[2002] 256 ITR 730 (RAJ.)

HIGH COURT OF RAJASTHAN

Commissioner of Income-tax

v.

Mool Chand Salecha

N.N. MATHUR AND O.P. BISHNOI, JJ.

D.B. ITR NOS. 59 OF 1998 AND 27, 31 AND 93 OF 1999

AND S.B.C.W.P. NOS. 1070 AND 2723 OF 1997

MARCH 22, 2002

 

JUDGMENT

N.N. Mathur, J.—The D.B. Income-tax References Nos. 59 of 1998, 31 of 1999, 93 of 1999 and 27 of 1999 and S.B. Civil Writ Petitions Nos. 2723 of 1997 and 1070 of 1997 are disposed of by the common order as they arise out of the survey under section 133A of the Income-tax Act, 1961, conducted on November 25, 1994, at the premises of the assessee, Mool Chand Salecha, impounding all the books of account, ex parte assessment order dated February 24, 1995, and the ultimate order of the ITAT dated March 12, 1996.

Briefly stated the facts of the case are that the assessee, Mool Chand Salecha, deals in cloth dyeing and trading business. He has been filing returns in his individual capacity showing share income from Praveen Cotton Mills, Jasol and as karta of a Hindu undivided family (in short the HUF"), Mool Chand Praveen Kumar and as partner of Parmeshwari Textile Mill, Jasol. As no return for the assessment year 1994-95 was filed, a survey under section 133A of the Income-tax Act, 1961 (in short "the Act of 1961"), was conducted at the premises of Praveen Cotton Mills and Parmeshwari Textiles Mills, Jasol, on November 25, 1994. During the survey operation, the assessee, Mool Chand Salecha, disclosed in his statement that he was drawing a salary of Rs. 30,000 per annum from Praveen Cotton Mills and was also partner of Parmeshwari Textile Mills, Jasol, in his Hindu undivided family capacity. The tax authorities also recovered the account books of three concerns, viz., Sumit Textile Mills, Sabarmati Mills India and Arvind Padding Works, for the assessment year 1995-96. With respect to the said firms, the assessee, Mool Chand, admitted that all the three concerns were owned by him and the capital introduced in the three concerns was from his undisclosed income in the form of deposits in the books of account in various names. Accordingly, he offered to surrender the income of rupees five lakhs and rupees six lakhs for the assessment years 1994-95 and 1995-96, respectively as capital introduced in the three concerns out of his undisclosed income. He also admitted that he did not raise any loan from anybody and all cash deposits appearing in his account books in different names, represented his undisclosed capital and are included in the surrendered capital of rupees ten lakhs for the assessment years 1994-95 and 1995-96 in the three concerns. He also admitted that the account books of all the three concerns are written in his own handwriting or in the handwriting of his Muneem Rajesh and Siremal. Regarding the bank accounts, he stated that Smt. Babita Surendera Kumar was authorised by him to operate the bank account of Sumit Textile Mills and Smt. Damyanti Lalit Kumar to operate the bank account of Sabarmati Mills.

He further stated that as his business was mainly at Ahmedabad, he resided there with other family members. Regarding the sale of the said three concerns, he admitted that the sales were to the tune of Rs. 70 lakhs approximately in the assessment year 1994-95. He also admitted that the accounts were not got audited under section 44AB. In the facts of the case, the income-tax authorities issued a summons under section 131(1) to the assessee on November 25, 1994, to produce the account books found at the time of survey, which were subsequently produced and impounded under section 131(3) of the Act of 1961. The examination of the account books revealed that the said concerns were in existence prior to the assessment year 1994-95 also. For production of the remaining books of account and account books of earlier years, summonses under section 131(1) were issued to the assessee on December 6, 1994, but no compliance was made by the assessee. In view of the fact of non-production of account books of earlier years, enquiries were conducted from Barmer Central Co-operative Bank, Jasol. The copy of the account opening form and copies of bank accounts since the beginning in respect of the three concerns were also called for. The Barmer Central Co-operative Bank, Jasol, under communication dated December 30, 1994, intimated that all the concerns were the proprietary concerns of Smt. Damyanti, Ganpatlal and Surendera Kumar and the accounts were in operation since February 5, 1988, April 26, 1991 and December 19, 1991, respectively. It further revealed that all the three accounts were introduced to the bank by the assessee, Mool Chand, himself. It further revealed that though the cheques of three accounts were signed by Smt. Damyanti, Shri Surendera Kumar and Shri Ganpat Lal for Sabarmati Mills India, Sumit Textile Mills and Arvind Padding Works, respectively, the withdrawals of cheques of "self" were made mostly by the munim of the assessee, Mool Chand, viz., Siremal and Rajesh Kumar. Summonses under section 131 were issued to Shri Surendera Kumar, Smt. Damyanti Devi and Shri Ganpatlal on February 9, 1995. Surendra Kumar and Smt. Damyanti did not make compliance but Ganpatlal attended on February 10, 1995, and his statement was recorded on oath. He stated that he was doing job work of washing grey cloths on small scale in the name of Arvind Padding Works with the initial investment of Rs. 2,000 taken as loan from his brother-in-law, Shri Mohanlal. He denies to have maintained books of account. When he was confronted with the account books of Arvind Padding Works, he denied to be the owner of such books and stated that as these account books have been found from the premises of Shri Mool Chand, he can only speak about the maintenance and transactions recorded in the said books. He, however, admitted that the bank account in his name was introduced by Mool Chand and he has been doing petty job work of various firms of the assessee, Mool Chand, and his family members. On appreciation of these facts, the assessing authority concluded that the assessee, Mool Chand, was the actual owner of the said three concerns and Shri Surendra Kumar, Smt. Damyanti and Ganpatlal were the only benamidars of Mool Chand. Accordingly, he issued a notice under section 142(1) to the assessee, Mool Chand, and his family members calling upon them to file the return of their income on or before November 30, 1994. After a great hassle, Mool Chand filed a return on February 14, 1995, showing his income of Rs. 57,480 for the assessment year 1994-95 including income of Rs. 14,065 from Sumit Textile Mills and Rs. 2,124 from Sabarmati Mills India. The assessing authority found that the sales of Sumit Textile Mills and Sabarmati Mills for the assessment year 1994-95 were for Rs. 3,06,45,038. Obviously, these sales were not possible with a meagre investment of rupees four lakhs surrendered in the two concerns for the assessment year 1994-95. Further for a turnover of Rs. 3.6 crores, at least a capital of rupees fifty lakhs was required.

