G.S. Singhvi J.

1. In these petitions filed under Article 226 of the Constitution of India, the petitioners have prayed for quashing of the notices issued by the Assistant Commissioner of Income Tax (Investigation Circle-II), Ambala, under Section 226(3) of the Income Tax Act, 1961 (for short "the Act"), for attachment of their accounts. They have also prayed for quashing of the orders passed by the Deputy Commissioner of Income Tax (Investigation Circle-II), Ambala, declining the request made on their behalf to withdraw the attachment. Another prayer made by the petitioners is for quashing the approval granted by the Commissioner of Income Tax under Section 132(8) of the Act for continuing the seizure of their books of account and documents.

2. The facts :

3. During the course of search and seizure operation conducted on the business and residential premises of the petitioners on September 26, 1995, the officers of the Income Tax Department seized the books of account and documents. This was followed by attachment of their bank accounts. After about one year, the Assessing Officer passed an order of assessment dated September 27, 1996, and created a demand of Rs. 85 lakhs. The applications filed by the petitioners for stay of the recovery were dismissed by the Assistant Commissioner of Income Tax, the Deputy Commissioner of Income Tax, Ambala Range, Ambala; and the Commissioner of Income Tax, Rohtak. However, by an order dated May 29, 1998, the Income Tax Appellate Tribunal accepted their applications and stayed the recovery subject to certain conditions. The relevant extract of that order is reproduced below :

"After considering the rival submissions, we are of the view that these are fit cases in which the Tribunal can exercise its discretion of granting stay of the demand but only on the basis of the following conditions :

(i) Paras Rice Mills shall deposit 10 per cent, of the outstanding demand in three equal instalments, the first by June 15, 1998, and the remaining two by July 15, 1998, and August 14, 1998. The remaining asses-sees shall deposit 20 per cent, of the outstanding demand once again in instalments on the same dates as decided in the case of Paras Rice Mills.

(ii) The assessees shall furnish the security to the satisfaction of the Department within a period of 15 days from the date on which the present order of the Tribunal is received by them. We may, however, mention that we have come across a number of cases asking for bank guarantees and the assessees in the absence of liquid funds cannot meet this requirement. Under such situation, the Department may consider the feasibility of allowing the form of security which the assessee can furnish.

(iii) The appeals are directed to be listed for hearing on September 2, 1998, for which no formal notice will be sent to the parties.

(iv) If on the date of hearing, any of the parties request for an adjournment, then the Tribunal may be inclined to modify the terms of the stay order.

We would also ask the Income Tax authorities to consider the request for the release of stock of rice with reference to the case of Paras Rice Mills and subject to the claims and counter claims being made by the parties vis-a-vis the FIR registered with the police authorities, the Department may examine the request and if it is found feasible, the stock may be released to enable the assessee to sell the same and pay off the money to the Department. We must, however, add that this in no way would be treated as a modification of the condition that we have imposed on Paras Rice Mills to pay 10 per cent, of the demand in three instalments."

4. Some of the petitioners challenged the order passed by the Tribunal by filing Civil Writ Petitions Nos. 11567, 12501 and 12502 of 1998, which were disposed of by a Division Bench of the High Court on September 17, 1998. The order passed by the High Court in C. W. P. No. 11567 of 1998, reads as under:

"During the course of arguments, a consensus has been arrived at between learned counsel for the parties that the petitioner would be permitted to sell the rice/paddy, subject-matter of order under Section 132(1) of the Income Tax Act, annexure R-2. However, the sale shall be effected in the presence of a representative of the Income Tax Department and the sale proceeds thereof shall be deposited by the said representative with the Department, It is also agreed between learned counsel for the parties that the amount so deposited would be appropriated by the Department towards the tax liability that may be ultimately fixed, if the appeal preferred by the petitioner is dismissed, otherwise, the same shall be returned to it. In this view of the matter, there is no need for the Tribunal to ask for 10 per cent, of the total liability to be deposited. The appeal be heard and decided as early as possible.

This order shall, however, not prejudice the rights of the parties in other proceedings that may be launched by them against each other. Disposed of accordingly."

5. Thereafter, the petitioners filed applications dated October 20, 1998, and November 7, 1998, through their advocates for lifting of the attachment and return of the books of account. Their prayer was declined by the Deputy Commissioner of Income Tax, Investigation Circle-II, Ambala, vide communications dated November 16, 1998, and December 2, 1998 (filed as annexures P-17 and P-21 with C. W. P. No. 2087 of 1999).

