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December 21, 2022

Retention of impound documents beyond 15days need approval of higher authority

by CA Shivam Jaiswal in Income Tax, Legal Court Judgement

Retention of impound documents beyond 15days need approval of higher authority

Facts and Issue of the case

The assessee was an individual and partner in a partnership firm. As part of Income-tax survey operations, the petitioner’s premises was inspected on 17th February, 2010, and on issuing summons to him to produce books of account and other original documents, the petitioner produced various documents which were impounded u/s 131(3) of the Income-tax Act, 1961. The petitioner then filed his taxes and paid all of his income tax liability in 2010 by itself. However, the original documents that they seized were never given back by the authorities. The petitioner, therefore, filed a writ petition requesting a direction for returning the documents

It was pleaded that despite the request for the return of the original document of title, the respondents have, under one pretext or the other, delayed returning the document. The petitioner also asserted that the respondents had informed that they misplaced the documents and that the same would be returned after tracing it out. According the petitioner, the respondents cannot hold on to the documents indefinitely and that such an action is illegal and contrary to the principles of equality enshrined under article 14 of the Constitution of India.

The assessee filed a writ petition before the Kerala High Court.

Observation of case

As per the provision u/s 131(3) of the Income-tax Act, 1961, the documents impounded can be retained in the custody of the Income tax Department beyond 15 days only after obtain the approval of the Principal Chief Commissioner other officers named in the sub-section. Apart obtaining orders of approval from the officers to re the documents, there is an added obligation upon t Department to communicate the orders to the assessee to enable retention of documents beyond the period specified in the said sub-section.

As per the provisions of section 131(3), the documents can be impounded only for a period of 15 days. Any further retention, after such 15 days, is to be allowed only after taking the prior approval officer mentioned under section 131(3). In the instant case, AO hadn’t taken any such approval from any officers and thus, he can’t retain the documents of title under any circumstances.

 AO had kept the original documents of title illegally and material irregularity exists in his procedure of retention such documents. Thus AO was directed to return the original document of title to the assessee .

Conclusion

The High Court held that there is no provision under the Income-tax Act to retain the documents of title as security for any tax liability that may arise in the future. Thus, AO cannot retain documents of title impounded/seized in absence of any such statutory provision.

AO was directed to return the original document of title to the assessee

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