1988 (9) TMI 42 - HC - Income Tax

Court finds impounding of account books by Tax Officer non-compliant with statutory requirements

The court found that the impounding of the account books and documents by the Income-tax Officer was not in compliance with the mandatory provisions of ... Account Books Issues: Compliance with provisions of section 131(3) of the Income-tax Act regarding impounding of account books and documents.In this case, the petitioner, a registered partnership firm, was subjected to a survey under section 133A of the Income-tax Act by the Income-tax Officer. The petitioner claimed that their account books were seized and impounded during the survey, while the respondent contended that only lists 'A' and 'B' were prepared during the survey, and the account books were impounded later following a notice under section 131(3) of the Income-tax Act. The main issue revolved around whether there was compliance with the provisions of section 131(3) regarding the impounding of account books and documents. The court examined the requirements under section 131(3), which mandates that reasons for impounding must be recorded, and if retention exceeds fifteen days, approval from the Commissioner is necessary.The court analyzed the order made by the Income-tax Officer under section 131(3) and found that it did not mention the recording of reasons for impounding the account books and documents. The court emphasized that the recording of reasons is mandatory and goes to the root of the jurisdiction of the Income-tax Officer to impound such documents. It was held that in this case, the impounding was not in accordance with the mandatory provisions of section 131(3), as the required reasons were not recorded separately for impounding the documents. Therefore, the court concluded that the impounding of the account books and documents was in contravention of the statutory provisions.Additionally, the court noted that the assessment for the relevant year was pending due to the non-filing of the return by the petitioner. The respondent assured that the assessment would be completed within two months. Consequently, the court partly allowed the writ petition, granting two months for the completion of the assessment. The court ordered the return of the account books and documents to the petitioner after the specified period and vacated the stay order issued earlier. The judgment highlighted the importance of strict compliance with statutory provisions in matters of impounding account books and documents under the Income-tax Act.