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Union Of India (Uoi) And Ors. vs Sheo Shanker Sitaram And Anr.

High Court Of Judicature at Allahabad|30 November, 1973

JUDGMENT / ORDER

JUDGMENT Satish Chandra, J.
1. The petition under Article 226 of the Constitution of India has been filed by the Union, of India, the Commissioner of Income-tax, Lucknow, and the Income-tax Officer, Allahabad. It is directed against an order of the Income-tax Appellate Tribunal by which it rejected the claim of privilege raised by the petitioners under Section 124 of the Evidence Act in regard to the production, of certain documents and files.
2. The respondent is the assessee-firm. It carries on business in betel-nuts, etc., at Allahabad. On 21st September, 1964, the income-tax department searched the business and residential premises of the assessee-firm and its partners, and seized certain papers. The respondent's case is that in order to avoid litigation and loss of reputation and with a view to purchase peace with the department the partners of the firm offered to be assessed on agreed quantums on the basis of materials obtained by the department as a result of the search. The partners approached the Income-tax Officer, Allahabad, as well as the Inspecting Assistant Commissioner, Varanasi. The parties held conferences and a settlement was reached. The departmental authorities assured that no penal action would be taken. This assurance helped the settlement. The assessee's case is that in the course of settlement proceedings the Income-tax Officer prepared a draft assessment order for the assessment years 1959-60 to 1964-65, on 17th February, 1965, and forwarded it to the Inspecting Assistant Commissioner. The agreed figures of income for these assessment years were approved by the Commissioner. On 5th March, 1965, the Inspecting Assistant Commissioner drew up a formal order in which it was directed that penalty proceedings would be dropped. He sent this letter to the Commissioner of Income-tax for his approval. Ultimately, the assessee was assessed for these years on the basis of figures agreed to between the parties. In due course the Income-tax Officer drew up penalty proceedings for these years. After hearing the assessee the Income-tax Officer imposed penalties upon it for the aforesaid assessment years. The assessee went up in appeal but failed. It then filed an appeal before the Tribunal.
3. On 6th September, 1971, the assessee filed an application praying that certain records of the Central Board of Direct Taxes, New Delhi, the Commissioner of Income-tax, Lucknow, the. Inspecting Assistant Commissioner, Varanasi and Allahabad, and the Income-tax Officer, C and B Wards, Allahabad, be summoned under Section 255(6) read with Section 181 of the Income-tax Act in the interest of justice and in order to enable the assessee to establish its grounds of appeal. The principal grievance of the assessee on the merits of the appeal was that the penalty has been imposed in spite of a clear settlement that no penalty will be levied. On 29th October, 1971, the Tribunal held that the fact that there was a settlement has been referred to by the Appellate Assistant Commissioner in his order dated 18th November, 1959. Prima facie, it appears that the materials sought to be summoned are relevant for the purpose of proving that there was a settlement. On this view, it directed the departmental representative to produce the records mentioned in the application.
4. A perusal of the records mentioned in the application shows that the records were in respect of proceedings in connection with the settlement of the case as a result of the search of the premises of the firm and seizure of certain of its papers.
5. In response the Finance Secretary filed an affidavit dated 7th March, 1972, claiming privilege in regard to certain notings and files of his Ministry under Section 123 of the Evidence Act on the ground that these are unpublished records in relation to the affairs of the State and that their disclosure will cause injury to public interest. The Tribunal upheld this claim and rejected the prayer for summoning these documents. Learned counsel for the respondent did not challenge this finding before us.
6. Several officers who had custody of the files and other documents filed affidavits claiming privilege under Section 124 of the Evidence Act on the ground that the documents in question were communications made in official confidence and their disclosure will injure public interest because it will materially affect freedom and candour of expression of opinion by the officers of the department and will impair the proper functioning of the public services.
7. The Tribunal held that the proceedings for assessment or for imposition of penalty are quasi-judicial in nature. Section 119 of the Income-tax Act, 1961, prohibits the Board from issuing any instructions or directions so as to interfere with the discretion of the assessing officer in regard to the decision of an individual case. The Income-tax Officer as well as the Inspecting Assistant Commissioner who had jurisdiction to impose penalty exercised quasi-judicial functions. They could not act on the advice of any other person in the discharge of such duties. Therefore, these officers, while they were seized of penalty proceedings, were not entitled to take into confidence higher authorities as to how the assessment should be made and what penalty should be imposed. The correspondence made by them on the question of imposition of penalty does not consist of communications made in official confidence within the meaning of Section 124 of the Evidence Act and consequently these are not privileged communications. The Tribunal also held that the disclosure of these documents will not affect the public interest. From a perusal of some of the documents it appeared that their disclosure might defeat the defence that may be taken by the department and that was not a ground upon which privilege could validly be claimed. On these findings the claim of privilege under Section 124 of the Evidence Act was disallowed.
8. It has not been disputed before us that assessment proceedings as well as proceedings for the imposition of penalty are judicial in nature. It is well-settled that an officer or authority upon whom jurisdiction has been conferred to make an order judicially has to act independently. He has to apply his own mind to the evidence on the record. He cannot act on the advice given by an outsider even though that stranger may be an authority higher in rank to him in the official hierarchy. The communications between the officer empowered to impose penalty and the higher authorities in regard to assessment or penalty proceedings could not be held to be communications made in official confidence because in law these authorities were not entitled to exchange opinions or give advice in regard to judicial proceedings. In our opinion, the Tribunal was justified in rejecting the claim of the petitioners under Section 124 of the Evidence Act.
9. We are also satisfied that the petitioners made their claim of privilege more to bolster up their defence to the appeal filed by the respondent-assessee rather than in public interest. The documents sought to be summoned were in relation to the settlement reached between the parties. They consisted of draft assessment orders, etc. Disclosure of these documents on the file of the appeal filed by the respondent-assessee could have no adverse impact upon public interest. The fact that they may go to prove the respondent-assessee's case against the department was irrelevant and could not form the basis of a valid claim of privilege.
10. In the result, the petition fails and is accordingly dismissed with costs.
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Title

Union Of India (Uoi) And Ors. vs Sheo Shanker Sitaram And Anr.

Court

High Court Of Judicature at Allahabad

JudgmentDate
30 November, 1973
Judges
  • S Chandra
  • H Seth