The assessee was given show-cause notice as to why a sum of rupees fifty lakhs may not be treated as capital from the undisclosed sources on estimate basis. Because of non co-operation of the assessee, Mool Chand, the assessing authority was compelled to proceed under section 144. The assessing authority concluded that the assessee had owned the ownership of three concerns and he was the real owner of all the three concerns. The assessee made a request not to proceed with the proceedings as he had filed an application before the Settlement Commission on February 16, 1995. The request was turned down on the ground that simply filing of application before the Settlement Commission, was not sufficient and the proceedings could not be stayed unless the application was admitted by the Commission. The assessing authority expressed that the assessee was intentionally avoiding the assessment proceedings, hence, he proceeded ex parte with the assessment. The assessing authority computed the income of the assessee, Mool Chand, as follows:

"(8) After discussion income of the assessee is computed as under:

 

 

Rs.

(i)

Net salary income from Praveen Cotton Mills

16,667

(ii)

Income from interest, etc.

18,723

(iii)

Net income of minors

11,326

 

Add—

 

(iv)

Capital investment in Sabarmati Mills India and Sumit Textile Mills out of undisclosed sources as discussed above

51,00,000

(v)

Capital investment in Arvind Padding Works as surrendered by the assessee

1,00,000

(vi)

Bogus liabilities as discussed above (Rs. 10,11,944+2,00,781)

12,12,725

(vii)

Estimation of income from Sumit Textiles and Sabarmati Mills India, Jasol as discussed above

4,59,675

(viii)

Estimation of income from Arvind Padding Works as discussed above

50,000

Total income

69,69,116

Less: Deduction under section 80L

5,427

Net taxable income

69,63,689

Thus, the Income-tax Officer, Balotra, computed Rs. 69,63,689 as taxable income. He also directed to issue penalty notices under sections 271(1)(b), 271(1)(c) and 271B of the Act. The Department raised a tax demand of Rs.40,16,480. An appeal was preferred against the order of assessment dated February 24, 1995, before the Commissioner of Income-tax (Appeals), Jodhpur. The Commissioner rejected the contention with respect to the denial of opportunity of hearing. It was held that the assessee did not avail of the opportunity given and indulged in delaying tactics. He also held that in spite of the fact that the request of the appellant was accepted for inspection of record, he did not choose to avail of the same, though he inspected the documents on a few dates. He was of the view that the appellant-assessee was trying to put obstacles in the way of smooth investigation by resorting to various dilatory tactics. It was also found that the return filed by the appellant did not reflect the true state of affairs. He did not comply with the notice under section 142(1) and, therefore, the assessing authority rightly proceeded under section 144. He even went to the extent of observing that the assessing authority was too liberal. Looking to the attitude of the assessee in his opinion, it was a fit case to impose penalty for not responding to the repeated summonses issued. Accordingly, the Appellate Commissioner rejected the appeal by order dated March 27, 1995."

It was contended before the learned Tribunal on behalf of the assessee that the assessing authority in undue haste committed severe irregularities in the survey as well as assessment proceedings. It was submitted that the assessing authority while exercising the powers under section 133A, had no power to impound the books of account in view of the clear prohibition provided under sub-section (4) of section 133A. It was also contended that the assessee had a right to submit the belated return under section 139(4) and under section 153 up to March 31, 1995. The Assessing Officer had time up to March 31, 1996, to complete the assessment. It was submitted that the Assessing Officer committed an error in not taking into consideration the return filed by the assessee on February 14, 1995. According to learned counsel by issuing notice under section 133(1), the Assessing Officer curtailed the statutory period of submitting return to the assessee. It was also argued that in all fairness, the Assessing Officer should not have proceeded with the assessment proceedings, once it was brought to his notice that the settlement application was submitted under section 245C with the Settlement Commission on February 16, 1995. He also criticised the summary way of dealing by the Assessing Officer as well as the appellate authority with respect to the additions. It was argued that the assessee was denied the opportunity of hearing by refusing to supply the incriminating documents which were illegally seized and impounded during the survey. It was also argued that if the accounts lying with the Department were voluminous or complicated, the Assessing Officer had a power under section 142A to get the accounts audited and could have then determined the income instead of doing so arbitrarily. It was thus urged that the assessment made under section 144 may be annulled or set aside with the direction to make assessment de novo. On the other hand, it was submitted by the departmental representative that all the three proprietary concerns had a turnover exceeding rupees forty lakhs, yet the books of account were not got audited by the assessee in accordance with the mandatory provisions of section 44AB. It was also submitted that no returns were filed with respect to the income arising from the said three concerns. It was also argued that nothing more was required to be done, as the assessee himself had surrendered rupees eleven lakhs at the time of survey. With respect to denying of opportunity of hearing to represent the case fully during the assessment proceedings, it was submitted that in the peculiar facts and circumstances of the case, particularly looking to the gross tax evasion by the assessee, the Assessing Officer had no other option but to pin him down by invoking the provisions of section 144. As regards the settlement application, it was submitted that the proceedings could not have been stayed simply because the application for settlement was filed before the Commission. The findings of the learned Tribunal are summarised as follows:

(i) The powers of survey under section 133A are different and distinct than the powers under section 131(1). If the Assessing Officer suspected that the assessee had either concealed or was likely to conceal the particulars of his income, the Assessing Officer could have issued summons under section 131(1A) but while exercising powers under section 133A, he could not have usurped the powers under section 131(1).

