1972 (3) TMI 15 - HC - Income Tax

Court directs lower court to consider observations, requires production of 1965-66 records, parties bear own costs

The court accepted the petition, directing the lower court to pass appropriate orders considering the observations made. The production of records for the ... In a suit pending between the parties before the Subordinate Judge, First Class, Amritsar, records relating to the assessment of the respondents were summoned from the income-tax department. Though the records were brought to the court by a clerk of the department, on an objection taken by the defendant, the learned Subordinate Judge ruled that they could not be produced in view of the provisions of section 138 of the Income-tax Act and the notification issued by the Central Government under sub-section (2) of that section on 3rd June, 1965. It is for quashing this order of the trial court, dated 8th August, 1969, that the plaintiff has come up in revision under section 115 of the Civil Procedure Code Issues Involved:1. Applicability of Section 138 of the Income-tax Act, 1961, and the notification issued thereunder.2. Confidentiality and privilege of income-tax assessment records.3. Authority of courts to summon income-tax assessment records.4. Role of the Commissioner of Income-tax in disclosing information.5. Impact of repealed and amended provisions of the Income-tax Act on confidentiality.Issue-wise Detailed Analysis:1. Applicability of Section 138 of the Income-tax Act, 1961, and the notification issued thereunder:The court examined whether the records summoned from the income-tax department could be produced in light of Section 138 of the Income-tax Act, 1961, and the notification dated June 23, 1965. The notification was found to pertain only to banking companies, and thus, it was not applicable to the case at hand. The court noted that the general protection against disclosure provided by the repealed Section 54 of the Indian Income-tax Act, 1922, and Section 137 of the 1961 Act, was no longer in place.2. Confidentiality and privilege of income-tax assessment records:The judgment highlighted the historical context of confidentiality provisions under Section 54 of the 1922 Act and Section 137 of the 1961 Act. These sections provided that the particulars contained in income-tax assessment records were to be treated as confidential, and no court could require their production except as provided in the Act. The court emphasized that the repeal of these sections did not obliterate the obligation to maintain the confidentiality of records prepared before their repeal.3. Authority of courts to summon income-tax assessment records:The court clarified that after the repeal of Section 137 of the 1961 Act, courts have the authority to summon income-tax assessment records if they deem them relevant to the case. The court's power to summon records is distinct from the administrative function of the Commissioner of Income-tax under Section 138(1)(b). The court must apply its judicial mind to determine the relevance of the records to the case at hand.4. Role of the Commissioner of Income-tax in disclosing information:Section 138(1)(b) allows the Commissioner of Income-tax to furnish information if it is in the public interest. However, the court held that this provision does not grant the Commissioner the authority to override a court's requisition for records. The court's judicial order must be obeyed, and the Commissioner may only claim privilege under Sections 123 and 124 of the Indian Evidence Act, 1872, if applicable.5. Impact of repealed and amended provisions of the Income-tax Act on confidentiality:The court discussed the effect of the repeal of Section 137 and the amendments to Section 138 on the confidentiality of assessment records. It was held that the confidentiality obligations under Section 54 of the 1922 Act and Section 137 of the 1961 Act continue to apply to assessments made before their repeal. For assessments made after April 1, 1964, the records are not immune from production in court, and the Commissioner of Income-tax can disclose information under Section 138(1)(b).Propositions Emerged:1. Assessments under the 1922 Act are governed by Section 54, and the confidentiality privilege remains unimpaired by the repeal of the Act.2. For assessments after April 1, 1960, under the 1922 Act, information disclosure is governed by Section 59B of the 1922 Act and Section 138(1)(b) of the 1961 Act.3. Assessments under the 1961 Act before April 1, 1964, are governed by Section 137 despite its repeal.4. Section 138 does not affect the court's power to summon records, but the Commissioner can claim privilege under the Indian Evidence Act.5. The Central Government can protect classes of assessees from disclosure under Section 138(2).Conclusion:The court accepted the petition, directing the lower court to pass appropriate orders considering the observations made. The production of records for the year 1965-66 was required, and the notified order of 1965 did not prohibit their production as it related only to banking companies. The parties were directed to bear their own costs due to the complexity of the legal issues involved.