TaxTMI 
TaxTMI 
1988 (2) TMI 17
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....of the books beyond 180 days is absolutely illegal and the respondents be directed to return the account books forthwith. Thereafter, the petitioners made an application that the respondents started taking photostat copies from the account books illegally retained beyond 180 days. As no photostat copies or extracts were taken by the Department till the date of filing the writ petition, the petitioners stated that no prayer was made for issuing a direction to the respondents to return the photostat copies, extracts, etc., and hence an amendment is necessitated, since the mischief has been done subsequently. The petitioners, therefore, prayed that they be allowed to amend the writ petition and incorporate new prayer No. 5 in the petition as follows : "Prayer No. 5 : Issue a suitable writ, order or direction in the nature of mandamus directing the respondents to return the photostat copies, etc., which has been taken by them after 180 days." In their counter-affidavit filed by the respondents, it is stated that the petitioners never approached the Department to release the account books. However, it is stated that the seized books of account contained information and details regard....
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....have taken from the seized books after the expiry of 180 days and a question arising from the application of the respondents is whether the petitioners' representative can be directed to attest the photostat copies, extracts, etc. The short submission of Sri Sudhir Chandra, learned counsel for the petitioners, was that when the retention of the account books after the expiry of 180 days from the date of search is illegal, the retention of the photostat copies of the seized books is equally illegal and, therefore, a writ of mandamus can legally be issued against the respondents to return the photostat copies as well. The argument proceeds on the footing that when the respondents cannot retain the books of account, they cannot retain the copies/extracts of them as well. It was submitted that if no direction is given to the respondents to return the photostat copies, extracts, etc., of the seized books and if the respondents are permitted to retain them, then that would tantamount to legalising what is prohibited by the law. He went on to argue that if the account books retained for more than 180 days without the approval of the Commissioner are returned, then they cannot be read into....
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....hority may make extracts or copies of the account books so seized. But clause (iv) of section 132(1) thus clearly empowers the search authority to make copies or extracts from the books seized at the time of search. Sub-section (8) limits the retention period to 180 days and if the books are to be retained for more than that period, then approval to retain the books for a longer period has to be obtained from the Commissioner. In view of the limitation as contained in sub-section (8) of section 132, the retention of the books has become illegal and, therefore, they have to be returned. Return of the books is not opposed by the respondents. The question is whether sub-section (8) of section 132 or any other provision in the Act inheres a prohibition to make copies/extracts from the books seized, after the expiry of 180 days but before the books are returned either by the search and seizure authority on its own or on the direction of the court. The question whether mandamus can be issued against the petitioners to make the seized books available to the respondents after their return beyond 180 days to enable them to make copies will be entirely different and is not germane to the in....
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....preme Court further said that "in fact this decision was virtually for all practical purposes overruled by the decision of the Constitution Bench in Pooran Mat v. Director of Inspection (Investigation) [1974] 93 ITR 505 (SC)". The Supreme Court ruled that "the courts in India and even in England have consistently refused to exclude relevant evidence merely on the ground that it is obtained by illegal search or seizure". Then again, touching upon the decision of the single judge of the Calcutta High Court in CIT v. New Central jute Mills Co. Ltd. [1976] 105 ITR 262, the Supreme Court opined (p. 175) : "If, therefore, the view of the learned single judge of the Calcutta High Court were to be accepted, meaning thereby that if the search is shown to be illegal, anything seized during such illegal search will have to be returned to the person from whose premises the same was seized. It would tantamount to saying that evidence collected during illegal search must be excluded on that ground alone. This was in terms negatived by the Constitution Bench." The Supreme Court further observed (p. 175): "It has been often held that the illegality in the method, manner or initiation of a searc....
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.... over the books for an indefinite period and if the books relate to the year in which the search was conducted, then the owner of the books should not be inconvenienced by prolonged absence of the books. The purpose of the return of the books within a limited period is not aimed at the Department being deprived of having used the books in evidence. That being so, no mandate can be read into the use of language of section 132(8) that the Department will have to return not only the seized books but also the copies and extracts made therefrom, so that they might not be used in evidence by the Department at the assessment stage. The matter may be seen from another angle also. The petitioners seek relief under article 226 conferring equitable and discretionary jurisdiction. When the seized books disclosed concealment of considerable amount according to the respondents, will it be equitable to say that no copies/ extracts can be made/retained. Simply because the limitation to retain the seized books expired, especially when there is no averment that their retention is mala fide or in violation of any direction of the court, should the law be read so as to frustrate the scheme of search ....