(ii) It was within the powers of the Assessing Officer to require the assessee to furnish a return by issuing a notice under section 142(1), once the assessee had failed to furnish the same by due date mentioned in section 139(1). The assessee had furnished a return on February 14, 1995, and as such, the Assessing Officer was bound to consider the said return. It was further held that the assessee had a right to file the belated return under section 139(4) and having so filed, it was obligatory for the Assessing Officer to consider the same. The Assessing Officer was wrong in not considering the request of the assessee as contained in letter dated December 7, 1994, for inspection as well as supply of the photostat copies of the account books. The assessee on receipt of the notice under section 142(1), dated December 15, 1994, reiterated the request of supplying the copies of accounts but the same was rejected arbitrarily. The Assessing Officer made up his mind to frame assessment under section 144 before passing the order of assessment.

(iii) The Assessing Officer illegally impounded the books of account. In view of the findings, the Tribunal directed the Assessing Officer to release the entire impounded books of account to the assessee within a period of fifteen days from the receipt of the order. A further direction was given to make a fresh assessment after affording the adequate opportunity of hearing to the assessee.

The Department submitted an application under section 256(1) of the Income-tax Act, before the Tribunal proposing the following questions for referring to this court for its opinion:

"(i) Whether, on the facts and in the circumstances of the case, the ITAT was legally justified in entertaining the ground relating to impounding of the books of account under section 131 in respect of an appeal filed against the order passed under section 144 of the Income-tax Act, 1961?

(ii) Whether, on the facts and in the circumstances of the case, the ground relating to impounding of the books of account would be considered to be a subject-matter of appeal before the learned Commissioner of Income-tax (Appeals) in view of the provisions of section 246(1)(a) of the Income-tax Act, 1961, and the ITAT was legally justified in deciding the same and directing the release of the impounded books of account to the assessee?

(iii) Whether, on the facts and in the circumstances of the case, the ITAT was legally justified in its interpretation of sections 131 and 133A for releasing of the impounded books of account?

(iv) Whether, on the facts and in the circumstances of the case, the ITAT was legally justified in setting aside the assessment without considering the material on record and in not deciding the appeal on merits on the basis of the same?"

The Tribunal refused to refer the first two questions in view of the settled position of law and the decision of the apex court reported in Kapurchand Shrimal v. CIT [1981] 131 ITR 451. The fourth question was also declined on the ground that the finding of the Tribunal in not giving sufficient opportunity of hearing is a finding of fact and, as such, no referable question of law arises from this order. The Tribunal, however, referred question No. 3. The Tribunal after stating the statement of case and framing the aforesaid question of law, has referred it to this court for its opinion. The reference has been registered as D.B. Income-tax Reference No. 59 of 1998. The Commissioner of Income-tax has also filed an application under section 256(2) seeking direction against the Tribunal to refer questions Nos. 1, 3 and 4 for the opinion of this court. This reference has been registered as D.B. Income-tax Reference No. 31 of 1999. The assessee, Mool Chand, has also filed a writ petition under article 226 of the Constitution of India, which has been registered as S.B. Civil Writ Petition No. 2723 of 1997 seeking direction to the Assessing Officer to comply with the directions of the ITAT dated March 12, 1996, particularly the directions of releasing the books of account. The Department has also filed a writ petition under article 226 of the Constitution seeking direction to quash the order of the ITAT dated March 12, 1996, particularly the directions to release the impounded documents. A further direction has been sought to restrain the first respondent from taking any proceeding coercive or otherwise for enforcing the order of release of documents particularly in view of the fact that the settlement application before the Settlement Commission has been admitted.

As the summonses issued under section 131 on December 6, 1994, December 16, 1994, December 28, 1994 and January 6, 1995, were not complied with, the Assessing Officer made a reference to Deputy Commissioner of Income-tax for imposition of the penalty under section 272A(1)(c) of the Income-tax Act. The Deputy Commissioner inflicted a penalty of Rs. 10,000, for each default, in total Rs. 40,000 by order dated June 23, 1995. The appeal preferred by the assessee was dismissed by the Commissioner of Income-tax (Appeals) by order dated October 13, 1995. However, the ITAT cancelled the penalty levied under section 272A(1)(c) by order dated December 29, 1997. The Department filed an application for reference under section 256(1) of the Income-tax Act asking the Tribunal to refer the following questions of law for the opinion of this court:

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the penalty levied under section 271(1)(b) of the Act on the sole ground that the order of assessment has been set aside to be made afresh in appeal?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the penalty levied under section 221 of the Act?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the penalty levied under section 272A(1)(c) of the Act on the sole ground that the order of assessment has been set aside to be made afresh in appeal?

Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in cancelling the penalty levied under section 271B of the Act?"

This application has been rejected by the order of the Tribunal dated May 29, 1998. The Department has filed a reference application under section 256(2) for directing the respondent-Tribunal to refer the aforesaid questions of law for the opinion of this court, which has been registered as D.B. Income-tax Reference No. 27 of 1999.

It is made clear that all the said income-tax references are still at the admission stage. The writ petitions filed before the learned single judge have been placed before the Division Bench for hearing with the aforesaid income-tax references.