6. The petitioners have challenged the continued attachment of their bank accounts and the retention of books of account and documents beyond the period of 180 days stipulated in Section 132 of the Act by contending that the action taken by the respondents and the orders passed by them are ultra vires the provisions of Section 132(8) of the Act apart from being wholly illegal, arbitrary and unjustified. In paragraph 10 of the Civil Writ Petition No. 2087 of 1999, it has been averred that the approval regarding the retention of the books of account and documents was conveyed to the petitioner for the first time vide letter dated July 1, 1997 (annexure P-23), which was delivered to its representative by hand on July 4, 1997, and the second approval was conveyed to it vide letter dated December 11, 1998 (annexure P-29), which was received by registered post.

7. The respondents have controverted the averments made in para. 10 of the writ petition by making the following statements :

"The approval of retention of seized documents was received on March 19, 1996, from the Commissioner of Income Tax, Rohtak, which was well within the statutory period of 180 days from the date of the seizure. Under Section 132(8) of the Income Tax Act, as books of account and other documents seized under Sub-section (1) or Sub-section (1A) could not be retained by the authorised officer for a period of 180 days from the date of the seizure unless the reasons for retaining the same are recorded by him in writing and the approval of the Commissioner of Income Tax for such retention is obtained. The valid procedure was, therefore, adopted and the approval was obtained before 180 days. Section 132(8) does not oblige the answering respondent to communicate the reasons recorded for the retention of the books or approval granted thereon by the Commissioner of Income Tax, even then the petitioner was intimated about the retention of the books of account from time to time. First such intimation was sent vide letter No. 2112, dated July 1, 1997, second intimation vide letter No. 6152, dated December 30, 1997, and the third and final intimation vide letter No. 6523, dated December 11, 1998, along with the reasons for retention of these documents and books of account."

8. In the replication filed on behalf of the petitioner, it has been averred that the communications dated March 19, 1996, and December 30, 1997, were never received by it. In paragraph 10 of the replication, the petitioner has averred as under :

"That the contents of para. 10 of the written statement are wrong and hence denied except to the extent that the petitioner-firm did receive the approval of the Commissioner from respondent No. 3 vide his letters Nos. 2112, dated July 1, 1997 (received on July 4, 1997), after 626 days of the search and seizure operation and 6523, dated December 11, 1998. The petitioner never received any communication prior to July 4, 1997, and also has not received the alleged communication No. 6152, dated December 30, 1997, from respondent No. 3. The respondents did not bring on record the alleged approval obtained from the Commissioner of Income Tax, Rohtak, dated March 19, 1996, and the same was not conveyed within 180 days of the search and seizure operation as was required under law."

9. The respondents have filed a reply to the replication, but the statement made in para. 10 of the replication about the non-receipt of any communication prior to July 4, 1997, and the letter dated December 30, 1997, has not been controverted.

10. At this stage, we may mention that during the pendency of the writ petitions, the respondents have lifted the attachment of the bank accounts of the petitioners and to this effect, a statement was made before the court by Shri R. P. Sawhney, senior advocate for the Revenue, on August 9, 2000. In view of this, the only issue which remains to be considered is whether the continued retention of the books of account and documents seized on September 26, 1995, is legally sustainable.

11. Shri A.K. Mittal argued that the continued retention of the books of account and the documents seized during the search operation should be declared illegal because the approval of the competent authority was not communicated to the petitioners in respect of the period between March 26, 1996, and December 31, 1997, and the approval conveyed on July 1, 1997, was highly belated. He further argued that the failure of the concerned authority to communicate the approval for the period after December 30, 1997, should also be treated as sufficient to nullify the continued detention of the books of account and documents. Learned counsel referred to Section 27 of the General Clauses Act and Section 282 of the Act and argued that the alleged sending of the letter dated December 30, 1997, by ordinary post cannot be treated as sufficient compliance with the requirement of communication of the order of approval. Shri Mittal then submitted that the letter dated December 30, 1997, appears to have been fabricated by the respondents in order to justify the continued retention of the books of account and documents. He further submitted that the delivery of letter dated July 1, 1997, by hand and the letter dated December 11, 1998, by registered post should be treated as sufficient to disbelieve the version of the respondents about the sending of letter dated December 30, 1997, by an ordinary post.