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.... to keep them intact and produce them before the Department as and when required. The Delhi High Court, rejecting the submission of the Department, said (at p. 211) "We find ourselves unable to give such a direction. Once the bar set out in section 132(8) operates, the Department has got to return the books of account and other seized documents to the person concerned." From this authority, it clearly appears that the Delhi High Court did not consider the problem we are beset with. The question before the Delhi High Court was whether the petitioner can be directed to retain the books and produce them before the Department as and when required. No direction can be given to keep the books intact and produce them at the time of assessment, but if copies are made by the Department from the seized books, then they being valuable evidence according to the Supreme Court in Dr. Partap Singh [1985] 155 ITR 166, the petitioners in the instant case can surely be directed to attest them before their return. For the above reasons, the writ petition is partly allowed and the petitioners are directed to attest the photostat copies taken by the respondents of the seized books of account within ....
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....der the Representation of the People Act held, that the fact that a document was procured by improper or even illegal means will not be a bar to its admissibility if it is relevant and its genuineness is proved. In Pooran Mal V. Director of Inspection [1974] 93 ITR 505 (SC), a writ of prohibition was sought restraining the Department from using, as evidence, any information gathered from the search which was illegal because, admission of such evidence was against the spirit of the Constitution. The argument was repelled and the Hon'ble Court observed (P. 526) : " So far as India is concerned, its law of evidence is modelled on the rules of evidence which prevailed in English law, and courts-in India and England have consistently refused to exclude relevant evidence merely on the ground that it is obtained by illegal search or seizure. " The court did not approve of the American view that evidence obtained by the prosecution in a manner in which it should not have been obtained should not be taken advantage of, because that was not a rule of evidence but a rule of prudence and fair play. It would thus be seen that in India and England where the test of admissibility of evidence li....
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....ay be avoided as the evil consequences of tax avoidance are manifold. It should, therefore, be extended to empower the Department to obtain extracts from the account books even after search, so long as the books are in its custody. The question is how long ? In other words, till when can the custody be said to be in accordance with law to enable the Department to exercise its power. That has been provided by sub-section (8) itself, which puts an outer limit for retention of books except as provided therein. If the books cannot be retained after 180 days and their retention is illegal, then how can clause (iv) of sub-section (1) operate. The exercise of power depends on its existence. If the power itself becomes non-existent due to operation of law, then its exercise automatically ceases. The argument of learned counsel for the Department that there being no prohibition restraining the Department from obtaining photostat copies after 180 days, it should be taken as permissible, appears to be misconceived. The law appears to be just the otherwise. It has been succinctly summarised in Halsbury's Laws of England (Edn. 2, Vol. VIII, p. 73): "What the statute does not expressly or impl....
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.... appear to be more convenient or desirable that such power should exist to imply power in the latter case would be to legislate and not to interpret the statute." The doctrine of implied power, therefore, can be invoked for effective discharge of a duty or power which, in the absence of such auxiliary or incidental power, may become frustrated but if the power itself becomes non-existent, then the doctrine of implied power cannot be invoked. As has been held earlier, once the period of 180 days expires, the power to retain books becomes non-existent. Therefore, the implied power of obtaining copies or extracts also cannot be invoked. The powers conferred on the Department under this section can be summarised in brief as power to search and seize account books, money, bullion, jewellery, etc., to determine undisclosed income within 120 days after affording a reasonable opportunity of hearing to the person concerned, to deal with assets retained after assessment of the person concerned and to return the account books after expiry of 180 days unless the period is extended by the Commissioner. Is it possible to claim that any of these powers shall be rendered ineffectual if the Depar....
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....t or rule or some recognised principle. The Department cannot claim any inherent right or power. Now, like higher courts under the Constitution, it enjoys supervisory or preliminary powers. Provisions in fiscal enactments which have penal consequences have to be construed strictly. More so because of the constitutional constraint that no tax can be levied or collected except in accordance with law. It would be too literal a construction to hold that since books are being returned, the law is being complied with, and obtaining of copies after 180 days was not violating the law. What cannot be done directly cannot be done indirectly. Reliance was placed on Khandani Shafakhana v. Union of India, and it was urged that the Supreme Court having upheld the decision of the Delhi High Court which directed that account books be returned after obtaining of photostat copies, it should be taken as settled that the Department is entitled to obtain photostat copies even after expiry of 180 days. A copy of the order passed by the Delhi High Court against which the special leave petition was decided is on record. From its perusal, it appears that the claim of the Department before the High Court w....