The first question which arises for consideration is whether while conducting survey under section 133A of the Income-tax Act, the income-tax authority has power to impound or take into his possession the account books or documents?

In order to answer the question posed, it will be desirable to set out some of the relevant provisions of Chapter XIII of the Act, which deals with the different powers specified in different sections. Briefly stated section 131 deals with the power regarding discovery, production of evidence, etc; section 132 deals with search and seizure; section 132A deals with the powers to requisition books of account, etc; section 132B provides for application of assets retained under section 132(5); section 133 confers the power to call for information; section 133A deals with power of survey; section 133B deals with the power to collect certain information; section 134 deals with the power to inspect registers of companies; section 135 deals with the power of the Director-General or Director, the Chief Commissioner or Commissioner and the Joint Commissioner; and section 136 declares the proceedings before income-tax authorities as judicial proceedings.

In the instant case, since the controversy pertains to power of survey, it is necessary to set out section 133A. However, the question posed cannot be answered properly unless section 131 is also read along with section 133A. Thus, for convenience, sections 131 and 133A are set out as follows:

"131. Power regarding discovery, production of evidence, etc.—(1) The Assessing Officer, Deputy Commissioner (Appeals), Joint Commissioner, Commissioner (Appeals) and Chief Commissioner or 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 (5 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.

(1A) If the Director General or Director or Joint Director or Assistant Director or Deputy Director, or the authorised officer referred to in sub-section (1) of section 132 before he takes action under clauses (i) to (v) of that sub-section, 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 purposes of making any inquiry or 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;

(3) Subject to any rules made in this behalf, any authority referred to in sub-section (1) or sub-section (1A) may impound and retain in its custody for such period as it thinks fit any books of account or other documents produced before it in any proceeding under this Act:

Provided that an Assessing Officer or an Assistant Director or Deputy Director shall not—

(a) impound any books of account or other documents without recording his reasons for so doing, or

(b) retain in his custody any such books or documents for a period exceeding fifteen days (exclusive of holidays) without obtaining the approval of the Chief Commissioner or Director General or Commissioner or Director therefor, as the case may be."

"133A. Power of survey.—(1) Notwithstanding anything contained in any other provision of this Act, an income-tax authority may enter—

(a) any place within the limits of the area assigned to him, or

(b) any place occupied by any person in respect of whom he exercises jurisdiction, or

(c) any place in respect of which he is authorised for the purposes of this section by such income-tax authority, who is assigned the area within which such place is situated or who exercises jurisdiction in respect of any person occupying such place,

at which a business or profession is carried on, whether such place be the principal place or not of such business or profession, and require any proprietor, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession—

(i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place,

(ii) to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein, and

(iii) to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act.

Explanation.—For the purposes of this sub-section, a place where a business or profession is carried on shall also include any other place, whether any business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of his books of account or other documents or any part of his cash or stock or other valuable article or thing relating to his business or profession are or is kept.

(2) An income-tax authority may enter any place of business or profession referred to in sub-section (1) only during the hours at which such place is open for the conduct of business or profession and, in the case of any other place, only after sunrise and before sunset.

(3) An income-tax authority acting under this section may,—

(i) if he so deems necessary, place marks of identification on the books of account or other documents inspected by him and make or cause to be made extracts or copies therefrom,

(ii) make an inventory of any cash, stock or other valuable article or thing checked or verified by him,

(iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act.

(4) An income-tax authority acting under this section shall, on no account, remove or cause to be removed from the place wherein he has entered, any books of account or other documents or any cash, stock or other valuable article or thing.

(5) Where, having regard to the nature and scale of expenditure incurred by an assessee, in connection with any function, ceremony or event, the income-tax authority is of the opinion that it is necessary or expedient so to do, he may, at any time after such function, ceremony or event, require the assessee by whom such expenditure has been incurred or any person who, in the opinion of the income-tax authority, is likely to possess information as respects the expenditure incurred, to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act and may have the statements of the assessee or any other person recorded and any statement so recorded may thereafter be used in evidence in any proceeding under this Act.

(6) If a person under this section is required to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income-tax authority shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement made.

Explanation.—In this section,—

(a) 'income-tax authority' means a Commissioner, a Joint Commissioner, a Director, a Joint Director, an Assistant Director or Deputy Director or an Assessing Officer and for the purposes of clause (i) of sub-section (1), clause (i) of sub-section (3) and sub-section (5), includes an Inspector of Income-tax, if so authorised by any such authority;

(b) 'proceeding' means any proceeding under this Act in respect of any year which may be pending on the date on which the powers under this section are exercised or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year."

A perusal of section 131 makes it apparent that the powers of the income-tax authorities concerned under the section are co-extensive with those of a civil court trying a suit and such power can be exercised only if a proceeding is pending before such authority. However, section 131(1A) is free from such fetter, which is an overriding provision. In a case, where there is a reason to suspect that any income has been concealed or is likely to be concealed by any person, even though no proceeding with respect to such person may be pending before him or any other income-tax authority, the officers concerned mentioned therein for the purpose of making any enquiry or investigation relating thereto, can exercise the powers conferred under sub-section (1). Sub-section (3) empowers the Income-tax Officer to issue prohibitory orders on a person in control of books of account, documents, valuable article, etc., directing him not to remove, part with or otherwise deal with them without his permission, if he finds that it is not practicable to seize them. By a recent amendment, a proviso has been added prohibiting an Assessing Officer or Assistant Director or Deputy Director to impound any books of account or other documents without recording his reasons for doing so or to retain in his custody any such books of account for a period exceeding 15 days without obtaining the approval of the Chief Commissioner or Director General or Commissioner or Director. Thus, for invoking the provisions of section 131(1), there must be an application of mind by the Assessing Officer concerned to the requirement of document for the purpose of assessment and there must be evidence that there was material from which such relevancy of the documents, etc., had been considered by the Assessing Officer before passing the order. The provision is different from the seizure under section 132. The scope and effect of section 133A as substituted in the year 1975, has been elaborated in one of the Departmental Circular No. 179, dated September 30, 1975 (see [1976] 102 ITR (St.) 9, 14), which is extracted as follows:

"14. The Amending Act, 1975, has substituted a new section for the existing section 133A of the Income-tax Act, with a view to enlarging the scope and powers of survey available to the income-tax authorities. The main changes made in this behalf are as follows:

(i) At present, the powers of survey are vested in the Income-tax Officers or the Inspectors of Income-tax authorised by them in this behalf. These powers will now be available to the Inspecting Assistant Commissioners and the Assistant Directors of Inspection as well.