12. Shri R.P. Sawhney candidly stated that the record made available to him does not contain anything from which it could be said that the Department had sent any communication regarding the continued retention of the seized hooks of account and other documents for the period between March 26, 1996, and March 31, 1997. He also conceded that no proof is available with the Department about the delivery of letter dated December 30, 1997, to the petitioners.

13. We have considered the matter in the back drop of the facts brought on record. Section 132 (8) and (10) of the Act, which has been relied upon by the petitioner for seeking a declaration that the retention of the seized books of account and other documents beyond the period of 180 days is unlawful, reads as under :

"132. (8) The books of account or other documents seized under subsection (1) or Sub-section (1A) shall not be retained by the authorised officer for a period exceeding one hundred and eighty days from the date of the seizure unless the reasons for retaining the same are recorded by him in writing and the approval of the Chief Commissioner, Commissioner, Director-General or Director for such retention is obtained :

Provided that the Chief Commissioner, Commissioner, Director-General or Director shall not authorise the retention of the books of account and other documents for a period exceeding thirty days after all the proceedings under the Indian Income Tax Act, 1922 (11 of 1922), or this Act in respect of the years for which the books of account or other documents are relevant are completed ....

(10) If a person legally entitled to the books of account or other documents seized under Sub-section (1) or Sub-section (1A) objects for any reason to the approval given by the Chief Commissioner, Commissioner, Director-General or Director under Sub-section (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents

14. In CIT v. Oriental Rubber Works : [1984]145ITR477(SC) , their Lordships of the Supreme Court considered the question as to whether the Revenue is under a statutory obligation to communicate to the person (from whose custody hooks of account and documents have been seized under Section 132(1) ] the approval obtained from the Commissioner of Income Tax and the recorded reasons of the authorised officer/Income-tax Officer on which such approval is based for the retention of the seized books of account and documents by the Department for a period exceeding 180 days from the date of seizure. After analysing Sub-sections (1), (8), (10) and (12) of Section 132 of the Act, their Lordships laid down the following proposition (page 483) :

"On a plain reading of the aforesaid provisions it will be clear that ordinarily the books of account or other documents that may be seized under an authorisation issued under Sub-section (1) of Section 132 can be retained by the authorised officer or the concerned Income Tax Officer for a period of one hundred and eighty days from the date of seizure, whereafter the person from whose custody such books or documents have been seized or the person to whom such books or documents belong becomes entitled to the return of the same unless the reasons for any extended retention are recorded in writing by the authorised officer/the concerned Income Tax Officer and approval of the Commissioner for such retention is obtained. In other words, two conditions must be fulfilled before such extended retention becomes permissible in law : (a) reasons in writing must be recorded by the authorised officer or the concerned Income Tax Officer seeking the Commissioners approval, and (b) obtaining of the Commissioners approval for such extended retention and if either of these conditions is not fulfilled such extended retention will become unlawful and the concerned person (i.e., the person from whose custody such books or documents have been seized or the person to whom those belong) acquires a right to the return of the same forthwith. It is true that Sub-section (8) does not in terms provide that the Commissioners approval or the recorded reasons on which it might be based should be communicated to the concerned person but in our view since the person concerned is bound to be materially prejudiced in the enforcement of his right to have such books and documents returned to him by being kept ignorant about the factum of fulfilment of either of the conditions, it is obligatory upon the Revenue to communicate the Commissioners approval as also the recorded reasons to the person concerned. In the absence of such communication the Commissioners decision according his approval will not become effective.

Moreover, Sub-section (10) confers upon the person legally entitled to the return of the seized books and documents a right to object to the approval given by the Commissioner under Sub-section (8) by making an application to the Central Board stating therein the reasons for such objection and under Sub-section (12) it is provided that the Central Board may, after giving the applicant an opportunity of being heard, pass such orders as it thinks fit. It is obvious that without the knowledge of the factum of the Commissioners approval as also of the recorded reasons on the basis of which such approval has been obtained it will not be possible for the person to whom the seized books or documents belong to make any effective objection to the approval before the Board and get back his books or documents. In our view the scheme of Sub-sections (8), (10) and (12) of Section 132 makes it amply clear that there is a statutory obligation on the Revenue to communicate to the person concerned not merely the Commissioners approval but the recorded reasons on which the same has been obtained and that such communication must be made as expeditiously as possible after the passing of the order of approval by the Commissioner and in default of such expeditious communication any further retention of the seized books or documents would become invalid and unlawful. It is obvious that such obligation arises in regard to every approval of the Commissioner that might have been accorded from time to time."

