TMI Blog1972 (2) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... with the previous inspector to investigate the affairs of the petitioner-company. On the 30th June, 1964, another order was passed under section 237(b)(i)/(iii) of the Companies Act appointing another inspector in place of the earlier inspector and extending the time for investigation. On the 20th July, 1964, inspectors appointed under section 237(b)(i)/(ii) seized a large number of books, documents and papers pursuant to the warrants obtained by them from the Magistrates under section 240A of the Companies Act, 1956. On 21st July, 1964, an application was made under article 226 of the Constitution by the petitioner challenging the appointments of the said inspectors. A rule nisi was issued and an interim order was made. The said matter was Matter No. 272 of 1964 of this hon'ble court. On the 23rd July, 1964, another order was passed in the said Matter No. 272 of 1964, whereby the interim order issued on 21st July, 1964, was Varied. By the aforesaid order the inspectors were allowed to continue with the search and seizure for four days and thereafter to keep all the seized books, papers and documents with the Registrar of Companies, West Bengal. It was further directed that if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f 1964 was extended at the instance of the Government. On the 3rd May, 1969, a notice was issued under section 19(2) of the Foreign Exchange Regulation Act, 1947, and served on the Registrar of Companies by the Assistant Director of Enforcement. On the 7th May, 1969, stay was granted in appeal from the said Matter No. 272 of 1964 which was further extended at the instance of the Government. On the 31st May, 1969, another notice under section 19(2) of the Foreign Exchange Regulation Act, 1947, was served on the Registrar of Companies by the Assistant Director, Enforcement Directorate. On June 3, 1969, a letter was sent from the Registrar of Companies to the Assistant Director, Enforcement Directorate, stating that he could not part with the seized documents as the same were held by him pursuant to orders of this hon'ble court. On the 5th June, 1969, a letter from the Assistant Director, Enforcement Directorate, to the Registrar of Companies, was sent requiring him to comply with the notice under section 19(2) of the Foreign Exchange Regulation Act, 1947. On the 5th June, 1969, summons was issued under section 131 of the Income-tax Act, 1961, by the Income-tax Officer on the registra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an omnibus order to produce all papers and documents indicating non-application of mind by the Income-tax Officer. Counsel for the petitioner further urged that in order to apply section 131 of the Income-tax Act, 1961, there should be valid application of mind by the Income-tax Officer on the question whether the documents required to be produced were such which would be relevant for any of the purposes of the Act. It was submitted that there had been no such application of mind. It was also urged on this aspect that the order was vague and as such a vague order should not have been made. It was submitted that in any event the books, papers and documents were in the custody of the court pursuant to the directions of the court. So the order that was made on the Registrar of Companies was not a proper and valid one without leave being obtained from this court. In order to appreciate this contention it would be necessary to set out the impugned summons: "To The Registrar of Companies, West Bengal, "Narayani Buildings" Brabourne Road, Calcutta. Whereas your attendance is required in connection with the proceedings under the Income-tax Act in the case of Messrs. New Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t simply because the assessments prior to 1964-65 had been completed, resort to section 131 of the Income-tax Act would be not for the purpose of the Act. The purpose of the Income-tax Act is not only to make the assessments ; to make investigations to find out whether reassessment was necessary and proceedings for reassessment should be initiated or not is also within the purpose of the Act. The Income-tax Officer has stated that there were allegations against the petitioner regarding the concealment of huge income arising out of export business and if to investigate regarding the completed assessments and for the purpose of future assessments, the documents, books and papers were required by the Income-tax Officer as was suggested by him in his affidavit, in my opinion it cannot be characterised that the same was not for the purpose of the Act. The purpose of the Act is not only to make assessment but all proceedings incidental thereto including the proceeding for investigation relating to reopening of the assessments. Therefore, the contention that, as the assessments prior to the date of the seizure of the books had all been completed and the books, papers and documents could n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Supreme Court in my opinion were significantly different. Real controversy, however, centres round the question whether there has been application of mind by the Income-tax Officer. Section 131 of the Income-tax Act, 1961, provides as follows: " 131. (1) The Income-tax Officer, Appellate Assistant Commissioner Inspecting Assistant Commissioner and Commissioner shall, for the purposes of this Act, have the same powers as are vested in a court under the Code of Civil Procedure, 1908 (V of 1908), when trying a suit in respect of the following matters, namely: (a) discovery and inspection; (b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath; (c) compelling the production of books of account and other documents ; and (d) issuing commissions. (2) Without prejudice to the provisions of any other law for the time being in force, where a person to whom a summons is issued either to attend to give evidence or produce books of accounts or other documents at a certain place and time, intentionally omits to attend or produce the books of account or documents at the place or time, the income-tax authority may impose up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preme Court, were directed to be produced for the purpose of the Foreign Exchange Regulation Act. One of the items directed to be produced was "all other books, papers and other documents relating to Shri P.N.Balasubramanian, Transworld Trades, and the Barium Chemicals Ltd. in the possession of the Registrar of the Supreme Court of India, under an order dated 6th May, 1966, passed by the hon'ble Supreme Court of India in Civil Appeal No. 381 of 1966 (Barium Chemicals Ltd. v. Company Law Board ). " The Supreme Court held that such an order could not be passed because the order could only be passed if it was considered that the documents were necessary for the purpose of the Act. The Supreme Court further observed that there must be some nexus between the documents sought to be obtained and the purpose of the Act. It was further observed by the Supreme Court that where an omnibus order was made in respect of all documents relating to the appellants, which were in the custody of the Registrar under the orders of that court, including some of the documents which had not even the remotest bearing on the matters covered by the Act, it went to show that there was no due application of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant. In this case it is difficult to accept the position that the Income-tax Officer considered the said documents to be relevant for two reasons. Firstly, admittedly, the Income-tax Officer did not have and could not have any knowledge about the contents of the documents. Secondly, the omnibus nature of the order passed also indicated non-application of the mind. Counsel for the petitioner in this connection drew my attention to a decision of T. K. Basu J. in the case of Dwarkadas Shah Brothers Private Ltd. v. Income-tax Officer, " F " Ward, Companies District, III. The facts of that case were slightly different because there a third party was directed to produce the documents. In such cases unless the documents are identified there might be difficulty in complying with the order. Here, in view of the fact that the documents had been seized before the issue of the summons it may be considered from one point of view that the documents have been identified. But, it appears for the reasons mentioned hereinbefore that the documents bad been directed to be produced without consideration of the relevancy of the documents. Therefore, in view of the judgment of the Supreme Court in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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