(ii) Under the existing law, the power of the income-tax authorities is limited to the inspection of the books of account and other documents available at the place of business or profession of the assessee, placing of marks of identification thereon and taking of extracts therefrom. Under the amendment, the Inspecting Assistant Commissioner, the Assistant Director of Inspection and the Income-tax Officer will have the further power to check or verify the cash, stocks or other valuables found in the premises where the business or profession is carried on and also to require the proprietor, employee, etc., to furnish information which may be useful for or relevant to any proceeding under the Income-tax Act.

(iii) At present, the income-tax authorities have the power to enter only a place where business is carried on. Such entry can be made during the hours at which such place is open for the conduct of business or profession. Under the amendment, the income-tax authorities will also have the power to enter any other place in which the person carrying on business or profession states that any of his books of account or other documents or any part of his cash or stocks or other valuable articles or things relating to his business or profession are kept. The entry to such other place will, however, be made only after sunrise and before sunset.

(iv) The Inspecting Assistant Commissioner, the Assistant Director of Inspection and the Income-tax Officer will now have the power to make an inventory of any cash, stocks or other valuable articles or things checked or verified by them and also to record the statement of any person which may be useful for or relevant to any proceeding under the Income-tax Act.

(v) The income-tax authorities will also have the power to collect information and record statements of persons concerned at any time after any function, ceremony or event even before the stage of assessment proceedings for the following year for which the information may be relevant, if they are of the opinion, that having regard to the nature, scale or extent of the expenditure incurred, it is necessary to do so. The object of this provision is to help collecting evidence about ostentatious expenditure immediately after the event to be used at the time of assessment.

15. It may be noted that while the Inspecting Assistant Commissioner, the Assistant Director of Inspection and the Income-tax Officer will have all the powers under the new provisions, the Inspector of Income-tax have not been vested with the new powers referred to in items (ii) and (iv) of the preceding paragraph. Further, the Inspector of Income-tax can exercise the powers of survey vested in him only if he is authorised by the Income-tax Officer to do so."

Thus, it is evident that the provision gives power to the tax authorities to check or verify the cash, stock or other valuables in the premises where business or profession is carried on and also to require the proprietor, employee, etc., to furnish information which may be useful or relevant to the proceedings under the Act. The provision also empowers the tax authorities to enter any other place in which the person carrying on business or profession states that any of his books of account or other documents or any part of his cash or stock or other valuable articles or things relating to his business or profession are kept. The authorities have also been empowered to collect information and record the statements of the persons concerned at any time after any function, ceremony or event even before the stage of assessment proceedings for the following year for which the information may be relevant, if they are of the opinion that having regard to the nature, scale or extent of the expenditure incurred, it is necessary to do so. Thus, it is evident that the power of survey is to collect the information but the power to conduct survey does not extend to removal of books of account or other documents from the premises of survey. Sub-section (1) of section 133A empowers the income-tax authorities to enter into the premises mentioned under clauses (a), (b) and (c). After entering into the premises, the tax authorities can require any proprietor, employee or any other person to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place or to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein or to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under the Act. Sub-section (2) empowers the authority to enter into such premises during the hours at which such place is open for the conduct of business or profession and in case of any other place, only after sunrise and before sunset. Sub-section (3) empowers the income-tax authorities, if they deem necessary, to place marks of identification on the books of account or other documents inspected by them and make or cause to be made extracts or copies therefrom. It is also permissible to make an inventory of such cash, stock or other articles. The provision also empowers to record the statement of any person, which may be useful for or relevant to any proceedings under the Act. Sub-section (4) puts a complete ban on removal or causing to be removed from a place where such a tax authority has entered any books of account or documents or any cash or stock or other valuable article or thing, by the tax authority. Sub-section (5) provides that where having regard to the nature and scale of expenditure incurred by an assessee, in connection with any function, ceremony or event, in the opinion of such authority, it is necessary or expedient to do so, he may, at any time, after such function, ceremony or event is over, require the assessee by whom such expenses are incurred, to furnish such information as he may require as to any matter which may be useful or relevant to any proceeding under the Act. The provision also empowers the tax authorities to record the statement of the assessee or any other person. Sub-section (6) lays down that where a person, who is required to afford facility to income-tax authorities for inspection of books, etc., refuses or evades to do so, the tax authority shall have power under section 131 for enforcing compliance with the requirement made. Thus, the contents of section 131(1) are incorporated into section 133A(6) by reference. It is significant to notice that reference has not been given to section 131(3), which empowers the authority before whom books of account are produced to impound the same. There is an express prohibition under section 133A(4) for removing or causing to be removed the books of account or other documents or any cash, stock or other valuable article or thing from the place of survey. This leaves no scope for entering into or contending that the power conferred under section 131(1) extends to proceed further and invoke section 131(3). The prohibition contained in section 133A(4) is absolute and unqualified. The powers under section 132 as also under section 131(3) cannot be read into the power to carry out survey under section 133A. It is not permissible in law to do so. The apex court in Jagir Singh v. Ranbir Singh, AIR 1979 SC 381, has observed as under (page 384):

"What may not be done directly cannot be allowed to be done indirectly; that would be an evasion of the statute. It is a 'well known principle of law that the provisions of an Act of Parliament shall not be evaded by shift or contrivance (per Abbott C.J. in Fox v. Bishop of Chester [1824] 2 B&C 635).' To carry out effectually the object of a statute, it must be construed as to defeat all attempts to do, or avoid doing, in an indirect or circuitous manner that which it has prohibited or enjoined (Maxwell, 11th edition, page 109)."