15. In Survir Enterprises v. CIT : [1986]157ITR206(Delhi) , a Division Bench of the Delhi High Court held that once the bar set out in Section 132(8) of the 1961 Act operated, the Department had to return the books of account or other seized documents to the person concerned.

16. In Nutan Sahkari Avas Samiti Ltd. v. Director of Income Tax (Investigation) : [1994]208ITR843(All) a Division Bench of the Allahabad High Court relied on the decisions of the Supreme Court in the case of Oriental Rubber Works : [1984]145ITR477(SC) and of the Delhi High Court in Survir Enterprises case : [1986]157ITR206(Delhi) and held that non-compliance with the requirement of passing of a reasoned order by the authority concerned, approval by the Commissioner and communication of such approval together with reasons to the assessee would vitiate the retention of the books of account and documents beyond 180 days.

17. In Rajendra Prasad Agarwalla v. IAC of I. T. : [1994]209ITR784(Cal) a learned single judge of the Calcutta High Court followed the proposition laid down in Oriental Rubber Works case : [1984]145ITR477(SC) and proceeded to observe that no presumption can be drawn about the recording of reasons, grant of approval and communication thereof and it is the duty of the Revenue to prove all the three things, namely, recording of reasons in writing by the Assessing Officer for retention of the documents beyond 180 days, approval of such retention by the Commissioner and communication of the reasons recorded by the Assessing Officer as well as the Commissioners approval.

18. In George Philip Modayil v. Asst. CIT : [1999]238ITR517(Ker) a learned single judge of the Kerala High Court highlighted the necessity of recording of reasons and communication thereof in the following words (page 523):

"The object of communicating the order granting approval for retention of the seized records and the reasons recorded by the assessing authority is to enable the petitioner, if he is aggrieved, to file objection to the Commissioner of Income Tax as contemplated under Sub-section (10) of Section 132. Sub-section (10) of Section 132 provides that, if a person legally entitled to the books of account or other documents seized under Sub-section (1) or Sub-section (1A) objects for any reason to the approval given by the Commissioner of Income Tax under Sub-section (8), he may make an application to the Board stating therein the reasons for such objection and requesting for the return of the books of account or other documents. Sub-section (11) provides the procedure also. From the provisions of Sub-section (10) of Section 132 it is clear that it is mandatory that the order granting approval for the continued retention of the seized records together with the reasons recorded by the assessing authority are communicated to the petitioner and that too expeditiously."

19. The learned single judge then examined the petitioners plea on the merits and held that retention of the books of account and other records seized during the search operation was illegal and directed that while returning the documents, the respondents may take photostat copies of the seized record and get the signatures of the petitioner on all the pages of such photostat copies before returning the originals.

20. In Spring Dale Educational Society v. Union of India [2001] 247 ITR 409 [LQ/PunjHC/2000/1123] , C. W. P. No. 9287 of 1999, decided on September 14, 2000, this court has held that unexplained delay in the communication of approval for the retention of the books of account and documents beyond a period of 180 days is liable to be nullified.

21. By applying the propositions laid down in the aforementioned decisions to the facts of this case, we hold that the retention of the books of account and documents seized from the premises of the petitioners beyond March 26, 1996, is liable to be declared illegal because the respondents have failed to produce any evidence to prove that after receiving the approval from the Commissioner of Income Tax, Rohtak, on March 19, 1996, any communication was sent to them in terms of Section 132(8) of the Act or that the letter dated December 30, 1997, was, in fact, delivered to the petitioners. The respondents have also not explained the long time gap of about four months between the commencement of retention of documents, etc., from April 1, 1997, and the delivery of the letter dated July 1, 1997.

22. In the result, the writ petitions are allowed. The concerned authority of the Income Tax Department is directed to release the books of account and other documents seized from the premises of the petitioners on September 26, 1995. This shall be done within one month of the presentation of a certified copy of this order. However, we make it clear that it will be open to the concerned authority to retain photostat copies of the documents after getting them signed by the petitioners or their representatives, who shall certify the same to be true copies. The petitioners are also directed to make available the original documents as and when the same are required by the competent authority or any court.