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....herwise, the entire legal concept of strict interpretation of the provisions of law of escaped assessment or proceedings being barred by time, etc., shall undergo change. Much was attempted to be made of the ratio laid down by the hon'ble Supreme Court in McDowell and Co. Ltd. v. CTO [1985] 154 ITR 148 (SC), where while discussing the evil consequences of tax avoidance, it was urged that the court should avoid any construction of the law which may lead to loss of much needed public revenue, a must for a welfare State. Evil of tax avoidance by "artful dodgers" has to be fought politically, legislatively and judicially. But, as observed by the hon'ble court, "the transaction should be such that the judicial process may accord its approval to it". The action of the Department in taking photostat copies of account books after expiry of 180 days is a transaction which, being contrary to law, cannot be approved by the judicial process. Coming to the facts, it appears from the affidavit of the Income-tax Officer, Circle 11, Kanpur, that copies of five diaries mentioned at serial Nos. 1 to 5 of annexure of panchnama were made in June, 1987. Since extracts were made within 180 days, the d....
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....de after one hundred and eighty days was also admitted in the counter-affidavit filed on behalf of the respondents. However, the retention of papers was justified on the ground that the books of account and other documents seized established evasion of income-tax by the petitioners on large scale. The writ petition was heard by a Bench consisting of hon'ble R. M. Sahai J. and hon'ble Om Prakash J. Both the learned judges agreed that the books of account and other documents seized on January 15, 1987, were liable to be returned under sub-section (8) of section 132 of the Income-tax Act. They, however, differed on two questions : (1) Whether the photostat copies of the books of account and other documents obtained were also to be returned to the petitioners or not ? and (2) Whether the assessees could be compelled to attest the photostat copies ? In fact, since, in the opinion of hon'ble R. M. Sahai J., the photostat copies had to be returned, there was no question of their attestation by the petitioners. In view of the above, the following question was referred by the Division Bench to the hon'ble Acting Chief Justice, who has directed listing of the case for opinion before me : ....
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....nce of undue loss to the trading community. In order to give effect to the aforesaid intention, it couched the provision in peremptory terms. It did so by using the phrases "shall not be retained" and "for a period exceeding". Therefore, the provision is doubtlessly mandatory. On the expiry of one hundred and eighty days, the retention of books of account becomes illegal. The retention of books of account, if retained without the prior approval of the Commissioner, would entitle the assessee for return of the same. In Survir Enterprises v. CIT [1986] 157 ITR 206, a Bench of the Delhi High Court held that where documents seized as a result of a search were retained beyond one hundred and eighty days, without the authorisation of the Commissioner, the retention was invalid and the Department had to return the books of account and other documents seized to the assessee concerned. There is nothing in sub-section (8) of section 132 about photostat copies. Learned counsel for the petitioners urged that when the Department was not entitled to retain the books of account and other documents seized beyond one hundred and eighty days, photostat copies prepare therefrom had necessarily to ....
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....TR 836. It was held that it is now no longer necessary to seek in aid the general principles or rules of justice, equity and good conscience to test the validity of a search. What I mean to say is that if original books of account and other documents seized are returned within the period mentioned in sub-section (8) of section 132, it should not be of much concern to the assessee that photostat copies had been retained and not returned. Honest people need not fear it will never be used against them. It can be used only in the case of tax evasion. These would be the persons who would show losses when they had, in fact, made gains. There is not only an attempt at tax avoidance, but also resort to fraud on a large scale. Counsel for the petitioners contended that it was immaterial that photostat copies could be read into evidence against the assessee for the purpose of issuance of mandamus directing the income-tax authorities to return the photostat copies which had been illegally obtained. Learned counsel for the Revenue contested the submission of the petitioners and urged that even if photostat copies had been unlawfully obtained, there could be no valid objection to their admiss....
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....o". When assets, articles or books of account are seized, a trust, constructive in nature, is brought about. The authority becomes the trustee/custodian of the goods or articles seized. So, a solemn duty is cast upon such authority to restore the goods to the person concerned on the fulfilment of the conditions. Thus, so long as the goods remain in the custody of the Department and till they are returned to their lawful owner, the Department continues to have custody thereof notwithstanding the expiry of one hundred and eighty days. Even under section 71 of the Contract Act, a finder of goods is obliged to restore the goods to their owner. Till the goods are delivered to the owner, section 71 of the Contract Act casts on such finder of goods the same responsibilities as a bailee. Under section 151 of the Contract Act, bailee is enjoined to take the same care of the goods as a man of ordinary prudence takes of his own. Sections 168, 169 and 171 of the Contract Act speak of the right and lien of the bailee. The upshot is that on the expiry of one hundred and eighty days, the Department loses the right to retain the goods. But, nevertheless, the Department is under a duty to ensure ....