Thus, it is clear that the income-tax authority cannot impound the books of account or other documents in the proceedings conducting the survey under section 133A. We are buttressed in our view by the decisions of various High Courts, viz; (1) Dr. Vijay Pahwa v. Samir Mukhopadhyay, Deputy CIT [2001] 250 ITR 354 (Cal) (Appex.); (2) N.K. Mohnot v. Deputy CIT [1995] 215 ITR 275 (Mad); (3) Gheru Lal Bal Chand v. ITO [1982] 137 ITR 190 (P & H); (4) United Chemical Agency v. R.K. Singh, ITO [1974] 97 ITR 14 (All); (5) Sri Venkateshwara Tourist Home P. Ltd. v. Assistant Director of Income-tax (Inv.) [1998] 233 ITR 736 (Karn); (6) Ram Saroop Pawan Kumar v. ITO [1980] 125 ITR 603 (P&H) and (7) Maruti Mills P. Ltd. v. Union of India [2001] 250 ITR 348 (Raj).

It is not necessary, to traverse the law, nor to go into the facts of each case. There appears to be unanimity among all the High Courts that during the survey under section 133A, the tax authority, what to talk of impounding the books of account and documents, he cannot even remove them. Of course, during the survey under section 133A(3), the tax authority, if he so deems necessary, may place marks of identification on the books of account or other documents inspected by him and make or cause to be made extracts or copies therefrom. He may record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. In case, the assessee refuses or evades to co-operate in producing the books or documents asked for inspection, such authority may invoke the provisions of section 131(1) in view of section 133A(6) but such an authority cannot further proceed under section 131(3). Thus, even in a case where the assessee has refused or evades to co-operate in producing the books of account or documents during the survey, there can be neither seizure nor impounding. The summons can be issued under section 131(1) at the time of survey operation compelling the production of books of account and other documents. Even, summons cannot be issued after the survey operation is over because section 133A lays down that where a person, who is required to afford facility to tax authorities for inspection of books, etc., refuses or refrains to do so at the time of survey, further summons can be served under section 131(1) only in the case of obstruction by the person concerned or when some sort of hindrance is put by him. Thus, in our view, the ITAT was perfectly justified in holding that the tax authorities were wrong in impounding the documents of the assessee, Mool Chand, during the survey operation.

The second question which arises for consideration is whether the assessing authority is justified in not complying with the orders of the ITAT to release the books of account to the respondent-assessee, Mool Chand, on the ground that an application for settlement has been admitted by the statutory Settlement Commission?

It is not in dispute that the survey was conducted on November 25, 1994, and on the same day, books of account of the respondent-assessee, Mool Chand, were impounded. The assessee filed an application before the Settlement Commission on February 16, 1995, but the same was admitted as late as on September 30, 1996. During this period, the Income-tax Officer passed the order of assessment on February 24, 1995. The Commissioner of Income-tax (Appeals) confirmed the order of the assessing authority on March 27, 1995, and the ITAT remitted the matter to the assessing authority for fresh assessment and directed to release the books of account to the assessee. Thus, the question as to the effect of admission of the application for settlement by the statutory Settlement Commission on the order of the ITAT dated March 12, 1996, has arisen for consideration.

In order to appreciate the question posed, it will be convenient to read sections 245A to 245F, which provide a mechanism for settlement of cases under the Income-tax Act and sections 252 to 254 which deal with the powers of the ITAT. Chapter XIX-A contains the group of sections from sections 245A to 245M dealing with settlement of cases. It was felt that in the administration of fiscal laws, whose primary aim is to raise revenue, there has to be room for compromise and settlement because a rigid attitude would not only inhibit a one-time tax-evader or an unintending defaulter from making a clean breast of his affairs, but would also unnecessarily strain the investigational resources of the Department in cases of doubtful benefit to the Revenue, while needlessly proliferating litigation and holding up collections. Thus, a necessity was felt for provision for settlement with the taxpayer at any stage of the proceeding. This is what appears to be the object behind the Chapter XIX-A, i.e., settlement of cases. Section 245A is dictionary section. Section 245B provides for constitution of a Commission, called the Income-tax Settlement Commission. Section 245C provides the procedure for making an application for settlement of cases. It provides that an assessee may, at any stage of the case relating to him, make an application in such form and in such manner as may be prescribed, and containing a full and true disclosure of his income which has not been disclosed before the Income-tax Officer, the manner in which such income has been derived, the additional amount of income-tax payable on such income and such other particulars as may be prescribed, to the Settlement Commission to have the case settled. Section 245D provides the procedure on receipt of an application under section 245C. Section 245E empowers the Commission to reopen any completed proceedings connected with the case before it but this power is circumscribed by the requirement expressly stated in the proviso. Section 245F deals with the powers and procedure of the Settlement Commission. For convenience, section 245F is extracted as follows:

"245F. Powers and procedure of Settlement Commission.—(1) In addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in an income-tax authority under this Act.

(2) Where an application made under section 245C has been allowed to be proceeded with under section 245D, the Settlement Commission shall, until an order is passed under sub-section (4) of section 245D, have, subject to the provisions of sub-section (3) of that section, exclusive jurisdiction to exercise the powers and perform the functions of an income-tax authority under this Act in relation to the case."

