowed. There will be no order as to costs.
The prayer in W.P. No. 182 of 1983 is for the grant of a writ of prohibition prohibiting the respondents from passing any order in respect of
the search and seizure effected on March 3, 1982, and March 4, 1982, at the premises of the petitioner. The prayer as such is vague. In view of
the fact that I have directed in W. P. No. 181 of 1983 to return all the documents seized from the petitioner''s premises on March 3, 1982, and
March 4, 1982, there is no need to prohibit the respondents from passing any order in respect of such seizure. Any order passed by the
respondents in respect of such search and seizure has to be studied and decided on the merits of such orders that may be passed. It is too
premature to issue a writ of prohibition as at present. Hence, W. P. No. 182 of 1983 is dismissed. There will be no order as to costs.