The Scheme under Chapter XIX-A, i.e., settlement of cases, indicates that section 245C(1) enables an assessee to make an application therein "at any stage of a case relating to him". Section 245A(b) defines a case to mean any proceeding under the Act for the assessment or reassessment of any person in respect of any year or years, or by way of appeal or revision in connection with such assessment or reassessment, which may be pending before an income-tax authority. The contention that if such an application is filed by an assessee under section 245C, no further investigation or enquiry can be carried on by the officer and that he is obliged to stop all further proceedings with effect from the said date, has been negatived by a decision of the apex court in CIT v. Express Newspapers Ltd. [1994] 206 ITR 443. In view of section 245F(2), when an application made under section 245C has been allowed to be proceeded with under section 245D, the Settlement Commission shall have exclusive jurisdiction to exercise the powers and perform the functions of any income-tax authority under the Act in relation to the case till such time a final order under sub-section (4) of section 245D is passed. The only exception is contained in sub-section (3) of section 245D. The order of the Settlement Commission is conclusive in view of the provisions of section 245-I.

At this stage, it is also necessary to acquaint with the powers and functions of the ITAT, hereinafter referred to as "the Tribunal". It came into existence under Part II of the Indian Income-tax Act (Amendment) Act, 1939. Its powers and functions are laid down in sections 253, 254, 255 and 269G of the Income-tax Act. It is essentially an Appellate Tribunal. In Northern Plastic Ltd. v. Hindustan Food Mfg. Co. Ltd. [1997] 3 JT 101, the apex court has observed that the Appellate Tribunal constituted under section 252 is a creature of the statute and derives its jurisdiction and powers only from the statute creating it and not outside the same. The Tribunal being a judicial body, has all those incidental and ancillary powers which are necessary to make fully effective the express grant of statutory power. Though the Tribunal has the trappings of a court, it is not a "court" in the sense of exercising judicial power.

The Gujarat High Court has made a distinction between courts and Tribunals in CIT v. Western India Engineering Co. Ltd. [1970] 77 ITR 165 as follows (pages 174 and 175):

"All tribunals are not courts, though all courts are tribunals . . . The judicial power of the State is thus divided between two bodies, one being the 'courts' and the other being 'tribunals'. By 'courts' is meant courts of law and by 'tribunals', those bodies of men who are appointed to decide controversies arising under certain special laws. Their procedures may differ but the functions are not essentially different. Both exercise the judicial power of the state and it is often difficult to distinguish between them. There is no single test that can be applied to determine whether a particular tribunal is a court or mere judicial tribunal."

Thus, though the Tribunal is not a court, it is invested with judicial power to be exercised in a manner similar to the exercise of power of an appellate court acting under the Code of Civil Procedure. In the hierarchy of authorities, the Appellate Tribunal is the final fact-finding body. Though, it is under the supervisory control of the Department of legal affairs it does not extend to controlling and questioning the judicial decision of the Tribunal. Reference be made to ITAT v. V.K. Agarwal [1999] 235 ITR 175 (SC). Its judicial decisions are final so far as the Department of income-tax is concerned. Its judicial decisions can be only subjected to judicial review before the High Court within its territorial jurisdiction and the Supreme Court. However, it is also the settled position of law that in deciding appeals, the Tribunal acts as an appellate authority virtually in the same position as an Assessing Officer subject to the limitation, if any, placed on their jurisdiction by the relevant statute. Reference is made to the decision of the apex court in State of Orissa v. Babu Lal Chappolia [1966] 18 STC 17. Though the Tribunal acts as an assessing authority while hearing an appeal it is not an assessing authority under the Income-tax Act. Under section 116 of the Income-tax Act, the different tax authorities have been enumerated. The Tribunal does not figure therein as such the Tribunal though not a court exercises the powers of a court, though not an assessing authority but exercises the powers of an Assessing Officer. It is obligatory on the tax authorities to carry out its judicial directions. The apex court in Bhopal Sugar Industries Ltd. v. ITO [1960] 40 ITR 618, dealing with the case wherein the Income-tax Officer refused to carry out the directions of the Tribunal, while issuing mandamus to carry out the directions, observed as follows (headnote):

"the Income-tax Officer virtually refused to carry out the directions which a superior tribunal had given him in exercise of its appellate powers in respect of an order of assessment made by him. Such refusal was in effect a denial of justice. The order of the Appellate Tribunal having become final, it was not open to the Judicial Commissioner to hold that the order was wrong. As the Income-tax Officer had failed to carry out a legal duty imposed on him and such failure was destructive of a basic principle of justice, a writ of mandamus should issue ex debito justitiae to compel him to carry out the directions given by the Appellate Tribunal."

Thus, on examining the powers of the Tribunal and that of the Settlement Commission, it becomes clear that if the same has been admitted by the Settlement Commission, it will have all the exclusive powers of the Assessing Officer regarding the dispute of income pending before it. In terms of section 245C, the Commission shall have the power to withdraw a case relating to that assessment year from the assessing/appellate/revising authority and deal with the case as a whole by itself.

In the instant case, the ITAT passed the order dated March 12, 1996, before the Settlement Commission passed the order under section 245D(1) on September 30, 1996, allowing the application of the assessee to be proceeded within the Commission or in other words, admitted the application. Thus, on September 30, 1996, no appeal was pending before the Tribunal. In view of this, the Tribunal's orders will have to be given full effect. The order of the Tribunal does not stand set aside or wiped out or rubbed off, simply because at a later sage, the Settlement Commission admitted the application for settlement. The resultant position is that so far as the first part of the order of the Tribunal setting aside the order of impounding the books of account and documents is concerned, it has to be given effect to. The assessing authority cannot refuse to comply with the directions of the Tribunal under the garb that the application for settlement has been admitted by the Settlement Commission. As far as the second part of the order for fresh assessment by the assessing authority is concerned, the Commission may proceed in accordance with the provisions. Under section 245D, the Commission is required to form an opinion on the basis of the record with respect to the further enquiry or investigation in the matter. At this stage, we make it clear that there is no provision contained in Chapter XIX-A making a provision for transfer of a pending proceeding on the file of the tax authority it various levels standing transferred automatically. Once the application for settlement is admitted, it is for the Commission to pass an appropriate order looking to the facts of each case to call or not to call or to get the proceedings of the assessment transferred to its own file.

In D.B. Income-tax References Nos. 93 of 1999 and 27 of 1999 the question raised is with respect to imposition of penalty under section 272A(1)(c) of the Income-tax Act. It may be recalled that the Assessing Officer issued summons under section 131 on December 6, 1994, December 16, 1994, December 28, 1994 and January 6, 1995, to the respondent-assessee, which were not complied with. Thus, the Deputy Commissioner inflicted a penalty of Rs. 10,000 for each default, in total Rs. 40,000 by order dated June 23, 1995. The Tribunal cancelled the penalty on the ground that the order of assessment itself has been set aside. The question posed is as to whether in the facts and circumstances of the case, the Tribunal was justified in law in cancelling the penalty levied under section 272A(1)(c) of the Income-tax Act? The Tribunal has found the order of impounding the books of account and documents and also the order of assessment illegal. Looking to the approach of the assessing authority, the assessee cannot be blamed for the non-compliance of the notice. In these circumstances, no penalty can be imposed. In our view, no substantial and referable question of law arises from the order of the Tribunal. In view of this, the aforesaid reference applications deserve to be rejected.

As regards D.B. Income-tax Reference No. 31 of 1999, the Tribunal has refused to refer two questions of law in view of the settled position of law and the decision of the apex court in Kapurchand Shrimal v. CIT [1981] 131 ITR 451. The fourth question was also declined on the ground that the finding of the Tribunal in not giving sufficient opportunity of hearing is a finding of fact. We have dealt with this aspect in great detail and has affirmed the order of the Tribunal with regard to the fresh assessment. Thus, the Tribunal has rightly refused to refer question No. 4. Therefore, no referable question of law arises and, as such, D.B. Income-tax Reference No. 31 of 1999 deserves to be rejected.

In S.B. Civil Writ Petition No. 2723 of 1997, the petitioner-assessee has sought directions to the assessing authority to comply with the order of the Tribunal dated March 12, 1996, passed by the ITAT with regard to return of the impounded documents. Learned counsel for the Department has raised a preliminary objection as to the maintainability of the writ petition on the ground that the order of the ITAT cannot be challenged by way of writ petition under article 226 of the Constitution of India. Learned counsel has placed reliance on a decision of the Andhra Pradesh High Court reported in Dr. K. Satyanarayana v. ITAT [1997] 226 ITR 911. The contention is wholly misconceived. The petitioner is seeking enforcement of the order of the Tribunal and not challenging its order. The apex court in Bhopal Sugar Industries Ltd.'s case [1960] 40 ITR 618, has held that a writ of mandamus can be issued to the Income-tax Officer compelling him to carry out the directions given by the Appellate Tribunal. In the opinion of the apex court, the order of the Appellate Tribunal having become final, it is the legal duty imposed on the Income-tax Officer to carry out the directions and a failure was destructive of basic principle of justice. Thus, the S.B. Civil Writ Petition No. 2723 of 1997 deserves to be allowed and a mandamus is required to be issued to the assessing authority to comply with the order of the Tribunal dated March 12, 1996.

As regards the S.B. Civil Writ Petition No. 1070 of 1997, a direction has been sought to quash the order of the Appellate Tribunal dated March 12, 1996, so far as it relates to the directions as to impounding of the books of account, seized from the possession of the respondent-assessee. We have already held that the tax authority has acted illegally in impounding the books of account during the survey under section 133A of the Income-tax Act. In view of this, the petition deserves to be dismissed.

In D.B. Income-tax Reference No. 59 of 1998, the question posed is as to whether the Tribunal was right in its interpretation of sections 131 and 133A and as a consequence thereof, directing release of the impounded books of account? We have already upheld the view taken by the Appellate Tribunal and, as such, the reference application deserves to be rejected against the Revenue and in favour of the assessee.

In view of the aforesaid, we pass the order as follows:

(i) D.B. Income-tax Reference No. 59 of 1998 is answered in favour of the assessee and against the Revenue;

(ii) D.B. Income-tax Reference No. 31 of 1999 is rejected, as no referable question of law arises from the order of the Tribunal;

(iii) D.B. Income-tax References Nos. 93 of 1999 and 27 of 1999 are rejected, as no referable question of law arises from the order of the Tribunal;

(iv) S.B. Civil Writ Petition No. 1070 of 1997 is dismissed.

(v) S.B. Civil Writ Petition No. 2723 of 1997 is allowed. The assessing authority, viz., the Assistant Commissioner of Income-tax, Barmer, is directed to comply with the directions of the ITAT, Jaipur, dated March 12, 1996, so far as it relates to release of impounded books of account belonging to the assessee. The directions will be carried out within a period of fifteen days from today.

(vi) In view of the fact that the Settlement Commission has admitted the application of the assessee for settlement and the fact that the order of the ITAT setting aside the order of assessment and passing of the fresh order remains intact, further proceedings shall be taken in accordance with the directions of the Commission treating the assessment proceedings pending before the Assessing Officer. No order as to costs.